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Wednesday, March 11, 2009
Visa Ahead Of The Curve
Strong Beginning To 2009
Just when you thought it was all doom and gloom in an ailing economy, a beacon of light. Defying economic trends, Visa reporting a net operating revenue of $1.74 billion in 2009. This is a 17% increase from its $1.49 billion at this point 2008. This figure is the result of positive growth in all categories. The largest sector being international transaction revenues, $500 million to be exact. The company anticipates positive net revenue growth for all of 2009. There is however, talk that 2010 could bring declining economic conditions in the credit card industry. Many analysts feel that the implosion that has wreaked havoc on the economic front will indeed spread to the credit card sector. As more and more people rely heavily on credit just to get by, this to could result in the house of cards tumbling. In the short term.....Visa stands strong in a turbulent market.
Todd
Southern Lending Solutions
Just when you thought it was all doom and gloom in an ailing economy, a beacon of light. Defying economic trends, Visa reporting a net operating revenue of $1.74 billion in 2009. This is a 17% increase from its $1.49 billion at this point 2008. This figure is the result of positive growth in all categories. The largest sector being international transaction revenues, $500 million to be exact. The company anticipates positive net revenue growth for all of 2009. There is however, talk that 2010 could bring declining economic conditions in the credit card industry. Many analysts feel that the implosion that has wreaked havoc on the economic front will indeed spread to the credit card sector. As more and more people rely heavily on credit just to get by, this to could result in the house of cards tumbling. In the short term.....Visa stands strong in a turbulent market.
Todd
Southern Lending Solutions
Monday, March 9, 2009
New Program Announcement: Unsecured Business Lines of Credit
Readers of this blog know that I believe in it being informational and rarely, if ever, do I talk specifically about our services and programs. Today I have to make an exception and talk about a program returning into the fold of our offerings at Southern Lending Solutions.
The reason for this exception is due to the fact that this program addresses the primary problem for small businesses today, access to credit and credit lines.
So I am pleased to announce:
The Southern Lending Solutions Unsecured Business Line of Credit Program
This program is a revolving line of credit and as we all know these days, credit is important to the growth and sustenance of small and middle market companies.
Who qualifies:
1) A Credits (generally 700 or higher FICO scores)
2) 2 Years Time in Business (from date of incorporation)
3) Clean D&B Report (if one is listed for the company)
What's it cost?
A range of Prime plus 5 to Prime plus 12, depending. Currently, Prime is @ 3.25% so this variable rate starts at 8.25%.
If all 3 apply, then an application is all that's required. No tax returns, No business financials, No personal financials and no pre-existing relationships with the funders or banks are required.
A great program where everyone who qualifies should jump on board regardless of need, since as we have seen to need credit and not have it can devastate a business.
Stu
Southern Lending Solutions
The reason for this exception is due to the fact that this program addresses the primary problem for small businesses today, access to credit and credit lines.
So I am pleased to announce:
The Southern Lending Solutions Unsecured Business Line of Credit Program
This program is a revolving line of credit and as we all know these days, credit is important to the growth and sustenance of small and middle market companies.
Who qualifies:
1) A Credits (generally 700 or higher FICO scores)
2) 2 Years Time in Business (from date of incorporation)
3) Clean D&B Report (if one is listed for the company)
What's it cost?
A range of Prime plus 5 to Prime plus 12, depending. Currently, Prime is @ 3.25% so this variable rate starts at 8.25%.
If all 3 apply, then an application is all that's required. No tax returns, No business financials, No personal financials and no pre-existing relationships with the funders or banks are required.
A great program where everyone who qualifies should jump on board regardless of need, since as we have seen to need credit and not have it can devastate a business.
Stu
Southern Lending Solutions
Wednesday, March 4, 2009
Even More on Collateral
So Collateral affects pricing. How do we lend against it?
There are 2 circumstances where we lend against collateral. They are:
1) Use of additional collateral to back a lease for a new piece of equipment
2) Refinancing the collateral to generate cash (known as a Sale/Leaseback)
Clients can use existing collateral to back a new lease when they want to bring the risk to the funder down, and therefore the price or when the equipment is sitting there not being fully utilized. More often then not, existing collateral is used to back a new lease because the credit is weak and its the only way to get the deal done.
Refinancing existing collateral can occur when credit is weak or when its strong but in either case, usually it means there's a cash need in the business. A business that is equipment rich and cash poor. When credit is strong and there's extra collateral, then that's 2 strong C's and that equates to lower prices.
Stu
Southern Lending Solutions
There are 2 circumstances where we lend against collateral. They are:
1) Use of additional collateral to back a lease for a new piece of equipment
2) Refinancing the collateral to generate cash (known as a Sale/Leaseback)
Clients can use existing collateral to back a new lease when they want to bring the risk to the funder down, and therefore the price or when the equipment is sitting there not being fully utilized. More often then not, existing collateral is used to back a new lease because the credit is weak and its the only way to get the deal done.
Refinancing existing collateral can occur when credit is weak or when its strong but in either case, usually it means there's a cash need in the business. A business that is equipment rich and cash poor. When credit is strong and there's extra collateral, then that's 2 strong C's and that equates to lower prices.
Stu
Southern Lending Solutions
Thursday, February 26, 2009
More On Collateral
Collateral can be a big factor in the approval process for an equipment lease.
Does collateral affect pricing? Absolutely
If collateral is strong (heavy asset or something with a large active secondary market), then a residual value can be more easily established and profit through the resale of the equipment more easily attained by the lessor. Those things mean better pricing, higher residual value and lower stream rate (interest rate payable on the monthly payment stream).
Why does a higher residual mean a lower stream rate?
Think of it this way, let's say the lessor's required return is 12%. With no residual, the 12% most come from the payment stream. With a good residual value, some of that 12% can come from the payment stream and some from the resale of the equipment (either to the lessee or in the secondary market if the equipment is returned. Here is an illustration with a $10,000 lease over 36 months:
Equip Value 10000 10000
Term 36 36
Residual 1000 1
Payment 329 329
Rate 6.26% 12.03%
Note the difference with the same monthly payment. The lessor only gets 6% of their return from the 36 month payment stream. The client (and lessee) also benefits because if the equipment is returned, then the $1000 residual value is saved since they aren't paying for that as well. A true win/win.
