| --- | --- | |----------------------------------------------------|-------| | | | | | | | | | | | | | | | | INVESTOR PRESENTATION FIRST October 2024 DUNDATION | | Safe Harbor Statement This report includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, including forwar statements regarding our expectations and beliefs about our future financial performance and financial condition, potential loan sales, as well as strend ...

Core Viewpoint - First Foundation (FFWM) reported a revenue of $61.06 million for Q3 2024, reflecting a year-over-year decline of 4.3%, while EPS was $0.04 compared to $0.05 a year ago, indicating a significant EPS surprise of +113.79% against a consensus estimate of -$0.29 [1]. Financial Performance Metrics - Efficiency Ratio (non-GAAP) was reported at 98.1%, slightly above the average estimate of 97.2% from three analysts [3]. - Average Balances of total interest-earning assets reached $13.20 billion, exceeding the three-analyst average estimate of $13.01 billion [3]. - Net charge-offs to average loans were reported at 0%, matching the average estimate of 0% from three analysts [3]. - Net Interest Margin stood at 1.5%, consistent with the average estimate from three analysts [3]. - Total nonperforming assets amounted to $44.40 million, significantly higher than the two-analyst average estimate of $27.24 million [3]. - Net interest income was reported at $49.12 million, slightly above the average estimate of $48.68 million from three analysts [3]. - Total Noninterest income reached $11.94 million, marginally exceeding the average estimate of $11.91 million from three analysts [3]. - Asset management, consulting, and other fees were reported at $9.16 million, above the two-analyst average estimate of $9.09 million [3]. - Other income was $2.79 million, surpassing the two-analyst average estimate of $2.57 million [3]. Stock Performance - Shares of First Foundation have increased by +24.5% over the past month, outperforming the Zacks S&P 500 composite, which saw a change of +1.7% [4]. - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential for outperformance in the near term [4].

Company Performance - First Foundation (FFWM) reported quarterly earnings of $0.04 per share, exceeding the Zacks Consensus Estimate of a loss of $0.29 per share, and compared to earnings of $0.05 per share a year ago, representing an earnings surprise of 113.79% [1] - The company posted revenues of $61.06 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.75%, although this is a decrease from year-ago revenues of $63.77 million [2] - Over the last four quarters, First Foundation has surpassed consensus EPS estimates four times and topped consensus revenue estimates two times [2] Stock Performance and Outlook - First Foundation shares have declined approximately 19.7% since the beginning of the year, while the S&P 500 has gained 22.1% [3] - The company's earnings outlook is crucial for investors, with current consensus EPS estimates at $0.06 on $66.33 million in revenues for the coming quarter and -$0.13 on $235.93 million in revenues for the current fiscal year [7] Industry Context - The Banks - Southwest industry, to which First Foundation belongs, is currently ranked in the top 6% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can significantly impact stock performance [5][8]

First Foundation (FFWM) is expected to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended September 2024. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price.The earnings report, which is expected to be released on October 29, 2024, might help the stock move higher if these key numbers are better ...

Core Viewpoint - First Foundation (FFWM) reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of $0.01 per share, representing a 500% earnings surprise [1] - The company has shown a consistent ability to surpass consensus EPS estimates over the last four quarters [2] Financial Performance - First Foundation's revenues for the quarter ended June 2024 were $57.49 million, surpassing the Zacks Consensus Estimate by 6%, but down from $61.06 million a year ago [2] - The company has topped consensus revenue estimates two times in the last four quarters [2] Stock Performance - First Foundation shares have declined approximately 30.7% since the beginning of the year, contrasting with the S&P 500's gain of 13.8% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.08 on revenues of $58.27 million, and $0.03 on revenues of $225.13 million for the current fiscal year [7] - The trend of estimate revisions for First Foundation has been unfavorable leading up to the earnings release [6] Industry Context - The Banks - Southwest industry, to which First Foundation belongs, is currently ranked in the top 42% of over 250 Zacks industries, suggesting a relatively strong industry performance [8] - Red River Bancshares, another company in the same industry, is expected to report quarterly earnings of $1.12 per share, reflecting a year-over-year decline of 10.4% [9]

