First Foundation stock drops on CRE worries after $228 mln investment

First Foundation

03/07/2024 11:21

July 3 (Reuters) - First Foundation's  FFWM.N  shares
lost nearly 33% before the bell on Wednesday, prompted by
worries about the Texas-based lender's exposure to commercial
real estate (CRE) loans after it secured $228 million in an
"unexpected" capital-raise.
    Exposure to CRE loans has been a drag on the banking
industry for months, as high interest rates and low occupancy
fanned fears of defaults. Investors, already rattled by the
collapse of three lenders last year, have been punishing banks
at the slightest hint of trouble.
    The investment into First Foundation was led by Fortress
Investment Group, with backing from Canyon Partners, Strategic
Value Bank Partners and North Reef Capital, among others.
    Raymond James downgraded the bank's stock to "market
perform" from "strong buy" and said the deal was "unexpected".
    "We fundamentally did not believe the bank needed to raise
additional capital. With limited details on the plans for the
new capital and the roadmap going forward, we are forced to move
to the sidelines for now," the brokerage wrote in a note.
    Raymond James, however, said, "the worst case scenario has
now been taken off the table" because of the increased liquidity
that the deal would bring.

 (Reporting by Niket Nishant in Bengaluru; Editing by Shilpi
Majumdar)
 ((Niket.Nishant@thomsonreuters.com;))