Stu
Southern Lending Solutions
Does collateral affect pricing? Absolutely
If collateral is strong (heavy asset or something with a large active secondary market), then a residual value can be more easily established and profit through the resale of the equipment more easily attained by the lessor. Those things mean better pricing, higher residual value and lower stream rate (interest rate payable on the monthly payment stream).
Why does a higher residual mean a lower stream rate?
Think of it this way, let's say the lessor's required return is 12%. With no residual, the 12% most come from the payment stream. With a good residual value, some of that 12% can come from the payment stream and some from the resale of the equipment (either to the lessee or in the secondary market if the equipment is returned. Here is an illustration with a $10,000 lease over 36 months:
Equip Value 10000 10000
Term 36 36
Residual 1000 1
Payment 329 329
Rate 6.26% 12.03%
Note the difference with the same monthly payment. The lessor only gets 6% of their return from the 36 month payment stream. The client (and lessee) also benefits because if the equipment is returned, then the $1000 residual value is saved since they aren't paying for that as well. A true win/win.
Stu
Southern Lending Solutions
Monday, February 23, 2009
Collateral Based Leases
Collateral can be an important factor in both the approval and the pricing of a lease. How so?
There are many companies in the equipment leasing business that make their $$ off the residual values. Many leases, and all true leases, are structured with a residual value and purchase option. Often that purchase option is $1, 10% or Fair Market Value (FMV). So leasing companies can make $$ on the residual if they do a 10% option and their real cost is 5 or 6%. That spread becomes their profit. Since lease rates have to be affordable and competitive, as well as profitable, this means lessors have to be familiar with the equipment type and know how much they can resell the equipment for should the client (the lessee) return the equipment. If the residual value is way too high, then the payments are way too low (at the same lease rate) and the lease isn't profitable so its a balancing act.
There are other factors that influence collateral's affect on pricing as well for future entries.
Stu
Southern Lending Solutions
There are many companies in the equipment leasing business that make their $$ off the residual values. Many leases, and all true leases, are structured with a residual value and purchase option. Often that purchase option is $1, 10% or Fair Market Value (FMV). So leasing companies can make $$ on the residual if they do a 10% option and their real cost is 5 or 6%. That spread becomes their profit. Since lease rates have to be affordable and competitive, as well as profitable, this means lessors have to be familiar with the equipment type and know how much they can resell the equipment for should the client (the lessee) return the equipment. If the residual value is way too high, then the payments are way too low (at the same lease rate) and the lease isn't profitable so its a balancing act.
There are other factors that influence collateral's affect on pricing as well for future entries.
Stu
Southern Lending Solutions
Friday, February 20, 2009
Cash Flow
Everyone has heard that Cash is King and that's never been more true than it is today since companies have less access to credit than they used to. So what's important in analyzing a lease based on cash flow?
By cash flow, we mean cash flow circulating through the business. Cash Flow is one of the 3 primary business financial statements, along with the Income Statement (also known as P&L for profit and loss) and the Balance Sheet. The only exception to this is for startups where there is no cash flow and that cash flow has to come from another income source, other assets or from savings. One of the benefits of strong cash flow is often times, this equates to good business credit, as measured by Paydex, a service provided by Dun and Bradstreet.
In nearly every case we need the previous year's 3 financial statements and sometimes we need 2 years in order to look at trends. Remember, these companies often don't qualify on credit alone so more information is almost always required.
Debt Service Coverage Ratio is the ratio that defines the risk in this type of lease. How much cash flow runs through the business that can be used to service the debt? Most prefer to see a ratio of 2x or 2.0, meaning that the free cash flow covers twice the amount of the lease payment.
By analyzing cash flow of a company where cash flow is strong but credit is weak, we can often use the strength of the cash flow to answer the ultimate question, will they be able to pay this lease back.
Having poor credit makes it tougher but its by no means impossible especially if strong steady solid cash flow is a part of the picture.
Stu
Southern Lending Solutions
By cash flow, we mean cash flow circulating through the business. Cash Flow is one of the 3 primary business financial statements, along with the Income Statement (also known as P&L for profit and loss) and the Balance Sheet. The only exception to this is for startups where there is no cash flow and that cash flow has to come from another income source, other assets or from savings. One of the benefits of strong cash flow is often times, this equates to good business credit, as measured by Paydex, a service provided by Dun and Bradstreet.
In nearly every case we need the previous year's 3 financial statements and sometimes we need 2 years in order to look at trends. Remember, these companies often don't qualify on credit alone so more information is almost always required.
Debt Service Coverage Ratio is the ratio that defines the risk in this type of lease. How much cash flow runs through the business that can be used to service the debt? Most prefer to see a ratio of 2x or 2.0, meaning that the free cash flow covers twice the amount of the lease payment.
By analyzing cash flow of a company where cash flow is strong but credit is weak, we can often use the strength of the cash flow to answer the ultimate question, will they be able to pay this lease back.
Having poor credit makes it tougher but its by no means impossible especially if strong steady solid cash flow is a part of the picture.
Stu
Southern Lending Solutions
Monday, February 16, 2009
The 3 C's of Lending
Bankers are taught these in credit training and everyone who is in any money lending business looks at the 3 C's. What are they? They are:
1) Credit
2) Cash Flow (as measured by Debt Coverage Ratio)
3) Collateral
What differs between lenders of all types (even successful ones in different areas) is how they analyze the C's, which they emphasize more and what risk they attach to each C.
Bankers often require having all 3 C's or at least 2 very strong (Credit and Cash Flow usually). What makes equipment leasing different is often strength in only one C can still mean getting a deal done to get a client the equipment they need.
For instance, I use a couple equipment leasing companies that care much more about the cash flow of the business OR the collateral (in this case the equipment being leased) than they care about the credit profile of the owners. This is especially helpful in an environment like we have now where nearly every one's credit profile looks a little worse now than it did a year or two ago.
