Bank OZK in late October announced the hiring of industry veteran Jim Lyons as Managing Director, Equipment Finance and Capital Solutions Group. Lyons is to lead the launch of the group, providing a full array of equipment-oriented collateral products, including equipment finance and lease structures.

Lyons brings more than 30 years of experience with him to Bank OZK, a regional bank based in Little Rock, AR. His proficiency in building and managing large and complex specialty finance platforms will allow Bank OZK to expand its capabilities and become the lender of choice for middle-market specialty lending, bank officials said. The new equipment finance and capital solutions group augments Bank OZK’s successful lending programs, including community banking, commercial real estate, commercial and industrial, business aviation, RV and marine, SBA and asset-based lending.

Bank OZK conducts banking operations through 249 offices in eight states, including Arkansas, Georgia, Florida, North Carolina, Texas, New York, California and Mississippi and had $26.14 billion in total assets as of Sept. 30.

Lyons, in an interview with Equipment Finance Advisor, said he has begun forming the group and he has a three-year plan to build out the new group to more than 15 members.

Equipment Finance Advisor: What made the position with Bank OZK a good fit for you?

Jim Lyons: That’s the $30,000 question. I’ve done this before and both sides recognized the cultural fit with respect to an entrepreneurial spirit, a collaborative approach and a long-term vision. As the discussions evolved, I became very interested in building out the commercial lending platform here. We share the same interest in building it from the ground up – the right way – with a proven credit thesis, best practices and focused on developing a long-term customer relationship model.

Although these de novo type initiatives come with their own set of challenges, I was excited to join at Bank OZK. One of the opportunities I see is, unlike some of my prior positions, it doesn't come with the impediments of a legacy infrastructure or portfolio. In addition, there are not many banks this size that have this type of strong capital position, historical performance and really don't have a large C&I portfolio. There's an extensive runway for me to not only get into equipment finance, but some of the other C&I businesses.

Equipment Finance Advisor: Does the bank have any existing equipment financing and capital products?

Lyons: The bank previously had a small-ticket equipment finance platform. That business ended around 2019, but those were very small-ticket transactions. This is the bank’s first middle-market approach. And with respect to C&I verticals, we do have a business aviation group. The ABL group is being formed now.

Equipment Finance Advisor: Have you had opportunities to start a new unit previously.

Lyons: I started a few capital markets groups at AIG Commercial Equipment Finance and TCF Equipment Finance. I’m familiar with a bank environment, including the necessary steps for compliance and credit policy, etc. And, with a couple of colleagues, started the equipment finance group at Alliance Partners, which is now part of Congressional Bank. I also started an equipment specialty group at Community Trust Bank, which is now Origin Bank. And I helped start some of the C&I verticals at Axos Bank, formerly known as the Bank of the Internet.

Equipment Finance Advisor: Describe your vision for building out the team?

Lyons: The bank’s commercial side, which includes the commercial bankers, aviation and asset-based lending, has a centralized credit function. We will be able to utilize that credit function. We're going to take a three-prong approach to bringing in transactions: lender finance, structured finance and equipment finance. We want to approach the overall finance universe. The bank is looking to supplement the credit team with some additional resources that have expertise in those three areas. My approach in the past, and the bank’s approach as well, is that we will pre-screen the transactions. I and a couple of individuals will be able to make the credit decision upfront. We'll be able to provide constructive feedback and structuring recommendations fairly quickly to the customer. On the credit side, we'll go through the normal regulatory underwriting process. We're going to be set up for doing larger deals, so we’ll have a prescreen on all of our deals.

Equipment Finance Advisor: What are your plans in terms of originations? Will the group have a buy desk to get started?

Lyons: One of the ways, especially in the equipment finance arena, to get started is to buy indirect transactions to help feed the system and pay for expenses immediately. We will purchase some transactions; we are already looking at some. We also will get involved in some club type transactions. But indirect isn't going to be our focus because we are going to grow the business conservatively from that three-prong approach, which is attacking C&I from the non-bank private funds and direct customers arena. We feel that based on my experience and relationships, and a few people we will bring in, we should have plenty of opportunities without relying extensively on the indirect market.

The other thing we want to do is keep the group lean. We’re 10 years into a seven-year average recovery. We want to be positioned and plan to be able to pivot quickly and opportunistically when a market dislocation occurs.

Equipment Finance Advisor: Do you expect initially to focus on the bank's existing footprint and existing customers?

Lyons: We thought that through. The states where the bank has an extensive footprint, I call it the SEC Conference: It’s across Arkansas, Florida, Georgia, North Carolina and Texas. We have corporate lenders out there and we're working now on how we can best help them, and how they can best serve their customers. There will be a bit of overlap where the corporate or the commercial bankers will be able to help their customers. But when the deals get larger, they'll probably refer them to us, and we can probably better serve their customers on the larger transactions. Given our community bank roots, although we have a footprint, we have served our customers no matter where they are located throughout the 50 states.

Starting up an equipment finance group, and particularly lender finance and structured finance, you really need to have a nationwide footprint. We will work with existing customers for certain. We anticipate crossover with the business aviation group, the ABL group and potentially with the RV and Marine Group. But we will have a national platform and the hope is to bring on a lot of new customers.

Equipment Finance Advisor:Can you provide an overview of which sectors, types of credits and ticket sizes the group will focus on?

Lyons: Let me break it down into the two major asset classes. First, on the equipment finance side, we'll be middle-market oriented. We anticipate providing a full array of products, including leases and loans. I think our sweet spot will be in the $5 million to $25 million range at inception, and then grow as customers and the overall portfolio size warrants. We'll have a heavy focus on mission critical collateral. The tenures will range in the three- to seven-year range. The one product that we won't have this year, but hopefully will next year, will be tax-oriented and open-end Fair Market Value lease structures. We will be able to provide the other types of closed-end leases and loans.

With respect to what we call Capital Solutions, which is our lender finance and structured finance businesses, they will be larger transactions. We think our sweet spot will be in the $25 million to $75 million range. Those transactions generally have tenures of three to five years. We'll be providing senior capital facilities targeted to the non-bank and private fund lenders. The bank currently has a portfolio and offers revolving subscriptions facilities, which we think will be another nice crossover leverage point for us to bring in new customers for the revolving subscription facility business, and to leverage off of their existing customers on providing facilities for any funds that are heavily invested in portfolios of loans and leases.

Equipment Finance Advisor: Can you share your vision for building out the team?

Lyons: As it stands today, there there’s me and another individual that will provide the senior leadership. That should carry us through the end of the year. We're in talks with a few salespeople. I think next year at this time, we will probably have a team that will be lean, six to eight employees. In addition, we'll opportunistically look for building on some sub-components, such as perhaps healthcare, maritime or others. The bank intends to scale this business. We've got the full support of senior management to grow this business.

We are looking for a three-year plan to build a meaningful high-quality portfolio with a team of 15-plus. We're not going to staff up and then be forced to grow the business. We're going to grow the business conservatively with a large volume pristine credit assets. We're going to grow the business logistically and then backfill. One strength we'll have here as a group is we've got a lot of support – credit, risk, compliance, etc. We'll be able to utilize the existing infrastructure of the bank.

Equipment Finance Advisor: What's your biggest worry?

Lyons: It concerns me starting to build a business this far along in a recovery. We're due for a little dislocation. I think that concerns us all individually, but what I like, and the reason I chose to come over to Bank OZK, is they are very entrepreneurial. When there is dislocation, they’re a leader in the market. That also is one of the reasons we want to get this lender finance and structured financed platform up and running. We want to be well-positioned when there is dislocation, when the institutional traditional capital markets tighten.