Monday, January 30, 2012
Who Will Win Super Bowl XLVI?
######## 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.
The emails started late morning on Thursday that Marlin had closed down their broker division and would only keep the direct division working. Leasing News had reports the company was down to two broker representatives, not getting the quality business it was seeking, and the once performing division has never been the same since Mike Bennie was fired by Executive Vice President, General Counsel & Secretary Corporate Secretary George D. Pelose.*
There were others let go, other changes, exiting factoring, doing loans, vehicles, cutting staff, then a bank, which has enable Marlin to go after TARP, plus the economy changed. As many companies
One of the readers who informed us of being telephoned to inform them not to send any more business, also sent a copy of an email letter he received:
January 29, 2009
I would like to thank you for your past business with Marlin Leasing and express our appreciation for your patronage. Whether we have completed five business transactions or one hundred, we have valued your business.
Unfortunately, and effective immediately, Marlin Leasing will not be accepting equipment financing applications from the broker community in the near term. Marlin will honor outstanding approvals (subject to the terms and conditions set forth in such approvals) and respond to outstanding applications. However, no new credit applications will be accepted.
Given the current economic environment, this action is a prudent and necessary step for our business. We believe this action is a temporary one, but one which needs to be taken as we navigate through this economic climate.
Please do not hesitate to call your sales professional at Marlin if you need more information.
Thank you for the privilege of your business, and we wish you only the best in your future endeavors.
Leasing News was able to receive a statement from Marlin Leasing:
“Thanks for asking for clarification from Marlin’s management regarding our announcement today. If you choose to print my response to your request please do so in its entirety.
“Marlin exited the Broker channel today by informing all of our broker customers in writing of the change. We intend to provide professional service as we honor the backlog and process all open business.
“Our decision was based on the credit quality deterioration that we have been seeing in broker application flow. The risk vs. price relationship simply did not match the attractiveness of our other origination channels. Therefore we are applying former broker sales resources and capital to our direct channels. We sincerely wish the best for the broker community as we all manage through this economic climate.”
Thursday’s stock closing was $3.99.
*Mike Bennie and the Broker Division:
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Arvest Equipment Finance 2011 Double-Digit Growth
Arvest Equipment Finance, a division of Arvest Bank, Fort Smith, Arkansas, reported 2011 net assets were up $46 million, or 62 percent, from the previous year for a record $121 million in loans and leases.
New business volume was also up more than $47 million over 2010 to $76 million, or a 160 percent increase.
Kyle W. Gilliam, CLP,
"This is a substantial increase over the 2011 industry average where new business volume was up 25 percent, “Kyle W. Gilliam, CLP, President of Arvest Equipment Finance, said.
“Companies were careful during the recession to extend the life of their equipment by making repairs instead of purchasing new products, but after several years of repairs, many businesses simply could not afford to delay replacing old equipment any longer. This replacement cycle helped the substantial increase in business in 2011.”
He also noted that in addition to AEF’s increase in business from the manufacturing and medical sectors, lease financing for county and municipal governments remained strong.
“Multiple industries are looking to conserve their financial resources by seeking out available leasing and financing options.”
CFG Community Joins Equipment Leasing Fray
According to the Baltimore Business Journal, CFG Community Bank of Towson, Maryland, formed December 1, 1997 with 90 full time employees in three offices (Annapolis, Towson, Baltimore), " is betting it can wrestle away at least a modest share of the $628 billion industry from industry behemoths like Wells Fargo and Bank of America and manufacturers like John Deere and Caterpillar."
In November, Daniel McKew joined CFG Community Bank as president after serving as president of 1st Mariner Bank. He previously served as chief executive of SunTrust Equipment Finance & Leasing Corp. in Towson. November 3, 2011, it was announced that CFG Community Bank and its parent company, Capital Funding Bancorp, have agreed to a consent order with state and federal bank regulators to shore up their corporate governance and management review processes. In addition, it was agreed a majority of its board of directors would be independent members. Other stipulations included revising its allowance for loan losses and developing a strategic plan for 2012.
In 2009, Capital Funding bought Towson-based AmericasBank Corp., which had been under intense government supervision after struggling with losses in its mortgage-lending business.
The bank had a $7 million profit the end of 2011 with a net worth of $50.7 million, according to FDIC records. Tier 1 risk-based capital ratio: 15.8%
The Baltimore Business Journal article states three industry veterans were hired to basically cover Maryland, northern Virginia and southern Pennsylvania: Robert Rynarzewski, Arthur Sanchez, James Swalwell.
Robert Rynarzewski was previously vice-president loan officer for SunTrust Equipment Finance & Leasing (2011-2011). University of Maryland BS, Mathematics. Completed accounting classes after BS and passed CPA the first time.
Arthur Sanchez was previously with SunTrust Equipment & Finance.
