Monday, February 28, 2011
Today's Equipment Leasing Headlines
Saluting Leasing News Advisor Steve Crane, CLP
######## surrounding the article denotes it is a “press release” and was not written by Leasing News nor information verified, but from the source noted. When an article is signed by the writer, it is considered a “by line.” It reflects the opinion and research of the writer. It is considered “bias” as it is the writer’s viewpoint.[headlines]
Saluting Leasing News Advisor Steve Crane, CLP
Steve Crane, CLP is an original member of the Leasing News Advisory Board, joining in July of 2000. During his career he has held positions at Westinghouse Credit, Ingersoll Rand Financial, CIT and Taylor Financial. He is currently Vice President and Marketing Manager for the Indirect Equipment Finance Group at Bank of the West where he has been employed for over 15 years. “I have known Kit Menkin for almost 25 years, going back to the CIT and Taylor Financial days of my career and am happy to be a part of The Leasing News Advisory Board”.
Steve Crane, CLP
Steve has been active in the equipment financing industry though the years having been a Director of the Eastern Association of Equipment Lessors, President and Treasurer of the Certified Leasing Professional Foundation and held numerous other association volunteer positions.
Having been in the Equipment Leasing Business for his entire career, Steve enjoys his work at Bank of the West. “We have gone through some difficult times in our industry over the past couple of years, and many companies have failed. I am fortunate to work for an organization that is well managed and very supportive of the equipment finance industry”.
Steve and his wife Cheryl have two sons, Ryan, who recently graduated from Chico State University as well as the Butte Fire Academy, and Alex, who is a sophomore at The University of Oregon and studying to become a doctor. Steve and Cheryl are enjoying the empty-nester life and get away frequently for long weekend outings and visits to see their sons. With Alex at Oregon they have become avid college sports fans and like watching the Ducks teams compete.
Steve’s sons are both Eagle Scouts, which is something that he is very proud of. They have done numerous camping and backpacking trips over the years and in 2012 are planning a backpacking adventure, covering the entire John Muir Trail. Steve remains an Assistant Scoutmaster in his sons’ old Troop as a merit badge counselor and Eagle Scout mentor.
An avid outdoorsman, Steve enjoys backpacking, skiing, sailing, golfing and endurance sports. He is currently training for an Ironman race in July. “I have completed several Olympic, half ironman and marathon races in the past and have always dreamed of completing a full ironman race (140.6 miles). I have the mind to do it, just need the knees and feet to cooperate. Cheryl and I traveled to Kona last October to watch the Ironman Championship and it was extremely inspiring. With luck, I will finish the race in July before the 17 hour cutoff time.”
Steve enjoys his work and is looking forward to many more years of participating on the Leasing News Advisory Board and the equipment financing industry.
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Lobbyists Getting their way on proposed FASB Lease Changes
The original date for comments regarding proposed changes for leasing accounting was scheduled for December 15, 2101 by the International Accounting Standards Board (ISAB) along with the United States Financial Standards Accounting Board (FASB). While over 781 separate comments were received, the period was extended until April 4, 2011. (1)
As originally perceived by the staff and accounting board as bringing transparency for all those who view a financial statement, creditor, debtor, investor, owner, stock holder, all the leasing associations in the world mounted a campaign as their member corporation CFO's also joined in as well as the many famed leasing accounting consultants such as Bill Bosco and Shawn Halladay.
The latest key change is a fundamental definition between a capital lease and an operating lease. Another hang-up is the centers on the proposed standards of forecasting of the results of unknowable future events, which would have produced great differences in accounting treatment between similar leases. It is reported The FASB and the IASB decided to "clarify" several other points in the proposed Exposure Draft, and the FASB instructed staff to seek additional guidance from the affected industries.
As time distances itself away from the financial crisis that came to the surface, the realization of the proposed changes has met The Law of Momentum Conservation.
Collisions commonly occur in contact sports (such as football) and racket and bat sports (such as baseball, golf, tennis, etc.). Consider a collision in football between a fullback and a linebacker during a goal-line stand. The fullback plunges across the goal line and collides in midair with the linebacker. The linebacker and fullback hold each other and travel together after the collision.
