December 22, 2000

Thomas Depping meeting with Sierra Cities Board of Directors

ePlus Gets New Line of Credit

ePlus inc., a leading provider of remotely-hosted, Web-based e-procurement, asset management, and financing solutions, announced that it established a 364 day revolving line of credit for $20 million with National City Bank on December 19, 2000.

The National City credit facility replaces the First Union credit facility which expired December 19, 2000.

Michael J. Labrum, senior vice president of National City Bank said ``We have known the principals of ePlus for several years. The company has strong management, a very strong and conservative balance sheet, and has delivered profitable financial results for ten years. We have had the chance to watch their e-commerce initiatives over the past year and are very excited about their growth potential.'' He continued ``We expect to amend this line to a three year facility and add additional banks in the first quarter of 2001.''

Phillip G. Norton, chairman, president and chief executive officer said ``National City Bank is a leading lender to our industry and we are very pleased that they have become our agent for the renewal of our line of credit facility. The facility is structured to allow other banks to easily join the line in the future, so that we can expand the line to capture opportunities as they arise.''

The Company currently has no amounts outstanding under the line of credit.

Summit National Signs Bank of New York

Summit National is pleased to announce that Summit and its Optima platform have been chosen as "Application Service Provider" to manage new equipment leasing portfolios of the Bank of New York, one of the largest bank holding groups ($80 billion) in the Atlantic region. The new portfolios will be housed on state-of the art, secure, client server networks in Summit's Chicago data center. Customer support will be provided from our facilities in both Chicago and Atlanta.

Please join us in welcoming another prestigious client to the growing Summit family.

Happy Holidays

Kenneth E. Duffy,Sr. President

kduffy@sumnat.com

Credit Scoring Reactions

Credit is Credit Fraud Perpetuated by the Funders

Creating a statistical model assumes that the variables are random and relative. Unfortunately, brokers tend to make the variables less random by "shinning the car". I believe this accounts for some of the defaults.

However, by far the biggest problems (T&W, Greentree, Copelco, Granite etc) had to do with bad credit models. These models were created by people with many, many years of experience. It is not a coincidence that these "big mucky mucks" made a lot of money from selling people on their improper statistical models. There are bad people everywhere but brokers who warrant deals have much more to lose than a multi millionaire who sells a "statistical theory". The "big mucky mucks" at the above companies made millions yet cannot be sued (save maybe T&W). Even First Sierra should have known what The Republic Group was all about but why not make millions before everyone finds out. You have probably sold deals to many of the above funders. Weren't you amazed at how deep they bought? I was even more amazed to find out how much experience the founders had. Do you see the problem?? How many of you out there with 5 years of experience know the difference between a bad deal and a good deal? We all do. Yet these 20 year veterans with millions do not?

They have frauded our industry at the expense of those who do not know better. And now it is affecting all of us. I reviewed a portfolio from T&W for purchase. I could not believe how flawed the model was. It was absolutely incredible how bad it was. A vendor could fill out a form authenticating experience. Scores were relatively unimportant. Based on the vendor and brokers written statements(un verified) the deal would be approved at relatively low rates. I saw 600 scores, with collections, two years of credit history and two years of driving experience (for someone other company and unverified) approved for a titled vehicle at 12.9%. These companies created models that stacked on funded volume and predicted income based upon a credit model. It did not work. The volume would not have happened if the model was to tight. It had to be loose if they were to grow at the promised percentages. Next to the Dot Coms, this was the largest fraud.

Statistically speaking, a credit model that accounts for all material variables should work over time. BK Scores and Empirica scores analyze a person credit worthiness over 10 years. Thus, economic factors should be somewhat irrelevant since the economy usually changes every few years. Most credit models take into account, industry and equipment. I have been told by United that Lehman did not like the way they assessed construction and valued heavy equipment (to name but a few).

Their portfolio is actually O.K. I know that ours is doing very well with them. I firmly believe that sources of equity are learning how to use this investment vehicle. However, be rest assured, the models will tighten before they loosen. Don't be tempted to structure. Integrity will get you everywhere. It always has and always will.

Concerned Leasing Agent

+ + +

Bob Rodi and Rob Yohe are both right. Credit scoring will continue to be refined to take high quality vanilla deals. This lends itself very well to technological commerce, particularly business done over the web. I see very little room for Brokers in this market as pricing will be the only significant item to differentiate oneself. That said, the gray area will become larger than ever and will include many deals that last year would have been considered good quality and especially industry and equipment niches. As the economy weakens and then works to recovery, the ability to build a relationship with our customers and to package and place deals deserving of credit, will be greatly valued. This means that skilled Brokers and Lessors who understand all the components of our business and their Lessees will be rewarded. In short, although we will have some challenges, quality sources who add value to their customers will do well. In my opinion, credit scoring is flawed in that it uses objective information to make an objective decision. In my opinion, credit is subjective not objective, an art not science, as businesses are run by people not machines. There will always be a place for a quality Broker who can build relationships and has also mastered the tools of our trade. A final thought, once we go through the downturn that has begun and the economy fully recovers, look for history to repeat itself again with lenders stretching scorecards for volume and opening the gates to anyone that can send them a deal. The scorecard lessons learned as mentioned by Bob Rodi will be forgotten until the next economic downturn.

