F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to          

Commission File Number 001-36461

FIRST FOUNDATION INC.

(Exact name of Registrant as specified in its charter)

Delaware	20-8639702
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
200 Crescent Court, Suite 1400 Dallas, Texas	75201
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (469) 638-9636

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	FFWM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No   ☒

As of August 2, 2024, the registrant had 67,852,058 shares of common stock, $0.001 par value per share, outstanding.

FIRST FOUNDATION INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

TABLE OF CONTENTS

		Page No.
Part I. Financial Information
Item 1.	Financial Statements	1
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 4.	Controls and Procedures	61
Part II. Other Information
Item 1	Legal Proceedings	62
Item 1A	Risk Factors	62
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 5	Other Information	62
Item 6	Exhibits	63
SIGNATURES		S-1

(i)

PART I — FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

FIRST FOUNDATION INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	June 30,		December 31,
	2024		2023
		(unaudited)
ASSETS
Cash and cash equivalents	$	1,421,486	$	1,326,629
Securities available-for-sale ("AFS"), at fair value (amortized cost of $1,135,757 and $731,489 at June 30, 2024 and December 31, 2023 respectively; allowance for credit losses of $7,342 and $8,220 at June 30, 2024 and December 31, 2023 respectively)		1,105,801		703,226
Securities held-to-maturity ("HTM") (fair value of $675,348 and $710,021 at June 30, 2024 and December 31, 2023, respectively)		755,033		789,578
Loans held for investment		10,087,268		10,177,802
Allowance for credit losses - loans		(29,295)		(29,205)
Net loans		10,057,973		10,148,597
Investment in FHLB stock		37,810		24,613
Accrued interest receivable		58,325		54,163
Deferred taxes		36,493		29,142
Premises and equipment, net		37,035		39,925
Real estate owned ("REO")		6,210		8,381
Bank owned life insurance		49,309		48,653
Core deposit intangibles		4,222		4,948
Derivative assets		6,267		—
Other assets		138,459		149,393
Total Assets	$	13,714,423	$	13,327,248
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	10,756,344	$	10,688,932
Borrowings		1,716,552		1,409,056
Subordinated debt		173,428		173,397
Accounts payable and other liabilities		134,855		130,520
Total Liabilities		12,781,179		12,401,905
Shareholders’ Equity
Common Stock, $0.01 par value; 100,000,000 shares authorized at June 30, 2024 and December 31, 2023; 56,543,382 shares and 56,467,623 shares issued and outstanding, respectively		57		56
Additional paid-in-capital		721,814		720,899
Retained earnings		221,321		218,575
Accumulated other comprehensive loss		(9,948)		(14,187)
Total Shareholders’ Equity		933,244		925,343
Total Liabilities and Shareholders’ Equity	$	13,714,423	$	13,327,248

(See accompanying notes to the consolidated financial statements)

1

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(In thousands, except share and per share amounts)

	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Interest income:
Loans	$	120,244	$	123,471	$	238,688	$	244,114
Securities		17,975		6,772		37,749		13,663
FHLB Stock, fed funds sold and interest-bearing deposits		12,695		15,085		24,930		24,551
Total interest income		150,914		145,328		301,367		282,328
Interest expense:
Deposits		91,388		72,932		185,880		135,072
Borrowings		13,992		21,707		29,862		36,122
Subordinated debt		1,705		1,705		3,410		3,395
Total interest expense		107,085		96,344		219,152		174,589
Net interest income		43,829		48,984		82,215		107,739
Provision (reversal) for credit losses		(806)		887		(229)		1,304
Net interest income after provision for credit losses		44,635		48,097		82,444		106,435
Noninterest income:
Asset management, consulting and other fees		9,183		9,016		17,797		17,812
Gain on sale of loans		415		—		678		—
Gain on sale of securities available-for-sale		983		—		1,204		—
Capital market activities		836		—		1,673		—
Gain on sale of REO		—		—		679		—
Other income		2,241		3,063		4,310		5,965
Total noninterest income		13,658		12,079		26,341		23,777
Noninterest expense:
Compensation and benefits		19,095		21,026		38,502		46,312
Occupancy and depreciation		9,026		9,181		18,113		18,078
Professional services and marketing costs		3,667		3,642		7,057		7,937
Customer service costs		16,104		19,004		26,842		35,719
Goodwill impairment		—		215,252		—		215,252
Other expenses		7,737		4,659		15,724		8,806
Total noninterest expense		55,629		272,764		106,238		332,104
Income (loss) before income taxes		2,664		(212,588)		2,547		(201,892)
Income tax (benefit) expense		(421)		(300)		(1,331)		1,900
Net income (loss)	$	3,085	$	(212,288)	$	3,878	$	(203,792)
Net income per share:
Basic	$	0.05	$	(3.76)	$	0.07	$	(3.61)
Diluted	$	0.05	$	(3.76)	$	0.07	$	(3.61)
Shares used in computation:
Basic		56,523,640		56,430,813		56,504,148		56,403,891
Diluted		56,532,465		56,430,813		56,515,844		56,403,891

(See accompanying notes to the consolidated financial statements)

2

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF CHANGES

IN SHAREHOLDERS’ EQUITY - UNAUDITED

(In thousands, except share amounts)

