8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 28, 2020

FIRST FOUNDATION INC.

(Exact name of registrant as specified in its charter)

Delaware	001-36461	20-8639702
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

18101 Von Karman Avenue, Suite 700
Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 202-4160

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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	NASDAQ Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

Item 2.02  Results of Operations and Financial Condition

On January 28, 2020, First Foundation Inc. issued a press release reporting its consolidated financial results as of and for the quarter and year ended December 31, 2019. A copy of that press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information contained in this Current Report on Form 8-K, including Exhibit 99.1, are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, and such information and that Exhibit shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

The press release furnished as Exhibit 99.1 to this Current Report on Form 8-K may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and, as such, may involve known and unknown risks, uncertainties and assumptions. Such forward-looking statements relate to First Foundation’s current expectations and are subject to the limitations and qualifications set forth in First Foundation’s other documents filed with the U.S. Securities and Exchange Commission, including, without limitation, that actual events and/or results may differ materially from those projected in such forward-looking statements.

Item 9.01	Financial Statements and Exhibits.
Exhibit No.	Description
99.1	Press Release dated January 28, 2020, announcing the consolidated financial results of First Foundation Inc. as of and for the quarter and year ended December 31, 2019.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	FIRST FOUNDATION INC.
Date: January 28, 2020	By:	/s/ JOHN MICHEL
		John M. Michel Executive Vice President & Chief Financial Officer

EX-99.1

Exhibit 99.1

First Foundation Announces 2019 Full Year Results

• Earnings per share: $0.34 for the quarter, $1.25 for the year

• Annual earnings of $56 million, year over year growth of 31%

• Annual revenues of $212 million, year over year growth of 11%

• Loan production of $553 million for the fourth quarter, $1.9 billion for the year

• Tangible book value per share: $11.57 at December 31, 2019, a 12% increase from prior year

IRVINE, CA – 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 year ended December 31, 2019. As we present certain non-GAAP measures in this release, the reader should refer to the non-GAAP reconciliations set forth below under the section “Use of Non-GAAP Financial Measures.”

“2019 was another strong year across all aspects of our business,” said Scott F. Kavanaugh, CEO. “Banking and trust revenues experienced record years and our assets under management ended the year at peak levels. We have been able to elevate our brand through successful digital marketing efforts and our financial performance is a reflection of the valuable franchise we have created for our clients, employees, and stockholders. With the economy in a solid place and our business model performing well, I believe we are well-positioned for the year ahead.”

Highlights

Financial Results:

• 2019 fourth quarter compared to 2018 fourth quarter:

o Total revenues were $54 million, an increase of 8%

o Net interest income was $44 million, an increase of 6%

o Income before taxes was $22 million, an increase of 9%

o Earnings were $15 million, an increase of 8%

o Earnings per fully diluted share were $0.34, compared to $0.31

• 2019 compared to 2018 (full year):

o Total revenues were $212 million, an increase of 11%

o Net interest income was $170 million, an increase of 9%

o Income before taxes was $79 million, an increase of 32%

o Earnings were $56 million, an increase of 31%

o Earnings per fully diluted share were $1.25, compared to $1.01

• 2019 Financial ratios:

o Return on average tangible equity of 11.9% for the quarter (annualized), 11.5% for the year

o Return on average assets of 0.96% for the quarter (annualized), 0.91% for the year

o Efficiency ratio of 58.6% for the quarter, 61.9% for the year

o Total tangible shareholders’ equity of $517 million, tangible book value of $11.57 per share, and tangible common equity to tangible assets of 8.31%, in each case, as of December 31, 2019

Other Activity:

• Loan originations totaled $553 million for the quarter, $1.9 billion for the year

• Deposits increased by $358 million in 2019

• Declared and paid cash dividend of $0.05 per share in fourth quarter, $0.20 per share for the year

• Net interest margin (“NIM”): 2.88% for the fourth quarter; 2.87% for the year

• Assets under management (“AUM”) at FFA increased by $504 million in 2019 to $4.4 billion

• AUM for our Trust operations increased by $146 million, or 20%, during 2019, with an increase in trust fees of 33%

“I am very pleased with our loan and deposit accomplishments in 2019,” said David DePillo, President. “Our accomplishments included record loan originations, higher deposit balances, increased loan yields, lower deposit costs and lower borrowing costs. In addition, we maintained strong credit quality as evidenced by our non-performing assets ratio decreasing to 20 basis points as of the end of the year. Lastly, we were able to increase our operating efficiencies and enhance our digital banking offerings, which will continue to be a focus in 2020.”