Jeff Rudin - Quail Leasing

jrudin@quailcap.com

UAEL Membership Directory

Closing note to your "something to think about" - maybe by the 2002 conference UAEL will have merged with EAEL and we'll have a printed membership directory again - to keep on the bookshelf for quick reference, rather than wade through (how many) online pages to be able to look something up.

The UAEL "www" membership list also does not allow one to cross-reference by a person's (principal's) name, as the printed directory does.

The internet is just fine - for some things. I wonder how much UAEL "saved" by not printing a members directory. Will they reduce my dues by a like amount?

Happy Holidays - keep-up the good

Mrlease@aol.com

Charlie Meaker, CLP since 1991 - Lease Financing, Inc.
- UAEL/WAEL member since 1987

( I believe UAEL intended to publish, meaning print a directory as they do every year, and did not. In a story we wrote in reaction to Dr. Ray Williams leaving UAEL as executive director, the failure to produce a written directory was mentioned several times. It is basically a moot point as the year will be over soon, and members will be billed for their renewal. So the new membership directory will be based on members for the year 2001. editor )

( P.S. I agree 100% with your comments. I definitely prefer a written directory, too. editor ).

Retirees can rest easy with 'sleep at night' stocks

THE ASSOCIATED PRESS

DENVER -- The slumping stock market may tempt many retirees to dump their stock holdings and flee to bonds and cash.

But stocks remain important to retirees, and retirees can still find "sleep at night" stocks if they take the time to carefully review their stock portfolio, an investment expert says. Retirees, like all ages of investors, have become enamored with the hot stock market in recent years. Like many of those investors, they have felt the effect of the declining market, particularly among high-flying tech stocks. But that is no reason to abandon the stock market and move their portfolios solely into the "safety" of cash or bonds, even for retirees, says Hal Lenhart, an academic associate at the College for Financial Planning. "If you're a long term investor, which I think retirees should be, they shouldn't sell all of their stocks now."
"Obviously the prime portfolio concern for retirees is income," says Lenhart, which can come from interest payments, dividends and capital gains. With life expectancies increasing, today's retirees must rely on a mix of investments in their portfolio instead of the traditional reliance on just bonds and cash.
"Stocks do one thing that bonds and cash do not: Over the long term, they provide a better buffer against inflation because they can add at least a portion of inflationary costs into their prices," Lenhart says.
Bonds provide a stable source of income, and the principal is safe if they are government-backed bonds or high-quality corporate bonds. However, standard bonds make regular fixed coupon payments and that's it. Over time, inflation means those payments will not buy as much as they did before. Also, if interest rates rise, which is common during high-inflation periods, the price of the bond also falls, so you can lose at both ends if you don't hold on to the bond until maturity.
Inflation has stirred its dangerous head again, notes Lenhart. For example, the cost-of-living adjustment for monthly Social Security retirement payments is 3.5 percent for 2001, a full percentage point gain over the previous year.
"The business cycle is not dead," Lenhart says. "That's why investors need alternative investment classes, so they don't have to sell in the long haul."
Despite the anti-inflationary benefits of stocks, the problem for retirees is that many of them have gotten caught up in the riskier hot growth and high-tech stock frenzy just like many investors. But investors cannot expect continued 20 percent to 30 percent annual returns. "The stock market is down because corporate earnings are down, and investors are beginning to realize that the future earnings of many of these hot growth stocks can't be sustained at these levels," Lenhart says. "A good lesson for retirees is that they should not play the dot.com game. That doesn't mean, however, that you won't see a more reasonable growth come back, and therefore retirees should continue to hold stocks in their portfolios."
One style of stocks retirees might want to investigate is value stocks, which are again becoming popular. These are stocks that are selling at prices below what analysts consider their "intrinsic value," Lenhart says.
Growth stocks, on the other hand, are stocks whose prices reflect the expectation that they will return above-normal rates of return for a period of time because of investment opportunities for that company. "I think the growth stocks today aren't doing as well because there are not enough investment opportunities for the companies to justify their expected rates of return," Lenhart says. Lenhart believes that retirees can sleep better at night by sticking to good-quality stocks that they believe will survive such market upheavals as high oil prices and economic slowdowns. Besides individual stocks, he likes index mutual funds that invest in large companies. Lenhart recommends that retirees take some time to closely review their portfolio holdings. "If you have real concerns about a specific stock or a specific mutual fund, consider selling it. Look at your asset allocation. If you're 60 percent in equities and you're leery about having that much devoted to stocks, then cut back." If you sell some stocks to buy bonds, be sure they are high quality bonds. Lenhart says that quality corporate bonds have a good spread in interest rates over Treasury bonds. However, don't buy a bond if you wouldn't feel comfortable buying the company's stock, he cautions. But although you may want to make adjustments to your portfolio, don't sell all your stocks, Lenhart advises. Down markets will come back. In the meantime, you can lean more heavily on your cash and bonds to see you through until the market or specific investments rebound. Stock investments remain a need for retirees to combat inflation. "The Federal Reserve Board has not raised interest rates lately," he says, "but their bias is that the inflation threat is still there."