Archives--September 3, 2002
"Top Gun" Ignacio Sanchez, CLP

"I grew up in Southern California and attended both San Diego State
University and California State University, Fullerton.
 
"I started working for Balboa Funding Group in Jan 1990 right after I
graduated from California State University, Fullerton where I graduated with a BA degree in Business Administration with my emphasis in finance. I started out as a Junior Account Executive where I was taught leasing by Jim Raeder, Shawn Giffin and Mark McQuitty. I became an account executive in June ,1990. In January, 1993, I became the Sales Manager for the Irvine office and served as sales manager for almost 4 years.  As sales manager, I was in charge of all Irvine sales operations, and at times funding, credit and training of new sales reps. Even with all my responsibilities, I continued to sell and was in the top 3 in sales for Balboa Capital every year.  In 1995, I became a CLP. In 1997, I stepped down as Sales Manager and went back to selling and training Jr. account executives. I continued selling there until I quit in 1998 because there was no chance of ownership.
 
"I received a base salary, car allowance, plus 30% of all profit on both the front and back end of my transactions.
 
"In 1998 I started TriStar Capital, LLC with my brother Mike Sanchez who was with Balboa for 5 years and Banc One leasing for 1 year and Robert Hendrix who was the National Sales Manager at Balboa Capital. I continue to sell and run the company with my partners. In the 4 years we have been in business we have grown rapidly and funded about 20mm in equipment cost in 2001.  We hope to grow by at least 25% this year."

 

TODAY

Ignacio Sanchez, CLP
Business Development
TA Equipment Finance
Santa Ana, California
(August, 2012-Present)
Partner
TriStar Capital, LLC
(September, 1998-October, 2011)
Sales Manager
Balboa Capital
(1990-1998)
www.linkedin.com/pub/ignacio-sanchez/11/3b4/b81

 

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Classified Ads---Credit

(These ads are “free” to those seeking employment
or looking to improve their position)

Credit, syndication, workout experience Exceptional work ethic, common sense coupled with practical experience in equipment finance, consumer, commercial. Can interact with all levels of borrowers and intermediaries. Not an originator – but can help sales team close – great up sell ability. Will relocate for the right opportunity AND can work remotely.aaacorrespondent@gmail.com

Orlando, Florida As a Commercial Credit Analyst/Underwriter, I have evaluated transactions from sole proprietorships to listed companies, across a broad spectrum of industries, embracing a multitude of asset types. Sound understanding of balance sheet, income statement and cash flow dynamics which impact credit decisions. Strong appreciation for credit/asset risk.  rpsteiner21@aol.com  407 430-3917

Free Posting for those seeking employment in Leasing:
http://www.leasingnews.org/Classified/Jwanted/Jwanted-post.htm

All “free” categories “job wanted” ads:
http://www.leasingnews.org/Classified/Jwanted/Jwanted.htm

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Bank Refused Coverage on Banker’s Bond
for Sheldon Player’s Equipment Acquisition Resources
By Tom McCurnin
Leasing News Legal Editor

(Sheldon Player in Wyoming)

Highland Bank’s $3 Million Dollar Loss Due to Forgery of EAR’s Principal, Donna Malone (the late Sheldon Player’s alleged wife), Was Claimed to Have Been Directly Caused From Forgery, Thus Triggering Bankers’ Blanket Bond.  But Bank’s Insurer Obtains Summary Judgment That Loss Was Inevitable and Not Directly Related to Forged Guaranty.

Although Christmas season is not yet upon us, the Equipment Acquisition Resources (“EAR”) case is a case which continues to bless lawyers with seemingly endless litigation. There are several cases on going, such as Home Savings Bank, as well as FBI filings against the president Mark Anstett and vendor of equipment, George Ferguson (1)

Today’s case is a marginal case between victim Highland Bank and its insurer, BankInsure.  The Bank thought that its EAR loss was covered under its Bankers Blanket Insurance Policy. The Insurer disagreed, and the Court ruled that it was not a covered loss.  The facts follow. 

A regurgitation of the complete facts surrounding the EAR scam is unnecessary here.  Sheldon Player, the principal of EAR, scammed dozens of leasing companies with double financed equipment and non-existent equipment.  (2)

In 2005, EAR and First Premier Capital entered into a lease agreement under which First Premier was to provide manufacturing equipment to EAR.  As a condition precedent to the Lease Agreement, EAR principals Sheldon Player and Donna Malone executed personal guaranties with First Premier on May 27, 2005, guaranteeing all the obligations under the Lease Agreement.  The bank believed that Ms. Malone’s guaranty was likely forged. 

In 2006, First Premier approached Highland Bank on EAR's behalf, seeking to borrow $3 million to finance the equipment lease, contemplating that Highland Bank would advance $3 million acquisition cost of the equipment to First Premier, which would then advance the funds to EAR’s equipment vendor.  First Premier would retain title to the equipment, and EAR would lease the equipment from First Premier under a lease schedule.  Highland Bank would receive payment of its lease financing through an assignment of the rental payments due to First Premier under the Lease Agreement.  As relevant here, First Premier assigned three schedules to Highland Bank for an approximate aggregate sum of $4,000,000.  Before closing any of the three loans, Highland Bank did not contact EAR, Player, or Malone, did not inspect the equipment or determine its liquidation value.  The Bank did not conduct a background check on Player or Malone, or ask First Premier to do so. 

By 2009, Highland Bank determined that the loans were uncollectible.  In 2010, Highland Bank filed suit against First Premier in Minnesota, alleging that First Premier was in default of the representations and warranties under the Assignment.  Highland Bank obtained judgment against First Premier, but has been unable to collect on its judgment.  First Premier is out of business. 

As a last resort, Highland Bank brought suit against its insurer, BancInsure, which issued a blanket bankers bond, insuring against certain losses arising from a variety of exposures, such as forgery and counterfeiting.  Highland Bank sued its insurer for a total of $2,011,618.30, the loss it incurred from the three loans.

