CTB Equipment Finance Expands Bank Footprint, Deepens Relationships
by Megen Donovan 2015
In a Q&A with Monitor, Jim Lyons, director of CTB Equipment Finance, discusses how he and partner Drew Hayes are incorporating their best equipment finance practices to relationship-focused Community Trust Bank in order to develop a high-quality, sustainable equipment finance unit.
Monitor: Could you please discuss what led Community Trust Bank to form an equipment finance unit?
JL: Community Trust Bank currently has equipment loans within its loan portfolio, but with the addition of a dedicated equipment finance team, the bank should be able to be diversify its growing loan portfolio and expand the lending capabilities with a broader range of loan facilities to meet the needs for its current customers and for new customers outside the footprint.
Monitor: How and when were you invited to lead the team? What has gone into the development of the unit prior to its launch?
JL: This past summer Drew Hayes and I were introduced to the bank and had an opportunity to meet with a couple members of the executive team, which was exploring new opportunities and new products to continue the bank’s growth. One of the things they liked was that we — aside from equipment finance — have had experiences with other specialty lending products. The discussions led to other meetings with other executive team members with both sides becoming excited about the opportunity about how Drew and I would fit into their overall scheme.
Prior to joining Community Trust Bank, Drew and I worked together at Beal Bank, and then both went over to start-up the Equipment Finance group at Alliance Partners. As of today, we’re only a few months into our relationship with the bank, so we spent our first few weeks learning and supplementing existing bank lending policy specifically tailored for equipment financings [loans and capital leases] and hope to launch a tax leasing product in the near future as well. The bank currently comprises a footprint of Texas, Louisiana and Mississippi.
It’s still just Drew and I dedicated to the equipment unit. However, we have been fortunate to be able to utilize the bank personnel with respect to accounting, IT, loan administration and documentation. Obviously there is an infrastructure in place, and like most banks, they’ve done equipment deals [in the past], but we’re giving them a dedicated focus to that space and also pulling in transactions and relationships outside their footprint. I think in 2015 we’re looking to expand some people to our team, which would just be a part of the equipment group so we can continue to build and expand the platform.
Monitor: Please share with our readers your background and what led you to a career in equipment finance and to your current post at Community Trust Bank.
JL: I had a brief career with the FDIC and then worked for a privately owned bank. I was heavily active in acquiring distressed assets from the FDIC and then selling the distressed assets and banks for the FDIC to other institutions. In 1994, I joined the Associates Commercial Corporation, which was kind of my entry into the equipment finance world. Ever since then, I’ve been pretty much focused on equipment lending and specialty lending. My most recent roles have been as a capital markets leader in the equipment finance space.
Monitor: What types of asset classes will CTB Equipment Finance focus on and why?
JL: We’ll generally look at most types of collateral in the industry, maybe with the exception of energy for two reasons: First, the bank currently has an energy finance group, and second, in the market overall there is a lot of concern for what’s going on in that space.
Initially, we only had the directive to participate in loans and capital lease-type products because the bank did not have a tax lease in the platform. We’re hoping to help them open up their tax lease platform in the near future.
Monitor: What size and types of business clients are you reaching out to? What is your transaction size range?
JL: We’re a lean team right now. Therefore, we’re looking for $3 million opportunities — which can include multiple fundings — and up, particularly since we are not fully staffed up. Given the equipment portfolio is fairly new, we’ll probably keep the maximum investment size somewhere between $20 million and $25 million, at least initially. I think as the equipment portfolio grows over time, our investment appetite will increase. We’re not really focused on any specific businesses type, asset size or revenues, but mainly looking for essential-use type equipment.
The bank seems to have the appropriate patience and focus on building a high-quality portfolio as opposed to volume. The bank just really wants us to build the portfolio with high-quality assets and proper procedures.
Monitor: Could you please discuss your go-to-market strategy for the unit (direct origination, indirect buying, etc.)?
