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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.
July 9th, 2012 Leasing News reprinted with permission from the National Association of Equipment Leasing Brokers his colon operation discovered during a colonoscopy exam, asking readers to pray for him. His tumors were removed, but he continues his recovery from cancerous tumors.
While he is active publically not only as a broker, but as director of marketing and sales at Natures Harvest International, he is a private person and has been downplaying any display at the NAELB Regional Meeting September 7-8 in Baltimore, Maryland.
It is fitting that his friends be able to communicate as well as keep up-to-date and therefore:
(Note: We hope to improve the photo quality)
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Marlin 1st Time Net Income Exceeds Evergreen Income
For the first time since Leasing News has been keeping records of Evergreen Clause "extra payments", Marlin Business Services, Mount Laurel, New Jersey (NASDAQ: MRLN) for the second quarter, 2012, net income allocated to common stock of $2.861 million is higher than the Evergreen renewal income net of depreciation $1.9 million. Also higher, six month net income allocated to common stock
In fact, the Evergreen renewal income is down $100,000 compared to the previous year of $1.8 million for the first quarter, or $200,000 compared to six month of $3.6 million to $3.8 million. (SEC filing, pages 18 and page 42.)
Part of the increase in income comes from two sections, even with a slight decline in one section:
“Fee income decreased $0.1 million to $2.8 million for the three-month period ended June 30, 2012 compared to $2.9 million for the three-month period ended June 30, 2011. Fee income included approximately $0.8 million of net residual income for the three-month period ended June 30, 2012 and $1.1 million for the three-month period ended June 30, 2011.
“Fee income also included approximately $1.7 million in late fee income for the three-month period ended June 30, 2012, which increased 6.2% from $1.6 million for the three-month period ended June 30, 2011. The increase in late fee income was primarily due to the increase in average total finance receivables.”
“Insurance income. Insurance income remained stable at $1.0 million for the three-month period ended June 30, 2012 compared to the three-month period ended June 30, 2011.
“Other income. Other income remained constant at $0.4 million for the three-month period ended June 30, 2012 compared to the three-month period ended June 30, 2011. Other income includes various administrative transaction fees and fees received from lease syndications.”
“Our leases offer our end user customers the option to own the equipment at lease expiration. As of June 30, 2012, approximately 67% of our leases were one dollar purchase option leases, 32% were fair market value leases and 1% were fixed purchase option leases, the latter of which typically contain an end-of-term purchase option equal to 10% of the original equipment cost. As of June 30, 2012, there were $31.3 million of residual assets retained on our Consolidated Balance Sheet, of which $25.1 million, or 80.2%, were related to copiers.
“As of December 31, 2011, there were $32.7 million of residual assets retained on our Consolidated Balance Sheet, of which $26.5 million, or 80.9%, were related to copiers. No other group of equipment represented more than 10% of equipment residuals as of June 30, 2012 and December 31, 2011, respectively. Improvements in technology and other market changes, particularly in copiers, could adversely impact our ability to realize the recorded residual values of this equipment...
(Leasing News underline; note, no mention of any possible change of notification at end of lease in 46 states.)
“Our leases generally include renewal provisions and many leases continue beyond their initial contractual term. Based on the Company’s experience, the amount of ultimate realization of the residual value tends to relate more to the customer’s election at the end of the lease term to enter into a renewal period, purchase the leased equipment or return the leased equipment than it does to the equipment type.
“We consider renewal income a component of residual performance. Renewal income net of depreciation totaled approximately $1.7 million and $1.8 million for the three-month periods ended June 30, 2012 and June 30, 2011, respectively. Renewal income net of depreciation totaled approximately $3.6 million and $3.8 million for the six-month periods ended June 30, 2012 and June 30, 2011, respectively.”
Banking requirements are well above minimum as well as loan agreements, as well as the Bank Tier 1 ratio's are very strong:
"At June 30, 2012, MBB’s Tier 1 leverage ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio were 18.49%, 18.24% and 19.05%, respectively, which exceeds requirements for well-capitalized status of 5%, 6% and 10%, respectively. At June 30, 2012, Marlin Business Services Corp.’s Tier 1 leverage ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio were 32.04%, 34.77% and 35.85%, respectively, which exceeds requirements for well-capitalized status of 5%, 6% and 10%, respectively."
