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“Sometimes the best deals I do are the ones we say no to.” — Kris Foster, president of equipment finance and specialty industries, Pinnacle
Listen in as Equipment Finance News editors interview the leaders in the industry, on both the lender and dealer sides of the table, to discuss new developments, trends, opportunities and more.
Johnnie: Hello and welcome to the dig. Join equipment, finance news editors as they connect with leaders in the equipment finance industry on both the lender and dealer sides of the table to discuss new developments, market analysis, trends, tips and more. I am Johnny Martinez, the second deputy editor of equipment finance news, the one news source for both dealers and lenders. Find us at equipment finance news.com On today's episode of The Dig, I am joined by Chris Foster of Pinnacle, and I will let him introduce himself further.
Kris: Yeah, Johnny, thank you for this opportunity today, and so I'm Chris Foster, and I'm Executive Vice President of our special lending group. I manage three of our businesses, equipment finance, our dealer finance business, we're really focused on floor planning and also JB and b capital, which is sort of a small ticket lender, joined Pinnacle four and a half years ago with three of my good friends, Greg pinchback and Jason Fran Heiser, and it's been, it's been a fun ride.
Johnnie: Fantastic. Well, thank you so much for joining us today. And I want to really get into the the questions, and kind of get your thoughts on what's going on with the CO five industry and what's going on at Pinnacle. I think the best place to start is, where does equipment finance fit within pinnacles broader commercial breaking strategy today, Pinnacle will obviously be involved in so many different things as a company. Where does it fit in the strategy and sort of what you guys do as part of the wider bank?
Kris: Yeah, the easy answer is, right? We provide CNI loan growth, and if you look at our numbers and new growth last year, it represented more than 15% of the new loan growth for the bank. So we're a growth engine for the bank, but I think it's much more than that. It's on the credit side, right? We bring an expertise to those CNI companies, whether it's, you know, understand the cyclicality of a contractor or maybe the leverage of a trucking company. We bring that credit expertise, you know. Then on the operation side, we have equipment finance specific documentation. You know, we're experts at perfecting and, you know, in equipment finance, you need to be secure. So filing UCCS, doing title work on aircraft, working with Oklahoma City, you know, just all these different industries. So that's credit expertise, operational expertise, and then asset management, helping the firm better understand equipment, finance, assets, whether the value of the asset today or into the future. So, you know, we play an important role, and we're proud of the role we play for the bank.
Johnnie: Fantastic. And sort of going into to the, you know, there's been a lot of big activity going on at Pinnacle recently, first and foremost, the merger between Pinnacle and Synovus. And sort of, how does that merger maybe expand or reshape the opportunity set for the equipment finance platform now that there is this much larger entity that you guys are a part of. Yeah, it's certainly an interesting time in banking, right? It seems like every week we open the newspaper and we see one bank acquiring another. So that's certainly the period we're in today. And, you know, I think we found a great partner in Synovus. I was lucky to be in the early stages of the integration. And just, you know, thought was able to connect a lot of like minded people over at Synovus and so.
Kris: And I think they bring a lot of things to bear, you know, technology. But John, what I'm most excited more specifically about equipment finance is they didn't have an equipment finance product. So it's absolute green field for us and a new opportunity. So if you look kind of high level, roughly pinnacle, had 60 billion of assets. And you know, Synovus had 60 billion of assets. So we now have, you know, 4000 team members, new team members to talk equipment finance with all these new customers to talk equipment finance with. So we're really excited, and it's so it's an absolute growth opportunity for myself and our businesses. So excitement is the key word I'd say. And I think mergers can be tricky. I think one of the key things with this merger is there's only 6% overlap, so we fit really well together. As you look at the geography,
Johnnie: gotcha, that makes a ton of sense. As far as that works for for you guys, it sort of getting into your role specifically, right? You're not just responsible for.
