Western Alliance Equipment Finance

by Amanda L. Gutshall June 2011

Western Alliance Equipment Finance has entered the Monitor 100 at #73 in style — boasting 101% asset growth and 55% volume growth in 2010. On a steady role since 2008 when Michael Brown, president and CEO, joined the company to lead the division, Western Alliance EF is poised to continue meeting its growth goals by sticking to the basics — offering a quality product with a personal touch.

Michael Brown Headshot

Michael Brown President, Western Alliance Equipment Finance

Western Alliance Equipment Finance (WAEF) was launched in 2008 as an affiliate of Western Alliance Bancoporation, a regional holding company with $6.2 billion in assets. The company operates in the southwest U.S., covering Arizona, California and Nevada. The division offers off-balance sheet financing, non-tax capital leases, TRAC leases and other options to a variety of industries but focuses on what Michael Brown, president and CEO says are “capital intensive industries,” such as manufacturing, healthcare, construction, aviation as well as municipalities.

“Our focus is on serving as a trusted advisor to our customers to ensure they get the most advantageous financing solution available for their equipment purchase whether it’s a $20 million aircraft, a $2 million MRI or a $200,000 piece of manufacturing equipment,” he says.

That customer-centric focus has aided the company in performing on a steady upward curve over the past few years during one of the biggest economic downturns in history, and that growth is due in part to the leadership of Brown, who joined the division in the summer of 2008. With his arrival, changes were imminent, and proved to be fruitful. One of the first leadership decisions Brown made was to change the moniker of the affiliate, reflecting the tone in the industry, replacing Leasing with Equipment Finance.

Brown knew what he was doing. He graduated from Kansas State University with a Bachelor of Science degree in Business Administration. Brown then went to work as a credit analyst at Dunn & Bradstreet in Texas and held various other management positions before moving to Denver and working for 26 years with the first stop at IFG Leasing. He then took a position at Equitable Life Leasing, later acquired by GE Capital. After ten years there, Brown went to 1st Interstate Leasing, which was purchased by Wells Fargo, and was placed under the umbrella of Wells Fargo Equipment. After 13 years, most recently as a senior vice president, he then traveled to Phoenix to work for CIT Diversified Industries as executive vice president in 2005, where he stayed becoming executive vice president and group head of CIT Group, Equipment Finance until joining WAEF.

Brown came to Western Alliance because of its reputation of putting customers in the forefront with a hands-on approach. “Western Alliance has built its reputation as a customer-centric company based on providing an exceptionally high level of service and direct access to decision makers.”

The bank’s organization, he says, is flat, which makes access to top management easy for both employees and customers. “They make themselves accessible to discuss not only opportunities but to meet with customers directly to work on those opportunities,” which makes closing a good transaction that much easier. Brown notes that when large deals do come through the pipeline, all involved in the process from the chairman, president and CFO to the chief credit officer can meet and act quickly. “We can put action on it and execute it pretty fast due to that,” Brown explains.

Along with it being a financially sound company from both a capital and liquidity standpoint, what pulled Brown even more was the executive team’s, and especially the chairman’s, attitude toward being more contrarian in the face of the recession by promoting growth in loans and deposits. This allowed Western Alliance to provide necessary funding to companies when they really needed it at a time when financing was hard to come by — and this became a source for developing more fulfilling relationships.

“It was really in large part recession-based, where there were a lot of banks that were really inwardly focused because of their issues associated with real estate,” he says. The company chairman’s response: when everybody else is playing defense, let’s play offense, because as Brown relays, “we can gain market share, and we can go secure these relationships at a time when customers really appreciate it… When times are good, everybody can go play in the market. When times are bad, it’s the ones that are playing that stand out.”

