Arvest Equipment Finance

by Amanda L. Gutshall June 2011
In business for a little more than four years, Arvest Equipment Finance has seen steady growth, even through a brutal economic downturn. With 2010 assets up $10.5 million, or 16.1% from 2009, the company has entered the Monitor 100 rankings at #96. Behind this success is Kyle W. Gilliam, president and CEO, and his team based in Fort Smith, AR.

Kyle W. Gilliam Headshot

Kyle W. Gilliam President & CEO, Arvest Equipment Finance

Arvest Equipment Finance (AEF), the equipment leasing division of Arvest Bank, was launched by Kyle W. Gilliam along with Arvest management, including Jim Walton, chairman, and Kevin Sabin, president of the bank, in the first quarter of 2007. With more than 240 branches across four states — Arkansas, Oklahoma, Kansas and Missouri — and close to $11 billion in assets, the bank will celebrate its 50th anniversary this year. According to Gilliam, the inception of the division occurred when all parties felt the right players were in place to be successful. Gilliam admits, “I just knew that it was a fit. I was very comfortable and they were open to the product. The culture here at Arvest is very sales-oriented… It was just the perfect culture with the perfect timing.”

Looking back over the division’s short, but fruitful, history he states, “We have been so fortunate to have had the success that we’ve had in such a short amount of time. To make the Monitor 100 this quickly is phenomenal.”

Arvest Equipment Finance’s primary objective is to serve commercial bank customers with all of their equipment financing needs. The division has split the four-state territories in half with Larry Randall responsible for Arkansas and Missouri, and Darrel Peters covering both Kansas and Oklahoma. Lori Dean is AEF’s operations manager and oversees all of the administration for the division. With almost 25 years at Arvest under her belt, Dean aided Gilliam in establishing the day-to-day operations. “She was a phenomenal help to me in getting it started,” he says.

Gilliam, early in his own career, quickly became fascinated with equipment leasing. But before that, at 17, he enlisted in the Arkansas Air National Guard, establishing an impressive career most recently with the 188th Fighter Wing in Fort Smith where the master sergeant worked as an operations superintendent in the Civil Engineering Squadron. He retired after 27 years as a citizen soldier in March 2011. During those years, he earned two associates degrees, one in civil engineering from the Community College of the Air Force, and one from the University of Arkansas at Fort Smith. He also earned a Bachelor’s of science degree in agricultural business with a minor in marketing from Arkansas Tech University, and a Bachelor’s of science in management from John Brown University.

A few years out of school, he began his banking career in the mid-1990s with Regions Bank in Fort Smith as a commercial lender, where he had access to working with the equipment leasing team. “I quickly realized that equipment finance and leasing was my favorite part of the job,” he says.

He moved to Little Rock in 1999 to take a vacant leasing officer position at Regions. Then, in 2003, he joined Bank of the Ozarks Leasing, a new division at the time that was primarily vendor driven. There he learned a lot about the different business models through his mentors at both banks. These skills aided him in helping to establish AEF. “My approach to this new venture at Arvest was to combine my experiences and mold them together into what we have here today.”

The cross-selling culture employed at the bank and including AEF is what has contributed to its success. “We work very closely with all of our commercial lenders and bankers to ensure one of our options is on the table each and every time… The important thing is that customer gets to decide which option they go with… We never stop educating our lending teams on the advantages of equipment leasing and finance. This helps to keep our product top of mind. I feel like this is the most important part of my job.”

In fact, Gilliam notes that one of his main initiatives for the division is to expand on building relationships within the branches with the lenders in the field as well as expand on product education. “The way I see our growth expanding is by building better and deeper relationships with our commercial lenders in the field. These are the [folks] that need to be educated to the point that they can identify an equipment leasing opportunity … and then refer it to us and allow us to get involved with it early enough that we’re able to help structure and price the transaction.”

In its almost five years in the industry, AEF has grown, and it’s shown in the numbers. In 2009, it had 65.3 million in equipment-related loans and leases. That increased to 75.8 million a year later. “We’ve grown,” Gilliam says with pride. “We’ve got about $20 million in our pipeline and we’ve grown over $25 million since we submitted our [Monitor 100] numbers, so we’re going to be closer to another $45 million to $50 million in outstandings by the end of 2011.”

