2017 bcsc elfa convention 2017 with john deane moderating

EQUIPMENT LEASING AND FINANCE ASSOCIATION
Financial Institutions
Business Council Luncheon
ELFA 56th Annual Convention
October 24, 2017
Orlando, FL
Sponsored by:

Agenda
• BCSC Mission
• 2017 Review
• Outgoing Committee Members
• Welcome 2018 Committee Members
• Session: Best Practices of Bank-Owned Equipment
Finance Companies
• Networking

Mission
• Analyze and represent the needs of ELFA members who
are leasing and finance subsidiaries of a national or
regional bank; and those who provide financing to large,
capital-intensive users of equipment
• Provide insight and guidance to the ELFA and its
membership on matters impacting this market segment
• Recommend and initiate program priorities to the ELFA
staff and leadership that are responsive to the needs of
members in this market segment

Accomplishments
• Membership: Met and exceeded goal of recruiting 13 new
members. Recruited 14 new members.
• LeasePAC: 13 out of 14 committee members contributed to
ELFA LeasePAC (goal was 100%)
• Grassroots Program: 64% participated in Capitol Connections
• Congressional Visits: Completed 4 total in 2017
• Beige Book Participation: Contributed regularly to the ELFA
Beige Book (87% participation for 2Q17)

Accomplishments
• Education: Delivered Bank Best Practices Roundtable in
April 2017. Attended by 34 senior bank leasing executives
• Annual Convention: Helped identify content for the
convention breakout sessions. Served on proposal review
committee
• Foundation Participation: 42% of all Foundation
contributions are from financial institutions
• Guest Lecture Program: Twelve Guest Lecture Program
presentations will be delivered by year-end 2017

ELFA Membership
2017 Membership Status (as of Oct. 3)
• Revenue
– $4.6MM goal
– $4.78MM achieved
• Retention
– 562 billed
– 503 renewed or 90%
• Recruitment
– 56 new members including 8 community banks
– 601 total members

LeasePAC
• The ONLY political action committee for the
leasing and finance industry
• Takes voluntary personal contributions from
employees at member companies to support
candidates running for federal office bipartisanly

Group Leader Receipts
Goal
Current
Receipts
Participation
Goal
Current
Participation
Participation
Rate
BCSC
Board Gary LoMonaco $ 28,000 $ 27,500 24 23 96%
Prior
Board
Lori Frasier /
James Cress
$ 15,000 $ 17,850 25 14 56%
CVF Dan Waller $ 6,500 $ 3,715 44 27 61% 5 of 14
FI Kirk Phillips $ 25,000 $ 26,306 100 85 85% 13 of 14
IMM Brian
Eschmann
$ 16,000 $ 8,170 75 29 39% 9 of 10
Service
Providers
Joe Collins $ 10,000 $ 9,465 60 41 68% 7 of 14
Small
Ticket
John Beard $ 9,000 $ 11,123 55 25 46% 5 of 10
ELFA
Staff
Richard $ 5,500 $ 7,471 17 17 100%
Total $ 115,000 $111,400 400 261 65% 39 of 62
as of 10/1/17

• Equipment Leasing & Finance Industry Snapshot
• Q4 Update to 2017 Equipment Leasing & Finance U.S. Economic Outlook
• The State of Credit Quality
• New Technologies Video
• State of the Equipment Finance Industry Report
• Fall Journal of Equipment Lease Financing
• Headwinds and Undercurrents: Discerning the Future of Fintech
RESEARCH
Recently Published Products and Projects in Progress

Guest Lecture Program
Designed to increase awareness of
equipment leasing and finance and
attract new talent to the industry.
Share your personal experience and
pay it forward!
Internship Center
A one-stop shop for managing your intern
search in the equipment leasing and
finance industry. Provides a platform for
students and organizations to find each
other and make connections.
ACADEMIC OUTREACH
Learn more at www.leasefoundation.org

Outgoing Committee Members
• Jeff Elliott, The Huntington National Bank
• John J. Evans, Bank of the West (2017 Board Liaison)
• David Farrell, Banc of America Leasing
• Nathan Gibbons, First American Equipment Finance (2016-2017
ETAC Liaison)
• David Miele, Citizens Asset Finance
• Steve White, Stonebriar Commercial Finance
Thank You for Your Service

