1. Send comments or questions.
  2. Full Name*
    Please enter your full name.
  3. Company*
    Please enter your company
  4. E-mail*
    Invalid email address.
  5. Phone #
    Invalid Input
  6. Subject*
    Please make a selection
    Invalid Input
  8. *
    Just a simple security measure to prove you are a human.
  9. * = Required

The Coming Move in Rates

August 22, 2018
Alex Balc

Two of the best minds in fixed-income have very strong yet differing views on interest rates. Interestingly, their views may not matter to their ultimate success. In this Disciplined Investor®, Alex Balc explains why their views shouldn’t matter to your ultimate success, either.

View Full Article

Disciplined Decision-Making: Eight Analytical Principles

March 7, 2018
Phil Nussbaum & Eric C. Brown

For nearly 25 years, Performance Trust has been committed to the Mission of “inspiring financial decision makers to pursue the Path of Great Performance™ and helping them achieve results that surpass those they otherwise would attain.” While there are many contributing elements in our approach to this Mission, the most recognizable and unique component is our dedication to disciplined decision-making. In this article, Phil Nussbaum and Eric C. Brown lay out the Eight Analytical Principles that have been foundational to the success of Shape Management®.

View Full Article

Duration as a Risk Management Tool

February 21, 2018
John Behof

Using duration, especially in the investment portfolio, can be challenging for the balance sheet manager. With conventional wisdom saying that rates are going to rise, the balance sheet manager has probably faced little second-guessing on this front. However, John Behof challenges this complacency and offers multiple reasons for maintaining the proper duration and relative size of the investment portfolio—as a tool for managing the risk of the institution as a whole—and not just interest rate risk.

View Full Article

Christmas Letter 2017

December 22, 2017
Rich Berg & Phil Nussbaum

Continuing a time-honored Performance Trust tradition, Rich and Phil send their annual Christmas greetings and message.

View Full Article

No Thrill in Chasing Yield

October 27, 2017
Andrew Pace

In today’s lower rate environment, it can be far too tempting for investors to chase after higher stated yields. However, they should always be careful to run the numbers to ensure such investments will not actually derail their long-term earnings. As an example, Andrew Pace takes a look at an Agency bond that was issued recently with a structure that does look tempting at first glance. As he walks through the structure, Andrew emphasizes the importance of Shape Management®, running total returns, and looking at the long-term consequences of investments.

View Full Article

In-Market Bank Mergers

August 9, 2017
Jon Briggs, Performance Trust and Rob Carothers, Jones Walker

Are you looking to merge with a nearby institution? In the following article, Jon Briggs and Rob Carothers explore the unique regulatory issues that can arise when two significant bank competitors are considering a merger with each other.

View Full Article

A How-To-Guide to Total Return Investing, Revisited

June 15, 2017
Alan Crain

Twelve years ago, Kitsap Bank CFO Alan Crain wrote a Disciplined Investor® article titled “A How-to Guide to Total Return Investing,” which was a personal account of his experiences changing organizational culture to implement a disciplined investment approach. While a lot has changed over the past 12 years, the core principles of that essay remain timeless. With the benefit of hindsight and additional experience, he thought it would be worthwhile to revisit the topic and distill it down to its most critical elements.

View Full Article

Don't Leave It On the Table

May 4, 2017
Gary Penrose

You may be leaving $28.5 million on the table at your institution. In the following article, Gary Penrose lays out an explanation for this number, and how this relates to bank mergers and the investment portfolio.

View Full Article

The Value of "Rolling the Curve"

April 20, 2017
Andrew Pace

At Performance Trust, we aim to teach specific bond math concepts that can improve your ability to make better risk/reward decisions in the bond portfolio. As Andrew Pace outlines in this article, one concept that Shape Managers have learned to help them seek outperformance that non-Shape Managers may not have learned, specifically at one of our Performance Trust University® programs, is the value of bonds that efficiently “roll the curve.”

