Personal Financial Statement (PFS)
What does it mean
A Personal Financial Statement (PFS) is the personal equivalent of a balance sheet. On this document, the borrower or guarantor lists all of the Assets that they own with their corresponding estimated market value. In addition to Assets, the borrower/guarantor also lists all of their debts and the amounts owed. By determining the difference between the assets and the liabilities, the borrower’s net worth can be determined.
Common items listed in a Personal Financial Statement:
- Cash
- Checking Account
- Savings Account
- Certificate of Deposit (CD)
- Cash Value of Life Insurance (CVLI)
- Marketable Securities
- Non-Marketable Securities
- Retirement Accounts
- Primary Residence
- Secondary Residence
- Lines of Credit
- Installment Loans
- Mortgage
- Contingent Liabilities
Why does it matter
A Personal Financial Statement serves as a crucial cornerstone in assessing the financial stability and creditworthiness of a borrower or guarantor. This document provides a comprehensive overview of an individual's economic life, offering insights into their assets and liabilities. From a banker's perspective, analyzing this statement is akin to peering into the financial DNA of the borrower.
The Personal Financial Statement not only outlines the current financial standing of the individual but also plays a pivotal role in gauging their ability to weather financial storms. By scrutinizing the assets and liabilities, a banker can discern the individual's net worth, liquidity, and leverage. This, in turn, helps in assessing the borrower's capacity to repay the loan, offering a glimpse into their financial resilience.
In essence, a Personal Financial Statement is not just a collection of numbers; it's a narrative that reveals the financial health and risk profile of the borrower. A banker's ability to read and understand the intricate details of this statement is foundational. It empowers the banker to make informed decisions, assess potential risks, and tailor financial solutions that align with the borrower's financial capacity and goals. In essence, the Personal Financial Statement is a roadmap that guides the banker in ensuring the financial well-being of both the borrower and the lending institution.
Other Relevant Terms
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A bit about me
Greetings! I'm Clay Sharkey, and there is nothing I like more than assisting others in achieving their goals. I firmly believe that by enhancing a banker's understanding of their customer's' business, they can provide superior service. This superior service, in turn, leads to stronger relationships for the bank, improved performance for the businesses, and better experiences for our communities. Win-win-win.
