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Scottrade: Financing American Ambition, Driving Growth

Date: Feb 05, 2014 @ 07:00 AM

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.”

Photo of Frederick Van Etten - President - Scottrade Bank Equipment Finance

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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