View Full Article

The End of Alchemy

March 3, 2017
John Behof

In this article, John Behof reviews the book, The End of Alchemy by Mervyn King, which was given to Performance Trust customers as a Christmas gift for 2016. King, who served as governor of the Bank of England during the economic crisis, provides a fascinating perspective of the causes of the crisis as well as some thought-provoking and admittedly controversial suggestions to fix the current structure and prevent it from happening again. Mr. King’s views do not necessarily reflect those of Performance Trust.

View Full Article

Rates Up - Time to Reevaluate

February 2, 2017
Andrew Pace

As most investors are aware, we had an aggressive rate rise in U.S. Treasury rates over the last few months, specifically on the 10-year Treasury during Q4 2016. Given this unexpected, aggressive rate rise and the uncertainty of where rates will go in 2017, many portfolio managers may be tempted to try and predict where interest rates will go and base their investment decisions on that prediction. Shape Managers, though, know that they must continue to stay disciplined. They understand that, after such an aggressive rate change, it is important to reevaluate the current market by running total return scenario analysis to assess which sectors are best to add in (or subtract from) the portfolio based on their forward-looking total returns. But first, it is important to examine just how large of a rate rise we experienced the past few months to then determine what strategies to consider going forward.

View Full Article

The Christmas Light

December 21, 2016
Phil Nussbaum & Rich Berg

Phil and Rich present their annual Christmas message, sharing their personal perspective on what Christmas means to them.

View Full Article

Don't Fall for Discount Callables

December 15, 2016
Chris Hiebert

A recent sell-off has revived interest in “deep discount” callables. While these may look like an intriguing option, it is important to look at them through the lens of Shape Management®. To illustrate the benefits of remaining disciplined in your investment decisions, Chris Hiebert walks through an analysis of a sample callable and bullet.

View Full Article

Barbell CMOs

September 6, 2016
Adam Buresh and Andrew Pace

In today’s challenging markets that offer less reward for the risk, many investors change their strategies in an attempt to get more reward; however, this often means they are taking on more risk. When relying on metrics such as yield and duration, it’s easy to get an incomplete or even inaccurate picture of the risk and reward. Consequently, investors end up purchasing bonds that seem to offer high yields with low duration, but are actually poor risk/rewards. In this article, Andrew Pace and Adam Buresh closely analyze an example of one of these bonds that seems to be making a comeback in the marketplace: the Barbell CMO.

View Full Article

Sizing Up Option Risk

July 7, 2016
Adam Buresh

The risk/reward profiles for bonds with option risk can be good or bad—it depends on pricing and how much reward we are being paid for the risk. However, the current low-rate, low-spread environment may be tempting investors to reach for yield and spread without taking all risks into account. Adam Buresh takes a closer look at embedded options and why it is critical to understand the risk associated with them.

View Full Article

Credit Double-Check

February 25, 2016
Michael Kelly and Umrai Gill

Many of you have asked for a follow up piece to Umrai Gill’s recent Market Minute, “Following Credit Signals,” discussing trends in the broader credit markets. This Disciplined Investor® is intended to further explore that idea and point the direction to a solution. We hope to help you understand the current status of credit markets in a way that enables you to make better balance sheet risk/reward decisions. We discuss developments in the pricing of credit risk you may not be fully aware of, and suggest the possibility of using the “Gray Area” of the balance sheet to address the situation.

View Full Article

My New Year’s Resolution—Think Slower

January 27, 2016
John Behof

In the spirit of the new year, John Behof proposes a resolution to adopt for 2016: think slower. Using the principles laid out in Daniel Kahneman’s Thinking, Fast and Slow, he explains the difference between the “fast brain” and the “slow brain” and why defaulting to the fast brain can lead to poor decisions.

View Full Article

Moneyball and Christmas

December 18, 2015
Rich Berg and Phil Nussbaum

For each of the past 20+ years, and again this year, Phil and I have observed a tradition of sending out a Christmas letter, a personal letter from us as a pair of individuals, rather than as an official corporate communication. I learned this tradition from one of my mentors, Clayton Brown, for whom I had the privilege of working from 1982 until 1994 (the year we started Performance Trust). If such a thing was politically incorrect during that era, we appreciate that in today’s climate persisting in this tradition may raise more than a few eyebrows. We nonetheless feel compelled by our convictions to do so.

