Starting From Scratch: Fosmark Leads Celtic’s Equipment Finance Venture

by Phil Neuffer January/February 2016

After building Continental Bank from the ground up for 12 years, Michael Fosmark goes back to the drawing board as president of Celtic Bank’s Equipment Finance Group. In his first few months, he has assembled a team of staff members, established a basis for future growth and anticipates exploiting Celtic’s already strong position in the national SBA lending space as a catalyst for expansion.

Starting something new can be a scary proposition. Whether it’s something as simple as riding a bike for the first time or something more complex, like starting a new career, the combination of uncertainty and fear of failure is often difficult to confront. Luckily Michael Fosmark knows all about starting from scratch. Fosmark, who was named president of the newly created Celtic Bank Equipment Finance division in October, spent the last 12 years building Continental Bank from an emerging startup to a respected Utah commercial bank specializing in equipment leasing and finance.

“It’s not often you get an opportunity to start something from the ground floor, and that was one of the things that really intrigued me about Continental Bank,” says Fosmark.

Fosmark was not hampered by the anxiety of starting a new business with Continental, and he isn’t scared now. In fact, after serving more than a decade as the president and chief lending officer at Continental, Fosmark is ready and excited to build from the ground up one more time.

“When I entered into [Continental Bank] and agreed to be a part of that start-up, I anticipated that I would probably be there for about 10 years,” says Fosmark. “I was there for 12, so it was kind of a natural time for me to move on, and with the opportunity to be able to start something new here [at Celtic Bank], that intrigued me. It was something that I found appealing, the challenge of it. And it was something that I decided I was ready to do.”

Apart from his proven experience constructing and leading a brand new bank-based equipment finance and leasing company, Fosmark’s years of experience in the banking and financial sectors made him an attractive candidate to lead this new venture from Celtic Bank. Fosmark spent two decades with the Bank of Utah, rising from the role of collector to executive vice president and chief lending officer.

“It was a community bank so it did everything. It did a lot of general commercial lending, CNI lending,” says Fosmark, who got the bulk of his leasing experience with Continental where the focus was leasing and equipment finance. “So, that is where my efforts were concentrated for 12 years prior to joining Celtic Bank.”

Getting Off the Ground

Since Fosmark took the reins of an entirely new entity, the main tasks of the first few months have been geared toward ensuring the business is set up to succeed in the long term. More than bulking up the portfolio, he has been focused on making sure Celtic Equipment Finance has the core processing in place to support a business in fundamentals before venturing out to bulk up the portfolio.

“The focus to this point has been just to get the structure in place. Get a core processor identified and start moving towards that, and just getting a feel for the credit culture here at Celtic Bank and being prepared to implement our philosophy of business,” says Fosmark. “That’s an ongoing process to some degree. We will have our core processing probably in place sometime during the first quarter of 2016, and then we’ll be able to go full-speed ahead. We’re doing business now, but on a little bit of a limited basis.”

Limited is the best way to describe the amount of business Celtic’s equipment finance division has done so far, but that doesn’t mean it isn’t off to a good start. According to Fosmark, the portfolio currently sits in the $7 million to $8 million range and is only growing.

“We’re just building that pipeline right now,” says Fosmark. “It takes a little while to get to the funding stage. So, we anticipate we’ll probably do somewhere around $30 million to $35 million [in 2016].”

One of the benefits of starting fresh is Fosmark can make decisions about what sectors Celtic will concentrate on in its first year and which ones it will focus on in the years to come. Right now, he says transportation assets and construction assets are the major areas of focus, but he would like to get into more manufacturing situations with machine tools as well.

“We’ve always been leaning more toward hard assets in our mindset and our philosophy. That will likely continue,” says Fosmark.

Using SBA Lending as a Tool

Celtic Bank is best known as an SBA lender. In the most recent ranking of the top 100 SBA 7(a) lenders by the Small Business Administration, Celtic was ranked sixth, with more than $88 million of loans. With such a successful track record in the SBA space, Fosmark approached the management of Celtic Bank, about the possibility of starting a leasing company within the bank.

Along with its prominence in the SBA lending space, Celtic’s ability to reach a national customer base appealed to Fosmark as a reason to bring the bank into the equipment leasing and finance space. In fact, he hopes that using that national reach along with the work the bank already does in SBA lending will help create a symbiotic relationship between his unit and the already established arms of the bank.

“I think they have a national mindset. They do business all over the country,” says Fosmark. “They have a national sales force generating leads for SBA loans, and I think we should be able to incorporate those business development professionals to generate leads for leasing opportunities. So, the biggest thing is that sales force, but also the mindset that there really is a national market out there, and they’ve been a part of that national market with those other products so it’s natural to expand into leasing.

“I just think there’s a lot of opportunity in the market today. There’s an awful lot of competition right now. Pricing is really aggressive, and there’s not a lot of risk premium out there, but I still think there are niches and opportunities to do a lot of business.”

Building for the Future

There has been another key responsibility for Fosmark in his first few months as president of this new venture: building a team around him. As successful as he was at Continental, he obviously didn’t do it alone. He worked with Continental’s current CEO, Nathan Morgan, and others along the way.

At Celtic, he has already put together a small stable of professionals to build out the business. First, Trevor Rawlings was hired as vice president of the equipment finance group. Rawlings and Fosmark already had a working relationship, as Rawlings served as a vice president of credit at Continental Bank.

Following Rawlings’ hiring, Celtic added Andrew Yocom, also a Continental alum, and Kim Simmons, formerly of Stalwart Contract Finance, to serve as assistant vice presidents of the new group.

“[Rawlings] is somebody who has worked with me and for me probably for about the last 18 years, both at Bank of Utah and Continental Bank. Trevor was given the opportunity and decided to come with me, as did Andy Yocum who worked for me previously,” says Fosmark. “[Simmons] came highly recommended. We [knew] we were going to need to hire somebody with her skillset, probably within the first six months or so of being in business. When the opportunity presented itself, I decided to go ahead and do that sooner rather than later. I think we have a sufficient staff to go forward for the next nine to 12 months, and beyond that we may need to hire some additional talent.”

With a team in place, Fosmark must now put an emphasis on getting everyone on the same page.

“Getting our business development professionals comfortable with the lease products that we offer, with the identification of potential business out there and how they can go about generating leads for the leasing group is the top priority,” says Fosmark. “I think that educational process will be our big focus for this year.”

Fosmark’s short-term goals speak to his larger aspirations for his new unit. He has his sights set on stabilizing the group into the $70 million to $80 million range portfolio-wise and is dedicated to adding value to Celtic Bank’s current suite of products, especially its main business: SBA lending.

Of course, there are still challenges to consider when ensuring successful short- and long-term production. Fosmark points to funding credits with appropriate risk levels that give suitable yield as a major difficulty on the horizon. Luckily for him, facing challenges as a new venture is nothing new, especially in an industry Fosmark is particularly optimistic about.

“I think there’s attraction out there. There seems to be a lot of leasing groups popping up, and banks are looking to get into leasing more than they have in the last five or six years,” says Fosmark. “So, I see increased focus and attention on the sector. And I think that if our economy continues to grow, that there will be a lot of business going forward.”

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