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The Compass Newsletter

- Thursday, April 11th 2013
The Compass - Spring 2013 - Click here to Download PDF

"WE SURROUND OURSELVES WITH GOOD PEOPLE"

Susan LinmanWhen she first walked through the derelict shell of another era, the only surviving electric railroad company building in Portland, Susan wanted to save the structure and give it another chance. Years later, would she get hers?

2009 was a tough year for everyone. And Susan found herself affected by some of those economic shock waves. But when her back was literally up against her brick wall, Susan Linman, President and founder of Dunthorpe Marketing Group, kept calm and her vision was as steady as her eye for untapped potential.

Dunthorpe Marketing Group has had one of its most successful years to date recently, boasting a 49% increase in revenue. Like many entrepreneurs, Susan started the business in 1996 from her home office. She eventually purchased the brick "Carmen's Clubhouse" in 2002. The building in Sellwood, a diamond in the rough that once offered amenities to local conductors and motormen in 1910, now hosts Dunthorpe Marketing Group, a company specializing in lead lifecycle strategy, planning and campaign implementation.

Success hasn't come without innovation or rejuvenation. Like the interior of her building, the company has good bones. Susan's team has grown to 20 plus employees, including a tele-services department that has proven to be a key factor in the agency's growth. "Gathering a talented crew has been our biggest achievement and I know our clients will be treated well because I trust the team. We surround ourselves with good people. Character is important."

And "character" is what Susan eventually found in a banking partner. When the economy tanked, her old bank changed its policies and turned its back on Dunthorpe Marketing and other small business clients, even after many years with a solid lending relationship. That's when Susan contacted Lewis & Clark Bank's Co-President/CEO, Jeff Sumpter, for advice. Susan still fumes when remembering the about-face she experienced with her previous bank, and after going through the loan process with Lewis & Clark Bank she knew she could count on us to treat her with respect.

Just like Susan, we have an eye for character and potential, too. We understand business. We understand that the economy moves in cycles. We understand that clients need to be treated with respect. We're extremely creative when it comes to business solutions. And, you could say we have good bones, too.

Dunthorpe Marketing is a full-time service marketing firm that helps companies improve the performance and impact of their sales and marketing programs at each stage of the lead lifecycle. Their building is located in SE Portland at 8825 SE 11th Ave, 97202. You can also call at 503.236.4242 or visit their website at www.dunthorpemarketing.com.


AWARDS WORTH BRAGGING ABOUT

Lori Milton, VP/Commercial Lending, Lewis & Clark Bank, garnered a 2012 Partnership Award for Northwest Community Lending Officer from Evergreen Business Capital. The award celebrates her efforts in aiding small business and growing the local economy by creating community based SBA 504 loans with Evergreen.

Lori is honored for her extraordinary contributions to local business growth. As a community lending officer, she not only originated the most 504 loans with Evergreen in the Portland Metro Area, but also the most by one individual in the state of Oregon.

In January, Lewis & Clark Bank was awarded the Oregon City Chamber of Commerce's Large Business of the Year award for 2012.

We are truly honored to have received this recognition, especially in light of the other strong community member businesses that were nominated along side of us.


BUYING OR LEASING? ASK YOUR BANKER FIRST

As a bank that focuses heavily on business lending, our clients are regularly involved in commercial real estate transactions, and as the lender, we are very familiar with purchase and lease agreements. If you are considering the purchase or lease of real estate for your business, your banker can help you evaluate the advantages or disadvantages of leasing or owning a building that you may not have thought about.

A variety of factors should be considered before a business owner initiates the commercial real estate loan process. These include property location, whether the building contains the necessary facilities or will need remodeling, the building's size, its parking environment, working capital, and many more.

What other items should you consider before entering into a commercial real estate purchase agreement?
Cash Flow. A company must demonstrate the ability to repay both the loan principal and interest. Cash flow generated from the business should exceed the debt service by a healthy margin.

Financial Information. Your financial information is fundamental to the borrower-lender relationship. Is it up-to-date? Is it sophisticated relative to the business? Is it easily produced? Does it identify capital that can be contributed by the borrower? So, consult your CPA or accountant prior to your visit to the bank.

Collateral. A secondary source of repayment is needed to offset the potential loss of principal if a business is unable to repay the loan. Banks are not equity partners; they do not share in the upside potential of a business and conversely need to protect against the downside. This is one of the primary reasons collateral adequacy is so important.

Business Plan. A solid business plan that is supported by historical financial information is important to demonstrate the predictability of a company's forecasted cash flows. If gross revenue has declined, how have you responded to maintain profitability? Show that you are in control of the business.

Purchase or Lease Documents. Evaluate whether you have the necessary capital to enter a real estate purchase or lease agreement, taking into account your current income and current expenses, balanced against your payments for the building. Add to that the costs of maintenance and repairs. Get familiar with the fine print.

Contractor. Choose the party responsible for your building's future health carefully: do your due diligence and look into the contractor's financial status. If the contractor is financially weak, the bank may decline due to the company's lack of financial stability.

