Building Community: Banc of California CEF Closes the Small-Ticket Gap
by Megen Donovan March/April 2015
David Normandin joined the Banc of California team to start its commercial equipment finance unit in 2012. With recent key hires and exponential growth, the young business is poised to expand Banc of California outside its Southern California footprint into the small- to mid-sized ticket range through third-party brokers.
Through its mergers and acquisitions over the years, Banc of California has grown from its credit union status in the 1940s to a bank with more than $5.5 billion in assets. With the bank’s footprint nestled in Southern California, the management team eventually started eyeing other opportunities for expansion.
David Normandin was brought into the board room in early 2012 to discuss the bank’s interest in equipment finance. “I started consulting [for them] in January or February of 2012,” he says. “In June of 2012, they decided to move forward and build a program and hired me full time to come aboard. That is how I got to where I am now.”
Prior to his current post as SVP of Banc of California Commercial Equipment Finance (BOC CEF), Normandin was seeking work at a bank interested in small- and mid-ticket commercial equipment transactions. He says that small businesses — defined as those with top line annual revenues of less than $20 million — make up about 87% of all U.S.-based businesses. Despite their apparent contribution to the overall economy, these smaller companies do not have the easy access to information and resources that larger companies have.
But despite logistical disadvantages, financial companies like BOC CEF find unique ways to serve those niches — often through third-party brokers. “I think there are a number of ways that the broker community adds value to the business,” Normandin explains. “They have more of a local presence. Think about it as going to Wal-Mart [versus] going to the local grocery store in your neighborhood that’s privately owned. The level of care, the selection for that specific group’s needs — whether it is an industry, the type of equipment or an actual geography — I think it’s one of the things that brokers do very well in our space and [it] adds value by delivering that level of care and understanding. It’s a unique niche that is a huge part of the American economy.”
BOC CEF finances many types of assets, including software and infrastructure as a service. With such a wide-reaching portfolio, it is natural for the company to find new and innovative solutions to the financial problems smaller businesses face and work on a level that Normandin refers to as “down market.”
“I think there’s an under-served market in small- to mid-sized vendors for the knowledge and skill that can help them be more successful,” Normandin explains. “So our goal is to really partner with third-party originators … to provide unique solutions so they have an advantage in the market that they’re competing in. Hopefully by providing that niche solution, we’re supporting that solution, we see more of their business. We feel like by consistently adding value, we will gain more traction in the market.”
In gaining loyalty in the marketplace, Normandin believes BOC CEF is building community, something the parent bank focuses on a great deal. “We feel like we can give a competitive advantage to that broker that may have a niche market that they’re trying to serve,” he says. “Their competitors have an advantage because they’re much bigger. We can provide products and services that you wouldn’t normally see with that size of opportunity.
“The same thing is true for the bank,” Normandin continues. “The bank is really focused on how to build community. How do we build from the small mom and pop business in its footprint? How do you allow that target customer to be successful? And [it’s] not just providing banking services. The easy part is providing the capital. The hard part is helping them acquire some of the skill sets they may be lacking as a small business.”
Normandin says the most important thing a bank does in its footprint is not only working alongside smaller businesses and providing them with capital, but also providing them with the knowledge and skill to be successful. He says this collaborative team approach is what sets BOC CEF apart from competitors.
When he started the equipment unit, Normandin was the sole member of that group. “I remember going into my office and sitting there looking at the business plans that I had built, and I thought ‘Ok, it’s time to find a good quality team of people.’ The first two hires I made were Chris Maudlin, who runs credit for our team, and Jamie Haver, who runs operations for our team. We now have a team of 11 that runs our commercial equipment finance business.”
Normandin says the group offers the skills and expertise needed to give clients a competitive edge. “For example, bringing Dan Krajewski on board for our team was one of those things we can do, we can leverage his background,” he says.
