First Niagara Leasing

by Stuart P. Papavassiliou June 2011

How do you transform a non-descript small-ticket leasing company whose business is sourced primarily through the broker channel into a burgeoning regional operation in 14 states focused on the middle market in two years’ time? We asked industry veteran Edward Perkowski, who heads First Niagara Leasing, and we found out that like its famous namesake, First Niagara Leasing is rapidly becoming a force to be reckoned with.

Edward Perkowski Headshot

Edward Perkowski First Vice President, First Niagara Leasing

It comes as no surprise that Edward Perkowski, who marks his 40th year in the leasing industry, has come to thrive on challenges. In fact, the industry’s fast-paced tempo is something he most appreciates about it. When he joined First Niagara in early 2009, the leasing shop wasn’t leveraging the fast-growing bank’s outstanding capital, liquidity, customer base and other resources. Enter Perkowski, who was charged to affect a change in that dynamic. “Our team has been able to grow the volume of our business from $50 million at the close of 2008 to $90 million in 2009 and then up to $141 million by year-end 2010. We have a plan to reach $207 million by the end of this year. So far in the first four months of 2011, we’re ahead of that plan. From a portfolio perspective, the company has grown from $100 million at the end of 2008 to $220 million at the close of 2010 with plans to grow to $325 million in 2011,” Perkowski notes excitedly.

Yet, he’s quick to point out that he and his team have been able to accomplish this through the swell provided by First Niagara’s acquisitions of National City branches in Pittsburgh and Harleysville Bank in suburban Philadelphia. First Niagara’s latest transaction closed in mid-April, this time with Connecticut-based NewAlliance Bank. To put things in perspective, he explains, “When I joined First Niagara, it was a $9 billion bank. Today, the bank has grown to $30 billion in assets, and its size and strength in position has certainly enabled me to introduce new lease products.”

As far as those new products are concerned, he explains that the company has moved away from broker-sourced business in favor of participating in deals with other bank leasing companies and large independents. First Niagara Leasing has retained those broker relationships that have demonstrated consistent solid performance. On the other hand and as a result of the expansion, Perkowski has hired middle-market sales representatives in the Pittsburgh, Philadelphia, upstate New York and most recently, in New England.

Drawing on his past experience, the lion’s share of which was with Chase Equipment Leasing, Perkowski and the First Niagara team are also concentrating on the municipal sector, as well as conduit healthcare structures in New York, Pennsylvania, Connecticut and Massachusetts. The transformation continues. Perkowski notes, “We implemented a tax-oriented lease product in March of this year. Until then, we were strictly doing equipment finance agreements. With the tax product, we are now able to work with our bankers instead of competing with them by offering a product that differentiates us within the bank. We’re starting to see more leads from our bankers. Not only are we adding volume, we’re deepening relationships as an institution, which is what we want to do throughout the bank. We’re still capable of closing independent deals across our footprint, and once we accomplish that, we’ll bring the bank in to see if there’s a cross-sell opportunity for other First Niagara products.”

That collaboration between bank and leasing company suits Perkowski just fine. “The strategy is working well. I’ve never been one who wanted to run an ‘independent’ bank leasing company that operates separately from the rest of the bank. The synergies between the bank and leasing are very important for the leasing company’s long-term success. I think the business has evolved in such a way that we, as leasing people, have to learn to function within a banking environment from both a compensation and a structural perspective.”

Perkowski is equally self-assured when it comes to First Niagara Leasing’s concentration on the municipal sector, a sector that has recently and frequently been in the news as state and local governments struggle to meet their financial obligations. He says, “Clearly municipalities aren’t doing nearly as well as they once were. There have been changes in accounting rules in which all of the Other Post Employment Benefits (OPEB) have to go on the balance sheet now, as does future pension liability, and so forth. But we’re sticking to the essential use equipment only and as long as we’re dealing within our markets, we can certainly keep a handle on how these states and local governments are performing. Besides, our deals are short term. We’re not doing ten- to 20-year energy management deals … we’re doing deals with school districts for their computers or public works equipment. I feel confident in our ability to be successful with these deals.”

While the future of municipalities remains unclear, Perkowski, who has never experienced a non-appropriation on one of his deals, stresses the collateral and its essentiality along with knowing the customer are critical. “We’re very conservative and our deals are reviewed by our municipal banking group. Even if we have a certain Moody’s rating, we’re internally downgrading the lessee for risks associated with its pensions and other benefits.”

In terms of conduit healthcare structures mentioned earlier, Perkowski and his team primarily work through the New York State Dormitory Authority to finance medical equipment on a tax-exempt basis for the state’s strongly rated hospitals. “While working in tandem with First Niagara’s healthcare bankers, we’ve been able to fund a number of deals in the $5 million to $20 million range. This group really understands healthcare financing and we leverage their knowledge to ensure that there is flawless execution. “And that’s just one example of how we do things at First Niagara. I work for Buford Sears, senior vice president, Specialty Lending, who is responsible for leading all of the specialty businesses including real estate, municipal banking, healthcare, asset-based lending and, of course, leasing. First Niagara has been distinguished by its asset quality, so credit is clearly ‘king’ here. We’re not going to do a deal simply because we can get 50 basis points more in spread. We’d rather be finer on the rate and make sure the credit quality is there. We’ve worked through our previous issues in the small-ticket broker program and both our delinquencies and losses are down significantly.”

With the issues of the past tidied-up and the present well tended, Perkowski says the future, as far as the rest of 2011 is concerned, will bring deeper penetration into the corporate customer base by utilizing the tax product as well as concentrating its efforts in New England. He says, “As we move into next year, we’ll have to look at our projected growth and our structure and continue to support the growth by expanding both the sales side and the back office. I’m told we can expect to continue on this path for the next few years. In other words, my marching orders are to plan for significant growth for the foreseeable future … and that’s what we’re doing.”

As to what the future holds for the equipment finance industry itself, Perkowski offers the following outlook: “I think today we’re seeing mostly demand stemming from the need to replace equipment versus from expansion and I really don’t expect to see a major change in that until after the 2012 election. There will be some pure growth, but not a lot. As for municipal financing, I’m optimistic due to the lack of cash from the budgets, these entities will be doing more in terms of leasing in the three- to seven-year time frame as opposed to paying cash. Other than that, I don’t expect to see much in terms of volume growth for the industry in total.”

But if volume growth and demand from expansion are tenuous in the near term, Perkowski doesn’t lose heart. After all, in leasing as in life, change is inevitable and frequently comes with little warning. With 40 years under his belt, he still enjoys the speed of the industry. “Bankers and credit people work on deals for weeks and months … in leasing, we do deals in days and sometimes hours. I’ve always enjoyed that,” he says.

“It’s a changing business with a lot of smart people in it. Tax laws change, accounting rules change, one day you have ITC, the next day, you don’t. But through it all, everyone adapts, changes and targets the next source of business. I appreciate the fact that it’s sales-oriented and vital to the economy, but if I had to choose one or two things … I’d say it’s the innovativeness and the pace that I appreciate most.”

Stuart P. Papavassiliou is senior editor of the Monitor.

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