Details

• Total loans, including loans held for sale, increased $254 million in 2019 as a result of $1.9 billion of originations which was partially offset by the sale of $551 million of multifamily loans and payoffs or scheduled payments of $1.1 billion.

• The $358 million growth in deposits during 2019 included increases in branch deposits of $138 million and specialty deposits of $222 million and a $2 million decrease in wholesale deposits.

• The $504 million increase in AUM at FFA during 2019 was the net result of $285 million of new accounts, $691 million of portfolio gains and terminations and net withdrawals of $473 million.

About First Foundation

First Foundation, (NASDAQ: FFWM), 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.firstfoundationinc.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, dividends, 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," "outlook," 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 risks associated with the Federal Reserve Board taking actions with respect to interest rates, any of which

2

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; the risk that we may be unable or that our board of directors maydetermine that it is inadvisable to pay future dividends; risks associated with changes in income tax laws and regulations; and risks associated with seeking new client relationships and maintaining existing client relationships. 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 2018 Annual Report on Form 10-K for the fiscal year ended December 31, 2018 that we filed with the SEC on March 1, 2019, 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 and the Risk Factors section of other documents we file with the SEC from time to time. 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 2018 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.

Contact:

John Michel

Chief Financial Officer

First Foundation Inc.

949-202-4160

jmichel@ff-inc.com

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FIRST FOUNDATION INC.

CONSOLIDATED BALANCE SHEETS - Unaudited

(in thousands, except share and per share amounts)

	December 31, 2019			December 31, 2018
ASSETS
Cash and cash equivalents	$	65,387		$	67,312
Securities available-for-sale (“AFS”)		1,014,966			809,569
Loans held for sale		503,036			507,643
Loans, net of deferred fees		4,547,633			4,293,669
Allowance for loan and lease losses (“ALLL”)		(20,800	)		(19,000	)
Net loans		4,526,833			4,274,669
Investment in FHLB stock		21,519			20,307
Deferred taxes		11,079			13,251
Premises and equipment, net		8,355			9,145
Real estate owned (“REO”)		−			815
Goodwill and intangibles		97,191			99,482
Other assets		66,070			38,219
Total Assets	$	6,314,436		$	5,840,412
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	4,891,144		$	4,532,968
Borrowings		743,000			708,000
Accounts payable and other liabilities		66,423			40,260
Total Liabilities		5,700,567			5,281,228
Commitments and contingencies		−			−
Shareholders’ Equity
Common Stock, par value $.001: 70,000,000 shares authorized; 44,670,743 and 44,496,007 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively		45			44
Additional paid-in-capital		433,775			431,832
Retained earnings		175,773			128,461
Accumulated other comprehensive income (loss), net of tax		4,276			(1,153	)
Total Shareholders’ Equity		613,869			559,184
Total Liabilities and Shareholders’ Equity	$	6,314,436		$	5,840,412

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FIRST FOUNDATION INC.

CONSOLIDATED INCOME STATEMENTS - Unaudited

(in thousands, except share and per share amounts)

	For the Quarter Ended December 31,				For the Year EndedDecember 31,
	2019		2018		2019		2018
Interest income:
Loans	$	54,123	$	50,360	$	220,951	$	186,211
Securities		7,304		6,279		25,004		16,855
FHLB Stock, fed funds sold and deposits		867		803		2,805		4,240
Total interest income		62,294		57,442		248,760		207,306
Interest expense:
Deposits		15,763		13,378		64,182		38,776
Borrowings		2,643		2,699		14,624		12,920
Total interest expense		18,406		16,077		78,806		51,696
Net interest income		43,888		41,365		169,954		155,610
Provision for loan losses		694		73		2,637		4,220
Net interest income after provision for loan losses		43,194		41,292		167,317		151,390
Noninterest income:
Asset management, consulting and other fees		7,424		7,251		28,658		28,748
Gain on sale of loans		−		−		4,218		419
Other income		2,774		1,450		8,900		6,604
Total noninterest income		10,198		8,701		41,776		35,771
Noninterest expense:
Compensation and benefits		16,531		16,117		69,933		67,508
Occupancy and depreciation		5,420		5,255		20,905		19,779
Professional services and marketing costs		1,644		2,003		7,417		8,583
Customer service costs		4,266		3,628		17,858		15,077
Other expenses		3,812		3,135		13,481		16,128
Total noninterest expense		31,673		30,138		129,594		127,075
Income before taxes on income		21,719		19,855		79,499		60,086
Taxes on income		6,505		5,726		23,260		17,128
Net income	$	15,214	$	14,129	$	56,239	$	42,958
Net income per share:
Basic	$	0.34	$	0.32	$	1.26	$	1.02
Diluted	$	0.34	$	0.31	$	1.25	$	1.01
Shares used in computation:
Basic		44,661,852		44,476,829		44,617,361		42,092,361
Diluted		45,014,092		44,871,146		44,911,265		42,567,108

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FIRST FOUNDATION INC.

