Faye Pantazelos

Wednesday, 17 December 2003 11:53

Good credit = a good idea

Even in the strongest nation on Earth, economic uncertainty is a frequent reality.

In both our personal finances and in business, serious decisions with long-term consequences must be made, sometimes on short notice or with little opportunity to prepare. At such times, having good credit can be especially important.

Credit transactions are so much a part of our daily routine that they are often taken for granted -- and therein lies a huge potential problem. A history of missed or late payments can have a negative, even devastating impact on your ability to secure credit.

Since no one knows when the need for a loan may arise, it's a good idea to secure a line of credit before you face an emergency situation and while your good credit is unblemished.

Ninety percent of business expenses and as much as half of today's consumer purchases involve credit. Most people finance the purchases of their homes and cars, and almost everyone has at least one credit card.

While once considered a matter of convenience, a credit card today is a necessity when it comes to reserving hotel rooms and rental cars or even creating an Internet service account. And while the United States might still have a way to go before becoming a cashless society, a growing number of people prefer to not even carry cash, choosing instead to transact their business using either credit cards or credit accounts accessed by PIN numbers and passwords.

But the failure to pay bills promptly and regularly can leave blots on credit records that can become problematic.

Credit reporting agencies collect and record information from banks, credit unions, finance companies, retailers and other sources, and maintain detailed histories indicating the credit-worthiness of individuals and businesses. These credit histories play a large part in determining a person's or company's ability to secure new or additional credit.

Owners of a business in need of additional working capital or homeowners seeking to refinance who have maintained a good credit history can secure a home improvement or equity loan or establish a line of credit. A good credit rating can mean the difference between swift approval and letters of regret.

With so much at stake, it is worth taking time to check credit reports and make certain records are correct and up-to-date.

According to Fair Isaac Corp., a prominent industry consulting organization, there are five factors that a affect a credit rating:

* Payment history is usually the most significant factor. Pay bills on time.

* Total amount of debt relative to available credit is considered.

* An established credit history generally counts in your favor.

* Several new accounts opened in a short period of time is usually not a good idea.

* The number and types of active accounts, such as retail loans, mortgage loan, auto loan or line of credit are considered better than simply having many credit cards.

Personal credit is a privilege, not a right. Business loans are sometimes necessary to help a business grow. Paying bills on time, decreasing outstanding balances and limiting the amount of new debt taken on will help maintain a good credit rating, and maintaining good credit is simply a very good idea.

Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400 or www.newcenturybk.com.

Thursday, 20 November 2003 06:09

Protective measures

Identity theft is one of the fastest-growing types of fraud, with as many as 500,000 cases reported each year.

Many routine transactions require people to share private data such as bank and credit card account numbers, income, Social Security number, and name, address and phone numbers. Criminals can steal this information and assume your identity by applying for credit cards or opening accounts under your name.

The offender can run up huge bills, deceive the creditors and ruin your credit history in the process. You may not know what is happening for months or even years.

There is no foolproof way to guarantee your personal information is secure, but there are ways to help reduce the risk.

* Be careful about giving out personal information to anyone over the phone or on the Internet unless you know the organization you are dealing with.

* While traveling, have your mail held at your local post office or ask someone you trust to collect and keep it until you return.

* Password-protect your credit cards and checking accounts, then keep the information in a secure place -- not in your purse or wallet. Also, beware of thieves looking over your shoulder as you enter information at an ATM machine.

* Order your credit reports twice a year from each of the three national credit bureaus: Equifax, Experian and Trans Union. Review them carefully for anything that appears deceitful.

* Shred all paperwork you no longer need, such as receipts, bills and other documents that contain personal/financial information. Sign all new credit cards immediately and destroy pre-approved credit card offers before throwing them in the trash.

* Monitor your bills, bank records and credit card statements each month. Check for suspicious entries or purchases. If your bills do not arrive according to your billing cycles, follow up with your creditors and utility companies.

Also consider your relationship with your bank and how well you know its procedures. Would it call you if something seemed suspicious? And, find out if it sells lists, as well as whether it shreds unwanted documents or merely throws them in the trash.

Maintaining a close connection with your financial institution can substantially help you keep a closer eye on the distribution of your personal data.

Even if you have been cautious about giving out your private information, an identity thief can still attack. If you suspect you're a victim of identification fraud, follow these guidelines.