Financial Performance - Net income for Q2 2024 was $3.1 million, or $0.05 per share, compared to a net loss of $212.3 million in Q2 2023[3] - Total revenue for Q2 2024 increased to $57.5 million, up from $51.1 million in the prior quarter[11] - Net interest income was $43.8 million for the quarter, compared to $38.4 million in the prior quarter and $49.0 million in Q2 2023[25] - Noninterest income increased to $13.7 million in the quarter, up from $12.7 million in the prior quarter and $12.1 million in Q2 2023[28] - Net income for Q2 2024 was $3,085 thousand, compared to a net loss of $212,288 thousand in Q2 2023, indicating a significant recovery[50] - The company reported a basic net income per share of $0.05 for Q2 2024, compared to a loss of $3.76 per share in Q2 2023[50] - Net income for Q2 2024 was $3,535, compared to a loss of $211,117 in Q1 2024 and a loss of $200,774 in Q2 2023[54] - Adjusted net income attributable to common shareholders for Q2 2024 was $3.34 million, up from $1.06 million in Q1 2024 and $3.71 million in Q2 2023[67] Asset and Liability Management - Total assets increased to $13,714,423 thousand as of June 30, 2024, compared to $12,840,554 thousand a year earlier, representing a growth of 6.8%[49] - Total liabilities stood at $12,781,179 thousand as of June 30, 2024, compared to $11,925,020 thousand a year earlier, an increase of 7.2%[49] - Total loans remained stable at $10.1 billion as of June 30, 2024, with loan originations of $516 million for the quarter[13] - Total deposits increased to $10.8 billion as of June 30, 2024, compared to $10.6 billion in the prior quarter[11] - Deposits totaled $10,756,344 thousand as of June 30, 2024, a slight decrease from $10,806,986 thousand in the previous year[49] Efficiency and Profitability Ratios - The efficiency ratio improved to 96.1% in Q2 2024, down from 98.4% in Q1 2024[2] - Return on average assets increased to 0.09% in Q2 2024 from 0.02% in Q1 2024, while it was (6.38)% in Q2 2023[52] - Return on average equity improved to 1.3% in Q2 2024 compared to 0.3% in Q1 2024, down from (78.8)% in Q2 2023[52] - The efficiency ratio (non-GAAP) improved to 96.1% for the quarter, compared to 98.4% in the prior quarter[34] - Efficiency ratio for Q2 2024 improved to 96.1%, compared to 98.4% in Q1 2024 and 92.5% in Q2 2023[66] Capital and Book Value - The company raised $228 million in strategic capital investment, indicating strong confidence from investors[4] - Shareholders' equity totaled $933.2 million as of June 30, 2024, compared to $928.7 million in the prior quarter[40] - Tangible book value per share rose to $16.43, up from $16.35 in the prior quarter[11] - Book value per share increased to $16.50 in Q2 2024 from $16.43 in Q1 2024 and $16.22 in Q2 2023[52] - Tangible book value per share increased to $16.43 in Q2 2024, compared to $16.35 in Q1 2024 and $16.12 in Q2 2023[67] Loan and Deposit Metrics - The loan to deposit ratio was 93.8% as of June 30, 2024, down from 94.8% in the prior quarter[21] - Demand deposits increased to $10,756,344 in Q2 2024, up 1.11% from $10,638,970 in Q1 2024[55] - Noninterest-bearing demand deposits rose to $2,109,830 in Q2 2024, up 15.43% from $1,827,520 in Q1 2024[55] - Total real estate loans amounted to $7,203,293 in Q2 2024, a decrease of 0.46% from $7,236,948 in Q1 2024[55] Credit Quality - Nonperforming assets to total assets remained unchanged at 0.18%[11] - Nonperforming assets totaled $25.1 million as of June 30, 2024, with a ratio of nonperforming assets to total assets at 0.18%[36] - The allowance for credit losses for loans was $29.3 million, or 0.29% of total loans held for investment as of June 30, 2024[37] - The allowance for credit losses on loans decreased to $29,295 thousand from $31,485 thousand year-over-year, indicating improved asset quality[49] - Total nonperforming loans increased to $25,129 in Q2 2024 from $24,020 in Q1 2024, up from $15,836 in Q2 2023[52]

