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Wednesday, February 12, 2025
 

MANAGING DIRECTOR:
Scott Carrithers
 
PORTFOLIO SALES AND SERVICE:
Chris Thompson • Sean Doherty • Mark Tranckino • Brian Schaff
Natalie Regan • Aaron Stoffer • David Farris • Jeff Macy 
Josh Kiefer • Todd Czinege • Trey Valentine • Cody Kreutziger

US Treasury Market
Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
02/05/25 4.30 4.32 4.30 4.17 4.19 4.21 4.25 4.33 4.42 4.70 4.64
02/06/25 4.31 4.32 4.31 4.18 4.21 4.23 4.28 4.36 4.44 4.70 4.64
02/07/25 4.31 4.33 4.33 4.23 4.29 4.31 4.35 4.42 4.50 4.74 4.69
02/10/25 4.33 4.34 4.34 4.23 4.28 4.30 4.34 4.42 4.50 4.76 4.71
02/11/25 4.33 4.33 4.34 4.24 4.29 4.31 4.37 4.45 4.53 4.80 4.75

The data in the table above is static as of the time it was pulled, so rates may have changed. Treat all data in this table and PMR as indications only and availability is always subject to change. This information was pulled manually from sources we believe to be reliable. New source, as of 12/12/2022, Bloomberg, L.L.P.  As of: close of business 2/11/2025.

                                                                                                                                                                                        

Asset Strategy Performance 2002-2024

At BancPath we are always doing market research for the benefit of our clients.  We thought you might find our recent study to be interesting.

Over the last 22 years, we measured the Top and Bottom performing institutions, and then segregated each by Asset Strategy. Those who pursued a predominately High Loan/Asset Ratio v. those who pursued a relatively High Investment/Asset Ratio Strategy.

You can see the results of this below:

A couple of interesting observations:

  1. The High Loan Strategy banks had an average Loan/Asset ratio of 67% and an average yield of 5.69%
  2. The High Investment Strategy banks has an average Investment/Asset Ratio of 37%
  3. The High Loan Strategy resulted in better performance on Net Interest Margin, but lower on ROA
  4. The High Investment Strategy banks typically did better on ROA, EXCEPT in the period since 2020 (the lowest yields on securities in the last 100 years)

What might have been some of the reasons behind this disparity? Call Report data can only take us so far, but based on experience we can make an educated guess on some of the factors that impact this:

High Loan Strategy:

  1. Did these banks achieve a high enough return on loans to cover the additional overhead necessary to acquire and service those clients resulting in lower ROA?
  2. Did credit write offs overwhelm the additional income generated from the loan strategy, resulting in diminished ROA?
High Investment Strategy:
  1. By properly extending in previous cycles, these banks were likely able to positively impact income streams through lower yield troughs in the market.
  2. The pursuit of this extension strategy during and after 2020, likely led to poor performance.
  3. A poorly designed strategy revolving around negatively convex assets may have led to extension risk.
Again, it is impossible to tell from Call Report data exactly what is driving some of this. The initial analysis is interesting nonetheless, and as we think about bank balance sheets all day every day feel free to reach out and see if there are ways we can assist you in becoming a top performer with either loan or investment strategies.

Also, several of us will be at the ABA Community Bankers Conference next week in Phoenix, so if you are going be sure to stop by booth #705 or give us a call.


This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.

•Not FDIC Insured •No Bank Guarantee •May Lose Value