One company I'm currently working with has a terrible credit history but has good cash flow in their business and their need is for manufacturing equipment that helps increase their output of product. This is an ideal case for us as a banker would never touch a credit profile like this but for us, they have 2 of the C's covered (Cash Flow and Collateral). Two C's means we can find a home for them to get this new equipment that they need.
Most everyone understands the idea of credit based lending and pricing since that's how mortgages are often priced so we'll focus the next couple entries on the other C's of Cash Flow and Collateral and how they play into approvals and pricing for equipment leases.
Stu
Southern Lending Solutions
1) Credit
2) Cash Flow (as measured by Debt Coverage Ratio)
3) Collateral
What differs between lenders of all types (even successful ones in different areas) is how they analyze the C's, which they emphasize more and what risk they attach to each C.
Bankers often require having all 3 C's or at least 2 very strong (Credit and Cash Flow usually). What makes equipment leasing different is often strength in only one C can still mean getting a deal done to get a client the equipment they need.
For instance, I use a couple equipment leasing companies that care much more about the cash flow of the business OR the collateral (in this case the equipment being leased) than they care about the credit profile of the owners. This is especially helpful in an environment like we have now where nearly every one's credit profile looks a little worse now than it did a year or two ago.
One company I'm currently working with has a terrible credit history but has good cash flow in their business and their need is for manufacturing equipment that helps increase their output of product. This is an ideal case for us as a banker would never touch a credit profile like this but for us, they have 2 of the C's covered (Cash Flow and Collateral). Two C's means we can find a home for them to get this new equipment that they need.
Most everyone understands the idea of credit based lending and pricing since that's how mortgages are often priced so we'll focus the next couple entries on the other C's of Cash Flow and Collateral and how they play into approvals and pricing for equipment leases.
Stu
Southern Lending Solutions
Monday, February 9, 2009
Changes at Marlin Leasing
Reprinted from Leasing News
January 6, 2008 SEC filing:
“On December 31, 2008, the Registrant’s wholly-owned subsidiary, Marlin Business Bank (“MBB”), received approval from the Federal Reserve Bank of San Francisco to become a member of the Federal Reserve System. In addition, on December 31, 2008, the Registrant received approval from the Federal Reserve Bank of San Francisco to become a bank holding company upon the conversion of MBB from an industrial bank to a commercial bank.
The Registrant has three months from the approval date to consummate the transaction unless such period is extended by the Federal Reserve System. Prior to consummating the transaction, the Registrant will seek to modify the Federal Deposit Insurance Corporation (“FDIC”) Orders issued when MBB became an industrial bank to eliminate any inconsistencies between the FDIC Orders and the Federal Reserve Bank’s approval.”http://www.snl.com/Cache/c7177044.htm
Editor's Note: Marlin had been a Utah Industrial Bank, but this filing allowed them to convert to a business bank and become part of the Federal Reserve system, allowing them to receive TARP funds.
This comes on the heels of them closing their broker division, which according to The Leasing News, is Marlin's most profitable division. These things together spell financial difficulty for the lessor and serve as a red flag to other lessors who have vendor divisions whose policies are too liberal.
Stu
Southern Lending Solutions
January 6, 2008 SEC filing:
“On December 31, 2008, the Registrant’s wholly-owned subsidiary, Marlin Business Bank (“MBB”), received approval from the Federal Reserve Bank of San Francisco to become a member of the Federal Reserve System. In addition, on December 31, 2008, the Registrant received approval from the Federal Reserve Bank of San Francisco to become a bank holding company upon the conversion of MBB from an industrial bank to a commercial bank.
The Registrant has three months from the approval date to consummate the transaction unless such period is extended by the Federal Reserve System. Prior to consummating the transaction, the Registrant will seek to modify the Federal Deposit Insurance Corporation (“FDIC”) Orders issued when MBB became an industrial bank to eliminate any inconsistencies between the FDIC Orders and the Federal Reserve Bank’s approval.”http://www.snl.com/Cache/c7177044.htm
Editor's Note: Marlin had been a Utah Industrial Bank, but this filing allowed them to convert to a business bank and become part of the Federal Reserve system, allowing them to receive TARP funds.
This comes on the heels of them closing their broker division, which according to The Leasing News, is Marlin's most profitable division. These things together spell financial difficulty for the lessor and serve as a red flag to other lessors who have vendor divisions whose policies are too liberal.
Stu
Southern Lending Solutions
Saturday, January 31, 2009
Can I still lease in this environment?
This is a question I am getting asked more frequently as the financial system continues to lack in stability. The short answer is Yes you can.
What is different now?
1) Credit underwriting guidelines are tighter.
This is no big surprise but get the obvious one out of the way. When companies have less $$ to lend and fund, guidelines tighten
2) More due diligence and restrictions
Since tough times usually see increases in criminal and fraudulent activity, due diligence is on the rise for lessees and their vendors selling them the equipment they need. Also, more industries and other circumstances are becoming restricted.
For instance, 2 of my funder partners examined their portfolios and found an unreasonably high % of defaults from lessees in California. So a policy change was announced at both, in the form of a freeze on new business origination in CA. This kind of internal credit and portfolio examination is commonplace now.
3) Startups are more difficult and more restricted
Startup businesses are tougher generally and certain industries like restaurants, startups have been restricted almost entirely.
4) Funders going out of business
Some funders are going out of business entirely or are getting out of the broker originated so it means that there is less choice out there than there used to be for funding leases.
5) Lease rates are increasing
See # 4 above. Also, lease rates are increasing thanks to the market for Treasury rate swaps, an instrument where a rate of interest on Treasuries is traded (swapped out) for the monthly payment stream on the Treasury (more to come in a future entry on this topic). These swaps are not the cause of the financial market meltdown though, as those swaps are known as credit default swaps.
So these 5 things are the major changes but leases are still being approved and funded. So while some deals in some of these areas are more difficult to do than they used to be, there are still many places, sources and resources available for funding leases.
