HomeStreet Bank Sells $990 Million In Commercial Real Estate Loans To Bank Of America
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
HomeStreet Bank reportedly sold nearly $990 million worth of its commercial real estate loans to Bank of America. The Seattle-based bank said the deal would help it return to making money and reduce the costs from expensive funding.
According to reports, Bank of America agreed to pay about $906 million for the loans, which is around 92% of the loans’ total value. HomeStreet said that the small discount was due to the current interest rate situation and the fact that the loans being sold are mostly lower-yielding.
HomeStreet Bank Aims To Cut Costs And Return To Profitability
This deal is seen as an important step for HomeStreet, which has faced four quarters of losses. The sale could help ease concerns from investors, especially after regulators stopped the bank’s proposed merger with FirstSun Capital Bancorp. Reports shared that HomeStreet’s shares rose nearly 6% after the announcement.
HomeStreet’s Chief Executive Officer, Mark Mason, stated that the agreement is part of a new plan to help the bank return to profitability in the coming year. He said that the deal was the first step in turning things around for the bank and would improve its financial situation.
The money from the loan sale will be used to pay off some debt that HomeStreet owes to the Federal Home Loan Bank and to reduce the cost of brokered deposits. These deposits have higher interest rates compared to the bank’s regular deposits. Reports explained that HomeStreet’s goal is to lower costs and increase its ability to profit again.
HomeStreet Bank Seeks Stability And Growth Through Strategic Loan Sale
Commercial real estate loans, especially those linked to multifamily properties (apartment buildings with more than four units), have been a concern for smaller regional banks. This is because higher interest rates have made it harder for borrowers to repay their loans.
However, reports revealed that bigger banks like Bank of America have managed to handle these loans better because they have more capital, more deposits, and less risk from commercial real estate loans.
Experts said that the pressure on these loans is expected to lessen if the Federal Reserve lowers interest rates in the future. The deal between HomeStreet and Bank of America is expected to close before December 31, 2023. After the sale, HomeStreet will continue to manage the loans, according to the reports.
This transaction marks an important moment for HomeStreet as it seeks to recover from financial difficulties and create a path toward profitability in the near future.
