The ‘New’ PNC Equipment Finance — A Year in the Making
by Christopher Moraff November/December 2009
In a formal announcement on November 6, the equipment finance units of National City and The PNC Financial Services Group were joined together under one name as PNC Equipment Finance; and who better to lead the new unit than Vince Rinaldi, who 25 years ago founded the tiny firm that today is among the top-five largest bank leasing companies in the nation.
On a Friday afternoon in early November, the Cincinnati offices of National City Commercial Capital Co. were abuzz with big news. The name the equipment finance company had carried for the past five years — and with it the NC4 brand — was going away for good. Earlier in the day the firm’s parent, PNC Financial, officially completed the integration of NC4 with its own leasing firm, PNC Equipment Finance. From now on, the merged company would carry the PNC name.
The combination of the units came more than a year after PNC scooped up National City in an all-stock deal valued at $5.2 billion, making it the fifth-largest bank in the United States with more than $180 billion in assets and 2,700 branches.
With the announcement, Vince Rinaldi assumed the lead of the newly merged leasing company. Rinaldi — who served as CEO of National City Commercial Capital — has already led his company through two previous buyouts, first when the firm he founded was bought by Provident Bank, and then again with Nat City’s acquisition of Provident.
Today, as president and chief executive officer of PNC Equipment Finance, Rinaldi takes the helm of the fifth largest bank-affiliated leasing company in the U.S. by net assets, and the sixth largest when ranked by new business volume, according to Monitor Bank 25 rankings (Vol. 36, No. 5).
That’s all the more remarkable when you consider that Rinaldi never really intended to be a leasing industry executive. Like many in the field, Rinaldi, 60, entered equipment leasing more by happenstance than design. He graduated from the University of Cincinnati with the intention of being an accountant and went to work in 1971 with the CPA firm Ernst & Ernst — the predecessor of Big Four accounting giant Ernst & Young. Three years later, he took a job with Xerox Corporation, where he would spend more than a decade working his way up the corporate ladder from a sales position into a management role before ending his time there with a stint in the company’s leasing division.
In 1984, he made his official foray into equipment leasing when he went to work for McLean, VA-based Finalco Group, which specialized in the leasing of data processing and telecommunications equipment. At Finalco, Rinaldi held a number of positions including president of the Finalco Capital Group; but he didn’t stick around for long.
“I started off in sales and ended up as an executive vice president, and I got to learn a lot about the industry,” Rinaldi says of his time at Finalco. “Then the company got bought and I left and came back to Cincinnati around 1985 or 1986 and started my own leasing company along with three other partners.”
Rinaldi’s company, called Information Leasing Corporation (ILC), was focused primarily on IT and vendor programs. Unbeknownst to him at the time, over the next two-and-a-half decades he would lead the company through a number of incarnations, starting in1996, when Cincinnati-based Provident Bank decided it wanted to enter the equipment leasing business and acquired Information Leasing Corp. in a stock deal valued at $31 million. The deal also included Procurement Alternatives Corp., Information Leasing’s affiliated servicing company.
“When I sold that business I had 32 people and about $100 million in assets,” Rinaldi recalls. He stayed on with Provident, eventually becoming executive vice president of the equipment leasing & financing and residential mortgage operations of Provident Financial Group.
In February 2004, Cleveland-based National City signed an agreement to acquire Provident, which was then Cincinnati’s second-largest bank holding company, for just over $2 billion. With the acquisition, Rinaldi was named to lead the combined leasing division, which became National City Commercial Capital.
“At that point we had several billions of dollars in management, we had developed a very strong IT delivery process organization, particularly with respect to the vendor product. We were broad and national at that time and we were able to do pretty well,” he says of the merger. “National City brought capital to the table and that allowed us to grow more and do larger deals and we had a better cost of funds, and that was truly a great experience for several years until there were some issues that came up within National City.”
“Issues” is probably an understatement; by October 2008 National City was teetering on the verge of collapse and struggling to find a savior to help keep the company out of bankruptcy court. Rinaldi is understandably reluctant to talk about that time, preferring, he says, to “focus on the future.” But when pressed he admits the fall of 2008 was characterized by “many anxious moments.”
