Marshall BankFirst Corp. of Minneapolis, which has built a business on making commercial real estate loans, now wants to diversify its portfolio by more than doubling its commercial and industrial loans over the next year.
To reach that goal it has hired John G. Kimball as the president of its subsidiary banks, BankFirst in Sioux Falls, S.D., and Marshall Bank in Hallock, Minn. He had spent the past four years as the Minneapolis regional president for the $21.3 billion-asset Associated Banc-Corp of Green Bay, Wis.
Mr. Kimball is looking to add $70 million of new commercial and industrial loans to the $60 million Marshall BankFirst had at the end of the first quarter, in part by tapping his contacts in the Minneapolis area.
“You work in the community for a while, and you get to know people,” he said. “I have a good network of referral sources, as do the people I work with in the bank.”
The $605 million-asset Marshall BankFirst does not plan to cut back on its commercial real estate lending but wants to cap it at about 70% of its total portfolio, said Scott Anderson, its vice chairman and chief operating officer. At the end of the first quarter commercial real estate was about 66% of its portfolio.
Adding commercial and industrial loans would diversify its revenue sources and put the excess funds the company got when it sold its portfolio of credit card receivables last year for $320 million into higher-yielding loans, rather than in securities and cash on hand.
“By hiring John to add the commercial and industrial product, this helps maintain the diversification in the loan portfolio that we need,” Mr. Anderson said.
The move to diversify comes at a time when the regulators have raised concerns about commercial real estate concentrations at banks and have proposed guidelines that could require them to hold more capital against commercial real estate loans. Mr. Kimble said it was coincidence rather than concern about regulations that led him to join Marshall BankFirst. Until final guidelines come down, it is premature to make any decisions based on them, he said.
“Just out of good business practice we are working to diversify our revenue stream, which is what every bank generally aspires to do,” Mr. Kimball said.
He aims to add $20 million in growth by the end of June, and said he expects to meet his goal for the year. Marshall BankFirst will focus primarily on companies in the upper Midwest, starting with those in the Twin Cities, he said.
Two things will drive its growth. The first is that the lenders on the commercial real estate side will refer business. The second is that Mr. Kimball is working to form a “club” of local banks with which he can share larger commercial and industrial loans.
“If we find a deal that is a little larger than our hold limit, we can easily find a place for it,” he said.
Marshall BankFirst has built a business out of making large commercial real estate loans and selling pieces of them to a network of 1,300 banks nationwide. The company grew out of Marshall Group, a firm founded in 2001 to make and sell commercial real estate loans to banks.
In 2003, Marshall Group’s founder, Dennis M. Mathisen, bought the $40 million-asset Northwestern State Bank of Hallock, which was renamed Marshall Bank. In January 2005 he bought the $534 million-asset BankFirst Corp. of Sioux Falls and merged the two companies to create Marshall BankFirst. From 2001 to 2005 the company originated about $2.1 billion of loans and participated in 2,589 loans with other banks. Commercial real estate loans made up 73% of that volume.
On the commercial and industrial side, Marshall BankFirst would focus on lending to privately owned businesses with revenue of $5 million to $50 million. The average loan would be somewhere in the range of $1 million to $10 million, Mr. Kimball said. He said that with his connections and those of the other bankers at the company he should be able to find enough business to diversify the portfolio.
“The folks that are concentrating on the real estate business have connections, and they refer business to us as well,” he said. “The reason I was brought in … is to help capitalize on that and be more of a one-stop shop.”
