It seems as though as the summer of 2013 turned to fall, this year’s harvest has yielded a notable bumper crop … newly formed asset-based lending shops in community banks aimed at financing small- to mid-sized businesses. Since September, the industry has witnessed the launch of ABL units at Signature Bank, mBank (Mackinac Commercial Credit), First Internet Bank of Indiana and most recently, Hudson Valley Bank.

For Stephen Brown, President and CEO of Hudson Valley Bank, the creation of HVB Capital Credit was the perfect next step for the Yonkers, NY-based community bank. With HVB Capital Credit, led by 30-plus year industry veteran Mark Fagnani, Brown intends to send a message to both his existing customers and to the marketplace at large: he and his team members are serious about being a more complete bank to its business customers.

With competition in the ABL space at an all-time high, loan demand relatively thin and margins compressed, ABL Advisor spent time with both Brown and Fagnani to find out more about Hudson Valley’s recent undertaking. Brown explains, “Our entry into the asset-based lending market addresses what we think is a growing need in the market for alternative financing solutions. This initiative is consistent with the bank’s strategy to expand lending offerings and to diversify our loan portfolio from what historically has been a commercial real estate lending effort.”

With complete candor, Brown is quick to point out he’s undaunted by the competitive nature of today’s ABL environment. He notes, “I find the entire banking industry to be competitive … it’s demanding in many ways. Banking is price competitive and demands attention to detail and quality service. As bankers, we are required to differentiate ourselves from our competitors, which we think we do well. With Mark heading up the ABL team, we have brought on capable bankers that have the experience and expertise to build the business.”

In terms of the timing, Brown explains Hudson Valley maintains a strong capital base that will serve as the foundation of the unit’s growth. “We have an abundant amount of liquidity available to lend along with a low cost of funds. This enables us to be priced competitively and at the same time, maintain acceptable margins.”

But, of course, there’s more to the story. Brown continues, “We think that there is significant potential in our market and within our customer base and as the economy continues to strengthen and expand, loan demand will increase. We firmly believe that this is the right type of offering at the right time as companies begin to respond to the strengthening economy.”

Hudson Valley Bank was founded in 1972 with the purpose of banking local businesses and professionals by offering a high degree of personalized service. At Hudson Valley, each customer has a single point of contact to source the resources of the entire organization. “We don’t try to be all things to all people, but we do pride ourselves on the way we build our banking relationships,” Brown says.

“For us, banking is a state of mind and what that means to us is as a community bank serving local businesses, we pay attention to the details. We go ‘into the weeds’ with our customers, we know them, we reach out to them and we make ourselves accessible. Our goal is to make their banking experience not just tolerable, but an experience they actually value.”

Brown assures the entry into the asset-based lending market is therefore a part of a well-executed strategy that began with the search for the right team. “This was a process we brought great diligence to because the right people make all of the difference,” he emphasizes. From Brown’s perspective, Fagnani fit the bill for a number of reasons. “Mark not only brings years of experience, but he has gone through a number of business and economic cycles as well. His track record with larger institutions – experience that I personally find valuable – convinced us that Mark is a professional who could take us from the start-up phase to the establishment of a meaningful business for Hudson Valley. In the end, we took our time and it took longer to select the right people for the job than we had originally thought … but I’m delighted because we ended up with the best team possible.”

Fagnani, who most recently held the offices of Chief Credit Officer and Chairman of the Credit Committee for Wachovia Capital Finance, began his career in 1976 at its predecessor, Congress Financial. He recalls, “I was 20 years old when I began my career. I had terrific bosses who were great mentors and I had every conceivable job in ABL, so I learned the business from the bottom up. And while the names changed … from Congress to First Union Business Credit to Wachovia Capital Finance and ultimately to Wells Fargo Foothill and Wells Fargo Capital Finance, the truth is I never really left Congress.”

As with Brown, Fagnani too remains unruffled by today’s highly competitive environment. He states, “The fact is that while it’s a competitive space, ABL has always been that way for the most part. But in my view, the $25 million and under space has been particularly underserved for the past few years. So while there are a number of entrants trying to occupy that space these days, we are prepared to compete with them. I believe that there are many businesses that still need financing in this space."

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