Shares of First Foundation Inc. (NYSE: FFWM) saw a significant boost on the US stock charts after the company announced a strategic reclassification of a portion of its loan portfolio. That resulted FFWM stock surged 10.42% on Thursday, closing the trading session at $6.57.
Reclassifying Loans by FFWM to Improve Financial Position
First Foundation (FFWM) declared that a $1.9 billion portion of its portfolio of multifamily loans has been changed from “held to maturity” to “held for sale.” This action represents a significant milestone in the company’s continuous endeavor to fortify its balance sheet and embrace a more assertive financial approach. The firm wants to get these loans back to a sale-ready state so it may resume its previous level of operational performance and profitability.
Fair-Value Pricing Expected to Surpass Estimates
The decision to reclassify loans is grounded in First Foundation’s expectation that the fair-value pricing of these assets will exceed 92% of the $1.9 billion principal balance by the third quarter’s end. This optimistic outlook is largely driven by favorable Southern California multifamily transactions and renewed market optimism regarding interest rates.
While the fair-value write-down will impact third-quarter earnings and reduce tangible book value, the company believes this move will provide the necessary flexibility to maximize final execution pricing.
Strategic Share Conversion Following Capital Raise
In addition to the loan reclassification, First Foundation announced that all Series B Noncumulative Convertible Preferred Stock, issued during the company’s July 2024 capital raise, had been automatically converted into common stock. As of October 2, 2024, this conversion resulted in the issuance of 14,490,000 shares of common stock, bringing the total to 82,345,084 shares.
This development follows the company’s Special Meeting of Stockholders, held on September 30, 2024, and represents another strategic milestone in its financial restructuring. With these changes, First Foundation is poised to explore options for securitizing or selling the loans and optimizing final pricing outcomes over the next two to three years.
