First Foundation (US:FFWM)2025-04-30 16:02Financial Data and Key Metrics Changes - Net income for the first quarter was $6.9 million or $0.08 per share, a recovery from a net loss of $14.1 million in the previous quarter [4] - Net interest margin expanded by nine basis points to 1.67%, with a significant reduction in provision expense and a $5 million decrease in non-interest expense compared to the fourth quarter [5][12] - Pre-provision net revenue increased to $9.7 million or $0.11 per share, up from a loss of $2.3 million in the fourth quarter [12] Business Line Data and Key Metrics Changes - Funded $180 million in new loan balances at an average yield of 7.09%, with approximately 78% being commercial and industrial (C and I) loans [5] - Loans held for investment decreased primarily due to $354 million in payoffs, while loans held for sale remained stable at $1.3 billion [5] - Total non-interest income for the quarter was $19.6 million, including a $4.7 million gain on the sale of securities [15] Market Data and Key Metrics Changes - Assets under management decreased to $5.1 billion from $5.4 billion at the end of the previous year, while trust assets under advisement increased to $1.2 billion from $1.1 billion [9] - Overall deposits declined slightly to $9.6 billion, primarily due to a $400 million decrease in high-cost brokered deposits [9] Company Strategy and Development Direction - The company is focused on reducing its commercial real estate concentration and selectively exiting lower-yielding multifamily loans [5] - A five-point strategic plan is in place, emphasizing remixing the loan portfolio, improving interest rate risk management, and enhancing non-interest income through various services [8] - The company aims to build long-term value through a renewed focus on private banking and attractive demographic markets [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the financial future over the next 12 to 36 months, anticipating modest asset reductions and continued margin expansion [19] - The company expects to see a net interest margin exit run rate between 1.8% and 1.9% by the fourth quarter of 2025, with further improvements anticipated by the end of 2026 [19][20] - Management remains cautious about the economic backdrop but believes in the strength of the credit portfolio [57] Other Important Information - The company remains well-capitalized with a common equity Tier 1 ratio of 10.6% and a Tier 1 leverage ratio of 8.1% [10][18] - The tangible book value per share increased to $9.42 from $9.36 in the prior quarter [18] Q&A Session Summary Question: How have utilization rates trended thus far in 2025? - Management noted some hesitancy among clients regarding capital expenditures, but some clients have accelerated inventory purchases due to trade uncertainties [27] Question: Did you invest in any particular markets in 1Q? - The company added personnel in the Florida market and remains optimistic about that area, with most production expected from California [30] Question: Is the decline in AUM due to fluctuations in customer account balances? - Management acknowledged some terminations and turnover but remains optimistic about the pipeline going forward [31] Question: What rate environment does the NIM outlook assume? - The company is assuming two rate cuts in 2025, with a total of six cuts anticipated through the end of 2027 [36] Question: Any expense impact from internal control remediation? - Management indicated there would be some professional service expenses but nothing significant, as they aim to improve internal controls [43] Question: How do you expect overall loan balances to trend going forward? - The company expects modest growth in loan balances over time, focusing on reducing CRE concentration and increasing higher-yielding loans [72]