The Bankers Bond covers financial institutions from losses resulting directly from the Bank having, in good faith, acquired any credit on the faith of any original guaranty which bears a signature which may
have been a forgery.  Actual physical possession of the guaranty is a condition precedent to the Insured's having relied on the faith of such items. 

Highland Bank moved for summary judgment, seeking coverage for its loss, due to forgery.  BankInsure also moved for summary judgment. 

BancInsure argued that there is no loss “resulting directly from” Highland Bank's extension of credit on the faith of an alleged forged document, because the Malone guaranty was worthless.  According to the credit write up, the Malone guaranty was worthless because Ms. Malone had a tangible net worth of negative $4,580,000.  BankInsure argued that the Bank could not demonstrate reliance on the Malone guaranty because it never examined the original document before funding the loans, a condition of the Bankers Blanket Bond. 

The Court held that the loss had to be one which resulted directly from the forgery, and as we know now, the EAR leases were doomed from the start, and a loss would have occurred whether the guaranty was forged or not.  Accordingly, the Court granted BankInsure’s motion for summary judgment and denied Highland Bank’s motion for summary judgment.  This left Highland Bank high and dry to collect on its three EAR deals totaling over $4 million dollars.  Highland Bank appealed to the 8th Circuit. 

What are the lessons here for the equipment lessor?

First, Banker’s Blanket Bonds are specialized forms of insurance, which generally protect a financial institution against specific kinds of fraud and defalcation.  It cannot be used as a poor man’s credit insurance. 

Second, while I don’t fault the Bank giving the lawsuit the old college try, I thought the case was doomed from the start, because it was hard to argue with a straight face that the loss was directly attributable to the forged guaranty.  I guess what I am saying is that I wouldn’t rely too much on these types of bonds. 

Finally, as a post script, BankInsure was placed into receivership on August 21, 2014 by the Oklahoma, so the likelihood of recovery from this avenue has now been made even more remote. 

The bottom line to this case is that Bankers Blanket Bonds are a specialized form of insurance which protect a financial institution from specific kinds of fraud and defalcation, and are not credit insurance.  As such, they are strictly construed. 

The outcome of this case was very predictable.  “Before closing any of the three loans, Highland Bank did not contact EAR, Player, or Malone, did not inspect the equipment or determine its liquidation value.  The Bank did not conduct a background check on Player or Malone, or ask First Premier to do so.”  This pre-closing contact with the parties involved, the inspection and evaluation of the equipment in consideration of the amount to be extended, and background checks on the principals and guarantors would have provided documentation against the extension of ANY amount.

Highland Bank Case
http://www.leasingnews.org/PDF/HighlandBankCase_932014.pdf

1. US Attorney Indicts EAR President Mark Anstett
   and Two Others for $100 Million Leasing Fraud
   http://leasingnews.org/archives/Mar2014/3_03.htm#us

1. Articles on E.A.R. and Sheldon Player
   http://www.leasingnews.org/Conscious-Top%20Stories/Sheldon_Player.htm

Tom McCurnin is a partner at Barton, Klugman & Oetting
in Los Angeles, California.

Tom McCurnin
Barton, Klugman & Oetting
350 South Grand Ave.
Suite 2200
Los Angeles, CA 90071
Direct Phone: (213) 617-6129
Cell (213) 268-8291
Email: tmccurnin@bkolaw.com
Visit our web site at www.bkolaw.com

Previous Tom McCurnin Articles:
http://www.leasingnews.org/Conscious-Top%20Stories/leasing_cases.html

 

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Top Stories August 25--August 29
Opened Most by Readers of Leasing News

 

(1) Name This Company in the Bulletin Board Complaint
Take a Guess
http://leasingnews.org/archives/Aug2014/8_25.htm#name

(2) Balboa Capital Settles $36,454 Attorney Fee Complaint
   After Getting Suit Dismissed Against Regents Capital
http://leasingnews.org/archives/Aug2014/8_25.htm#balboa

(3) A Key Part of the Economic Recovery Is Finally Happening
http://leasingnews.org/archives/Aug2014/8_29.htm#key

(4) Archives---August 25, 2004
Jim Raeder Responds to Criticism of CapitalWerks
http://leasingnews.org/archives/Aug2014/8_25.htm#archives

(5) New Hires—Promotions in the Leasing Industry
http://leasingnews.org/archives/Aug2014/8_29.htm#hires

(6) Are Accurint Reports a Consumer Credit Report?
           Will This Change Their Use?
 By Tom McCurnin, Leasing News Legal Editor
http://leasingnews.org/archives/Aug2014/8_27.htm#accurint

(7) Leasing 102 by Mr. Terry Winders, CLP
Pricing
http://leasingnews.org/archives/Aug2014/8_25.htm#pricing

(Tie)(8) Earthquake in Napa, California
http://leasingnews.org/archives/Aug2014/8_25.htm#napa

(Tie) (8) Financial Pacific Completes First Year
as Subsidiary of Umpqua Bank
http://leasingnews.org/archives/Aug2014/8_29.htm#fin

(9) Sales Make it Happen by Robert Teichman, CLP
Sales Isn't Just for the Salesperson
http://leasingnews.org/archives/Aug2014/8_27.htm#happen

(10) Napa Valley Open for Business
http://leasingnews.org/archives/Aug2014/8_27.htm#napa 

 

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Differences Between iPhone & Android Users
By Dave Smith, businessinsider.com

Based on comScore data charted for us by Statista, there are more people using Android apps than iPhone apps — which makes sense, since Android is killing iOS in global smartphone market share — but as you can see from the chart, iPhone owners tend to spend more hours on their apps, and they also make more money in general. But that makes sense: More than 80% of Apple devices are “high-end,” while ~60% of Android devices are considered “low-end,” since they cost less than $200. Apple currently sells zero “low-end” devices.