SELECTED FINANCIAL INFORMATION - Unaudited

(in thousands, except share and per share amounts and percentages)

	For the Quarter Ended December 31,						For the Year EndedDecember 31,
	2019			2018			2019			2018
Selected Income Statement Data:
Net interest income	$	43,888		$	41,365		$	169,954		$	155,610
Provision for loan losses		694			73			2,637			4,220
Noninterest Income:
Asset management, consulting and other fees		7,424			7,251			28,658			28,748
Gain (loss) on sale of loans		−			−			4,218			419
Other		2,774			1,450			8,900			6,604
Noninterest expense		31,673			30,138			129,594			127,075
Income before taxes		21,719			19,855			79,499			60,086
Net income		15,214			14,129			56,239			42,958
Net income per share:
Basic	$	0.34		$	0.32		$	1.26		$	1.02
Diluted		0.34			0.31			1.25			1.01
Selected Performance Ratios:
Return on average assets - annualized		0.96	%		1.01	%		0.91	%		0.81	%
Return on average equity - annualized		10.0	%		10.4	%		9.6	%		9.1	%
Return on average tangible equity – annualized(1)		11.9	%		12.8	%		11.5	%		10.6	%
Net yield on interest-earning assets		2.88	%		3.05	%		2.87	%		2.99	%
Efficiency ratio (2)		58.6	%		60.2	%		61.9	%		64.4	%
Noninterest income as a % of total revenues		18.9	%		17.4	%		19.7	%		18.7	%
Other Information:
Loan originations	$	553,212		$	505,084		$	1,932,462		$	1,844,209
Charge-offs (recoveries) / average loans - annualized		0.03	%		0.01	%		0.02	%		0.08	%

(1) Tangible equity is a non-GAAP financial measure. See disclosures regarding “Use of Non-GAAP Financial Measures” included as a separate section in this press release.

(2) Efficiency Ratio is a non-GAAP financial measure: See disclosures regarding “Use of Non-GAAP Financial Measures” included as a separate section in this press release.

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FIRST FOUNDATION INC.

SELECTED FINANCIAL INFORMATION - Unaudited

(in thousands, except share and per share amounts and percentages)

	December 31, 2019			December 31, 2018
Selected Balance Sheet Data:
Cash and cash equivalents	$	65,387		$	67,312
Loans held for sale		503,036			507,643
Loans, net of deferred fees		4,547,633			4,293,669
ALLL		20,800			19,000
Total assets		6,314,436			5,840,412
Noninterest-bearing deposits		1,192,481			1,074,661
Interest-bearing deposits		3,698,663			3,458,307
Borrowings		743,000			708,000
Shareholders’ equity		613,869			559,184
Selected Capital Data:
Tangible common equity to tangible assets(3)		8.31	%		8.01	%
Tangible book value per share(3)	$	11.57		$	10.33
Shares outstanding at end of period		44,670,743			44,496,007
Other Information:
Assets under management (end of period)	$	4,438,252		$	3,934,700
Number of employees		485			482
Loan to deposit ratio		103	%		106	%
Nonperforming assets to total assets		0.20	%		0.21	%
Ratio of ALLL to loans(4)		0.49	%		0.51	%

(3) Tangible common equity and tangible book value are non-GAAP financial measures. See disclosures regarding “Use of Non-GAAP Financial Measures” included as a separate section in this press release.

(4) This ratio excludes certain acquired loans for which GAAP requires estimated credit losses to be recorded as discounts to those loans.

7

FIRST FOUNDATION INC.

SEGMENT REPORTING - Unaudited

(in thousands)

	For the Quarter Ended December 31,						For the Year EndedDecember 31,
	2019			2018			2019			2018
Banking:
Interest income	$	62,294		$	57,442		$	248,760		$	207,306
Interest expense		18,318			15,886			78,450			49,935
Net interest income		43,976			41,556			170,310			157,371
Provision for loan losses		694			73			2,637			4,220
Noninterest income		4,206			2,736			18,844			11,322
Noninterest expense		25,582			23,882			104,367			100,778
Income before taxes on income	$	21,906		$	20,337		$	82,150		$	63,695
Wealth Management:
Noninterest income	$	6,262		$	6,327		$	24,136		$	25,247
Noninterest expense		5,423			5,337			21,931			21,670
Income before taxes on income	$	839		$	990		$	2,205		$	3,577
Other and Eliminations:
Interest income	$	−		$	−		$	−		$	−
Interest expense		88			191			356			1,761
Net interest income		(88	)		(191	)		(356	)		(1,761	)
Noninterest income		(270	)		(362	)		(1,204	)		(798	)
Noninterest expense		668			919			3,296			4,627
Income before taxes on income	$	(1,026	)	$	(1,472	)	$	(4,856	)	$	(7,186	)

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FIRST FOUNDATION INC.

