WaFd Bank Completes Sale of $2.8 Billion in Multi-Family Loans
WaFd Bank has completed the sale of approximately $2.8 billion in multifamily commercial real estate loans to Bank of America, which is reselling the loans to funds managed by Pacific Investment Management Company (PIMCO). This transaction is one of the largest non-FDIC assisted CRE loan sales in history and was executed at 92% of the principal balance.
Importantly, the sale was conducted without incurring any losses for WaFd, enhancing its liquidity. These loans originated from Luther Burbank Savings, which WaFd acquired in March 2023. This sale was also not a merger condition. The bank now has options to buy down debt, originate new loans, or buy back stock.
- Sale of $2.8 billion in multifamily CRE loans completed with no losses.
- Sale executed at 92% of the principal balance, indicating high loan quality.
- Provides immediate liquidity for WaFd Bank.
- Sale offers options for debt reduction, new loan origination, or stock buyback.
- Discount on loan sale attributed to changes in interest rates.
The sale of
From a financial health perspective, the liquidity gained from this sale can be used to pay down debt, originate new loans, or buy back stock. Each of these actions can have different implications for shareholders. For instance, buying back stock can increase the share value by reducing the number of outstanding shares, while originating new loans can drive future revenue growth. The strategic flexibility this liquidity provides is a notable advantage.
It is also important to observe that this transaction was not a condition of the recent merger with Luther Burbank Savings, hinting at WaFd's strong operational position. Investors should see this as a sign of WaFd's robust risk management practices and its ability to execute large transactions smoothly, even in a challenging market.
This sale can be viewed through the lens of market positioning. By divesting a portion of their multifamily CRE loans, WaFd Bank is effectively reducing its exposure to this specific sector. This can be seen as a cautious approach in light of potential market uncertainties in commercial real estate, particularly in the multifamily segment, which can be sensitive to economic cycles and changes in interest rates.
The fact that the loans were sold at a discount mainly due to interest rate fluctuations rather than credit risk reflects the broader market conditions. Multifamily CRE loans are generally considered less risky compared to other CRE segments, such as office spaces, which have been under pressure due to remote work trends. Therefore, this transaction likely reflects a strategic rebalancing rather than a retreat from perceived risk.
Moreover, the involvement of a major player like Bank of America and funds managed by PIMCO underscores the high quality of these loans. It also suggests confidence from these institutions in the underlying assets. For retail investors, this deal can be seen as a sign of WaFd's prudent management approach, ensuring that they maintain a healthy balance sheet while adapting to market conditions.
WaFd Bank President and CEO Brent Beardall stated, “This should prove to the investment community that the sky is not falling when it comes to CRE loans. These are high quality loans and we believe the purchase price is reflective of the low amount of credit risk in the portfolio. Further, this sale was executed at 92-percent of principal balance. That discount is almost entirely attributable to changes in interest rates not the quality of these CRE loans. CRE is a broad category which includes: multifamily, owner occupied, industrial, hospitality, storage and office. When evaluating CRE risk it is very important to understand the type of CRE, the location and sponsor equity.”
Mr. Beardall continued, “These packaged loans all came from Luther Burbank Savings in the acquisition by WaFd Bank in March of this year. The sale of CRE loans was not a condition of the merger. WaFd Bank has previously disclosed this loan sale gives the Bank several immediate options including the option to either buy down debt, originate new loans, buyback stock or a combination of all three.”
Washington Federal Bank, a
Important Cautionary Statements
The foregoing information should be read in conjunction with the financial statements, notes and other information contained in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
This press release contains statements about the Company’s future that are not statements of historical or current fact. These statements are “forward looking statements” for purposes of applicable securities laws and are based on current information and/or management's good faith belief as to future events. Words such as “expects,” “anticipates,” “believes,” “estimates,” “intends,” “forecasts,” “may,” “potential,” “projects,” and other similar expressions or future or conditional verbs such as “will,” “should,” “would,” and “could” are intended to help identify such forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the Company believes any such statements are based on reasonable assumptions, forward-looking statements should not be read as a guarantee of future performance, and you are cautioned not to place undue reliance on any forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statement.
By their nature, forward-looking statements involve inherent risk and uncertainties including the following risks and uncertainties, and those risks and uncertainties more fully discussed under “Risk Factors” in the Company’s September 30, 2023 10-K, and Quarterly Reports on Form 10-Q which could cause actual performance to differ materially from that anticipated by any forward-looking statements. In particular, forward-looking statements are subject to risks and uncertainties related to (i) fluctuations in interest rate risk and market interest rates, including the effect on our net interest income and net interest margin; (ii) current and future economic conditions, including the effects of declines in the real estate market, high unemployment rates, inflationary pressures, a potential recession, the monetary policies of the Federal Reserve, and slowdowns in economic growth; (iii) risks related to the integration of the operations of Luther Burbank Corporation; (iv) financial stress on borrowers (consumers and businesses) as a result of higher interest rates or an uncertain economic environment; (v) changes in deposit flows or loan demands; (vi) the impact of bank failures or adverse developments at other banks and related negative press about regional banks and the banking industry in general; (vii) the effects of natural or man-made disasters, calamities, or conflicts, including terrorist events and pandemics (such as the COVID-19 pandemic) and the resulting governmental and societal responses; (viii) global economic trends, including developments related to
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Brad Goode
WaFd, Inc.
425 Pike Street,
Brad.Goode@wfd.com
(206) 626-8178
Source: Washington Federal Bank
FAQ
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