First Foundation Bank next in line? Received a massively dilutive lifeline from Fortress, but another example of the absurd amount of leverage in the banking system that the general public simply does not appreciate… First Foundation at its peak had a $1.6b mkt cap and $13.6 billion in assets. That’s 9:1 leverage; again at PEAK equity valuation. The mkt cap is now $280m, a mere 49:1x leverage. Most investors would laugh any company running at 9:1 leverage out of the room, but because it’s a “bank…” How the riskiest companies in the world (banks), that are run on one day loans (deposits), are viewed as financial juggernauts is baffling. The FDIC is going to need a bigger boat.
Balance sheet leverage isn’t calculated on market cap, it’s calculated on the book value of equity…
Good insight and we’re actively seeking distressed CRE loans. In my opinion, banks don’t want a run on deposits so their treading very lightly on selling off portfolios.
More carnage coming! We are in the 2nd inning.
Thanks, Michael. Eric Mark
Very informative
Well said Michael!
Real Estate Structured Finance
6moFirst Foundation's problems are NIM.........