August 5, 2013 â€¢ An Advertising Supplement to the San Fernando

August 5, 2013 • An Advertising Supplement to the San Fernando Valley Business Journal

Banking &Finance

By TAMARA GURNEY

Very recently, in an odd twist of politicalfate, Governor Jerry Brown signed AB 93,legislation that effectively eliminates

California’s coveted Enterprise Zone Program andreplaces it with three new tax incentives designedto grow local economies and create new jobs. Oneof the three upcoming programs creates a one-yearsales tax exemption for research and developmentequipment for biotech and manufacturing compa-nies, and all manufacturing equipment. A secondbill, SB 90, extends the sales tax exemption onmanufacturing equipment to the year 2022.

The legislation seeks to stimulate manufactur-ing by granting sales and use tax exemptionsworth up to $500 million a year to companies thatbuy new equipment.

Elimination of the Enterprise Zone Programbecomes effective January 1, 2014 subject to a fewprovisions. Unused sales or use tax credits, alongwith unused hiring credits, may be carried forwardfor 10 years; the net interest deduction may beapplied to interest received before January 1, 2014.This deduction expires for taxable years beginningon or after January 1, 2014, and will be officiallywithdrawn on December 1, 2014.

The tax incentive of AB 93 applicable to equip-ment procured by businesses engaged in manufac-turing or biotechnology research and developmentwill replace the Enterprise Zone Program’s sales taxcredit. Eligible companies include manufacturersin aerospace, textiles, pharmaceuticals, printing,and food, as well as biotechnology research andexperimental development activities in agriculture,electronics, environmental biology, botany, com-puters, chemistry, food, fisheries, forestry, geology,health, mathematics, medicine, oceanography,pharmacy, physics, veterinary, and other alliedfields. At this time, extractive industries are not el-igible for the exemption.

Beginning July 1, 2014, qualifying businessescan exclude the first $200 million of eligible pur-chases per year from the state portion of the salesand use tax. Eligible purchases include machineryand equipment, including component parts;devices used or required to operate, control, regu-late, or maintain the machinery; pollution controlitems; special purpose buildings and foundationsthat are an integral part of the process or that con-stitute a research or storage facility used during theprocess, excluding warehousing.

The exemption also applies to rentals payableunder leases that are classified as “continuingsales” or “continuing purchases”.

Qualified tangible items must be used at least50 percent of the time by the purchaser in anystage of manufacturing or research and develop-ment, and have a useful life in excess of one year.An exemption certificate must be provided to theretailer at the time of purchase. This exemptionsunsets on July 1, 2022.

There are some favorable equipment financingprograms available in today’s market to help yourbusiness take advantage of the new incentives.Competitive rates, up to 100 percent financingand flexible repayment terms are just some of theloan terms being offered for equipment financing.

Be aware that time may be of the essence. Oneimportant requirement of AB 93 is the reporting ofresults. That could mean that if the new systemdoesn’t work as expected, lawmakers will be ableto swiftly eliminate it. If your business could bene-fit from the purchase of new equipment, now isthe time to speak with your CPA/Tax Adviser aswell as a qualified banker and trusted advisor.

Tamara Gurney is President & CEO of Mission ValleyBank, a locally-owned, full service community businessbank headquartered in Sun Valley with branch officesin Valencia and Santa Clarita. Gurney is also presidentof the California Independent Bankers Association andcan be reached at (818) 394-2300. For more informa-tion visit www.MissionValleyBank.com.

Equipment Purchase Tax IncentivesReplace Enterprise Zones

There are some favorable equipment financing programs available in today’smarket to help your business take advantage of the new incentives.Competitive rates, up to 100 percent financing and flexible repayment termsare just some of the loan terms being offered for equipment financing.