JL: Initially, the low-hanging fruit, as well as our prior relationships, will make up the bulk of our new volume, with an emphasis on indirect originations with relationships we have developed at prior employers through the years. We anticipate supplementing existing bank customers and the commercial lenders in providing equipment financing solutions. And lastly, we do have some direct relationships that we’ll call on as we build up the portfolio. It’s kind of a three-pronged marketing strategy. The first one is indirect, the second one would be working with commercial lenders — our goal is to get out with commercial lenders in 2015, explain some of the products and structure that we have expertise in and see what we can offer to them to maintain those relationships — and lastly, with the least amount of focus in 2015, would be direct transactions.
Monitor: From a competitive perspective, what do you believe differentiates CTB Equipment Finance from others in the marketplace?
JL: At the end of the day, we are selling a commodity product. I think one of the things we have done in the past, and will continue to do, is be committed to our relationships. The bank has significant market share in its core markets, and I think the reason for that is that the bank is strategically focused on long-term relationships and the value these long-term lending relationships have in both good and bad economic times. We hope to translate that same philosophy into our relationships on the equipment side.
Monitor: Could you please share some information about the leadership team that is helping you manage CTB Equipment Finance?
JL: The bank has a senior management team that is not only very seasoned, but they all have long tenured careers with the bank. So they have a common vision, and are very cohesive, and are very heavily involved in assisting us in getting this platform up and running. The senior executive team that was responsible for bringing us on includes the bank’s CEO, chairman of the board, the senior risk officer and the Texas state president. They have been huge advocates for us as a new group.
Additionally I think we’re fortunate in that I am reporting [directly] to the bank’s chairman of the board, Ronnie Myrick. He’s been really instrumental in bringing us and other groups on board and expanding the specialty lending initiative. I think having Ronnie as our business leader and supporting our business on a day-to-day basis is invaluable as we strategically incorporate our best practices into the bank’s culture, and put in procedures we’ve acquired to help build a scalable and sustainable business for the bank. I think the key there is the senior management team collectively envisioned bringing on this product and expanding its equipment finance footprint to the entire country. They are very involved and supportive so far with what we’ve done in regards to the equipment types and financing structures that we’ve brought into the bank.
Monitor: What are the opportunities/advantages of operating under the bank’s umbrella?
JL: Community Trust offers a balance sheet with over 100 years of solid growth and portfolio performance, so that in of itself is a top priority for us. We also liked the bank culture, which is heavily focused on the customer and building mutually [beneficial] satisfactory long-term relationships. We weren’t looking for a bank that was strictly interested in bringing in volume and just doing equipment transactions. We’re highly dependent upon having relationships with our customers that sometimes includes our intermediaries, so we want to make sure we’re in a culture that operated the same way and knew the importance of keeping those relationships [intact].
It’s an incredible opportunity for us to help the bank build a national equipment platform, and we get the opportunity to be instrumental in expanding the bank’s line of other specialty products. I think if somebody asked us for a list of the three main things you are looking for in a financial partner and an employer, that would be it.
Monitor: How does your approach to equipment financing correspond to Community Trust Bank’s philosophy toward its commercial clients?
JL: The bank, at its core, is a relationship lender. Our philosophy is the same: We need to develop and maintain long-term relationships in our markets. The economy has times that are great for lenders and times that are great for borrowers. The only way you succeed over a long period of time is by maintaining these relationships. This is one of the strengths [the bank] can help us with.
Monitor: What are a few of your short-term and long-term goals for CTB Equipment Finance?
JL: Our short-term initiative is to build a high-quality portfolio and be able to share our best practice equipment lending procedures within the organization. We as an equipment group will look to be yield accretive, but at the same time, our main theme will be to continue to [expand upon] the bank’s portfolio from a collateral, industry and geographic perspective.
With respect to volume, I would say that we’re looking to add about $100 million to $150 million in new outstanding balances for 2015. Our intermediary goals would be to bring a tax lease product to the market, which we’re hoping to accomplish in 2015.
I think the bank and both Drew and I [see this as] a long-term commitment, and we want to build a platform that is going to be around for many years.
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