FFWM First Foundation Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 25, 2024

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FIRST FOUNDATION INC.

(Exact name of registrant as specified in its charter)

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(469) 638-9636

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name or former address, if changed since last report.)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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Securities registered pursuant to Section 12(b) of the Act:

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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On July 25, 2024, First Foundation Inc. issued an earnings release reporting its consolidated financial results as of and for the quarter ended June 30, 2024. A copy of that earnings release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information contained in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, and such information and that Exhibit shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Exhibit 99.1

FIRST FOUNDATION INC. REPORTS SECOND QUARTER 2024 RESULTS

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DALLAS, TX – First Foundation Inc. (NYSE: FFWM), a financial services company with two wholly-owned operating subsidiaries, First Foundation Advisors (“FFA”) and First Foundation Bank (“FFB”), reported net income of $3.1 million, or $0.05 per share (basic and diluted) for the quarter.  

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Loans

Loan balances totaled $10.1 billion as of June 30, 2024, compared to $10.1 billion and $10.6 billion as of March 31, 2024 and June 30, 2023, respectively.  Loan fundings totaled $516 million, offset by loan payments and payoffs of $515 million, in the quarter.  This compares to loan fundings totaling $302 million, offset by loan payments and payoffs of $393 million, in the prior quarter and loan fundings totaling $474 million, offset by loan payments and payoffs of $559 million in the second quarter of 2023.  Commercial and industrial (“C&I”) loans accounted for 83% of total fundings for the quarter, and 86% of total fundings year to date.  C&I loans consist primarily of commercial revolving lines of credit and term loans.

During the quarter, loans totaling $4.4 million in unpaid principal balance were sold, resulting in a net gain on sale of loans of $415 thousand.

Loan portfolio average yield increased to 4.77% in the quarter, compared to 4.70% in the prior quarter, and 4.69% in the second quarter of 2023.  Average yields on new loan fundings were 8.19% in the quarter compared to 8.39% in the prior quarter and 7.90% in the second quarter of 2023.

Investment Securities

Investment securities were $1.9 billion as of June 30, 2024, compared to $1.6 billion and $1.0 billion as of March 31, 2024 and June 30, 2023, respectively.  During the quarter, $459 million in investment securities were purchased, offset by $143 million in sales and maturities, resulting in a net gain on sale of securities available-for-sale of $983 thousand.  The investment securities purchased during the quarter consisted of agency mortgage-backed securities.  

The allowance for credit losses for investments was $7.3 million as of June 30, 2024, compared to $7.9 million and $8.5 million as of March 31, 2024 and June 30, 2023, respectively.  Unrealized losses (tax-effected) on the available-for-sale portfolio totaled $16.6 million as of June 30, 2024, compared to $17.5 million as of March 31, 2024.  Unrecognized losses (tax-effected) on the held-to-maturity portfolio totaled $56.4 million as of June 30, 2024, compared to $60.1 million as of March 31, 2024.  Combined unrealized and unrecognized losses (tax-effected) on the available-for-sale and held-to-maturity portfolios totaled $73.0 million, or 3.91% of the combined portfolios as of June 30, 2024, compared to $77.6 million or 4.91% of the combined portfolios as of March 31, 2024.

Investment securities portfolio average yield was 4.00% in the quarter, compared to 4.06% in the prior quarter and 2.39% in the second quarter of 2023.

Deposits and Borrowings

Deposits were $10.8 billion as of June 30, 2024, compared to $10.6 billion and $10.8 billion as of March 31, 2024 and June 30, 2023, respectively.  Noninterest-bearing demand deposits accounted for 20% of total deposits as of June 30, 2024, compared to 17% and 25% as of March 31, 2024 and June 30, 2023, respectively.  Certificates of deposit accounted for 26% of total deposits as of June 30, 2024, relatively unchanged compared to March 31, 2024 and June 30, 2023, respectively.  Core deposits accounted for 62% of total deposits as of June 30, 2024, compared to 64% and 71% as of March 31, 2024 and June 30, 2023, respectively.  Brokered deposits accounted for 38% of total deposits as of June 30, 2024, compared to 36% and 29% as of March 31, 2024 and June 30, 2023, respectively.    