ROLLING INCOME STATEMENTS - Unaudited

(in thousands, except share and per share amounts)

	For the Quarter Ended
	December 31, 2018		March 31, 2019		June 30, 2019		September 30, 2019		December 31, 2019
Interest income:
Loans	$	50,360	$	53,835	$	56,510	$	56,483	$	54,123
Securities		6,279		6,165		6,186		5,349		7,304
FHLB Stock, fed funds sold and deposits		803		544		612		782		867
Total interest income		57,442		60,544		63,308		62,614		62,294
Interest expense:
Deposits		13,378		15,448		16,296		16,675		15,763
Borrowings		2,699		4,049		5,125		2,807		2,643
Total interest expense		16,077		19,497		21,421		19,482		18,406
Net interest income		41,365		41,047		41,887		43,132		43,888
Provision for loan losses		73		540		1,231		172		694
Net interest income after provision for loan losses		41,292		40,507		40,656		42,960		43,194
Noninterest income:
Asset management, consulting and other fees		7,251		6,794		7,136		7,304		7,424
Gain (loss) on sale of loans		−		−		−		4,218		−
Other income		1,450		1,671		1,995		2,460		2,774
Total noninterest income		8,701		8,465		9,131		13,982		10,198
Noninterest expense:
Compensation and benefits		16,117		18,902		17,333		17,167		16,531
Occupancy and depreciation		5,255		4,868		5,167		5,450		5,420
Professional services and marketing costs		2,003		2,004		2,024		1,745		1,644
Customer service costs		3,628		3,389		4,283		5,920		4,266
Other expenses		3,135		3,782		3,475		2,412		3,812
Total noninterest expense		30,138		32,945		32,282		32,694		31,673
Income before taxes on income		19,855		16,027		17,505		24,248		21,719
Taxes on income		5,726		4,768		5,095		6,892		6,505
Net income	$	14,129	$	11,259	$	12,410	$	17,356	$	15,214
Net income per share:
Basic	$	0.32	$	0.25	$	0.28	$	0.39	$	0.34
Diluted	$	0.31	$	0.25	$	0.28	$	0.39	$	0.34
Shares used in computation:
Basic		44,476,829		44,540,865		44,625,673		44,639,481		44,661,852
Diluted		44,871,146		44,798,306		44,894,720		44,935,308		45,014,092

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FIRST FOUNDATION INC.

ROLLING SEGMENT REPORTING - Unaudited

(in thousands)

	For the Quarter Ended
	December 31, 2018			March 31, 2019			June 30, 2019			September 30, 2019			December 31, 2019
Banking:
Interest income	$	57,442		$	60,544		$	63,308		$	62,614		$	62,294
Interest expense		15,886			19,482			21,322			19,328			18,318
Net interest income		41,556			41,062			41,986			43,286			43,976
Provision for loan losses		73			540			1,231			172			694
Noninterest income		2,736			2,994			3,471			8,173			4,206
Noninterest expense		23,882			26,587			25,801			26,397			25,582
Income before taxes on income	$	20,337		$	16,929		$	18,425		$	24,890		$	21,906
Wealth Management:
Noninterest income	$	6,327		$	5,731		$	5,982		$	6,161		$	6,262
Noninterest expense		5,337			5,518			5,567			5,423			5,423
Income before taxes on income	$	990		$	213		$	415		$	738		$	839
Other and Eliminations:
Interest income	$	−		$	−		$	−		$	−		$	−
Interest expense		191			15			99			154			88
Net interest income		(191	)		(15	)		(99	)		(154	)		(88	)
Noninterest income		(362	)		(260	)		(322	)		(352	)		(270	)
Noninterest expense		919			840			914			874			668
Loss before taxes on income	$	(1,472	)	$	(1,115	)	$	(1,335	)	$	(1,380	)	$	(1,026	)

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FIRST FOUNDATION INC.

