Today Billboard Insider begins a series on out of home lenders with a profile of Alerus Financial.
Out of Home Lender: Alerus Financial
Loan Amounts: $1 million and up.
Last week Billboard Insider talked with Alerus Financial Executive Steve Haggard about trends in the out of home lending market. Haggard joined Alerus through its 2022 merger with Metro Phoenix Bank.
Steve what’s new at Alerus Financial over the past year
We’ve continuing to integrate after the Alerus merger. We’re about 20 months into the process. Alerus wants continue to grow and scale the Out of Home lending vertical. They have supported that program. We’ve got a team approximately 5 people in out of home….I think the big difference between Metro Phoenix Bank and Alerus is that the merger gives us more dry powder and provides us more resources and the capacity to move upstream to facilitate bigger transactions.
What’s the smallest deal you’ll look at?
$1,000,000. We’ll look at something below that if there’s a growth path or there’s some other redeeming reason but generally speaking $1,000,000 is where we start.
How big is your out of home loan portfolio.
$120 million. We would like to double the portfolio within 36 months.
Pricing trends.
Because interest rates went up so quickly and the market remains challenged with an inverted or flat yield cureve, we are looking at a more manageable fixed rate options for the borrowers. However, we continue to lend at a floating rates as well. Our “going-in” interest rates are currently in the mid-8’s.
Do you require a third party appraisal?
Not every deal but most of the time. For larger or more complicated loans, we use ASA or MAI certified appraisers like Paul Wright of SignValue or Donna Desmond. For smaller deals we may use a broker opinion.
What trends are impacting banks?
Although the flashing headlines are accentuating the commercial real estate exposure in banks, the reality is that the primary risk the naysayers are talking about are portfolios of real estate in large urban central business districts….dense office and residential/condo high rises. Most community and regional banks do not lend in this space and therefore have very little exposure to the asset class. If community and regional banks have real estate exposure, it is typically suburban, small office, retail and industrial assets, which continue to perform quite well in terms of vacancies. Furthermore, banks across the country in general have yet to see material downgrades in their overall credit quality. The headlines also strategically ignore the fact that underwriting fundamental have been much stronger (i.e. more equity was required in these projects) compared to the last recession and bank capitalization is quite robust. It is accurate that community/regional bank lending has slowed down, but that has been driven more by the tightened liquidity in the market rather than the erosion of credit quality (specifically commercial real estate).
To learn more about Alerus Financial and Out of Home Lending contact Steve Haggard at steve.haggard@alerus.com or Nick Gonzales at nick.gonzales@alerus.com.
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