Cost of deposits decreased to 3.49% for the quarter, compared to 3.63% for the prior quarter and 2.85% for the second quarter of 2023.

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Insured and collateralized deposits accounted for approximately 85% of total deposits as of June 30, 2024, relatively unchanged from the prior quarter.

Our loan to deposit ratio measured 93.8% as of June 30, 2024, compared to 94.8% and 97.9% as of March 31, 2024 and June 30, 2023, respectively.  

Borrowings were $1.7 billion as of June 30, 2024, compared to $1.7 billion and $802 million as of March 31, 2024 and June 30, 2023, respectively.  Average borrowings outstanding were $1.4 billion or 10.4% of total average assets for the quarter, compared to $1.6 billion or 11.8% of total average assets for the prior quarter and $1.7 billion or 12.6% for the second quarter of 2023.  The weighted average rate paid on borrowings was 4.12% for the quarter, compared to 4.08% for the prior quarter and 5.13% for the second quarter of 2023.

As of June 30, 2024, our unused borrowing capacity was $2.8 billion, which consists of available lines of credit with FHLB and other correspondent banks as well as access to the Federal Reserve Bank’s discount window.

Private Wealth Management and Trust Assets

AUM was $5.5 billion as of June 30, 2024, relatively unchanged from the prior quarter, and compared to $5.3 billion as of June 30, 2023.  Activity within the AUM balance during the quarter consisted of the following:  $35 million of new accounts; $74 million of net withdrawals; and $61 million of performance gains.  AUA at FFB’s Trust Department was $1.1 billion as of June 30, 2024, compared to $1.2 billion in both the prior quarter and at June 30, 2023.

Net Interest Income and Net Interest Margin

Net interest income was $43.8 million for the quarter, compared to $38.4 million for the prior quarter and $49.0 million for the second quarter of 2023.  Interest income totaled $150.9 million for the quarter, compared to $150.5 million for the prior quarter and $145.3 million for the second quarter of 2023.  Average interest-earning asset balances totaled $12.8 billion for the quarter, compared to $13.0 billion for the prior quarter and $12.9 billion for the second quarter of 2023.  Yields on interest-earning assets averaged 4.71% for the quarter, compared to 4.64% for the prior quarter and 4.51% for the second quarter of 2023.

Interest expense was $107.1 million for the quarter, compared to $112.1 million for the prior quarter and $96.3 million for the second quarter of 2023.  The decrease in interest expense compared to the prior quarter was due to a decrease in average interest-bearing liability balances offset by a slight increase in the average rates paid on such balances.  Average interest-bearing liability balances, consisting of interest-bearing deposits, borrowings, and subordinated debt, totaled $10.1 billion for the quarter, compared to $10.6 billion for the prior quarter and $9.7 billion for the second quarter of 2023.  Rates on interest-bearing liability balances averaged 4.27% for the quarter, compared to 4.24% for the prior quarter and 3.97% for the second quarter of 2023.  Rates on interest-bearing deposits averaged 4.30% for the quarter, compared to 4.28% for the prior quarter and 3.72% for the second quarter of 2023.  Rates on borrowings averaged 4.12% for the quarter, compared to 4.08% for the prior quarter and 5.13% for the second quarter of 2023.  

The 0.07% increase in average yield earned on interest-earning assets was offset by a 0.02% increase in average rate paid on interest-bearing liability balances, contributing to an increase in net interest margin (“NIM”) for the quarter.  NIM was 1.36% for the quarter, compared to 1.17% for the prior quarter and 1.51% for the second quarter of 2023.    

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Noninterest Income

Noninterest income was $13.7 million in the quarter, compared to $12.7 million in the prior quarter and $12.1 million in the second quarter of 2023.  