View Full Article

The Price Effect of Municipal Bond Federal Tax Exemption

November 13, 2015
David Gobberdiel

Municipal bonds comprise one of the largest capital markets in the world: tens of thousands of issuers, billions of dollars of issuance per week, and trillions of dollars of outstanding debt. In addition to credit, various maturity, call, and coupon structures increase the complexity of the municipal bond arena. Here, we will focus on one unifying characteristic of many municipal bonds: federal tax exemption. How does federal tax exemption change the analysis of municipal bonds? Specifically, how does it affect duration and the price movement of municipal bonds versus taxable assets?

View Full Article

The Quantile Grid: Why, What and How

October 19, 2015
Derek Kessen and Girish Patel

A fundamental question facing Shape Managers seeking to improve their performance prospects is “What’s my benchmark?” The Quantile Grid attempts to provide that benchmark. It gives depository institutions a way to assess projected bond portfolio performance compared to projected results of other investors subject to similar constraints and general objectives. This article explores how the Quantile Grid is derived and maintained, what it represents (and what it does not), why we devised it in the first place, and how useful it is as a benchmark.

View Full Article

Curve Flattening: A Study

September 15, 2015
Jun Yang and Karen Kinsey

Karen and Jun devise and share a relatively robust metric for comparing portfolios in terms of how resistant or vulnerable they are to yield curve flattening. While we do not predict a curve flattening, any more than we make any rate prediction, some readers may take comfort from their findings, which suggest that the current Level Playing Field® Strategic Portfolio (for banks) is more resistant to a so-called “flattener” than are most industry portfolios.

View Full Article

The Knowledge Curve - Reloaded

May 5, 2015
Will James and Chris Carney

A video dating back to 2009 is one of the most popular on our website; it is a short educational clip entitled “Your Performance.” More than five years later, the message of that clip is as relevant as ever. In this article, Chris and Will examine the case made then, and how its truths have continued to play out since.

View Full Article

Challenging Myths About Life in a "Rates Up" World

April 16, 2015
Andrew Hixson

This article is not about debunking a belief in imminent rates up, for once. Instead, Andy Hixson cedes that assumption—and proceeds to bust four myths about preparing for that scenario that many investors erroneously rely upon.

View Full Article

The Market Will…

February 26, 2015
Kurt Fritz

A veteran of old-school open outcry floor trading shares a timeless lesson from memorable “crashes”, and uses that experience to imagine an unpleasant fixed-income scenario you may not have thought about before—and to share how you might take steps to protect your portfolio against it.

View Full Article

NCUA Risk-Based Capital Proposal: Reloaded

February 11, 2015
Bart Smith

The NCUA recently released its revised risk-based capital proposal for credit unions, and early indications suggest the changes are very promising. Performance Trust has actively followed this issue from the start, and this latest commentary from Bart Smith provides details on the various revisions and discusses items that credit unions should consider going forward.

View Full Article

The Christmas Edition: A Christmas Look-Back

December 23, 2014
Rich Berg & Phil Nussbaum

As many of you know, Rich and I send out a Christmas letter every year that is not from Performance Trust Companies, but rather from the two of us personally. We use this special time of the year to communicate with you in a very personal way, as we give you our perspective on what Christmas means to us.

View Full Article

Chapter 9 Resolutions from Detroit and Stockton—Lessons to Learn

December 12, 2014
John Behof 

Now that the two major outstanding municipal Chapter 9 cases—Detroit and Stockton—have been largely resolved, it is time to assess what we can learn from these realities. How do the outcomes change our belief from the prior legal theory? How might we improve our investment selection criteria for municipal bonds going forward, based on our observations of the actual practicalities these two cases, at least, have demonstrated?

View Full Article

Call to Action: Sell Over-Achieving MBS!

November 4, 2014
Derek Kessen & Jonathan Norman, CPA 

Take advantage of recent market dynamics and unload your over-achieving Agency MBS before the market flips the script! 