Attorney. When closing a commercial real estate transaction, using an attorney can save you a lot of money. Additionally, the bank may require documents to be reviewed by an attorney. If not, we will often suggest you hire an attorney to look after your interests, such as an environmental or title attorney.

Relationship Focused. Build a long-term advisory relationship with your banker. Transactional borrowing may be a thing of the past. If your banker is simply an order taker, do yourself a favor and find one that will take the time to understand your business and provide you actual banking advice.

Character. Last but not least, a borrower's willingness to repay a loan, even when times are tough, is critical. Credit history and character references are very important.

Choosing a commercial building for your business is a tough decision, and while we can't make that decision for you, Lewis & Clark Bank can provide you with the tools to help you navigate this often complex process.


THE REAL ESTATE FACTOR: WHAT YOU MISSED
Special Strategic Feature

Earlier this fall, Lewis & Clark Bank presented The Real Estate Factor: Preparing Small Business for Today's Economy. Our panel included commercial real estate appraiser, developer, and sustainability expert Todd Liebow of Valuation Forensics, Mark Hepner of Portland Residential Appraisers, and Greg Rogers of Rogers Financial Services, as well as, Trey Maust and Jeff Sumpter, co-founders of Lewis & Clark Bank.

Kicking things off with some interesting real estate facts, Trey took us on a trip back to 19th-century Oregon, where until 1854, the state government offered free land to certain residents. Unmarried males received 320 acres each, while married men each received 640. After 1854, land sold for only $1.25 an acre, which converts to roughly $37 in today's dollars.

Mark Hepner, Principal at Portland Residential Appraisers and 30-year expert in the local Portland market, showed us what kind of land $37 could buy you today and discussed how the past few years have changed the real estate market in the United States and around Portland. In 2007, investors saw the market top out, then steadily drop in time with the recession. For Mark, it was a depressing period to conduct property appraisals. "During that time I couldn't tell you what your house was worth and have any confidence in the value," he said.

The market continued losing value until 2012, and now Portland's real estate is experiencing stabilization, if not an upward trend in values. Of particular interest to the audience, what area around the Portland Metro retained most of its value during that time period? The answer, according to Mark's analysis, is St. Johns, where properties lost only 10 percent in value since 2007. Due to good FHA financing, and the fact that many first-time buyers and investors were looking to buy property in the area, St. Johns held on well through tough times. Northeast Portland was a close second to St. Johns for holding its value.

Mark also explained the shift in appeal from Portland's west side to its east side. "It is remarkable how things have shifted - the inner city's now more popular than the suburbs." He laid out comparable statistics for a sampling of the Portland area, noting that since 2007, a number of neighborhoods have seen property values decline:
  • Southeast Portland: 20 percent
  • Happy Valley: 28 percent
  • Lake Oswego: 26 percent
  • Tualatin: 25 percent
  • Oregon City: 24 percent
Nonetheless, Mark speculated that prices in the area could continue to go up in the next year.

Next, Todd Liebow spoke about the state of commercial real estate. Todd added that while the market hasn't seen much population migration into the Portland area, retail hasn't been hurt too badly by the recession - people just keep buying things. Then, Todd spent time going through each geographic area of the market and pointing out important statistics that added detail and analysis, such as vacancy rates, net absorption, and inventory.

Also, Todd showed the audience an example of a property tax form. This was very informative because he reviewed it line by line and pointed out information that could be challenged! It's something that every property owner should think about and pay attention to. He discussed the property tax appeal process and made it clear that it is definitely worth it to go through the details because there are oftentimes mistakes and over-charging taking place.

Greg Rogers guided us through the world of taxes. "The federal government is kind of broke," he said. "If you made decent money last year, cough up your checkbook."

Here are a few of Greg's tips for saving money:
  • High-end residential real estate - You can deduct interest on "acquisition" or "home improvement" mortgages secured by your primary home on the first $1,000,000 of debt. If you use the equity on your primary home for non-acquisition purposes, you can only deduct interest on the first $100,000 of that equity debt and it is not deductible under the Alternative Minimum Tax (AMT) rules. If you need to tap into your home equity for investment or business purposes, consider doing that through a loan separate from your primary mortgage - there are ways to potentially keep all of that new loan interest fully deductible instead of subject to the limitation rules.
  • Foreclosure - Up through December 31, 2012 any acquisition/improvement debt on your primary home that gets forgiven through a loan modification, short sale, or foreclosure is not subject to income taxes for the first $2,000,000 of debt. Even if you don't qualify under this rule (a home equity line, for example) you could still exclude that forgiveness from taxable income through the Internal Revenue Code Section 108 "insolvency" rules.
  • Selling land and home - You are allowed an exclusion of $500,000 of taxable gain from the sale of your primary residence for married taxpayers ($250,000 for single). If you divide and sell off land from your primary home, you will need to report that gain and pay taxes, but if you sell your home up to two years later you can potentially go back and amend your returns and exclude that gain from the land sale.
  • Business deductions - Non-residential real estate is deductible over thirty nine (39) years. If you have spent more than $1,000,000 on a non-residential real estate investment, it might be beneficial to look at a "cost segregation study." In this study, an engineer prepares a report that could potentially pull up to 40% of the cost basis of the building into five (5), seven (7), and fifteen (15) year recovery periods, greatly accelerating the current depreciation deductions claimed.