Here is a financial analogy: Jack and Jill meet. Each have $50. Jill wants to borrow $50 from Jack. So Jack transfers $50 to Jill. Jack has lost $50 and Jill has gained $50. The money Jack has given to Jill is equal to the money gained by Jill. After the transaction, Jack now has $50 in his pocket and Jill has $150 in her pocket. Yet, the total amount of money of the two people after the transaction is $200. The total amount of money (Jack's money plus Jill's money) before the transaction is equal to the total amount of money after the transaction. It could be said that the total amount of money of the system (the collection of two people) is conserved. It is the same before as it is after the transaction.
The total amount of momentum of the collection of objects in the system is the same before the collision as after the collision.
However, if Jack leases the $50 to Jill in a capital lease, Jack still has the $50 dollars, plus interest, and Jill has the $50 but pays interest. And perhaps there is a residual at the end or an Evergreen clause. Jill then not only has $50 and pays interest but also a "bonus." Most small and middle market leases are like this, perhaps more designed as a "finance with a balloon at the end or a bargain purchase option of a $1.00 or 10%). The change in rules would continue not to recognize the residual as part of the momentum, meaning there is more debt on the books.
In an operating lease, Jack gives Jill $50, but Jill records it as $25 in a rental payment, knowing it has an end that results in returning $25 or purchasing what it bought with the $50. Jill books the transaction as rent and may footnote the term of the rent. The residual is not recognized. It may be "guessed" at 10% or another number, even 50%, but it is a future event.
In the United States, forgetting the recent change in depreciation laws, there is a tax consequence in the transaction to Jack, as he writes off $50, although he extended only $25, and then when the residual is due, he then has a capital gain, which is taxed differently in computing net income.
Back to the first analogy (a writer has that prerogative :) The fullback being the ISAB/FASB Bears and the linebacker being the Leasing Associations being the Vikings and they collide......Time out for a television commercial:
(1) The draft document is open for comment until 4 April 2011 and can be accessed at: http://go.ifrs.org/IFRS+for+SMEs+QandA
Revisiting Recourse Funding
The tight credit market is pushing some funders to ask for support from the brokers and packagers. It should be understood by all, that if you use your own documentation and assign it to the funding source, you are on recourse for any fraud. Therefore it is wise to have a strong section in the assignment form that deals with representations and warranties to insure the transaction is valid and both parties understand what constitutes fraud. There is a fine line between what is “due diligence” and what is not, but any vendor relationship or deception or referral fee may invalidate a funder’s position.
I would shy away from any recourse reasonability’s on equipment with a low resale market or a limited resale market. A small ticket lease is also hard to recourse due to litigation costs and that fact that self help repossession is no longer valid. Many small tickets are just plain written off when a business closes down due to the costs involved in pursuit of remedy. Some are discounted to a collection firm.
If recourse is required make sure you get a higher rate from the lessee and try to get credit enhancements such as advance payments, security deposits, high closing costs or holdbacks on vendor pricing.
Recourse has reared its ugly head to those spoiled with nonrecourse because funding is very tight today. But before you accept placing yourself or your company in harm’s way think through the commitment and have legal support---review the documents and with an attorney with equipment leasing experience. Don’t be cheap because the mistakes could be very closely when discovered against your position.
Don’t just accept them as being a standard form from the bank. These are things to review, as well as go over with your experienced equipment leasing attorney. While you may not be able to amend the bank’s agreement, you might get some clarification on what full recourse means and what you should be especially looking out for.
You and your recourse funding source need a document that spells out all of the possible events that may happen during the lease to determine when actions need to be taken and who pays for them.
Here is a partial list of subjects for a recourse agreement:
1. At what term of delinquency is a default declared?
There are many ways to offer support without offering full recourse. Having such an agreement may also open community banks to look at transactions in their geographic area, especially if they have the opportunity to sign up a deposit arrangement with the lessee and develop a banking relationship. Don’t look at the community bank as your competitor, but as your partner.
You can establish a reserve fund and place a small portion of each fee earned into it and let it remain under the control of the funder until it reaches an agreed upon percentage of the portfolio. Then on an annual basis extract the overage. Any losses could be charged to the reserve. To mitigate the potential for loss charged against the reserve the Lessor would have to be allowed to participate in the collection activities.
It is also possible to only recourse the first year or two until the lessee proves his ability to pay and has established some equity in the equipment. Also if a vendor is anxious to sell equipment, they may recourse for a period of time---but the agreement must spell out most of the same issues explained above to make sure everyone knows when to act and who pays for that action.
Recourse may not be as bad as you expect if you know what you are getting into, and it certainly will open up more funding avenues to increase your competitiveness.
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty-five years and can be reached at firstname.lastname@example.org or 502-649-0448
He invites your questions and queries.
