Banking And Finance

HOWELL: A bank will do sensitivity analysis on the numbers. They’re going to look at pro formas, and then they’re going to run the sensitivity—what happens if this happens or this happens. And businesses should be doing that themselves. Of all people, they’re the ones that are taking the risk, so they should know what’s going to happen if the market isn’t what they think it should be.

PITCHER: At one time earlier in my career, I owned some businesses. And it became very apparent to me once I became a banker that, as bankers, we think of things differently than business owners. Business owners are in the business to make money and to provide a living for their family. As bankers we look at risk, and the more that is taken out of the business, the more risk that it increases to us.

            So it’s really incumbent upon business owners to understand how banks evaluate risk and then try and plan to meet that risk and to meet those thresholds if they are wanting the bank to assist them in the growth of their company. If they follow those metrics, it will increase the soundness and safety of their company into the future.

HEADLEE: Some people think that our risk tolerance is too low. Their expectations about our risk tolerance are not realistic. Our risk tolerances are based upon our source of funding. When people put their money in the bank, they expect to get it back, and when we make a loan, we basically tolerate the same amount of risk as the people who are putting their money in the bank. This is not a risky investment for people, and we don’t go out taking unusual risks with people’s money.

Speak to the readers of the magazine. Is now a good time for them to be investing and approaching a bank? If I’m a small business owner or a consumer, what should I be looking for in 2012?

MORRIS: If I’m on the fence and I’m a prospective first-time home buyer, now is the time to find a way to qualify to buy a home. Locking in a 30-year 4-percent mortgage may prove very advantageous in the future.

MORRIS: And there may still be a little downside exposure, but now is the time in terms of a little bit more devaluation to come—but not much. This is the bottom.

PACKARD: Generally, from a business side, you should be selling when people are buying and buying when people are selling. If you want to make money in this cycle, it’s a great opportunity. Rates are low, opportunities abound, and there are lots of people who are interested in selling, not a lot of buyers.

BEARD: In a capitalistic society, markets go up and down. We’re in a trough, and there’s a lot of concern been expressed here. But, assuming the capitalistic system in one form or another keeps going, it’s time to get back in. If people will start looking at the need to grow this again, we can change the logic, we’ll be back in an up cycle.