In late October 2016, Hanmi Financial Corporation (Hanmi), the holding company for Hanmi Bank, announced the acquisition of the Commercial Specialty Finance (CSF) unit of Irvine, California-based Banc of California. The transaction included the acquisition of the CSF portfolio consisting of over $200 million of equipment leases covering multiple asset classes generated via a national network of vendors and third-party originators. An important element of this acquisition was the strategic decision to retain substantially all existing CSF employees led by a seasoned management team -- including the leader of the former Bank of California CSF unit, David Normandin.
Equipment Finance Advisor spoke with Normandin, the unit’s Managing Director and C. G. Kum, President and Chief Executive Officer of Hanmi Financial Corporation to gain an understanding of the rationale behind this strategic acquisition and the role this unit will play in expanding Hanmi’s market presence nationally.
Equipment Finance Advisor: Prior to the acquisition, the CSF unit experienced significant success operating across the U.S., focusing on vendors and third party originators. How does the acquisition by Hanmi Financial Corporation positively impact your successful go-to-market strategy?
David Normandin:The acquisition accomplishes a number of things for us. Throughout our history, we have funded business in all 50 states, and we will continue to do so. This acquisition provides a stable funding platform for our unit as the bank is very well capitalized to fund the growth of this business. It also enables us to dig into Hanmi Financial Corporation’s customer base – which is a commercial small business customer base – allowing us help grow overall customer relationships for the bank. This is the exciting part for us – to be a part of an integrated platform rather than a stand-alone business that operates independently. Hamni has a strong history of lending to small businesses in their community and this provides us an opportunity to step right into that customer base. In only thirty days, we have already seen numerous opportunities from Hanmi’s customers.
Equipment Finance Advisor: Will this allow you to expand beyond your traditional model of vendor and third-party originations and go directly after the end user via the referral network of Hanmi Bank?
Normandin: Exactly. It allows us to add true value to the core bank franchise, not just an additional business line for the bank. This strategy increases the value of this unit within this franchise.
Equipment Finance Advisor: C.G., please tell us what attracted Hanmi Financial Corporation to the Banc of California’s CSF unit versus other potential acquisition targets?
C.G. Kum: I believe that under David’s leadership, the business has built a fantastic team from production, to underwriting, to the back-end servicing portion of the business. When we evaluate potential acquisitions – whether a whole bank acquisition or a business unit acquisition – I always start with an extensive review of the leadership team. I was very impressed with David’s accomplishments over the years at the Banc of California – having started a de novo operation, and developing a highly skilled team of professionals to grow the portfolio. The other element that attracted me to David’s operation is the risk management side of the business. We are in a highly regulated business, and operating a leasing business or subsidiary within a bank takes an understanding of how to operate within constraints. David’s unit had a strong history of performance while operating within certain parameters of risk tolerance at the Banc of California. The unit consistently generated quality assets with nominal levels of losses.
As David mentioned, this acquisition presents a tremendous opportunity to take advantage of our customer base. We’re a small business-oriented commercial bank with over 80% of our customer base qualifying as a small business. Additionally, our space is what would be considered to be an “ethnic” small business banking space, and until now there has not been a bank that can serve the needs of Asian entrepreneurs as it relates to financing equipment. Therefore, we believe that under David’s leadership, we can expand his influence into our customer base and provide an added value to our customers.
Equipment Finance Advisor: Was experience building a de novo operation important to you and Hanmi when considering this acquisition?
Kum: Yes. David started the operation, and this was very attractive to me. He will be leveraging this experience now with us – utilizing his ability to recruit and train personnel in order for his group to effectively cover our 41 branches throughout the U.S. – which includes a client base of various Asian nationalities. Having built a business from the ground up is very valuable, and David certainly brings this experience to the table for us within our platform.
Equipment Finance Advisor: What impact will this acquisition have on the CSF team? More specifically, do you anticipate growing your team in any particular areas – (e.g. business origination, underwriting)?
Normandin: Our business is really about having the right people to execute a solid plan – because at the end of the day, we sell money. We have taken a consistent and disciplined approach toward building the business based upon volume, and the need to continue to scale this business is predictable. As we continue to grow the business, I believe we will be adding the required resources needed to maintain high customer-service levels. This is important as this is a differentiator for us in the market. We understand our customers and deliver solutions in a timely and consistent manner. This requires having the right people on the team. In order to succeed, our people must be fluid and capable of achieving our customer service requirements.
More strategically, we will focus on adding some people who can directly work within the current footprint of Hanmi Bank. Having bi-lingual team members will be important, and while we have some today, we will need more. As we continue to grow the business, we will also be leveraging the utilization of technology. Integrating into the Hanmi platform and having the resources that Hanmi brings to the table on the IT and technology side is very valuable for us.
Kum: As David mentioned, the key to success is building an efficient operation and again, David’s experience in this area was very attractive to me. The economy will vacillate over a period of time, and we must be able to react to economic changes by scaling up or scaling down, depending upon the economic environment. Because of the way David has built this operation, we will be able to move up or down the scale depending on the economic environment. We have tremendous organic growth opportunities within our branch network and the addition of equipment leasing will likely even out some of this potential economic volatility. We have a long and rich history of connectivity with our client base and I am certain we will take full advantage of this connectivity with our clients under David’s leadership.
Equipment Finance Advisor: Please tell us a bit about Hanmi Bank’s geographic footprint and your unique focus on immigrant entrepreneurial customers.
Kum: We are very strong in particular markets such as the state of California, Texas, Illinois, Virginia and New Jersey. We also have loan production offices in Washington, Colorado and Georgia. The significance of this experience is that we understand the nationwide sourcing opportunities that come with this leasing platform. Our goal is to be the leading provider of small ticket leases for immigrant communities throughout the country. Currently there is no institution that is focused on the immigrant sector. What makes us unique is that by providing language and cultural familiarity in general day-to-day banking, we will have a competitive edge in all markets we serve and will be serving with this new unit.
Equipment Finance Advisor: Will this group be pulling out of any markets it has been working within for many years?
Normandin: No, we will not be pulling out of any markets. What we will be doing is penetrating the markets we have been in more succinctly while expanding our services into the bank platform. A nice surprise for me since we have moved is the depth of Hanmi’s leadership quality – as exemplified by C.G. It’s already been a pleasure to work with the Hanmi leadership team and experience the depth and knowledge of the executive leadership team. Under this new company, we are now a strategic player within the franchise and this is important to me and our team. The Hanmi leadership team has done an excellent job of painting the picture of this vision and this is very exciting for us.
Equipment Finance Advisor: What is your two to five year outlook for growth potential within the equipment finance industry?
Normandin: This is a question we continually ask ourselves. Our platform has been one of the fastest growing platforms in the country and our intention is to grow at a disciplined pace. There is a lot of uncertainty in the market as we have all seen over the past year. Major election years are always like this and perhaps this election cycle was more polarizing that in past years. I think we will begin to see this uncertainty begin to “unfreeze” in January and February and we expect 2017 to be a good year for us. We expect to see optimism in the small business market and we plan to take advantage of this optimism, especially now that we are a part of the Hanmi Financial Corporation team.
Kum: I echo David’s comments about disciplined and managed growth. We will explore all markets, but we will use 2017 as a year to understand each other better as well as our businesses. Then, we will put a reasonable three to five year plan together that will be measured and disciplined. I believe we have a rich opportunity to take full advantage of over time.