Krajewski joined BOC CEF as vice president and national sales director in late 2014. According to the company’s press release, Krajewski brings more than 30 years of direct experience to the business. He previously held senior management roles with GE Capital and CIT. Most recently, he was with Direct Capital, an independent equipment finance company serving the direct, vendor and franchise markets until its mid-2014 acquisition by CIT Group.
“He comes with a lot of skill sets that generally our target third-party broker probably doesn’t have in-house,” Normandin explains. “So we’re working alongside them and helping [to] partner with them and create new ideas and new ways for them to grow their businesses.”
More than “Just” an Equipment Finance Company
Part of Normandin’s short-term strategy to remain competitive is continual growth. Due to the unique environment Banc of California offers, his expectations are high.
“This environment is unique in that Banc of California is not a traditional community bank,” Normandin says. “The way the capital structure is built in the bank, it’s really more similar to a combined entrepreneurial and traditional bank environment. To give you an example, in our first year of business, we originated about $23 million. Our second year, we did about $73 million. for our third year of business, which is 2015, our target is about $150 million. With an average ticket size in the $50,000 range, the growth expectations are ambitious.”
Ultimately, Normandin’s long-term goal is to evolve BOC CEF into more than just an equipment finance company. For example, in the fourth quarter of 2014, Normandin says the group leveraged its knowledge in small- to mid-ticket underwriting, systems and processes and built a small commercial lending product, which allowed the unit to take over lending for the bank’s non-real estate transactions under $1 million.
“We do working capital loans and lines of credit,” Normandin explains. “We also offer — for the bank branches — a partnership with some of our external partners. We’re trying to become more of a full-service finance company for small- to mid-sized businesses.
“We’re not looking to do the same things that other banks do in the same ways,” he adds. “We’re looking for ways to be progressive, to do it better and more efficiently, to find ways to add additional value for our customers.”
This open-minded approach to commercial transactions is fully supported by the entrepreneurial spirit that exits among Banc of California’s management. “That’s refreshing given that my career has been spent in the independent market,” Normandin says. “One of the challenges I think many people have in the bank environment is that it can be stifling. I haven’t found that to be the case here. It’s about, ‘How do we view this bigger?’ It makes me think larger.
“It’s not about throwing people at it,” he continues. “It’s not about necessarily throwing dollars at it. It’s about being innovative in the way that we go to market.”
Innovation is driven by leavingone’s comfort zone, which Normandin notes is a great benefit to pairing oneself with mentors not only early on in one’s career, but also throughout the years.
“I think at different stages, it’s different people,” he says. “My initial manager [from] early in my career is someone with whom I’m still in contact. Those are the relationships that cause you to think and push you to do the things you’re not comfortable with sometimes that are incredibly valuable.”
Therefore, he feels strongly about cultivating the younger generation as its members rise through the ranks of the financial services industries. “We think there are great opportunities there on a lot of different levels. First, trying to provide younger people an entrée into our business — that’s so crucial for the future of our business — and helping them develop knowledge and skills to make them successful and second to learn how they interact and how our products can be more focused towards that target audience is valuable,” Normandin explains.
Normandin says that Banc of California hosts training seminars, which are incidentally often attended by competitors, as well as younger professionals seeking guidance. “We’re constantly looking for ways we can invest in the knowledge of the skill of that next generation in our industry,” he says. “That’s really important to me personally and I think it’s something the bank values and supports.”
“Coming Out” Year
With the support of the parent bank, BOC CEF is able to take its position in the marketplace to the next level.
“Since the time we started building this team, we’ve placed fairly under the radar,” Normandin says. “And for us this year, it’s going to be kind of a ‘coming out’ year. We were quieter when we were smaller, when we were building the infrastructure and the team. We’re excited for this year and we’ll probably do a lot more in the market with greater visibility. I think that from an environment standpoint, BOC has provided the opportunity for us to build something unique and special. It’s our intention to maintain the uniqueness and specialness that we have.”
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