Noninterest income during the quarter was comprised of $7.5 million in investment advisory fees, $1.7 million in trust consulting and administrative fees, $1.4 million in combined gains on the sale of loans and securities, $0.8 million in realized gains on derivative assets classified as capital market activities, $1.5 million in loan and servicing fees, $0.5 million of deposit account fees and other income of $1.6 million.

Noninterest income as a percentage of total revenues was 23% for the quarter, compared to 25% for the prior quarter and 20% for the second quarter of 2023.  

Noninterest Expense

Noninterest expense was $55.6 million in the quarter, compared to $50.6 million in the prior quarter and $57.5 million in the second quarter of 2023.  The $57.5 million noninterest expense in the second quarter of 2023 excludes a $215.3 million one-time goodwill impairment charge.  

Compensation and benefits were $19.1 million in the quarter, compared to $19.4 million in the prior quarter and $21.0 million in the second quarter of 2023.  Compensation and benefits expense decreased due to a slight reduction in headcount in the quarter as well as the prior quarter including the impact of annual employer-paid payroll tax re-setting.  Average FTEs totaled 554 in the quarter, compared to 564 in the prior quarter and 615 in the second quarter of 2023.    

Customer service costs were $16.1 million in the quarter, compared to $10.7 million in the prior quarter and $19.0 million in the second quarter of 2023.  The increase in customer service costs was due to both an increase in the average balances of depository accounts receiving earnings credit as well as an increase in the rates paid on such accounts.    

Our efficiency ratio (non-GAAP) for the quarter was 96.1%, compared to 98.4% for the prior quarter, and 92.5% for the second quarter of 2023.  The efficiency ratio is a measure of noninterest expense to revenue (net interest income plus noninterest income) on an adjusted basis.

Income Tax Expense

We recorded income tax benefit of $421 thousand in the second quarter of 2024, compared to a tax benefit of $910 thousand in the prior quarter and $300 thousand in the second quarter of 2023. Our effective tax rates for the second quarter of 2024, the prior quarter and the second quarter of 2023 were -15.8%, 777.8%, and 0.1%, respectively.  The changes in the effective tax rate were predominately due to the changes in pretax income, as well as the impact of tax-exempt interest income and tax benefits associated with low-income housing tax credit investments.      

Asset Quality

Total nonperforming assets were $25.1 million as of June 30, 2024, compared to $24.0 million and $15.8 million as of March 31, 2024 and June 30, 2023, respectively.  Our ratio of nonperforming assets to total assets was 0.18% as of June 30, 2024, compared to 0.18% and 0.12% as of March 31, 2024 and June 30, 2023, respectively. Total delinquent and nonaccrual loans were $33.2 million or 0.33% of total loans as of June 30, 2024, compared to $35.9 million or 0.36% of total loans as of March 31, 2024, and $14.8 million or 0.14% of total loans as of June 30, 2023.

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Our allowance for credit losses for loans was $29.3 million, or 0.29% of total loans held for investment as of June 30, 2024, relatively unchanged from the prior quarter, and $31.5 million, or 0.30% of total loans held for investment as of June 30, 2023.  Net charge-offs were $0.3 million or 0.01% of average loan balances for the quarter, relatively unchanged from the prior quarter, and net charge-offs of $0.5 million or 0.02% of average loan balances for the second quarter of 2023.

The ratio of the allowance for credit losses for loans to total past due and nonaccrual loans was 88.1% as of June 30, 2024, compared to 81.6% and 213.0% as of March 31, 2024, and June 30, 2023, respectively.

Capital

As of June 30, 2024, First Foundation Inc. exceeded the regulatory capital minimum requirements, as summarized in the table below:

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Shareholders' equity totaled $933.2 million as of June 30, 2024, compared to $928.7 million and $915.5 million as of March 31, 2024, and June 30, 2023, respectively.  The change from the prior quarter consists primarily of net income of $3.1 million for the quarter and a net gain in accumulated other comprehensive income (“AOCI”) of $1.5 million for the quarter.  Our tangible book value per common share (non-GAAP measure) was $16.43 as of June 30, 2024, compared to $16.35 as of March 31, 2024, and $16.12 as of June 30, 2023.