Core Insights - First Foundation Inc. (FFWM) is experiencing significant implied volatility in its options market, particularly with the Jul 19, 2024 $5 Call option, indicating potential trading opportunities [2][4]. Company Overview - First Foundation is currently rated as Zacks Rank 3 (Hold) within the Banks - Southwest industry, which is positioned in the bottom 15% of the Zacks Industry Rank [6]. - Over the past 60 days, there has been a mixed revision in earnings estimates, with one analyst increasing the estimate for the current quarter while two have decreased theirs, leading to a consensus estimate drop from 4 cents per share to 2 cents [6]. Market Sentiment - The high levels of implied volatility suggest that investors are anticipating significant price movement for First Foundation shares, potentially due to an upcoming event that could trigger a major rally or sell-off [5][6].

Financial Performance - For the quarter ended March 31, 2024, the Company reported net income of $793 thousand, a decrease from $2.5 million in Q4 2023 and $8.5 million in Q1 2023[143]. - Noninterest income for Q1 2024 totaled $12.7 million, compared to $13.9 million in Q4 2023 and $11.7 million in Q1 2023[143]. - Combined net income for Q1 2024 was $793 thousand, a decrease from $8.5 million in Q1 2023[150]. - Noninterest expense decreased to $50.6 million in Q1 2024, down from $55.9 million in Q4 2023 and $59.3 million in Q1 2023[143]. - Wealth Management net income before taxes increased by $0.4 million due to a decrease in noninterest expense[150]. Assets and Liabilities - Total assets increased to $13.6 billion at March 31, 2024, compared to $13.3 billion at December 31, 2023, primarily due to an increase in cash and cash equivalents[144]. - Total liabilities rose to $12.7 billion at March 31, 2024, driven by a $0.3 billion increase in borrowings, while deposits decreased slightly by $0.1 billion[145]. - Cash and cash equivalents increased by $261 million to $3.1 billion as of March 31, 2024, compared to December 31, 2023[173]. - Total loans decreased by $91 million to $10.1 billion, with loan fundings of $302 million offset by payments and payoffs of $393 million during Q1 2024[181]. - Total deposits decreased slightly by approximately $50 million to $10.6 billion at March 31, 2024, compared to $10.7 billion at December 31, 2023[185]. Interest Income and Expenses - Net interest income before provision for credit losses was $38.4 million for Q1 2024, down from $42.5 million in Q4 2023 and $58.8 million in Q1 2023, with a net interest margin of 1.17%[143]. - Interest income increased to $150.5 million in Q1 2024, compared to $137 million in Q1 2023, driven by higher average interest-earning asset balances and yields[157]. - Interest expense increased to $112.1 million for Q1 2024, up from $78.2 million in Q1 2023, driven by a 14.0% increase in average interest-bearing liabilities to $10.6 billion[158]. - The net interest rate spread decreased to 0.40% in Q1 2024 from 0.91% in Q1 2023[155]. Capital and Equity - The Company had total shareholders' equity of $928.7 million at March 31, 2024, reflecting a net gain in accumulated other comprehensive income of $2.7 million during the quarter[146]. - Shareholders' equity increased by $3.4 million in Q1 2024, primarily due to a reduction in accumulated other comprehensive loss[171]. - FFI's CET1 capital ratio was 10.20%, exceeding the required 4.50% for well-capitalized status[222]. - Total risk-based capital ratio for FFI was 12.49% as of March 31, 2024, exceeding the 8.00% minimum requirement[222]. Credit Losses and Provisions - The provision for credit losses was $0.6 million in Q1 2024, up from $0.4 million in the same quarter last year[152]. - The allowance for credit losses (ACL) for loans totaled $29.3 million as of March 31, 2024, compared to $31.1 million as of March 31, 2023[196]. - Total past due and nonaccrual loans amounted to $35,914 thousand as of March 31, 2024, representing 0.36% of total loans[195]. Dividends and Future Plans - The Company announced a quarterly cash dividend of $0.01 per common share to be paid on May 16, 2024[148]. - The Company intends to explore opportunities for growth, including opening additional offices or acquiring complementary businesses[228]. Operational Efficiency - Average quarterly Banking full-time equivalents (FTEs) decreased to 497.1 in Q1 2024 from 601.8 in Q1 2023, reflecting efforts to maximize efficiency[165]. - Noninterest expense in Banking decreased to $44.5 million in Q1 2024 from $51.6 million in Q1 2023, largely due to a $6.0 million decrease in customer service costs[166]. Liquidity and Cash Flow - The available liquidity ratio was 44.3% as of March 31, 2024, exceeding the minimum policy requirement of 25%[202]. - Operating activities provided net cash of $7.1 million during the quarter ended March 31, 2024, primarily due to net income of $793 thousand[203]. - Financing activities resulted in a net cash increase of $246 million, mainly from a net increase of $284 million in FHLB and FRB advances[205].

