How To Sign North Dakota Banking Form

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[Music] welcome welcome welcome how's everybody doing hope you are doing well my name is andrew kuhn sing next to jeffrey gannon jeff how are we doing today uh i'm doing very well andrew how are you doing doing great we hope everyone is having a wonderful day so on a podcast we did recently when we were going over banks larger banks we did jp morgan we did do frost even though that's not like the larger ones that we did we did bank of america um i think we may have looked at citigroup you were saying that you know it's totally your style to go and look at smaller banks more regional stuff etc so in this podcast let's go over smaller banks okay and you said you have a list of ones that we could punch in and then we'll kind of go from there yes so i just want to give you an idea of what's out there these are some of these are not that small but interesting so let's start with access financial axos all right so this is not a small one i think 1.3 billion i think this is kind of awesome so um it's trading at about one times book value now so i think that it may have improved a little bit in price this year uh you know from its lows of this year but if i'm remember this one right go to business description so that i can explain what it is this is yeah so this is the company that was bank of internet b-a-b-o-f-i and they changed its name to axos financial what happened why did they change it i don't know uh they all they only have a great history i mean the company's to my knowledge hasn't had problems i mean i i only look at the financial results so i don't know if that people didn't like uh something culturally about it but it's been a great big success as a stock um so it's an interesting business if we look we can see why so price to book is only about one times but you can see like look at earnings per share for instance over the years uh you know earnings per share growth obviously is like 20 you know it's showing us like 25 but it's up almost every year meaningfully and yet the ps7 or eight so i don't know but if you're telling me should i buy access financial should i buy some uh internet whatever growth company uh access probably grows as fast or faster and you know um it's a lot cheaper yeah look at that growth has been really good and stability now we could get into it it doesn't exactly do kinds of things i love i think technically access operates pretty much like a thrift um so it has like it doesn't have a very low cost of capital if i remember right and is doing pretty high interest loans that way you can see the the net interest margin is three point yeah it's four percent wow over time um and that's so it's probably just you know doing a huge amount of real estate loans that's why it's loans to deposits are pretty high things like that so um but it's not way out of line of to me it didn't look way out of line of what a thrift would look like in the 1990s or something before the internet um we'll see if that holds to be true but you know um i'm just showing you what's out there in terms of prices and and uh growth rates absolutely and you have a fast growing company that said seven to eight times earnings yeah i i love the quote and you won't remember this since you were like yeah if if you know about investing your own money or whatever you're like i own a bunch of banks you're like i could always find a cheap bank yeah there's so many you know yeah um this is a bigger over a billion dollar company it does invest in presentation things i think if i remember right what would your next steps be then to do more due diligence on this company learn about the companies risk taking and stuff like that everything about it looks very standard like it's uh loan loss reserves are very standard it's amount of assets to equity and stuff we can you know leverage ratios and stuff are very standard um so i just be worried are they taking some sort of unusual risks they're growing incredibly fast that's usually very dangerous for a company to grow that fast um but especially in the financial industry but because historically the way they did it was internet stuff and i know that historically like early on uh b of i um did it through like having uh attractive like cd savings uh type things you know like high yield savings stuff got it you know come online and um put in large deposits with us and stuff because we offer slightly higher rates in other places and things like that so um it just looks like a really good financial information from that if you just look historically at it it has good tenure and even longer period stuff another thing that's just fascinating is you know you'd expect it to be two to four times more expensive right in terms of its growth rate and stuff like that sure so people are very negative on it all right uh bfin a lot of these will just be pretty basic so let's see how interesting these are so this is a 109 million dollar company right yep and then um if we look here again price to book 0.6 right so that's interesting you have no growth and stuff over time at this company you can do business descriptions so we have some idea to be able to explain to people okay so um pretty typical bank this way founded a hundred years ago in illinois has you know lower beta lower share turnover things you would expect um it hasn't grown and hasn't had a lot of success um in the last 10 years but it's kind of a very random and middling performance i would say so you could just find out more about it and learn the reason why i mention it is just