Flushing Financial's (FFIC) proposed merger with OceanFirst Financial (OCFC) faces "inherent deal risk" even in a favorable regulatory backdrop for approval, Raymond James said Wednesday.

Late Monday, the companies said they have agreed to merge in an all-stock deal worth about $579 million.

Raymond James downgraded its rating on the Flushing Financial stock to market perform from outperform.

The move factors in "the fair price paid by (OceanFirst) which reflects earnings challenges (Flushing Financial) has faced due to the challenging rate environment for the past several years, and inherent deal risk," Raymond James said in a note to clients.

"The sale is also a positive from a long-term perspective, as the election of [New York City Mayor-elect Zohran Mamdani] will likely increase concerns about exposure to rent-regulated properties over time if proposed rent freezes occur," the brokerage said.