Flushing Financial, a New York-based commercial real estate lender, is making moves to raise $70 million in capital, according to sources familiar with the matter. The bank’s CEO, John Buran, is planning to sell low-yielding bonds and loans backed by commercial real estate, including multifamily buildings, which will result in a loss and necessitate the sale of new stock.
While the pricing for the equity sale has not been finalized, it is expected to be in the range of $15 to $15.50 per share, lower than the $17.25 closing price on Thursday. Flushing Financial declined to comment initially but later confirmed the equity sale in a release.
Banks with exposure to commercial real estate have faced challenges following the Federal Reserve’s interest rate hikes through 2023, leading to unrealized losses on their balance sheets. New York Community Bank, for example, had to raise capital earlier this year due to concerns over its commercial loan portfolio.
Most of the pressure has been on community banks with assets under $10 billion, like Flushing Financial, which had around $9.3 billion in assets as of September. With a rebound in bank stock prices this year and the Fed’s easing cycle starting in September, investors anticipate more banks to raise capital in the near future. Regulators have been discreetly urging banks to improve their capital levels behind the scenes.
Despite the challenging rate environment, Buran remains optimistic about the future, stating, “We’re controlling what we can control and setting the foundation for a better future,” in a meeting with analysts in October. Flushing Financial’s shares have seen a 5% increase this year, falling behind the 18% rise in the KBW Regional Banking Index.
In conclusion, Flushing Financial’s efforts to raise capital reflect the broader challenges faced by banks with commercial real estate exposure in the current economic climate. As the industry navigates these challenges, it is crucial for banks to adapt and strengthen their financial positions to ensure long-term stability and growth.