SELECTED INFORMATION: INTEREST MARGIN - Unaudited

(in thousands, except percentages)

	For the Quarter Ended December 31,						For the Year EndedDecember 31,
	2019			2018			2019			2018
Average Balances:
Loans	$	4,942,708		$	4,558,869		$	5,032,447		$	4,453,822
Securities		1,023,715			818,056			805,724			594,514
Total interest-earnings assets		6,114,122			5,427,610			5,921,326			5,200,220
Deposits: interest-bearing		3,616,384			3,332,969			3,544,346			2,883,161
Deposits: noninterest-bearing		1,443,233			1,257,721			1,314,296			1,329,873
Borrowings		583,458			427,006			625,948			612,817
Average Yield / Rate:
Loans		4.37	%		4.41	%		4.39	%		4.18	%
Securities		2.85	%		3.07	%		3.10	%		2.84	%
Total interest-earnings assets		4.07	%		4.23	%		4.20	%		3.99	%
Deposits (interest-bearing only)		1.73	%		1.59	%		1.81	%		1.34	%
Deposits (noninterest and interest-bearing)		1.24	%		1.16	%		1.32	%		0.92	%
Borrowings		1.80	%		2.51	%		2.34	%		2.11	%
Total interest-bearing liabilities		1.74	%		1.70	%		1.89	%		1.48	%
Net Interest Rate Spread		2.33	%		2.53	%		2.31	%		2.51	%
Net Yield on Interest-earning Assets		2.88	%		3.05	%		2.87	%		2.99	%

	For the Quarter Ended
	December 31, 2018			March 31, 2019			June 30, 2019			September 30, 2019			December 31, 2019
Average Balances:
Loans	$	4,558,869		$	4,835,920		$	5,064,903		$	5,282,338		$	4,942,708
Securities		818,056			802,503			779,903			616,424			1,023,715
Total interest-earnings assets		5,427,610			5,687,224			5,892,960			5,985,601			6,114,122
Deposits: interest-bearing		3,332,969			3,505,191			3,500,824			3,553,660			3,616,384
Deposits: noninterest-bearing		1,257,721			1,124,318			1,175,707			1,508,290			1,443,233
Borrowings		427,006			637,036			798,609			486,807			583,458
Average Yield / Rate:
Loans		4.41	%		4.46	%		4.46	%		4.27	%		4.37	%
Securities		3.07	%		3.07	%		3.17	%		3.47	%		2.85	%
Total interest-earnings assets		4.23	%		4.27	%		4.30	%		4.18	%		4.07	%
Deposits (interest-bearing only)		1.59	%		1.79	%		1.87	%		1.86	%		1.73	%
Deposits (noninterest and interest-bearing)		1.16	%		1.35	%		1.40	%		1.31	%		1.24	%
Borrowings		2.51	%		2.58	%		2.57	%		2.29	%		1.80	%
Total interest-bearing liabilities		1.70	%		1.91	%		2.00	%		1.91	%		1.74	%
Net Interest Rate Spread		2.53	%		2.36	%		2.30	%		2.27	%		2.33	%
Net Yield on Interest-earning Assets		3.05	%		2.88	%		2.84	%		2.89	%		2.88	%

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Use of Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we use certain non-GAAP measures (including, but not limited to, non-GAAP net income and non-GAAP financial ratios) of financial performance. These supplemental performance measures may vary from, and may not be comparable to, similarly titled measures by other companies in our industry. Non-GAAP financial measures are not in accordance with, or an alternative for, GAAP. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. A non-GAAP financial measure may also be a financial metric that is not required by GAAP or other applicable requirement.

We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures (as applicable), provide meaningful supplemental information regarding our performance by providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate a comparison of our performance to prior periods. We believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, net income or other financial measures prepared in accordance with GAAP. In the information below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release, or a reconciliation of the non-GAAP calculation of the financial measure.

In this press release, we use certain non-GAAP financial ratios and measures that are not required by GAAP or exclude certain financial items from calculations that are otherwise required under GAAP, including:

• The efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income and may exclude one-time items of income or expense.

• Tangible common equity (also referred to as tangible book value or tangible equity) and tangible assets, are equal to common equity and assets, respectively, less $97.2 million and $99.5 million of goodwill and intangible assets as of December 31, 2019 and December 31, 2018, respectively. We believe that this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios.

• Average tangible equity is equal to average common equity less $97.5 million and $99.6 million of average goodwill and intangible assets for the quarters ended December 31, 2019 and 2018, respectively, and less $98.3 million and $69.2 million of average goodwill and intangible assets for the years ended December 31, 2019 and 2018, respectively. We believe that this information is consistent with the treatment by bank regulatory agencies, which exclude intangible assets from the calculation of capital ratios.

