Jamie Spencer
Bank of America Corp. has agreed to purchase approximately $990 million in multifamily commercial real estate loans from HomeStreet Inc., a move aimed at helping the struggling Seattle-based lender return to profitability.
Transaction Details
The deal involves the sale of loans at a price equivalent to 92% of their unpaid principal balance. Proceeds will allow HomeStreet to pay down Federal Home Loan Bank advances and high-cost brokered deposits, replacing them with less expensive core deposits.
The transaction is divided into two phases:
- $652 million to close on Friday.
- $338 million scheduled to close around Dec. 30.
A Step Toward Profitability
HomeStreet has faced mounting challenges, including four consecutive quarters of losses and regulatory hurdles that blocked its acquisition by FirstSun Capital Bancorp. Rising deposit costs and declining returns on investments further strained its financial position.
In the third quarter, HomeStreet reported a net loss of $7.28 million. However, CEO Mark Mason expressed optimism that this loan sale marks a turning point.
“This is the first step in implementing a new strategic plan which we expect to result in a return to profitability for the bank and on a consolidated basis early next year,” Mason said.
Strategic Implications
The sale represents a key part of HomeStreet’s broader strategy to stabilize its finances and recover from regulatory and market challenges. By reducing reliance on higher-cost funding sources, the lender aims to improve its financial performance and focus on core operations.
Bank of America’s Investment
For Bank of America, the acquisition of these loans bolsters its position in the multifamily commercial real estate sector, aligning with its broader strategy to expand its asset portfolio in a lucrative market.
Conclusion
This transaction highlights how strategic asset sales can provide a lifeline for struggling financial institutions like HomeStreet, while also offering growth opportunities for major players like Bank of America. As the deal finalizes, all eyes will be on HomeStreet’s performance in early 2025 to see if its new strategy delivers the promised turnaround.