Since Brown has joined the division, it has posted gains. In 2009, WAEF reported $115 million in assets, increasing that 101% in 2010 with $231.1 million in assets. Net business volume has also increased from $95.5 million in 2009 to $148.3 million a year later. “We are very fortunate that we have tremendous liquidity and capital and a true desire to grow, but to grow sensibly and smartly with a real focus on quality opportunities. In fact, the bank has had loan growth for four consecutive quarters and deposit growth for five consecutive quarters, which was pretty amazing considering what we have all gone through for the last couple of years and considering the footprint that we are in was pretty challenged.”

The bank and its respective affiliates also offer a small bank feel with larger bank capabilities. “We could be classified as a large community bank or a small regional bank and there are many customers who prefer working with a bank/equipment finance group in that segment. Many of our customers don’t want to be at a big money center bank nor a small community bank, thus, we fit the bill nicely for those customers.”

Much of WAEF’s growth, Brown says, has come from referrals from its customers as well as its commercial bankers who now work closely with the division. “I think both have found us as a ‘go to’ source they can trust for coming up with solutions that are more advantageous to our customers and just being more responsive and staying close to our customers.”

When Brown first came on as head of the group, it was performing some broker business, which wasn’t working out as well as it could have been for the company. “They weren’t as focused on the bank customers as much as I thought they should have been. Now we are part of all their pipeline meetings and we are providing opportunities for bankers, which they love.”

He adds, “You need to recognize, if you are a bank leasing company or a bank equipment finance company, you need to deal with the [bank]. This is absolutely core and fundamental and very, very necessary. You can’t just go out on your own and do your own thing, you have got to always stay dialed into the bank.”

That focus has worked. Now, he explains, if an equipment opportunity is raised by a banker in a conversation with a customer, the division is involved. Many times, he says it is a “proactive effort where they’ll have us get engaged directly with their particular customers to alert them whether it’s bonus depreciation or other things that are applicable to equipment… Now most of the bankers are dialed in to when there’s an equipment opportunity, we should be involved.”

As Brown sees WAEF’s opportunities expand, he’s also noting positive factors in the industry as a whole. “The economy is moving forward, but it’s still slow and especially tough in some of our traditional equipment financing industries,” he says, like construction, which was pretty hard hit in the Southwest and California. He adds, “On the positive side, we are seeing movement in most other industries, and the bonus depreciation incentives and the incentives in the healthcare industry are encouraging some businesses to move ahead with their purchases now. 2011 is much better than 2010, and I think 2012 will look even more positive.”

And, he states, refinancings are increasing as well as some modest new activity this year. “I think everybody has seen some refinancings whereby perhaps some banks have gone inwardly focused … but there has been some new opportunity and activity and it seems as though it’s picked up clearly this year over last and particularly this quarter, I have seen some increased activity, but we are still not in that ‘robust’ arena like we had been prior to the recession.”

The major challenge Brown is experiencing within the industry is how many lenders and lessors have short memories — easing right back into the same bad practices that played a part in the economic downturn. “It seems since there are fewer opportunities out there, everybody is looking for loan growth, and as a result, everybody is fighting intensely for those fewer opportunities, thus the rates have gotten pretty aggressive. It’s almost like we’ve forgotten what it was like over the last couple of years.”

Challenges or not, Western Alliance Equipment Finance is moving through the rest of 2011 and into the future poised for growth. Brown says that so far this year he has hired two experienced business development officers that will be focused primarily on opportunities in the California market to increase the division’s current efforts in that area.

In addition, Brown explains, “We will continue to keep a low-cost platform relative to our peers coupled with very reliable and stable cost of funds that will enable us to be competitive in the market and to grow our relationships within our footprint. We realize that we are not able to provide ‘all things to all people’ but we strive to do the basic ‘blocking and tackling,’ and that has enabled us to grow pretty effectively over the last few years and the plan is to continue in that fashion.”

He continues, “We’re not out there offering the full, full gamut of products. We are really trying to focus on the few that we think are the most [relevant] to our particular customer base… We’re keeping it relatively simple, and staying focused on the basics.”

Amanda L. Gutshall is an associate editor of the Monitor.

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