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Discussion of Changes in Results of Operations and Financial Position

Quarter Ended December 31, 2019 as Compared to Quarter Ended December 31, 2018

Our net income and income before taxes in the fourth quarter of 2019 were $15.2 million and $21.7 million, respectively, as compared to $14.1 million and $19.9 million, respectively, in the fourth quarter of 2018. The $1.9 million increase in income before taxes was the result of a $1.6 million increase in income before taxes for Banking, a $0.2 million decrease in income before taxes for Wealth Management and a $0.4 million decrease in corporate expenses.The increase in Banking was due to higher interest income and higher noninterest income which were partially offset by a higher provision for loan losses and higher noninterest expenses. The decrease in Wealth Management was due to lower noninterest income and higher noninterest expenses. The decrease in corporate expenses was due to decreases in interest expense and noninterest expenses.

Our effective tax rate for the fourth quarter of 2019 was 30.0% as compared to 28.8% for the fourth quarter of 2018 and as compared to our statutory tax rate of 29.0%.

Net interest income for Banking increased $2.4 million from $41.6 million in the fourth quarter of 2018, to $44.0 million in the fourth quarter of 2019 as a 13% increase in interest-earning assets was partially offset by a decrease in the net yield on interest earning assets. On a consolidated basis, the net yield on interest-earning assets decreased from 3.05% in the fourth quarter of 2018 to 2.88% in the fourth quarter of 2019 due primarily to a decrease in the net interest rate spread which was partially offset by an increase in the proportion of noninterest-bearing deposits to total deposits. The net interest rate spread decreased from 2.53% in the fourth quarter of 2018 to 2.33% in the fourth quarter of 2019 due to a decrease in yield on interest-earning assets and an increase in costs of interest-bearing liabilities. The yield on interest-earning assets decreased from 4.23% in the fourth quarter of 2018 to 4.07% in the fourth quarter of 2019 due to decreases in yields on loans and securities and an increase in the proportion of lower yielding securities and deposits to total interest-earning assets. The yield on loans decreased as the realization of credit and yield discounts on the payoff of acquired loans decreased from $2.1 million in the fourth quarter of 2018 to $1.1 million in the fourth quarter of 2019. The yield on securities decreased due to the purchase of $576 million of securities in the third quarter of 2019 at current market rates which were lower than the overall yield realized in 2018. The increase in the cost of interest-bearing liabilities from 1.70% in the fourth quarter of 2018 to 1.74% in the fourth quarter of 2019 was due to increased costs of interest-bearing deposits, resulting from increases in deposit market rates, which was partially offset by a decrease in the cost of borrowings due to decreases in the Fed Funds rates which strongly influences our borrowing rates. The average balance outstanding under the holding company line of credit decreased from $12.8 million in the fourth quarter of 2018 to $6.2 million in the fourth quarter of 2019, resulting in a $0.1 million decrease in corporate interest expense.

The $0.7 million provision for loan losses in the fourth quarter of 2019 was due to the growth in loan balances and $0.4 million of net chargeoffs. The provision for loan losses was $0.1 million for the fourth quarter of 2018 reflecting net chargeoffs of the same amount.

Noninterest income in Banking in the fourth quarter of 2019 was $1.5 million higher than the fourth quarter of 2018 due to a $1.2 million increase in loan fees and a $0.3 million increase in trust fees. The increase in loan fees was due primarily to higher prepayment fees and higher servicing fees. Noninterest income for Wealth Management decreased by $0.1 million in the fourth quarter of 2019 when compared to thecorresponding period in 2018 due to lower investment management fees.

Noninterest expense in Banking increased from $23.9 million in the fourth quarter of 2018 to $25.6 million in the fourth quarter of 2019 primarily due to higher customer service costs and higher other expenses. Customer service costs increased from $3.6 million in the fourth quarter of 2018 to $4.3 million in the fourth quarter of 2019 due to higher balances of related deposits. In the fourth quarter of 2018, we recognized a $0.8 million recovery of

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merger related costs with no similar recovery in 2019. Noninterest expenses for Wealth Management increased by $0.1 million in the fourth quarter of 2019, when compared to the fourth quarter of 2018, due to increased occupancy and depreciation costs.The $0.3 million decrease in corporate expenses was due to one-time compliance consulting costs incurred in 2018.

2019 as Compared to 2018

Our net income and income before taxes in 2019 were $56.2 million and $79.5 million, respectively, as compared to $43.0 million and $60.1 million, respectively, in 2018. The $19.4 million increase in income before taxes was the result of a $18.5 million increase in income before taxes for Banking, a $1.4 million decrease in income before taxes for Wealth Management and a $2.4 million decrease in corporate expenses. The increase in Banking was due to higher net interest income, a lower provision for loan losses and higher noninterest income which were partially offset by higher noninterest expenses. The decrease in Wealth Management was due to lower noninterest income and higher noninterest expenses. The decrease in corporate expenses was due to decreases in interest expense and noninterest expenses.  