34 40_banking_and_finance_supplement.qxp 7/31/2013 5:46 PM Page 34

AUGUST 5, 2013 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL 35

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36 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL AUGUST 5, 2013

By CARSTEN HEERING

The Chinese government is activelypromoting the use of its currency,the renminbi (RMB), in the financ-

ing of international trade. As a result, thePeople’s Bank of China is easing its currencytrading restrictions and allowing businessesto send, receive, or hedge RMB through aHong Kong-based offshore market knownas the CNH Market. To address this need,Union Bank N.A.’s (Union Bank) foreign ex-change specialists are providing guidanceand insights, ranging from RMB hedgingcapabilities to helping companies controltheir costs, manage their risks and competemore effectively by sending and receivingRMB payments through the CNH Market.

Current payments can be made usingspot transfers, which are usually receivedoverseas within two business days. Futurepayments can be managed using one ofseveral hedging tools, the most commonof which is the forward contract, rangingfrom a minimum of three days to 365days in duration – or even longer.

Since China is the world’s second-largesteconomy behind the United States, under-standing and managing your RMB exposurecan provide your company with a potentialcompetitive advantage. However, the rulesand regulations governing RMB trading con-stantly change. Although the value of theRMB was set by a direct peg of 8.28 to theUS dollar for more than a decade up until2005; it has appreciated about 35% againstthe US dollar. Nevertheless the RMB remainslargely undervalued, according to some mar-ket participants. The RMB’s value is currently

set by the Chinese government via thePeoples Bank of China (PBOC) and allowedto fluctuate in a daily band — currently +/-1% of the daily fixing, but is expected to beas much as +/-2% of the daily fixing byyear’s end. This appreciation can increaseyour costs and lower your profit margins.

Given the likelihood of further RMB ap-preciation, companies may benefit from em-

ploying advantageous foreign currency trad-ing strategies. Based upon our knowledge ofthe Chinese foreign exchange market, UnionBank can set up an appropriate RMB strategyfor your business, utilizing a combination ofspot, forward, and option contracts in theoffshore CNH market. By working withUnion Bank, we can help you access a widearray of sophisticated banking products

through our parent, the Mitsubishi UFJFinancial Group’s branch network in China.

This and any other information orcommunication provided by Union Bank,N.A. relating to foreign currency, foreignexchange and related products and servic-es, whether written or oral, is not intend-

Reducing Costs, Risks in Your Chinese Supply Chain

BANKING & FINANCE

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Continued on page 38

The above graphic shows the useful-

ness of a typical forward contract hedge:

Challenge

A U.S. company needs to pay its

Chinese supplier and will transfer the funds

in one month. The company is concerned

about potential appreciation of the renmin-

bi (RMB) over that time and wants to lock

in its cost now.

Solution

The company enters into a one-month

forward contract on the CNH market with

its bank and agrees to set a rate at which it

will buy a predetermined amount of CNH

for delivery in one month’s time. Upon set-

tlement, the forward contract matures, and

the company’s supplier in mainland China

is paid in the local currency, called CNY

(CNH converts to CNY on a 1-for-1 basis

when transferred from Hong Kong or other

overseas trading hubs to mainland China).

Buying RMB today for future delivery

typically results in a more advantageous

exchange rate than the current spot rate,

enabling companies to lock in a meaningful

cost reduction by hedging their future pay-

ments, while gaining other benefits:

• Lower Costs — Paying suppliers in local

currency can potentially reduce the margins

typically built-in by Chinese businesses to pro-

tect themselves against adverse exchange

rate movements.

• Help Improve Certainty and Reduce

Risk — Lock in a future exchange rate for

the amount of China-based payables and

receivables, reducing the impact of curren-

cy swings and determining costs in

advance.

• Gain Competitive Advantage — Paying in

CNH enables preferential pricing from suppliers

because they do not have to worry about cur-

rency movements affecting the value of their

receivable.

USD CNH CNY1

4

2 3

U.S. CompanyUnion BankRMB Account inHong Kong

Sends trade goods to US Company/US Company sends trade goods

China Company(MDE) MainlandCNY Account



1 U.S. Small Business Administration, for federal fiscal year 2012.2 Wells Fargo is the #1 SBA 7(a) lender by dollars according to the U.S. Small Business Administrationas of September 30, 2012.