1. Call the fraud departments of all three credit bureaus. Ask them to put a "fraud alert" on your file. This forces creditors to call you before they open any more accounts in your name.

2. Contact the creditors which opened the fraudulent accounts and close them immediately.

3. File a report with the local police and request a copy. Having a police report can help clear any possible credit problems due to the unauthorized accounts.

4. File a complaint with the Federal Trade Commission. Call the Identity Theft Hotline at (877) IDTHEFT or fill out the complaint form at www.consumer.gov/idtheft/. You can also write to Identity Theft Clearinghouse, Federal Trade Commission, Washington, D.C. 20580.

With so many ways ID thieves can retrieve your personal information, it is imperative to monitor what you disclose, when you disclose it, why you're doing it and to whom you are giving the information. Help us help protect you.

Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400 or www.newcenturybk.com

Thursday, 26 February 2004 09:41

The ripple effect

People responsible for running businesses usually learn a couple of important lessons early on -- that the financial health of a community has a critical impact on local businesses, and that what other companies do affects more than just those individual companies.

For example, when two big banks become one even bigger bank, the result is often felt by many other businesses, their customers and their communities.

The Citicorp-Travelers merger made headlines a few years ago, as did the NationsBank-BankAmerica merger, the Banc One-First Chicago NBD merger and Bank of America Corp.'s announcement in October that it was buying FleetBoston Financial Corp.

According to Federal Reserve statistics, there have been about 7,000 mergers of financial institutions in the United States since 1980. The number of individual banks has dropped from a peak of 14,400 in 1980 to 9,064 today, and the big are getting bigger.

Last month came news of the acquisition of BankOne by JP Morgan-Chase & Co., a deal one local business writer described as "almost a compelling enough story to make us forget that tens of thousands of jobs and many billions of investment dollars are at stake."

This merger might be great news for the company that wants its Chicago, Zurich and London offices to have the same bank. But for a local business concerned about its own economic health and that of its customers, there could be less to celebrate. The impact on a community in terms of lost jobs and the ability of individuals and companies doing business with those people can be dramatic.

For bank customers, the big deals can sometimes mean a difficult period of adjusting to new locations, new people and new account requirements and rules that were not part of the original pre-merger arrangement. More obviously, a change in banking relationships can mean a change in the quality of service.

Some corporate treasurers have expressed concern that companies could conceivably see their banking fees rise as the number of possible lenders or underwriters declines.

Technological developments and other market forces are reshaping much of America's financial services industry. But how do these changes affect your organization?

If banks close because of mergers and people lose their jobs, will they still be your customers? If you do business with a bank that is acquired, and decisions are now made by someone in another state, will that affect your operations?

The public interest is definitively intertwined with the health of the financial community.

The decisions that drive the financial services industry must be evaluated on the basis of what is best for consumers and the overall financial environment. A strong economy is impossible without a vibrant, competitive financial services industry.

The question is whether these big deals help or hurt the competitive and economic viability of our communities and cities. Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400 or www.newcenturybank.com.

Monday, 02 February 2004 06:48

Safety measures

Every day, the news includes fresh reports of economic uncertainty and of companies in trouble. Suspicion is up, confidence is down. Generally speaking, it's been a rough stretch for business.

While the importance of maintaining your business accounts in an FDIC-insured bank are obvious, you should also know that the FDIC is more than just an insurer. As an independent agency of the federal government, the Federal Deposit Insurance Corporation was created to preserve and promote public confidence in the U.S. financial system.

Its primary role is to identify, monitor and address risks to the deposit insurance funds and to limit the effect of the economy and the financial system if bank or thrift institution fails.

In an economic environment in which many portfolio balances and other investments have declined, it is reassuring to know that certain accounts and funds needed to operate your business -- or that have been allocated for specific needs -- are protected and will remain secure, regardless of market fluctuation.

The FDIC conducts its assessment of banks using the Uniform Financial Institutions Rating System (UFIRS), which has been in place since 1979 and was updated in 1997. It has been an effective tool for evaluating the soundness of financial institutions on a uniform basis and for identifying those that require special attention or concern.

The system considers certain financial, managerial and compliance factors that are common to all institutions. Government agencies endeavor to ensure that all institutions are evaluated in a comprehensive and uniform manner, with special attention focused on those that exhibit financial and operational weaknesses or adverse trends.

