Thus far, its performance has nonetheless held firm. Remarkably, the bank has never recorded losses, or even a delinquency, in its nonbank lending business. Yet that record may be harder to maintain if conditions for private equity and private credit continue to deteriorate. The merger with WaFd will reduce the combined company's exposure to so-called shadow banks to 28% of loans. EverBank Chief Executive Greg Seibly, who will lead the merged institution, has told investors that he plans to pursue growth in other areas, including energy, life sciences and equipment leasing.
For WaFd, the transaction brings a faster-growing business and new revenue streams. For EverBank's private equity owners, it offers a path to a full cash-out after a year. If credit ructions continue, though, the buyout barons might have timed the better deal.
Banking mega-merger signals a shift for nonbank lending
Servicing nonbank financial upstarts has been a great side hustle for regulated lenders. Monday’s tie-up between EverBank, which lends to and is owned by private equity, and WaFd WAFD.O, a sleepier regional institution, is a sign that the golden era is ending.
Formerly known as Washington Federal, the smaller partner in the deal offers a way for EverBank to snag a public listing and access to retail depositors served by brick-and-mortar branches. Combined, the two should account for roughly $75 billion in assets. Just as importantly, it provides an eventual exit for private-equity backers who faced a challenge, for once, from less regulation.
EverBank’s nonbank lending growth faces a changing backdrop
Jacksonville, Florida-based EverBank was once a more traditional retail and mortgage lender. A consortium led by Warburg Pincus and Sixth Street acquired it three years ago, turbo-charging its growth in decidedly non-traditional areas. More than 40% of the firm’s roughly $37 billion loan portfolio now consists of loans to nonbank financial firms, up from nearly 25% in mid-2023, according to regulatory filings. The strategy helped more than double the bank's earnings over that period.
The problem is that its clients’ old-school rivals are getting a freer hand. As the Trump administration loosens banking rules, Wall Street giants are reclaiming activities that had migrated to less-regulated firms. Private credit firms are making fewer loans to back buyouts as their access to financing slows. At the same time, private equity managers have struggled to sell portfolio companies and return cash to investors, putting pressure on the industry that fueled EverBank's growth.
WAFD•
