The Best Bankers in America

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It's easy to get caught up in numbers and metrics when you're thinking about investing, but at the end of the day, people are at the root of everything that happens in the financial world. Every industry has its shining lights, and the bank industry is no different.

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In this episode of Industry Focus: Financials edition we discuss the top bankers in the modern era, including Jamie Dimon, Richard Davis, Robert Wilmers, and more. Listen in to hear who made the list and what unique contribution they bring to their institutions and the industry. Find out a few massive shifts that have happened in the banking industry in just the last few decades, and the bankers behind them, how some of the top-yielding banks have performed fantastically throughout multiple financial crises in the last 30 years, and more.

A full transcript follows the video.

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This video was recorded on Aug. 7, 2017.

Gaby Lapera: Hello everyone! Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. You're listening to the Financials edition, taped on Monday, August 7th, 2017. My name is Gaby Lapera and joining me via Skype, but I can actually see him today, which is very exciting, is John Maxfield, all-around great guy and super smart contributor. How's it going, John?

John Maxfield: It's going great! Thank you very much, Gaby, for those kind words.

Lapera: Yeah, no problem. They're true, so it's OK! [laughs] 

Maxfield: [laughs] I'm going to make my wife listen to this one!

Lapera: So, listeners, just so you know, this show is pre-taped. It's going to go out on August 28th. If you listening to this on the 28th, I'm on vacation, I'm somewhere in Maine eating my weight in blueberries right now, it's very exciting. Anyway, today is a very special show. I know I say that all the time. I sound like Mister Rogers. But today's show is actually special, because today's show is all about stories. I think a lot of the time, we think about numbers and we think about metrics when we're talking about investing and thinking about investing. And we forget that there's a very human element to investing. That's why, today, we're going to talk about seven bankers, and use them as a lens to understand both what it takes to be a great leader and what it takes to be a great bank. We're going to use those stories to humanize all of this. Does that sound good, Maxfield?

Maxfield: That sounds great. I'm really excited, because one of the great things about our job is that you have these opportunities to talk to these really incredible people once in a while. I've had a chance in the past couple of years to talk to a lot of our top bankers in this country. So, what we're going to be doing is, we're going to tease out the lessons that you can learn from the seven extraordinary bankers in particular, which then whether you're interested in the financial system in general or in stocks and extraordinary banks more specifically. I think that you all will really appreciate the context that we're able to give around the bank industry.

Lapera: Definitely. I think with that, I'm going to dive right in, because we have a lot of content today, which is very exciting. I'm going to tell you a little bit of a meandering story, a little bit of a Maxfield story, if you will. [laughs] I'm going to start with this challenge that was posed hypothetically to myself, which is to pick the top three bankers in the United States. The first one is Alexander Hamilton, which kind of goes without saying. He was the one who was like, "You know what we should do? We should have central banking. Also, America's future is not agrarian." You know, I think he called the right shot on both counts with that one. 

Second banker that I think everyone can agree was huge for the American financial system is J.P. Morgan. He helped bail out the American financial system, he created these connections with Europe. Without him, I don't really know where we would be as a country. But then, if forced to pick a third one, and I know that Maxfield definitely agrees with me on this, I would pick Hugh McColl of Bank of America (NYSE: BAC). I don't know if listeners know this, but you know how you can go to Bank of America and there's a Bank of America in basically every state -- except for Nebraska, much to my ire. There's a Wells Fargo in Nebraska. Anyway. Before, you couldn't do that. Before, it was really hard for banks to have branches, and it was illegal in a lot of states for banks to have more than one branch. And that was for a variety of reasons. But, back in the day, Hugh McColl, he was in North Carolina, one of the few states that allowed banks to have more than one branch, and he really pushed for legislation to be changed so that banks could branch outside of their state. Without that, we wouldn't have the financial system that we have today.

