IPO For First Foundation Inc. Shows Strong Base

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 |  About: First Foundation (FFWM)
by: Don Dion

Summary

FFWM, a commercial bank and wealth manager, plans to raise $50.0 million in its upcoming IPO.

FFWM has grown its client base and assets under management over the past decade and is currently turning a profit.

We are optimistic on this IPO, despite mega-bank competitors WFC, JPM, and BAC.

First Foundation Inc. (NASDAQ:FFWM), a commercial bank and wealth manager, plans to raise $50.0 million in its upcoming IPO.

The Irvine, California-based firm will offer 2.2 million shares at an expected price range of $21-$24 per share. If the IPO can find the midpoint of that range at $22.50 per share, FFWM will command a market value of $239 million.

FFWM filed on April 18, 2014.

Lead Underwriters: Keefe, Bruyette & Woods, Inc; Sandler O'Neill & Partners, LP
Underwriters: Stern, Agee and Leach, Inc

Overview of First Foundation
FFWM is a California-based wealth management firm and commercial bank offering financial services to high net-worth individuals and their families and businesses. The firm offers wealth planning, consulting, banking, and investment management services and products. FFWM also offers a lending platform for entities that own and operate multifamily residential and commercial real estate properties.

As of March 31, 2014, FFWM had $2.80 billion of assets under management, $1.09 billion of total assets, $949 million of loans, and $855 million of deposits. Non-interest revenue, primarily composed of fees charged for wealth management services and consulting, accounted for 36% of the firm's total revenues in 2013.

Valuation
FFWM offers the following figures in its S-1 balance sheet for the quarter ended March 31, 2014:

Revenue: $16,226,000.00
Net Income: $1,462,000.00
Total Assets: $1,090,348,000.00
Total Liabilities: $1,001,507,000.00
Stockholders' Equity: $88,841,000.00

Big Competitors
FFWM competes with large national and regional banks, especially those that have a significant presence in Southern California, as well as private banking and wealth management firms.

Major competitors include Wells Fargo (NYSE:WFC), US Bank, JP Morgan Chase (NYSE:JPM), Union Bank, Comerica (NYSE:CMA), and Bank of America (NYSE:BAC). Some of FFWM's competitors are better capitalized than FFWM, allowing them to offer products and services that FFWM cannot.

Management Highlights
CEO Scott Kavanaugh has served in his current position since December 2009, and previously served as the firm's President and COO.

He also serves as the firm's Vice-Chairman. Mr. Kavanaugh previously served as an Executive Vice President and Chief Administrative Officer of Commercial Capital Bancorp, Inc.

He also worked as the Executive Vice President and COO of Commercial Capital Mortgage.

Mr. Kavanaugh holds a Bachelor of Science degree in Business Administration and Accounting at the University of Tennessee and an MBA in Information Systems at North Texas State University.

Strong Conclusion
We are optimistic on this IPO in the proposed range.

Though FFWM does not have the financial resources of some of its competitors, it has been able to effectively establish and grow its client base and assets under management over the past decade.

As both JPM and BAC flail, clients could turn to more reliable managers.

The firm is turning a profit, and should see increasing revenues as its growing staff of relationship managers matures.

FFWM's emphasis on personalizing its services and spending time with clients has proven appealing to high net-worth individuals in the Southern California area, and we believe that the firm has every opportunity tocontinue to expand in the area.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in FFWM over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.