2017 Financial Institutions
Business Council Steering Committee
• Richard Barry, Merchants Bank Equipment Finance (NEW)
• Chris Bucher, Whitney Equipment Finance (NEW)
• Peter Bullen, Key Equipment Finance (returning)
• David Coons, Mitsubishi UFJ Lease and Finance (USA) (NEW)
• Jennifer Coyle, Macquarie Corporate & Asset Finance (NEW; Board
Liaison)
• R. Timothy Evans, F.N.B. Equipment Finance (returning)
• Joe Hines, SunTrust Equipment Finance & Leasing Corp. (returning)
• Eric Miller, CIT (returning)

• William C. Perry, III, Regions Equipment Finance Corporation
(NEW)
• Kirk Phillips, Wintrust Commercial Finance (returning)
• Jason Price, GrowthFunding Equipment Finance (NEW)
• Michael Romanowski, Farm Credit Leasing Services Corporation
(returning; 2018 Committee Chair)
• Charles Stackhouse, Wafra Capital Partners (NEW)
• Ken Sullivan, TD Equipment Finance, Inc. (returning)
• Donald A. Synborski, Citizens Asset Finance (NEW)
• Ernie Tsorvas, Fifth Third Equipment Finance (NEW)

• David Verkinderen, U.S. Bank Equipment Finance (returning)
• Mike Wiedemer, First American Equipment Finance (returning)
• Bonnie Wright, Wells Fargo Equipment Finance (returning)

Share Your Thoughts and Ideas
• How can this Business Council better serve YOU?
• Contact your Business Council representatives to share
ideas on how the committee can better serve you:
– Mike Romanowski (2018 Committee Chair)
– Jennifer Coyle (2018 Board Liaison)
– Julie Benson (ELFA Staff Liaison)

Save The Date!
Bank Best Practices Roundtable
April 10, 2018
Swissôtel Chicago
Chicago, IL

“Are We Finally Moving Away
From a Primary Focus on
Regulation to More of a Focus on
Volume and Income Growth?”
John C. Deane
The Alta Group
Moderator

18
© 2017 The Alta Group, LLC
18
18
18
18
Key Data Sources
SOURCE: Equipment Leasing & Finance Foundation 2017 State of the Equipment Finance Industry Report, Keybridge LLC)
$1 Trillion Sector Well-Positioned for the Future
Many Signs Point to Strong Business Confidence and
Increased Investment as Key Sectors Rebound

19
19
19
19
19
Equipment Leasing Market
– Forward Projections
SOURCES: Equipment Leasing & Finance Foundation: 2016-2017 U.S. Equipment Finance Market Sizing Study (IHS Markit)
Term Equipment Leasing & Finance based on Competitive Industry Analysis of The Alta Group
Now 7 years into the current economic recovery,
growth is forecasted to plateau at 2.1% over the next 3 years
$180 $197 $240 $270 $277 $269 $270 $272 $275 $281
$467 $396
$449
$533
$599
$677
$776 $777 $776 $792
$436 $578
$602
$601
$566
$579
$538 $578 $621 $633
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016F 2017F 2018E
Tot. Non-Financed Investment Equip. & Software (09A-15E 6.5% AACGR)
Non Leased Vol. Financed (09A-15E 8.3% AACGR)
Term Equip. Leasing & Fin. Vol. (09A-15E 7.6% AACGR)
$1,705
$1,083
$1,584

20
20
20
20
20
Momentum Monitor – Sector Matrix
SOURCES: Equipment Leasing & Finance Foundation: Foundation-Keybridge Equipment & Software Investment Momentum Monitor-October 2017
Indicator Recent Activity
Consumption
Consumer spending expanded 3.3% (annualized)
in Q2 2017.
Equipment &
Software Investment
Equipment & software investment expanded by a
solid 8.3% (annualized) in Q2, its strongest
quarter in almost three years.
Residential
Investment
Residential investment fell 7.3% (annualized) in
Q2 after experiencing double-digit growth in Q1
Government
Expenditures
Government expenditures fell 0.2% (annualized),
as a drop in state and local spending (-1.5%)
outweighed an increase in federal (+1.9%).
Net Exports
Net exports improved, as exports rose 3.5%
(annualized) in Q2, while imports increased 1.5%
(annualized).