Equipment leasing remains one of the best and most widely available sources of capital for a business even in today's environment.
Stu
Southern Lending Solutions
What is different now?
1) Credit underwriting guidelines are tighter.
This is no big surprise but get the obvious one out of the way. When companies have less $$ to lend and fund, guidelines tighten
2) More due diligence and restrictions
Since tough times usually see increases in criminal and fraudulent activity, due diligence is on the rise for lessees and their vendors selling them the equipment they need. Also, more industries and other circumstances are becoming restricted.
For instance, 2 of my funder partners examined their portfolios and found an unreasonably high % of defaults from lessees in California. So a policy change was announced at both, in the form of a freeze on new business origination in CA. This kind of internal credit and portfolio examination is commonplace now.
3) Startups are more difficult and more restricted
Startup businesses are tougher generally and certain industries like restaurants, startups have been restricted almost entirely.
4) Funders going out of business
Some funders are going out of business entirely or are getting out of the broker originated so it means that there is less choice out there than there used to be for funding leases.
5) Lease rates are increasing
See # 4 above. Also, lease rates are increasing thanks to the market for Treasury rate swaps, an instrument where a rate of interest on Treasuries is traded (swapped out) for the monthly payment stream on the Treasury (more to come in a future entry on this topic). These swaps are not the cause of the financial market meltdown though, as those swaps are known as credit default swaps.
So these 5 things are the major changes but leases are still being approved and funded. So while some deals in some of these areas are more difficult to do than they used to be, there are still many places, sources and resources available for funding leases.
Equipment leasing remains one of the best and most widely available sources of capital for a business even in today's environment.
Stu
Southern Lending Solutions
Thursday, January 29, 2009
Biggest Banks Lending Less After Getting TARP Funds
The January 26th edition of the Wall Street Journal reported this story.
Despite its stated purpose to increase liquidity in the credit markets, the largest recipients of bailout money under the Troubled Asset Relief Program are actually lending less today than before they received government assistance, according to an article published today (1/26) in The Wall Street Journal.
A Journal analysis found that ten of the 13 large banks that have received funds so far saw their outstanding loan balances decrease $46 billion, or 1.4%, in the fourth quarter. Among those whose lending has declined are Bank of America Corp. and Citigroup Inc., each of which received $45 billion under TARP. Only three of the banks reported growth in their loan portfolios: U.S. Bancorp, SunTrust Banks Inc. and BB&T Corp.
The reluctance of banks to lend the money they have received under the government bailout package has prompted resounding criticism of the TARP program and led many to question its efficacy. Now the government says it wants an accounting of the money. In a January 16 letter to 20 banks receiving TARP funds, Neel Kashkari, the head of the program, asked the banks to provide monthly accounting statements detailing commercial and consumer lending activity. "The purpose of this snapshot is to provide insight into the lending and financial intermediation activities of the largest recipients of the CPP (Capital Purchase Program)," said Kashkari.
Editor's Note: Since the initial TARP $$ did not have covenants attached that included requirements to lend, banks have been using the $$ for other purposes, namely activity like acquiring weaker competition who did not get TARP funds but still hold valuable deposits worth buying. This kind of activity is what makes having a good banker and multiple sources for access to cash or credit so vitally important in this challenging environment.
Stu
Southern Lending Solutions
Despite its stated purpose to increase liquidity in the credit markets, the largest recipients of bailout money under the Troubled Asset Relief Program are actually lending less today than before they received government assistance, according to an article published today (1/26) in The Wall Street Journal.
A Journal analysis found that ten of the 13 large banks that have received funds so far saw their outstanding loan balances decrease $46 billion, or 1.4%, in the fourth quarter. Among those whose lending has declined are Bank of America Corp. and Citigroup Inc., each of which received $45 billion under TARP. Only three of the banks reported growth in their loan portfolios: U.S. Bancorp, SunTrust Banks Inc. and BB&T Corp.
The reluctance of banks to lend the money they have received under the government bailout package has prompted resounding criticism of the TARP program and led many to question its efficacy. Now the government says it wants an accounting of the money. In a January 16 letter to 20 banks receiving TARP funds, Neel Kashkari, the head of the program, asked the banks to provide monthly accounting statements detailing commercial and consumer lending activity. "The purpose of this snapshot is to provide insight into the lending and financial intermediation activities of the largest recipients of the CPP (Capital Purchase Program)," said Kashkari.
Editor's Note: Since the initial TARP $$ did not have covenants attached that included requirements to lend, banks have been using the $$ for other purposes, namely activity like acquiring weaker competition who did not get TARP funds but still hold valuable deposits worth buying. This kind of activity is what makes having a good banker and multiple sources for access to cash or credit so vitally important in this challenging environment.
Stu
Southern Lending Solutions
Monday, January 12, 2009
Georgia Banks' Problems 'Alarming'
Reprinted from the Atlanta Journal Constitution
In ‘brutal’ third quarter, 26 banks had Texas ratios over 100%
By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Sunday, January 11, 2009
More Georgia banks faced deeper problems from souring loans and other challenges in the third quarter, based on a commonly used measure of their financial health.
The number of banks with high “Texas ratios” — a figure that attempts to gauge how likely institutions are to face insolvency — grew during the quarter ended in September. Most banks’ ratios also got worse.
“The third quarter was brutal,” said Walt Moeling, an Atlanta attorney who represents many of the state’s banks and the Georgia Bankers Association, a trade group.
Georgia once again had the largest number of troubled banks in the nation, with 26 banks with Texas ratios over 100 percent, said Brett Villaume, a research analyst at Atlanta bank consulting firm FIG Partners, which produced the quarterly update based on third-quarter data, the latest available.
“It’s just alarming,” he said. “No other state came close.” He said Florida had seven problem banks, the next largest concentration. Georgia and California tied for the biggest share of the nation’s 26 bank failures last year, with five each.
Moeling said 90 percent of local banks reported increases in problem loans or foreclosures during the quarter as the economy worsened and home sales and building activity remained virtually frozen. More home builders’ and developers’ loans went unpaid, and most local banks booked bigger charges for expected loan losses.
