Shares of HomeStreet Inc. (HMST) rose over 2% on Friday following the announcement that its subsidiary, HomeStreet Bank, has entered into an agreement to sell $990 million in multifamily real estate loans to Bank of America (BAC). The transaction marks a significant step in HomeStreetâs strategic efforts to improve profitability.
The company stated that the sale price, including the value of retained servicing rights, represents 92% of the loans’ principal balance. The transaction is expected to be finalized before the end of 2024. According to CEO Mark Mason, the initiative aligns with a broader strategic plan aimed at returning the bank to consolidated profitability by early next year.
Mason emphasized that the pricing of the loan sale reflects the current interest rate environment and the characteristics of the loans being sold. âThese loans primarily consist of lower-yielding assets with longer durations compared to the rest of our portfolio. The proceeds from the sale will be used to reduce Federal Home Loan Bank (FHLB) advances and brokered deposits, which carry significantly higher interest rates than our core deposits,â Mason said.
The announcement also influenced market sentiment for Bank of America, with retail sentiment shifting from bearish to bullish, according to data from Stocktwits. As of 1:43 p.m. ET on December 27, 2024, the sentiment score stood at 55/100.
In a related development, Wedbush recently increased its price target for HomeStreetâs stock from $12 to $15, maintaining an âOutperformâ rating. The firm noted that the loan sale might achieve better pricing than initially expected.
Year-to-date, HomeStreetâs shares have gained over 10%, while Bank of Americaâs stock has risen more than 30%, reflecting robust investor interest in both institutions.
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By Proptechbuzz
By Ravi Kumar
