First Foundation (NYSE:FFWM) vs. Southside Bancshares (NYSE:SBSI) Critical Review

First Foundation (NYSE:FFWM) and Southside Bancshares (NYSE:SBSI) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, risk, valuation, earnings and analyst recommendations.

Institutional & Insider Ownership

73.1% of First Foundation shares are owned by institutional investors. Comparatively, 55.7% of Southside Bancshares shares are owned by institutional investors. 9.5% of First Foundation shares are owned by company insiders. Comparatively, 6.0% of Southside Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Volatility and Risk

First Foundation has a beta of 1.05, indicating that its stock price is 5% more volatile than the S&P 500. Comparatively, Southside Bancshares has a beta of 0.68, indicating that its stock price is 32% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and target prices for First Foundation and Southside Bancshares, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Foundation	1	1	0	2	2.75
Southside Bancshares	0	1	0	0	2.00

Profitability

This table compares First Foundation and Southside Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Foundation	-26.09%	-0.07%	-0.01%
Southside Bancshares	15.58%	10.94%	1.07%

Dividends

First Foundation pays an annual dividend of $0.04 per share and has a dividend yield of 0.8%. Southside Bancshares pays an annual dividend of $1.44 per share and has a dividend yield of 5.1%. First Foundation pays out -2.0% of its earnings in the form of a dividend. Southside Bancshares pays out 62.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Southside Bancshares has raised its dividend for 30 consecutive years. Southside Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares First Foundation and Southside Bancshares”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Foundation	$196.20 million	2.11	-$92.41 million	($1.96)	-2.55
Southside Bancshares	$240.20 million	3.54	$88.49 million	$2.30	12.31

Southside Bancshares has higher revenue and earnings than First Foundation. First Foundation is trading at a lower price-to-earnings ratio than Southside Bancshares, indicating that it is currently the more affordable of the two stocks.

Summary

Southside Bancshares beats First Foundation on 10 of the 16 factors compared between the two stocks.

About First Foundation

First Foundation Inc., through its subsidiaries, provides personal banking, business banking, and private wealth management services in the United States. It operates through two segments, Banking and Wealth Management. The company offers a range of bank deposit products, including personal and business checking accounts, savings accounts, interest-bearing negotiable order of withdrawal accounts, money market accounts, and time certificate of deposits; and loan products consisting of multifamily and single family residential real estate loans, commercial real estate loans, and commercial term loans and line of credits, as well as consumer loans, such as personal installment loans and line of credits, and home equity line of credits. It also provides various specialized services comprising trust services, internet and mobile banking, remote deposit capture services, merchant credit card services, ATM cards, Visa debit cards, and business sweep accounts, as well as insurance brokerage services and equipment financing solutions. In addition, the company offers investment management and financial planning services; treasury management services; advisory and coordination services in the areas of estate planning, retirement planning, and charitable and business ownership issues; and financial, investment, and economic advisory and related services. Further, it provides support services, including the processing and transmission of financial and economic data for charitable organizations. The company operates through a network of 28 branch offices and 3 loan production offices in California, Nevada, Texas, and Hawaii. First Foundation Inc. was founded in 1985 and is headquartered in Dallas, Texas.

About Southside Bancshares

Southside Bancshares, Inc. operates as the bank holding company for Southside Bank that provides a range of financial services to individuals, businesses, municipal entities, and nonprofit organizations. Its deposit products include savings, money market, and interest and noninterest bearing checking accounts, as well as certificates of deposit. The company’s loan portfolio comprises consumer loans that include 1-4 family residential loans, home equity loans, home improvement loans, automobile loans, and other consumer related loans; commercial loans, such as short-term working capital loans for inventory and accounts receivable, short and medium-term loans for equipment or other business capital expansion, commercial real estate loans, and municipal loans; and construction loans for 1-4 family residential and commercial real estate. It also offers wealth management and trust services consisting of investment management, administration, revocable and testamentary trusts, and custodian services for individuals, partnerships, and corporations; safe deposit services; and brokerage services. As of December 31, 2021, the company operated through 56 banking facilities and 73 ATMs/ITMs. Southside Bancshares, Inc. was founded in 1960 and is headquartered in Tyler, Texas.