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Five Questions YourCPA Should be Asking You

BANKING & FINANCE

ed as (and shall not be deemed) invest-ment advice or a recommendation to buyor sell any currency or other investmentor instrument, nor shall it be deemed anassurance or guarantee as to the results orexpected results of any transaction. Thesematerials are for discussion purposes only.

Market information is provided fromsources deemed reliable, but no represen-tation or warranty, express or implied, ismade as to the accuracy or completenessof such information and nothing con-tained herein is, or shall be relied uponas, a representation, whether as to thepast, the present or the future.

Foreign currency and foreign exchangeproducts and arrangements, such as for-wards, options, and swaps, are not FDICinsured, and the risks of such products and

arrangements should be understood priorto entering into any such transaction.

Transacting in foreign currency such asoffshore Chinese Renminbi is subject to cer-tain restrictions set by the foreign jurisdic-tion of the foreign currency. Please be sure tounderstand those restrictions prior to enter-ing into any foreign currency transaction.

Carsten Heering is a Regional FX Director inGlobal Markets Foreign Exchange withUnion Bank. He can be reached atcarsten. [email protected] or(800) 325-9422.

Union Bank is a proud member of the MitsubishiUFJ Financial Group (MUFG, NYSE:MTU), oneof the world’s largest financial organizations. Visitwww.unionbank. com for more information.

Continued from page 36

G iven the current state of theeconomy, professionals can nolonger rely on job proficiency,

but instead must quickly adapt tochange. The accounting profession isno exception. An excellent CPA musttranscend traditional logical thinking,and challenge the status quo by inject-ing creative thinking into the conversa-tion with their clients. By employingcreativity in tandem with logic, anaccountant can provide real-time andmeaningful guidance. An exceptionalCPA aims to do more than manageyour finances — he or she means toimprove your quality of life. Here’s alist of questions your CPA should beasking you . . . not just at tax time, buta few times a year!

What are the greatest challenges you’re fac-

ing at the moment?

Your advisor should be someone whocan help you with all of your woes, bothpersonal and professional. If your advisorasks you about all the challenges youface, it’s a sign that they’re looking at thebigger picture.

What kind of growth do you hope to achieve

in a year? Are you happy with it?

While the primary goal of any busi-ness is to grow, a good advisor is some-one who digs deeper. Your CPA shouldaim to anticipate potential needs, possi-ble changes in policies and procedures,and fluctuations in cash flow.What is your business’s greatest weakness?

CPAs are constantly trying to stay up todate with the issues faced by businessestoday, but every business is unique. Makesure you and your CPA are addressingyour unique issues along with advice forovercoming your needs in response tochanges to tax laws, health care reform,and current lending policies.

Are you happy with your personal income?

Do you carry sufficient life and disability

insurance? Do you know how your retirement

plan is doing?

Your CPA should take an active role inunderstanding your overall financial pic-ture by integrating your tax and account-ing services with wealth management

services. Many accounting firms have part-nered with respected financial advisors,but if yours hasn’t, they should be willingto talk with your financial advisor to makesure you’re getting the best combinedadvice possible.

What is impossible to do right now? If you

could do it, would it change your business for

the better?

It helps to aim high, and set a goalwith a plan of action. KnowledgeableCPAs are great at helping you locate areasof waste, assessing risks and recommend-ing improvements to internal controls.Plus, they’ll be able to help you measureyour progress.

Excellent client service begins withcommunication. Top CPAs are looking fornew and innovative ways to interact withtheir clients. They want to deliver valuebeyond the traditional tax and accountingservices. If you are looking to establish along-term relationship with someone whowill learn your business and individualneeds inside and out, look not only fortechnical competence but also for a CPAwho can strategize on major decisions tohelp chart the path to success.

Kristine Vail, having worked as a CPA for 17years, now shares her expertise with clientsat Roschke & Wall, Business Advisors andCPAs, Inc. Kristine can be reached at (818)991-1099 or by email [email protected].

By employing creativity in

tandem with logic, an

accountant can provide

real-time and meaningful

guidance. An exceptional

CPA aims to do more

than manage your

finances — he or she

means to improve your

quality of life.