“They were certainly very trying times not knowing what was going to happen and hoping for the best, and obviously the year got worse,” he says. “Between mid-2007 and late 2008, I think people were mentally tired of the problems and the customers were growing weary of our capabilities. Not that we didn’t want to do the right things, we didn’t have the capital to do them.”
On October 23, 2008, in the midst of entertaining a less-than-attractive acquisition bid from U.S. Bank, Peter Raskind — then-chairman of National City — got a call from PNC head Jim Rohr, who two weeks earlier had withdrawn his company as a potential bidder for Nat City. Rohr, who was in the process of working out a TARP deal with the Treasury Department, said he was interested again, and proceeded to top U.S. Bank’s bid by 40 cents a share. By the next morning Rohr and Raskind had worked out a deal for PNC to acquire National City for $2.23 a share, or roughly $5.2 billion.
On reflection, Rinaldi calls the PNC merger “a very good thing.” He adds, “What PNC brought to the table was a great capital base and an interest in moving the business forward.”
In fact, it would have been hard for Nat City to attract a better suitor. PNC is a rare success story in the sea of bank failures, plunging profits and government bailouts that have characterized the worst recession since the 1930s. The company has turned a profit every year since the recession began, posting 2006 net income of $2.6 billion — or a record $8.73 per diluted share; and 2007 net income of $1.5 billion, or $4.35 per diluted share.
And PNC more than doubled its earnings in the third quarter of 2009, reporting net income of $559 million, or $1.00 a share — far exceeding analyst expectations. The fifth-largest U.S. bank by deposits, PNC was uniquely suited to integrate National City into its fold.
In January 2009, Rinaldi was put in charge of the combined PNC Equipment Finance and National City organizations — including PNC Aviation Finance — under the National City Commercial Capital moniker.
“There was really a blending of cultures, which are different in some ways but very similar in others,” Rinaldi says of the early integration. “What we did was take the best of what they had and what we had and bring that to the table.”
Rinaldi says the company spent the rest of the spring and summer working pretty much from scratch to bring the two companies’ leasing businesses together into one vehicle. “We were afforded the time to understand all of our businesses, restudy all our businesses, re-look at our businesses with a focus on strategic implementation of a process, and develop a plan that would provide a very good offering in that space,” he says.
Each week, executives in charge of marketing, credit, risk, legal, IT and sales met to talk about each section of the business and how to move the company forward, Rinaldi says. “You know, it’s very few times that you are given the opportunity to step back and then go forward, so we had this great chance, and what you see now is the culmination of all that work starting to come to fruition.”
PNC revealed the culmination of those efforts in the November integration announcement. In a published statement, the company said the name change “more effectively communicates our commitment to delivering a powerful combination of comprehensive, specialized and highly unified equipment and vendor finance capabilities” and “reinforces our financial backing and association with PNC.”
Rinaldi explains: “We’ve made a few changes in the structure; the processes are a little different, but we are more focused on areas where we have our strengths and we feel comfortable in those spaces. Had we had to keep moving it forward hard, in an undisciplined way, I think that would have been the wrong way to combine two businesses.”
The newly merged PNC Equipment Finance has more than 400 employees who serve 50 states and Canada, a far cry from the handful of people that started Information Leasing Corp. with Rinaldi some 25 years ago. Specializations of the combined organization include aviation, technology, health care, energy, general office equipment and equipment financing for golf courses.
The company maintains a full office in PNC’s hometown of Pittsburgh; an aviation finance unit in Boise; a vendor finance division in Chicago; and keeps the bulk of its staff — which Rinaldi says represents roughly 200 employees — in Cincinnati, the home base of the old National City.
Despite daily speculation that the recession is over and the economy is poised for a rebound, Rinaldi says that it’s a mistake to expect any kind of abrupt turnaround and that change for the better will be a slow and gradual process. In the meantime, he says, it doesn’t make sense to dwell on the past.
“I like to focus on where we are today and where we will be tomorrow, and I think that future is fairly bright. I think it’s going to offer us an ability to provide sustainable and predictable growth … and value to our shareholders, our customers and our employees.”
Christopher Moraff is an associate editor of the Monitor.