21
21
21
21
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Monitor 100 Total ($ Billion)
$157
$612
$514
$569
$478
$211
$228
$150
$231
$182
$0
$100
$200
$300
$400
$500
$600
$700
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Tot. NEA (@ each FYE)
Ann. New Bus.Vol.(for ea.FY)
 NBV generally flat since dip from 2007
 Notable lessors still active missing from Monitor participation since …
 FY’14: Daimler (2013 Volume ~$3 Billion) & Siemens (2013 Volume ~$1 Billion)
 FY’16: GE Capital: Continuing as captive thru GE Healthcare; GE Industrial & GECAS (2015 Volume ~$ 7 Billion)
 GE previously sold Transportation platform to BMO Harris and Vendor/Direct to Wells -
 FY’16 Element (active as fleet lessor through combined PHH Arval and GE Fleet) (2015 Volume ~$15 Billion).
 ~ $26 Billion New Business Volume ‘MIA’ from above alone - presuming flat volume YOY
Source: Monitor-100™ 1992-2017. © 2017 Xander Media Group, Inc. Monitor is an Xander Media Group (XMG) publication
$Billion

22
22
22
22
22
Volume by Business Origination Model ($ Billions)
SOURCES: ELFA Survey of Industry Activity (2007) ELFA Survey of Equipment Finance Activity (2008-2017)
NOTE: There is modest variance in ELFA SEFA survey participant composition year-to-year
Dramatic 2009 dip in Direct Origination Volume due to liquidity issues arising from great recession
Vendor Volume did not fall as Captives stepped in to more aggressively support their parent sales efforts
0
1
2
3
4
5
6
7
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Indirect / Third Party Volume
0
10
20
30
40
50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Direct Origination Volume
0
5
10
15
20
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Vendor Volume (w/o Captive)
0
10
20
30
40
50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mixed/Multiple Model Volume

How to Use Live Polling:
1. Open the ELFA Mobile Events App
2. Find and Click on this session
• Date: Tuesday, October 24th
• Title: Financial Institutions Business Council: Best
Practices of Bank-Owned Equipment Finance Companies
• Time: 12:45 pm – 2:30 pm
3. Scroll to the end of the session description and
find the polling questions (Q-1 – Q-14)
4. Click to open the appropriate Polling Question
and submit your answer.

Volume Survey Question
• Q-1: We expect our volume to reflect the
following growth % in 2017
a. Growth of 10%+
b. Growth of 5-10+
c. Growth of 0-5%
d. Flat
e. Contraction 1% - 5%
f. Contraction over 5%
RESULTS

•Q-2: We expect the majority of our
volume growth to come from the
following EQUIPMENT TYPES
a. IT
b. Office
c. Manufacturing & Construction
d. Transportation
e. Other
RESULTS

Q-3: We expect the majority of our
volume growth to come from the following
INDUSTRIES
a. Aircraft
b. Construction
c. General Small/Medium Business
d. IT
e. Other
RESULTS

•Q-4: We expect the majority of our
volume growth to be focused on the
following ORIGINATION CHANNEL
a. Direct
b. Vendor
c. Indirect / Third Party
RESULTS

•Q-5 We expect the majority of our
volume growth to come from the
following PRODUCT TYPE:
a. FMV True Lease
b. Finance Lease
c. Term Loan
d. Other: ____________
RESULTS

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29
29
29
29
Equipment Finance – Portfolio Quality
 Non accruals rose from 1.0%
(2006) to 1.9% (2009) –
receding to 0.3% (2014-15)
edging up to 0.6% in 2016
 After several years of
deteriorating trends (2007-
2009), percentage 30+ days
Past Due has hovered at
much lower levels since
though has trended up since
2013
 After trending up for the 4
years 2006-2009, net charge
offs have continued to
recede and level off 2010-
2016
0.6
0.8 0.8
1.6
1.1
0.4
0.3
0.2
0.1
0.2
0.3
2.3
2.1
2.7
3.2
1.8
1.4
1.5
1.2
1.6
1.8 1.8
1.0
0.9 0.9
1.9
1.2
0.9
0.5
0.4
0.3 0.3
0.6
0
0.5
1
1.5
2
2.5
3
3.5
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
NCO's
Delinq 30+
Non Accr.
Overall Equipment Finance Industry
SOURCES: ELA Survey of Industry Activity (2001-2006); ELFA Survey of Industry Activity (2007) ; ELFA Survey of Equipment Finance Activity (2008-2017)
0.6
0.8
1.6
0.4 0.1
0.2
0.3
2.3
2.1
3.2
1.8
1.2
1.6
1.8 1.8
1.0 0.9
1.9
0.3 0.3
0.6
0
0.5
1
1.5
2
2.5
3
3.5
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
NCO's
Delinq 30+
Non Accr.

