Tag Archives: First Fidelity Bank in Arizona

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Finance tips for Arizona’s young married couples

According to a survey conducted by The American Institute of CPAs, financial matters are among one of the largest issues creating conflict among young American couples. Financial values need to be addressed between young couples, before and after they say their vows. So, when discussing a dream vacation and envisioning the perfect home, why not include a life of financial harmony to the plan?

“Good financial habits can take root early on in a relationship and become a part of everyday life,” said Kevin Sellers, executive vice president of First Fidelity Bank in Arizona. “Financial choices need to be a team effort. Monetary decisions affect current and long-term goals, so it’s important that young couples begin their financial journey in the right direction.”

First Fidelity Bank is offering financial first steps for new Arizona couples as they begin their walk of life together.

Consider establishing a joint checking account. Merging two bank accounts into one can be a savvy decision for married couples. Having a joint bank account allows for transparency and equal access to the account. Joint checking provides a simplistic way to handle shared funds.

Make a budget. Often times there is a more natural “spender” and a “saver” in a relationship. Before these roles are determined in your own relationship, create and follow a spending plan. Tools, like FFB’s Home Budget Analysis help you set realistic budgets for common home maintenance needs and assess where your money is being spent.

Save and invest. Saving is a crucial piece of the financial puzzle for couples. Together, prioritize your future goals or establish a “wish-list” and keep a separate savings account to achieve these goals. Investing as a new couple now can pay off in the future. Low-risk savings vehicles like mutual funds and IRAs offer great ways to get started on long-term investing and help to build a habit of putting away money for the future.

Pay off debt and loans quickly. Working toward a new home or automobile are common priorities for young couples. But, before signing on the dotted line, make sure to investigate which loan and mortgage options work best for you both. In the current economic climate and with student loan debts increasing, it is common for young people commonly enter a relationship with debt. However, this does not mean a new couple must stay in debt or refrain from enjoying leisure activities. New couples should work on paying off debt together, focusing primarily on payments with the highest interest rates to start.

Talk about finances. New couples should be open and honest when discussing their finances. Just like other values and opinions, thoughts and concerns about finance are an important factor to communicate with your partner.

A Guide to Applying for a Bank Loan

Are Arizona banks lending?

Are they or aren’t they?

Banks can only stay in business by making loans, not turning away customers who want to borrow money. So why does the public believe that banks aren’t lending?

“The truth of the matter is that when things were really bad a few years ago, banks weren’t lending,” said Robert Sarver, CEO of Western Alliance Bancorporation. “The banking business, not unlike other businesses, tend to react and overreact and sometime we react too much when times are good and we lend too much money on too liberal terms, and when times are tough, we don’t lend enough money and are too conservative.”

Banks are a business — a unique kind of business — that is under significant pressure to make a profit like any other like any other business. A typical bank, in healthy years, should earn a return on assets (ROA) of 1.1 percent to 1.5 percent. That translates into an return on equity (ROE), because of leverage, of anywhere between 8 percent and 18 percent, similar to most other businesses.

A bank makes its money by investing deposits into either securities or loans, both of which earn a return. Typically, loans earn more than securities and both earn more than what banks pay out to depositors. Although loans earn more, they come with a credit loss rate that a securities portfolio generally does not have. In 2009, in the depths of the economic crisis, a typical bank had a loan loss rate of 1.73 percent on its loan portfolio, which ate into the profitability of the bank. So what does a bank to do when it incurs such high loss rates in its loan portfolio? It invests in fewer loans.

But that is changing. Banks have increased their lending for four of the last five quarters, but Federal Deposit Insurance Corporation (FDIC) acting chairman Martin Gruenberg, is still taking a ”wait and see if the trend toward increased lending can be sustained” approach.

“Banks are lending today, and most banks have excess liquidity that they would prefer to put out in loans,” said Keith Maio, president and Chief Executive Officer of National Bank of Arizona. “Those that feel that banks aren’t lending are likely those who have had their credit compromised in recent years. Loan demand is down from consumers and businesses particularly, since the recession. The recession has caused many personal borrowers to be more conservative in their approach to leverage. Businesses tend to increase borrowing when their revenues are increasing and they need to finance that growth.”

Sarver said that banks do want to lend, “but unfortunately there is a lot of regulation in our industry, which to a certain degree has stifled long-term growth because our capital requirements have almost doubled over the last five years, so that’s been another barrier to banks lending money.”

As an outgrowth of those regulatory changes, lending standards have tightened in certain consumer loan categories like mortgages, experts said. But while mortgage rules have changed, lending standards for business haven’t seen dramatic shifts.

“Commercial lending standards for owner-occupied real estate and commercial and industrial loans have not changed much,” said Kevin Sellers, executive vice president with First Fidelity Bank in Arizona. “For investment property loans, banks are requiring owners to maintain more equity capital in the properties and higher net operating income relative to the property debt service.”

