Flushing Financial Corporation is looking to raise $70 million in capital as it seeks to improve its balance sheet after it has recently faced some challenges in commercial real estate. As of September 30, its total assets stood at about $9.3 billion. It will raise these from low-yielding bonds and commercial real estate loans, among them multi-family property loans. The strategy, however, will come at a cost as the company will have to issue new stock to raise the much-needed money.
CEO John Buran has also informed potential investors that the bank intends to sell the illiquid assets, whose values have been depleted due to high interest rates. The initial public offering price will be within $15.00 to $15.50 per share, a value that is less than the bank’s closing price at $17.25 on December 12. Flushing Financial subsequently announced that it has sold equity in the public disclosure.
The move is during broader headwinds faced by banks with big exposures to commercial real estate, which themselves have seen a sharp deterioration from rate hikes at the Federal Reserve since last year. which resulted in many banks taking on such losses; these increases were most pronounced, however, for community banks total assets stand below $10 billion. Other institutions, such as New York Community Bank, were recently forced to raise capital when their stock prices plunged following fears over the strength of their commercial real estate loan portfolios.
These challenges notwithstanding, Flushing Financials‘ stock has increased by about 5% so far in 2024, though that still trails the 18% jump of the KBW Regional Banking Index. With the Federal Reserve signaling that interest rates may be easing off in coming months, market observers would expect other banks in this position to look at raising capital in the near term.
The regulators have also been nudging the banks quietly to improve their capital positions as market volatility continues. In a call with analysts in October, CEO Buran admitted that the interest rate environment is challenging but emphasized that the bank is focused on managing its challenges and laying a solid foundation for future growth.