Old Standard Life Insurance Co., an affiliate of Spokane-based Metropolitan Mortgage & Securities Co., says its commercial lending division is on track for a record year, based on mid-year results.


The division posted $338.3 million in closed loan transactions through the first half of 2003, up from $294.6 million and $144 million, respectively, for the same periods in 2002 and 2001, says Gregg Weed, vice president and sales manager for the division.


We have more than doubled production every year, but it gets to be harder to double that as the prior years figure balloons in size, Weed says. The company earlier had hoped to hit the $1 billion mark in commercial loans this year, but instead probably will be around $700 million, he says.


Weed says, though, that he expects Old Standards loan production to continue to grow at a fast clip, due to the niche and reputation it has developed nationally for funding what are called nonconforming commercial loans, meaning they dont fit conventional lenders criteria.


We do the loans that most financial institutions dont want to do, he says. Were probably one of the very few (insurance companies) that do the type of lending we do. That gives us a huge advantage in the broker market because they see us as a stable source of funds.


Through a national network of about 5,000 brokers, Old Standards commercial lending division provides bridge loans for projects that are in transition for various reasons. The loans range in size from $1 million to about $20 millionaveraging about $6 millionand in length from 12 months to 36 months.


The current average interest rate charged on the loans is about 13 percent, which reflects the higher risk and other factors associated with the projects that make traditional lenders unwilling to fund them, Weed says.


He says Old Standard expects shortly to expand beyond broker-direct lending and to begin offering funding to a targeted percentage of the many private lenders with which it competes for customers.


Its going to provide us a more stable and increased production volume, he says.


The commercial lending division makes the loans with funds provided by the Metropolitan Financial Group of Companies three insurance companiesOld Standard, Old West Annuity & Life Insurance Co., and Western United Life Assurance Co., Weed says. Old Standard and Old West both are subsidiaries of Spokane-based Summit Securities Inc., and Western United Life is a subsidiary of Metropolitan Mortgage.


Old Standard and Old West both now are based in Post Falls, having moved their administrative and executive functions there earlier this year. Western United Life is based in Spokane.


Summit and Metropolitan Mortgage both are controlled by C. Paul Sandifur Jr. Additionally, Metropolitan Mortgage provides servicing, accounting, data processing, and other administrative services to Summit Securities, which also includes Metropolitan Investment Securities Inc. and a real-estate asset department.


Old Standards lending activities are crucial to the Metropolitan Financial Group because commercial lending now represents the groups main business focus, following a strategic shift it initiated several years ago away from the high-volume, low-margin mortgage-banking business.


Weed says Metropolitan began dabbling in commercial lending in 1998, and, It just has gone straight up since then. Old Standard closed commercial loans worth about $129.9 million in 2000, $251.2 million in 2001, and $568 million in 2002.


In contrast with some of the big conventional lenders that stick to rigid lending criteria, perhaps even more unwaveringly during slow economic times, Weed says, We really look at them (prospective deals) and try to find a way to say yes. He adds, We experience some higher default rates than other lenders, but our losses are right with the A lenders, due partly to a mostly lower average loan-to-value ratio of 50 percent to 60 percent.


Summit Securities primary business activity is investing in cash-flow assets, consisting of obligations collateralized by real estate, structured settlements, annuities, lottery prizes, and other investments.


Summit reported net income of about $4.4 million for its 2002 fiscal year ended last Sept. 30.


It had net interest income for that fiscal year of $25.2 million, up from $15.9 million and $11.7 million the two prior years, due mostly to increased commercial lending activities. Through the first three quarters of its 2003 fiscal year, though, it has posted a net loss of $3.2 million.


Metropolitan Mortgage has had a net loss of about $19.7 million through the first three quarters of its 2003 fiscal year, but says it expects to erase much of the red ink by years end with revenues from the sale of some residential development property in Hawaii.