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Do Not Call Registry
--and you need to make a complaint

All telemarketers calling consumers in the United States are required to download the numbers on the Do Not Call Registry to ensure they do not call those who have registered their phone numbers. The first five area codes are free, and organizations that are exempt from the Do Not Call rules, such as some charitable organizations, may obtain the entire list for free. Telemarketers must subscribe each year for access to the Registry numbers.

For consumers who want to add their phone number to the Registry, registration is free and does not expire.
https://www.donotcall.gov/?utm_source=govdelivery

You can also verify a registration on the site above, as well as submit a complaint.  You need to file a complaint to make the registry work, otherwise you will find yourself screaming more often to those who
make these calls (who will continue regardless of what you call them).

 

 

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“Interviewer Had Concerns. Help! ”
Career Crossroad---By Emily Fitzpatrick/RII

 

Question: During my last interview, I could tell the interviewer had some concerns regarding my candidacy. How do I handle a situation like this in the future?

Answer: Towards the close of the interview, you should have asked the interviewer if he/she had any concerns regarding your candidacy and addressed them accordingly. However, many times the interviewer does not introduce the subject, and many job seekers will not touch this issue because they are not prepared.

 
Moving Forward
No matter how successful an interview seems to be going, the interviewer will have questions (maybe concerns) about the candidate’s skills and abilities relative to a position.  Concerns may be caused by something that was or was not discussed; there may have been a misunderstanding of a question asked or an answer given, etc.… this is normal; seldom does a candidate fill 100% of the job specs.

A concern in the mind of the interviewer can often be corrected. However, if a concern is not addressed before the end of the interview, your candidacy could be lost; the need to deal with concerns must be made clear and obvious.   

Dealing with concerns or potential weakness in any form is difficult under the best of circumstances. Perhaps the best way to approach the discussion is to request a comparison between the targeted candidate and yourself. This is a very direct question that will require an open, direct response. For example, “Mrs. Fitzpatrick, now that we have had an opportunity to talk about the position, I feel more confident than ever that I can be of assistance to your organization. Do you have any concerns about my abilities to do the job?"

The candidate must now be ready for the response and know how to handle it. Since this is a direct approach, some interviewers are able to deal with the question openly, and some have problems with it. If you hear a vague response, you are probably not being given the information you requested. You might come back and say, “… I was trying to see if you had any concerns about my ability in any specific area so that we could address them now …”   If you sense the interviewer is uncomfortable, then move on.

If a concern has been raised, you do not have a lot of time to prepare your response. You should have spent time prior to the interview identifying strengths and weaknesses and preparing appropriate answers.

Bottom line, do not be afraid to ASK the interviewer their concerns AND make sure you PREPARE before the interview for every type of scenario/question/concern that may arise.

Emily Fitzpatrick
Sr. Recruiter
Recruiters International, Inc.
Phone:  954-885-9241
Cell:  954-612-0567
emily@riirecruit.com
Invite me to Connect on LinkedIn
www.linkedin.com/pub/emily-fitzpatrick/4/671/76
Also follow us on Twitter #RIIINFO

Career Crossroads Previous Columns
http://www.leasingnews.org/Conscious-Top%20Stories/crossroad.html

 

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Leasing Industry Help Wanted
 

 

Collector, Atlanta, GA Experienced, calling 11-90 day delinquent customers, assisting Asset Re-marketer with delinquency reporting, weekly reporting to home office. Sales, Chicago, Atlanta Work out of main office and satellite. Heavy phone sales calling on both independent dealers and end users (cold/warm calling), marketing, weekly reporting to management. Outside territorial salespeople will also be considered. Contact: Michael Testa 312-881-3133 mtesta@secondcityleasing.com www.secondcityleasing.com Financing for Commercial Truck & Trailer, Exotic, High Line, Vintage & Classic Automobiles, Taxi, Livery & Paratransit

For information on placing a help wanted ad, please click here:
http://www.leasingnews.org/Classified/Hwanted/Hwanted-post.htm 
Please see our Job Wanted section for possible new employees. 

 

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Leasing 102
by Mr. Terry Winders, CLP

So You Want to Start a Leasing Company?

One of the problems when you start a leasing company is to determine if you are going to be a broker, packager, or funder. Possibly a bit of all three. A broker gets a fee for introducing the lessee to a lessor. The transaction is not being completed until the lessor approves the deal. Usually the documents are created or supplied by the lessor. It is priced with the lessor in mind so the broker’s fee is part of the deal. Once the transaction is completed and funded, the broker has no further responsibilities and has earned the fee.

A packager usually structures and prices the deal and creates the documents. A packager reviews the credit requirements and any residual prior to approaching a lessor. When the deal is acceptable to the lessor, a complete package is delivered. Income to a packager is a front end fee and they may participate in the proceeds from a residual sale or re-rental that exceeds the booked residual.

If you establish the ability to fund leases by borrowed funds or invested capital, the firm must have at least three years of operating expenses because all the expenses are front end loaded while income is spread over the term of the leases. In addition, a lease loss reserve must be established that reduces income for three to five years until it gets fully established. This means that charge offs or the loss from the sale of capital assets must be taken at the same time that the loss account is being established.

One of the advantages of small companies is the ability to avoid using GAAP accounting requirements in the first few years. Cash accounting will allow for a better control of income and a better control of expenses in the near term. Once a few years elapse and the firm needs to look for institutional capital or bank loans, GAAP accounting and audits will be required.

The territory served by the new leasing entity needs to be more local that spread out among several states. There is a fact in the leasing business that as your market size increases so do your operating expenses. The vendor market is appealing, but you need to have vendors that sell in your market and avoid vendors that ask you to fund leases that are across the country as it increases your licensing, state income tax, property tax, and other requirements to do business

in each state. The cost of doing business in each State requires a couple of million dollars portfolio to just cover the operating expenses. It takes time to establish this portfolio so it is a further drag on income.

