First Foundation (US:FFWM)2022-11-08 22:16Financial Performance - Total loans increased by $2.9 billion in the nine months ended September 30, 2022, due to $5.0 billion in originations, partially offset by $2 billion in payoffs or scheduled payments [118]. - Total deposits increased by $738 million, and total revenues rose by 25% compared to the nine months ended September 30, 2021 [119]. - Net interest income for Banking was $89.5 million, while noninterest income totaled $5.7 million for Banking and $6.9 million for Wealth Management [122]. - Income before taxes for the three months ended September 30, 2022, was $39.5 million, down from $51.9 million in the same period in 2021, reflecting a $12.4 million decrease [123]. - Net income for the nine months ended September 30, 2022, was $93.2 million, an increase from $85.6 million in the same period of 2021 [125]. - Income before taxes for the nine months ended September 30, 2022, was $128.9 million, compared to $119.4 million in 2021, reflecting a $9.5 million increase [125]. - Net interest income for 2022 was $243.971 million, up from $171.326 million in 2021, indicating a significant growth in interest income [127]. - Noninterest income for the nine months ended September 30, 2022, was $41.011 million, down from $56.623 million in 2021, showing a decline in this segment [125]. Expenses and Costs - Compensation and benefit costs accounted for 52% of total noninterest expense for Banking and 78% for Wealth Management in the nine months ended September 30, 2022 [120]. - The decrease in income before taxes was attributed to a $9.8 million decrease in Banking income, a $1.0 million decrease in Wealth Management, and a $1.6 million increase in corporate expenses [123]. - The increase in corporate expenses was mainly due to higher interest expenses from subordinated debt acquired in the TGRF acquisition and $150 million of subordinated notes issued in Q1 2022 [123]. - Noninterest expense for Banking increased from $31.5 million in the three months ended September 30, 2021, to $53.6 million in the same period of 2022, primarily due to higher compensation and benefits, occupancy and depreciation, and customer service costs [142]. - Total noninterest expense for the company reached $135.7 million in the nine months ended September 30, 2022, compared to $88.9 million in the same period of 2021 [143]. Credit Quality and Losses - The provision for credit losses for loans was $(22,000) in the three months ended September 30, 2022, compared to $(417,000) in the same period in 2021 [122]. - Provision for credit losses decreased to $(641,000) in 2022 from $(13,000) in 2021, indicating better credit quality [125]. - The provision for credit losses for the three months ended September 30, 2022, was $32,900, reflecting a decrease from the previous period due to adjustments in impairment assumptions [169]. - The allowance for credit losses (ACL) related to loans represented 0.32% of total loans outstanding as of September 30, 2022, down from 0.49% as of December 31, 2021 [170]. - The total amount of troubled debt restructurings (TDRs) as of September 30, 2022, was $3,611, with $2,563 classified as nonaccrual [166]. Asset and Liability Management - Total assets as of September 30, 2022, were $11.766 billion, compared to $7.935 billion in 2021, indicating substantial growth in asset base [127]. - Total assets increased by $2.1 billion during the nine months ended September 30, 2022, primarily due to a $2.9 billion increase in loans [147]. - The average balance of borrowings increased from $74 million in the nine months ended September 30, 2021, to $489.2 million in the same period of 2022 [133]. - The company issued $150 million of subordinated notes in the first quarter of 2022, impacting interest expenses and overall financial strategy [125]. - The loan-to-deposit ratio was 108% as of September 30, 2022, compared to 84% on December 31, 2021, indicating a significant increase in loan activity relative to deposits [183]. Deposits and Funding - Deposits grew by $738 million, with commercial deposits increasing by $1.3 billion and a decrease in branch deposits of $1.1 billion [148]. - The average balance of interest-bearing deposits increased from $4.0 billion in Q3 2021 to $6.0 billion in Q3 2022 [130]. - The weighted average rate of interest-bearing deposits increased from 0.18% at December 31, 2021, to 1.50% at September 30, 2022 [158]. - The bank held $276 million in brokered deposits as of September 30, 2022 [160]. - The FHLB overnight advance outstanding as of September 30, 2022, was $1.1 billion, with an interest rate of 3.22% [162]. Strategic Initiatives and Future Outlook - The company expects continued increases in total assets as a result of its growth strategy in banking operations [146]. - The Company intends to continue paying quarterly dividends, subject to Board approval and regulatory restrictions, with a limit that dividends and stock repurchases do not exceed 50% of net income for the same twelve-month period [193]. - There are no material commitments for capital expenditures as of September 30, 2022, but the Company plans to explore opportunities for growth, including opening additional offices or acquiring complementary businesses [194]. - The Company may seek additional borrowings and sell shares of common stock to raise funds for growth initiatives, although success in these efforts is uncertain and dependent on market conditions [194]. - The Company is exposed to financial risks, particularly interest rate risk, as detailed in the Management's Discussion and Analysis of Financial Condition and Results of Operations [195].