Each financial institution is given a rating based on an evaluation of six essential components of its financial condition and operations: the institution's adequacy of capital, the quality of its assets, the capability of management, the quality and level of earnings, adequacy of liquidity and its sensitivity to market risk.

Composite and component ratings are assigned based on a 1 to 5 numerical scale. A "1" indicates the highest rating, strongest performance and risk management practices, and the least degree of supervisory concern; a "5" indicates the lowest rating, weakest performance, inadequate risk management practices and, therefore, rates the highest degree of concern.

The ability of management to identify, measure, monitor and control the risks of its operations is also taken into account when assigning ratings. For more information on the rating system and the role of the FDIC, go to the agency's Web site at www.fdic.gov.

Since the start of FDIC insurance on Jan. 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure. It is important to remember, however, that the FDIC insures deposits only and does not insure mutual funds, securities or similar types of investments that banks may offer or investment accounts typically promoted by many brokerage firms and financial service companies.

Banking is a competitive business. A well-managed bank will offer rates that are competitive while adhering to strict regulations and exercising all prudent methods to manage risk.

Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400 or www.newcenturybk.com.

Friday, 31 October 2003 07:24

Choosing a bank

All too often, banks promote their personal service but fail to execute customers' requests in a timely manner and to their satisfaction.

The impersonal, sterile formula-driven processes of banks have resulted in the public's antipathy toward banking. Customers complain of the inaccessibility, unresponsiveness and insufficient knowledge of bankers and the lack of impartial financial advice.

Allegations of unfair predatory lending practices, discriminatory underwriting and inadequate levels of participation and investment in their local communities have seriously impaired the industry's reputation. The public's growing distrust in banks has provoked customers' endless price-comparison shopping in lieu of seeking a comprehensive, long-term banking relationship.

Commercial bankers are traditionally perceived as one of the three principal advisers to businesses, and unless a business secures a good banking relationship or receives the service levels it needs, it can suffer.

Unfortunately, bankers are abdicating this responsibility without appreciating its vital importance. Their primary objective is to attain lucrative commissions for attracting new business instead of developing existing relationships. Some institutions are forcibly retiring senior, experienced credit officers and replacing them with younger, more aggressive business development lenders with lower salaries.

These new lenders do not possess the necessary business knowledge and therefore cannot determine appropriate remedies and loan structures or define suitable products for customers. As a result, rather than concentrating their efforts on assisting the customer as an ally and mentor, commercial bankers are more concerned about protecting their careers.

What's in store for the banking industry? One thing is certain. Banking as we know it will be infinitely different. Banks continue to lead with pricing without considering the long-term impact their strategies will have on net interest margins.

Logic would seem to dictate that one cannot offer credit at the lowest rates possible while also availing the highest market rates on deposits. As banks fail to recognize the value of a long-term, profitable relationship in their pricing decisions, customers begin seeking alternatives.

Over the past several years, mortgage bankers and brokers have obtained a majority share of the residential market, forcing community banks to limit their distribution of mortgage products solely to accommodate existing customers. Banks were displaced by mortgage brokers who serviced customers better by visiting their homes or offices and expedited the processing and decision timelines in closing a loan.

Likewise, customers' distress with commercial banks may facilitate the success of the growing number of 'non-bank' banks such as Merrill Lynch and American Express, as well as the neighborhood Wal-Mart. Each possesses greater economies of scale and can easily absorb extraordinary advertising and staffing expenses.

However, there are there negatives to these non-bank banks. Financial service companies that deliver exceptional service in a timely manner have a unique opportunity to attract an increasing share of good business and professional customers, previously served by large, bureaucratic business banks.

Smaller banks, however, can offer the prospective customer a viable, exciting alternative that large banks can't -- personal relations. Smaller banks take the time to get to know you and your business.

They have talented, experienced bankers who can offer substantive, valuable advice to enhance a business or improve a commercial real estate project's marketability. A smaller bank's first and foremost concern is listening to you and determining what products or services will best accommodate your needs -- not simply meeting their sales quotas.

To overcome growing cynicism toward the banking industry and compete with non-bank banks, smaller bankers must ensure their customers' banking experiences are much better than their expectations. And they must always execute what they say they can do. Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400.www.newcenturybk.com.

Wednesday, 28 April 2004 06:46

Check 21

The new law that the government refers to as the "Check Clearing for the 21st Century Act" (or Public Law No. 108-100), everyone else calls simply "Check 21."