because it's trading at two-thirds of book value so but you can see that why it might it also is somewhat um like the loan loss reserves here are pretty meaningful right uh historically had been and its leverage is pretty low um so like you know uh in terms of its uh uh you can see there where it says earning assets to equity and things like that yeah so there's a potential that it has a bunch of assets and you know a bunch of it's but it's the kind of thing that someone might want to buy i don't know if it will happen or anything but a competitor might want to buy them you you know at a you could pay like a 30 premium right and get them at slightly below book or something if you're a competitor and you could probably do better it doesn't matter how great their lending and stuff was because you can change change sure you know so just a way to get all those deposits and stuff yeah i mean if they're another illinois bank or something this is the kind of thing that you see a lot in that area um there's a lot of m a in the banking industry and the smaller and smaller smaller banks and there haven't been many banks created in the last 10 years or so uh b-a-a-n-r b-a-n-r banner okay so um yeah so let's look again same thing pe like 11 price to book is like a little bit below one your 10-year return equity is a little bit above it it looks very um normal that way so like if you take a 7.7 return equity divided by 0.7 price to book you're getting slightly above 10 it's slightly above 11 stuff um uh returns you know like earnings yield normalized earnings yield that's one way of looking at it uh so it's just slightly cheap growth and deposits yeah however it hasn't like self-funded all that stuff obviously they had problems a while ago and they haven't always had a great return assets and stuff this isn't striking me as necessarily a great bank or anything like that it's just a very typical bank it's also not that small if i remember right yeah it is 178 branch offices 1.1 billion yeah let's look at the chart really quick how do you come across small banks uh you look through like every bank there is got it just go yeah so you can pay for financial crisis yeah i got smoked they've never recovered from so they've done 90 or something from the financial crisis um which isn't if we looked at the 20 year ones we could probably see why that is so you wonder are the same people running it and all those sorts of things again so party 113 million dollar market cap right this one is one of the most uh s most normal looking i would say so if we go up here to see like their market caps like 113 million or something they have like 15 branches or something like that they're mainly in um you know they describe a few kinds that they're in in indiana and then if we look down here the price to book is slightly below one but the return equity is slightly worse than um seven percent over the 10-year period but it is interesting like you were looking at there it's been getting better like every year it's getting better right yeah so that's the fascinating thing about this one is you look at the history and you're like okay well that's not very good you know the return equity was five percent 10 years ago but it's like 15 now so what happened well that's almost all from return on asset increases return assets tripled so it's not from leverage increasing it's from an improvement in the return on the assets why did that happen i don't know because their loan loss reserves are the same as they were back then paying a dividend and their net interest margin is uh worse well that would show up in terms of increasing leverage yeah so their net interest margin is um actually lower now so you have a lower net interest margin now you haven't you're not taking lower losses than you were before and you're not more leveraged than before that tells me only one thing that i can think of which is your expenses are down relative to your revenue i could be wrong about that you can look up a thing called the company's expense efficiency ratio and in banking i like the efficiency ratio that's based on their percent of like non-interest net non-interest costs relative to deposits and things like that or to earning assets they're basically the same thing we're to assets but what most people will use in the industry is an efficiency ratio which is what amount of expenses you have per dollar of revenue okay and um i my guess would be just looking at these financials i haven't read the 10ks for this company that their efficiency ratio has probably improved in the last 10 years and if that's true that's great so but otherwise it's a pretty typical bank but again what ps what five price to book less than one yeah absolutely you know return equity i mean if you were finding this in a non-financial company there'd be a bunch of losses and stuff in its history here's something that's made money basically except for the financial crisis made some money and that's the kind of difference between banks and non-financial things and how easy they are fine so hmnf okay so 65 million market cap right again price to book less than one p e less than 10. um as you can see uh you have a terrible performance what 10 years ago or whatever in the financial crisis and then it gets better over time and so the question from that becomes has that stuff changed as i said yeah yeah would you go back and see like what crushed them in 2010 first thing you have financial crisis by the same people they're being run by some people pass if they're not being run by the same people then um you know is that an automatic pass