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As Big Banks Get Bigger, Sale-Leasebacks Soar For Smaller Banks


While banks report year-end earnings results, giants are announcing large brick-and-mortar expansions while small and midsized operations are sharing plans to leverage their locations for cash.

JPMorgan Chase said Wednesday it is expanding into new markets and adding more than 500 branches and 3,500 new hires over the next three years. Along with the expansion, about 1,700 stores will be renovated in a "multibillion dollar commitment," according to a company statement, Bloomberg reported.

The bank has opened 650 new branches and entered 25 new states since 2018, according to The Wall Street Journal. It has also renovated about 1,300 stores since 2021.

The new branches are being placed in low-income, rural neighborhoods as well as affluent cities. JPMorgan is the only bank with branches in all 48 contiguous states, according to Bloomberg.

Rival Bank of America is similarly upping its branch count and renovating others. The bank is eyeing entering nine new markets and four states in the next few years.

The expansion is a turnaround in strategy. Banks have been closing branches for the last decade, and JPMorgan and BofA both operate fewer locations now than they did six years ago, the WSJ reported.

While larger banks are opening new locations, regional banks are turning to a different strategy: monetizing the real estate they already own by selling branches and leasing them back.

Known as sale-leasebacks, these transactions provide banks with cash to pay down high-interest debt, shore up their balance sheets and invest elsewhere. That capital infusion is particularly important considering small banks’ exposure to real estate. 

Regional banks upped the ante on CRE lending after the Global Financial Crisis and through the pandemic, and they held about three-quarters of all CRE loans in the second quarter of 2023. Now that property values are declining, $331B in commercial and multifamily debt is coming due and high interest rates are the norm, sale-leasebacks offer capital needed to cover nonperforming loans and write-offs.

Bank sale-leasebacks amounted to $125.3M in 2023, CoStar reported. That number is expected to be surpassed early in 2024, with deal volume over $43M this month. There were only $14.7M worth of bank sale-leasebacks in 2022.

Reno-based Plumas Bank is one bank embarking on a sale-leaseback strategy this quarter to invest the capital in securities and secure cash flow, according to Andrew Ryback, the CEO of parent company Plumas Bancorp.

This month, Indiana-based Peoples Bank agreed to sell and lease back five locations to Atlanta-based MountainSeed Real Estate Services for $17M. The lease agreements last 15 years. 

"The expected increase in capital from our sale-leaseback transaction and a moderating interest rate environment increase optionality as we work to improve our earnings profile," Benjamin Bochnowski, CEO of Peoples Bank's parent, Finward Bancorp, said in a statement.