First Foundation (NYSE:FFWM) versus Texas Capital Bancshares (NASDAQ:TCBI) Critical Review

Texas Capital Bancshares (NASDAQ:TCBI) and First Foundation (NYSE:FFWM) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, earnings, institutional ownership, analyst recommendations, profitability, dividends and risk.

Institutional and Insider Ownership

96.9% of Texas Capital Bancshares shares are held by institutional investors. Comparatively, 73.1% of First Foundation shares are held by institutional investors. 1.7% of Texas Capital Bancshares shares are held by company insiders. Comparatively, 9.5% of First Foundation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Texas Capital Bancshares and First Foundation, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Texas Capital Bancshares	3	6	4	1	2.21
First Foundation	1	2	0	1	2.25

Texas Capital Bancshares currently has a consensus target price of $101.17, suggesting a potential upside of 0.90%. Given Texas Capital Bancshares’ higher possible upside, equities analysts clearly believe Texas Capital Bancshares is more favorable than First Foundation.

Risk and Volatility

Texas Capital Bancshares has a beta of 0.68, meaning that its stock price is 32% less volatile than the S&P 500. Comparatively, First Foundation has a beta of 0.93, meaning that its stock price is 7% less volatile than the S&P 500.

Earnings & Valuation

This table compares Texas Capital Bancshares and First Foundation”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Texas Capital Bancshares	$1.26 billion	3.64	$330.24 million	$6.80	14.74
First Foundation	$588.36 million	0.85	-$155.16 million	($1.89)	-3.20

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Texas Capital Bancshares	16.52%	10.05%	1.03%
First Foundation	-26.37%	1.06%	0.08%

Summary

Texas Capital Bancshares beats First Foundation on 11 of the 14 factors compared between the two stocks.

About Texas Capital Bancshares

Texas Capital Bancshares, Inc. operates as the bank holding company for Texas Capital Bank, is a full-service financial services firm that delivers customized solutions to businesses, entrepreneurs, and individual customers. The company offers commercial banking; consumer banking; investment banking solutions, including capital markets, mergers and acquisitions, and syndicated finance, as well as financial sponsor coverage, capital solutions, and institutional services; and wealth management services, such as investment management, financial planning, lockbox and insurance, securities-based lending, estate planning, and business succession, as well as philanthropic, trustee and executor, custom credit, and depository services. It also provides deposit accounts, analyzed accounts, commercial card, SBA and business loans, packaged solutions, and merchant services; liquidity and investments, working capital, international trade and payment, and treasury and credit products; and commercial real estate, homebuilder and community, and mortgage finance. In addition, the company offers payables and receivables management; online and mobile banking; term loans and lines of credit, equipment finance and lease, acquisition finance, and asset-based lending; private wealth advisory solutions; and checking and savings accounts, debit and credit cards, and certificates of deposit, as well as ETF and funds management services. Further, it provides financial institution money market accounts and loan syndication products; commercial loans for financing for working capital, organic growth, and acquisitions; real estate term and construction loans; mortgage warehouse lending services; treasury management, trust, and advisory and escrow services; and letters of credit. The company operates in Austin, Dallas, Fort Worth, Houston, and San Antonio metropolitan areas of Texas. Texas Capital Bancshares, Inc. was incorporated in 1996 and is headquartered in Dallas, Texas.

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.