Many start-ups in the commercial equipment leasing business use all three methods of leasing so they can get income from the best source and hopes all goes well for a few years so they can establish a good footing with out many losses.

Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty years and can be reached at terrywinders11@yahoo.com or 502-649-0448.

He invites your questions and queries.
Previous #102 Columns:
http://www.leasingnews.org/Conscious-Top%20Stories/Leasing_102/Index.htm

 

Mr. Terry Winders available as a consultant regarding assisting attorneys in resolving disputes or explaining procedures or reviewing documents as utilized in the finance and leasing industry. He is the author of several books, including DVD's, as well as weekly columnist to Leasing News. He also performs audits of leasing companies as an expert on documentation, and has acted as an expert witness on leasing for litigation in legal and tax disputes, including before the IRS. He also has taught the senior bank examiners, how to review a bank leasing department, for the Federal Reserve in Washington D.C. and has trained the examiners for the FDIC on how to prepare a lease portfolio for sale. 502.649.0448/terrywinders11@yahoo.com

(This ad is a “trade” for the writing of this column. Opinions
contained in the column are those of Mr. Terry Winders, CLP)

Nine New Certified Leasing Professionals
New Total 215

The Board of Directors of the Certified Lease Professional (CLP) Foundation announced nine attendees of the Southern California and Seattle-area Institute for Leasing Professionals that sat for the exam attained the CLP designation. The nine are:

 

Kimberly Bartling
Funding Manager
Alliance Funding Group

Mitch Bedke, CLP
President/Founder
Finance Capital

Nicholas Fong, CLP
Marketing Manager
First Star Capital

David Maslyk, CLP
Vice President
Bank of the West Equipment Finance

Chooney Pak, CLP
Funding Manager
Providence Capital Funding

Jennifer Pryor, CLP
Credit& Risk Manager
First Star Capital

Bobby Siddiqui, CLP
Senior Business Development Manager
Alliance Funding Group

Lauren (Zabaronick) Timlin, CLP
Senior Funding Coordinator
Banc of California

Emily Windle, CLP
Director of Operations
Finance Capital

The CLP designation identifies an individual as a knowledgeable professional to employers, clients, customers, and peers in the equipment finance industry. There are currently 215 Certified Lease Professionals throughout the world. For more information, call Reid Raykovich, CLP at (206) 535-6281 or visit www.clpfoundation.org.

Companies with More than One CLP

1. Financial Pacific Leasing – 23
2.  First American Equipment Finance – 21
3.  Orion First Financial – 9
4.  Allegiant Partners- 10 (includes Clearview and First Star)
5.  ECS Financial Services – 7
6.  Arvest Equipment Finance – 6
7.  GreatAmerica Financial Services – 6
8.  Ascentium Capital LLC – 5
9.  Banc of California - 4
10. Innovative Lease Services, Inc. – 4
11. Maxim Commercial Capital – 4
12. Bank of the West – 4
13. Canon Financial Services-3
14. FSG Leasing - 3
15. LeaseTeam-3
16. Pacifica Capital - 3
17. GO Capital- 2
18. Alliance Funding Group -2
19. Finance Capital -2
20. Padco Financial Services- 2
21. Pinnacle Business Finance- 2
22. Portfolio Financial Servicing- 2
23. TEQ Lease – 2

Why I Became a CLP
http://www.leasingnews.org/items/CLP_logo.jpg

 

End of Refi Boom Creating Opportunity for
Smaller Banks and Other Financial Firms

SNL Financial Report
By Hina Nawaz and Zach Fox

 

Regulatory data from the second quarter showed mortgage holdings continued to decline among banks through the second quarter, with the largest banks posting the most severe declines.

Mortgage origination volume has struggled after a rise in rates in the middle of 2013 put an end to a refinancing boom. In 2012, rates on 30-year fixed-rate mortgages fell to nearly 3.5% and rates on 15-year mortgages actually dipped below 3.0%. After spiking in the second half of 2013, rates on 30-year mortgages started 2014 at roughly 4.5% and 15-year mortgages at about 3.5%.

Since then, rates have ticked down some, but they are still well above the 2012 lows. As of the week ended Aug. 22, the average 30-year mortgage carried an interest rate of 4.26% and the typical 15-year mortgage was at 3.43%.

"It shows you how dependent the mortgage industry really is on refinancing," said Guy Cecala, CEO of Inside Mortgage Finance, an industry publication.

Inside Mortgage Finance reported refinancing constituted 36% of the mortgage market in the second quarter, the lowest share since the 1980s, Cecala told SNL. On Aug. 26, the Mortgage Bankers Association released a second-quarter report on independent mortgage banks and mortgage subsidiaries of chartered banks, showing a somewhat similar trend. The report's release only showed a purchase share, as opposed to refinance share, putting the purchase share at 59% in the second quarter for the mortgage industry as a whole.

Cecala said that over the last 25 years, the refinance share has generally stayed above 50%.

"Are we going to see it back up to 50% any time soon? Not unless rates suddenly drop dramatically, or there's an influx of well-heeled immigrants who we decide to qualify for mortgages — but nothing in the immediate future," he told SNL.

Declines in mortgage origination seem to be hitting the largest players the hardest, creating opportunities for nonbanks and smaller banks.

For example, Wells Fargo & Co. has seen retail mortgage originations tumble to $14.33 billion in the second quarter, down 71.02% from the $49.46 billion reported in the 2013 second quarter. Meanwhile, nonbank Freedom Mortgage Corp. said July 21 that the company had doubled its monthly volume over the last two years. And Inside Mortgage Finance reported originations for the company totaled $5.72 billion in the second quarter, up 31.1% from the prior-year period.

Generally, the weaker origination figures have also translated to declines in the amount of one- to four-family loans sold or held for sale by banks in the second quarter, relative to the prior-year period. The four largest, money-center banks — Wells Fargo, Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. — all posted year-over-year declines of larger than 45% for both one- to four-family loans sold off the balance sheet, as well as such loans held for sale.

