• Earnings per diluted share of $0.58
  • $7.2 million gain on sale of loans
  • Strong loan and deposit growth

IRVINE, Calif.--(BUSINESS WIRE)--First Foundation Inc. (NASDAQ: FFWM), a financial services company with two wholly-owned operating subsidiaries, First Foundation Advisors (“FFA”) and First Foundation Bank (“FFB”), announced today its financial results for the quarter and nine months ended September 30, 2016.

“Our third quarter results are a reflection of remaining focused on our business plan and delivering an excellent client experience across our entire platform. We continue to manage the firm to high standards and prudent business principals, including a strong credit culture, which is reflected by our NPA ratio of 28 basis points,” said Scott F. Kavanaugh, CEO.

Highlights

Financial Results:

  • Compared to 2015 third quarter:
    • Earnings per fully diluted share were $0.58, an increase of 176%
    • Earnings were $9.7 million, an increase of 250%
    • Total revenues (net interest income and noninterest income) were $38.2 million, an increase of 71%
    • Net interest income was $23.2 million, an increase of 50%
  • Financial ratios:
    • Efficiency ratio of 60.0% for the quarter and 66.5% for year to date
    • Return on average assets of 1.29% for the quarter and 0.80% for year to date
    • Return on average equity of 13.7% for the quarter and 8.2% for year to date
    • Shareholders’ equity of $287 million and tangible book value of $17.49 per share, in each case, as of September 30, 2016

Quarterly Transactions:

  • A $7.2 million gain was realized on the sale of $265 million of loans secured by multifamily properties to Freddie Mac who securitized the loans as part of their small balance loan program. $2.2 million of this gain was related to a clause included in the agreement with Freddie Mac which provided for changes in pricing based upon changes in rates on certain treasury swap indices. To reduce the interest rate risk created by this clause, in the second quarter of 2016 the Company entered into a swap agreement, and, as a result of changes in interest rates, paid $2.4 million, including fees, to counterparties under the swap agreement. This amount was recognized in the second quarter of 2016 as a loss in capital markets activities.
  • A $1.0 million gain was realized on the sale of $64 million of securities. Due to changes in the interest rate markets in July 2016, the Company decided to sell certain mortgage backed securities from its portfolio that carried higher risks of prepayments.
  • A $0.8 million reduction in taxes on income was realized in the third quarter as a result of the adoption of ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting” (“ASU 2016-09”). Under this new standard, excess tax benefits and deficiencies resulting from the exercise of, or vesting of, stock awards are now recognized as income tax benefit or expense in the period in which they occur. As set forth in ASU 2016-09, the Company recognized the impact of any activity that occurred since January 1, 2016 in the third quarter results.

“The loan and securities sales and the tax benefit from adopting the new accounting standard substantially increased our already strong base of earnings in the third quarter” stated John Michel, CFO. “We expect to continue our strong growth in the coming quarters and project our earnings in the fourth quarter of 2016 to be between $0.24 and $0.26 per fully diluted share.”

Other Activity:

  • Loan originations totaled $424 million for the quarter and $1.32 billion year to date;
  • Deposits increased by $73 million for the quarter and $817 million year to date; and
  • Assets under management (“AUM”) at FFA increased by $69 million for the quarter and $126 million year to date.

“Our team has been working diligently to provide for our clients’ needs, and uncover new opportunities to work with existing clients, while also attracting new business,” stated John Hakopian, President of FFA. “We measure success on how well we do for our clients and will continue our mission to deliver trusted, conflict-free services.”

Details of Growth

  • Total loans, including loans held for sale, increased $743 million during the first nine months of 2016 as a result of the $1.32 billion of originations which was offset by the sale of $265 million of loans and payoffs or scheduled payments of $311 million.
  • The $817 million growth in deposits for the first nine months of 2016 was broken down as follows: $476 million increase in noninterest bearing demand deposits; $84 million decrease in interest bearing demand deposits; $344 million increase in money market and savings accounts; and $81 million increase in certificate of deposit accounts.
  • The $126 million growth in AUM for the first nine months of 2016 was the result of $224 million of new accounts and $224 million of portfolio gains which were partially offset by terminations of $229 million and net withdrawals of $93 million.

“Our growth in loans and deposits during the quarter remained strong and in line with our expectations which, as expected, was slightly lower than what we experienced in the second quarter” stated David DePillo, President of FFB. “We were also very pleased with the final results of our loan sale and expect sales of multifamily loans on a recurring annual basis in the future.”

As previously announced, First Foundation Bank entered into a definitive agreement to acquire two branches located in Laguna Hills and Seal Beach, California with deposits of approximately $200 million. This transaction is expected to be completed before the end of the year subject to regulatory approval and customary closing conditions.

For a full copy of the release, please click here.

About First Foundation

First Foundation, a financial institution founded in 1990, provides personal banking, business banking and private wealth management. The Company has offices in California, Nevada and Hawaii with headquarters in Irvine, California. For more information, please visit www.ff-inc.com .

We have two business segments, “Banking” and “Investment Management and Wealth Planning” (“Wealth Management”). Banking includes the operations of FFB and First Foundation Insurance Services, and Wealth Management includes the operations of FFA. The financial position and operating results of the stand-alone holding company, FFI, are included under the caption “Other” in certain of the tables that follow, along with any consolidation elimination entries.

Forward-Looking Statements

Statements in this news release regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." The forward looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, but are not limited to, the risk of incurring loan losses, which is an inherent risk of the banking business; the risk that we will not be able to continue our internal growth rate; the risk that we will not be able to access the securitization market on favorable terms or at all; the risk that the economic recovery in the United States will stall or will be adversely affected by domestic or international economic conditions and the risk that the Federal Reserve Board will continue to keep interest rates low, any of which could adversely affect our interest income and interest rate margins and, therefore, our future operating results; the risk that the performance of our investment management business or of the equity and bond markets could lead clients to move their funds from or close their investment accounts with us, which would reduce our assets under management and adversely affect our operating results; and the risk that we do not successfully integrate Pacific Rim Bank’s business and customers or otherwise fail to achieve anticipated business enhancements related to the acquisition. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in Item 1A, entitled “Risk Factors” in our 2015 Annual Report on Form 10-K for the fiscal year ended December 31, 2015 that we filed with the SEC on March 15, 2016, and other documents we file with the SEC from time to time. We urge readers of this news release to review the Risk Factors section of that Annual Report. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today's date, or to make predictions based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this news release or in the above-referenced 2015 Annual Report on Form 10-K, whether as a result of new information, future events or otherwise, except as may be required by law or NASDAQ rules.