Jim Swalwell was previously an account executive at CSI Leasing (2009-Junly, 2011), VP National City Commercial Capital (2005-2008), VP Bank of America Leasing & Capital (1996-2004), Manager Syndications, NYNEX Credit Company (1994-1996), Manager AT&T Capital (1992-1993), Vice-_resident, Manufacturers Hanover/The CIT Group Equipment & Project Financing (1983-1985).Eastern Illinois University Bach Bus Adm., Maj - Finance, Finance (1979 – 1983)
--- Mergers, Acquisitions & Changes
The count is well over 100, including 25 actual closures not counting acquisitions and merges, or the 75 no longer accepting indirect business, companies getting out of leasing the last three years. As the economy improves, more are becoming interest in leasing. (1)
Element Financial (Toronto, Canada) (12/11) Steve Hudson takes the company public.
Commercial Money Center (CMC), Southern CA. (12/11) Fallout from CMC Continues in Nevada Federal Court http://leasingnews.org/archives/Dec2011/12_28.htm#fallout
Puget Sound Leasing (12/11) First Sound Bank Investor Pleads to Keep Bank Open as negotiations continue regarding settlement with Secords.
LEAF Financial, Philadelphia, PA (12/11) Resource America "deconsolidates" LEAF Financial
Radiance-Capital, Tacoma, WA (12/11) Bulletin Board Complaint as Mike Price claims there is a 10% residual on an Equipment Finance Agreement, calling it an "FAA."
(1) Leasing Companies Out of Business
(Leasing News provides this ad as a trade for investigations
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Ten Worst Cities to Find a Job
Downtown Merced, California
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Unemployment Rate, November, 2011
Difference between a $1 Purchase Option Lease
Many think leasing contracts are just disguised conditional sales contracts (CSC). It is much more complicated than that with both good and bad aspects about using a lease form with a bargain purchase option.
Often an Equipment Finance Agreement would offer the lessor a better position as a creditor than as the “owner.” There are many consequences affecting many rules and regulations, just because a lease looks like a CSC does not make it so in the eyes of some of those rule makers.
If you use a lease agreement with a $1 or bargain purchase option you are declaring that you are the owner until the lessee actually exercises the purchase option at lease termination. Therefore you are subject to unpaid taxes that are assessed on the equipment over the term such as property tax, school tax, county taxes, or any other local tax, even though you may not know about it, plus any penalties or interest. This requires a lease accounting software package based on assets and their location and not customers address.
A CSC and a loan are both cancelable with payoffs computed to reduce the payoff by determining the unearned interest. A lease contract is non-cancelable to protect the lessor and gives the lessor control to request the remaining payments. Even though most lessors only impose this non-cancelable clause in the case of default, it does separate a CSC from a lease and has other consequences.
There is no language in a lease contract to accept down payments, trade-ins, or additional collateral. If you try to include them, you are going to have to create an addendum and it will be the camel when you expected a horse. Any attorney will tell you it is a no win document because it is a hybrid and a loan with a security agreement or a Conditional Sales Contract or Equipment Finance Agreement would have been a stronger way to go. However in many States you do not need a license to be in the leasing business, but you do need to qualify for a lender’s license.
One problem with leasing is the amount of documents required to properly complete a lease. You do not find acceptance forms, purchase orders, vendor’s invoices, delivery certificates, or requirements for equipment maintenance, or return requirements in a CSC or Equipment Finance Agreement. Some lessor’s try to include some of these forms in the lease agreement, but clearly do not understand the importance of proper dating and performance issues to follow legal requirements. This opens the can of worms of fraud and recourse on non-recourse funding.
Like it or not, you must require “additional insured” endorsements as well as the “loss payee” on the lessees insurance policies. Because you are the owner until termination you could be subject to a lawsuit for injuries or damage caused by your equipment. Lenders are rarely included. Just the cost of the litigation can be expensive even though you may be exonerated. Some lessor’s seem to ignore the question of insurance under the assumption that a bargain option lease is some protection. This is a dangerous assumption.
There are a lot of provisions in a lease that are not found in a CSC such as a re-location notice, so if the equipment moves to a different tax location changes in tax reporting can occur for personal property taxes or if you are collecting the tax monthly. A CSC does not make the lender subject to any equipment taxes and therefore the accounting is much simpler. Sad to say that some funders buy payment streams and because they look at the lease like a loan, many aspects are ignored and they do not understand the risks that they put the broker in when they do the accounting without a leasing software package.
In short a lending department does not have the tools or the training to account for, or handle, an equipment lease, regardless if the UCC decides it is an Article 9 transaction. Case law will only determine if the lease meets legal or tax standards and has no affect on the accounting standards (SFAS #13) used to classify a lease.
In addition the Lessor is usually concerned about the equipment being leased and studies the actual useful life and the economic value of the equipment over the term. A lender usually reviews the financial statement of the borrower to determine the credit quality of the transaction. A lender rarely reviews the requested term in relation to the risk or the “true” collateral value of the equipment, and let’s not even begin to talk about the warranty concerns. This leads a Lessor to completely describe the equipment and understand its potential use to the lessee, as well as any vendor or manufacturer’s warranty.
Many states require full disclosure on Conditional Sales Contracts and Equipment Finance Agreements, whereas Lease Contracts do not, and many think do not need to follow the state usury laws, thus they are more popular by credit grantors, as well as the advantages of a “true lease” without a bargain purchase option.
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.
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