Previous #102 Columns:
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Bank Beat---Local Bank Investors Lose Out Again
While FDIC Chairman Sheila C. Bair said that bank failures would be slowing down, and there is only one for last week, the numbers are ahead of last year. The total is 23 this year compared to 20 at this time last year. The unofficial "Calculated Risk Finance & Economics" list of banks is long with many Cease and Desist and other rulings from the FDIC. (1) Community and regional banks are still having a lot of noncurrent loans, charge offs, and losses, most of it from land and construction loans that never found completion or a permanent take-out.
After two years of trying to raise capital to match the losses, the five branches of Valley Community Bank, St. Charles, Illinois were closed with First State Bank, Mendota, Illinois, to assume all of the deposits.
Bank stockholders lost all their investment, and seeing the numbers, it is not difficult to see why the bank did not survive.
Formed June 24, 1996 with three offices in St. Charles, one each in Batavia, Geneva, and North Aurora the full time employee numbers had gone from 46 to 41 at the end of 2010. The area is 40 miles west of Chicago. The Fox River runs through the center of St. Charles, population in 2004 was 32,134.
St. Charles Paddlewheel (rides closed during the winter)
Bank equity had dropped from $12.9 million 2008 to $6.4 million 2009 to a minus $833,000 year end 2010. During the same periods the bank lost $$506,000, $6.2 million$2 million in charges off, then lost $7 million year-end 2010 with $4.1 million in charge offs (primarily in $3.8 million in construction and land development, $228,000 in commercial and industrial loans, $119,000 in loans secured by nonfarm nonresidential property.)
Tier 1 risk-based capital ratio -0.88%
As of December 31, 2010, Valley Community Bank had approximately $123.8 million in total assets and $124.2 million in total deposits.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $22.8 million. Compared to other alternatives
(1) Banks with notices from the FDIC:
Tracking Bank Failures Map:
List of Bank Failures:
Leasing Industry Help Wanted
Please see our Job Wanted section for possible new employees.
Top Stories February 22---February 24
Here are the top ten stories opened by readers:
(1) Tyco Kozlowski Mansion Sold to Direct Capital CEO & Wife
(2) Fourth Alert----AMC Funding Still at It
(3) Alert Up-Date--AMC Funding, Charlotte, North Carolina
(4) Bulletin Board Complaint
(5) Wells Fargo could become No. 1 U.S. bank
(Tie)(6) CHG-Meridian Joins Funder & Looking for New Broker Lists
(Tie)(6) Data Sales Joins "Funder List"/"Looking for Broker Business"
(7) Leasing 102 by Mr. Terry Winders, CLP
(8) What is Fraud? by Bernie Boettigheimer, CLP
(9) Two more in Georgia, Napa Wine Country, San Luis Obispo
(10) “That’s Life” -ELFA MLFI-25 January, 2011 Alarming!
5 Things You Never Knew Your Cell Phone Could Do
(A good idea to print, fold and keep in your car, purse, and wallet.)
The Emergency Number worldwide for Mobile is 112. If you find yourself out of the coverage area of your mobile network and there is an Emergency, dial 112 and the mobile will search any existing network to establish the emergency number for you, and interestingly, this number 112 can be dialed even if the keypad is locked. Try it out.
SECOND (Locked Keys in Car)
Have you locked your keys in the car? Does your car have remote keyless entry? This may come in handy someday. Good reason to own a cell phone:
If you lock your keys in the car and the spare keys are at home, call someone at home on their cell phone from your cell phone. Hold your cell phone about a foot from your car door and have the person at your home press the unlock button, holding it near the mobile phone on their end. Your car will unlock. Saves someone from having to drive your keys to you. Distance is no object. You could be hundreds of miles away, and if you can reach someone who has the other 'remote' for your car, you can unlock the doors (or the trunk).
Editor's Note: It works fine! We tried it out and it unlocked our car over a cell phone!'
THIRD (Hidden Battery Power)
Imagine your cell battery is very low. To activate, press the keys *3370#. Your cell phone will restart with this reserve and the instrument will show a 50% increase in battery. This reserve will get charged when you charge your cell phone next time.
FOURTH (How to disable a STOLEN mobile phone?)
To check your Mobile phone's serial number, key in the following Digits on your phone:
A 15-digit code will appear on the screen. This number is unique to your handset. Write it down and keep it somewhere safe.
