Axos Financial in Las Vegas bought two commercial real estate loan portfolios from the Federal Deposit Insurance Corp.
The $20.8 billion-asset company said in a press release that it paid cash for nearly $1.3 billion of performing loans that were previously held by the failed Signature Bank at a purchase price equal to about 63% of par value. The result was a roughly $463.7 million discount to par value for the loans.
Axos said the weighted loan-to-value for the 58 loans is about 59%. About $675 million of the loans are tied to multifamily properties. The transaction includes interest rate swaps where Axos receives a 6.9% variable note rate and borrowers pay a 3.8% fixed rate.
“We believe that we purchased these performing loans at an attractive valuation that will be accretive to our net interest margin and net interest income,” Greg Garrabrants, Axos’ president and CEO, said in the release.
“We performed extensive due diligence and valuation analysis on each of the properties in the acquired loan pools,” he added.
Axos expects to provide more detail about the loan-loss allowance, purchase accounting and other aspects of the deal when it reports fourth-quarter financial results.
“In our opinion, Axos was able to pay substantially less than par for the portfolio for two reasons,” Tim Coffey, an analyst at Janney Montgomery Scott, wrote in a client note.
“We believe the auction was exclusive to FDIC-insured institutions, limiting participation from traditional debt funds that could have provided higher bids,” Coffey added. “Second, the loans were originated a fixed rates of less than 4%, which is inherently less valuable to an acquirer in the current rate environment.”