Bob Rodi: On Line Brokers

I hope your readers aren't tired of hearing from me but I just have to weigh in one more time on the e-commerce issue. Does anybody think that all of these "exchanges" are going to make it? I hope that all of the press releases and hype that we've been deluged with aren't discouraging people this early. All we've heard so far is what these exhanges are capable of or that they are going to profoundly change our industry. I haven't seen a press release yet on earnings. I am anxiously awaiting that one. Our industry will change, without a doubt. Automation has caused and will cause a lot of that. The day of "hands off" robotic lease transactions are years away. People in this industry should be learning as much as they can about technology and its applications to their business. Don't run scared. Learn to leverage technology to improve your service to your customers. There are tools out there that can help you level the playing field. You don't need millions in venture capital either. There are off the shelf programs and some others that can be customized. Yes, it takes a lot of effort to get up to speed but that's a proactive way to react instead of sitting back and wringing your hands. The venture capital people have to create hype and excitement. That's how they get investors to stand in line to part with their money on some of these dumb ideas. Look at the tech stocks lately. Was the growth of the last 4 years a big illusion. A lot of people made a lot of money. May more lost a lot of money. We never hear about those ones, do we? It will be the same in our industry. When one of the exchanges or auction sites breaks it really big that's all we'll hear about and then everybody who ever said that they would work will claim to have had the "vision" to see the future. We've all seen it in the last few years. The problem was that a lot of these people had more money than brains. It's easy to pick this business apart by saying its fragmented and inefficient. So was the mortgage business. So was auto leasing. A few big leasing companies have dominated auto leasing for the past 10 years. Recent statistics demonstrate that they are getting their "clocks cleaned". You won't see 55% residuals on SUVs and other vehicles in the future. They are trying to figure out how to induce people to "buy" cars again after they trained them for 10 years to lease them.

There will be a time in the future when A/I (artificial intelligence) programs may be able to replace humans. They will have the ability to anticipate and deal with the emotion of a small business person who is about to risk a lot of money. They will be able to handle sensory input, discern the level of customer anxiety, deal with last minute objections, and negotiate" solutions to those objections. As much as I love technology I hope I am actually here to see it. I'm fairly certain, however, that I will be clipping coupons at the nursing home instead of worrying about being put out of business by a computer program.

Technology is a steamroller that you're not going to stop. You can decide to ride the steam roller or you can decide to be part of the road. Personally, I don't look that good in "black top"

Bob Rodi
drlease@leasenow.com

American Capital Depreciates Investment in Capital.com $62 Million

American Capital valued its investment at September 30, 2000 in Capital.com at its original cost of $1.5 million, a depreciation of $62 million from its June 30, 2000 valuation. This depreciation is attributed to numerous factors including the unfavorable financing environment for Internet companies, substantial declines in the valuations of comparable public companies and tremendous declines in the valuations of comparable private companies. Capital.com received a $15 million venture capital investment in December 1999 for 15% ownership and warrants to acquire an additional 5% ownership. Since that investment, Capital.com made significant progress on its business plan. It developed a state-of-the-art financial portal, a network of 32 financial institutions, extensive content, CapitalTV, and an initial marketing campaign. Since the initial venture capital investment, the condition of the capital markets for Internet business models has changed dramatically. Capital.com has been working on raising additional funding, has modified its business plan and initiated staff reductions focused in the content and technology areas.
Capital.com is a business finance portal where premier financing sources compete to provide receivable and inventory financing, machinery and equipment loans and leasing, real estate and construction financing, subordinated debt and equity financing for growth, acquisitions, management buyouts, liquidity, recapitalizations, ESOP transactions and SBA loans

Comerica to Buy Imperial Bancorp
Banking: Southern California institution agrees to be acquired by Detroit company in a stock swap valued at $1.25 billion.
By EDMUND SANDERS, JAMES FLANIGAN, Times Staff Writers
Imperial Bancorp--one of the largest banks based in Southern California--will announce today that it has agreed to be acquired by Detroit banking company Comerica Inc. in a stock swap valued at $1.25 billion.

