First Foundation in Calif. wastes little time lining up next bank deal

First Foundation in Irvine, Calif., spent very little time on the M&A sidelines.

The $4.1 billion-asset company has agreed to pay $99 million in stock for PBB Bancorp in Los Angeles. The announcement comes just five weeks after First Foundation completed its $50 million purchase of Community 1^st Bancorp in Auburn, Calif.

PBB, the holding company for the $587 million-asset Premier Business Bank, has three branches in Los Angeles and another three in San Bernardino.

A chance to expand in Los Angeles, where First Foundation has two branches and $118 million in deposits, was a big draw for Scott Kavanaugh, the company's CEO. PBB's Los Angeles branches have more than $300 million in deposits.

“It’s just a great opportunity to strengthen a lot of the markets we’re already in,” Kavanaugh said in an interview. “I felt we had a good presence in [Los Angeles] but not a great presence. … It is probably the strongest market in all of California in terms of what the opportunities are.”

First Foundation, which raised millions of dollars in its 2015 initial public offering, has become an aggressive acquirer. PBB would be its fourth whole bank acquisition since 2012, and Kavanaugh said his company could handle another if the opportunity arises.

“I think we can do more,” Kavanaugh said. “One of the things we did in 2015 when we did the capital raise was [add] a lot of infrastructure. We wanted to make sure, from an operations and a compliance standpoint, that we had enough people sitting in those chairs so we were prepared when the day came to do some acquisitions.”

Fletcher

PBB has established a reputation “as a strong banking partner” among real estate investors and small business owners, Kavanaugh added. The acquisition also offers First Foundation an opportunity to market private banking and wealth management products to PBB's clients.

The deal is expected to close in the second quarter.

First Foundation said the deal should be 10% accretive to its 2018 earnings, while adding 8% the next year, excluding $5.1 million in merger-related expenses. It should take about four years to earn back the expected 3.8% dilution to First Foundation’s tangible book value.