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First Foundation Inc. will host a conference call at 8:00 a.m. PT / 11:00 a.m. ET on Thursday, July 25, 2024 to discuss its financial results. Analysts, investors, and the general public may participate in the question-and-answer session. The call will be broadcast live over the Internet and can be accessed by visiting First Foundation’s website and clicking on “Investor Relations” and “Events & Presentations” https://investor.ff-inc.com/events-and-presentations/default.aspx.  For those wishing to participate in the question-and-answer session, the conference call can be accessed by telephone at the following dial-in number:  Toll-Free at (800) 715-9871 using conference ID 2340475.  It is recommended that participants dial into the conference call approximately ten minutes prior to the call. For those who are unable to participate during the live call, an archive of the call will be available for replay.

About First Foundation

First Foundation Inc. (NYSE: FFWM) and its subsidiaries offer personal banking, business banking, and private wealth management services, including investment, trust, insurance, and philanthropy services. This comprehensive platform of financial services is designed to help each client at any stage in their financial journey. The broad range of financial products and services offered by First Foundation are more consistent with those offered by larger financial institutions, while its high level of personalized service, accessibility, and responsiveness to clients is more aligned with those of community banks and boutique wealth management firms. This combination of an integrated platform of comprehensive financial products and personalized service differentiates First Foundation from many of its competitors and has contributed to the growth of its client base and business. Learn more at firstfoundationinc.com, or connect with us on LinkedIn and Twitter.  

Forward-Looking Statements

This report includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995, including forward-looking statements regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets. Forward-looking statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "outlook," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." The forward-looking statements in this report are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this report and could cause us to make changes to our future plans. Those risks and uncertainties include, but are not limited to, changes in our capital management and balance sheet strategies and our ability to successfully implement such strategies; changes in our strategic plan, and our ability to successfully implement such plan; whether and when certain of our preferred stock converts into common stock and the capital treatment of such shares prior to conversion; the risk of incurring credit losses, which is an inherent risk of the banking business; the quality and quantity of our deposits; adverse developments in the financial services industry generally such as bank failures and any related impact on depositor behavior or investor sentiment; risks related to the sufficiency of liquidity; risk that we will not be able to maintain growth at historic rates or at all; the risk that we will not be able to access the securitization market on favorable terms or at all; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; risks associated with changes in interest rates, which could adversely affect our interest income, interest rate margins, and the value of our interest-earning assets, and therefore, our future operating results; the risk that the performance of our investment management business or of the equity and bond markets could lead clients to move their funds from or close their investment accounts with us, which would reduce our assets under management and adversely affect our operating results; negative impacts of news or analyst reports about us or the financial services industry; the impacts of inflation on us and our customers; results of examinations by regulatory authorities and the possibility that such regulatory authorities may, among other things, limit our business activities or our ability to pay dividends, or impose fines, penalties or sanctions; the risk that we may be unable or that our board of directors may determine that it is inadvisable to pay future dividends at historic levels or at all; risks associated with changes in income tax laws and regulations; and risks associated with seeking new client relationships and maintaining existing client relationships.

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Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and other documents we file with the SEC from time to time. We urge readers of this report to review those reports and other documents we file with the SEC from time to time. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report, which speak only as of today's date, or to make predictions based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this report or in the above-referenced reports, whether as a result of new information, future events or otherwise, except as may be required by law or NYSE rules.

Non-GAAP Financial Measures

This presentation contains both financial measures based on GAAP and non-GAAP based financial measures, which are used when management believes them to be helpful in understanding the Company's results of operations or financial position. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

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CONSOLIDATED BALANCE SHEETS

(unaudited)

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SELECTED CONSOLIDATED FINANCIAL DATA AND ASSET QUALITY

(unaudited)

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SEGMENT REPORTING

(unaudited)