Kris: For Pinnacle equipment finance, but also the dealer Services Group, gbmb capital. How does being responsible for you know these three different business units, maybe just your approach to Asset Management at the firm, knowing that you get all these different kind of buckets you have your hands in and these different ways you can go about working with companies. Yeah, so, Johnny, when you smash all those businesses together, right? It's over 4 billion in assets and over 100 people. So it's, it's a great privilege to, you know, be working with a team of that size when you focus really on asset management. You know, I think a lot of regional banks, you know, don't have or people that don't have an equipment finance focus don't really understand the asset piece of the equation. And maybe I'll share a little story from with with you when I interviewed with Pinnacle four and a half years ago. So I'm having my first interviews with pinnacle. I must have met even 910 people. And you know, we're hitting it off. We're talking about loan growth and all this opportunity. In my last meeting with was with our chief credit officer, and you know, he hits me right between the eyes, right on the shoe, and he's like, you know, Chris, you seem like a great guy, but I have a concern about equipment finance. And to be honest with you, a lot of our losses have come in the equipment, finance space, and so, you know, kind of rock back, and now it's like, whoa. Help me understand these losses. So the first example he shares with me is, is, was in the aviation space, you know, lost a large chunk of money on an aircraft. And I said, Give me some more details. Well, the company's, you know, hard chart, it was a heavy Charter Business. They made all their money in the charter space the engines. We lost multiple millions of dollars on the engines. Whoa, whoa, whoa, hey, you know, let me tell you about I've been in equipment finance for 30 years, and so we really don't focus on the charter aviation space, right? We lend money to people in the aviation space that make their money for their high net worth individuals are going to pay that bill through their operating company, a manufacturing company, some other company, you know, we make sure that we finance aircraft. They're on an engine program, and so on and so forth. So then we talked about the next asset and the next assets after that. And after that conversation, he looked at me and said, I think you're a perfect fit for what we're going to do here at Pinnacle. And he was a massive advocate for us early on as we were building out this business. So I think that, you know, I think if people can look at, you know, the loan growth is obviously an important feature of equipment finance, but understanding that asset and bringing that asset discipline is a huge piece to our puzzle, and help can mitigate losses. So I like to say a lot of you know, sometimes the best deals I do are the ones we say no to
Johnnie: gotcha No. That makes a ton of sense. And I think with that in mind, how are you thinking about the portfolio structure and the credit discipline in the current rate environment. You know, sometimes, like you were saying some of the best deals you ever the deals you say no to. And right now, there's a complicated environment that maybe that is still the case at times, and other times it's not.
Kris: Yeah, you're right. And so, you know, right? I mean, client selection is really, really key. And so we're blessed to have a really senior team. The average tenure on my team is 25 years. So we have an advantage of, kind of having a longer history with a lot of these companies and knowing this leadership. So that's a key piece of that is like that client selection, please place. But I don't think we're different, much different from a lot of the other banks out there. You know, we're looking for three to five years in business, right? Not a customer concentration, a proven cash flow, strong balance sheet, right? You know, I think a lot of us are in that similar place, you know, where we're looking to separate ourselves from all the competition is that customer experience and client experience, in operating with speed and surety. That's where we're trying to separate ourselves, and that's where we're focused.
Johnnie: Gotcha. That makes sense. And as you guys are sort of building out the strategy and figuring out what it all looks like, especially with the now combined bank, and the bank sort of working on its capital strategy and funding strategy. How does that maybe influence growth priorities for the equipment finance business now that is just a larger entity post-merger,
Kris: Yeah, you know, we started this business, you know, right out of covid. And certainly it was an interesting period. And then and then. But, you know, a year or so later, we had that regional bank scare of 22,23 and boy, that was an interesting period in this business, right? And so some of our competitors folded. Some of our competitors chose to say, hey, we're only going to use our capital. Capital for our customers. And, you know, in that, there was a lot of talk about, you know, capital was key. People were wondering what how important it was to have deposits to lend. So that capital allocation, kind of, more to your question, is an important piece of the equation. There were concerns around CRE, but that was a great time for our business. So while all of our competitors from question what direction they were going to do or if they were going to lend, in general, it was an opportunity for me to get in front of our senior leadership and team and say, Hey, see, equipment finance, and specifically CNI loan growth is a way to help diversify our portfolio away from or less of a concentration from cre and a way to push our loans into the southeast. So I feel very blessed to have you in support of senior leadership and all the capital we need to grow these businesses.