Previously, “there was a lot of denial” among some bankers who hoped home builders could catch up on late loan payments if the real estate market improved, said Moeling, with law firm Bryan Cave Powell Goldstein. “The third quarter ended the period of denial.”
The Texas ratio — developed during the savings and loan crisis in the 1980s, when far larger numbers of financial institutions failed — attempts to measure a financial institution’s health by comparing its total defaulted loans and foreclosed properties to total cash reserves and other funds it has available to absorb potential losses. A ratio over 100 percent suggests “you owe more than you have,” Villaume said.
Critics of the Texas ratio say it provides a one-time snapshot and doesn’t reflect the bankers’ ability to shore up cash reserves by raising capital, selling foreclosed houses, cutting expenses and generating additional revenue.
“A lot of things could have changed” since the third quarter ended in September, said David Oliver, spokesman for the Georgia Bankers Association. “We advise people to exercise caution when looking at those numbers.”
Georgia’s bumper crop of problem banks has its roots in the creation of more than 100 new banks since 2000, mostly in metro Atlanta. Those and older banks in turn bet heavily on metro Atlanta’s then-booming residential real estate market by bankrolling developers and home builders. Many of those loans imploded after the real estate market crashed.
“There was an oversupply of new banks. And needless to say, when times got tough, they were the first victims,” Villaume said. “Everyone on the street who was watching for bank failures was surprised there weren’t more [failures] in 2008,” he said.
Still, he and other industry players argue that there are glimmers of hope despite continued grim industry trends. A handful of Georgia’s banks recently have snagged federal bailout money, shoring up their capital reserves.
Outside investors also have injected money or shown interest in a few of the state’s banks. Some troubled banks said they have made some progress toward digging out of their holes by cutting expenses and selling foreclosed properties or other troubled assets.
Five Georgia banks have announced that they were getting federal bailout money from the Troubled Asset Relief Program, or TARP, including Atlanta’s SunTrust Banks and Fidelity Bank, Columbus-based Synovus, and United Community Banks in Blairsville.
None of those banks were on FIG Partners’ troubled bank list. However, industry insiders said some banks on the list have also applied for TARP money. They expect more that currently don’t qualify because of their legal structure — typically the smallest community banks — to apply as well if the U.S. Treasury Department broadens its program rules to cover them.
The parent company of Jackson-based McIntosh State Bank, which landed on the Texas ratio list for the first time in September with a ratio of 101 percent, announced late last month that it is raising up to $14 million from private investors, including Atlanta-based Redemptus Group. McIntosh also said it has applied for $10.7 million from the federal TARP program.
“We feel real good, even though we did creep onto the list,” said William “Pete” Malone, McIntosh’s chairman and CEO.
David D. Stovall, chief executive of Habersham Bancorp., said the Clarkesville bank holding company likewise is applying for roughly $11 million in TARP money after raising new capital at year-end from a private investor.
“We’ve already injected $3 million of private money. … That should bode well in our favor,” said Stovall, whose bank had a 115 percent Texas ratio in September. He said the bank has been “fairly aggressive about addressing issues” by also selling about three foreclosed homes per month.
“We have plenty of capital and plenty of liquidity to ride it out,” he said.
Dan Baker, president of First Security National Bank, with a Texas ratio of 273 percent, said the Norcross-based bank has been able to sell most of its foreclosed homes with modest losses. But the pace is slow because “the public wants to buy them for nothing,” he said.
The 25-employee bank has cut four employees and foreclosed on more than a dozen home builders in recent months.
“It’s a shame, because they’re good people,” he said.
The bank’s federal regulators, who want the institution to raise additional capital, “have been working very closely with us,” Baker said. “I think we’re probably in for a slow 2009. I think we’ve got a ways to go to work through this real estate.”
State banking regulators “obviously want us to raise capital,” said Vincent Cater, chief executive of Freedom Bank of Georgia. The state Department of Banking and Finance hit the Commerce-based bank with a cease-and-desist order last month requiring several improvements. Cater said the bank, which had a Texas ratio of 175 percent, is “talking to several potential investors.” Meanwhile, it has been able to sell foreclosed homes relatively quickly and deposits “remain very stable,” he said.
“I think we’re seeing some leveling off. The problems don’t seem to be getting worse. They’re not getting any better,” he added. “I think we would obviously not like to be on the next [Texas ratio] list.”
Stephen Klein, chief executive of Omni National Bank, said its recent Texas ratio, 219 percent, “doesn’t do justice” to the Atlanta bank. “We do not have a liquidity problem,” he said, noting that the bank has “$105 million of cash in the bank” and rent coming in from about 70 percent of the roughly 500 foreclosed homes in its portfolio.
Unlike most banks, he said, Omni isn’t rushing to sell those homes because prices fell too far. Following an unusual strategy, the bank made most loans to home builders who were rehabilitating homes in inner-city Atlanta neighborhoods populated primarily by low-income black families.
But those neighborhoods were especially hard-hit, he said, after the market for subprime home loans froze up, sidelining many would-be buyers. Omni foreclosed on the builders and now rents the houses out until it can work through its problems, Klein said.
“If something happens to the bank, there’s going to be a … void in inner-city Atlanta,” he said.
PROBLEMS GROWING FOR GEORGIA BANKS
More Georgia banks have landed on a list of troubled institutions, as measured by a statistic known as the “Texas ratio.” The formula, used with some modifications by Atlanta-based FIG Partners, attempts to gauge risk levels at banks — the higher the number, the bigger the potential problems.
Bankers want to avoid a score above 100 percent, which indicates that a bank’s problem loans exceed the capital it has to absorb losses.
Editor's Note: While the Texas ratio is only a snapshot, it is indicative of the banking environment in the state of GA, that is so heavily real estate and construction based. The ones healthy enough to make it through this will likely expand into other forms of asset based lending once their books allow them to start lending $$ again.