Maxfield: Yeah. I think that's a great overview. Alexander Hamilton wasn't actually a banker, and I think this is exactly the point you're trying to make -- if you look at the bank industry that we have today and you had to pick three people who had the most significant contribution to how it has evolved, the first one, yeah, Alexander Hamilton, because he set this thing up. The second one, J.P. Morgan, because he was the link between us and Europe during the American Industrial Revolution or the Gilded Age, which is really where the United States of America gained its power. And then, more recently, Hugh McColl. To your point, when he started banking, Hugh McColl joined a small bank in North Carolina in 1959. When he started banking, it was called unit banking at the time. Unit banking meant that you could basically just have one location in most states. You couldn't have branches in most states. And you couldn't operate across interstate lines. And think about how different that is relative to what we have today, where we have a bank like Bank of America and a bank like Wells Fargo and JPMorgan Chase (NYSE: JPM), literally, the branch networks span the North American continent. And the person who is most responsible for that is Hugh McColl. What he did is, he really proactively pushed, he saw the importance of expanding branches across interstate lines and having larger branch networks. 

Let me add a little bit more context around this. There's a guy named Charles Calomiris who's probably the top bank historian in the United States. Really, in particular, he's at the top when it comes to understanding how the regulatory environment has evolved over the years in the United States. And one of the things he talks about in this incredible book called Fragile By Design that goes back through the history of banking and regulatory policies, one of the things he talks about in there is that, in Canada, they basically had no banking crises over the past couple hundred years, whereas in the United States, we've had 17 major banking crises. And you say, "Why would the United States have so many but Canada wouldn't?" And one of the reasons is, we didn't let our banks, for all these years, expand and diversify geographically. If you were an agricultural bank in Nebraska, to your point, which is also, I'm from Wyoming, right across the border to Nebraska, my family's business is principally in Nebraska. And what you would see is, you would have these agricultural depressions or you would have droughts that would hit those areas. Well, the banks in those areas, if you could only operate in that area and you had a drought and you were an agricultural bank, you had no hope. The farmers wouldn't be able to pay their debts and you would go under. What Hugh McColl realized, and other people realized this, too, is, look, if you could have branches in all of these different regions, you would reduce the fragility of each individual bank. And then, you wouldn't have as many financial crises, because financial crises are fueled by bank failures. And Hugh McColl is really the one who, at Bank of America, pushed through, came up with this idea and proactively pushed through the legislation that changed the United States banking structure from one based on unit banking to what we have today.

Lapera: I think listeners are probably thinking to themselves, "This is a wonderful story!" Thank you, listeners. We really appreciate that. Secondly, they're probably also wondering, "What is this meant to illustrate?" And I think the thing that we're trying to get at here is that really great bankers and really great banks are really proactive at seizing opportunities and making opportunities for themselves.

Maxfield: That's exactly right. The laws were against Hugh McColl's ideas, so what did Hugh McColl do? And I literally talked to Hugh McColl two weeks ago, and the way he explained it was great. He said, "Look, it was my banker." It was Bank of America's in-house banker who wrote the legislation for what was called the Southeast Regional Banking Compact, which then allowed banks in all the states in the Southeast to have branches within each of them, so you could expand and have these regional banks. And it was Bank of America that got that ball rolling. They wrote that legislation, got that ball rolling that eventually culminated in a piece of legislation that was passed in the U.S. Congress in 1994 that then opened up branch banking across the entire United States.

Lapera: Yeah. I think, how that's applicable today is, what banks should be looking for, generally, the opportunities that they're going to need to seize to create opportunities for themselves, are probably going to be in the tech arena. So they stay relevant, and not just relevant but push beyond that, and find the next thing that will make them bigger, more stable, draw more customers in.

Maxfield: Oh my God, that's such a good transition, Gaby. The reason that such a good transition is because one of the benefits of Bank of America today, one of its advantages is, because of Hugh McColl's work, building that banking to what it is today, the behemoth that it is, it has the economies of scale to invest in technology. And technology is where the battle of banking is being fought right now, and really will be fought in the future. And it's because of the scale that Hugh McColl built that they're going to be able to compete effectively in that arena.

