Flushing Financial, a renowned commercial real estate lender based in New York, is reportedly on a mission to gather $70 million in a bid to strengthen its capital base, according to information obtained by CNBC. CEO John Buran has been reported to have shared his intentions of offloading low-yield bonds and loans backed by commercial real estate assets, such as multi-unit residential properties, with potential investors.
This strategic move is expected to result in a loss and a subsequent need to sell off new stock. Individuals privy to this information have relayed it to CNBC. The pricing details of the deal are yet to be confirmed by the bankers managing the venture, but predictions place it between $15 and $15.50 per share. This is considerably lower than the $17.25 per share at which the stock closed on Thursday.
Flushing Financial refrained from making any comments on the matter earlier on Thursday. However, they later issued a statement confirming the sale of equity. Banks like Flushing Financial that have commercial real estate exposure have faced challenges due to the Federal Reserve’s decision to increase interest rates through 2023. This has resulted in unrealized losses on their balance sheets.
New York Community Bank is another such institution that had to raise capital earlier this year when its stock value plummeted due to concerns about its commercial loan portfolio. The majority of American banks feeling the heat are community banks with less than $10 billion in assets, like Flushing Financial, which had approximately $9.3 billion in assets as of September.
With the resurgence of bank stock prices this year and the onset of a Fed easing cycle in September, it’s predicted that more banks will start raising capital in the coming months. Regulators have been discreetly urging banks to increase their capital levels behind the scenes.
Despite the challenging rate environment, Buran remains optimistic about the future. The CEO stated in October that the bank is focusing on what it can control to lay the groundwork for a better future. The shares of Flushing Financial have seen a 5% increase this year through Thursday, lagging behind the 18% rise in the KBW Regional Banking Index.
