There were a number of new ventures and units created in the equipment finance and leasing space in 2015. One such company was Wintrust Commercial Finance. Born in April, and headed by Kirk Phillips, a former executive at AIG Commercial Equipment Finance and Transamerica Equipment Finance Services, WCF may still have that “new car smell” but it has done a lot in a short period of time, growing loan and lease originations to $220 million in its first seven months in the market.
A Supportive Parent
When asked, Phillips points to two major drivers of his group’s success in its first calendar year. The first of which is Wintrust Financial itself, a parent company that Phillips is quick to praise for its entrepreneurial spirit and its aggressive, albeit measured, tactics for growth.
“It takes a great parent like Wintrust to make this possible. We’ve had strong support from the CEO on down through the entire organization helping us get up and running,” says Phillips, noting the excellent cultural fit.
Wintrust’s support for its new division goes beyond a few crisp high fives. The bank believes in the potential of the equipment finance space as well as the ability of WCF to become a major part of the organization and enhance its standing in the financial landscape.
“They want us to diversify and help them diversify the company,” says Phillips. “They would like us to at some point represent 10% and 15% of the asset growth of the business. That gives us quite a bit of runway to grow this.”
Along with being a supportive parent, Wintrust is always looking to improve and enhance the entire organization. The company finalized five acquisitions in 2015 and, although those don’t have an immediate impact on WCF, they are a signal that Wintrust is hungry for more.
“What it does do for us is create additional capital that they need to deploy by our platform,” says Phillips of the purchases. “So far they’ve had an appetite, they being the parent company and the other banks within its family, for the diversification both geographically and by product type, as well as an appreciation for the credit discipline and pricing we’ve been able to bring.”
A Great Team
In Phillips’ estimation, the second most important driver for WCF has been the team surrounding him.
WCF has not been quiet on the personnel front from the outset. When the group was started, it brought in Phillips, along with Paul Hallauer, Jeff Darlington and Joe Thompson as chief credit officer, chief financial officer and chief operating officer, respectively. It was what Phillips calls a “real plug and play team.”
In June, WCF made another slew of moves, expanding with the addition of several senior vice presidents: Joe Gensor and Ryan Berlage in credit, Tom Forbes in capital markets and Derek Marcello in asset management.
Just last month, WCF put two more on the roster, taking on Stephen C. Cusick as a senior vice president in the capital markets group and John Benoit as a vice president of business development.
With so many experienced and talented people coming into the fold, Phillips is far from surprised at the amount of success WCF has enjoyed.
“We’re building a culture here that’s really focused on doing the right thing with honesty and integrity and efficiency,” says Phillips. “The team has really melded together in a way we felt like it would. We’ve been able to deliver results that exceed every measure we’ve put on the business so far, whether its with customer service, new business volume, credit quality, pricing, profitability, you name it, we have delivered.
“I’m constantly amazed by how creative the members of our team are and some of the solutions they can achieve when they’re given a chance to be a part of the process.”
One creative undertaking WCF already completed was the purchase of a $108 million portfolio of loans, leases and municipal debt, an acquisition Phillips characterizes as a “shot in the arm.”
“We knew all the assets well and that made the transaction relatively straight forward for us. It did divert some of our resources from the organic growth of the business, but it was well worth the effort because of the pricing and credit quality it provided for us,” says Phillips, who hopes to continue to make such moves in the future. “We’re always on the lookout for those opportunities that can be accretive to the platform whether its portfolio acquisitions or a small team of specialists that can help us grow and diversify the business into other profitable routes and invested areas.”
A Dedication to Discipline
While growing the business aggressively is something Phillips applauds, that does not take away from his focus on maintaining discipline, especially as a specter of uncertainty from the international economic community begins to creep closer to our shores. That desire to maintain discipline is bred from Wintrust’s culture. In Phillips’ estimation, the company’s conservative underwriting is part of what allowed it to grow even during the recent economic recession and is instilled in each division and company within its family.
“We’ve always had a very strong discipline in the underwriting process and the legal and documentation process,” says Phillips. “So, from that standpoint, I don’t think that we’re going to be changing too many of the things that we have historically done.”
With a lengthy background in the commercial equipment finance space, Phillips has learned a great many lessons on how to approach challenges. Going all in on new business volume aggression or being entirely closed off doesn’t work. Balance, he says, is the key.
“I think that path has served me well in learning how to balance the need for growth while maintaining price and credit discipline,” says Phillips. “Oftentimes you’ll find organizations that lean too heavily one way or the other, and at times this may be needed. A balanced view, in my opinion, is the best view.”
That balanced and disciplinary mindset will be a real boon for the company as it faces a major challenge on the horizon. The U.S. can remain insulated from the economic slowdown in China and some European companies for only so long. A downturn in the economic cycle will come, but an upturn will as well.
“That slowing is going to have impact on credit metrics of some of our industrial borrowers as well as the amount of capital expenditure. That combination is going to tend to slow investment and make for fewer quality deals in the marketplace. Right now with the continued high levels of capital out there, pressure is going to remain on pricing and structured covenants,” says Phillips. “Here at Wintrust Commercial Finance, we are constantly focused on maintaining our disciplines in the underwriting and pricing sectors so we can position ourselves for the next up cycle which will occur.”
Even when the economic cycle does become a little more turbulent, Phillips is confident that not only will his company survive, but that the equipment finance industry as a whole will come through stronger than ever.
“Our industry has weathered many cycles and shown a tremendous amount of resilience over the years. I’m constantly amazed at how individuals and companies are continually innovating and changing to meet marketplace dynamics,” says Phillips. “I think it’s a real testament to why this industry continues to historically outperform the rest of the lending sectors over economic cycles.”
An Ambitious Game Plan
In the meantime, Phillips and the WCF team are focused on 2016 and accomplishing short-term goals. Of those, expanding direct origination capabilities is at the top of the list.
“We really want to move this business to a 65/35 direct versus indirect platform. We want to start out with a few key locations and broaden it out from there,” says Phillips. “Right now our portfolio and back log remain strong, so we’re looking to add a few additional staff to help underwrite and process opportunities during 2016.”
Expansion plans are also in the works when it comes to the sectors WCF covers. Phillips currently feels confident in the group’s coverage in transportation, construction and manufacturing, but he is hopeful it can move into food and beverage, material handling equipment, waste, recycling and renewables.
According to Phillips, the first few months of 2016 have continued the theme of unanticipated success for WCF. If that continues, his group will be able to accomplish the goals it has set further down the road sooner rather than later.
“We want to be a best-in-class commercial finance company. Wintrust senior management is looking at us to be a growth driver and we want to do that in a smart, responsible way. We’re definitely shooting to be in the top 20 of the Monitor Bank 50 in a few years as measured by asset size,” says Phillips. “But that’s only one piece of the equation. We want to be a solid contributor to the company’s bottom line and maintain good credit discipline and underwriting.”
After all the success it has already had, it’s hard to imagine WCF won’t be able to do just that.
One Reply to “Explosive Success, Disciplined Approach: Wintrust’s Swift Ascension”
Congratulations to you, Kirk. Delighted to see your continuing success!