Monday, October 18, 2010
Placard--Rule #1 Boss is Right
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GE Keeps on Trimming
General Electric (GE) reported third quarter earnings to $2.06 billion, down from $2.49 billion, with Revenue slipping 5% from the year-ago period to $35.9 billion. Wall Street wasn’t happy as GE moves in new directions, and its competition will be found asleep at the wheel as it expands into better markets while trimming away not only the fat, while expanding new markets.
At their news conference, CEO Jeffrey Immelt blamed the trend on lower equipment sales in the quarter, as well as on the impact of reduced assets at GE Capital, which it has been downsizing, noting a $1.1 billion boost to reserves stemming from the 2008 sale of its Japan consumer-finance business.
It is all part of their entering new markets as seen by recent acquisitions and expansions.
In its trimming mood for going on the second year, perhaps the third before the announcement of what its plans were, GE Capital has also been diversifying. Much of it has been by lack of demand, and perhaps that is recognized in its supplemental flying showing one of its major decreases in vehicle financing:
winner GE Slogan Contest
GE Third Quarter Supplemental Financial"
Adrian Hebig resigns from US Bank Manifest
The runaway from the independent brokers’ marketplace continues from Balboa Capital, Direct Capital, Key, LEAF, Marlin, and now it appears Manifest. It appears Adrian Hebig, SVP-COO, has resigned and other changes are and have been taking place, but due to conflicting information, Leasing News is not able to give a report at this time. Whether it is US Bank not being satisfied with the last number of years credit decisions or marketing not following the credit model or the rising costs involved or seeming separate operation from the bank or lack of management control being split across the country from Portland to Marshall to Minnesota and other points or all of the above.
Leasing News is seeking an interview with Mr. Hebig.
Lease Police Identifies "Repo Machines"
Bernie Boettigheimer, ex-leasing and manufacturer executive, now semi-retired, running Lease Police, Dallas, Texas, told Leasing News: "I hear these excuses every time I talk to executives throughout our industry:
"None of these executives are safe!" he declares. "I'm not just talking about the vendors who worked fraud with Allied, Cyberco, E.A.R., GMD, or Wildwood, as the list is long, and we had information on them----I'm talking about the over 560 legitimate vendors Lease Police is tracking; these 560 legitimate vendors have an abnormally large amounts of repossessions? These vendors are not fraudulent, but they are what I call ‘Repo Machines’!
"They may not be engaged in fraud, but 10-20% of their transactions end up as repossessions and they probably account for over a third of your repossessions. They go from funder to funder."
He said at LeasePolice.com his software program has categorized and analyzed over 10,000 recent repossessions. He said: "Some of these legitimate vendors produce over 50 repossessions per year! Because vendors use multiple leasing companies, many funders have never seen the whole repossession picture. Only when the data is aggregated (by LeasePolice.com) can you see the trends develop.
"I don't care how much experience or how smart the executive is or what they know about credit or leasing. They don't have what Lease Police has collected in its software program: the data and the collective intelligence of hundreds of funding companies who have contributed their records.
“These records also retain other information, all from the contributions of records of funders who participate in the software records."
Here are the facts, Boettigheimer says:
Bernie Boettigheimer CLP
(Leasing News provides this ad “gratis” as a means
There is a major concern by funding sources today on how to determine a proper fee for commercial lease transactions. One could easily say that competition keeps fees down by restricting rates and rent payments.
With the cost of funds so low, meaning leasing rates being so low, it does open the door for some interesting fee amounts. Historically transactions under $50,000 allow up to 10% of equipment cost and the percentage drops pretty fast as the equipment cost is greater than $100,000. But funding sources are beginning to look at their own income and are comparing it to the requested fees from lessors.
One thing brokers and packagers (often called “discounters” who utilize a private label contract and discount the stream of payments and may “sell” one lease at a time or a group of them) need to keep in mind is that with the rates as low as they are today the margin between a funders cost of money and the purchase rate is also very tight. When you exceed the margin that the funder is making, be prepared for some opposition to your fee. An example would be a $50,000 transaction for 36 months at purchased by the funder at 8%.
