The largest bank headquartered in South Carolina has sold its manufactured housing loan portfolio at a loss to a company backed by Warren Buffett’s Berkshire Hathaway, describing the specialty financing niche as a distraction.
The Greenville-based parent of United Community Bank said Sept. 3 that the deal was finalized late last week. The buyer of the loans, totaling more than $318 million, was 21st Mortgage Corp., a division of Berkshire-owned manufactured housing developer Clayton Homes.
United Community said it expects to book a onetime $21.6 million loss on the sale when its reports its third-quarter financial results later this year. Beyond that, the deal will have no “ongoing effect on earnings,” CEO Lynn Harton said in a written statement
The Upstate bank decided to exit the business about a year ago, when it stopped originating new mortgages for manufactured home buyers. It acquired the portfolio as part of its 2022 buyout of Nashville’s Reliant Bancorp Inc.
“Rather than continue to slowly liquidate the portfolio through normal collections, we took this opportunity to accelerate our exit from this business,” Harton said Tuesday.
He described 21st Mortgage as “the premier lender in this area with great capability to service the customers.” The portfolio’s new owner is based in Knoxville, Tenn., and was acquired by Clayton Homes in 2003. It describes itself as the manufactured housing industry’s largest mortgage financier, with more than 230,000 loans exceeding $15 billion.
Harton said the sale eliminates some overhead costs and “a management distraction” at United Community while also trimming the bank’s credit risk. He noted that while the manufactured home unit represented just 2 percent of total loans, it accounted for 11 percent of net charge-offs this year and 18 percent of assets that are no longer accruing interest.
“Exiting the business enables management to focus on core operations and allocate capital to other growth opportunities,” the bank said in a presentation to investors.
Shares of United Community’s parent company fell 1 percent in afternoon trading Tuesday to $30.14, according to CNBC.com. The bank owner moved its listing earlier this month from the Nasdaq to the New York Stock Exchange.