Breaking down the banking industry by asset size, it is clear that declines are hitting the largest players harder. Among bank holding companies with more than $10 billion in assets, residential loans sold in the second quarter totaled $97.66 billion, a decrease of 65.20% year over year in the second quarter, while such loans held for sale fell 42.08%. Among banks with asset size of less than $1 billion, residential loans sold in the quarter totaled $13.75 billion, a decline of 41.41%.

Inside Mortgage Finance's Cecala told SNL that the law of large numbers is playing a role — that the banks with the most volume a year ago had the farthest to fall. But he also said the shift toward more purchase activity and less refinancing volume favors smaller lenders.

"People buying homes tend to go with real estate agent recommendations, and that tends to be more local lenders," Cecala said.

While the year-over-year figures remain dour, the mortgage market showed definite signs of improvement in the second quarter relative to the start of the year. It should be noted that winter is generally the slowest season for home purchases.

Among the top five banking originators, as selected based on the most recent data available from the Home Mortgage Disclosure Act, all but one posted a quarter-over-quarter increase in retail mortgage origination in the second quarter, according to Y-9C regulatory filings for the quarter. Mortgage giant Wells Fargo posted a whopping 21.71% gain from the linked quarter, while JPMorgan was the one to post a decline, as its origination volume slipped to $4.70 billion, a 3.85% decline from the linked quarter.

The MBA report showed the second-quarter bump in origination volume also carried a return to profitability. The industry group's report, which relies on production data from 349 companies, showed a net gain of $954 on each loan originated in the second quarter, compared to a loss of $194 per loan in the first quarter.

Marina Walsh, vice president of industry analysis for MBA, said the swing to profitability was driven by the bump in origination volume, as well as lower expenses.

"It was an expense play more than a revenue play," Walsh told SNL. "It largely came from expenses going down after six quarters of going up."

 

 

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A Resurrection in Problem Loan Sales
SNL Financial Report

By Nathan Stovall and Salman Aleem Khan

The pace of problem loan sales at banks rebounded in the second quarter, reaching the highest level in the last 18 months.

After a slow start to 2014, banks' sales of nonaccrual loans rose considerably in the second quarter. Problem loan sales at banks more than tripled in the period, jumping 222.2% from the first quarter and 12.6% from a year earlier. Inflows of nonaccrual loans dropped as well, declining 6.9% from the linked quarter and more than 29.3% from a year ago, according to SNL data.

Banks' problem loan sales bounced back even as real estate prices held virtually flat in the second quarter, with U.S. home prices climbing just 0.8% from the linked quarter, according to the Federal Housing Finance Agency. Still, the jump in volume could have come from pent-up demand, with bankers noting that problem loan sales activity was exceptionally slow in the first quarter due to the severe winter.

Even at this late stage in the credit cycle, the potential supply of problem loans that could be sold on the market remains considerable. For instance, Compass Point analysts estimate that the supply of nonperforming one- to four-family mortgage loans stood at $305 billion at the end of the second quarter, based on holdings of commercial banks, the Department of Housing and Urban Development and the government-sponsored enterprises. The analysts said pricing on recent sales has reportedly increased, even with home prices holding fairly steady. The higher pricing could lead to increased sales activity, they said.

"Given increases in pricing, we would not be surprised to see more supply come to market (and recent activity and press reports indicate this is happening)," Compass Point analysts wrote in an Aug. 26 report.

Indeed, banks significantly increased their plans to sell problem loans in the second quarter, reversing a trend witnessed over the last few quarters. Banks reported $110.48 billion in loans classified as held for sale in the second quarter, up 42.5% from $77.51 billion in the linked quarter, SNL data shows.

Some banks took opportunities to purge their balance sheets in the second quarter and continued to take hits despite the increase in prices.

"On the nonperforming side, I still think for the folks that still have meaningful nonperformers on their balance sheet, I think the bid/ask spread is still pretty wide," said Kenneth Segal, a managing director in the bank and loan advisory group at Situs. "Despite relative recovery in values, there isn't still enough value there to support motivating the folks holding these assets to sell them."

Segal, whose firm provides portfolio valuation services and has also recently worked with banks on data population and aggregation services to help with stress testing, told SNL that the spread between investors' bids and banks' carrying values has narrowed some but still remains wide enough to result in losses when banks sell problem loans.

"With the nonperformers, particularly for the smaller banks, the bid/ask spread is more narrow than it used to be, but I still think it is sufficiently wide to prevent a lot of people from truly cleaning up their balance sheet without a major capital infusion. It's still relatively challenging for a smaller bank to attract capital," Segal said.

One smaller bank that has recapitalized, Sun Bancorp Inc., sold loans at the end of the second quarter as part of a major restructuring initiative. Sun Bancorp noted in an investor presentation in late July that the sales would help lower workout expenses going forward. The company completed a cash sale of $71.4 million of individual commercial loans, resulting in a loss of roughly $11.8 million. Sun Bancorp also moved $24.7 million of nonaccrual and other "low-quality" consumer and related credit to held-for-sale, resulting in an estimated loss of $4 million.

Astoria Financial Corp. also recently engaged in sales of problem loans and managed to ink a transaction without incurring significant costs because it had already written down and taken reserves against the loans. In late July, Astoria entered an agreement to sell certain nonperforming residential mortgage loans for consideration of about $186 million, or at roughly 95 cents on the dollar.

Other banks could look to clean up their balance sheets and sell foreclosed real estate in the second half of 2014. Old Second Bancorp Inc. COO James Eccher said on the company's second-quarter earnings call in late July that it has not ruled out a bulk sale, and sales activity in general could pick up after a slow start to the year.