If the funders cost of money was say 4% then the total mark up prior to a loss reserve, operations and credit investigation would be around $3,000. Their actual margin after operating costs would be around $1,500. If you sell a lease at 10% rate your fee on a discount of 8% would be $1,400. Therefore you are making almost as much as the funding source with no risk. If you could sell it at 12% your fee would be much greater than the earnings to the funding source. They are beginning to view this with skepticism. Especially when the transactions are non-recourse.
I do not think you should be restricted from earning a fee, but understand that if you are looking to make more, you should think of other ways to earn the excess fee. Do not expect the funder to pay you off and then take all the risk of the credit, and your fee, if a default happens.
You might change the funders’ attitude by offering a 2% reserve, as was common in the old days. Instead of making eight points, put two of the points in an escrow account to offset any loses on leases you have submitted. At a specified period, when the lease pays out for instance, 2% from the reserve is returned to you. If your loses start to eat up your reserve, you may want to look for much better credits for your source than to reduce your reserve.
Packagers can consider only selling a portion of the payments to the funder (like 33 months instead of 34) so their margin is collected prior to your excess income, so they are not taking the risk of your fee. That also means that you will be there to help them with pass dues, because you have a vested interest in a successful outcome.
Please understand funding sources are the lifeblood of your business and the more you work with them on setting your fees instead of just letting it happen the stronger your bonds will be. Some greedy brokers and packagers can ruin a funding source with the attitude that the funding source is responsible for their own mistakes and ignorance. You must work with a funding source remembering that what is good for the goose also applies to the gander.
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty-five years and can be reached at email@example.com or 502-649-0448
He invites your questions and queries.
Previous #102 Columns:
(This ad is a “trade” for the writing of this column. Opinions
Bank Beat---Land Development Brings Down three more banks
The 132nd bank to fail this year, the sixth in Missouri, was Premier Bank, Jefferson City, who had nine branches that were closed with Providence Bank, Columbia, Missouri, to assume all of the deposits of Premier Bank, except certain brokered deposits. Founded May 15, 1995, they had three branches in Jefferson City, with six in four other counties, in the cities of Chesterfield, Grapevine, Lake Saint Louis, Osage Beach, Saint Charles, Saint Peters.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $406.9 million. This is approximately 35% of Premier Bank's assets.
www.problembanklist believes the FDIC waited too long: “Premier was hopelessly insolvent with almost a third of its loan portfolio worthless, as indicated by the FDIC’s loss calculation. The huge losses on Premier Bank’s loan portfolio would have been obvious by early 2009 as residential and commercial real estate values crashed, yet Premier, though obviously insolvent, was allowed to remain open until today.
"As regulators come to the conclusion that many small and midsized banks cannot raise additional capital nor depend on rising assets values to offset defaulting loans, the pace of small and mid sized banking failures is likely to increase."
The Missourian newspaper noted Premier Bancshares Inc., was placed under the supervision of the Federal Reserve in March 2009.
"The demise of this bank is the result of aggressive lending decisions made by management,” Richard J. Weaver, commissioner of the Division of Finance said in a written statement. “Many of the loans were in commercial real estate and development projects which proved unsuccessful. These loans became uncollectible. Losses are more than the bank can support, and management acknowledges that failure of the bank is inevitable.”
Net equity took a larger a major hit from $90.7 million to $19 million the same period; non-current loans increased from $102 million to $166.4 million. Premier had a loss of $33.2 million June 30, 2009 to a $25.1 million loss June 30, 2010 after $33.4 million in charge offs ($21.9 million in construction and land development, $6.5 million secured by nonfarm nonresidential property, $2 million in commercial and industrial loans, $1.9 million secured by 1-4 multifamily property, and $1 million secured by residential property.
In an effort to stay alive, full-time employees had dropped from 244 June 30, 2009 to 193 June 30, 2010 and other strict measure were taken, but it was too late. Investors lost everything.
Tier 1 risk-based capital ratio 1.90%.
