First Foundation entering Florida with TGR acquisition

First Foundation in Dallas is moving into Florida with an agreement to buy TGR Financial in Naples.

The $7.1 billion-asset First Foundation said in a press release Thursday that it will pay $294.8 million in stock for the $2.3 billion-asset parent of First Florida Integrity Bank. The deal, which is expected to close in the second half of this year, priced TGR at 174% of its tangible book value.

First Florida has seven branches, $1.2 billion of loans and $1.9 billion of deposits in southwest Florida. 

“This strategic acquisition provides First Foundation an excellent opportunity to expand into a highly desirable market,” Scott Kavanaugh, First Foundation’s CEO, said in the release. 

First Florida “has built a valuable banking franchise and we are committed to continuing its legacy by serving the needs of all its clients and enhancing its offering with our broad platform of services, as well as supporting programs available to local nonprofits in the bank’s local communities,” Kavanaugh added. “This acquisition highlights our desire to continue growing our business in markets with attractive demographic and economic trends.”

Gary Tice, TGR’s chairman and CEO, is set to join the board of First Foundation.

The deal is expected to by 4.5% accretive to First Foundation’s 2022 earnings per share. It should take the company about two years to earn back the projected 2.4% dilution to its tangible book value. 

First Foundation plans to cut about 30% of TGR’s annual noninterest expenses, or roughly $10.3 million. The company expects to incur $16.8 million of merger-related expenses. 

The deal is the sixth for First Foundation since 2012. Its last acquisition was the June 2018 purchase of PBB Bancorp in Los Angeles. 

"As Florida has been among First Foundation's list of targeted affluent, growth states it was considering via M&A, it should not come as a big surprise to shareholders," Matthew Clark, an analyst at Piper Sandler, wrote in a note to clients. "We expect First Foundation to quickly get questions around its plans to cross $10 billion in assets now that this deal will bring it to $9.4 billion after [it] closes."

Clark said he was "surprised" First Foundation was able to compete against in-market banks to land TGR.

D.A. Davidson and Sheppard Mullin Richter & Hampton advised First Foundation. Truist Financial, Swan Hill Advisors, Smith Mackinnon and Smith Gambrell & Russell advised TGR.