Kroll Bond Rating Agency (KBRA) assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to Dallas, Texas based First Foundation, Inc. (NASDAQ: FFWM) (“the company”). In addition, KBRA assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 for the subsidiary bank, First Foundation Bank. The Outlook for all long-term ratings is Positive.
FFWM’s ratings are supported by a seasoned management team, that in addition to reflecting extensive experience and a demonstrated track record with the company’s core multifamily lending operation, along with its heritage (and fairly sizeable) wealth management platform, also have exhibited capabilities diversifying the company’s operations from a business standpoint, effectively managing risk and return. The assignment of a Positive Outlook incorporates the expectation that FFWM will likely be able to execute similarly over an expanding regional footprint. Acknowledging that workforce multifamily lending has historically been a comparatively safe asset class, FFWM’s credit performance has been unblemished, with no charge-offs in its multifamily book since inception. With this low loss content loan category as an anchor, we view FFWM’s consolidated portfolio as safer than other commercial oriented banks.
Further supporting FFWM’s ratings are the company’s wealth management and trust operations – the scale of which are somewhat unique for an $8 billion commercially focused bank. These businesses provide stable and recurring sources of fee income (almost 20% of revenues) that contrasts favorably to other commercial banks where fee income can be more volatile. On the funding front, investments in talent, technology, and reporting capabilities have allowed the company to establish a competitive advantage in the niche “specialty deposit” business that services large, complex commercial customers (e.g., mortgage servicers, 1031 exchange accommodators, etc.), allowing the company to pivot away from a funding model that had historically relied on wholesale funding to a greater degree. FFWM is adequately capitalized with a CET1 ratio of 11.3% at 3Q21.
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The ratings are based on KBRA’s Bank & Bank Holding Company Global Rating Methodology published on October 16, 2019 and KBRA’s ESG Global Rating Methodology published on June 16, 2021.
Disclosures
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.
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