Our effective tax rate for 2019 was 29.3% as compared to 28.5% for 2018 and as compared to our statutory tax rate of 29.0%.During 2018, the effective tax rate benefited from excess tax benefits resulting from the exercise or vesting of stock awards.

Net interest income for Banking increased from $157.4 million in 2018, to $170.3 million in 2019 due primarily to a 14% increase in interest-earning assets which was partially offset by a decrease in our net yield on interest earning assets. On a consolidated basis, the net yield on interest earning assets decreased from 2.99% in 2018 to 2.87% in 2019 due to a decrease in the net interest rate spread which was partially offset by  a larger benefit derived from noninterest bearing funding sources, including noninterest-bearing deposits and equity, as interest rates rise. The net interest rate spread decreased from 2.51% in 2018 to 2.31% in 2019 due to an increase in the cost of interest-bearing liabilities which was partially offset by an increase in yield on total interest-earning assets. The yield on interest-earning assets increased as new loans added to the portfolio during the year bore interest rates higher than the current portfolio rates. The increase in the cost of interest-bearing liabilities was due to increased costs of interest-bearing deposits, resulting from increases in deposit market rates, and increased costs of borrowings as the average rate on FHLB advances and other Bank borrowings increased from 1.92% in 2018 to 2.30% in 2019. The average balance outstanding under the holding company line of credit decreased from $31.4 million in 2018 to $6.1 million in 2019, resulting in a $1.4 million decrease in corporate interest expense.

The $2.6 million provision for loan losses in 2019 was due to the growth in loan balances and $0.8 million of net chargeoffs. The $4.2 million provision for loan losses in 2018 was due to $3.5 million of net chargeoffs and growth in loan balances.

Noninterest income in Banking in 2019 was $7.5 million higher than 2018 due to a higher gain on sale of loans, higher loan fess, higher trust fees and gains on sales of REO which were partially offset by a $0.3 million loss on the sale of securities. The $3.8 million higher gain on sale was due to the benefits of a decreasing interest rate environment in 2019. The $2.2 million increase in loan fees was due primarily to higher prepayment fees and higher servicing fees. The $1.3 million increase in trust fees relates primarily to new clients, some of which were transferred from or referred by Wealth Management. The $0.7 million gain on sale of REO relates to the sale of properties obtained in recent acquisitions. Noninterest income for Wealth Management decreased by $1.1 million in 2019 when compared to 2018 due primarily to lower levels, on average, of billable AUM in 2019.

Noninterest expense in Banking increased from $100.8 million in 2018 to $104.4 million in 2019, due to increases in staffing and other costs associated with the Bank’s expansion, including the acquisition of Premier Business Bank (“PBB) in June 2018, and increases in customer service costs which were partially offset by a $3.4

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million decrease in merger related costs. Compensation and benefits for Banking increased $2.0 million during2019 as compared to2018 due to salary increases and an increase in the FTE in Banking, which increased to 421.4 in2019 from 385.8in 2018 primarily as a result of the increased staffing related to the PBB acquisition. The $1.1 million increase in occupancy and depreciation for Banking in 2019 as compared to2018 was due to costs related to the PBB acquisition and increases in our data processing costs due to increased volumes. Customer service costs for Banking increased from $15.1million in 2018 to $17.9 million in 2019 due to increases in the earnings credit rates paid on the related deposit balances. Other expenses decreased by $2.4million in 2019 when compared to the corresponding period in 2018 due to a $3.4 million decrease in merger related costs which was partially offset by increases in the amortization of core deposit intangibles and FDIC insurance. Increases in FDIC insurance were partially offset by a $1.2 million refund received from the FDIC for deposit insurance fees in the third quarter of 2019. Noninterest expenses for Wealth Management increased by $0.3 million for2019, when compared to the comparable period in 2018, due to increased compensation costs. The $1.0 million decrease in corporate expenses for 2019, when compared to2018, was due to lower marketing costs, lower legal costs and $0.5 million one-time compliance consulting costs incurred in 2018.

Quarter Ended December 31, 2019 as Compared to Quarter Ended September 30, 2019

Our net income and income before taxes in the fourth quarter of 2019 were $15.2 million and $21.7 million, respectively, as compared to $17.4 million and $24.2 million, respectively, in the third quarter of 2019. The $2.5 million decrease in income before taxes was the result of a $3.0 million decrease in income before taxes for Banking, a $0.1 million increase in income before taxes for Wealth Management and a $0.3 million decrease in corporate expenses. The decrease in Banking was due to lower noninterest income and a higher provision for loan losses which were partially offset by higher net interest income and lower noninterest expenses. The increase in Wealth Management was due to higher noninterest income. The decrease in corporate expenses was due to decreases in interest expense and noninterest expenses.

