Start-Up Bank Turns Money Away

First Foundation Bank tells BS&T that, despite the crisis, it rejected "excess" funding at opening.

Having rich relations definitely helped First Foundation Bank. Half of the de novo bank's customers came from its affiliates, investment advisors to the affluent (with $500,000 to invest) and the rich (those with more than $10 million to invest).

Offsetting that advantage was the disadvantage of starting out at arguably the worst time in 80 years for a bank to begin business—Sept. 2007, when the credit crunch was setting in.

It was shocking then for BS&T to learn recently from Dave Rahn, president and COO of First Foundation Bank, that FFB turned away capital when it opened. The bank kept just $32 million of the $38 million it raised in start-up capital, in its first 18 days of business, to preserve the majority stake of its founders, Rahn says. The founders were directors and officers of the bank's precursors, the Irvine, Calif., investment companies, formerly known as The Keller Group, now changing its name to First Foundation Inc.

Despite turning money away, FFB opened its doors with more than six times the required tier-one capital, at a ratio of 31.6 percent. Rahn credits as an "essential" part of the bank's s success its use of customer relationship management (CRM) software to mine the best customer leads within its pre-existing sister companies, and beyond. (The role CRM played is the subject of a forthcoming BS&T case study.)

Rahn says he's often questioned on the wisdom of FFB having started a bank seemingly at a really bad time. "You know a lot of people think that but for us it was great timing because we were starting with no baggage and a very strong capital base, when other banks weren't lending and as consumers were switching out of equities into safer deposits," he says.

By the end of 2008, FFB had $91 million in deposits and $93 million in loans, he adds.