"We're seeing continued interest in the portfolio. First quarter, I think, it was slower than we'd like, it's probably more the weather than anything. But we do have several properties that we're in current negotiations with," Eccher said on the call, according to the transcript. "We see prices firming up a little bit. We still have about a third of the portfolio in construction-related assets which, as you know, is a little more challenging to move. But we are seeing better interest in some of those properties as well."

Some banks are still very hesitant to pursue nonaccrual sales, at least in bulk form. Capital City Bank Group Inc., for example, has long preferred selling foreclosed properties through a retail strategy versus a wholesale strategy. Capital City CFO J. Kimbrough Davis touted that strategy at an investor conference in late July, noting that the company had sold other real estate at 101% of book value over the last 26 quarters. He said holding costs on the properties were currently running at 7%, compared to the average discount of 30% to 40% that the company would receive when pursuing a sale.

The hesitation to take such large hits has kept many banks from selling problem loans and foreclosed real estate in recent years. The banking industry is also now seeing problem loan formation slow. SNL data shows that additions to nonaccruals fell again in the second quarter of 2014, dropping 6.9% sequentially to $17.11 billion. This marked the third quarter in a row that nonaccrual additions had fallen below the $20 billion level. That level previously had not been seen since the second

The amount of nonaccrual loans in the banking industry has fallen 63% since peaking in the first quarter of 2010, but much of that decline occurred in 2010 and the early part of 2011, when distressed asset sales activity was much higher.

SNL data shows that sales activity reached its highest level in the fourth quarter of 2010. Nonaccrual sales totaled $28.71 billion for the whole of 2010. Sales activity fell substantially in 2011, particularly in the latter half of the year when investor sentiment toward banks soured and capital raising slowed. Sales of nonaccrual loans fell to $19.00 billion in 2011, with about 40% of the overall sales activity coming during the last six months of the year, according to SNL data.

After a lackluster ending to 2011, nonaccrual sales remained slow in 2012, falling to $15.19 billion — down 20% from the previous year.

Nonaccrual sales activity in 2013 proved choppy, but ultimately finished the year at subdued levels. Sales activity was below the $3 billion level in the first quarter, in the third quarter and again in the fourth quarter, totaling $2.99 billion in the last period of the year. Overall nonaccrual sales activity in 2013 fell to $11.81 billion, down about 22% from the previous year.

Nonaccrual sales activity plunged even further in the first quarter of 2014, dropping 59% to $1.22 billion. However, after falling to levels not seen since before the credit crisis, nonaccrual sales activity jumped to $3.93 billion in the second quarter. With market conditions holding, there seems some hope that the rebound in sales activity could continue through the remainder of 2014.

 

 

[headlines]
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### Press Release ############################

Compensation in Equipment Finance Industry
Continues to Closely Mirror Business Performance
  According to ELFA Survey

WASHINGTON, D.C. - Compensation in the equipment finance industry increased modestly in 2013, according to the 2014 Equipment Leasing and Finance Compensation Survey from the Equipment Leasing and Finance Association (ELFA) and McLagan. For the fourth consecutive year, a year-over-year increase in new business volume contributed to increases in compensation, albeit at a slower rate than previous years.

The 2014 Equipment Leasing and Finance Compensation Survey measures compensation rates for the 2013 fiscal year as reported by 60 equipment finance companies representing a cross section of the equipment finance sector, including independent, bank and captive leasing and finance companies. Firms provide data for more than 90 executive, front-office and support positions, including a breakdown of salary (for 2013 and 2014), incentives (including cash bonuses and commissions), long-term awards and total compensation by company type. The survey is a collaborative initiative between ELFA and McLagan, a performance/reward consulting and benchmarking firm for the financial services industry.

Highlights from the 2014 Equipment Leasing and Finance Compensation Survey include:

· Total Compensation: On a “same-store” basis (constant incumbents in multiple survey years), total compensation was flat (+/- 1%) at median for key originations functions from 2012 to 2013. Infrastructure received marginally larger increases at median, ranging from approximately 3–6%. Notably, divisional management fared better than most other functions. The team leader / senior role experienced the greatest year-over-year variability, with many individuals receiving decreases of 20+%, while others received increases of 14+%.

· Salary: On a same-store basis, origination roles tended to have slightly lower increases between approximately 2–2.75%. Additionally, more than 25% of incumbents in key origination positions did not receive salary increases year-over-year. Salaries tended to rise between 2–4% for infrastructure roles.

· Differences by Level: Increases tended to be larger at the more senior levels (particularly in direct origination and infrastructure). Notably, the team leader / senior level for the direct and vendor origination functions was flat (+/- 1%).

· Differences by Firm Type: Generally, banks awarded higher compensation at median relative to captive and independents, particularly for senior roles. Median total compensation and salary compensation rates tended to be comparable (+/- 5%) at lower levels for infrastructure and origination roles.

Industry Trends
In 2013, new business volume in the U.S. equipment leasing and finance industry increased—for the fourth consecutive year—to levels at or near pre-recession highs. However, the rate of increase slowed in 2013 compared to the significant increases experienced in the previous three years. This trend was not experienced uniformly by all market competitors, as some organizations saw business volume increases while others experienced modest declines. Along with top-line growth, the environment has been marked by heightened competition for deals, which has put pressure on margins. The credit picture, however, remains strong, with low levels of delinquencies and charges offs. The compensation trends in the industry mirror this uneven growth, with compensation linked to industry financial performance over the last year and since the recovery began.

About ELFA
The Equipment Leasing and Finance Association (ELFA) is the trade association that represents companies in the $827 billion equipment finance sector, which includes financial services companies and manufacturers engaged in financing capital goods. ELFA members are the driving force behind the growth in the commercial equipment finance market and contribute to capital formation in the U.S. and abroad. Its 580 members include independent and captive leasing and finance companies, banks, financial services corporations, broker/packagers and investment banks, as well as manufacturers and service providers. For more information, please visit www.elfaonline.org and follow ELFA on Twitter @elfaonline.