Lapera: Yeah, definitely. This is something that you see with smaller banks, it's really interesting because they don't have the economies of scale, so they're playing catch-up, essentially. Like, they're just starting to get phone apps. They're just starting to do the online banking instead of the physical branch banking. And you see other banks, the bigger banks, are light years ahead. And this isn't to say that consolidation is 100% great all the time. Everyone knows about too-big-to-fail and all that. But, in a lot of ways, this kind of foresight and this push to change things is the thing that made Bank of America such a great and such a big bank today.

Maxfield: Yeah, I totally agree with that.

Lapera: Okay. So, let's turn to the Buffett of banking, Robert Wilmers of M&T Bank (NYSE: MTB). Warren Buffett has this really great quote, it goes, "Be fearful when others are greedy and be greedy when others are fearful." That basically means that there's cycles. I think everyone knows this, there's cycles to the stock market. But when the stock market is really high and everyone is buying everything in sight, that's the time to be conservative, to think, "Do I really need to buy this? Is this really a great idea right this second?" And let everyone else drive the price up of everything. And when the cycle inevitably comes back down, that's when you should jump in and be like, "I already know this is a great company and I'm going to buy it and add to my portfolio now." And Robert Wilmers exemplifies this, except with banking. It's really interesting.

Maxfield: That's exactly right. Be fearful when others are greedy. Warren Buffett has a lot of amazing sayings. I want to make one other point about Warren Buffett before I go on that line of thought. There are few people in this country who truly understand the fundamental mechanics of banking better than Warren Buffett. He understands it, you get that sense. He understands it from his experience in the insurance business, because if you look at what Berkshire Hathaway is, it's fundamentally predicated on an insurance company, and using the float for that, to then take that float, invest it profitably. And the way he invests profitably is to be fearful when others are greedy and greedy when others are fearful. So, that's really why Buffett and banking, where those two come together. Also, he owns probably the best portfolio of banks that's ever been accumulated ever, certainly in the United States.

But there's another component of this that makes Robert Wilmers, in my mind, the Buffett of banking. And that is, Robert Wilmers, since he took over M&T Bank in 1983, this guy has just produced phenomenal returns. Buffett-like returns. Let me give you some specific numbers to hang your hats on. No. 1, if you go back to 1983, when Wilmers took over M&T Bank, of the 100 largest banks that were operating in the country at the time, only 23 remain today. That was a result of the consolidation wave that we talked about, in the context of Hugh McColl. M&T Bank is the top-performing bank in terms of total shareholder return over that time period. And you can even expand that out to see how incredible the returns Robert Wilmers has produced at M&T. Go back to the 1980, that was three years before Wilmers took over, but if you look back there, it's a good, clean number. And you take all the companies in the United States, all the publicly traded companies in the United States that were there then and are still here today, M&T Bank is the 16th highest performing stock over that time period. So, you're talking about a guy who has really used these same principles and understands cycles and when to be aggressive, when to pull back from the market in the same ways that Warren Buffett does. And, not coincidentally, one of M&T Bancorp's biggest shareholders is Warren Buffett himself. So, it's this beautiful narrative arc that really comes together.

Lapera: I'm going to insert myself really quickly. For M&T Bank to be the 16th highest returning company, that's crazy. Banks don't really do that. Banks are slow and steady wins the race tortoises, not superstars. It's crazy.

Maxfield: And the way he's done it, to your point when you set this all up about M&T, is that every time the United States financial industry has gone through a crisis, Robert Wilmers has gone in -- it's such a well-run bank that they didn't get into trouble in these crises, they just come in and basically rescued other banks and bought them for pennies on the dollar when they ran into trouble. And you do that time and time again. He did it through the LDC crisis, the less-developed loan crisis, the savings-and-loan crisis, they did it in the early 2000s when we had issues in the markets following September 11th and the whole Enron scandal, and then he bought a whole bunch of banks in the wake of the financial crisis. He just, over and over and over again, he's just done this and it's produced these phenomenal returns.