yes is it they could have learned from the financial crisis or is it to you it's just like if anyone had lost money at a bank during the financial crisis and was running a bank i would not buy any bank that they're running now great they should be out of the industry so there's no reason that you should have lost money in the financial that your banks should lost money in the financial crisis other than you ran it wrong excessively sure yeah so um uh yeah so you know but like for instance your capitalization position is different they're 50 more capitalized now than they were 10 years ago so this is hmn financial but again it's just typical of that sort of thing so um it's not that different in size and stuff than it was 10 years ago many of the numbers are sort of the same as it was 10 years ago but you've worked through some bad loan problems and stuff this one still doesn't necessarily strike me as particularly safe or anything like that i should point out you can look up things about the texas ratio that's a good number to look at their capitalization position is strong but they've had extremely high amounts of reserving for loans for a very long time i mean even now they're at levels that are like high levels for banks generally and they were incredible levels 10 years ago obviously they lost a lot of money for a long period in the financial crisis so they had problems um but otherwise it's very typical bank that you know that we've seen so i guess when you're looking at these smaller banks that maybe are tied more to regions i mean if you're going to do scuttlebutt what are some interesting things that you would do is it learning more about the town the income in there the type of individuals that live there what are your thoughts on that uh yeah i guess that's part of it you could visit the area and stuff like that you by living in a particular area you have a better feel for that and have an idea of if the bank is different from other banks the easiest thing is probably to talk to the bank and then ask them who they respect and stuff like that um that's usually the best way of doing it there's also a list of banks that i can see that i can compare them to and if you have other banks in the area that are strong i think the area that a bank is in is incredibly unimportant compared to what most investors think some of the best banks in the country are in the same counties and stuff as some of the worst banks i don't think being in a fast-growing place or whatever is necessarily going to help you a lot you many of the banks that have had a lot of success can have it in very slow growth areas and stuff so um i would rather buy a good bank in a bad state than a bad bank in a good state got it southern missouri bancor smbc 216 million dollar market cap price to book 0.9 yeah so looks like they did they've done pretty good yeah so this is one that's much more predictable in terms of their history if we look at it so for instance you notice that they don't really increase their loan loss reserves up or down over the last 10 years which is interesting very stable return on assets and then there is some difference in like um leverage ratio over time where their leverage had been declining for a while and then started to improve but that was about the financial crisis so that's probably something that would happen naturally um like uh and then it's probably spiked a lot now um but what's interesting here to me is for the last 10 years which have been a tough 10 years in banking and we can actually see a 20-year chart of return equity so if we take out like one little blip which i don't even know if it's legitimate we don't know what happened in 2005. but in 19 of the last 20 years of this company basically they've earned a return on equity that would justify a price above book you can see that so like the it's been 10 or better basically not a lot better usually it's right around 10 percent but this is something that earns like 10 a year almost every year for the last 20 years right and yet it's priced at 0.9 times book well when we compare that to other um industries and stuff other industries are not being priced uh at um anywhere near that no where you're getting a p e of 10 basically so this is like a p of 10 i'm saying that earns that almost every has earned that almost every year for the last you know 20 years that dividend growth as well so you have pretty uh consistent cheap business and again it's somewhat less leveraged than historically it had been so true for all these banks what do you think is the profile of a bank that trades at a premium to book that's a fascinating question and i've looked at lots of banks and i don't get why people are pricing some banks above very very small banks seem to be priced above sometimes i think anything that's an acquisition candidate that people think is going to be taken over gets priced high and then i think things that people don't think are gonna be taken over priced lower i think certain industries in certain states priced lower i've seen that before so like if people worry about a state right now or worry about an industry y u sometimes can get a good deal in that um in that in banks that do business in those areas yeah it's just i mean look you look at their 10-year keger right growth and deposits strong yeah return on equity strong everything was strong you know the loan loss reserved to loans predictable right and then you look at the price to book but then you look at some other companies that trade you know at a premium yeah and this is is it i don't want to use the size thing you know