Robert Allanson President, Huntington Bank Equipment Finance

Time and again, I get some variation of the same response when I ask the question, “What was it that led you to equipment leasing?” Invariably a leasing executive will reply, “I got here by accident.” Robert Allanson, president of Huntington Bank Equipment Finance, was no exception when I asked him this question in a recent interview.

“It was by pure accident,” Allanson replies. “I was working for Star Bank back in the days when it was known as First National Bank of Cincinnati … and it was a very conservative and very profitable bank in the 1980s. They wanted to take advantage of the tax benefits associated with the investment tax credit because it was so lucrative. And they were looking for someone to run it. I was a commercial banker at the time and I was available … so I was it.”

Landing in the Middle
If Allanson’s pathway in his career in equipment leasing isn’t “snazzy” as he would say, what is it that distinguishes him and his group at Huntington Bank Equipment Finance? For one thing, in 2008, a year we have deemed to be “like no other,” Allanson and his team broke the $1 billion mark in net assets and managed to advance six places to land squarely in the middle of this year’s Monitor 100.

When asked about this accomplishment, Allanson looks back to the group’s beginnings as a de novo shop in the fourth quarter of 2001. “A group of us — there were eight, to be exact — had worked together at U.S. Bank and its predecessor companies, Star Bank and First Star, and we got this opportunity to start a business with someone else’s money. And even though the timing didn’t seem to be quite right … it was in the middle of a credit crunch … we jumped in. It wasn’t anything like we’re seeing today, but it was still a credit crunch. A lot of the competition was spending its time on portfolio management issues and since we didn’t have a portfolio, we could go out there and sell.”

And while his team took the selling part seriously, he explains that making a big splash on the equipment finance scene wasn’t the name of the game. “Of course Huntington wanted us to grow the business and we wanted to grow the business, but we really didn’t set fast growth as our number one objective because inevitably in this business, that objective gets you into trouble.

“But we’ve gotten wonderful support from Huntington in terms of adding resources. As we’ve grown the portfolio, we’ve had more resources provided to us to grow it even further.”

Remarkably, the original eight are still with Huntington Equipment Finance and Allanson is quick to point out that this also has contributed to the group’s success. He sums it up: “I think that’s it … support from our parent along with longevity and stability of the team, and you can’t underestimate that in a cyclical business. It is critical to have people in spots where they’ve experienced the ups and downs.”

All in the Footprint
For Allanson, while the first seven full years have been about growth — albeit at a steady pace — the company has also been about balancing the success of the equipment finance unit with the strategic objectives of the parent. In 2008, Huntington discontinued two lines of business: machine tool finance and vendor finance.

On the vendor business, he says, “We started that business just a couple of years ago and we anticipated a couple of challenges. One was a fairly simple one of geography … most of the people were located in Seattle and that proved to be a bigger challenge than we thought it would be.”

But for Allanson and Huntington, the bigger challenge was a matter of the risk/reward ratio that was out of balance. “We simple couldn’t see how to add value in third-party financing and since we did that, I know of other vendor groups that have been disbanded, as well.”

For the machine tools finance business, it all boiled to the footprint. The “machine tools [business] was a totally different story. That was a good business for us but the bank’s strategy was to pull back into the geographic footprint and these folks were pretty much outside of it. The focus so far and probably for the near future has been and, will be, growing the business within the footprint.”

The parent, Huntington Bancshares, is a $50 billion-plus bank holding company headquartered in Columbus, OH, operating 600 regional banking offices in Ohio, Indiana, Kentucky, Michigan, Pennsylvania and West Virginia. Its principal subsidiary is The Huntington National Bank.

But for Allanson, the footprint strategy doesn’t limit the opportunities particularly because Allanson characterizes the equipment finance groups’ relationship with the rest of the bank as “really, really good.” He explains, “If we can go back a bit as to what accounts for our growth, I think this is also a big part of it. We work hand in hand, we share income with bankers, we offer our asset management capabilities to them and our people in the regional offices are housed with them.”

From where he sits, this approach alleviates the common tug-of-war issues that can arise in bank-affiliated leasing operations.

Still Waiting for the Clouds to Break
Being positioned in the Heartland with its industrial concentration in the automotive and manufacturing sectors has Allanson and his team focusing on the management of the Huntington portfolio. “There’s no indication that this is going to be a short-lived recession … what I mostly hear are varying degrees of pessimism,” he notes. “The amount of effort, energy and resources we’re putting toward this is the greatest I’ve seen in my entire career and I’ve been in banking since the late 1970s. I’ve seen a few cycles and I can tell you, this is a tough one — no question about it.”

But Allanson, more pragmatist than optimist, plans to accept it as it comes. “We’re still seeing new business and our focus now is managing our way through the economic issues and to get to the end point, wherever that is. I’d like it to be sooner versus later, but whatever it is, we’re just going to have to get through it.”

As for what comes next, he says, “The longer-term focus is continuing to grow the business. We’ve restructured our credit shop and we’ve segmented our portfolio management from our underwriting to make sure that we’re still responsive to the new transactions that come in.”

He is determined not to let the current economic conditions overwhelm his team. To that end, Huntington has improved its portfolio management and collections processes and systems. “That’s not as snazzy as starting some new product line or heading into a new geography, but it’s about what matters … managing the business and making sure the functions that we need to perform are done very, very well. We want to make sure we’ve tightened it down with the right people in the right spots. It might not be snazzy, but I’m sure it’s what a lot of our competition is doing right now as well.”

Whenever the turnaround comes, Allanson says, “When it’s back in full swing, it will be robust because there’s only so long you can go without replacing one’s capacity. When it turns around, we want to make sure we’re poised to take advantage of it.”

As for keeping it simple, Allanson finds that what’s made it worth it is the people he’s worked with over the years. “I’ve been very lucky … I’ve pretty much worked with the same group of managers most of my career and that’s very rare. The people I hired in the 1980s are still here. They’ve moved up and are doing different things, but it’s the thing I feel the best about.”