Stu
Southern Lending Solutions
In ‘brutal’ third quarter, 26 banks had Texas ratios over 100%
By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Sunday, January 11, 2009
More Georgia banks faced deeper problems from souring loans and other challenges in the third quarter, based on a commonly used measure of their financial health.
The number of banks with high “Texas ratios” — a figure that attempts to gauge how likely institutions are to face insolvency — grew during the quarter ended in September. Most banks’ ratios also got worse.
“The third quarter was brutal,” said Walt Moeling, an Atlanta attorney who represents many of the state’s banks and the Georgia Bankers Association, a trade group.
Georgia once again had the largest number of troubled banks in the nation, with 26 banks with Texas ratios over 100 percent, said Brett Villaume, a research analyst at Atlanta bank consulting firm FIG Partners, which produced the quarterly update based on third-quarter data, the latest available.
“It’s just alarming,” he said. “No other state came close.” He said Florida had seven problem banks, the next largest concentration. Georgia and California tied for the biggest share of the nation’s 26 bank failures last year, with five each.
Moeling said 90 percent of local banks reported increases in problem loans or foreclosures during the quarter as the economy worsened and home sales and building activity remained virtually frozen. More home builders’ and developers’ loans went unpaid, and most local banks booked bigger charges for expected loan losses.
Previously, “there was a lot of denial” among some bankers who hoped home builders could catch up on late loan payments if the real estate market improved, said Moeling, with law firm Bryan Cave Powell Goldstein. “The third quarter ended the period of denial.”
The Texas ratio — developed during the savings and loan crisis in the 1980s, when far larger numbers of financial institutions failed — attempts to measure a financial institution’s health by comparing its total defaulted loans and foreclosed properties to total cash reserves and other funds it has available to absorb potential losses. A ratio over 100 percent suggests “you owe more than you have,” Villaume said.
Critics of the Texas ratio say it provides a one-time snapshot and doesn’t reflect the bankers’ ability to shore up cash reserves by raising capital, selling foreclosed houses, cutting expenses and generating additional revenue.
“A lot of things could have changed” since the third quarter ended in September, said David Oliver, spokesman for the Georgia Bankers Association. “We advise people to exercise caution when looking at those numbers.”
Georgia’s bumper crop of problem banks has its roots in the creation of more than 100 new banks since 2000, mostly in metro Atlanta. Those and older banks in turn bet heavily on metro Atlanta’s then-booming residential real estate market by bankrolling developers and home builders. Many of those loans imploded after the real estate market crashed.
“There was an oversupply of new banks. And needless to say, when times got tough, they were the first victims,” Villaume said. “Everyone on the street who was watching for bank failures was surprised there weren’t more [failures] in 2008,” he said.
Still, he and other industry players argue that there are glimmers of hope despite continued grim industry trends. A handful of Georgia’s banks recently have snagged federal bailout money, shoring up their capital reserves.
Outside investors also have injected money or shown interest in a few of the state’s banks. Some troubled banks said they have made some progress toward digging out of their holes by cutting expenses and selling foreclosed properties or other troubled assets.
Five Georgia banks have announced that they were getting federal bailout money from the Troubled Asset Relief Program, or TARP, including Atlanta’s SunTrust Banks and Fidelity Bank, Columbus-based Synovus, and United Community Banks in Blairsville.
None of those banks were on FIG Partners’ troubled bank list. However, industry insiders said some banks on the list have also applied for TARP money. They expect more that currently don’t qualify because of their legal structure — typically the smallest community banks — to apply as well if the U.S. Treasury Department broadens its program rules to cover them.
The parent company of Jackson-based McIntosh State Bank, which landed on the Texas ratio list for the first time in September with a ratio of 101 percent, announced late last month that it is raising up to $14 million from private investors, including Atlanta-based Redemptus Group. McIntosh also said it has applied for $10.7 million from the federal TARP program.
“We feel real good, even though we did creep onto the list,” said William “Pete” Malone, McIntosh’s chairman and CEO.
David D. Stovall, chief executive of Habersham Bancorp., said the Clarkesville bank holding company likewise is applying for roughly $11 million in TARP money after raising new capital at year-end from a private investor.
“We’ve already injected $3 million of private money. … That should bode well in our favor,” said Stovall, whose bank had a 115 percent Texas ratio in September. He said the bank has been “fairly aggressive about addressing issues” by also selling about three foreclosed homes per month.
“We have plenty of capital and plenty of liquidity to ride it out,” he said.
Dan Baker, president of First Security National Bank, with a Texas ratio of 273 percent, said the Norcross-based bank has been able to sell most of its foreclosed homes with modest losses. But the pace is slow because “the public wants to buy them for nothing,” he said.
The 25-employee bank has cut four employees and foreclosed on more than a dozen home builders in recent months.
“It’s a shame, because they’re good people,” he said.
The bank’s federal regulators, who want the institution to raise additional capital, “have been working very closely with us,” Baker said. “I think we’re probably in for a slow 2009. I think we’ve got a ways to go to work through this real estate.”
State banking regulators “obviously want us to raise capital,” said Vincent Cater, chief executive of Freedom Bank of Georgia. The state Department of Banking and Finance hit the Commerce-based bank with a cease-and-desist order last month requiring several improvements. Cater said the bank, which had a Texas ratio of 175 percent, is “talking to several potential investors.” Meanwhile, it has been able to sell foreclosed homes relatively quickly and deposits “remain very stable,” he said.
“I think we’re seeing some leveling off. The problems don’t seem to be getting worse. They’re not getting any better,” he added. “I think we would obviously not like to be on the next [Texas ratio] list.”
Stephen Klein, chief executive of Omni National Bank, said its recent Texas ratio, 219 percent, “doesn’t do justice” to the Atlanta bank. “We do not have a liquidity problem,” he said, noting that the bank has “$105 million of cash in the bank” and rent coming in from about 70 percent of the roughly 500 foreclosed homes in its portfolio.
Unlike most banks, he said, Omni isn’t rushing to sell those homes because prices fell too far. Following an unusual strategy, the bank made most loans to home builders who were rehabilitating homes in inner-city Atlanta neighborhoods populated primarily by low-income black families.