people will like oh well it's always going to trade at a you know discount to price the book because it's a small company but i don't we don't obviously agree that right but that can't be true because it's quadrupled in the last 10 years so if it quadruples again and then quadruples again it'll be 16 times that size sure if it's 16 what's today's market cap 216 million yeah so if you increase that by 16 times you got a four billion dollar company it'll change so obviously they'll either pay you a lot more in dividends or something will go wrong with the business or they'll be you know a lot bigger and at that point they'll be valued a lot higher in terms of price to book and stuff like that yeah well we could also look at a long-term chart do you have that so yeah for some reason it didn't come up we'll just put it on an overview wait what oh just go to oh yeah we're on news instead of on news oh yeah beautiful and then go to max chart right so if you go to 1995 for this company we can go back and see it was at like three dollars and now it's a 23 is it 20 what's it at 2307 yeah so you have an increase of you know you're close to eight times there um over a period of in this case it's 25 years however you had been at a much higher price for most of the last few years until there was a big decline this year you know there's been a big decline in a lot of banks um this year that's why i'm mentioning all of these uh we can go to timberland bancor tsbk so i just want to show people all the choices that are out there there's just it's not that one of these is special it's like there's a lot out there would you buy a basket of these probably would you try to focus more in on it no i would try to figure out ones where i could meet management and talk to them and stuff i'd be concerned about losing a lot of money in one of them and also there's certain ones that i could pick out and and mention um that i like a lot that i think the potential is a lot higher uh we could do one in that way it's um this is different from the rest but instead of timberland right now put in h i f s this is one i think is very different from the rest of the group so this is a highly unusual bank it's hingham institution for savings hifs it was taken over in the 1990s by some major shareholders in like a proxy battle who then changed the direction of the company dramatically and if we go to the otc markets thing you can see that reflecting the stock performance and we could if you get that like use just money chimp cake or something would be a good way for me to show you that their return has probably been about um 15 a year for a pretty long time period now um so if we look right they were taking over around there they were about four dollars a little bit less when it happened in 1993 and then you have today you're at 186 dollars and that's over 27 years let's say it's 28 years yeah about 15 a year they've also paid a slight dividend and you had a huge drop in the stock price if we go to otc markets again to show you you had it they've recovered significantly from there but they're still down a bit from where their high was so you've returned 15 a year or more for 25 years or something it's been a terrific stock and the reason why is if you look here it's a strong growth stock and so this is the one that's kind of fascinating to me i mentioned this different from everyone else because a lot of people don't like the price it's 1.6 times book this is the kind of bank that i like i'm not saying i haven't learned enough about this and stuff to know is this my favorite bank or whatever but when talking to the value investors and stuff i like something like hifs compared to what they like and the reason for that is it's retaining almost all of its earnings it's dividend right its dividend was only a dollar fifty or something last year and um you know so you can its earnings per share were um well i don't have it right there but you can see it's a very low earnings per share were shown they pay out like 10 of their earnings so they retain 90 that's unheard of for a financial business um they have one of the lowest efficiency ratios in the in the country i don't know the exact number because it depends on how you measure them and stuff but looking at about 5 000 other financial institutions and stuff which some of them are multiple financial institutions in the same publicly traded entity but still i'd say i would say they're in the top 1 lowest cost banks um and that's very that's the most important thing out there and they write a annual uh not letter but like comments to shareholders and stuff at the annual meeting they put up like a transcript of the comments they make at the annual meeting and it's very um they have a very clear awareness of the efficiency ratio and the importance of it so a lot of the returns come from that so if they all if they have the same expenses as other banks that do what they do their return on assets and equity would not be impressive um they're not a low leverage bank and they have high loans to deposits so they have to be smart about what they do historically they'd always made loans in the massachusetts area which is where all of their um locations are but now they just opened a bit one in washington dc which i'll be careful about it seems like it's just a loan production office so they're excited about it or whatever but that always worries me when you open one in a completely different place um really low actual charge offs that they've had you know yeah things like that um so those are the actual those are the reserves but they haven't had