 

 

[headlines]
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##### Press Release ############################

Diversified Capital Credit Corp. Celebrates 20 years
Today Has Two Branch Offices

Diversified Capital Credit Corp. is celebrating 20 years of incorporation.  Starting in September 1994 in a small office in New Jersey, Diversified has expanded to include branch sales offices in Georgia and Minnesota.  Additionally it has added Health Care Equipment Funding, FotoFunding, Waste Funding and Telco Funding as divisions, as well as developing a number of private label programs for its vendor partners.

Bruce Smith

“Much has occurred in our industry over the last 20 years” said Bruce Smith, President and owner of Diversified Capital.  “During that time, many other independent equipment finance companies have come and gone. I’m proud of the fact that our business model has allowed us to grow and flourish. Our resiliency and flexibility has enabled us to assist hundreds of vendors sell equipment to thousands of end user customers, even during the recent economic downturn. I’m looking forward to the next 20 years with a lot of optimism.”

Through its headquarters in Gillette, NJ, and branch offices, Diversified Capital and its divisions specialize in the implementation of value added leasing and financing programs that assist equipment vendors in their sales efforts.

#### Press Release #############################

 

Labrador Retriever Mix
San Pedro, California Adopt-a-Dog

ID#A1501788

“I am an unaltered female, tan Labrador Retriever mix.

“The shelter thinks I am about 2 years and 1 month old.

“I have been at the shelter since Aug 17, 2014.”

Adoption fees include spay/neuter surgery, all animals will be sterilized prior to release.

Adoption Information
For more information about this animal, call:
Harbor Animal Care and Control Center at (888) 452-7381
Ask for information about animal ID number A1501788

Los Angeles County Services
Harbor Shelter
957 N. Gaffey Street, San Pedro, CA 90731 Directions
888-4LAPET1 (888-452-7381)

Shelter Hours
Monday & Holidays: Closed
Tuesday-Saturday: 8am-5pm
Sunday: 11am-5pm

Adopt a Pet
http://www.adoptapet.com/

[headlines]
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Collector/Collections/Consultant/Communications
Classified ads—

Leasing Industry Outsourcing
(Providing Services and Products)

Collector: Atlanta, GA Asset Recovery Specialist. We get your money or we get your > equipment back for you. Physical Asset Recovery Experts! E-mail: mcrouse911@joimail.com	Collector: Cleveland, OH  Huntley Capital & Associates is your solution to late payments, no payments, and asset recovery. Call 216-337-7075.  Email: ghpatey@msn.com
Collections: Dallas, Texas Contingency Fee basis. Receivables Outsourcing. We are a fully bonded nationwide licensed agency. We collect for nationally known banks and leasing companies.  800-886-8088.	Collector: Los Angeles, CA Expert skiptracers covering Southern California. We locate skips, judgment debtors and collateral. When you can't get the job done in house, give us a call at 1-800-778-0794. E-mail: ceo@interagencyLA.com
Collector: Louisville, KY We are a full service collection agency with attorney network. 21 years experience. Please call Jon Floyd, VP at 1-800-264-6850  email: jfloyd@collectcsg.com	Collector: Louisville, KY  Euler Hermes/UMA 92 year old Global Receivables Outsourcing. Presence in 143 Countries. Work w/ 4 out of 5 Fortune 500 firms. Contingency Fee Structure. 20% off first time clients.! Andrew.Newton@eulerhermes.com 1-800-237-9386 x 205.
Collector: Mandeville, MI International commercial collection services all fees are on contingency on line access. E-mail: rmelerine@collect-now.com  www.drspay.com www.collect-now.com	Collector: Milwaukee, WI  We specialize in ATM machine reposession and remarketing. We can get you top dollar for your inventory. E-mail: bdperry1@yahoo.com
Collector: Nationwide End of lease negotiations & enforcement. Third-party collections. Skip-tracing. Background checks. Credit & asset investigations. 15+ years in leasing industry. Providing services to clients nationwide. 800-824-0234 johnkenny2@verizon.net	Collector: Saint Louis, MO Complete commercial collection agency. Licensed bonded in all states and will out performed any other agency! Call 1-800-659-7199 ext.315 E-mail:  jfloyd@lindquistandtrudeau.com
Consultant: Nationwide 25 yrs. experience: Creating/Refining Business Plans to raise capital· Credit Underwriting support/policy/procedure development · Operations Support/policy/procedure development. Call: 610-246-2178, McCarthy Financial, LLC, David.mccarthy@mccarthy-financial.com	Consultant: Burlington, CT We provide our clients with a full range of consulting services such as portfolio conversions, reconciliation, custom programming and leasing operations utilizing InfoLease.  Email: info@new-millennium-assoc.com
Consultant: Europe 15 years doing deals/running own technology leasing company – looking to advise/ lead new entrants to take advantage the European market opportunity. www.clearcape.co.uk or kevin.kennedy@clearcape.co.uk	Consultant: Henderson, NV Focus on new business development and process efficiencies to create incremental revenue and profitability. Executive level vendor experience, and satisfied outsourcing clients. Incredible track record. E-mail: rbutzek@cox.net
Consultant: Sausalito, CA Lease trainer and consultant. 50 years in equipment leasing. Expert in transaction analysis, financial statement analysis, credit, packaging, structuring. Presents highly popular classes and workshops. E-mail:BoTei@aol.com	Consultant: North of Detroit, MI  INFOLEASE EXPERT - 18 years experience. Since being downsized in 2002, working as a consultant for several leasing companies. Seeking consulting projects nationwide.  E-mail: darwint@prodigy.net
Consultant: Ridgefield CT. Lisa Lersner w/20 years exp. specializing in leasing technology now providinglessor selection andmanagement services, includingthe securing of debt and equity and acquisition guidance services. Email Go to www.leasefinanceconsulting.com	Communications:Chassell, MI Cartoons on business, finance & computers. Use for your presentations, website, newletter, direct mail projects etc. Fees are negotiable.  Email: dan@danscartoons.com  Go to http://www.danscartoons.com