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A lthough economic growth hasbeen constrained in recent quar-ters, it will accelerate later this

year and into 2014 as external pressuresand fiscal drag ease, according to theEconomic Advisory Committee of theAmerican Bankers Association.

According to the committee, whichincludes 13 chief economists fromamong the largest banks in North Ameri-ca, inflation-adjusted GDP growth for2013 will be 2.1 percent over the courseof the year, and is expected to increase to2.8 percent in the first half of 2014.

The bank economists believe the hous-ing market has finally entered a sustainablerecovery. The group sees the housing re-covery gaining significant strength thisyear, with improving construction levelsand rising home sales and prices. The com-mittee forecast is that home prices nation-wide will rise solidly and residential in-vestment will increase 15 percent in 2013.

“This strong growth demonstrates thathousing has finally caught up with thebroader economic recovery,” Anderson said.

Consumers are on a stronger financialfooting and have regained confidence.The group believes consumer spendingwill support economic growth over thenext two years.

“Higher equity prices and rising homevalues, along with declining gas andenergy prices, have helped consumerscope with rising taxes and reduced feder-al spending,” Scott Anderson, committeechairman and Bank of the West chiefeconomist, said. “The wealth effect creat-ed by rising home values will boost con-sumer sentiment and spur increasedspending.”

The committee believes federal taxand spending policy will exert a smallerdrag on growth over the course of nextyear. The committee’s forecast is for thefederal deficit to fall to $650 billion in fis-cal year 2013 (down from $1.1 trillion infiscal year 2012) and below $600 billionin fiscal year 2014.

After slowing in recent months, thegroup sees job growth accelerating to

200,000 per month next year.“The 175,000 jobs number for May is

an encouraging sign of steady progress inthe labor market,” Anderson said. “Thestrengthening growth in jobs will bringthe unemployment rate down to 7.2 per-cent by year-end. The committeebelieves the unemployment rate will fallto the Fed’s threshold of 6.5 percent inthe first quarter of 2015.”

The committee believes the FederalReserve will dial down asset purchasesbefore the end of the year.

“The stronger economy and job creationlater this year will allow the Fed to reduce its

pace of asset purchases,” Anderson said.While the committee forecasts a slight

rise in long-term interest rates, short-termrates will remain exceptionally low as wemove into 2014.

“Inflation concerns will remain on theback burner, which will constrain increasesin long-term rates,” Anderson said.

The bank economists forecast thatconsumer credit growth will pick up thisyear, and that delinquencies will contin-ue to show broad-based improvementboth this year and next. In both 2013and 2014, loans to individuals are expect-ed to grow more than 6 percent and

loans to businesses will grow by morethan 7 percent.

Although the general outlook is posi-tive, the group believes risks remain.

“While the most serious threats haveabated, greater-than-expected fiscal dragand weak global economic and financialconditions could still pose downside risks,”Anderson said. “In addition, a prematureexit from accommodative policy by theFederal Reserve could hurt the housingrecovery and the broader economy.”

Information for this article was provided bythe ABA.


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BANKING & FINANCE

Bank Economists See Stronger Economic Growth Ahead

‘Higher equity prices

and rising home values,

along with declining

gas and energy

prices, have helped

consumers cope with

rising taxes and

reduced federal

spending. The wealth

effect created by

rising home values

will boost consumer

sentiment and spur

increased spending.’

SCOTT ANDERSON,

Bank of the West



BANKING & FINANCE

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SMALL

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BIG

Consumer delinquencies declinedsignificantly in this year’s first quar-ter, falling in 11 out of 13 loan cat-

egories as consumers more carefully man-age their finances, according to resultsfrom the American Bankers Association’sConsumer Credit Delinquency Bulletin.

The composite ratio, which tracksdelinquencies in eight closed-end install-ment loan categories, fell 29 basis pointsto 1.70 percent of all accounts in the firstquarter, the lowest level since December2004 and well below the 15-year averageof 2.37 percent. The ABA report defines adelinquency as a late payment that is 30days or more overdue.

Bank card delinquencies fell 6 basispoints to 2.41 percent of all accounts inthe first quarter – the lowest level sinceJune 1990 and well below the 15-yearaverage of 3.87 percent.