actual charge offs meaningfully for there um this is why i mentioned this one to you before they just had a loss on the one in nantucket they foreclosed on like a three million dollar home or something in nantucket so they have one office in nantucket they don't have martha's vineyard but they're on this uh south shore um by like boston and places like that basically i think they might have one or two branches in boston but they're really basically all around boston and like cape cod type area and you're most interested in this one out of all the ones that we've gone over yes so this is one that i think can create tons of value over time the problem of course is that it's priced a lot higher we can see it's priced somewhere between um 50 percent higher and like 150 higher we've seen banks that are priced anywhere from two from we've seen banks that are priced you know two-thirds of book value this one is priced at 60 premium to book value so a lot of people would say why would i want to buy it and stuff but to me if you're earning a 15 return on equity and this bank has been between a 10 and 20 return actually for the last 20 years and if you went back to the 90s it's the same thing so it's really almost 30 years since current management came in so 30 years of earning about a 10 to 20 return on equity if you retain almost all of your earnings and earn 10 to 20 for me that's pretty good returns are going to fall in the long run between 10 and 20 percent so i could get like a 15 return on that um if that's what you get you know over time in your business and so those interest me more usually than the low price to book ones but this is very different as you can see from other um banks uh you know it's just bank stocks this is not i think this is kind of bank stock that value investors are usually not interested in it's the kind of one i am usually interested in it has a certain level of stability if you look at the 20-year record and stuff that if this was a huge bank if this was a jp morgan a bank of america a big regional bank or whatever people would talk about the record but they don't talk about it because it's such a smaller bank like this has the kind of record of a bank that buffett would buy into or something it's so stable in terms of its history that way um but you know it is not overly conservative or something and like it may be in terms of the loans it's making and everything but it has high loans to deposits one of the strategies of managing took over is to own as few securities as possible and to make a lot more loans which has risks that are different from when i talk about frost or something which is much more balanced portfolio of loans and securities um it doesn't have the lowest cost deposits possible but it's very efficient in terms of its actual operations so like it's not paying out the lowest amount of interest to people but it is and it doesn't have the stickiest deposits i'd say but it is able to have very low cost just in terms of everything that it does it's very it seems to be a very very cost conscious uh culture there so um but completely different from the rest of the group that we talked about but that would be the kind of one that would interest me more even though to most people it's like look it's at 1.6 times book but to me it's like it's here's something that's growing at 10 or faster a year has a 15 return on equity and as an 11 pe and then from here you would just be interested if you could talk to management maybe see that the way they think about it but i've read everything for the last like 20 or 30 years or something so i don't know if there's even that much that you need to do on that kind of stuff so to me it's like the only reason why the price is this is because it's a bank and something might change so that now it'll earn a different return on equity than they did for the last 20 years 30 years i mean we know this bank going back 30 years so um something could change that the last 25 years let's say is inaccurate now yeah but so the bank was found in 1834 but it did not have a good history until current management came in it didn't grow a lot all the offices are new i just think it's fascinating that banks can literally be around for hundreds of years this is one of the oldest banks in america yeah i mean some are older bank of new york i guess it's probably the oldest still around or something got it um yeah so cool we can we don't need to do but there i added examples of many more banks but we don't have to do this very well but anyway so there's at least half a dozen more that you could find easily that trade a price to book less than one and why do you think more investors aren't i guess so interested in banks um is it because the complexity of it no i think interest rates are the main reason would be my guess um so you had like is that a concern when you say for this company that you don't think their deposits are that sticky correct where if interest rates you know are going to stay low a lot of their customers will kind of go shop around maybe i mean i have their return on equity numbers since 1993. we've had a lot of different interest rates from 1993 today is it different though from well i guess but like i guess we are at like what record low interest rates though so how yeah i mean yeah we're at i mean depends on what yeah we're at about the same interest rates and some things that we had at different periods yeah they're about record lows i don't i just i wonder why you know we looked at a bunch of these that look very interesting right return on equity is great um cheap buy a lot