Our effective tax rate for the fourth quarter of 2019 was 30.0% as compared to 28.4% for the third quarter of 2019 and as compared to our statutory tax rate of 29.0%.

Net interest income for Banking increased from $43.3 million in the third quarter of 2019 to $44.0 million in the fourth quarter of 2019 due to a 2% increase in interest earning assets. On a consolidated basis, the net yield on interest earning assets decreased from 2.89% in the third quarter of 2019 to 2.88% in the fourth quarter of 2019 due to a lower proportion of noninterest bearing deposits during the fourth quarter as compared to the third quarter. The net interest rate spread increased from 2.27% in the third quarter of 2019 to 2.33% in the fourth quarter of 2019 as a decrease in the cost of our interest-bearing liabilities was partially offset by a decrease in yield on interest-earning assets. The decrease in yield on interest earning assets was primarily due to the higher proportion of lower yielding securities and cash and a decrease in the yield on securities due to purchase of $576 million of securities in the third quarter at current market rates. The decrease in the cost of interest-bearing liabilities was due to decreased costs of interest-bearing deposits, resulting from decreases in deposit market rates and decreases in our borrowing costs due to declines in the Fed Funds rates which strongly influence our borrowing rates. The average balance outstanding under the holding company line of credit decreased from $10.5 million in the third quarter of 2019 to $6.2 million in the fourth quarter of 2019, resulting in a $0.1 million decrease in corporate interest expense.

The provision for loan losses in the fourth quarter of 2019 was $0.7 million as compared to $0.2 million in the third quarter of 2019.

Noninterest income in Banking decreased from $8.2 million in the third quarter of 2019 to $4.2 million in the fourth quarter of 2019 due to a $4.2 million gain on sale of loans realized in the third quarter and $0.5 million of gains on sale of REO realized in the third quarter which was partially offset by a $0.3 million loss on the sale of

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securities realized in the third quarter and higher prepayment fees realized in the fourth quarter. Noninterest income for Wealth Management increased by $0.1million in the fourth quarter of 2019 when compared to the third quarter of 2019 due primarily to higher levels of AUM.

Noninterest expense in Banking decreased from $26.4 million in the third quarter of 2019 to $25.6 million in the fourth quarter of 2019 due to lower customer service costs which were partially offset by a $1.2 million refund received from the FDIC for deposit insurance fees in the third quarter of 2019. Customer service costs decreased by $1.6 million in the fourth quarter of 2019 when compared to the third quarter of 2019 due primarily to lower rates and lower balances of related deposits. Corporate noninterest expenses decreased by $0.2 million for the fourth quarter of 2019 when compared to the third quarter of 2019 due to lower legal and contribution costs.

Changes in Financial Position

During 2019, total assets increased by $474 million primarily due to increases in securities and loans, including loans held for sale. During 2019, securities increased by $205 million as we sold $284 million of lower yielding securities and purchased $576 million of securities from our loan securitization in the third quarter. Loans and loans held for saleincreased $249 million in 2019 as a result of $1.9 billion of originations which were partially offset by the sale of $551 million of loans and payoffs or scheduled payments of $1.1 billion. The $358 million growth in deposits during 2019 included increases in branch deposits of $138 million and specialty deposits of $222 million and a $2 million decrease in wholesale deposits. Borrowings increased by $35 million during 2019 primarily to support the growth in our total assets. At December 31, 2019 and December 31, 2018, the outstanding balance on the holding company line of credit was $10 million and $5 million, respectively.

Our credit quality remains strong as our ratio of non-performing assets to total assets is at 0.20% at December 31, 2019. We recorded $0.8 million and $3.5 million of net loan chargeoffs in 2019 and 2018, respectively. The ratio of the allowance for loan and lease losses to loans, excluding loans acquired in acquisitions, was 0.49% and 0.51% at December 31, 2019 and December 31, 2018, respectively.

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XML

Document and Entity Information	Jan. 28, 2020
Cover [Abstract]
Entity Registrant Name	FIRST FOUNDATION INC.
Document Type	8-K
Amendment Flag	false
Entity Central Index Key	0001413837
Document Period End Date	Jan. 28, 2020
Entity Emerging Growth Company	false
Entity File Number	001-36461
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-8639702
Entity Address, Address Line One	18101 Von Karman Avenue
Entity Address, Address Line Two	Suite 700
Entity Address, City or Town	Irvine
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92612
City Area Code	949
Local Phone Number	202-4160
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	FFWM
Security Exchange Name	NASDAQ