But those neighborhoods were especially hard-hit, he said, after the market for subprime home loans froze up, sidelining many would-be buyers. Omni foreclosed on the builders and now rents the houses out until it can work through its problems, Klein said.
“If something happens to the bank, there’s going to be a … void in inner-city Atlanta,” he said.
PROBLEMS GROWING FOR GEORGIA BANKS
More Georgia banks have landed on a list of troubled institutions, as measured by a statistic known as the “Texas ratio.” The formula, used with some modifications by Atlanta-based FIG Partners, attempts to gauge risk levels at banks — the higher the number, the bigger the potential problems.
Bankers want to avoid a score above 100 percent, which indicates that a bank’s problem loans exceed the capital it has to absorb losses.
Editor's Note: While the Texas ratio is only a snapshot, it is indicative of the banking environment in the state of GA, that is so heavily real estate and construction based. The ones healthy enough to make it through this will likely expand into other forms of asset based lending once their books allow them to start lending $$ again.
Stu
Southern Lending Solutions
Wednesday, January 7, 2009
Benefits Of Payment Processing For Emerging Markets
Credit Card Acceptance For Emerging Markets
Anytime that I get into a lengthy conversation regarding rates and fees for credit card acceptance, it ultimately leads to a discussion on Interchange. A discussion on Interchange is something I try to avoid unless it is absolutely necessary because most people get bored out of their minds. Interchange being the information highway that credit card transactions travel on and the fees associated with them.
A rare secret that most people don't know and rarely talk about is the exceptional pricing for emerging markets. Visa/MasterCard considers an emerging market to be any industry that is new, ground breaking, controversial, etc... You get the picture. Some of those markets include: multi-ethnic, non-profit, government, and defense(to name a few). Visa/MasterCard rewards those industries with a lower rate because they see these markets as untapped, and often containing higher volume and/or dollar amounts. In an earlier post I referred to the government office that pays by way of a purchase card for a helicopter. Price....$4 million dollars!
I think you're getting it now. In conclusion emerging markets are where it's at, and the credit card industry endorses them.
Todd
Southern Lending Solutions
Anytime that I get into a lengthy conversation regarding rates and fees for credit card acceptance, it ultimately leads to a discussion on Interchange. A discussion on Interchange is something I try to avoid unless it is absolutely necessary because most people get bored out of their minds. Interchange being the information highway that credit card transactions travel on and the fees associated with them.
A rare secret that most people don't know and rarely talk about is the exceptional pricing for emerging markets. Visa/MasterCard considers an emerging market to be any industry that is new, ground breaking, controversial, etc... You get the picture. Some of those markets include: multi-ethnic, non-profit, government, and defense(to name a few). Visa/MasterCard rewards those industries with a lower rate because they see these markets as untapped, and often containing higher volume and/or dollar amounts. In an earlier post I referred to the government office that pays by way of a purchase card for a helicopter. Price....$4 million dollars!
I think you're getting it now. In conclusion emerging markets are where it's at, and the credit card industry endorses them.
Todd
Southern Lending Solutions
Tuesday, December 30, 2008
GMAC Gets $5 Billion in TARP Funds
Reprinted from The Monitor
GMAC said it has sold $5.0 billion of GMAC's preferred membership interests and warrants to the U.S. Department of the Treasury as a participant in the Troubled Assets Relief Program (TARP) established under the Emergency Economic Stabilization Act of 2008. In return, GMAC will be subject to additional regulation and must be in compliance with the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act.
Separately, the Treasury Department said it has agreed to lend up to $1 billion to General Motors so that General Motors (GM) can participate in the rights offering at GMAC in support of GMAC's reorganization as a bank holding company. In its announcement, GMAC said, "As a bank holding company, GMAC has improved access to funding to provide financing to consumers and businesses. In particular, the company intends to act quickly to resume automotive lending to a broader spectrum of customers to support the availability of credit to consumers and businesses for the purchase of automobiles."
GMAC also announced that GM and an affiliate of Cerberus Capital Management contributed to GMAC the $750 million subordinated participations in the $3.5 billion senior secured credit facility, as amended, between GMAC and Residential Capital, LLC in exchange for new common equity of GMAC.
In addition, GMAC announced that GM and an affiliate of Cerberus Capital Management entered into agreements to purchase $1.25 billion of new common equity. The U.S. Treasury and GM intend to enter into an agreement for the Treasury to fund GM's share of the new common equity. GMAC also announced that the conditions to its previously announced separate private exchange offers and cash tender offers have been satisfied and that GMAC has accepted all of the validly tendered GMAC old notes and ResCap old notes.
Editor's Note: GMAC was one of the largest originators of mortgages for many years. This statement and action is a clear indication they intend to get back to their original purpose, which was to provide access to credit for people buying GM cars and trucks.
Stu
Southern Lending Solutions
GMAC said it has sold $5.0 billion of GMAC's preferred membership interests and warrants to the U.S. Department of the Treasury as a participant in the Troubled Assets Relief Program (TARP) established under the Emergency Economic Stabilization Act of 2008. In return, GMAC will be subject to additional regulation and must be in compliance with the executive compensation and corporate governance requirements of Section 111 of the Emergency Economic Stabilization Act.
Separately, the Treasury Department said it has agreed to lend up to $1 billion to General Motors so that General Motors (GM) can participate in the rights offering at GMAC in support of GMAC's reorganization as a bank holding company. In its announcement, GMAC said, "As a bank holding company, GMAC has improved access to funding to provide financing to consumers and businesses. In particular, the company intends to act quickly to resume automotive lending to a broader spectrum of customers to support the availability of credit to consumers and businesses for the purchase of automobiles."
GMAC also announced that GM and an affiliate of Cerberus Capital Management contributed to GMAC the $750 million subordinated participations in the $3.5 billion senior secured credit facility, as amended, between GMAC and Residential Capital, LLC in exchange for new common equity of GMAC.