Financial Data and Key Metrics Changes - The company reported net income attributable to common shareholders of $793,000 or $0.014 per share for the first quarter of 2024, with tangible book value increasing to $16.35, up $0.05 from the previous quarter [112] - Net interest margin (NIM) decreased to 1.17% from 1.36% in the fourth quarter of 2023, largely due to the return of non-interest-bearing deposits later in the quarter [113][129] - Non-interest expense decreased to $50.6 million from $55.9 million in the prior quarter, indicating a focus on cost management [113] Business Line Data and Key Metrics Changes - Wealth and Trust related fees remained flat at $8.6 million, while assets under management (AUM) increased to $5.5 billion, up $300 million from year-end 2023 [4][5] - The company exited the equipment finance operations, which is expected to save approximately $1.5 million annually [115] - Loan balances ended the quarter at $10.1 billion, a reduction of $100 million compared to the previous quarter [120] Market Data and Key Metrics Changes - Non-interest-bearing demand deposits increased to 17% of total deposits, up from 14% in the fourth quarter of last year [117] - The company maintained a strong liquidity position of $4.4 billion, with a liquidity to uninsured and uncollateralized deposits ratio of 2.7 times [118] - Average borrowings increased to $1.6 billion, representing 11.8% of total average assets for the quarter [119] Company Strategy and Development Direction - The company is focused on improving operating efficiency and controlling discretionary costs, with a strategic pivot back to relationship banking [7][10] - Management emphasized the importance of maintaining a strong deposit pipeline, particularly in non-interest-bearing categories [117][133] - The company plans to continue strategically adding hedges to improve recurring revenues and reduce interest rate sensitivity [138] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow once economic uncertainty subsides, highlighting a robust deposit pipeline [9][33] - The management team acknowledged the challenges posed by the current economic environment but remains optimistic about future growth opportunities [36][122] - The company is preparing for potential rate cuts in 2024 while focusing on relationship-driven deposit gathering strategies [29][57] Other Important Information - The company reported a nonperforming assets to total assets ratio of 0.18%, slightly up from 0.15% in the previous quarter, indicating stable credit quality [120] - The company is committed to a gradual increase in CECL reserves as part of its risk management strategy [20] - The company is actively working to enhance its digital banking capabilities to improve customer service and operational efficiency [28] Q&A Session Summary Question: What is the expected pace of loan repricing in the next 12 to 18 months? - Management indicated that borrowers are currently cautious but expect a normal cadence of refinance activity as rates stabilize [41][45] Question: What strategies are being focused on for deposit growth? - The company is emphasizing relationship-focused strategies, particularly in the C&I business, to drive deposit growth [56][58] Question: What is the outlook for net interest income and margins? - Management expects net interest income to benefit from increasing non-interest-bearing deposit balances in the second quarter, but specific guidance on margin expansion was not provided [83][106] Question: How are customer service costs expected to trend? - Customer service costs are anticipated to increase as deposits return, but management is focused on maintaining a favorable expense-to-assets ratio [104][92]

This report includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, including forwar statements regarding our expectations and beliefs about our future financial performance and financial condition, as well as reads in our business and markets. Forward-look statements often include words such as "believe," "expect," "auticipate," "intend, ""plan, " estimate, ""project," "outdook," or words of similar meaning, or future o ...