The driving force behind the division’s success has been working within the municipal sector. In its 2010 Monitor 100 survey, AEF stated that its volume concentration by equipment type that year was in the municipal sector, despite what’s been written nationally about state and federal governments’ financial troubles.

Although Gilliam admits that many areas of the country have been facing extreme financial stress due to a number of factors including high unemployment, shrinking tax bases, lack of government funding as well as a reduction in spending, he notes, “We’ve never had those huge swings that other parts of the country experienced… We have not been immune to problems, but they have been much less severe here than in other parts of the U.S… Things have remained somewhat stable throughout the turmoil.”

In AEF’s trade area, Gilliam says, demand seems to be increasing “by the day. So far in 2011, we have grown the portfolio by over $25 million against year-end 2010 numbers, and have over $20 million in our 30-day pipeline… There are problems, but all in all, we were super blessed. Last year, we charged off only $83,000. Currently, we don’t have any contracts that are over 30 days past due in the entire portfolio… We’ve already recovered $46,000 this year from what we had charged off last year. It wasn’t even one basis point — that’s unheard of… I am very optimistic about the future of equipment finance and leasing in 2011 and the years to come.”

The key to being successful in the municipality sector is to “underwrite smart,” Gilliam says. “Just because they are a municipality doesn’t make it risk free. You have to look at underlying factors in those particular markets,” he adds, including what’s the swing or reduction in the tax basis and is there any future growth in the market for companies to enter. “You do have to be careful,” he warns, and you have to “stick with providing essential use equipment for these municipalities.”

In addition to this sector, AEF looks to finance stable companies that have been around for at least five years, with three positive trending years on the balance sheet. “When you are a regional bank, you are looking to bank as many bankable companies and prospects as you can… The ideal client, today, is going to be someone that weathered the storm that managed to modify their business model in a fashion that they are still there, they’ve survived and they’re going to be stronger when they come out of this downturn in the economy.”

As AEF has become a player in the industry over the years, Gilliam has seen the opportunities that are available within the industry, one of them being the resources the equipment leasing and financing sector offers through its associations. “I really appreciate the willingness of professionals within our industry sharing best practices with each other. This was so helpful to me when I was getting started and it is still helpful to me today.” Noting the educational efforts of the Equipment Leasing and Finance Association and National Equipment Financing Association, he also utilizes the opportunities within the CLP Foundation, as he recently became a CLP in the fall of 2010.

Another opportunity Gilliam has seen for the industry lately is the increase in demand. “Demand has definitely increased over the last 60 days, which has just been really exciting… There’s obviously been pent up demand for equipment purchases over the last few years and at some point in time, companies are going to have to start to purchase new equipment because the equipment they’ve been using for the last three or four years is starting to wear out.”

As maintenance costs rise, and eventually become more of an expense than purchasing new equipment, lessees are going to have to make the jump back into purchasing newer models. “I think we’re there. I’m confident that things are just about to turn, at least in that arena, it doesn’t mean the economy as a whole is going to turn. Just looking at what’s out there and how long people have put off equipment purchases, they’re not going to be able to do it much longer.”

On the flip side, Gilliam is concerned about the potential effects the Financial Accounting Standards Board (FASB) rulings will bring to the industry. “I’m a little bit concerned with how the FASB rulings are going to finally shake out… It looks like they’ve settled on the fact that all leases are going to be on the balance sheet… I think we’re all just going to have deal with that in a positive frame of mind… We’re just going to have to realize that the rules are changing and we’re going to have to change with them.”

Despite his concerns, Gilliam, as he was years ago as a novice in the equipment financing business, is still excited about the product and its use in the industry as well as what AEF is doing to meet customers’ needs. “We’ve received a warm reception since day one, and I think that is why we’ve been so successful here. We’ve received support from our chairman all the way down.”

He adds, “Things are looking up. We’ve already beat our budget for 2011, we’ve surpassed it. We’re looking at a good year… We’re loving it. Things are great.”


Amanda L. Gutshall is an associate editor of the Monitor.

Leave a comment

No tags available