of investor standards i think why aren't they just interested american banks are the most interesting like asset class or whatever you could say in the world right now and you've made that comment before why is that um i i mean i don't know so like maybe because of financial crisis is it because it's not sexy enough you know i mean it kind of is it could you know which it could be you know but the reason why i say that though is like we talk about lots of different industries that could have prob that are cheap right so price to book less than one p e single digits whatever but how many of them do we talk about that have no chance of not being around forever sure yeah that's the difference between banking and if we could talk about something that's like the other things that ever hit these levels that we can talk about are things that people are believed that because of um global warming and stuff will be eliminated completely right so they're things that they like have coal and natural gas and things like that that people have pricing that's that low there's some sort of retail thing that's that cheap because they think it's all going to go online and all that sort of thing or they're you know in the past when we saw it like tobacco or something things with huge lawsuits and stuff like that the the things we're talking about here are generally cheaper i mean to just give you an idea here right um i could be totally wrong and this something could go very wrong with this organization here hifs and that next year is that a different from the 27th this thing's cheaper than tobacco companies we just looked at the tobacco companies i'm not saying companies aren't cheap or whatever but you could buy a bank that has a record of creating value for the last 25 years or something at prices that are lower than tobacco which would you rather own for the next 25 years as you say which would you feel more certain will be around for another 100 years right yeah that's all i mean just in terms of the simplicity of what they're doing and the risks to it and stuff you know um i just i read all these investor letters and rarely do banks come up on them well that's the thing i find fascinating because the investors that i see don't pick specific banks which is one of the ones that it most i was even surprised with something like frost it's very rare the people who would own frost would buy it the big institutions would buy it while buying other things too so like they buy frost and prosperity or something because they like texas banks or whatever they want to just focus in on one bank and buy it um which is different from like the buffett approach focusing on these specific banks that they like like he liked you know m t bank or whatever and it wasn't necessarily that he had this big obsession with that region of the country or whatever but he had a chance to do a deal in there and liked management probably um you know i've mentioned that before with some banks that like um we did write up some specific banks and stuff but there are some unusual ones in their approach to things um i i guess they're also seen as very commodity-like and that's part of the issue here i see it a little different just like insurers um this company that we're looking at here hi fs for instance so we could look at theirs and then look at what was another one that we looked at um you know it could be uh let's pick any of the other ones fsfg for instance okay yeah okay so let's look at the return on equity graph for these two companies they're both banks they could not look more different one of them has a very stable 10 to 20 return on equity going back 20 years and we know it goes back 30 years right it has a chart that you would expect for like uh you know a serial company or something right then we look at this company it had highly cyclical earnings for 10 years going to the financial crisis at which it lost money and stuff and then it's had almost higher returns on equity every single year since then it's completely different the level like they're like so i'm not saying that first savings financial might not be better because it's half the price of hingham right so it may be a better stock it could be but it's achieving about a 15 return on equity 14.6 or something is that what i see there yeah so 1.4 roa 14.6 roe that's about the same as hifs so they both are hitting this number now but if we look the history of it is that that number's in the middle of a 30-year record the median that with little you know variation on either side for hifs with the same engine team the whole time versus this bank at which is the highest they've ever hit in the last 20 years and there's no pattern of an even level of earnings here right so i it's just like if it is as commodity of businesses people say that you should buy it on price to book would we see two gold producers and one has the record we saw of hr ifs right that stability and stuff look at that chart and then look at the chart of uh fsfg right i don't think like if it's a pure commodity banking that you would ever see that you know but with insurance companies with banks people think of them as like a commodity company but if you have the right culture if you have the right management if you have the right niche whatever it is you can have very different earnings and investing these two different banks must have gotten you very different results we can look at the chart we could probably charge them against each other um yeah so f yeah chart against f a s f s f g and c how will the chart let's see so look at that so that goes back