First Foundation (FFWM) - 2024 Q3 - Quarterly Report

Financial Performance - For the quarter ended September 30, 2024, the Company reported a net loss of $82.2 million, compared to net income of$3.1 million for the prior quarter and net income of $2.2 million for the quarter ended September 30, 2023[151]. - For the nine months ended September 30, 2024, the company reported a net loss of$78.3 million, compared to a net loss of $201.6 million for the same period in 2023, indicating an improvement[162]. - The company recorded a combined net loss before income taxes of$114.4 million for the nine months ended September 30, 2024, compared to a loss of $200.3 million in the previous year[162]. Interest Income and Expenses - Net interest income after provision for credit losses increased by$4.2 million or 9.4% compared to the prior quarter, totaling $48.8 million for the quarter ended September 30, 2024[151]. - Interest income increased by$31.4 million or 7.4% year-over-year, reaching $458.5 million, but was offset by a$59.9 million or 22.4% increase in interest expense[162]. - The company reported a total interest expense of $108.037 million for Q3 2024, compared to$92.692 million in Q3 2023, an increase of approximately 16.5%[167]. Asset and Liability Management - Total assets at September 30, 2024, were $13.4 billion, including$8.1 billion of loans held for investment and $1.8 billion in loans held for sale[152]. - Total liabilities decreased by$95.1 million or 0.8% for the nine-month period ended September 30, 2024, primarily due to a $0.4 billion decrease in deposits[154]. - The loan to deposit ratio was 95.9$1.1 billion, a rise of $144.5 million or 15.6$925.3 million at December 31, 2023, primarily due to a capital raise of $228 million[155]. - Shareholders' equity stood at$1,069,797 as of September 30, 2024[192]. Credit Losses and Provisions - The allowance for credit losses (ACL) related to loans held for investment totaled $29.3 million, with a coverage ratio of ACL to total loans held for investment increasing from 29 basis points to 36 basis points[151]. - The provision for credit losses for the nine months ended September 30, 2024, was$53 thousand, compared to a reversal of $0.7 million in the prior year[163]. - The allowance for credit losses on loans held for investment totaled$29.3 million as of September 30, 2024, slightly up from $29.2 million at December 31, 2023[164]. Noninterest Income - Noninterest income, excluding the LOCOM adjustment, totaled$11.9 million for the quarter ended September 30, 2024, compared to $13.7 million for the prior quarter[151]. - Noninterest income for the nine months ended September 30, 2024, was$38.3 million, an increase from $35.5 million in the prior year[162]. - Noninterest income for Banking was$(112.9) million in Q3 2024, significantly lower than $4.6 million in Q3 2023, impacted by a$117.5 million LHFS LOCOM adjustment[182]. Loan Portfolio - The multifamily loan portfolio totaling $1.9 billion was reclassified from loans held for investment to loans held for sale, with loans held for sale totaling$1.8 billion as of September 30, 2024[205]. - Total loans decreased by $300.5 million to$8.1 billion at September 30, 2024, compared to $10.2 billion at December 31, 2023, due to loan fundings of$1.2 billion offset by loan payments of $1.4 billion[206]. - The average current loan-to-value (LTV) ratio for multifamily loans was 53.2$384 million to $10.3 billion at September 30, 2024, compared to$10.7 billion at December 31, 2023[212]. - Brokered deposits totaled $3.7 billion at September 30, 2024, down from$4.2 billion at December 31, 2023, including insured cash sweep accounts[213]. - Total borrowings increased to $1.5 billion with a weighted average interest rate of 4.08$1.2 billion and 4.67% for the year ended December 31, 2023[219]. Capital and Regulatory Ratios - The total risk-based capital ratio as of September 30, 2024, is 13.81%, exceeding the regulatory minimum of 8.00%[254]. - The Common Equity Tier 1 ratio as of September 30, 2024, is 13.41%, well above the required minimum of 4.50%[254]. - As of September 30, 2024, FFB has $598 million in excess capital above the well-capitalized requirements for the Common Equity Tier 1 ratio[262]. Operational Efficiency - Noninterest expense in Banking for Q3 2024 was$53.2 million, a decrease of $4.8 million from$58.0 million in Q3 2023, primarily due to a $5.7 million decrease in customer service costs[186]. - Average Banking FTEs decreased to 492.3 for the nine-month period ended September 30, 2024, from 551.2 in the prior year, reflecting staffing reductions aimed at maximizing efficiency[189]. - The increase in other expenses in Banking was largely due to a$6.2 million rise in FDIC insurance costs compared to the previous year[189]. Future Outlook - The company intends to explore opportunities for growth, including opening additional offices or acquiring complementary businesses[264]. - The modeled NII results indicate that the Bank is more sensitive to earnings in rising rate scenarios[249].