According to Adam White, senior vice president of credit administration at Biltmore Bank of Arizona, bankers have always used the “Five C’s of Credit” to determine if a business is credit worthy.  Those included:
1. Cash flow – history of positive cash flows and probability of recurring
2. Collateral – adequate collateral support
3. Capital – adequate capital to support normal business operations
4. Conditions – what’s affecting the business
5. Character – who are the people behind the business

“In today’s environment, banks emphasize ALL five elements,” White said, “whereas in the past too much reliance may have been placed upon appreciating collateral values under unsustainable market conditions.”

Kevin Halloran, Arizona state president of Mutual of Omaha Bank, said that while there have been shifts in the requirements banks are setting for lending, he sees the industry taking steps toward normalcy.

“I believe lending standards have returned to the original norm,” he said. “In the early to mid-2000s, the banking industry required only limited borrower documentation relating to income and other basic information for residential loans. Now, the industry is requesting proper information to make sound decisions.”

On the business lending side of the equation, “lending standards over the past 10 months have loosened in both pricing and structure for both large and small companies,” Halloran said.

And while some banks have pulled back lending activity, it’s definitely not the case at many Arizona banks.

“Loans at our company have grown 8 percent this year and in discussions with my colleagues at other financial institutions in the Valley, they are experiencing similar results,” said Dave Ralston, chairman and CEO of Bank of Arizona. “Loans are the lifeblood of a bank and at Bank of Arizona. loan growth is our number one priority.  We are seeing increasing demand from credit-worthy consumers and businesses in the Valley.”

Halloran echoed Ralston’s observations.

“Over the past three years, we have completed more than $500 million in new loans in Arizona,” Halloran said. “That includes commercial loans and commercial real estate financing across multiple industries, as well as private banking loans and residential mortgages. Our local commercial banking group has provided local businesses with working capital, revolving lines of credit, equipment loans, owner-occupied loans and merger and acquisition loans. Our commercial real estate group has provided loans in industrial, multi-family, senior and student housing, charter schools and multiple other real estate segments. So we have been – and will continue to be – a very active lender.”

A positive result in the changes in lending banks have been forced to examine in the wake of the Recession is that bank have learned lessons that will create a stronger business model for the industry.

“Banks need to consistently monitor their concentrations in all lending sectors and understand they can only provide so much capital to any one industry,” Halloran said. “Arizona’s population grew so much over the past decade that it resulted in a substantial need for real estate lending. The concentration Arizona banks had in real estate negatively affected all Arizona banks.  In the future, I believe all banks will be better at managing their overall balance sheet risk as a percentage of capital.”

holiday.shopping

First Fidelity Bank offers layaway tips for Arizona residents

With the economy on the upswing for the first holiday season in years, national and local retailers alike are promoting layaway plans to help Arizona families buy something special for their loved ones without breaking the bank.

“A layaway contract with a reputable retailer can be a great money-saving tool for the budget-conscious holiday shopper,” said Kevin Sellers, executive vice president with First Fidelity Bank in Arizona. “The important thing is to do your homework and make sure you’re being smart with your money. That way, the process of preparing for the gift-giving season can be fun and rewarding for everyone.”

Layaway refers to an agreement between a retailer and a customer where the customer makes payments on an installment plan until the product is paid for in full. The method’s historical roots are in the Great Depression, when credit was largely unavailable even for the most hardworking Americans.

Today, retailers are bringing layaway back in an effort to reach out to budget-conscious consumers, according to the Better Business Bureau. Sometimes, layaway is placed on credit and debit cards by people who want to stay out of debt over the holidays by keeping their monthly payments low, avoiding the sticker shock of seeing the entire price of an item show on a single monthly statement. Other times, it is used by buyers who do not have credit cards.

Identifying a safe and cost-effective layaway arrangement can be difficult. First Fidelity Bank is offering the following tips for shoppers considering layaway this holiday season:

Know the terms. Each retailer offering layaway has a different plan, and even then the terms can vary based on the type of the product being purchased. Before committing to layaway, know what payment amounts are, when they are due, the exact product you will receive upon completion of payment and other relevant details. Ensure that the terms are locked over the life of the contract.

Know who you’re doing business with. Although national retailers are promoting layaway in a big way this year, local and regional retailers sometimes offer the service, too. Make sure that the company with which you enter a layaway contract is reputable. The Bureau of Consumer Protection makes available the federal guidelines governing layaway contracts in their online business center, accessible at www.business.ftc.gov.

Keep records. Ask for a printed invoice of the entire payment schedule upon entering a layaway contract, and request a receipt each time you make a payment. This will avoid any confusion when the time comes to pick up your product.

Discuss the cancellation policy. Over the course of the weeks leading up to the holidays, sometimes it becomes clear that the “perfect” gift for your loved one won’t be so perfect after all. Make sure you know what happens if you back out of your contract. Reputable companies will usually offer a full rebate or store credit for the amount you have paid so far, but check for any unexpected fees.

Watch out for fees. Sometimes, companies will include fees in addition to the stated payment installments, often as storage fees for keeping the product on the shelf instead of making it available to buyers willing to pay for it on the spot. Know what these fees are and what the final total of your payment will be, and make sure that total is an economically sound alternative to buying the product through another avenue.