Jeff Sumpter walked us through the ins and outs of buying and financing commercial property, and what to watch out for in the process. Read his article from our Strategic Insights article on this topic on Page 2 of this newsletter. You can also find it on our website along with other business and strategy related content.


*NEW* REMOTE DEPOSIT
Lewis & Clark Bank is thrilled to announce a new deposit solution that will add to the convenience and efficiency of your business: Remote Deposit.

In addition to our current suite of technologies for businesses and individuals, such as online banking, mobile banking, and our Go Deposit mobile app for smart phones, Remote Deposit is a check deposit business solution for your desktop computer. 

Do you receive payments via checks? Contact us today to begin a conversation about how Lewis & Clark Bank can improve your current set up.


KNOW YOUR BANKER 2012 YEAR IN REVIEW
Looking back on 2012, here are a few questions and answers from your banking pros at Lewis & Clark Bank - a quick glimpse behind the curtain. 

1. Did you keep your New Year's resolutions?
"What resolutions! Never make 'em." - Marianne Mora
"Really?! Does anyone?" - Pam Bisbing
"Yes, but they were not highly aggressive." - Trey Maust
"Yes, to lose 30 lbs!" - Larry Snyder

2. Did you do anything new in 2012?
"Studied Spanish on my way to work." - Karen York
"Swam with stingrays in the Caribbean!" - Marianne Mora
"Golfed a 78 at Widgi Creek." - Larry Snyder
"Married." - Adam Hiatt
"Visited Mexico City." - Kirk Hansen

3. What did you get really excited about this year?
"Pinterest! My new obsession is crazy!" - Carrie Buswell
"My new home." Pam Bisbing
"Playing music." Kirk Hansen
"Trips to Alaska and Mexico." - Karen York
"The Olympics." - Adam Hiatt
"The Oregon Ducks football team." - Colby Schlicker

4. What news, celebrity, event, etc. will you remember?
"Presidential election." - Larry Snyder
"Hurricane Sandy." - Marianne Mora and Karen York
"NY Jets not using Tebow to his fulfillment." - Dawn Curry
"Felix Baumgartner - Space Jump." - Kirk Hansen
"No more Twinkies." - Carrie Buswell
"Outlawing large sodas in NYC." - Trey Maust
"Gaga, unfortunately." - Karen Dunford
"Newtown." - Colby Schlicker

5. What was your biggest achievement of the year?
"Personal trainer." - Trey Maust
"My kids. So proud of them everyday." - Carrie Buswell
"Surviving another hip replacement." - Kirk Hansen
"Staining my deck before the rain." - Dawn Curry
"Teaching my kids to read and swim." - Marianne Mora

6. What was your most memorable 2012 LCB moment?
"Special recognition from upper management." - Karen York
"Mikes return!" - Marianne Mora, Dawn Curry, Kirk Hansen
"Not taking last place in the annual bank putt-putt tournament." - Adam Hiatt
"Pigeons." - Pam Bisbing, Carrie Buswell
"Going to Pacific Coast Banking School." - Colby Schlicker
"The warm welcome I received from everyone at the Bank." - Larry Snyder

7. What do you wish you had done more of?
"Be more active outside." - Karen York
"Fished." - Adam Hiatt, Larry Snyder
"Sleep." - Trey Maust
"Exercise - as in, I pretty much did none." - Carrie Buswell
"Relaxed." - Pam Bisbing
"Running. In a 'need to' sort of way." - Colby Schlicker

8. What was your favorite movie, book, or music this year?
"Looking forward to the Hobbit." - Trey Maust
"Not a movie buff, but I listen to Jimi Hendrix." - Larry Snyder
"Bridesmaids." - Karen Dunford
"21 Jumpstreet." - Adam Hiatt
"The best song of the summer was Pontoon by Little Big Town." - Dawn Curry
"The Partner by John Grisham." - Karen York
"Arrested Development." - Carrie Buswell
"Adele." - Pam Bisbing

9. Did you learn any life lessons?
"Too many to mention." - Pam Bisbing
"Conventional wisdom, in terms of 'health food', is not necessarily fact." - Karen York
"You can't stay angry at your kids or spouse while giving them a bear hug." - Marianne Mora
"Can't take your health for granted." - Karen Dunford
"I am getting older." - Trey Maust

10. What are you looking forward to in 2013?
"The end of our de novo period, 12/2013." - Trey Maust
"Productive work and more ski and fishing days (weekends only)." - Larry Snyder
"My son's wedding!" - Karen Dunford
"Road trips." - Adam Hiatt
"Success - in whatever form is comes." - Colby Schlicker
"Getting a dog." - Dawn Curry
"Winning the lottery." - Pam Bisbing




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