In the mid-2000s, a lot of small- and mid-size banks came into the leasing space because of their need to grow assets. They either funded portfolios for third-party originators that continued to service the lease portfolio or purchased leases from these originators and serviced the portfolio themselves. Larger banks with solid infrastructure and experienced leasing staff were already established in the business as part of their long-term growth strategy. After the economic downturn, those successful banks with intermittent involvement in the leasing market once again face a decision to support their customers by offering a structured lease product.

In some cases, issues began to develop at the onset of the economic downturn and the small- and mid-size banks immediately elected to discontinue their funding into this leasing segment. As their portfolios became unstable, their investment became cumbersome and began to show stress. Their only alternative was to quickly analyze their own portfolio and evaluate strategies based on the results. Decisions needed to be made on whether or not they should take over a portfolio being serviced by a third-party originator or what to do with a liquidating portfolio they serviced.

Banks found themselves no longer buying new paper from the originator and current servicer, yet the banks still relied on the originator to service the declining or runoff portfolio they had on their books. To control their own destiny, banks closely monitored the servicing standards and practices applied to their portfolio. In some instances, banks transferred servicing to an in-house solution or found a new servicer with aligned interests.

A new business model has emerged concurrently with the granularity of the information age. There is now general consensus that maintaining a profitable lease portfolio requires tenured platforms, people to run them, professional technical systems and flexibility in being able to handle a variety of portfolio management methods. In aggregate, these elements add stability and risk mitigation from the assessment stage to actual implementation. Investment in systems, software and people to successfully grow a lease portfolio should also include sound advice on credit model building and maintenance. Essentially, specialists are in and generalists are out!

Today, the industry finds itself at the peak of a portfolio servicing learning curve as banks again evaluate asset growth from third-party lease originations. For those staying in the game, there has been an increase in outside servicers assisting banks that want to ultimately serve their customers while simultaneously benefiting from growing their asset base. The role of the trusted servicer can vary greatly from actual servicing to backup servicing. In either case, the focus is on servicing risk mitigation with an aligned partner. It’s an exciting time for servicers as they get more involved in global solutions for banks, lessors and captives. The industry once again is witnessing gradual consideration by small- or medium-size banks to invest capital in leasing.

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Joe Andries, vice president and general manager of GreatAmerica Portfolio Services Group LLC, is responsible for the sales, marketing, operational oversight and strategic planning for the Portfolio Services Group. Prior to joining the company in 2010, Andries was SVP and general manager of U.S. Bank’s Portfolio Services and Small Ticket Capital Markets Divisions. Previously, he spent 12 years with Lyon Financial Services.