Loss reserves are conservative, down due to better receivable, and overall the company is in very good shape, and perhaps the Evergreen clauses are changing, which would really turn this company around into a more positive position than today.
Marlin Second Quarter:
Previous Marlin Articles:
Companies who utilize Evergreen Clauses for Extra Lease Payments
These companies use language in their purchase options to confuse, perhaps to deceive, with the result an automatic continuation for an additional twelve months of payments.
Several have contiuation of payments and the requirement of replacing the equipment for a new lease. Leasing News has had complaints involving companies who invoke the twelve months on a $1.00 purchase option, as well as on an Equipment Finance Agreements.
ACC Capital, Midvale, Utah
ACC Capital, Midvale, Utah---This company is no longer in business, although its portfolio is being wound down, according to its owner Loni Lowder; the receivables are being collected by creditors. Lowder today is an employee, manager, Stalwart Contract Finance, Salt Lake City, Utah. To date, all Evergreen Clause complaints have been satisfied.
IFC Credit, Morton Grove, Illinois---This company is in bankruptcy, appeared many times in the Leasing News Bulletin Board prior to filing bankruptcy, but engaged in Evergreen Clauses, and unfortunately a recent example is a complaint to the trustee, stemming from M&T Bank lease assignment expiring and notify the lessee that they did not notify about the residual, which was a $1.00. This has happened many times with other banks who have taken over the IFC Credit Corporation portfolio. Calls and letters to the trustee and attorneys have gone unanswered.
Jules and Associates, Los Angeles, California--- Jules and Associates, Los Angeles, California---A repeat customer, who notified Jules and Associates on a lease, but was not before the 180 day expiration, so Jules and Associates instead of the 1% due for the residual ($2,308.79) charged six more payments or $40,463.94, and if 1% is not paid in this time, they will be subject to another three months.
LEAF Financial Group, Philadelphia, Pennsylvania---It appears this company is in a more wind down phase, moving its operation of LEAF Commercial Credit with basically the same management. There have been complaints about the Evergreen Clause, including one this year for an Equipment Finance Agreement!
Marlin Business Leasing, Mount Laurel, New Jersey---The actual SEC filings state the profit earned from Evergreen Clause, primarily from copier leases. Bulletin Board Complaints have been received about this practice in addition to the SEC financial statement filings.
(9) Marlin Response to posting
When the company was bought and became Pacific Western Equipment Finance (a division of Pacific Western Bank) he maintained the same position. It was noted his old company was still on the list, and a request of his "master lease" was made.
"Our docs are the same as when we were with Marquette. Because we’re public now, it is very difficult to get documents released."
I asked him if he could send to a broker wanting to do business with him, "Sorry, can’t forward to you or your brokerage."
A search of PACER, a national index for U.S. district, bankruptcy and appellate courts brought up a number of Marquette cases, and the first one hit pay dirt: Merchants & Farmers Bank, a Mississippi Corporation versus Marquette Equipment Finance and Applied Financial. It was a similar case and while "dismissed with prejudice" (6), it had the arguments regarding the purchase option and a copy of the complete contract with a similar PPR as with Mazuma Capital:
"(g) Lessee's Options at End of Initial Period. At the end of the Initial Period of any Lease, Lessee shall, provided at least one-hundred-eighty (180) days prior written notice is received by Lessor from Lessee via certified mail, do one of the following: (1) purchase the Property for a price to be determined by Lessor and Lessee, (2) extend the Lease for twelve (12) additional months at the rate specified on the respective Schedule, or (3) return the Property to Lessor at Lessee's expense to a destination within the continental United States specified by Lessor and terminate the Schedule; provided, however, that for option (3) to apply, all accrued but unpaid late charges, interest, taxes, penalties, and any and all other sums due and owing under the Schedule must first be paid in full, the provisions of Sections 6(c) and (d) and 7(c) hereof must be specifically complied with, and Lessee must enter into a new Schedule with Lessor to lease Property which replaces the Property listed on the old Schedule. With respect to options (1) and (3), each party shall have the right in its absolute and sole discretion to accept or reject any terms of purchase or of any new Schedule, as applicable. In the event Lessor and Lessee have not agreed to either option (1) or (3) by the end of the Initial Period or if Lessee fails to give written notice of its option via certified mail at least one-hundred-eighty (180) days prior to the termination of the Initial Period, then option (2) shall apply at the end of the Initial Period. At the end of the extension period provided for in option (2) above, the Lease shall continue in effect at the rate specified in the respective Schedule for successive periods of six (6) months each subject to termination at the end of any such successive six-month renewal period by either Lessor or Lessee giving to the other party at least ninety (90) days prior written notice of termination."