George L. Graziadio, chairman and chief executive of Inglewood-based Imperial, said Tuesday night that a merger agreement had been reached with Comerica at a price of $27.74 per Imperial share based on Tuesday's closing prices for both companies.

"Comerica will give us the size to be able to better serve our customers," Graziadio said. Imperial has $7.4 billion in assets and 15 branches in the West, including 12 in fast-growing California. Comerica is the nation's 24th-largest bank, with $41 billion in assets nationwide and a strong focus on commercial lending.

In California, Comerica has 31 branches and $5.3 billion in assets. The combined company would be the fourth-largest bank in the state.

"With this we think we're going to be someone to be reckoned with in California," said Comerica Chairman Gene Miller. He noted that both banks emphasize lending to the high-tech and entertainment industries, as well as to small businesses.

Comerica entered the California market in 1991 with a series of acquisitions and has built a substantial business in the state through its San Jose-based Comerica Bank-California.
Comerica has been eyeing California over the last year, announcing plans to open new offices and boost staff.
"Like us, Comerica specializes in middle-market lending," Graziadio said. Graziadio would become chairman of the combined California operations, which would operate under the Comerica name after the merger is completed. J. Michael Fulton, head of Comerica's California operations, would serve as president of the combined Comerica-Imperial operations in the state. Miller said it was too soon to say whether the merger would result in any layoffs, but Comerica expects it would slash Imperial's expenses by about 20% over the next two years by eliminating duplicative and other administrative costs.
The $27.74 price tag represents a 14% premium over Imperial's Tuesday closing price of $24.31, up $2.81 a share. Imperial's stock has risen 56% since Oct. 17. Comerica's stock closed at $60.31 a share Tuesday, unchanged. Under terms of the proposed deal, Imperial shareholders will receive 0.46 share of Comerica stock for each share of Imperial, Graziadio said.
The deal, expected to close in the first quarter of 2001, is subject to regulatory and shareholder approval.
Speculation about a possible sale of Imperial--a fixture on the Southern California financial scene for decades--has swirled around the bank for years, particularly as founder Graziadio, 81, passed the age at which most executives retire.
Imperial's position as a lender to entrepreneurial companies in the vibrant Southern California market and elsewhere made the bank an attractive takeover candidate for large out-of-state players interested in breaking into California.
But Graziadio, whose family controls more than 20% of Imperial Bancorp, had resisted a sale until now. But, Graziadio said Tuesday, "I always said if an offer was in the interest of shareholders and the stability of our business, I'd welcome it."
Analysts said Imperial's recent credit problems may have played a role in the bank's decision to find a buyer.

The bank's stock was hammered this spring by concerns about rising loan problems. In May, Imperial shares sank after the bank warned that loan charge-offs would rise significantly in the second quarter, largely due to the failure of a large worker's compensation insurer.
But last week, Imperial officials said that the bank's credit quality is improving, though bad loans rose slightly to $59.9 million as of Sept. 30, compared with $56.1 million as of June 30.
Graziadio and Imperial Vice Chairman Norman Creighton emphasized Tuesday that Imperial has made adequate provisions for its loan problems.
Miller said Comerica examined 80% of Imperial's loan portfolio and "we feel comfortable with what we've been able to see."
Graziadio, a former shopping mall developer, launched Imperial Bank with his real estate partner George M. Eltinge in 1963, funding the new institution with a $1.25-million investment. Eltinge died in 1994 at age 76.
Graziadio said he opted to start his own bank out of frustration with the poor service that large banks were offering small businesses and entrepreneurs such as himself.
Imperial specializes in making loans to specific niches of major industries, including film production.
In addition, Imperial also has bet heavily on the technology sector, providing financing to risky tech start-ups in exchange for lucrative stock warrants in the firms.
Not all of Imperial's unconventional ventures have succeeded. A spinoff of Imperial Credit Industries in the mid-1980s, for example, burned many investors. Today Imperial Credit's stock has skidded to under $2 a share, below the company's book value.