View Full Article

Available for Sale or Held to Maturity: How to Make the Right Decision For Your Institution

May 7, 2014
Bart Smith

The rate rise over the last year has led many depository institutions to consider transferring securities to “Held to Maturity” (HTM). Former regulator Bart Smith thoroughly discusses the many factors one must consider and evaluate before deciding on whether to take this virtually-impossible-to-reverse step.

View Full Article

Performance Trust Response Letter to NCUA

April 15, 2014
Bart Smith

As Bart Smith promised in his recent Disciplined Investor article, “NCUA Risk-Based Capital Rules: A Comparison” (February 18, 2014, Volume 7), we have formulated our official response to the recent proposal regarding potential changes to credit union capital measures. Please find our letter attached. While we suggest a number of changes to various parts of the proposal, our overall view is that the proposal is highly inconsistent with the Basel III standards for banks and that it could create serious negative consequences for the credit union industry, if implemented as suggested.

View Full Article

NCUA Risk-Based Capital Rules: A Comparison

February 18, 2014
Bart Smith

Bart Smith, former FDIC regulator, has been looking at the recently proposed NCUA regulation ostensibly intended to mirror recent BASEL III requirements promulgated for banks. In this first official commentary, he explains certain key aspects of the proposal, and foreshadows some potential avenues to attempt to improve the final ruling via the comment period.

View Full Article

2013: Reflections on a "Rates Up" Year

January 9, 2014
John Behof

We can broadly divide fixed-income portfolio managers into two camps—those who follow a long-term disciplined strategy and are relatively agnostic about the timing of rate movements, and those who try to time the market. The year 2013 resulted in one of the most rapid rate sell-offs in professional memory, and many “market-timers” saw their strategy pay off. But does the data show that this strategy has been a success for them—or costly and risky even given the occurrence of this 2013 “pay off?”

View Full Article

The Christmas Edition

December 23, 2013
Rich Berg & Phil Nussbaum

Phil and Rich share a personal message about what Christmas means to them.

View Full Article

Alert: Volcker Rule Update

December 18, 2013
Bart Smith

Former regulator Bart Smith shares the latest of the rapidly-developing interpretational information concerning the recently released Volcker Rule. He attempts to answer several significant questions that community financial institutions suddenly find themselves facing. He also announces a short-notice webinar to further discuss this topic.

View Full Article

To Classify or Not to Classify: Interpreting the New Regulatory Guidance for Securities

December 12, 2013
Bart Smith

Former regulator Bart Smith unravels the regulators’ recently released guidance on securities classification for practical industry users.

View Full Article

The 7 Habits of Highly Effective Portfolio Managers

December 10, 2013
Chris Carney and Jason Elder

Research indicates that achievement is primarily a result of thoughtful practice and good habits. What good habits can we observe in consistently successful financial institution portfolio managers?

View Full Article

Basel III - The Final Ruling

August 9, 2013
Bart Smith

Bart Smith offers a thorough summary of Basel III as it has been officially issued, which incorporates significant adjustments to the initial proposals in response to effective industry feedback.

View Full Article

My Fantasy Investment League

June 17, 2013
Jim Toliver

Jim Toliver, a former credit union bond portfolio manager, investigates the factors that make a portfolio manager perform better or worse than his peers – and why these factors can make a big difference to a credit union’s bottom line.

View Full Article

Investment Policy

May 7, 2013
Bart Smith

Bart offers an overview of our latest sample investment policy, with versions for both banks and credit unions (modifiable Word files of the sample policy are currently available). He also provides some background as to why this policy takes the form it does and some considerations to bear in mind should you wish to customize the sample for your own use.

View Full Article


January 24, 2013
Bart Smith

In recent Congressional testimony, representatives of the regulatory agencies responded to concerns raised by commentators to their BASEL III-related Notices of Proposed Rulemaking. Former FDIC Senior Manager Bart Smith interprets what they said and opines on the future, final form of these proposals.