to 2007 only for them right yeah so as you can see this is where the part that i find really interesting if you chart two banks against each other let's do for last five years to give you some idea right isn't that amazing yeah wow so and this is true for lots of different banks i find that they trade together so much um wow yeah that's wild yeah even like do year to date even if you zoom in as extremely your day i think we'll see yeah that's pretty significant matching even year-to-date in terms of the moves that you're seeing why does the banks move together a lot i don't know i don't there doesn't seem to be much of an independent investor base for specific banks that's separate from buying other banks i don't know what that's all about um there seems to be a very high correlation between banks of similar sizes and stuff even though i think that in the long run you get very different results um depending on which bank you pick uh you know they all tend to move together like i wrote up a bunch of regional banks and whatever but the truth is if you have bought that basket you know they were in a fairly now range that all of them a basket of all the regional banks in the country would have done pretty similar to one individual regional bank um so i just think it's very hard to know like why people are as pessimistic about banks i guess you could say about banks in general now or i should say all banks i don't have a problem with the idea that okay interest rates are low and likely to stay low that presents some real problems for banks because they have certain expenses that are non-interest expenses and so this eats into their earnings yeah does their pass record of course it matters but do you have to think of the future differently than the past because of where rates are um maybe they might have a slightly lower net interest margin it's already declined quite a bit um this bank will benefit somewhat so hifs will benefit somewhat because some banks and we were talking to one bank in person stuff that mentioned this remember some banks use short-term forms of financing and because of the way that lowering interest rates will work and all of that you're going to see a bigger benefit to that part of your portfolio where you can give your funding to the point where it can basically be funded for free now um so there were some banks that had to pay some we're saying we had to pay somewhat competitive rates and stuff on um short term money uh and they no longer will they basically can pay their customers nothing for it um in some cases significant like you know there's a bank that's like they're we're gonna pay like one percent or something they're gonna pay zero now you know 0.05 or something will be what they give people so um that's meaningful and for some banks like this one that uses cds and also some other sorts of things it'll be really big difference now at first it should benefit them a little i would guess now in the long run of course the question is does that mean that real estate loans and stuff drop by so much over time that there's no benefit to them um so like if rates fall more on the loans that they're making then they fall on their um funding that's one thing that people might be concerned about my bigger concern would be there's a certain minimum level of expense that you have this bank's incredibly low most banks are about twice this so if we knew i think their efficiency ratios in the 25 to 30 range i would guess that most banks are in more like 50 to 60 range i mean the average rank's even higher than that probably technically but i'd say double so this bank is about spending about half as much per dollar of revenue that it's generating so if you do the math on that um you know the net interest margin stuff is only where it is uh i mean it's only generating a net interest margin so here we go if you look at this bank right this bank's earning a 15 net interest margin right mm-hmm let's try another one let's try fsfg and see 15 return on equity 15 return yeah sorry 1.5 or so return on assets yeah so this bank having a uh one percent higher net interest margin so almost 50 you know 40 higher like their charge you know their the spread is about 1.4 times the size of the other bank yeah is earning slightly lower return on assets how's that happening that money isn't going to shareholders because it's going to be people at the bank they're less efficient in generating each dollar got it um so that's the biggest issue and it's an issue like when we talk about railroads and stuff right how efficient are they i just think that if a bank is twice as efficient usually they stay twice as efficient stuff like for instance because it's like a culture thing i believe hf hifs i believe within like three years or so management taking over would have been one of the best in the state so they've stayed one of the most efficient banks in the state for 25 years and in my experience like there are some size advantages and things over time but a bank that's one of the most efficient if it's run by the same people 25 years later will still be one of the most efficient i i've yet to see a bank that like i thought was run particularly inefficiently management stayed around for 10 or 20 years and they suddenly became more efficient you know got it cool i don't know what's going on with erin and i here well i think everybody so much for tuning in with jeff and i on the focus compounding podcast make sure hit that subscribe button thumbs this video up if you're watching on youtube we appreciate all the support and we will see you in the next podcast