First Foundation (US:FFWM)2022-10-25 19:02Financial Data and Key Metrics Changes - Earnings for Q3 2022 were reported at $29 million or $0.51 per share, with total revenues of $99.9 million, reflecting a 5% increase from Q2 2022 and an 11% increase year-over-year [5][18] - Tangible book value per share increased to $15.96, and the net interest margin (NIM) for the quarter was 3.10% [5][20] - Return on assets was 98 basis points, and return on tangible common equity was 13.2% [18] Business Line Data and Key Metrics Changes - Loan originations for the quarter totaled $1.6 billion, with a breakdown of 43% commercial, 46% multifamily, 6% single-family, and 1% land and construction [25] - Wealth management revenues decreased by $900,000 due to lower assets under management, ending the quarter at $4.6 billion [21][66] - Noninterest income for the quarter was $12.2 million, primarily driven by wealth management revenues [21] Market Data and Key Metrics Changes - Deposits remained stable at $9.5 billion, despite outflows in the overall banking sector [10][29] - The loan-to-deposit ratio increased to 108%, aligning with pre-COVID levels but indicating a need for active management going forward [30] Company Strategy and Development Direction - The company is focused on protecting the balance sheet, building liquidity, and competitively pursuing deposits while retaining valuable clients [7] - A strategic decision was made to slow loan growth in response to the macroeconomic cycle, with an emphasis on maintaining high credit standards [8][30] - The company anticipates a shift towards more commercial loan growth, with a focus on variable rate loans [41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of the Federal Reserve's actions on the banking sector and expressed confidence in the company's ability to navigate the current environment [4][16] - The leadership team emphasized the importance of client relationships and proactive communication during volatile market conditions [11][66] - Management expects loan growth to slow in the coming quarters but remains optimistic about the company's positioning and client retention [8][66] Other Important Information - The company activated its business continuity and disaster recovery plans in response to Hurricane Ian, with minimal expected impact on the loan portfolio [12][14] - The effective tax rate decreased to 26.6% compared to 27.9% in the prior quarter, with anticipated benefits from tax strategies [24] Q&A Session Summary Question: Outlook for loan-to-deposit ratio - Management indicated a cautious approach to lending, aiming to bring the loan-to-deposit ratio back under 100% over the next several quarters [33][34] Question: Mix of loan growth - The focus will be on commercial loan growth, with an expected 60% from commercial and 40% from other channels [41] Question: Customer service charge expense - Management noted that customer service costs are expected to rise in line with Fed rate hikes, with a close to 100% beta on larger clients [43][45] Question: Margin expectations - Management anticipates the net interest margin to dip below 3% in Q4 2022, with a recovery expected as the market stabilizes [48] Question: Capital growth targets - The company is evaluating whether to grow capital organically or through market means, with a reasonable chance of capital growth without external funding [88]