 

All "Outsourcing" Classified ads (advertisers are both requested
and responsible to keep their free ads up to date:
http://www.leasingnews.org/Classified/Outsourcing/Outsourcing.htm

How to Post a free "Outsourcing" classified ad:
http://www.leasingnews.org/Classified/Outsourcing/Outsourcing-post.htm

John Kenny  Receivables Management • End of Lease Negotiations & Enforcement • Fraud Investigations • Credit Investigations • Asset Searches  • Skip-tracing • Third-party Commercial Collections john@jkrmdirect.com | ph 315-866-1167| www.jkrmdirect.com

(Leasing News provides this ad as a trade for investigations
and background information provided by John Kenny)

  

News Briefs----

Changes in Lease Accounting Rules Draw Closer
http://online.wsj.com/articles/the-big-number-changes-in-lease-accounting-rules-draw-closer-1409613447

Nat. Assoc. Credit Management Index Steady Last 5 Months 
http://www.leasingnews.org/PDF/NacmINDEX_932014.pdf

Faster Payments Could Help Speed Economic Recovery
http://bankinnovation.net/2014/08/faster-payments-could-help-speed-economic-recovery/

 

[headlines]
--------------------------------------------------------------

--You May Have Missed It

Cash Out Your Lease on Your Car
http://www.kiplinger.com/article/cars/T009-C004-S002-cash-out-your-lease-on-your-car.html

[headlines]
--------------------------------------------------------------

SparkPeople--Live Healthier and Longer

9 Ways to Get More Out of Your Day
Time to Ignore the Hourglass
http://www.sparkpeople.com/resource/motivation_articles.asp?id=149

[headlines]
--------------------------------------------------------------

Baseball Poem

THERE WAS A BALL GAME SOMEWHERE

   by Tim Peeler

Before video parlors, PCs and iPads
iTouch, Smartphones, on our ragged bicycles
We scrambled to one house or the other—
Hefners, Peelers, then the Swansons who moved
In the neighborhood, sometimes the Coffeys
From church, or the Swansons' friends from their church -
For the really big affairs with full teams,
Baseball games with football scores. Out in the heat
Most of the day, just breaking for lunchtime—
Easy pitches and little guys taking
Big cuts, ghost runners and no catcher, weird
Rules like ground rule doubles for balls driven
Into the short cow pasture fence in left
Or how to play a pop fly that rolled off
The eight-sided parsonage roof or smacked
The huge oak trees in center field or the
Maple in right-center.
Barefoot sometimes, always in shorts only,
Crew cuts and popsicle stains on our mouths—
Before Play Station and VCRs there
Was a baseball game somewhere in dust and
Sweltering heat, a game to be played by
 Our rules only.

--- with the permission of the author, from his
book of baseball poetry:
“Waiting for Godot's First Pitch”
   More Poems from Baseball
available from Amazon or direct from the publisher at: www.mcfarlandpub.com

[headlines]
--------------------------------------------------------------

Sports Briefs----

Harbaugh has ‘no tolerance’ for domestic abuse,
 but will let legal process play out in McDonald case
http://www.sacbee.com/2014/09/02/6672041/harbaugh-has-no-tolerance-for.html

Vernon Davis 'didn't see anything'
http://espn.go.com/nfl/story/_/id/11455673/ray-mcdonald-party-attended-large-number-san-francisco-49ers-vernon-davis-says

Broncos' Wes Welker suspended four games for taking amphetamine
http://www.usatoday.com/story/sports/nfl/broncos/2014/09/02/wes-welker-suspended-four-games-amphetamine-denver/14992795/

Dallas Cowboys Sign Michael Sam, Save NFL from Stupidity
http://time.com/3257923/dallas-cowboys-sign-michael-sam-save-nfl-from-stupidity/

Schaub extends willing hand upon learning Carr will be Raiders quarterback
http://www.contracostatimes.com/raiders/ci_26454454/schaub-extends-willing-hand-upon-learning-carr-will

 

[headlines]
--------------------------------------------------------------

California Nuts Briefs---

PG&E fined $1.4B for deadly 2010 gas line blast
http://www.sacbee.com/2014/09/02/6672654/pge-fined-14b-for-deadly-2010.html

[headlines]
--------------------------------------------------------------

“Gimme that Wine”

http://www.youtube.com/watch?v=EJnQoi8DSE8

Standout Wine Lists in New York City
http://www.nytimes.com/2014/09/03/dining/10-of-new-york-citys-most-surprising-wine-lists.html?_r=1

Sonoma Harvest Wine Auction pulls in record $4 million
http://www.pressdemocrat.com/news/2608032-181/wine-auction-pulls-in-record

Go-to spots for the best coastal chardonnays
http://www.pressdemocrat.com/lifestyle/2586003-181/go-to-spots-for-the-best

Thousands pay respects at Baroness Philippine de Rothschild funeral
http://www.decanter.com/news/wine-news/587430/thousands-pay-respects-at-baroness-philippine-de-rothschild-funeral

The Pleasant Surprise of Chain-Restaurant Wines
http://online.wsj.com/articles/the-pleasant-surprise-of-chain-restaurant-wines-1409328776

Napa wine industry faces $48 million economic cost
http://www.winesandvines.com/template.cfm
?section=news&content=138023

Free Mobile Wine Program
http://leasingnews.org/archives/Feb2010/2_26.htm#mobile

Wine Prices by vintage
http://www.winezap.com
http://www.wine-searcher.com/

US/International Wine Events
http://www.localwineevents.com/

Winery Atlas
http://www.carterhouse.com/atlas/\

Leasing News Wine & Spirits Page
http://two.leasingnews.org/Recommendations/wnensprts.htm