The first option is to purchase the equipment for a price to be determined by Lessor and Lessee and requires a certified letter 180 days prior. This sounds like a fair market purchase option, but the “price to be determined” language means that the Lessor can set any price it wants. This option is illusory in my opinion.
The second option is to continue the lease for an additional 12 months, the “Evergreen” period. No notice of this provision is given to the lessee either in advance of signing or prior to exercising this option. Republic Bank purchases these 12 month extensions in advance of their exercise. How would the bank know that the lessee is going to exercise this option, unless everyone knows it is the only practical option for the lessee to exercise? Republic Bank President Boyd Lindquist confirmed in a telephone call that he “buys” these extensions from Mazuma and has for quite some time.
The third option is to return the equipment, but the clause is draped with the condition that the lessee has to re-lease identical equipment for a similar term. It also has 180 day certified letter requirement, and applies to the second option of 12 months, but also has the clause of an automatic six month option. So what is the point of exercising this option? At the end of this re-lease, there would be the same three identical options, so the lessee would be required to re-lease and re-lease. It’s just like Groundhog Day.
Leasing News is working on obtaining information on other companies so named to add to the list, including follow-up on the master lease for Pacific Western Equipment Finance. If you have a copy, please send and will keep your name “off the record.”
((7) See for Copy of Filing, including contract.)
Mazuma Capital Corp, Draper, Utah Several routie "end of lease agreements, as alleged in Unified Container and Anderson Dairy (1) "8. The basic scheme involves the inclusion of a purchase, renewal, return (“PRR”) provision in the lease. The lessor assures the customer they will be able to purchase the equipment at the end of the initial term in the lease for a reasonable or nominal price. Often, the lessor promises the equipment can be purchased at a fixed percentage of the total amount financed. However, at the end of the initial lease term, the lessor refuses to honor the agreed upon purchase price or negotiate in good faith regarding a purchase price, but instead, insists the lease automatically renews for an additional term (usually twelve months).
9. The inclusion of the purchase and return options in the lease are entirely illusory and intended only to give the customer the false impression that it can exercise any of the three options at the end of the initial lease term, when in fact, the lessor will only allow an automatic renewal at the end of the initial lease term.) There are other exhibits. This case was settled "out of court."
H. Jared Belnap, President & CEO, Mazuma Capital Corp., takes exception on beingon the Evergreen list. His full letter and Leasing News Response is at (5).
Onset Financial, South Jordan, Utah --- Onset contract, which contained:
((8) See for Copy of Onset Contract with PPR purchase option.
Republic Bank, Bountiful, Utah Purchases and participates in extended Evergreen clause agreements.
They are legal in all states, except four states require advance notification be given to the lessee regarding termination of the lease and its residual (Four states: New York Rhode Island, Texas, Illinois (In Illinois, Consumer law, but may affect commercial, especially a proprietorship, partnership or personal guarantee)"
Tetra Financial Group, Salt Lake City, Utah Several routine "end of lease agreements, as alleged in Unified Container and Anderson Dairy (1)
“22. Mazuma Capital is associated with Republic Bank and obtains financing for its leases containing PRR provisions from Republic Bank.
