Bank of America Corp. has agreed to purchase approximately $990 million in multifamily commercial real estate loans from HomeStreet Inc. This strategic move is expected to pave the way for HomeStreet’s return to profitability. The sale price represents nearly 92% of the outstanding principal balance of the loans.
HomeStreet plans to utilize the proceeds from the sale to reduce its reliance on Federal Home Loan Bank advances and brokered deposits, both of which carry higher interest rates compared to the company’s core deposits. The Seattle-based lender has been grappling with financial challenges, reporting four consecutive quarterly losses and facing regulatory hurdles in its pursuit of an acquisition by FirstSun Capital Bancorp. Diminished earnings stemmed from the increasing cost of deposits coupled with lower returns on investments.
This loan sale signifies the initial phase of a comprehensive strategic plan aimed at restoring profitability for HomeStreet, both at the bank level and on a consolidated basis, anticipated in early next year, according to CEO Mark Mason. The bank reported a net loss of $7.28 million in the third quarter of 2024. This decisive action underscores the urgency of addressing the lender’s financial vulnerabilities.
The transaction is structured in two stages. The first, involving roughly $652 million in loans, was finalized on Friday. The remaining portion, approximately $338 million, is scheduled to close around December 30th, according to a regulatory filing by HomeStreet. This phased approach allows for a more managed transfer of assets.
This substantial acquisition by Bank of America reflects the ongoing dynamism within the commercial real estate market and highlights the strategic adjustments lenders are making to optimize their portfolios and navigate the evolving financial landscape. HomeStreet’s decision to divest these loans signals a significant step towards financial stability and future growth. The successful completion of this transaction will be a crucial indicator of HomeStreet’s ability to execute its turnaround strategy.
