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Summary

  • California-based financial services company that provides a comprehensive platform of personalized financial services to high net-worth individuals.
  • 2/3 of revenue is from lending and business banking. 1/3 of revenue is from asset management and other services.
  • Annualizing Q1 '14 earnings, the P/E is 40, which seems too high for a company with 2/3 of revenue from lending and business banking.

Based in Irvine, CA, First Foundation (NASDAQ:FFWM) scheduled a $50 million IPO on the Nasdaq with a market capitalization of $223 million at a price range midpoint of $22.50 for Thursday, May 22, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents

Manager, Joint managers: Sandler O'Neill, Keefe Bruyette Woods

Co-Managers: Sterne Agee

End of lockup (180 days): Tuesday, November 18, 2014
End of 40-day quiet period: Tuesday, July 1, 2014

Summary

FFWM is a California-based financial services company that provides a comprehensive platform of personalized financial services to high net-worth individuals.

2/3 of revenue is from lending and business banking. 1/3 of revenue is from asset management and other services.

Annualizing Q1 '14 earnings, the P/E is 40, which seems too high for a company with 2/3 of revenue from lending and business banking.

2012 net income took a -36% hit vs 2011, which raises questions about long-term earnings growth.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Q1 '14

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

First Foundation

$235

6.0

40.2

1.7

1.7

21%

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Conclusion
The rating on FFWM at the price range mid-point is neutral minus.

Business

FFWM is a California-based financial services company that provides a comprehensive platform of personalized financial services to high net-worth individuals (that is, individuals with a net worth greater than $1.0 million, exclusive of their primary residence) and their families, family businesses and other affiliated organizations.

FFWM's integrated platform provides investment management, wealth planning, consulting, trust and banking products and services to effectively and efficiently meet the financial needs of its clients.

Lending and business banking, 2/3 of revenue

FFWM has also established a lending platform that offers loans to individuals and entities that own and operate multifamily residential and commercial real estate properties.

In addition, FFWM provides business banking products and services to small to moderate-sized businesses and professional firms, and consumer banking products and services to individuals and families who would not be considered high net-worth.

Investment management & wealth planning, 1/3 of revenue

FFWM's investment management, wealth planning, consulting, and trust services provide it with substantial, fee-based, recurring revenues, such that in 2013, its non-interest income was 36% of its total revenues.

Strategy

FFWM's strategy is focused on expanding its strong and stable client relationships by delivering high quality, coordinated investment management, wealth planning, consulting, trust and banking products and services. FFWM is able to maintain a client-focused approach by recruiting and retaining experienced and qualified staff, including highly qualified relationship managers, private bankers and financial planners.

Dividend Policy

No dividends are planned.

Competition

A relatively small number of major national and regional banks, operating over wide geographic areas, including Wells Fargo, JP Morgan Chase, US Bank, Comerica, Union Bank and Bank of America, dominate the Southern California banking market.

Those banks, or their affiliates, also offer private banking and investment and wealth management services. FFWM also competes with large, well-known private banking and wealth management firms, including City National, First Republic, Northern Trust and Boston Private.

5% stockholders

Ulrich Keller, Jr. 17.7%

Scott Kavanaugh 7.5%

Victoria Collins 5.6%

John Hakopian 6%

Use of proceeds

FFWM expects to net $46 million from its IPO. Proceeds are allocated as follows:

repay the full amount of the indebtedness outstanding under its term loan described below, the aggregate principal amount of which was $21.9 million at March 31, 2014; and

support its organic growth, including the addition of new wealth management offices;

fund possible acquisitions that FFWM believes are complementary to its business and provide attractive risk-adjusted returns, although FFWM does not have any immediate plans, arrangements or understandings relating to any material acquisition;

for other general corporate purposes, which purposes may include hiring of additional personnel and the payment of costs of operating as a public company.

Disclaimer: This FFWM IPO report is based on a reading and analysis of FFWM's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: First Foundation