Backed by $250 million from feds, Sunrise Banks to double ‘impact’ lending to small businesses, underserved communities

Frederick Melo, Pioneer Press
·3 min read

Sunrise Banks, which brands itself “the world’s most socially responsible bank,” already issues more than $100 million in loans each year to underserved communities, from undercapitalized small businesses to low-income residents and prospective homeowners of color. A new $250 million investment from the U.S. Treasury Department will allow the St. Paul-based bank system to more than double its “impact” lending.

That’s a major service evolution that could entail opening new branches or exploring a merger or acquisition. It could also position the 38-year-old bank, which has $2 billion in total assets, to eventually double in size.

“The ultimate beneficiaries of this will be the communities of the Twin Cities and urban suburbs,” said Sunrise chief executive officer David Reiling in an interview Thursday.

RELIEF FUNDING

As a longstanding federally-regulated Community Development Financial Institution, or CDFI, Sunrise became eligible for a share of the $9 billion in relief funding that the U.S. Department of the Treasury made available through its emergency capital investment program (ECIP). The investment funding, aimed at federally-regulated financial institutions that lend to vulnerable clients, was one of the last pieces of major legislation signed into law by President Donald Trump in January 2021.

On Wednesday, the White House and the federal Treasury announced the 162 recipients of $8.28 billion in investments in CDFIs and minority-owned banks. Sunrise, the only Minnesota-based CDFI to receive backing through the ECIP, has received $250 million structured as a sale of perpetual preferred stock, effectively turning the Treasury into a bank owner.

Sunrise, registered with the Minnesota Secretary of State’s office as the University Financial Corp., GBC, will be expected to pay 2 percent of that figure back to the U.S. Treasury annually, or roughly $5 million.

The funds will allow Sunrise to increase its lending to underserved communities several times over, Reiling said.

Overall, “60 percent of our loans year-in and year-out are to low and moderate-income people. It allows us to do more of that lending because we have more of a capital base,” he explained. “A $10 loan has to equal $9 of deposits and $1 of capital. (With this $250 million capital investment), the bank could grow its lending another $2.5 billion.”

MORE STAFF, BRANCHES, SERVICES

That won’t happen overnight. Increasing lending — and increasing deposits in step with the new capital to back that lending — will likely require adding staff, branches and digital services, or even absorbing another bank.

“In simple terms, the bank today is basically $2 billion in total assets,” Reiling said. “It would allow the bank to more than double its size, to go from $2 billion to $4.5 billion. … It requires more bank lenders to do that, to meet with small business owners, to be engaged in the community. At the same time, you have to raise the deposits to match the loans. It could mean opening new branches. It could mean acquisitions. … We’re putting the infrastructure into place to be able to loan more.”

Reiling has led the bank, founded in 1984, for 27 years. He said its impact lending has ranged from business loans to personal loans and loans geared toward community development, and the federal investment will allow Sunrise to expand in each area. “All of the above,” he said.

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