First Foundation (US:FFWM)2022-08-08 17:32Financial Performance - Total loans increased by $2 billion in the six months ended June 30, 2022, due to $3.4 billion in originations, partially offset by $1.4 billion in payoffs or scheduled payments [125]. - Total deposits rose by $727 million, and total revenues increased by 34% compared to the six months ended June 30, 2021 [126]. - Net interest income for Banking was $83.5 million for the three months ended June 30, 2022, compared to $58.0 million in the same period of 2021, reflecting a significant increase [129]. - Income before taxes for the three months ended June 30, 2022, was $46.2 million, up from $36.3 million in the same period of 2021, indicating strong growth [129]. - Net income for the six months ended June 30, 2022, was $64.2 million, up from $48.4 million in the same period of 2021, representing a 32% increase [131]. - Income before taxes increased by $21.7 million to $89.3 million, driven by a $24.1 million increase in Banking and a $0.4 million increase in Wealth Management [131]. - Net interest income for the first half of 2022 was $156.3 million, compared to $112.1 million in the same period of 2021, reflecting a 39.4% increase [133]. - Noninterest income totaled $28.8 million, with $16.3 million from Wealth Management, indicating a strong performance in this segment [131]. Credit Quality - The provision for credit losses for Banking was $173,000 for the three months ended June 30, 2022, compared to $44,000 in the same period of 2021 [129]. - The provision for credit losses decreased to $(619,000) in 2022, compared to $(404,000) in 2021, indicating improved asset quality [131]. - Nonperforming assets decreased to $10.5 million, down from $17.3 million in the previous year, reflecting improved credit quality [135]. - The provision for credit losses for the three months ended June 30, 2022, was $179 million, with charge-offs of $164 million [173]. - The allowance for credit losses (ACL) related to loans was $33,165 million as of June 30, 2022, down from $33,776 million as of December 31, 2021 [174]. - The ACL represented 0.37% of total loans outstanding as of June 30, 2022, compared to 0.49% as of December 31, 2021 [175]. Business Segments - The company operates two business segments: Banking and Wealth Management, with distinct revenue sources and operational focuses [124]. - Noninterest income for Wealth Management was $7.98 million for the three months ended June 30, 2022, compared to $7.24 million in the same period of 2021 [129]. - Noninterest income for Banking for the six months ended June 30, 2022, was $13.388 million, an increase from $12.508 million in the same period of 2021 [142]. - Noninterest income for Wealth Management increased by $0.7 million in Q2 2022 compared to Q2 2021, driven by higher levels of billable assets under management [144]. Expenses - Compensation and benefit costs accounted for 57% of total noninterest expense in Banking and 78% in Wealth Management for the six months ended June 30, 2022 [127]. - Corporate expenses increased due to higher interest expense from subordinated debt acquired in the TGRF acquisition and $150 million of subordinated notes issued in Q1 2022 [129]. - Noninterest expenses for Banking increased from $28.9 million in Q2 2021 to $42.0 million in Q2 2022, primarily due to higher compensation and benefits, occupancy and depreciation, and customer service costs [148]. - Total noninterest expense for Wealth Management was $12.8 million in the six months ended June 30, 2022, compared to $11.1 million in the same period of 2021, indicating an increase of $1.7 million [149]. - Noninterest expenses for Banking in the six months ended June 30, 2022, were $82.1 million, up from $57.4 million in the same period of 2021, primarily due to increased staffing and operational costs [149]. Assets and Liabilities - Total interest-earning assets increased to $10.3 billion, with loans contributing $8.5 billion, yielding an average interest rate of 3.86% [133]. - Total interest-bearing liabilities were $6.1 billion, with a net interest margin of 3.18% for the first half of 2022 [133]. - Total assets increased by $1.1 billion during the six months ended June 30, 2022, primarily due to an increase in loans [152]. - Loans and loans held for sale increased by $2.0 billion, driven by $3.4 billion in originations, partially offset by $1.4 billion in payoffs or scheduled payments [153]. - Deposits grew by $727 million, including increases of $787 million in commercial deposits and $297 million in corporate deposits, while branch deposits decreased by $451 million [153]. - Borrowings increased by $284 million, primarily due to a $148 million increase in subordinated debt and a $149 million increase in overnight borrowings [153]. - Cash and cash equivalents decreased by $948 million, primarily affected by funding of loans and investments in securities [154]. Capital and Liquidity - As of June 30, 2022, the CET1 capital ratio was 9.92%, exceeding the required 4.50% for capital adequacy [194]. - The total risk-based capital ratio was 12.29% as of June 30, 2022, above the minimum requirement of 8.00% [194]. - FFB had $3.2 billion in available lines of credit as of June 30, 2022, indicating strong liquidity management [185]. - The company had $65.6 million of available liquidity as of June 30, 2022, along with a revolving line of credit [197]. - As of June 30, 2022, FFB's capital in excess of well-capitalized requirements was $409 million for the CET1 capital ratio [198]. Shareholder Returns - The Company paid $12.4 million in cash dividends ($0.11 per common share) in the first six months of 2022, with a total of $16.1 million in dividends ($0.36 per share) paid in 2021 [199]. - The Company purchased $2.5 million of its common stock in the first six months of 2022 [199]. - Future cash dividends and stock repurchases are subject to Board approval and regulatory restrictions, with a limit of 50% of net income for the previous twelve months [199]. Future Outlook - There are no material commitments for capital expenditures as of June 30, 2022, but the Company intends to explore growth opportunities, including opening additional offices or acquiring complementary businesses [200]. - The Company may seek additional borrowings and sell shares of common stock to raise funds for growth initiatives, depending on market conditions [200]. - There have been no material changes to the Company's disclosures about market risk since December 31, 2021 [201].