As of June 30, 2010, Premier Bank had approximately $1.18 billion in total assets and $1.03 billion in total deposits. The FDIC and Providence Bank entered into a loss-share transaction on $408.7 million of Premier Bank's assets.
WestBridge Bank and Trust Company, Chesterfield, Missouri, was closed with Midland States Bank, Effingham, Illinois, to assume all of the deposits. Founded February 7, 2006 they had one branch in St. Louis County with 12 full time employees.
225 investors who provided $12.5 million in capital approved their board to sell the bank for $480,246 to a new corporation owned by Paul Melnuk and Tom Hillman, owners of FTL Finance, to keep it alive. After looking it over, they turned the deal down. Hillman is chairman of FindStuff.com, an Internet comparison shopping company.
He and Melnuk owned FTL Finance, who reportedly specialize in lease financing HVAC equipment and is a division of FTL Capital Partners, a merchant bank based in St. Louis.
Many of the directors of the bank were involved in real estate and its environs.
Net equity had dropped from $5.1 million in June 30, 2009 to $1.3 million June 30, 2010. The bank had a loss of $2.9 million the same period in 2009 and $2.1 million June 30, 2010 with $7.1 million in non-current loans after a $1.1 million charge off ($446,000 in commercial and industrial loans, $340,000 in construction and land development, $170,000 secured by non-farm non-residential property, and $126,000 in loans secured by 1-4 family multi-residential property.)Tier 1 risk-based capital ratio 1.88%.
As of June 30, 2010, WestBridge Bank and Trust Company had approximately $91.5 million in total assets and $72.5 million in total deposits. The FDIC and Midland States Bank entered into a loss-share transaction on $72.6 million of WestBridge Bank and Trust Company's assets. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $18.7 million.
The nine branches of Security Savings Bank, F.S.B., Olathe, Kansas, were closed with Simmons First National Bank, Pine Bluff, Arkansas, to assume all of the deposits. Olathe is the fourth largest city in the state, according to the city's web site. It is located just 20 miles southwest of downtown Kansas City.
Security Savings Bank was founded January 1, 1956. They had 148 full time employees June 30, 2009 and 108 full time employees June 30, 2010. During the same time period, the net equity had gone from $2.5 million to $1.9 million, non-current loans from $17.4 million to $32.8 million. June 30, 2009 saw a loss of $12.7 million; June30, 2010 a loss of $14 million after $7.7 million charge off to construction and land development, $776,000 in multifamily residential property, $442,000 in commercial loans, $262,000 in loans secured by 1-4 family residential properties. Tier 1 risk-based capital ratio 4.13% .
The Kansas City Star reported: “Regulators’ seizure of Security ended the divinely inspired two-decade banking career of Kansas City area homebuilder and developer Donald H. Bell. Bell and his family owned Security Savings through a holding company called Brittany Savings Corp. that faces its own financial bind.
"God had told Bell during a 'divine revelation' in 1988 to buy a bank, according to a 2004 history of Security Savings that the family produced.
"Don Bell Homes already had become one of the most active homebuilders in the Kansas City area, and the history said Bell had cold feet about his vision until his wife, Faith, said they should follow it.
"The couple borrowed $1.6 million and acquired a small thrift in Garden City, Kan., the next year, and a Salina, Kan., thrift in 1992. Security moved its headquarters to Olathe a few years ago.
"Problem loans have dogged Security Savings since early 2006. It also felt the weight of an increasing collection of foreclosed real estate, including an aborted $8 million golf course development in Greenwood called the Wilds, on which only a few houses sprouted."
As of June 30, 2010, Security Savings Bank, F.S.B. had approximately $508.4 million in total assets and $397.0 million in total deposits. Simmons First National Bank will share in the losses on the asset pools covered under the loss-share agreement. The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $82.2 million.
Tracking Bank Failures Map:
List of Bank Failures:
Leasing Industry Help Wanted
Please see our Job Wanted section for possible new employees.
Top Ten America's Safest Cities
Cities with population of 250,000 plus.