Johnnie: Gotcha. And with that in mind, as you're looking at growth and looking at the kind of where you're taking the equipment, finance business, right, with all the competition in today's environment starting to heat bank up coming out of covid, where we started to lose some people in the industry. How do you guys balance the pricing pressure element with maintaining, you know, the strong risk adjusted returns.
Kris: Yeah, there's a lot of pricing pressure out there. And I think, I think people are getting coming back into the space. So, you know, we're fighting on every deal. I think, you know, a lot of our competitors, or a lot of the people in the industry, use pricing models, right array, rock roe models. That's a big piece of this industry. You know, I've certainly been around them in my 30 years of doing the business or in this business. And you know, we don't Pinnacle here. We're not looking to make decisions based on what what that model tells you, because inherently, in my experience, I think a lot of those models, they're directional, but they're flawed. We're evaluating risk and return on every deal. We're not going to plug a deal in the model and see what kind of score pops out. We're going to, there's a lot of different factors. And I think, you know, we're going to, I'm going to rely on that 25 years of agile experience from our team to make the best judgment on whether we should do the deal or not, or what's that rate of return. I mean, whether it's a customer, the industry, the strength of the customer. There are a lot of factors, but we're not going to rely on that model to make the decision. I want to rely on that kind of those senior people in our firm to make, make the each decision based on each individual opportunity, evaluate it holistically.
Johnnie: Got you know, that makes a ton of sense, but with that mind, I'm kind of curious, you know, you talk about using the model versus using your experience. How is maybe technology, or, you know, enhanced data capabilities improve things like underwriting and portfolio monitoring, knowing that you're also coming at it with all the experience and sort of melding that together.
Kris: Yeah, great question. Um, you know technology, so when you're we've been on the growth clip that we've been on. So just specifically our equipment finance business, we started four and a half years ago, right at zero de novo and three employees to now over 2 billion in assets. And just specifically in equipment finance 30 So technology is an important part of that equation, and becoming more efficient. So, you know, we're looking at a lot of different AI products. We're looking we're leveraging copilot, we're using AI to help identify, on the sales side, some customers. You know, I'm curious about some of it. You're reading about how we people are leveraging AI to help evaluate financial statements and things like that. So we're on the surface level. We haven't plunged deep, but the investment in technology and that piece is really important. So you know, now that we're coming together with Synovus and have this growth, you know, our data is a real important piece of the equation. So we're a process of building out additional capabilities with our APIs and integrating those into different platforms so we can better understand our data and better and make better decisions. So I'd say a lot of the focus is on processes and data. But man, I'm really curious about all the things that AI can bring to the equation.
Johnnie: For sure. No, that makes it a ton of sense.
Kris: And yeah, I know, especially now, there's so many things that AI can do, but there's so many things that people are figuring out what it can do for the equipment, finance space, especially. So just the opportunity to sort of see everything that's that's going on, technology is really important. And you know, from banks, we can never outspend the big guys, right? And I can't get $1 for dollar technology war with the big banks out there, so we're going to invest in it. We're going to put into it. But man, I where I'm really focused is that client experience, right, and making sure we take care of our customers with a personal touch, right?
Johnnie: No, for sure, that makes sense. And I think a fascinating point in working on that client experience, and bring all your experience into the industry. I'm curious, when you're or if you were giving advice to someone who's just getting started in the space, what one piece of advice would you share with them, given your kind of view on customer experience and bringing your personal experience into the banking side of it all?