30
30
30
30
30
Portfolio Quality Trends – by Origination Model
SOURCES: ELA Survey of Industry Activity (2001 to 2006) , ELFA Survey of Industry Activity (2007), ELFA Survey of Equipment Finance Activity (2008 to 2017)
81.4%
70.9%
66.6%
60.7% 56.2%
30%
50%
70%
90%
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Direct Vendor/Captive Indirect/3rd Party
0.4%
3.1%2.1%
16.4%
1.9%
0.0%
4.0%
8.0%
12.0%
16.0%
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
1.7%
0.4%
1.0% 1.0%0.9%
1.8%
0.0%
1.0%
2.0%
3.0%
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
0.40%
0.06%
1.50%
0.50%
1.80% 1.69%
0.0%
1.0%
2.0%
3.0%
4.0%
'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Direct Vendor/Captive Indirect.3rd Party
% $ Volume Approved of $ Volume Submitted % Full Year Charge Offs (Average)*
% 30+ Days Past Due (Average) % Non Accrual Assets

31
31
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31
31
Delinquencies and Charge offs: Mid-Ticket
2.2% 2.2%
2.1%
2.7%
1.1%
1.3%
0.8%
0.9%
0.6%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Non Accrual Assets * Total Over 30 days PD Total Over 60 days PD Total Over 90 days PD
Mid-Ticket FY Charge Offs 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Average (dollar weighted) 0.6% 0.6% 0.2% 0.5% 0.5% 1.3% 0.8% 0.3% 0.2% 0.1% 0.05% 0.08% 0.26%
25%ile 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.1% 0.0% -0.02% -0.01% -0.02% 0.00% 0.00%
Median 0.3% 0.2% 0.2% 0.2% 0.3% 0.7% 0.3% 0.1% 0.3% 0.1% 0.03% 0.04% 0.06%
75%ile 0.8% 0.8% 0.4% 0.5% 0.8% 1.8% 0.9% 0.3% 1.0% 0.2% 0.09% 0.22% 0.20%
Number of Respondents 48 44 43 39 42 36 29 37 37 34 25 29 32
 Mid-Ticket Market Segment - majority of transactions funded are $250,000 to $5,000,000
 Full year loss (charge-off) as a percentage of full year average net lease receivables balance
SOURCES: ELA Survey of Industry Activity (2005-2006), ELFA Survey of Industry Activity (2007), ELFA Survey of Equipment Finance Activity (2008-2017)

Delinquency Survey Question
•Q-6: Our delinquencies in 2017 v. 2016
are …
a. Going up
b. Staying the same
c. Going down
RESULTS

•Q-7: Our non-accruals in 2017 v. 2016 are
…
a. Going up
b. Staying the same
c. Going down
RESULTS

•Q-8: Our net charge-offs in 2017 v. 2016
are …
a. Going up
b. Staying the same
c. Going down
RESULTS

35
35
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35
Yield / Cost of Funds / Spread
Industry
Ban k Lessors
10.30%
8.31%
4.17%
6.40% 5.23%
1.61%
3.90%
3.08% 2.56%
0%
2%
4%
6%
8%
10%
12%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Pre-Tax Yield Cost of Funds Pre-Tax Spread
Sources: ELA Survey of Industry Activity (2001 to 2006) , ELFA Survey of Industry Activity (2007) ,
ELFA Survey of Equipment Finance Activity (2008 to 2017) NOTE: There is modest variance in ELFA SEFA survey participant composition year-to-year
10.20%
7.64%
3.92%
6.30% 5.18%
1.46%
3.90% 2.46%
2.46%
0%
5%
10%
15%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Pre-Tax Yield Cost of Funds Pre-Tax Spread
 Banks have consistently enjoyed a nominal cost of funds advantage
 But with the burden of regulation, originate higher quality transactions enjoying a lower return

