United Community Banks in Blairsville, Ga., is the latest bank to focus on baby boomers, but not in the business that most people relate to that generation.
Most talk about banking baby boomers has centered on wealth management as that generation ages and starts looking to transfer wealth to their children.
Another growing area of business, however, centers on senior care, and that is where United is making its move. After a lengthy pursuit, the $10.4 billion-asset company hired a four-person team from Community & Southern Bank in Atlanta that specializes in financing senior care facilities. (C&S wa sold last month to Bank of the Ozarks for $800 million.)
United had been eyeing the senior care market for two years, said Charles Chamberlain, the company's director of corporate banking. "We've been seeing the growth in the [senior care] space in our markets," he said.
"We kept seeing opportunities, but we wanted the skill set and support set to really do it right, and not in a haphazard way," Chamberlain added.
About 90% of all senior living units were occupied at June 30, according to data from the National Investment Center for Seniors Housing & Care, a nonprofit based in Annapolis, Md. Rents are up 3.2% in the past 12 months, while inventory has increased by 2.3%.
The C&S team, led by Jennifer Lawley, has been able to tap into those positive trends, originating more than $400 million of senior-care-related loans last year. Since joining United, the team has booked $80 million in loans, with another $50 million to $70 million "in various stages of negotiations," Lawley said.
"We've been able to build a robust pipeline in a very short period of time," Lawley said. "Most of that was driven by past relationships."
Lawley's team kept popping up in discussions United conducted as it looked to recruit lenders. "Certain names kept recurring…and it became obvious this team was very highly regarded," Chamberlain said. "We stuck to our guns and eventually got them."
The new United team lends to a wide range of senior-care providers, including assisted-living and memory care facilities, nursing homes and post-acute-care rehabilitation centers across the Southeast.
United, meanwhile, isn't the only bank to dive into the senior-care business.
The $1.9 trillion-asset Wells Fargo made a similar move last year, establishing a specialty business group focused on financing senior housing facilities. Business has ramped up significantly since the formation of Wells Fargo Senior Housing Finance; originations last year more than doubled those in 2014.
This year is showing even more improvement, said Mark Cotsakis, the group's leader, though he declined to discuss specific figures. "Based on transactions closed and in closing, we will see continued origination growth in 2016," he said.
Wells Fargo Senior Housing Finance focuses on private-pay, rental independent living, assisted living and memory care facilities. "We have specifically been successful at financing larger transactions with industry-proven operators, many of whom team with private equity or REIT capital partners," Cotsakis said.
So far, credit quality seems to be holding up well for loans tied to senior care.
"I like to think the loans we do perform better" than those for other loan categories, said Dennis Rowlen, a lender on the new United team. "We've never had any past-dues or any of the loans turn sour."
Rowlen's experience with asset quality is "very common within the sector," Chuck Harry, chief of research and analytics at National Investment Center for Seniors Housing & Care, said. "Statistics measuring delinquency rates give a strong indication of how solid these loans are compared to other categories."
Beyond sterling credit quality, a decision to focus on senior lending may receive a boost from simple demographics. In 2012, the 80-and-older population was 11.6 million, according to the Census Bureau. Those numbers are only going to get bigger; that demographic is forecast to nearly triple by 2050.
"Industry projections suggest annual demand over the next decade growing to three to five times the current industry output," Cotsakis said.
The supply of senior housing units should keep pace with demand in the immediate future, Harry said, adding that there are indications of "increased demand" in the future.
At United, adding the new team is just one of several efforts under way to expand into specialized lending. Under former TD Bank executive Richard Bradshaw, who was hired in 2014, United has also expanded its Small Business Administration lending.
Specialized lending at United has "grown very successfully and very rapidly," Chamberlain said, adding that the company was mulling adding new business lines such as equipment financing and affordable housing.