In addition, GMAC announced that GM and an affiliate of Cerberus Capital Management entered into agreements to purchase $1.25 billion of new common equity. The U.S. Treasury and GM intend to enter into an agreement for the Treasury to fund GM's share of the new common equity. GMAC also announced that the conditions to its previously announced separate private exchange offers and cash tender offers have been satisfied and that GMAC has accepted all of the validly tendered GMAC old notes and ResCap old notes.
Editor's Note: GMAC was one of the largest originators of mortgages for many years. This statement and action is a clear indication they intend to get back to their original purpose, which was to provide access to credit for people buying GM cars and trucks.
Stu
Southern Lending Solutions
Friday, December 26, 2008
GMAC To Become A Bank
The Feds have allowed the General Motors Corporation to become a banking institution in order to take advantage of the bail out dollars. Yet another company to make such a request. This is in addition to the over 17 Million approved in previous weeks to both GM and Chrysler. As a stipulation the Feds are requiring GM to reduce the amount of stake that they have in the company. The Federal Reserve Board granted GMAC's application on an emergency basis, shortening its normal review process. Emergency approval has become the Fed's routine practice this fall as it offers shelter to companies including investment banks Goldman Sachs and Morgan Stanley and credit card lenders American Express and Discover Financial Services.
Todd
Southern Lending Solutions
Todd
Southern Lending Solutions
Best CD Rates
Monitorbankrates.com offers a home on the web to find information and suggestions about your personal financing future. The company provides in depth articles and reviews on the latest trends in the market. Feel free to subscribe to their online news feed or use the mortgage calculator to find out payments on a home loan. Find out where to go and what information you will need to get the best cd rates on the market. You can review detailed information on the current state of the economy and what lending sources are offering the most competitive programs that suit your needs. If your interested in where to shelter your money, Monitorbankrates.com provides suggestions and the latest news regarding online savings accounts so that you can be sure that you are capable of making educated decisions with your money. Learn more about bank cd rates and which bank is providing the best return for your money.
Monitorbankrates.com reviews and details everything that you will need to know to prepare for your financial future and security. Don’t make decisions on your own. Use a resource that makes you capable of making the best choices with your money. With a variety of services offered and reviews to back them, monitorbankrates.com insures your ready for the challenges of today’s market.
Monitorbankrates.com reviews and details everything that you will need to know to prepare for your financial future and security. Don’t make decisions on your own. Use a resource that makes you capable of making the best choices with your money. With a variety of services offered and reviews to back them, monitorbankrates.com insures your ready for the challenges of today’s market.
Tuesday, December 23, 2008
What Is PCI Compliance?
Payment Card Industry Compliance is a critical and ever changing standard that affects millions of businesses in the US. Most importantly it was created to help with the rising issues surrounding identity theft. The Identity Theft Resource Center, a non-profit organization in San Diego states that not only is identity theft no going away anytime soon, it’s out of control! Today’s economic climate provides the perfect catalyst for identity fraud. The PCI Data Security Standard (PCI DSS) originally began as five different programs from the five credit card schemes. Each company’s intentions were roughly similar: to create an additional level of protection for consumers by ensuring that merchants meet minimum levels of security when they store, process and transmit cardholder data.
Who has to comply you might ask?
Any business accepting credit cards must comply annually. There is no way around it. It is especially critical for those businesses that feel the need to store credit card info after an initial transaction is complete such as those doing recurring transactions.
Todd
Southern Lending Solutions
Who has to comply you might ask?
Any business accepting credit cards must comply annually. There is no way around it. It is especially critical for those businesses that feel the need to store credit card info after an initial transaction is complete such as those doing recurring transactions.
Todd
Southern Lending Solutions
Perfect Cash Advance
These days we all find ourselves in the situation of coming up short by the end of the month. It’s hard to know where to turn to when finances are tight. Perfect Cash Advance offers quick and easy solution to short term cash crunches. The company offers one of the quickest cash advance services on the market. You can fill out a quick on-line form that is 100% secure and often receive cash delivered to your account by the next business day. Payday loans are yet another service that Perfect Cash Advance offers. They work with many different lenders and will be able to provide you with a service that’s right for you. Why deal with the hassle of going out to a retail location when you can apply for a loan right from their website. The whole process is automatic and funds are wired directly to your account. Fees are deducted electronically as well so there is no need for reminders or statements. Many of the lenders will also work with you to meet your needs should you not be able to pay back the loan in the required time period. That’s one of the greatest benefits of working with a company that has an established reputation with many lenders. Fill out the simple on line application and find out why Perfect Cash Advance is a great fit for your short term cash needs.
Professional And Reliable Supply Chain Solutions
Intermec Inc. is one of the leading supply chain technology companies, which not only offers unique and customizable products, but also the support necessary to keep your business running. Intermec acts a consultant as well as equipment provider to your company. They have a business model that supports and understands that the needs of businesses are different and will work to cater a solution that’s appropriate. Intermec provides supply chain solutions for a variety of industries including retail, healthcare, and transportation. From barcode printers to rfid readers, Intermec has a solution for you. You can review the companies website and see complete transparency of all their services. They offer education and training on all products and work to complete a seamless implementation in to your business. You can review case studies and white papers right from the company website and be sure that if you have questions regarding a fixed printer or one of the many other services and products offered, that they will provide a timely resolution to your requests.
Intermec has a worldwide network of distributors convenient to your location that represent the company and its products. Contact Intermec today and find out how they can offer technology as well as solutions for your business.
Intermec has a worldwide network of distributors convenient to your location that represent the company and its products. Contact Intermec today and find out how they can offer technology as well as solutions for your business.
Monday, December 22, 2008
Visa Covers Lawsuit Charges
Visa Inc. just deposited $1.1 billion into its litigation account to cover legal charges. Visa recently became a publicly held company, the giant set aside $3 billion to cover lawsuits, but the company has already spent $2.1 billion in a settlement with American Express Co for anti-competence practices. In addition, the credit card network agreed in October to pay $1.89 billion to Discover Financial Services over the next year for a similar settlement, surpassing the funds initially separated to cover legal charges.
Todd
Southern Lending Solutions
Todd
Southern Lending Solutions
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