- Key takeaway: Residential infill construction, which is growing in importance as the nation's housing stock ages, could be the tool Gateway Bank in Oakland, California, needs to complete its turnaround effort.
- Supporting data: Infill projects made up about 7% of the nation's homebuilding starts in 2025, according to National Association of Home Builders Chief Economist Robert Dietz.
- Expert quote: "Our developers are very specialized in taking existing single-family homes in very established neighborhoods, tearing them down basically and rebuilding." — Gateway Bank CEO Mukhtar Ali
Gateway Bank in Oakland, California, is nearing the finish line of a long-running turnaround. President and CEO Mukhtar Ali believes he may have put the final piece in place by hiring a veteran residential-construction lending team.
On Thursday, the $288 million-asset Gateway named Tom Rodriguez executive vice president and construction manager. Twana Sonesing was named associate vice president and construction underwriter. They will make loans to developers of residential infill projects, which often involve tearing down an older home and replacing it with a larger, more modern one.
"The kind of construction we do is generally single-family in-fill development, versus large subdevelopments of 20, 30, 50 houses," Ali told American Banker. "Our developers are very specialized in taking existing single-family homes in very established neighborhoods, tearing them down basically and rebuilding."
In the San Francisco Bay Area, such modernized housing developments, built in around 12 to 15 months and situated mainly in established neighborhoods, generally sells quickly. "Their time on the market is measured in days, not weeks," Ali said.
Strong demand for the newly built homes tends to lessen the lenders' risk, though the construction loans are still considered speculative.
Smaller-scale custom residential construction is expected to increase in importance as the nation's housing stock continues to age, according to Robert Dietz, chief economist at the National Association of Home Builders.
"We see remodeling really expanding over the next decade because of the aging housing stock," Dietz told American Banker. "More tear-down construction. More infill development."
Banks, including smaller regional and community banks, are well-positioned to capture their fair share of the market, Dietz said. The projects themselves are relatively small. The builders that specialize in infill construction are also smaller, so they're more likely to turn to banks for financing.
Dietz estimated that 7% of the nation's 943,000 housing starts in 2025 — more than 66,0000 — were tear-down jobs. "I think it's a real growth area," he said.
Ali joined Gateway in August 2025 as president and chief operating officer. He was elevated to the CEO position in February, following predecessor Arnold Grisham's retirement. Under Ali's leadership, the two-branch bank has narrowed its losses — from $3.9 million in 2025 to $507,000 through the first six months of 2026.
Now, Ali is counting on the residential-construction initiative, which is expected to generate solid levels of fee income and low-cost core deposits, to push the company past break-even.
The interest income that the construction loans generate is supplemented by fee income, Ali said.
"We price them well, so that [fees] get accreted to the yield, and the yield on these loans is much better than regular commercial real estate loans." Gateway expects to convert many of the developers it lends to into banking clients, creating deposit opportunities.
"With all of that, I think [residential construction] will be a big contributor to the return to profitability," Ali said.
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Rodriguez' track record lends credibility to Ali's projection. Rodriguez served as construction development manager at Oakland-based Community Bank of the Bay prior to that bank's
"I've worked with Tom close to 20 years at other banks," Ali said. "He's a very well-respected construction lender in the market."
Gateway was founded in 1990 as a thrift. For most of its history, it focused on residential mortgages, funding its portfolio with certificates of deposit.
While that traditional thrift strategy worked well during Gateway's early years, the bank has struggled over the past decade. A former CEO
In December 2021, Gateway agreed to sell itself to the $4.3 billion-asset RBB Bancorp in Los Angeles, but the parties struggled to close the deal, and it was canceled in September 2023.
Over the past year, though, Gateway has taken big strides toward recovery. The Office of the Comptroller of the Currency terminated a nearly five-year-old consent order in August 2025.
In February, Gateway announced the completion of a $16.1 million private placement. The following month, it celebrated the opening of a branch in Walnut Creek, California.
