Imagine a medium-sized, regional bank was able to achieve excellent growth for about four years by originating high-quality, low-risk loans. The bank’s owners would be quite happy with senior management, and they’d be looking forward to continued growth, even if the pace slowed a bit.

But then, unexpectedly, loan origination volume started to decline rapidly, culminating in a 60% drop in three years. And although the originated loans remained high in quality, the average size steadily dropped over the period, requiring more work per transaction and less net return for the capital invested.

At that point, the bank’s owner would be asking senior management hard questions, and not necessarily in polite language, either. As in: WTF happened? What changed? Are you sure you know why the bank was successful to begin with? What can you do to stop the decline?

Management better have good answers (not vague BS), or the next questions the owners might ask are: What’s the point of this bank? Why shouldn’t we just fire you all and liquidate this thing? And invest our resources in ventures where management understands what’s happening and the results are more predictable?

Well?