Lapera: Yeah. And the reason he can do this, like you mentioned, it's because the bank is really well managed. Which actually leads us perfectly into our next person, which is Richard Davis, who has really shown us that great banks are really efficient. And the reason that Richard Davis kind of stands out is, he's not about cutting expenses. He thinks, if you need to spend money to have a really good underwriting program, then you spend money to have a really good underwriting program. Where he tries to improve things is bringing in more money.

Maxfield: Right. Full disclosure, I'm a huge fan of Richard Davis, and he's been incredibly kind to me with his time and his knowledge over the past couple years. Of anyone that I've interacted with, he's probably taught me more about banking than anybody. There's a number of different things that he's taught me. The first is, driving efficiency at a bank is really important, because every bank has to earn a certain return on equity. If you're inefficient, if your costs are too high relative to your revenue, in order to earn that profitability that investors expect, you have to cut corners elsewhere. And where banks go to cut corners is their underwriting policy. Because fundamentally, what banks do is they sell money. And anybody wants to buy money so long as the price is right. If you go out and sell people money, make them loans to people who either shouldn't be having those loans, or the terms are too easy or the interest rate, i.e. the price, is too low, you're going to set yourself up for literally failure when the United States goes through, again, to go back to the very beginning, one of these 17 crises that we've gone through over the years, you're going to set yourself up for failure. 

Well, Richard Davis, he understands this in a very fundamental way. He understands how important it is to run an efficient bank. What is so unique about Richard Davis and the way they run U.S. Bancorp (NYSE: USB) -- and Richard Davis is now the chairman of U.S. Bancorp, he retired earlier this year. A guy by the name of Andy Cecere, it looks to me like he's running the bank in a very similar way to Richard Davis, which shouldn't be surprising because it looks like he was Davis' understudy at U.S. Bancorp. One of the things that Richard Davis has always said is, "The way to drive efficiency is not to reduce expenses on the bottom line," because what you're trying to do is widen that margin between revenue and expenses, "the way to do it, you drive efficiency through higher revenue." And it's just such a great way to think about banking that, whether you're a bank investor or a banker themselves, it's a great way to approach the profession. 

Lapera: Yeah. His core message, when you think about it, is, never lower your standards.

Maxfield: That's exactly right. Another point he has made is that, in the wake of the financial crisis, investors are particularly discerning of banks. We saw Citigroup almost go under, we saw Bank of America almost go under. WaMu went under, Wachovia went under, National City went under. We had all these banks that ran into trouble, and investors are particularly discerning, it's fresh in their minds, they're very discerning. Another fundamental point, I call this Richard Davis' twin pillars of prudent and profitable banking. One is driving efficiency through revenue, and the second is focusing obsessively on your credit score. U.S. Bancorp has the top credit score in the entire bank industry in the United States, and that gives it enormous advantages, and it signals to investors that this is an incredibly well-run bank.

Lapera: Yeah. If you are listening to this show and you're like, "Gosh, I hate stories, what's something tangible that I can get out of this?" Efficiency ratio, that's something tangible that you can get out of this. That's something that you can look at at a bank, and that's something you should definitely look at at every bank you are considering investing in. If the efficiency ratio is very high, probably a bad idea to invest in that bank. Let's turn to Jamie Dimon, who actually has a fair bit in common with Richard Davis when it comes to this other kind of metrics-driven thing that we're going to talk about when it comes to great banks, which is a fortressed balance sheet. 

