(Reuters) – First Foundation’s 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)
