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M&T: Banking on Equipment Finance as a Growth Engine

Date: May 31, 2019 @ 08:00 AM

In April, M&T Bank announced it had launched a series of steps to grow its Commercial Equipment Finance Division to serve more commercial and municipal customers across the U.S. This expansion includes the appointment of a team of experienced equipment finance professionals to various management roles as well as the development of a transaction buy desk.

Equipment Finance Advisor sat with Frank Campagna, Group Vice President for Equipment Finance at M&T Bank, to learn more about the bank’s strategic initiatives to expand its presence in the equipment finance sector. He has been with the bank since 2001 and the division since 2015.

Equipment Finance Advisor: M&T has been in the equipment finance space for years. Why is M&T expanding this division now – especially when we hear rumblings of a possible recession.

Photo of Frank Campagna - Group Vice President for Equipment Finance - M&T Bank

Frank Campagna: M&T’s commercial banking business is focused primarily on the middle market. Our customers are traditional C&I clients. They have weathered many storms, as has M&T. I know everyone is concerned about the rumblings of recession or a pull back. We don’t think there is a financial crisis on the horizon. We are seeing potential for some retrenchment. People are being a little more guarded with their CAPEX plans, trying to decide if they will spend money now or later.

When we look at a potential retrenchment, we also see an opportunity. Our clients and prospective clients still have the same needs. Our clients are in the business of using equipment to run their businesses and make money. Our business is to understand the equipment they use and really understand their businesses. We look at this expansion as a natural progression of what the bank does.

Equipment Finance Advisor: Can you give our readers a snapshot view of the division?

Campagna: We are on the low end of the spectrum when it comes to bank-owned equipment finance groups. We are managing approximately $2 billion in assets. This year we will do about $700 million in new originations; last year we did a little over $600 million. We are targeting growth over the next three years to be about $3 billion and in five years in the area of $5 billion of managed assets. That will put us in a year-over-year new origination range of about $1 billion. It is a reasonable growth projection. It may seem aggressive, but when you look at it in comparison to our peers it’s really not that aggressive.

We have about 55 people in our group—divided among direct originators and support, including our own documentation group, tax and accounting group, and equipment management group. We run a highly efficient organization, and our efficiency ratio is very good within the bank. There is a lot of intellectual capital here, and part of what we are doing is using that same capital to help grow in different areas.

In terms of transaction size, our floor is around $150,000; $2 million is our bread-and-butter deal. We are not a small-ticket shop today. I see someday, maybe through an acquisition, getting into the small-ticket market so we could service vendor business better. There is strong growth in some of our areas of focus, such as transportation and construction. There is a lot of opportunity in small-ticket leasing, but we need to service it differently than we do today with middle-market and large-ticket business.

Equipment Finance Advisor: Our research indicates M&T Bank operates primarily within an eight-state footprint, along with recently opened commercial offices in Florida and Boston. Will M&T be expanding its equipment finance presence beyond its primary footprint?

Campagna: If you look at the primary business that we do, we follow the commercial bank. If you look where the brick and mortar is, it is primarily an eight-state region. But not long ago, M&T acquired Wilmington Trust and with that its entire Wealth Management business. The business is spread throughout the United States. We support some of their business, particularly its private banking business. We are expanding our corporate air business, following Wilmington Trust private banking people, because it is a natural extension of their client base. Other areas within M&T, such as dealer commercial services which handles the floor plan business for both auto and recreational vehicles, are conducted throughout the United States.

We are not leaving our primary focus supporting the commercial bank’s middle market efforts. We are supporting their clients and helping prospect for new clients. The first layer of expansion is following these other M&T businesses that conduct business around the United States, which makes us a bit more of national player. 

There is a group within the bank that has national customers, which are large-ticket clients, and we service their equipment financing needs as well. One of the sectors we are very heavily into is transportation. There are natural extensions for us in that sector with rail, brown water marine, aviation, and truck and trailer.

Equipment Finance Advisor: John Wolfe has been named Director of Business Development. He will oversee the sales team and be developing a group specializing in acquiring equipment finance transactions. Will M&T be starting a buy desk for the first time for such transactions?

