Umpqua Bank to wind down multifamily lending division

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Umpqua Bank is closing its multifamily lending division amid rising concerns about the impact of high interest rates on the apartment sector.

The multifamily business was one of the designated lending arms in Umpqua's commercial real estate division. It had about $5.6 billion of loans as of June 30, or about 15% of the bank's overall portfolio of more than $37 billion.

"We will continue to do multifamily lending, we're just not going to do it through the multifamily division, Umpqua Bank President Tory Nixon said on a call with analysts Wednesday afternoon.

The Real Deal first reported the business's closure last month.

The news comes as the risks of multifamily housing begin to draw concern from analysts and market participants. At a time of rising rates, floating-rate loans for apartment buildings carry an extra set of risks compared with other real estate loans, especially for borrowers who plan to sell for a profit within a few years.

Another West Coast bank, PacWest Bancorp, said earlier this year that it would also exit its multifamily lending business. The Los Angeles bank also said it would wind down its premium finance business and restructure one of its lending subsidiaries.

Commercial banking

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Umpqua finalized its merger with Tacoma, Washington-based Columbia Banking System in March, bringing its total assets to more than $50 billion. The $5 billion merger is expected to deliver about $135 million in cost savings and boost the Pacific Northwest-based bank's business in target markets.

Umpqua did not explain its decision to close the multifamily lending division, but it said it will continue to make multifamily loans to current customers that have depository or other bank relationships. It also plans to keep servicing active multifamily loans.

"Real estate lending, including in the multifamily space, has been important to the bank for many years and will continue to be important to our success moving forward," the bank said in a statement.