If your phone is stolen, you can phone your service provider and give them this code. They will then be able to block your handset so even if the thief changes the SIM card, your phone will be totally useless. You probably won't get your phone back, but at least you know that whoever stole it can't use/sell it either. If everybody does this, there would be no point in people stealing mobile phones.
FIFTH (Free Directory Service for Cells)
Depending on your plan, some cell phone companies are charging us $1.00 to $1.75 or more for 411 information calls when they don't have to. Most of us do not carry a telephone directory in our vehicle, which makes this situation even more of a problem. When you need to use the 411 information option, simply dial:
(Snopes.com points out some things that are not fully correct; however, here is a better explanation, in my opinion, as certainly all cell phones, especially the digital telephones, work differently. Kit Menkin)
#112 does not work in all parts of the world, just as a non-international telephone do not work in all parts of the world. And some international telephones do not work in countries that do not support a specific telephone carrier
While certain cell phones cannot reproduce the beep, many can. In addition, new iPhones have difference sequences, and some manufacturers allow you to start your car from your telephone, even over the telephone as you may have seen in ads. I know the cellular unlock procedure works as have used it to open a Mercedes where the keys were locked in the car. That is does not work on all phones, most likely.
3370# may not give you 50% battery life, although, but most will give you time to make two or three important calls. It depends on the telephone model. Most phones are not set for the highest quality sound, and this brings up more power. In many cell telephones, it gives power to the telephone for a period of time.The point here is not how much time is left, but you will be able to make telephone calls if your cell telephone works in this manner, which may be very important at the time. Some cell phones also have this feature with a different number. Read the manual. Or test it out at home, run the power out and give it a try.
Entering #06# does not work on all telephones, and the feature of finding a lost telephone certainly is remote so identifying it may not be important. Normally if a cell phone is found, a discoverer needs only to a call back. That happened to me in New York when I inadvertently left my telephone in the Taxi Cab. I got it back almost right away as they called Sue who was with me and had her own
800-Free-411 of course does not count the time use of the telephone, and therefore is not fully free. However, most carriers today don't charge for 411 and more importantly, Google and other programs have made yellow pages and telephone information numbers obsolete. So how important this feature is a matter of the cell phone plan you have.
Leasing Association 2011 Conferences
March 8-11, 2011
March 17 - 19
April 3-April 5
Equipment Leasing and Finance
April 7-April 9, 2010
Early Registration fee extended to March 7
Exhibitors to Date:
April 12--April 14
Event Schedule and Exhibit Information:
May 4-6, 2001
"The National Funding Association is the premier financial networking organization in the country. Founded in 1991, the NFA has been networking financials professionals across America, and with nine chapters serving twelve metropolitan areas, the NFA continues to grow and expand! Our members include asset based lenders, factors, investment bankers, attorneys, CPA's, bankers, consultants, brokers, and other financial professionals."
"The NFA conference kicks off on Wednesday, May 4 with a Golf Tournament at a noted Atlanta area course. An opening reception starts the evening’s festivities from 6:00 to 8:00 PM! Following his presentation are attendee sponsored receptions and hospitality rooms."
"On Thursday, May 5, the conference formally begins with an opening session at 8:30 AM, with a welcome by Atlanta Mayor Kasim Reed, followed by a day long line-up of prominent speakers, including a luncheon, a networking exhibit hall, evening reception, and a banquet with an entertaining dinner speaker."
Our presenters include:
Keynote Speaker will be Beth Ann Bovino
Members register here:
May 11-May 13
Members (before March 16) $495
March 1st-Members $595
To view Leasing Association Events-Meetings Open to All, please click here.
Hempstead, New York -- Adopt-a-Dog
This is a gorgeous dog with a great soul and needs someone to be her pal
“Please come by today to adopt. I was picked up as a stray & have been here since Feb 2010. I know some commands. Give me a chance"
Free Adoption" until Feb. 28 2011 For more information on this animal please call the Town of Hempstead Animal Shelter at (516) 785-5220. Adoption always includes spay or neuter, basic shots, and microchiping.
Town of Hempstead Animal Shelter
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Hall of Famer Duke Snider, 84, dies
How California compares on taxes, schools, and other areas
Pay for California's 72 community college district chancellors varies widely
Wine in Two Words
With budbreak in Napa, another growing season begins
A semantic sommelier: Wine application highlights the power of Web 3.0
Wine Prices by vintage
US/International Wine Events
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This Day in American History
1646-- Roger Scott was tried in Massachusetts for sleeping in church.
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