View Full Article

Dismiss All Rate Forecasts--Again

January 18, 2013
John Behof

The financial media was full of predictions for 2012 one year ago. Today, the same outlets are abuzz with predictions for 2013. Why isn't anyone looking back on how they performed last year? Maybe because, as usual, they didn't turn out so well.

View Full Article

The Christmas Edition: The Hope of Christmas

December 20, 2012
Rich Berg and Phil Nussbaum

As many of you know, every year Phil and I send out a Christmas letter that is not from the Performance Trust Companies, but rather personally from the two of us. We use this special time of the year to share with you what Christmas means to us.

View Full Article

Forward Rates: Not What They Sound Like

December 19, 2012
Adam Buresh

Forward rates are often perceived to be a form of prediction of future interest rates. In fact, in their calculation and application, they are only a statement about current interest rates.

View Full Article

Skill or Chance

October 26, 2012
By Kurt Fritz

Recently, a federal judge ruled that poker—unlike roulette—is a game largely reliant on skill rather than luck. We find that many securities portfolio managers treat investing—which demands substantial skill—as though it were driven almost purely by luck.

View Full Article

Hands Off the PMBS Panic Button!

September 12, 2012
By Chirag Shah and Jason Elder

Regulatory Agencies have proposed changes to the capital treatment of securities in recent Notices of Proposed Rulemaking (NPRs). This had led to advice from other precincts suggesting that holders of PMBS securities divest of them now to avoid risk-based capital burdens in two and a half years’ time. We find this strategy to be premature and, when quantified, quite expensive. In our view, the income advantage of these securities over current alternatives provides significant cushion to offset any possible price depreciation over the next thirty months.

View Full Article

Have We Finally Hit Bottom?

September 4, 2012
Glenn Schultz

The Case-Shiller 20-City Index was released on August 28, 2012 and garnered some fanfare in the retail press. The headlines read: “Housing Prices Record First Increase Since the Third Quarter of 2010.” This has sparked hope in the market of a housing recovery. In fact, this event is perhaps even more long-awaited than it may appear, because the third quarter price increases in 2010 were largely attributed to the effects of a one-time tax credit for home buying, rather than to any secular improvement in the housing market. Case-Shiller’s release requires no such footnote, so we are left asking, have we finally bottomed in housing? 

View Full Article

Performance Trust Response Letter to Regulatory Capital NPRs

August 27, 2012
Bart Smith

As Bart Smith promised in his recent Disciplined Investor article, “BASEL III Regulatory Notices of Proposed Rulemaking” (July 2,2012, Volume 13), we have formulated our official response to the recent NPRs regarding proposed changes to regulatory capital matters. Please find our letter attached.

View Full Article

Bond Rates: On a Road to Nowhere?

August 7, 2012
John Behof 

A well-respected economist and money manager has recently made an intriguing case for continued low Treasury yields, based upon the growing dominance of non-investment-based demand for these instruments. While we believe that no one can reliably predict interest rates, his argument may help us resist the widespread assumption that Treasury rates must soon rise.

View Full Article

What’s the ARM in That?

June 5, 2012
Chirag Shah and Servia Rindfleish

We have traditionally found that ARM securities fail in their purported purpose—to protect the investor in rates up. Now, we find that a certain subset of ARMs with a unique history may finally be able to deliver on this promised protection.

Our Mission, Values and Methodology are committed to the ideal of intellectual honesty. This requires us to check—and frequently recheck—our opinions against facts, math and logic.

View Full Article

Municipal Guidelines for Depository Institutions

May 24, 2012
Bart Smith

In late 2010, prominent banking analyst Meredith Whitney voiced an ominous outlook for the municipal bond market. In a 60 Minutes interview, Ms. Whitney prognosticated that the market “could see 50 to 100 sizable defaults” amounting to “hundreds of billions of dollars” in potential exposures. In reaction to this and other negative predictions about municipal credit, the market experienced a massive sell-off between December 22, 2010 and February 2, 2011. Over this period, investors sold off some $14 billion in municipal funds, driving down prices and resulting in returns for the fourth quarter of 2010 that were the lowest in 16 years.

View Full Article