- We were pleasantly surprised to note that Hormel Foods’ Spam sales grew 5.3% in the past year. At $2.62 for a 12 ounce can, it’s a pretty good bargain in tough times. We think the best breakfast in the world is spam and fried eggs.
- Why do we have an Office of Thrift Supervision? Of the 8,494 FDIC-insured institutions, only 831 are OTS regulated savings institutions. That’s less then 10%. Also, we tend to think the OCC as a tougher regulator than the OTS. Had the OCC continued to regulate Countrywide, we don’t think they’d have allowed the situation to get so dire.
- Publicly traded American Mortgage Acceptance Co. announced that their CEO is retiring. Guess what he’s going to be doing? No, it’s not to ”pursue other interests” and no, it’s not so he can “spend more time with his family.” In fact, it wasn’t any of the typical reasons given when CEOs abruptly leave a company. According to an 8-K filed with the SEC, it was to attend divinity school. For some reason we can’t explain, that strikes us as funny.
- Here’s a bank in Pittsburgh whose name we like: The Iron and Glass Bank. It has $431 million in assets, trades under the symbol IRGB, and it has a nice, masculine sound to it.
- Who was the better power hitter, Willie Mays, Mickey Mantle, or Hank Aaron? Surprise. Mantle and Mays had identical slugging percentages (.557), with Aaron right there with .555. It seems statistically impossible that they could be this close, doesn’t it?
- And speaking of great outfielders, something that really caught our eye was that Joe DiMaggio stole only 30 bases in his entire career. He was thrown out nine times trying.
- Sixty day or greater delinquency rates at Thornburg jumped 21 bps to 65 bps, but even at 65 bps, that’s a very low number. Thornburg has its challenges, but it doesn’t look like credit quality is one of them. A tip of the hat to their credit culture.
- We were just reading about a bank (Whitney National Bank) that bought another bank in Louisiana, paying a deposit premium of roughly 16% on core deposits. We tend to look at things like PE ratios or price-to-book ratios and usually forget to look at premiums on deposits, but it always fascinates us. If this is unfamiliar to you, it’s very simple: Using this as an example, if there were $100 million of core deposits, it means they paid $16 million for the entire bank.
- Do you remember the so-called Texas Ratio from the late 1980’s? It was a formula that was meant to be predictive of serious bank problems and, possibly, of a bank’s likelihood of failing. The formula is calculated by taking total nonperforming assets, including loans 90 or more days delinquent, and dividing them by tangible total equity plus loan loss reserves. If the number is over 100%, it means, essentially, that problem loans exceed capital, and the higher the number, the more troubled the institution. Highly respected data-base publisher SNL published a list this week of those banks with the highest ratios, and Colorado Federal Savings Bank topped the list with a Texas Ratio of 709. Wow. A simple way to look at it is that if the Ratio is 700, that mean that for every $1 of capital + reserves, the bank would have $7 of bad loans.
- Will a high Texas Ratio be really predictive of a bank’s failure? Probably, if the ratio is high enough, but it’s a lot different this time around. In the late 80’s and early 90’s, there just wasn’t that much capital available to banks. Today, it seems like at least once a day, some bank is announcing the raising of new capital. There is a whole lot of money available this time around. A whole lot.
- Every mortgage banker needs to research outsourcing and off-shoring. We’ve seen many clients do little things (like have their docs done in India) that have huge paybacks. Having now said that, we have an excuse to mention the world’s greatest off-shoring story, so here goes: Estonia is probably the greatest success story among all the former soviet republics. They have a flat tax, a booming economy, and an entrepreneurial spirit that seems almost American. In any case, this small country of only 1.1 million people realized that although they have a Navy and an Army, they couldn’t afford to have an Air Force, so they contracted it out to Sweden. We’re not kidding. They pay the Swedish Air Force to fly planes that patrol their borders, along with some other typical Air Force functions. They have actually out-sourced and off-shored part of their national defense! Don’t you love it?
- There is lots of talk about potential bank failures, and this year we’ve already had four of them. For all the hand wringing, what we’re faced with is nothing like what we’ve in our lifetimes. In 1989, a total of 534 institutions failed. That’s ten failures a week, or two a day. Can you imagine?
- This Day in History may have changed everything. On June 12, 1987, exactly 19 years ago, President Ronald Reagan challenged Soviet leader Gorbachev to tear down the Berlin Wall. Two years later, portions of the wall began to fall, and within a year, the entire Soviet empire was in shambles. The State Dept. and all his advisors struggled to get Reagan to leave out that phrase “Mr. Gorbachev, tear down this wall.” There was huge pressure on him to say something less provocative, literally in the limo driving him to the speech that day. But Reagan knew what he wanted to say, and the world has never been the same.
* A sad day. Irv Robbins has died at 90. Robbins founded Baskin-Robbins in 1945 right after graduating from the University of Washington, and today there are more than 5,800 Baskin-Robbins stores in 34 countries. Despite all those exotic flavors he came up, with there’s still nothing like a cold chocolate ice cream on these hot summer days and nights. So long, Irv
- And how about 82-year old Chuck Berry? We just looked at his 2008 tour calendar and aside from touring the U.S., he’s also playing in Germany, France, England, Amsterdam, Moscow, Helsinki, Ireland, Switzerland, Spain, Brazil, and Croatia. How does he do it at 82? And why? Here’s to you, Chuck. You really are Johnny B. Good.
- And thanks to Chris M. in British Columbia for the photo below. We think it’s funnier than any of the cartoons we normally run. Hey, Dick, relax. Loosen the tie. Or even take it off.
Joe Garrett and Corky Watts
Garrett, Watts & Co.
