First Foundation 'anxious' to strike bank deal in Texas

As First Foundation Inc.'s strategic relocation to Dallas approaches the one-year mark, the company is growing hungrier for a bank deal in Texas.

In April 2021, the bank moved its headquarters to Dallas from Irvine, Calif. While the company has focused on organic growth efforts and will soon open its first branch in March or April, it is eager to strike a bank deal in the state, CEO Scott Kavanaugh said in an interview with S&P Global Market Intelligence.

"We've made great inroads, especially on the commercial real estate side, growing organically. We've got quite a few in deposits. We're continuing to build the pipeline here," Kavanaugh said. "But I am anxious to get something done here in Texas."

Given the large number of smaller banks in the state, Kavanaugh said he is open to a small transaction with banks around $300 million to $400 million in total assets, but he stipulated a potential target has to have a Dallas footprint. As of the fourth quarter of 2021, there are more than 200 banks with less than $400 million in assets headquartered in the state, according to S&P Global Market Intelligence data.

First Foundation is also looking for more M&A in Florida, but a bank deal in that state would have to be a little larger, at least $600 million to $800 million of total assets, Kavanaugh said. First Foundation crossed $10 billion in total assets during the last quarter of 2021, mainly as a result of its acquisition of Florida-based TGR Financial, which closed in December 2021.

"To the extent that opportunities come up, we're going to be all over trying to get another deal done as soon as possible," Kavanaugh said of Florida.

Since moving the company's headquarters closer to the Southeast and closing the TGR Financial deal, Kavanaugh is more optimistic about future deal prospects.

"I don't think a lot of the investment bankers took me serious when I said I'd like to look at other states, especially in the Southeast," he said, adding that investment banks in the Southeast have been more communicative since the TGR deal.

For now, the company is focused mainly on M&A in Texas and Florida, but it is interested in moving into Nashville, Tenn., Phoenix and the state of Colorado eventually, Kavanaugh said.

First Foundation is also hiring bankers throughout its footprint and expanding its trust and wealth management services into Florida and Texas. The company is currently seeking approval to expand its trust services in Florida. Once its first branch opens in Texas, the company will seek to expand its trust services into that state also.

The company is open to trust and wealth management M&A but has found it difficult to get those deals done.

"We've struggled to find opportunities that seem reasonable," Kavanaugh said. "You're buying the future cash flows of the manager itself. And if you don't get a good feel that the clients and the relationship people are going to be sticking around, that makes it difficult to pay the multiples that you need to pay in that space."