Maxfield: Jamie Dimon is the chairman and CEO of JPMorgan Chase, which is the largest bank in the country. JPMorgan Chase, if you think about the history of banking in the United States, and if you had to think about one brand, JPMorgan is probably the one that comes to mind most readily. And they've had these incredible bankers throughout the year, starting with J. Pierpont Morgan himself, and then they had a series of bankers in the teens, twenties, thirties, forties that were also incredible bankers. Well, Jamie Dimon is right along with them. He's a phenomenal banker. There's no question about it. 

And he's a phenomenal banker for two reasons. No. 1, he understands the importance of what he calls a fortressed balance sheet. Banks, we've talked a lot on this show in the past about, the banking business model is predicated on leverage. You can put in a little bit of capital, you put in $1 worth of capital, and you go out and borrow $10 worth of debt from depositors and institutional investors. You lend that out to people and you make more money because you charge a higher interest rate on the loans that you lend out than the interest rate that you're being charged by depositors and institutional investors. And that's really where you make your money. Well, that leverage makes you very fragile, because only 10% of your assets would have to default and your entire bank is totally kaput. Well, Jamie Dimon understands this so fundamentally. He talks about concept of a fortressed balance sheet. And what he means is, you have to have a lot of high-quality capital that can absorb losses in times like that. And they have something like an upwards of $190 billion in extremely high-quality capital. $190 billion, it's easy to get lost in how big some of these numbers are. That's a lot of money. There are not a lot of banks that are that big on the asset side. The other thing that Jamie Dimon talks about in the context of a fortressed balance sheet is liquidity. This is having cash, having assets in a form that is easy to turn into cash that you can then satisfy depositors in the event that you have a run on your bank. So, that's either cash itself or some type of short-term government security that can be easily traded. 

So, those are the two fundamental principles of a fortressed balance sheet, but let me bring up one more point about Jamie Dimon. This is when, in my mind, as someone who has read dozens of books about banking and bankers and by bankers, this is when it really clicked to me what we're dealing with in terms of Jamie Dimon. In his 2006 shareholder letter, which would have been written at the beginning of 2007, so probably February or March of 2007, he issues this apocalyptic warning, basically saying, "We don't know when trouble is going to strike, but when it does, we think we're going to be ready. We don't know where it's going to come from," all these different things. Well, you go and you look at the other big bank CEOs at the time -- Chuck Prince at Citigroup, Ken Lewis at Bank of America, and at other banks and you read their shareholder letters, they were all talking about, "Growth, growth, growth, oh my God, everything is so great, keep going, keep pushing, keep growing." Well, in August of 2007, when the first tangible sign of the financial crisis struck, and that's when this French bank, the BNP Paribas, suspended redemptions for these mortgage-backed security investment funds that they had. Then, in March of 2008, Bear Stearns went under and it was purchased by JPMorgan Chase at the behest of the government because the government needed somebody to help them. And then, in September of 2008, Lehman Brothers failed and the real crisis struck. Again, in that time, JPMorgan Chase came in and rescued a $300 billion bank based out in my neck of the woods called Washington Mutual. In fact, I was up in Seattle yesterday and I saw the old Washington Mutual building. Sheila Bair, who ran the FDIC at the time of the crisis, who was actually a very controversial figure, as I've come to learn from a lot of bankers, she had a great point about JPMorgan Chase and Jamie Dimon. She said, "In times of crisis, most bankers will come to the government for help. But there are some banks that are so well run that the government will go to them for help." And JPMorgan Chase was one of those.

Lapera: Yeah. Again, reiterating all the points that we've had before, with Jamie Dimon, he's really interesting because he's kind of an amalgamation of a lot of these different points. He's got this fortressed balance sheet so that he can turn on the dime and acquire companies when things are looking bad for everyone else, or help people out, as it may be. He never lowers his standards, that's why the bank is so well run that the government turned to them for help. And not only that, he's got this intangible thing that is really hard to measure and put into words, but this instinct and this deep, fundamental knowledge of what's going on in the industry that lets him see what's coming when other people can't.