Kris: Yeah, my first one, John was, stay, right? We're having, there are not enough people in our industry, right? You know, I started in the 90s, and there were great companies like GE Capital, CIT, associates, Oryx, there's a lot of us old folks here. We got some gray hair that started in, that started at those great institutions, and they were the training ground for so many of this, so many people in this industry. So we have less of that, those people, training people in this industry. So first stay, and then the second place is, is, you know, is build relationships. At the core of any business is build relationships across your bank, across your institution, develop mentors. I've had so many great mentors and mentors that have impacted my life and it made me better. So think about building relationships, finding mentors. It's a small industry, and you don't know who you're going to come across at one day that maybe was a co worker. Next thing you know is they're running an equivalent finance group. So build those relationships, develop mentors and learn as much as you can. The people that are really valuable to us not only know the sales side, they have strong credit expertise. They can help on the operation side. So just jump in. It probably not going to happen as quickly as you want it to happen, but they absorb as much as you can and learn as much as you can across the industry, but my most important ones, stay with us. There's not enough of us around. We need we need more youth in this business.
Johnnie: Got you know that that makes a ton of sense. And I think with that in mind, you know, we hope that people come into the industry, stay in the industry, and stay involved is sort of, where do you see the industry headed for, you know, the foreseeable future, the potential opportunities, or even the potential risk, especially for the banks and the equipment finance space,
Kris: Yeah, you know, I mean, I think on the risk side, Johnny, you know, uncertainty is never good, right? And, boy, man, we have a lot of uncertainty right now, every time of the paper right, it's some war skirmish, or whatever the right term is these days for that. So there's a lot of geopolitical uncertainty. Boy, these tariffs, and in talking to our customers, what percent do they need to add? Are we going to finance that? So the tariffs are kind of whirling around. So there's, there is a lot of uncertainty out there. And so you've got to, you've got, certainly got to be mindful, and that's never good for business. But you know, John, I'm a half-full guy, and boy, I see a lot of positive things out there. I mean, we've got bonus depreciation for industry, which is a huge, I think, a huge help. You know, we're moving reshoring. We've got manufacturing coming back here to the States, which I think creates a lot of opportunities. You know, not too long ago, maybe six months ago, we thought we're going to have some more falling interest rates, and now seems like maybe that's stabilized. We've got a new Fed Chairman now, and Kevin Warsh, maybe we'll see what he does. But, you know, I think the rate environment will certainly stabilize or be more favorable, from coming from where we were a couple years ago. Ai infrastructure, man, I think there's a lot of great things that are going to help drive equipment, finance, no, But at the end of the day, I can't control a lot of those things. And so, you know, what I'm kind of hyper focused on is our employees and our employee engagement. And, you know, kind of Pinnacle, we have a model here. And what we think is, is is, if our employees are excited about work, coming to work every day, that excitement is going to translate to our clients, and they're going to have this amazing experience, then they're going to become raving fans. And that's kind of what I'm focused on, is, you know, is you look at kind of the industry today. I mean, a lot of my a lot of our peers out there, they're counting their badge swipes as they come into the office every day. They're monitoring how many clicks they have on the computer. And I don't think a lot of people are, you know, I wouldn't like having to do that, you know. So at Pinnacle, we're really leaning in, and I'm really leaning in on our associates, because, like I said, going back to the equation, I think excited associates translate to great customer experiences. And when our customers have a great experience, they want to come back and use us. And so we want, we want to have that repeat client and be a customer of ours for a long, long time. So that's what I focus on every day.
Johnnie: Gotcha No, that makes a ton of sense, and it sounds like great stuff, and it's great getting your insights on the industry and what you guys doing at Pinnacle today. So I thank you so much for your time this morning.
Kris: Thanks John.
Johnnie: Thank you for joining us for the dig, where we aim to take the industry and you to better results. You. This podcast is a production of equipment finance news. Visit equipment finance news.com to learn more about our lender directory and about our annual event. Equipment finance Connect. Equipment finance Connect is where lenders and dealers come together to network and connect around financing opportunities. We hope you will join us for next month's episode of The Dig. You.