More recently, the bank's 56% stake in Official Payments Corp., which contracts with the Internal Revenue Service to allow citizens to pay their taxes with credit cards, looked promising at first. But in April, the Stamford, Conn.-based firm's stock sank 70% on news that its chief financial officer had resigned and its business was slowing.

First International Bancorp Reports Third Consecutive Quarter of
Record Operating Earnings, top Ex-Im Bank Lender Ranking and
Continuing Global and E-business Expansion

HARTFORD, Conn.--Nov. 1, 2000--First International Bancorp Inc. (NASDAQ: FNCE), parent of First International Bank, today reported net income of $1.4 million ($.17 per share on a diluted basis) for the third quarter of 2000, compared with $143,000 ($.02 per share on a diluted basis) for the same period of 1999.
During the first nine months of 2000, the company earned record net after tax operating income of $5.7 million ($.68 per share on a diluted basis), representing a 119% increase over the net after tax operating income of $2.6 million ($.46 per share on a diluted basis) earned through September 30, 1999 after excluding net non-recurring income of $1.8 million ($.22 per share on a diluted basis) that resulted from branch sale proceeds less several one-time expenses. A favorable mix of loan origination product types contributed to strong third quarter 2000 performance. The percentage of total originations comprised of SBA, USDA and Ex-Im Bank guaranteed loans was 64% during the quarter, similar to the percentages in the first and second quarters of 2000, and up from 53% in the third quarter of 1999. Owing to the higher profit margins, lower credit risk and attractive repayment terms of government guaranteed loans relative to other types, management has emphasized its core guaranteed lending business throughout 2000 in all of its domestic and international markets.

"We are continuing to shift the mix of loan originations toward SBA, USDA and Ex-Im Bank lending in response to the needs of small and medium size companies in the industrial sector and in accordance with the risk environment," according to Brett N. Silvers, chairman and chief executive officer. Silvers noted that, "The success of our strategy is evidenced by our third straight quarter of record operating earnings as compared to the same quarter in the previous year. Opportunities abound for First International's 95 commercial and international lenders in the field as our target niche of small industrial companies becomes increasingly plugged into global supply chains and requires creative financing tools to be competitive." Government guaranteed loan originations in the first nine months of 2000 totaled $227.4 million, a 9% increase over the same period of 1999. Total loan originations during third quarter 2000 were $128.7 million, 30% of which supported international trade.
The company completed loan sales totaling $132.7 million during the third quarter of 2000, making a positive impact on the period's earnings. These sales consisted primarily of government guaranteed loans purchased by institutional investors, as well as non-guaranteed loans sold into the company's commercial paper conduits and other sales facilities. The company delivered loans totaling $17.0 million to fulfill a prefunding commitment of the prior quarter's $65.0 million commercial term loan securitization. Loan sales and securitizations for the first nine months of 2000 were $364.8 million, 22% above last year's figure for the same period. Commercial loans on balance sheet at September 30, 2000 totaled $143.1 million, including $39.0 million held for sale.
Total loans under management, including loans on balance sheet plus serviced for investors, increased 25% to $1.2 billion at September 30, 2000 from $962.1 million at September 30, 1999. Loans serviced for investors rose 25% from last year to $1.1 billion at September 30, 2000 from the previous year. Loan servicing income and other fees totaled $2.3 million during third quarter 2000, a 41% increase over third quarter 1999. For the first nine months of 2000, loan servicing income and other fees were $6.8 million, a 52% increase over the same period of 1999.
The company reported non-performing loans at September 30, 2000 of $4.5 million, compared with $4.1 million at June 30, 2000, $4.6 million at March 31, 2000 and $5.0 million at December 31, 1999. Net charge-offs for the nine-month period ending September 30, 2000 were $1.8 million, representing minimal change from the same period in 1999. Third quarter net charge-offs in 2000 were $510,000, compared with $412,000 the previous year. The company made a provision for loan losses of $1.2 million during third quarter 2000, bringing the allowance to $5.3 million at September 30, 2000 and raising the coverage of non-performing loans on that date to 119%, compared with 114% at June 30, 2000, 99% at March 31, 2000 and 92% at December 31, 1999.