While Scottrade Bank Equipment Finance has been around for only a year, the equipment finance company’s president, Fred Van Etten, is certainly no stranger to the industry. Van Etten first joined the industry in 1980 at McDonnell Douglas Finance Corp. Since then and most notably, Van Etten was co-founder of First Sierra Financial which was sold to American Express in 2001 and the CEO of Popular Equipment Finance beginning in 2005. As many in the industry will remember, Banco Popular sold Popular Equipment Finance to TCF Equipment Finance in 2009.
Equipment Finance Advisor caught up with Van Etten one year after he joined Scottrade Bank to lead its equipment finance division. In his first trade publication interview, the industry veteran notes lightheartedly, “I joined Scottrade in late January of last year … the opportunity to talk about our business is a sort of an annual review for me.”
With 500-plus branches nationwide, the Scottrade brand is mostly associated with its online retail brokerage investment platform. Yet, in 2008 the St. Louis-based company established Scottrade Bank, an FDIC insured depository institution and by 2012, the bank was actively looking to add equipment finance to its product offerings. Van Etten explains, “In late 2012, I was introduced to Joe Pope, the CEO of Scottrade Bank and shortly after that I met with Rodger Riney, the founder and CEO of Scottrade. I then met with Rodger’s executive team. These meetings occurred within a couple of months of my first meeting with Joe and in short order; we had a plan together and decided to launch the new equipment finance division.”
While January 2013 marks the official launch date, Van Etten explains that the early months were devoted to creating an equipment finance operation from the ground up. He says, “The first six or seven months were all about hiring the key people, putting an infrastructure in place, creating documentation and working with both internal and external parties to get us to the point where we could take on both direct and vendor business. We actually began booking that business in October 2013, which was the first quarter of our fiscal year.”
Prior to October, Van Etten explains that the new unit did execute transactions on a wholesale acquisition basis with other FDIC insured institutions. He notes, “We did those on a servicing retained basis and we will continue to pursue those opportunities going forward through what we call our wholesale channel.”
A Natural Progression
From the organizational perspective, Scottrade views the path from online brokerage accounts to online banking and then to equipment financing as a natural progression. “It’s pretty simple,” he says. “Scottrade had grown a tremendous amount of assets from the brokerage area which in turn had moved over to the bank in the form of deposits.” Today, Scottrade Bank ranks number one in terms of total assets among the St. Louis-based banks. “Scottrade Bank recognized equipment finance provided an excellent opportunity to diversify assets and create a higher net interest margin from its loan portfolio. Our executive management likes both the mix of products and the types of customers that equipment financing attracts. With its strong nationwide identity, they felt it was a very good product we could roll out as a national business.”
Van Etten explains that behind Scottrade’s national identity in both brokerage and banking, lies a strong corporate culture. “Our culture is people centric. We are privately held and that gives us some advantages. We don’t drive the company for quarterly results and our owner and executive team tend to take a longer view toward results. They are keenly attuned to what it takes to invest in their businesses and cultivate them over the long term.”
Up and Running
As for the nuts and bolts of the equipment finance business, Van Etten and his group offer a full suite of products that is able to compete directly with the major bank-affiliated equipment finance companies. “We are highly competitive and financially strong and since we are a taxpayer, we have the ability to offer operating leases, municipal leases and all of the other leasing products a business would need.”
With a first full quarter under its belt, Van Etten notes that his business’ transactions have been averaging in the $250,000 range. He notes his team has both the ability and the desire to move upward into the mid-ticket size as well. Thus far, the results have been impressive.
He says, “Scottrade’s fiscal year end is September 30 and the first quarter ended on December 31. Scottrade Bank Equipment Finance ended the quarter at 133% of volume growth to our plan, so that’s gone very well.”
Asset classes include manufacturing, construction, transportation and waste equipment. Van Etten notes, “Those are the vertical markets that we are in and we finance equipment in those sectors and those areas directly related to those sectors. For example with waste equipment, we finance both waste haul trucks and waste bins. In construction, that could include various types of equipment for differing segments in construction.”
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As with all seasoned executives, Van Etten recognizes that success lies in the strength of his team. He is proud of the fact that 16 of his current 20 employees joined Scottrade Bank Equipment Finance from the Popular Equipment Finance and TCF Equipment Finance teams. He says, “It’s a great group of people and we are very comfortable working with one another. It’s been a team that’s performed well through up and down markets since 2005.”
The key management team includes Jordan Saegusa as Vice President of Corporate Development, Jim Denning as National Sales Manager, Dan Thompson as Credit Manager, Connie Schulte in Documentation, Mike Garrity in Marketing and Julie Pray as Sales Support Manager.
The team’s past experience was not lost on Scottrade Bank. “What the bank really liked was the fact that we were able to pull the right people together on short order. We were able to put the initial pieces together and then move on to focus on getting the business up and running as quickly as possible. Scottrade was pleasantly surprised at how quickly we closed our first deal.”
As for the future of the business in the near-term, Van Etten shares that he expects the net asset value of the equipment leasing and finance portfolio to be north of $150 million by Scottrade’s fiscal year end. With regard to the long-term, Van Etten shares, “Our goal for the next five to six years is to grow the company to be about 10% of the asset size of the parent bank. That’s ambitious because the bank is growing so quickly. If we accomplish that, our asset size will be over $2 billion by 2019. Today, the parent company is a little over $19 billion in assets and, as I said, it’s growing quickly. There’s plenty of room for growth and our team is excited about that.” Van Etten adds that this growth could also be accomplished through portfolio acquisitions as the right opportunities present themselves in the future.
At this point in time and from his vantage point, Van Etten expects the capital market volume will continue to increase in 2014 all the way through 2016. He explains, “As long as this happens, we should be in good shape. We have no legacy portfolio at this point so every dollar we book today is a dollar of growth in our portfolio. We most likely won’t have any run-off for another four to five years. Our ability to grow exponentially for the next few years should go without a hitch unless there’s a significant change in the market.
“I also think it’s worth mentioning that we don’t have any older systems in place either and that’s a plus. Many of our competitors do have legacy systems and we are thankful that we have the opportunity to build a new company, a new platform and a new portfolio based on today’s market environment. We are excited about the system we are building and we think that it will allow us to be scalable and deliver our product with less overhead cost,” he adds.
Competitive Advantages
For Van Etten, it is the core competencies along with the strength of Scottrade’s brand recognition and financials that provide his team unique competitive advantages. He says, “Just having the name Scottrade start a new business provides tremendous advantages.”
Then there are the dedicated professionals from the past, the present and even those to come in the future. “Our team is comprised of people who have an extraordinary dedication to the success of this division, to the success of the bank, Scottrade and to our industry as a whole. We are growing too … we’ve received more than 475 online applications for the first 18 jobs we’ve posted over the last year. The interest has been tremendous.”
With 30-plus years in the equipment finance industry, it’s still the “thrill of the build” that keeps Van Etten in the game. “When the opportunity arose to begin a company from the ground up under the Scottrade umbrella, I just couldn’t say no. I’ve always wanted to have a partner like Scottrade to share my vision with and to grow the company along the lines of what I see will be successful in the equipment finance marketplace. “
In parting, Van Etten adds, “It’s great fun to come to work with these people. As a team, we know that the service we’re providing amounts to much more than just a portfolio of loans and leases to our customers … it’s really about financing American ambition and helping to drive economic growth.”