36
36
36
36
36
P.T. Yield | Cost-of-Funds | Spread:
by Company Type
SOURCES: ELA Survey of Industry Activity (2001-2006); ELFA Survey of Industry Activity (2007) ;ELFA Survey of Equipment Finance Activity (2008-2017)
8.10%
4.16%
3.90%
1.62%
4.20%
2.54%
0.0%
2.5%
5.0%
7.5%
10.0%
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
All Company Types
Pre-Tax Yield
Cost of Funds
Pre-Tax Spread
7.30%
3.92%
3.60%
1.46%
3.70%
2.46%
0.0%
2.5%
5.0%
7.5%
10.0%
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Banks
Pre-Tax Yield
Cost of Funds
Pre-Tax Spread
8.50%
3.83%4.30%
1.80%
4.20%
2.03%
0.0%
2.5%
5.0%
7.5%
10.0%
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Captives
Pre-Tax Yield
Cost of Funds
Pre-Tax Spread
8.80%
7.97%
4.00% 2.86%
4.80%
5.10%
0.0%
2.5%
5.0%
7.5%
10.0%
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Independents
Pre-Tax Yield
Cost of Funds
 Banks enjoy a cost of funds advantage; but a lower return due to requirement for higher quality deals
 Independents, despite higher funds cost earn higher spreads given apparent nimble market focus

37
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37
37
Industry Performance: Inflection Points
SOURCES: Median ROE: ELA Survey of Industry Activity (2001-2006) | ELFA Survey of Industry Activity (2007) | ELFA Survey of Equipment Finance Activity (2008 to 2017)
Industry Financing Volume: Alta Interpolation NOTE: There is modest variance in composition of ELFA SEFA survey participants year to year
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0
50
100
150
200
250
300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Financing Volume Median ROE
Industry Median ROE drop attributable to spread compression from abundant capital but limited deals
There is some market variance noted with respect to YOY volume trends among data sources

Can We Finally Expect to See Better Spreads?
Survey Question
• Q-9: Here is what we are seeing in terms of
transaction pricing
a. Spreads the same: Transaction Yields & Our COF
unchanged
b. Spreads the same: Transaction Yields & Our COF
going up.
c. Spreads widening: Transaction Yields going up more
than Our COF
d. Spreads narrowing: Our COF going up more than
Transaction Yields
RESULTS

Can We Finally Expect to See Better Spreads?
Survey Question
• Q-10: Here is our primary focus to improve
transaction economics
a. Change product mix to FMV to enable
b. Retool comp program to provide sales incentives
more driven by deal profitability v. volume
c. Transaction Sundry fees (doc fees, late charges,
etc.)
d. Syndication/securitization to generate fee income
e. Work with treasury to get COF relief
RESULTS

If Regulation Impact is Actually Receding, What
About the Leasing Exemption For Beneficial
Ownership Issue?
• The CDD Rule requires covered financial institutions to establish and
maintain written procedures that are reasonably designed to identify
and verify the beneficial owners of legal entity customers. These
procedures must enable the institution to identify the beneficial owners
of each customer at the time a new account is opened, unless the
customer is otherwise excluded or the account is exempted. Also, the
procedures must establish risk-based practices for verifying the identity
of each beneficial owner identified to the covered financial institution,
to the extent reasonable and practicable. The procedures must contain
the elements required for verifying the identity of customers that are
individuals under applicable customer identification program (“CIP”)
requirements.
• Subject to certain limitations, covered financial institutions are also not
required to identify and verify the identity of the beneficial owner(s) of
a legal entity customer when the customer opens any of the following
four categories of accounts
o Accounts established to finance the purchase or lease of equipment and for
which payments are remitted directly by the financial institution to the vendor
or lessor of this equipment.

Equipment Leasing Market – Forward
If Regulation Impact is Actually Receding, What About
the Leasing Exemption For Beneficial Ownership
Issues?
Survey Question
• Q-11: We have a good understanding of this issue
a. Yes
b. No
RESULTS

Issues?
Survey Question
• Q-12: We are concerned about the regulatory impact
of this issue
a. Yes
b. No
RESULTS

Issues?
Survey Question
• Q-13: We have taken the necessary steps to address
this issue
a. Yes
b. No
RESULTS

Q-14: What are the biggest concerns
facing your organization in the next three
years?
a. Weak growth
b. Political uncertainty
c. Systems enhancements and integration
d. Weakening economy
e. Other
RESULTS

Questions?

We Want to Hear From You
Don't forget to take the session
survey within the ELFA mobile app.
Surveys can be found within each individual
session when you scroll to the bottom
of the app information.

Networking

2017 bcsc elfa convention 2017 with john deane moderating

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Editor's Notes