Dan Croft heads up the Healthcare Practice Solutions Group (HPSG) for TD Bank and his line of business recently hit a major milestone.
In the middle of a historic 2020, with economic lockdowns due to COVID-19, the HPSG eclipsed the $1 billion portfolio milestone after just five years in existence.
Croft isn't resting on this incredible success but thinking about the customer and his colleagues in 2021, who are producing more than ever for the bank.
We sat down with Croft for a revealing chat about his line of business, how COVID-19 has changed things and what the future holds for the group.
How has the HPSG progressed from where you started five years ago to reaching a $1 billion milestone last year?
We launched the business model that we have today in September 2015, developing a specialty healthcare lending group for both small business healthcare and commercial healthcare sectors. Creating the practice value or enterprise value policy for these two platforms took about a year and a half to accomplish. At that point, we hired healthcare industry credit management and line of business experts, and then went to market as the new TD Bank HPSG.
It's essentially a stand-alone healthcare vertical that handles practice finance deals in the small business and commercial space. We built a competitive program, including credit standards, products and hired the best team in the industry.
We also focused our business on deals up to $12 million in exposure in four main verticals, which are dental, veterinary, medical and eye care. It's very laser focused, and we brought in people who truly understand the space.
How has your leadership and the leadership within your line of business helped contribute to the growth you've seen in the last five years?
Like any business, it's a relationship industry. I've been in the healthcare practice finance space for almost 30 years and I hired people to lead that had impeccable reputations and long-term relationships within our four industry verticals.
Think of each of these worlds – dental, medical, eye and vet – as four separate worlds, and the same people travel within those circles. You have specialty colleagues who just work with professionals in these fields and know the business front to back.
If you look at the business today, 75% of the business is self-sourced by our Healthcare Specialist BDOs, with referrals coming from Centers of Influence (CPA, Attorney, Consultants, etc.) and doctors. That's why our business grew so quickly. We hired people that had relationships, locally, regionally and nationally.
What's unique about TD's approach as compared to competitors?
We have a real consultative approach. Other banks are more transactional, but we are relationship focused. We take an industry advisor role and using those relationships, we are able to really support our customers in a unique and special way.
We execute and demonstrate that we can get deals approved and closed in a timely manner, but with a human touch and that's what TD Bank is all about.
How would you describe your business and how has it shifted amid COVID-19?
Well, 70% of our business today is dental and 15% is veterinarian. So, 85% is what we call our lowest risk segments, as defined by policy. Then we have medical and eye care, which are some of our fastest growing verticals.
With COVID-19 though, a lot of dental practices were obviously shut down for months. Vet wasn't really impacted that much by COVID, but dental was. So, we put together a 35-40-page White Paper detailing the impact of COVID-19 on dental practices, collecting both external industry data and surveys, and internal commercial healthcare COVID-19 questionnaires. The goal was to enhance our ability to identify and further mitigate the risk factors from this pandemic. One of the key findings from the White Paper was the validation that dental practices had rebounded very quickly, rehiring around 95% of their staff and businesses are doing close to 90% of what they were doing pre-COVID.
Are there any products that are key to your business?
We have two specialty healthcare practice finance credit centers here for my team. We have a small business credit center adjudicating healthcare loans up to $1 million and we have a second commercial healthcare credit team for loan exposures from $1 million to $12 million.
We are able to use the intangible assets like patient records and goodwill that allow us to lend against those enterprise assets that act as the collateral for the loan. It's a special way to lend outside the usual lending against equipment, real estate and other tangible assets.
There's also been a major shift recently, including amid COVID-19, increasing practice consolidation and deal sizes, with practices being bought by other private doctors, private equity and corporate franchises.
The last two years, we've done almost 15 deals over $3 million in that lending space. We've followed the market dynamics and how things are changing, while always staying within our credit risk appetite, and not increasing our risk profile. So, as the market has shifted, we've been able to successfully shift with it.
What do you consider your biggest milestone in the past five years in this role?
I would say the educational platform we built. This is a real specialty business. It allows for people to come to us and then we can talk to them about their dental practice, their vet practice and discuss what's going on behind the curtain as a practice owner, clinician and manager.
With that, we advise them on how to expand their practice or purchase their first practice, obtain commercial real estate and more. This is our core value proposition along with the TD Bank brand and One TD model.
To facilitate that, we put together an educational library or intranet site so that we could educate and train the entire bank. We have 24 best practice articles written by our team, 12 monthly lunch & learn webinar training decks, we have practice profiles for each of our segments and lots of other educational materials.
How has COVID-19 affected you personally as a leader?
Well, I knew we had a good team, but you don't really know how good until you get tested. The team has responded in an amazing, productive way, not only contributing to the TD Bank PPP and loan deferral customer response, but also delivering a new money annual loan production milestone of $390 million, up an incredible 35% year over year, amid COVID and more.
I'm amazed by the team across the board, but it's been hard as a leader. I usually travel quite a bit. I'm often at trade shows, and conferences with my team, and also meeting with local market teams. I miss seeing the teams and spending time with customers and clients. For me personally, that's been hard.
Also, I know even though our business is doing very well, it comes at a cost. People are working harder than ever. It's stressful with people working out of their homes with their children, being kicked off computers and it's important to note that we as leaders see it and empathize. They've done it without complaining, showing incredible focus, resilience and commitment.
You mentioned consolidation and expansion has been big during COVID, what was the road map to making sure those loans were good for the business and the bank?
We needed to figure out three stages.
What was going on pre-COVID, like in January or February, what happened during the pandemic closures and what's happened since the business re-opened for full-time operations.
We needed to understand some questions like percent of rescheduled patients, cancelled patients, revenues, did the business take out a PPP loan and did they rehire staff?
That gave my team confidence that TD Bank can still lend to these practices as long as their businesses rebounded accordingly. The patients didn't go away, they just delayed going to their local doctors, due to their businesses being closed for a few months. They still need to go to the dentist, vet and physician, and the pandemic has illustrated that these are all essential businesses.
We didn't do all the deals that came our way, but a lot of the practices we worked with, we were comfortable doing deals because their practices had recovered quickly when the economy began to open back up again.
What can TD continue to do to move toward being the Better Bank?
We often talk about the customer and colleague experience and at the end of the day, that's what this is all about.
We keep growing and that's put pressure on our entire healthcare team.
The fact is people are busier than they have ever been. The plan in 2021 is to continue to invest in our business and our people. It’s the work-life balance we often talk about and the customer experience that are both essential ingredients for long-term sustained growth, therefore we are focusing on operational excellence, improving our processes, efficience and expanding our capacity model.