Maxfield: Yeah, I would agree with that.

Lapera: I know investing is interesting to a lot of people because of the money. You can make a lot of money when you're investing. But to me, the reason that investing is so exciting and so interesting is because it's about these stories. Maxfield, I know you're also a historian, there's these two schools of thought when it comes to history, the great man school of thought of history, which is that you have these great men or women who are driving history forward and making these turns and these forks in history that decide how we go, and then there's the trends and forces part of history. And honestly, the answer is a little bit of both. But, because it's a little bit of both, that means there are great men, and I think Jamie Dimon is one of those great men, especially in banking history.

Maxfield: Yeah, that's such a great analogy.

Lapera: I figured you would get a kick out of that. Let's turn to Terry Turner, haha, of Pinnacle Financial Group (NASDAQ: PNFP), who has bet the farm on culture. This bank, to give you guys some context, this bank didn't exist 20 years ago. And now, it's a huge bank.

Maxfield: Terry Turner, he's the CEO and founder of Pinnacle Financial Group, which is this Bank based in Nashville, Tennessee. Here's an interesting point about Nashville, Tennessee. There was a time when it was known as the Wall Street of the South because it had all these major regional financial companies headquartered there. Well, through the consolidation wave that we talked about in the context of Hugh McColl, all these banks that were based in Nashville and financial companies that were based in Nashville where eventually bought by all these other companies headquartered elsewhere. And 1999 was the year that the last major regional bank that was headquartered in Nashville was bought out by a bank named AmSouth Bank, which was later bought out by Regions Financial, they're based in Alabama. Terry Turner and two of what he calls his running mates, a guy named Rob McCabe and another guy named Hugh Queener, they were top-level executives of First American, which was the Nashville-based bank that was bought out by AmSouth. They were top-level executive at the time. And one of the things that Terry and Hugh and Rob noticed at the time was that, in this consolidation wave, customer satisfaction at banks went down. And when customer satisfaction at banks goes down, market share becomes vulnerable, and it can move to other banks. So, these guys got together and said, "Why don't we start our own bank? And we're going to predicate the entire strategy, the entire culture at this company on stealing market share from these larger regional competitors. And what we're going to do is, we're going to set up our control system, the way we compensate people, the environment in which they're able to work, there's going to be minimization of micromanagement, and what we're going to do is go and recruit the top bankers from these other banks, bring them over, bring over their teams, and bring over their books of business. And by doing that, we're going to be able to grow at a very, very rapid pace." 

But not only grow at a very rapid pace, because in the banking industry, one of the things that you'll learn is -- and, Dick Kovacevich, who was the former CEO of Wells Fargo, which Wells Fargo's reputation has been somewhat destroyed over the past few years, but he still made the very good point ... it's hard to say, I don't want this to come across wrong, but he was a very good banker, even though they made very significant mistakes, as we're learning right now. But, he had this great saying -- "If it's growing like a weed, it probably is one." And that's so true in the banking industry. If you're growing too fast, it means you're probably cutting on your lending standards, and then you'll eventually get caught up in one of these cycles that we talked about. Well, Terry Turner, I was talking to him a couple weeks ago, and he made this great point. He said, "Look, when these really experienced bankers bring over their books of business," and the average banker at Pinnacle has 33 years worth of experience. When these bankers and these groups come over with their books of business from these larger regional banks, not only does that let them grow quickly. But then, they can leave the bad loans at the bigger banks. So, it's almost reverse adverse selection. Not only can you grow rapidly, but you can also grow safely. And that is why Pinnacle Financial has been able to go from $0 in assets in the year 2000 to more than $20 billion in assets today.

Lapera: And it's because they care, right? That's the whole point with Terry Turner. He and his running mates, as you called them, they really, really care about making a great bank, and they really care about having a great environment for the bankers as well. And they have, again, this thing that you've heard over and over again, they have these standards and they really hue to them, and that's how they've basically been able to make something from nothing.