The law takes effect Oct. 28, 2004, and is the result of long, hard-fought efforts to bring the process of paying by check into line with advances in technology. Some industry experts predict it will have a major impact on the future of check use and processing.

Financial institutions stand to benefit from the new system through accelerated check processing time, which could result in greater efficiency and reduced costs. Benefits to bank customers include faster processing of their checks and a minimizing of check handling and shipping expenses. There is also the likelihood of fewer processing errors, as well as less opportunity for fraud.

The most notable change under Check 21 is that paper checks will no longer be returned to the account owner. Checks will be held or destroyed by the bank that presents the original check for payment. Customers requesting the return of their checks will receive instead a "substitute check," which is an electronic facsimile of the check that has the same legal standing as the original document.

By sending a bank an electronic image of a check presented for payment instead of continuing to operate under the current multistep routing process that moves paper checks between financial institutions, checks will not only clear sooner, but financial institutions and businesses will be less vulnerable to potentially costly delays caused by bad weather or other emergency situations that affect transportation systems.

Under "Check 21," bank customers will have certain rights, particularly with regard to recrediting. When a substitute check is provided at the request of a bank customer, in the event of a bank error -- such as a check being paid twice or paid for the wrong amount -- the consumer has a right to have funds recredited to his or her account within 10 business days.

The recrediting procedures were created to protect the bank's customers in situations such as when an original check (or a better copy of the original check) is necessary to determine the validity of a customer's claim. The law requires specific procedures for filing claims, recrediting consumers' accounts, and providing customers with the appropriate notices.

The Federal Reserve Board is developing the specific wording of the information, which discloses and describes the procedures and rights of consumers. Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400 or www.newcenturybk.com

Wednesday, 17 March 2004 12:02

Tax tips

As April 15 approaches, financial planners offer advice to executives for saving money on taxes. Every situation is different, but experts suggest these six areas are worth a closer look.

 

* Converting ordinary income to capital gains

 

* Assessing deferred compensation plans

 

* Examining stock options

 

* Benchmarking compensation and benefits

 

* Reviewing disability insurance options

 

* Considering contributing directors' fees to retirement accounts

 

Convert ordinary income to capital gains. Do this through a section 83(b) election. This section of the tax code imposes ordinary income tax on property, such as restricted stock received as compensation for services, as soon as the property becomes vested and transferable.

Once qualified, it is possible to elect to recognize immediately as income the value of the property received (fair market value minus any amount paid toward the property) and convert all future appreciation to capital gains income. It's wise to consult a tax adviser before making an election of this type.

 

Assess deferred compensation plans. Based on current cash flow needs, determine whether any company-offered deferred compensation plans would be advantageous.

Before deciding, assess the investment alternatives inside the plan, the credit risk of the plan and the distribution options available.

 

Remember, stock options come in different forms. Nonqualified stock options (NQSOs), for example, are flexible, but trigger ordinary income tax on any appreciation realized upon exercising the options.

There is also potential liability for capital gains tax on appreciation from a later sale of the stock. Incentive stock options (ISOs) must be retained for at least a specific required holding period, but once that requirement is satisfied, future appreciation above the exercise price is taxed at capital gains rates rather than the higher ordinary income rates.

The tax is payable only upon sale of the stock. When exercising ISOs, report income for the Alternative Minimum Tax calculation. A tax adviser can provide information on the rules and limitations for NQSOs and ISOs.

 

Consider benchmarking compensation and benefits with those of competing companies. Periodically review compensation, benefits and perquisites of competitors to ensure that employment packages of key employees remain competitive.

 

Review disability insurance options. If someone pays a disability insurance premium, any disability benefits paid will not be taxable.

This means less coverage is needed than would be necessary under a policy in which the employer pays premiums.

 

Consider contributing directors' fees to retirement accounts. Compensation earned for serving on a company's board of directors may enable a contribution to a tax-deferred self-employed retirement account for which a current income tax deduction is received for the amount contributed.

 

Other ideas include making pretax gifts to parents or grandparents if they are at a low level of income and making gifts to children or grandchildren to encourage IRA contributions.

Faye T. Pantazelos is president and CEO of New Century Bank and its parent company, NCB Holdings Inc. She founded NCB Holdings, which provides corporate banking services, in 1997. Reach her at (312) 944-5400 or www.newcenturybk.com