Information researched, then averaged
1. Plano, Texas
2. Portland, Ore.
3. Honolulu, Hawaii
4. San Jose, Calif.
5. Omaha, Neb.
6. New York, N.Y.
7. Santa Ana, Calif.
8. Anaheim, Calif.
9. San Diego, Calif.
10. Glendale, Ariz.
Top Stories---October 12--October 14
Here are the top ten stories opened by readers:
(1) Great America Starts New Division with Brian Bjella
(2) Schwartz Indicted for $87 Million Fraud Still in Jail as Ex-Employees are Surprised
(3) Pictures from the Past--Brian Bjella, 1995
(4) Lease Fleece Adam Zuckerman back in the news
(5) Butler Capital/Koch Financial sold to BankUnited
(6) Recommendations: Lease/Finance Calculators On Line
(7) Top 10 Most Expensive Homes for Sale
(8) Enterprise Leasing Sued over Rock of Love Bus Crash
(9) Leasing 102 by Mr. Terry Winders, CLP
(Tie) (10) Bank Beat---EverBank to go for $200 Million IPO
(Tie) (10) Operation Lease Fleece---the Unpublished Version
Minneapolis, Minnesota---Adopt a Dog
Please request an online application at firstname.lastname@example.org.
My Story: I came into Red Lake Rosie's Rescue on the Red Lake reservation as a stray. I was starving and my ears were all full of burrs. Now I am on my way to having a healthy, shiny coat and a full tummy.
Hobbies: My favorite thing besides eating is having lots of pets from anyone that will spend the time with me. I wag my tail so hard that my butt hardly hits the ground. I am a happy boy that just wants an active family with lots of love to give. I love rides in the car. And being a Springer I think I would love a cabin near a lake for swimming. I probably could be a good hunter but do not want to be left in one of those outdoor kennels. I have had enough of that life.
Commands/Tricks: I am very smart and a quick learner. My name is new to me so I may not come right away when called. I do sit nicely for treats and pets.
Crate / Potty Trained: I am totally housetrained and stay in a kennel when my foster mom is gone.
Activity Level: medium to high. As a Springer I am full of energy. But being a bit older I do calm down when in the house. I sleep through the night in a doggie bed. Daily walks will help me the best dog I can be.
Fun things I do: Running around outside is how I like to spend my afternoons. Frisbees are my favorite toys. I will run after them and carry them around but do not quite have the hang of bringing them back to my foster mom yet. Another dog to play with would be grand.
Socialization/who I currently live with: I currently live my foster mom and her teenage son. She owns Rescue Buddy Boarding & Beyond so we have lots of playful dogs coming and going and I love playing with all of them. There is also a resident Springer here to keep me company.
Darvin is attending Pet Haven's medium/large dog adoption events and his adoption fee is $300 (cash or check only) and includes spay/neuter, heartworm check, current vaccinations, and microchip and registration.
Due to post-adoption services provided, it is Pet Haven's policy to only place dogs into homes within a 60-mile radius of the Twin Cities area.
Please request an online application at email@example.com.
More about Darvin
Darvin's Contact Info
Adopt-a-Pet by Leasing Co. State/City
Adopt a Pet
Venture capital investments decline 7%
Italian Named World's Top Sommelier
Wine World to showcase over 500 Washington wines
Announcing the Los Gatos-Saratoga Wine Trail
California Farmland, Known for Its Drinks
Multimillion dollar 'green' winery at Davis
US/International Wine Events
Leasing News Wine & Spirits Page
This Day in American History
1767 -Boundary between Maryland and Pennsylvania , the Mason Dixon line, agreed upon on this date, a major step in establishing “state” territories.
World Champions This Date
1977 New York Yankees
Slowly as in an underwater dance
As the ball leaves his hand, the action stops —
of sadness or longing we sometimes feel
Written by Conrad Hilberry, published in
The object is to insert the numbers in the boxes to satisfy only one condition: each row, column and 3x3 box must contain the digits 1 through 9 exactly once. What could be simpler?
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