Maxfield: And they only hire the best bankers. He told me, literally, if you go in to Pinnacle Financial and you bring a resume and you reach out to them, there's basically a 0% chance you're going to be hired. What they do is identify the top bankers and go after them. And sometimes, it'll take six or seven years to convince these people to come over. But, one of the reasons they're able to convince these top revenue producers to come over to Pinnacle Financial is because they can set up their control system in a different way. A control system is like your credit risk management system. They set it up in a way where there is much less bureaucracy involved because you're dealing with all these bankers who have 30 years worth of experience, and in many cases, they're bringing over existing books of businesses from clients that they know really well and have dealt with for decades. So, it's reducing that bureaucracy that has made it such an attractive place for bankers who really want to serve their customers, grow their business, and be excellent bankers, as opposed to spending all of your time dotting I's and crossing T's.

Lapera: Yeah. I'm going to hustle us along a little bit because we have been talking for a while. Thank you guys for sticking with us. We're going to turn to Joseph Ficalora, who is the CEO of New York Community Bancorp (NYSE: NYCB). I know he's kind of an interesting one to have on the list, because there was, last year, this pretty huge strategic blunder when it came to the potential acquisition of Astoria Financial. It didn't go through, banks lost a lot of value. But, New York Community Bancorp does exemplify something that's really interesting, which is the value of operating in a niche. They, in case you've never heard of New York Community Bancorp, like their name implies, they're based out of New York City, and they specialize in multi-family homes, which is apartment buildings. More than that, they specialize in rent-controlled apartment buildings. That's a really great area to specialize in, because you know those apartments are going to constantly be filled, because they are rent-controlled, and in New York City, that's very valuable. That means you have this extremely steady, stable loan portfolio, because people are not going to default on these loans because the apartment buildings are always full. That has meant that, in the past, before this whole Astoria Financial thing, New York Community Bancorp has had one of the best efficiency ratios in the business because they can keep their underwriting standards very steady and they didn't have to spend a lot of money on it, because they knew what they were getting into with each of these loans they were making.

Maxfield: And even more importantly, and you brought this up, not only is their efficiency ratio very low, because they have these large customers, and each of these transactions are big transactions as opposed to having a whole bunch of little transactions, and any time you have just a few big transactions, you have scale as opposed to little transactions where you have to do the same amount of work but each one brings in less money. But, because of that rent controlled aspect, because of the fact that those buildings are always full and there's always revenue coming in through thick and thin, they've charged off essentially nothing. Let me give you an example. In 2009 and 2010, these are the worst years for the banking industry in terms of charging off loans, the average bank on the SNL U.S. Bank & Thrift Index charged off 2.83% of their loans in 2009 and 2.89% of their loans in 2010. New York Community Bancorp in those two years charged off 0.13%, and 0.21% of their loans. So, an incredible business model. 

I know we have to hurry, so I'll just make one more quick point on this. I think Joseph Ficalora is an excellent CEO. I think he's an excellent CEO. Where Joseph Ficalora fails is his inability to admit a mistake. What I mean is, the Astoria Financial deal that they entered into and they've gone through all this stuff over the couple of years, they then had to get out of it because it ran up with all these regulatory problems associated with the whole deal, when they exited that transaction, they destroyed an enormous amount of shareholder value. And what you would do in that situation as an excellent CEO is you would come in and explain to your shareholders, look, I know I've produced some of the best returns in the bank industry since the mid-1990s when we went public. And we have one of the best business models in the entire banking industry, and nobody should question what we do and how we've done it and the value and wealth that we've created for our shareholders. But, everybody makes mistakes. I make mistakes every freaking day, you could ask my wife. When you make mistakes, you have to come clean. That's so critically important. When you owe a fiduciary duty to your shareholders, when you destroy value through a mistake, and you can't admit that, that says something about you. And it tarnishes a reputation that absolutely should not be tarnished. Because again, Joseph Ficalora has done a lot for his bank and his shareholders, and there's just no reason for him to, at the tail end of his career, to have this tarnish it.

