I´m a community bank guy. Ok, ok yeah I worked for Citigroup for a bit in my 20’s, but at heart I am a community bank guy.
I recently took a small long position in my personal account in County Bancorp, Inc. (ICBK). Nicolet Bankshares, Inc. (NCBS) is buying Manitowoc Wisconsin based County Bancorp, Inc. and over the last month there have periodically have been good arb spreads.
What´s interesting to me is when you read about County Bancorp´s business model there´s just not a universe in which a Wall Street bank would acquire them. I get that branch overlap and geography matter but any bank who´s niche is dairy lending is never going to be a part of a New York based financial firm.
Culture matters. Trust matters. Any merger involving County was and always would be a merger among banks in America´s heartland.
They say history rhymes. Remember the term the Money Trust? I know, neither did I. But I´ve been listening to Roger Lowenstein´s America’s Bank: The Epic Struggle to Create the Federal Reserve.
Take yourself back to high school American History Class. The expression falls flat today but the Money Trust was a big deal about 100 years ago. What this term represents however, is alive and well today. The idea of a Money Trust was that of a Wall Street Cabal that pulled the strings of the US economy in the background. Sounds a lot like Occupy Wall Street anger a decade ago right?
Between the panic of 1907 and the end of the Wilson administration in 1921 major issues inside the US included:
- Concerns about sound money vs. inflation – typified by William Jennings Bryan who after unsuccessful presidential runs remained influential and became Secretary of State under Wilson
- Urban vs. Rural conflicts–country bankers at odds with big city (and especially NYC) bankers. Urban Bankers/industrialists were pro tariff, pro trust (monopoly) and anti-inflation
- The ongoing efforts of the Aldrich Plan and subsequent formation of the Federal Reserve and with it–fiat, which through the twisted looking glass of history is now officially a four letter word
- Workers and women’s rights–40 hour work week, worker´s comp
- A global pandemic
It feels a lot like 2008 to 2021. Distrust for Wall Street and this urban/rural divide in America are as strong as they have ever been.
Even as my partners and I fund hard money loans, I´m still drilling down on what our model will look like in the next 12-18 months. Sometimes your strength is less about what you are great at, and more a matter of what your competitors can’t do no matter how hard they try.
I’ve spoken with smaller hard money lenders that have anywhere from $2M-10M of loans outstanding at a time. They have room to grow their business but aren’t interested in anything that smells of Wall Street. Helping them grow their business will require real trust, something that’s been in short supply for at least the last hundred years.
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