	Common Stock			Additional				Accumulated Other
	Number			Paid-in		Retained		Comprehensive
	of Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance: December 31, 2023	56,467,623	$	56	$	720,899	$	218,575	$	(14,187)	$	925,343
Net income	—		—		—		3,878		—		3,878
Other comprehensive gain	—		—		—		—		4,239		4,239
Stock based compensation	—		—		1,057		—		—		1,057
Cash dividend	—		—		—		(1,132)		—		(1,132)
Issuance of common stock:
Stock grants – vesting of restricted stock units	93,780		1		—		—		—		1
Repurchase of shares from restricted shares vesting	(18,021)		—		(142)		—		—		(142)
Balance: June 30, 2024	56,543,382	$	57	$	721,814	$	221,321	$	(9,948)	$	933,244
Balance: March 31, 2024	56,511,864	$	57	$	721,362	$	218,802	$	(11,487)	$	928,734
Net income	—		—		—		3,085		—		3,085
Other comprehensive gain	—		—		—		—		1,539		1,539
Stock based compensation	—		—		452		—		—		452
Cash dividend	—		—		—		(566)		—		(566)
Issuance of common stock:
Stock grants – vesting of restricted stock units	31,518		—		—		—		—		—
Balance: June 30, 2024	56,543,382	$	57	$	721,814	$	221,321	$	(9,948)	$	933,244
Balance: December 31, 2022	56,325,242	$	56	$	719,606	$	426,659	$	(11,943)	$	1,134,378
Net loss	—	$	—	$	—	$	(203,792)	$	—	$	(203,792)
Other comprehensive loss	—		—		—		—		(7,898)		(7,898)
Stock based compensation	—		—		550		—		—		550
Cash dividend	—		—		—		(7,327)		—		(7,327)
Issuance of common stock:
Exercise of options	19,500		—		157		—		—		157
Stock grants – vesting of restricted stock units	133,386		—		—		—		—		—
Repurchase of shares from restricted shares vesting	(35,058)		—		(534)		—		—		(534)
Balance: June 30, 2023	56,443,070	$	56	$	719,779	$	215,540	$	(19,841)	$	915,534
Balance: March 31, 2023	56,424,276	$	56	$	719,261	$	428,956	$	(14,535)	$	1,133,738
Net loss	—		—		—		(212,288)		—		(212,288)
Other comprehensive loss	—		—		—		—		(5,306)		(5,306)
Stock based compensation	—		—		518		—		—		518
Cash dividend	—		—		—		(1,128)		—		(1,128)
Issuance of common stock:
Stock grants – vesting of restricted stock units	18,794		—		—		—		—		—
Balance: June 30, 2023	56,443,070	$	56	$	719,779	$	215,540	$	(19,841)	$	915,534

(See accompanying notes to the consolidated financial statements)

3

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS) - UNAUDITED

(In thousands)

	Quarter Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income (loss)	$	3,085	$	(212,288)	$	3,878	$	(203,792)
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities arising during the period		1,282		(5,008)		(966)		(6,984)
Reclassification adjustment for gain included in net income		(695)		—		(852)		—
Total change in unrealized gain (loss) on available-for-sale securities		587		(5,008)		(1,818)		(6,984)
Unrealized gain on cash flow hedge arising during this period		1,068		—		6,267		—
Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity		(116)		(298)		(210)		(914)
Total other comprehensive income (loss)		1,539		(5,306)		4,239		(7,898)
Total comprehensive income (loss)	$	4,624	$	(217,594)	$	8,117	$	(211,690)

(See accompanying notes to the consolidated financial statements)

4

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)

	For the Six Months Ended
	June 30,
	2024		2023
Cash Flows from Operating Activities:
Net income (loss)	$	3,878	$	(203,792)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Goodwill impairment		—		215,252
Provision for credit losses		952		1,157
Provision (reversal) for credit losses - securities AFS		(878)		1,067
Stock–based compensation expense		1,057		550
Depreciation and amortization		2,384		2,157
Deferred tax (benefit) expense		(6,599)		4,654
Amortization of (discount) premium on securities		(11,112)		(53)
Amortization of core deposit intangible		726		853
Amortization of mortgage servicing rights - net		1,138		1,155
Gain on sale of REO		(679)		—
Gain on sale of loans		(678)		—
Gain on sale of securities available-for-sale		(1,204)		—
Gain from hedging activities		(1,673)		—
Decrease in valuation of cash flow hedge		1,673		—
Amortization of OCI - securities transfer to HTM		(210)		914
Valuation allowance on mortgage servicing rights - net		—		(979)
Decrease in accrued interest receivable and other assets		8,586		9,485
Increase (decrease) in accounts payable and other liabilities		728		(6,092)
Net cash (used in) provided by operating activities		(1,911)		26,328
Cash Flows from Investing Activities:
Net decrease in loans		81,580		137,902
Proceeds from sale of loans		8,770		—
Proceeds from sale of REO		2,850		—
Purchase of premises and equipment		(1,536)		(2,603)
Disposals of premises and equipment		1		—
Proceeds from sale of land		1,650		—
Loss on sale of land		391		—
Purchases of securities AFS		(1,564,389)		—
Proceeds from sale of securities available-for-sale		749,020		—
Maturities of securities AFS		423,979		11,488
Maturities of securities HTM		33,984		48,322
Net (increase) decrease in FHLB stock		(13,197)		5,873
Net cash (used in) provided by investing activities		(276,897)		200,982
Cash Flows from Financing Activities:
Increase in deposits		67,412		444,375
Proceeds from FHLB & FRB advances		2,793,475		—
Repayments on FHLB & FRB advances		(2,465,402)		—
Net change in federal funds purchased		—		(295,000)
Net increase in subordinated debt		31		32
Net decrease in repurchase agreements		(20,577)		(99,426)
Dividends paid		(1,132)		(7,327)
Proceeds from exercise of stock options		—		157
Repurchase of stock		(142)		(534)
Net cash provided by financing activities		373,665		42,277
Increase in cash and cash equivalents		94,857		269,587
Cash and cash equivalents at beginning of year		1,326,629		656,494
Cash and cash equivalents at end of period	$	1,421,486	$	926,081
Supplemental disclosures of cash flow information:		</