Lapera: Yeah. This actually gets into our last banker. This is something that I think a lot of people have probably experienced in their own lives, but one of the things that you saw in common among all these people, especially with our last banker, is that they were kind and they took the time to talk to you. Even though these people that you're talking to are the best of the best, all of them were still humble.

Maxfield: Yeah. And let me be clear -- Ficalora won't to talk to me. I have tried to talk to him, he won't talk to me. I was pretty critical on that Astoria deal, and I suspect that has to do with it. But, I think that's a mistake on his part, but that's Joseph Ficalora's decision. So, that is what it is. But, my mom plays bridge, and somebody said this quote and one of her bridge games the other day that I just thought was so excellent, and it's, "Rudeness is the weak man's imitation of strength." One of the things that I have found talking to these CEOs, and the one who really drove this home to me, he didn't make this point specifically but, what I took away from it, when this message really struck me, was this guy by the name of John Allison who ran BB&T Bank, he was the CEO from 1989 to 2008. This was a bank that didn't record a single quarter of loss during the financial crisis. Again, another phenomenally run institution along the same lines as U.S. Bancorp and M&T Bank. As a matter of fact, I think of those three banks very much in the same little group of excellent banks. 

And he was just such a nice guy. You just couldn't believe that this guy ran this multi-hundred billion dollar organization. You have that saying, "nice guys finish last." Not true. That is not true in the bank industry, and I don't think it's true with most CEOs. The same is true with Robert Wilmers. He seems like an incredibly nice guy. It's definitely true with Richard Davis, I know that from firsthand experience. I know that from firsthand experience with Terry Turner. The point that I want to make on all of this, to put a bow on our conversation, is that great leaders are also great people. That's so true. That's one of the lessons that I have learned from having this rare opportunity to talk to these incredible executives at these incredible organizations. If you want to be a great leader, it's not about being mean and being dictatorial. It's about inspiring people, leading through positive example, and really being all around nice people, good people. It's one of the reasons that I feel so fortunate that I have the opportunity to get to know some of these people.

Lapera: Yeah, definitely. I think this speaks to what a lot of people have probably seen in their own lives, which is that when you're confident, when you know what you're talking about, when you can lead by example, you don't need to be mean to anyone. You don't need to cover up your insecurities with brashness. You can just be a nice person. And not only that, when you're nice person, people want to help you out more. And it makes your life a lot easier.

Maxfield: Let me leave you with one more quote, OK, Gaby? It goes this, "Confidence comes not from always being right, but from not fearing to be wrong."

Lapera: That's a great way to end this show. I feel like this has been a very Mister Rogers-like show, and I feel like he would have appreciated that quote. Thank you very much for joining us. Thank you too, Austin, our really excellent studio producer. Austin, are you going to do something nice for someone today?

Austin Morgan: I always do something nice for somebody.

Lapera: I think everybody should always do something nice for someone, just like Austin.

Morgan: Like that monitor.

Lapera: [laughs] That's true, Austin set up a monitor so that I could see John. That was very nice of you, thank you!

Maxfield: If you had to see me, Gaby, maybe that wouldn't be so nice. [laughs] That's kind of you to say.

Lapera: Okay, guys. As usual, people on the program may have interests in the stocks they talk about, and The Motley Fool may have recommendations for or against, so don't buy or sell stocks based solely on what you hear. Contact us at industryfocus@fool.com or by tweeting us @MFIndustryFocus. Thank you to everyone for joining us, everyone have a great week and remember to be kind to one another!

Gaby Lapera owns shares of JPMorgan Chase. John Maxfield owns shares of Bank of America, US Bancorp, and Wells Fargo. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.