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Wednesday, Jun 7, 2023

An Experienced Look at Economic Woes

With the nation in a financial crisis and broadbased economic downturn, this is surely a uniquely challenging environment for local business owners and managers. But it is not the first time many of them have lived through tough economic conditions. We checked in with some of these businesspeople to get their views on what has been happening as the nation struggles through in some areas of the economy turmoil of unprecedented proportions. The three who responded to our inquiries have just about 100 years of experience leading San Fernando Valley-based businesses through good times and bad. Leonard Moore has been the CEO of communications equipment manufacturer Moore Industries since he founded the company in 1968; Wendy Malkin is COO and CFO for First Commerce Bank in Encino and has 25 years experience in the banking industry; and Mike Quiroga has run Mike’s Roofing in Chatsworth for 37 years. Q. What makes this economic environment different from other challenging times you have faced in the past? Malkin: It’s all about Wall Street. The downturn in the ’80s had to do with banks, commercial banks. This has to do with investment banks. Quiroga: The way I look at it is people are more informed and they care a little bit more about their money. People, if they don’t know much about the economy, they just panic, and don’t want to spend any money. Compared to other years, like during the ’79, ’80 oil crisis, interest rates were higher. But this one is really different with what happened with the financial companies. Moore: The biggest problem, the thing that will give us the most trouble, is the credit adjustments or readjustments. The amount of bad equity that’s out there equity that doesn’t exist, which I guess doesn’t make it equity it’s causing a tremendous amount of pullout of money from the banks and money market funds. It will change the bank rules. Q. Which economic issues are most affecting your company credit scarcity, energy costs, plummeting real estate prices, or other things? Malkin: Knock on wood, we have not been affected like a lot of other banks because we’re primarily a business bank and we don’t make mortgage loans; we never have. We don’t make residential loans or 30-year mortgages. We haven’t been impacted by that. Obviously the decline in real estate values has impacted our borrowers because we do finance commercial real estate, buildings in the San Fernando Valley and the greater Los Angeles area, and that’s where it’s affected us. Fortunately our bank is still very strong and healthy. We’re a well-rated bank. We just haven’t had the problems that a Downey Savings has had. Quiroga: All of the above, plus in my industry, the price of materials because all of the materials are based on oil. They went up over the last year almost 50 percent and that’s the downside for the consumer. They don’t want to pay that amount. Moore: All of those things if they continue to go up will affect us. We are reasonably dependent on energy for air conditioning and running equipment but it’s not like we’re a smelter One of the issues is worker’s compensation As far as the credit issues, I don’t see it down at our levels here in the trenches. I don’t see a real problem. I think the economy’s sound from just a ‘sell it and collect for it’ kind of thing. Q. Are you doing anything differently in the way you operate your business to respond to the current conditions? Quiroga: Sure. You need to look at every penny, control expenses more closely, watch everything, especially when you have trucks going out. You have to watch the gasoline. The price of fuel went up so much in the past year, it’s amazing. The employees get hurt because we have had to lay off. We laid off probably five people in the last six or seven months. We cut the hours from 40 to 37 hours or 35 hours a week. Meanwhile the insurance the liability and workmen’s comp is not going down. And we can’t really lower our prices. Moore: In a turnaround or bad economic times, some people just get in a hole and pull a desk over it and wait. Generally, what we do when we see the possibility of a slowdown, we start advertising and promoting and training more than the average bear would. A lot of guys when things are looking bad they cut out advertising and training and things not instantly recognizable as generating profit. I do it the other way around; because when the thing turns, you’re there with a big club. It’s a strategy that’s worked successfully for 40 years. Malkin: Not really. We have always been very conservative in our underwriting. We haven’t tightened that up or changed that at all. We’re just operating as we always have. We haven’t raised interest rates to match Countrywide or Washington Mutual or Downey. The banks that are troubled are the ones showing 4 percent rates and there’s a reason they’re doing that, because they need liquidity. The banks you don’t hear about, like us, are paying normal rates when you think that prime is 5 percent today. Q. Have your employees expressed concern about how the economy will affect them, or is already affecting them? Malkin: No, we haven’t seen that. We regularly have staff meetings, we talk to people about how the bank is doing and how the economy is doing and any impact it might have on the bank, which is nothing, but no one has come to us individually and said ‘I’m losing my house, help me.’ And we’ haven’t had to lay off employees, fortunately. But, again, we’re a very small bank, with three branches and 60 employees and we’ve been like that for the past couple years. Quiroga: Yes, I have long-time employees, people working in my company for the last 35 years. The newest employees have been probably five years in the company. These people are very loyal to the company and the company is loyal to them. They understand we are trying to help everybody keep their paycheck going. Moore: No. I’m sure they’re aware of it and they get the liberal-biased news just like everyone else does. But our business overseas is doing fine the dollar is helping that, obviously and we bought a couple of companies in the last five years. We’re in the process of digesting the last one and that does add to our top line and gives us more things to sell. It’s just normal biz. We don’t do anything heroic.

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