23. Like what took place at Amplicon, Inc., the PRR scheme utilized by Matrix, Applied Financial, LLC, Mazuma Capital, Tetra Financial Group, LLC and others has begun to be exposed through litigation and negative press. See Deseret News (2) articles attached hereto as Exhibits B (2) and C. (3)”
Here is a case where New York courts threw out the Evergreen Clause as not legal in New York, even though venue appears to be Utah. (4))
(1) 36 main pdf
(2) Deseret News
(3) Exhibit C
(4) Salon Management case
(6) Order to Dismiss with Prejudice
(7) Copy of filing, including contract
(8) Copy of Onset Contract with PPR purchase option
(Leasing News provides this ad as a trade for investigations
Question: Emily, what is the best way to ask for a raise?
Answer: The best approach is to NOT ask for a raise outright. Typically, employees will present a list to their employer explaining why they should receive a raise. I don't like this approach, as it almost is a demand, with a list of why that an employer either accepts or objects, and I have a better suggestion. My two-phase approach minimizes objections!
First, approach your employer by asking how they believe you are doing in your role e.g. your contributions to the company/division, what you can improve on, etc… Obviously, if there are multiple areas that need improvement (take notes) and if the overall self-generated review is not positive, then this is NOT the time to ask for an increase in salary. Listen. Your goal is not to ask for a raise, but find out what your boss thinks about your performance.
If the outcome is positive, then continue with the conversation with something to the effect “… well that is great, that is why I wanted to meet with you … I also feel I have contributed in the following ways (give your list now--verbally, not written) ….
If your boss agrees and even points out other things you are doing well, you can react by saying, thank you, perhaps my performance warrants a -----% increase …”
If the outcome is not so positive, take notes and work on / strive to make the improvements / changes discussed. You can then request another review, (making SURE you have addressed any areas of needed improvement) then continue with the conversation with something to the effect “… well that is great, that is why I wanted to meet with you …
I also feel I have contributed in the following ways (share your list of reasons now) …. … I am hoping you agree that my performance warrants a -----% increase …”
This method ensures to the employer that you are truly interested in your career and that you are really interested in positively contributing to the organization - additionally, you will gain respect.
Now make this approach your own - modify it to sync with your personality, role, etc…
The following are sure ways to be knocked down: the “market dictates” or “my colleague is receiving …” – so what?!
The worst reason “I received a job offer”; you can bet you will be let go within the next 6 months! (Some employees use “counter-offers” from current employers to receive an increase – again, not only will be let go within the next 6 months! BUT more importantly, you are hurting yourself / your reputation – it is a small industry – word WILL get out).
Career Crossroads Previous Columns
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Top Stories July 30--August 3
Here are the top ten stories opened by readers
(1) Archive: August 3, 2000
(2) Placard ---Richard Branson's
(3) Onset Financial PPR as Marquette, Mazuma, Tetra
(4) Leasing 102 by Mr. Terry Winders, CLP
(5) Facebook admits millions of accounts are fake
(6) Marquette removed from
(7) Sales Make it Happen by Christopher Menkin
(8) New Hires---Promotions
(9) Companies Opt to Lease/Finance Equipment to Preserve Capital
(Tie) (10) Career Crossroad—
(Tie) (10) Exchange Bank Misses TARP payment
Leases to governmental bodies that are political subdivisions and have taxing authority are called Municipal leases and the lessor’s margin is tax free if certain rules are adhered to: Such as; the equipment must be for “essential use “that means the equipment is paid for by tax revenues and not by ticket admissions, grants, patient revenues, or other funds not connected to taxes.
The transaction must contain a “Non Appropriation Clause”. This allows the municipality to return the equipment at the end of “their’ fiscal year if no funds have been appropriated for this equipment the next fiscal year. Most municipal leases carry a clause that restricts the return of the equipment if it is replaced by equipment that serves the same purpose. Some lessors have been caught with this clause when the municipality did not replace the equipment but instead hired an outside contractor to perform the service. This caused a change in documentation to also restrict returning the equipment based on the service to the public.