James Chessen, ABA’s chief economist,attributed the falling delinquencies to asteady improvement in the economy andimproving financial health for consumers.

“Sharply lower delinquency levelsreflect improving consumer balancesheets, steady job creation and a continu-ing increase in household wealth,”Chessen said. “Many consumers havelearned the hard lessons of recession, andhave redoubled their efforts to keep debtat manageable levels.”

Chessen believes that rising wealthand improving consumer confidencehave played an important role in lowerdelinquency rates.

“Household net worth rebounded inthe first quarter, rising above its pre-reces-

sion peak for the first time in over fiveyears,” Chessen said. “Rising home andstock prices create a wealth effect thatboosts consumer confidence, which con-tributes to healthier finances and agreater ability to pay down debt.”

Chessen noted that delinquencies intwo home-related loan categories – prop-erty improvement loans and home equityloans – fell in the first quarter, a positivesign as the housing market continues itsgradual recovery.

“Positive trends in home-related delin-quencies reflect a stronger economy andrebounding home prices,” Chessen said.“While this improvement is encouraging,it will take a long time for delinquenciesto work their way through the systemand return to more normal levels.”

While delinquencies for home equityloans, which are closed-end loans with fixedterms and repayment schedules, fell sharply,delinquencies for home equity lines of cred-

it moved slightly higher in the first quarter.“An increasing number of home equity

lines of credit have gone from interest onlyto fully amortizing,” Chessen said. “Thisresults in a payment shock for some bor-rowers who must adjust to paying downthe principal, along with the interest.”

While Chessen found the broad-baseddecline in delinquencies encouraging, heemphasized that sustained job growthand strong consumer balance sheets arenecessary for current trends to continue.

“The future pace of delinquencies de-pends on a steadily improving labor marketand strong financial health for consumers,”Chessen said. “This will allow consumers tomore easily meet their debt obligations.”

The first quarter 2013 composite ratiois made up of the following eight closed-end loans. All figures are seasonally adjust-ed based upon the number of accounts.

CLOSED-END LOANS

• Personal loan delinquencies fell from2.08 percent to 1.82 percent.

• Direct auto loan delinquencies fellfrom 0.96 percent to 0.91 percent.

• Indirect auto loan delinquencies fellfrom 1.85 percent to 1.66 percent.

• Mobile home delinquencies rosefrom 3.53 percent to 3.92 percent.

• RV loan delinquencies fell from 1.27percent to 1.20 percent.

• Marine loan delinquencies fell from1.57 percent to 1.50 percent.

• Property improvement loan delinquen-cies fell from 0.83 percent to 0.74 percent.

• Home equity loan delinquencies fellfrom 4.03 percent to 3.72 percent.

In addition, ABA tracks three open-end loan categories:

OPEN-END LOANS

• Bank card delinquencies fell from2.47 percent to 2.41 percent

• Home equity lines of credit delinquen-cies rose from 1.85 percent to 1.91 percent.

• Non-card revolving loan delinquen-cies fell from 1.31 percent to 1.19 percent.

The American Bankers Association representsbanks of all sizes and charters and is the voice forthe nation’s $14 trillion banking industry and itstwo million employees. Learn more at aba.com.

Consumer TipsFor borrowers having trouble paying

down debts, ABA advises taking action —

sooner rather than later — to solve debt

problems with the following tips:

• Talk with creditors – the sooner you

talk to them, the more options you have;

• Don’t charge more purchases until

your problems are solved;

• Avoid bankruptcy – it’s a short-term

solution with long-term consequences;

and

• Contact Consumer Credit Counseling

Services at 1-800-388-2227.

For more information on budgeting, sav-

ing and managing credit, visit the ABA

Education Foundation’s consumer web

page at aba.com.

Consumer Delinquencies Decline Significantly in First Quarter

‘Many consumers have

learned the hard lessons

of recession, and have

redoubled their efforts

to keep debt at

manageable levels.’

JAMES CHESSEN,

American Bankers Association


Documents

August 5, 2013 â€¢ An Advertising Supplement to the San Fernando