One community bank’s novel approach to auto lending

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Access National in Reston, Va., aims to be contrarian — yet careful — with auto lending.

The $2.9 billion-asset company has created an automotive lending division and hired an industry veteran to run it. But don’t expect Access to immediately start making loans to car buyers.

The group will initially focus on financing commercial real estate deals and acquisition for dealerships, said Michael Clarke, Access’ CEO. That will allow Access to become more familiar with the market, while giving dealerships a chance to learn more about the company.

Dealers “don’t switch easily in terms of going from one [lender] to another,” Clarke said. “It’s a notoriously cyclical business, so they want to see a commitment — in good times and bad. Once you establish yourself as a trusted adviser, they’re very loyal.”

Several factors encouraged Access to make the move.

The company recently hired Roy Giese, who has managed dealership lending teams for more than three decades, to lead the venture. Giese was a mainstay at First Virginia Banks, which was sold in 2004 to BB&T.

Access plans to use Giese’s extensive contacts to get its foot in the door, Clarke said.

The recent purchase of Middleburg Financial nearly doubled Access’ asset size and significantly increased its lending capacity, opening the door to courting larger clients such as car dealers. The move will also allow Access, best known for lending to government contractors, to diversify.

Middleburg “has given us the scale and flexibility to consider different types of industry exposures,” Clarke said.

“There was a lot of good strategic rationale” for the Middleburg acquisition, Joe Gladue, an analyst at Marion Capital Group, said, though he prefers to observe another quarter of results before declaring the deal a success.

Access’ move comes as a time when several major banks are stepping back, ceding market share to credit unions and other nonbanks.

The $23 billion-asset TCF Financial in Wayzata, Minn., recently said it would stop originating indirect auto loans. The $19 billion-asset Chemical Financial in Midland, Mich., and the $4.5 billion-asset Fidelity Southern in Atlanta have de-emphasized auto-related lending as car sales have leveled off.

Sales of new cars and light trucks fell about 2% in 2017, to 17.2 million, the first year-over-year decline since 2009, according to Autodata.

Still, it was the third straight year that sales topped 17 million.

“Sales were down slightly from 2016, but it was still an excellent year,” Clarke said.

Given the company’s cautious approach, the auto initiative doesn’t alarm Gladue. At the same time, tough patches afford an opportunity for lenders to prove themselves to borrowers.

“You can’t wait until conditions are booming to get into it,” Gladue said.

“Auto can be up-and-down,” Gladue added. “There have been some signs of headwinds, but I don’t think sales are going to fall off a cliff.”

Access, which has made a number of other moves since buying Middleburg, is well on its way to exceeding management’s goal of making $200 million of new loans annually, Clarke said.

The bank has hired a number of new commercial lenders, expanded its government contracting division and upgraded its treasury management offerings.

“We’ve been hiring like crazy,” Clarke said.

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Community banking Auto lending Auto industry Growth strategies Auto ABS Virginia Washington DC