The transaction must show that the municipality will retain ownership at lease termination. This is usually handled by a mandatory low value purchase requirement.
Municipal lease documentation is different and requires the proper authority to approve it and the correct person designated to sign. This requires an incumbency certificate and a lessee’s attorney’s option to make sure all the required approvals have been met and the signer has the authority to sign.
Tax free income is attractive but the rates are very low and only have value to someone that has taxable income from other sources. If a large loss creates negative income for the lessor’s tax year then tax free income is not attractive because income would be higher on a taxable transaction and would be sheltered from taxes by the loss.
On occasion after a change in political makeup of the represented authority, it is important to note that on occasion they like to get out of the responsibility for the lease and will try and maintained that the previous administration had no authority to lease the equipment. Therefore you must maintain very strong documentation and “dot every i” and make sure all signatures and blanks are properly handled. Make sure the attorney’s option says that all approvals have correctly been made and the authority of the signor is in place.
Do not confuse municipal leasing with federal leasing or “not-for-profit” 501C companies. The normal rule for federal leasing is “don’t do it”…. give it to someone that knows how to handle all the required red tape and hopefully you can get a fee and run the other way just as fast as you can. My advice, leave it to the experts.
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---Waukegan Savings Bank
Fortieth bank to fail this year and the sixth in Illinois.
The two branches of Waukegan Savings Bank, Waukegan, Illinois, were closed with First Midwest Bank, Itasca, Illinois, to assume all of the deposits. Perhaps readers may identify that Waukegan is the birthplace of the late science fiction writer Ray Bradbury and comedian Jack Benny. Founded January 1, 1924, the bank had 26 full time employees as of March 31, 2012 at its two offices in Waukegan. Year-end 2003 they had 44 full time employees.
The bank was not doing well before the economic recession began, having their first major loss in 2004 of $562,000 and then a higher loss of $861,000 in 2005:
(in millions, unless otherwise)
Construction and Land, 1-4 family multiple residential, Multiple Family Residential, Non-Farm Non-Residential loans.
The bank was poorly managed for almost ten years and by the time it agreed to a consent order on April 8, 2010 (1) is was way too late. Perhaps the region was hit earlier than the recession, due to the make up of lower income marketing area of the bank.
“As of the 2011 the city had a total population of 92,046. It is the ninth-largest city in Illinois by population. It is the fifth-largest city on the western shore of Lake Michigan, after Chicago, Milwaukee, Green Bay, and Kenosha. Hispanic or Latino of any race were 44.82% of the population. 6.9% were of German ancestry according to Census 2000. 30.92% White, 19.21% African American, 0.54% Native American, 3.58% Asian, 0.06% Pacific Islander, 22.96% from other races, and 3.50% from two or more races.
"Unlike the rest of the Metro Chicago area's Hispanic population, which is predominantly Mexican, Waukegan is home to a diverse array of Hispanics hailing from Puerto Rico, the Dominican Republic, Honduras, Peru and Argentina.
"There were 27,787 households out of which 40.4% had children under the age of 18 living with them, 49.5% were married couples living together, 14.6% had a female householder with no husband present, and 30.0% were non-families."
March 31, 2012, the bank had a Tier 1 risk-based capital ratio 3.31%.
As of March 31, 2012, Waukegan Savings Bank had approximately $88.9 million in total assets and $77.5 million in total deposits. In addition to assuming all of the deposits of the failed bank, First Midwest Bank agreed to purchase essentially all of the failed bank's assets.
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $19.8 million. Compared to other alternatives.
List of Bank Failures:
Credit Union Deposits Outpacing Banks’
Americans are keeping more money in cash (deposits) than ever before. While banks have seen increases, and continue the main source for deposits, credit unions have grown faster, according to SNL Financial.
In addition to bank failures, including one of the largest, Washington Mutual, Bank of America’s attempt to charge a $5 monthly debit card fee brought more to credit unions. While the growth has been high compared to its history, the top five banks still have a tremendous lead.
Deposit growth across the industry (note the growth in deposits, meaning more savings and less spending.)
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