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To the previous point, one of the things you have to look at is how much of this is for working capital versus how much is for acquisition. Where it’s for inventories and forklifts and new warehouse space, it’s a great indicator. But clearly acquisition activity has been a significant component over the past year. Just as homes have fallen in value, so have businesses fallen in value, and people are buying them up.
Just a comment on the question “are we lending?” To me that’s such a curious statement. It’s like Holland & Hart saying, “We don’t want to provide legal services.” Do we want to lend? Is just a ludicrous question, really.
HOWELL: There’s a couple of things that we’ve got to remember. First of all, Utah has been rated by Forbes for the second year in a row as the number one place to do business. This is the best of our economy. Now, it’s still got some work to do, but it’s still the best we’ve got.
Look at the companies that have come in: eBay, Procter & Gamble, Goldman Sachs, Home Depot, Boeing, Adobe, the new NSA building. All these things are strengthening our economy and have really made the recession not as difficult as some of the other places in the country.
The challenge we have in Utah is we’re still tethered to a national economy. If the U.S. government gets downgraded again—we have several AAA rated entities in the state of Utah, but their rating is tied to the federal government rating. So if the government goes down again, those counties and municipalities within our state could lose that rating.
But overall there’s good things happening in Utah. We’re seeing the level of problem assets in all banks dropping. We made significant progress in our problem assets in the past year, and we’re out looking for assets. We bought three banks in the last six months because we’re trying to grow and we think this is a good time for that. Now, the companies are being wise. They’ve been conservative. But we’re seeing some people start moving back into the market.
STILLINGS: As I go out and meet with clients one on one, there’s a lot of pent-up demand, a lot of “I’d like to do this, but I’m going to wait.” A lot of cash on balance sheets. Cash is king. They can’t seem to get enough of it, especially our larger corporate clients.
I am concerned about the small business sector. I know we say that that’s going to lead us out of this, and that’s probably true. But on the other hand, if we have a dip, many of our small business clients are just kind of hanging on, and they’ve hunkered down. But they don’t have a lot of options. They don’t have many of the options left that some of our larger corporate clients have in terms of being able to get capital.
We see a lot of activity in the sale of businesses. That’s created opportunity for the bank. We see that continuing next year, maybe even heating up next year as the tax cuts expire—unless something happens. So you have owners that might be sitting on the sidelines, saying, “I don’t know what it’s going to be like going forward, so maybe it’s time to cash in the chips.”
We sit around in the bank spending way too much time talking about how we’re going to create a path through the regulatory issues that we have, rather than spending time on how we’re going to be creative and go do business. And I don’t see that changing anytime soon.
MORRIS: I’m in agreement with much of what’s been said, so I’ll amplify on some of the single-family dynamics that are going on in the market right now. We’ve had extremely high volumes because of the low rate environment. The real challenge now is how the box for qualification of a government loan looks, and it’s a tighter box. The average FICO score now on a Freddie Mac loan is 760—their average. The average FICO score at the peak of the market was 620. You have consumers who have had credit impairment along the way through The Great Recession trying to qualify for those rates, which is impossible for many.