Campagna: It is new. We have dabbled in syndications working with the bank’s capital markets team. But that team is focused primarily on loan participations—big transactions, either securitized transactions or big syndicated deals. They are not focused on individual equipment lease transactions. It’s two different worlds. We never have had a focused buy desk.

M&T makes a lot of money. As a result, it pays a lot of taxes; which makes us a big tax lease player. The more tax lease products we can bring to the bank, the more benefit we are providing. So along with all of our other avenues of direct origination, it makes sense for us to have a buy desk to help expand and diversify the portfolio. It is done as an enhancement of our growth strategy.

Equipment Finance Advisor: Please describe the types of companies and transactions the EF division will pursue.

Campagna: We have spent the last 24 months becoming a serious player in renewable energy. We walked into it slowly until we learned how to do the transactions and we put the right team in place. We are a very serious player now in renewable energy. We are doing not only sale/leasebacks, but tax participation flips — where at some point in time the partnership allocations are redistributed. We are doing mostly utility grade projects. It takes us away from our traditional middle market, but we are doing what we have always done: providing an understanding the benefits of tax leases and investment tax credits, and managing that business process.

We have been a rail player since M&T acquired Allfirst Financial Inc. and its portfolio in 2003. Marine is another area where we have expanded, financing barges and tugs. Many states M&T operates in touch water—meaning we have a coastal footprint and a river footprint. As a result, we see a lot of terminal business.

Equipment Finance Advisor: Will your direct origination team be working with the traditional bank C&I lenders to provide equipment financing options, or will it work independently from the C&I lenders?

Campagna: I would say 75 percent to 85 percent of our business comes from working collaboratively with C&I lenders; we are not in competition. We took this model on a long time ago where we work as a solution partner. We bring the tools that go beyond traditional banking, with a credit focus. People in our organization really understand equipment. When we sit together with the relationship manager and the client, we understand why the client is acquiring that equipment and how they use it.

We also are expanding our focus to where we don’t have established relationship managers, but where there are clients or potential clients that have similar financing needs. We are using that as an expansion model to start doing business on a direct basis. The non-M&T customer segment is 20 percent and growing. Definitely with renewable energy; that is all non-bank customers, although we are taking that expertise and bringing it into the commercial bank. It is a whole different product set, such as commercial real estate clients that are doing rooftop solar or companies that are working to develop community solar. That fits more into the regional banking footprint. Those tend to be smaller deals, $1 million to $3 million where the larger renewable deals are $30 million to $100 million.

Equipment Finance Advisor: How would you describe the credit profile of your target companies.

Campagna: A and B type credits are our focus at M&T. We don’t chase lower grade credits. The strong credit culture of M&T has gotten us through a lot of rocky times and helped us remain profitable. We will maintain the same credit culture.

When this division began, we were just a defensive machine. Our job was to keep out the competition when a competitor was offering leasing instead of loan. That was 20 years ago. Today the bank embraces what we do as a way to develop new customers. We are the key middle market prospecting tool for getting into new clients because most of M&T’s clients use equipment. We’ve shown the bank we can mitigate risk a lot better through ownership of the equipment or securing their interest in the equipment. 

The bank has embraced us as a method of growth. It’s a very exciting time for our group.

Mike Dickinson
Editor | Equipment Finance Advisor
Mike Dickinson is Editor of Equipment Finance Advisor. Dickinson has more than 30 years of experience as an Editor and Reporter. He spent 20-plus years at the Rochester Business Journal in Rochester, NY, including 18 years as Managing Editor. He also covered Eastman Kodak, technology, optics and telecommunications, among other areas. His writing and reporting on Eastman Kodak won 1st Place – 2012 National Newspaper Association Best Business Story and the Gold Award – 2012 Alliance of Area Business Publishers for Breaking-news coverage. He also won the Silver Award – 2001 Alliance of Area Business Publishers Best Coverage of Local Breaking News – Global Crossing. Prior to working in the business news arena, Dickinson was a reporter for the daily newspapers in Syracuse, NY, and Batavia, NY. Dickinson holds a Bachelor’s Degree in Mass Communications/Journalism from St. Bonaventure University.
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