F
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction | (I.R.S. Employer | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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.
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).
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.
☒ | 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
As of August 3, 2022, the registrant had
FIRST FOUNDATION INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 | ||||||
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52 | |||||||
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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, | ||||||
2022 | 2021 | ||||||
(unaudited) | |||||||
ASSETS |
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Cash and cash equivalents | $ | | $ | | |||
Securities available-for-sale ("AFS") |
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Securities held-to-maturity ("HTM") | | — | |||||
Allowance for credit losses - investments | ( | ( | |||||
Net securities | | | |||||
Loans held for sale |
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Loans held for investment |
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Allowance for credit losses - loans |
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Net loans |
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Investment in FHLB stock | |
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Deferred taxes |
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Premises and equipment, net |
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Real estate owned ("REO") | | | |||||
Goodwill and intangibles |
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Other assets |
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Total Assets | $ | | $ | | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Liabilities: |
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Deposits | $ | | $ | | |||
Borrowings |
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Accounts payable and other liabilities |
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Total Liabilities |
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Shareholders’ Equity |
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Common Stock |
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Additional paid-in-capital |
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Retained earnings |
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Accumulated other comprehensive (loss) income |
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Total Shareholders’ Equity |
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Total Liabilities and Shareholders’ Equity | $ | | $ | |
(See accompanying notes to the consolidated financial statements)
1
FIRST FOUNDATION INC.
CONSOLIDATED INCOME STATEMENTS - UNAUDITED
(In thousands, except share and per share amounts)
Quarter Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||
Interest income: |
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Loans | $ | | $ | | $ | | $ | | |||||
Securities |
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FHLB Stock, fed funds sold and interest-bearing deposits |
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Total interest income |
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Interest expense: |
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Deposits |
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Borrowings |
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Total interest expense |
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Net interest income |
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Provision for credit losses | |
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Net interest income after provision for credit losses |
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Noninterest income: |
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Gain on sale of loans | — | | — | | |||||||||
Other income |
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Total noninterest income |
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Noninterest expense: |
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Compensation and benefits |
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Occupancy and depreciation |
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Professional services and marketing costs |
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Customer service costs |
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Other expenses |
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Total noninterest expense |
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Income before taxes on income |
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Taxes on income |
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Net income | $ | | $ | | $ | | $ | | |||||
Net income per share: |
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Basic | $ | | $ | | $ | | $ | | |||||
Diluted | $ | | $ | | $ | | $ | | |||||
Shares used in computation: |
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Basic |
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Diluted |
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(See accompanying notes to the consolidated financial statements)
2
FIRST FOUNDATION INC.
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS’ EQUITY - UNAUDITED
(In thousands, except share amounts)
| Common Stock |
| Additional |
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| Accumulated Other |
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Number | Paid-in | Retained | Comprehensive | ||||||||||||||
| of Shares |
| Amount |
| Capital |
| Earnings |
| Income (Loss) |
| Total | ||||||
Balance: December 31, 2021 | | $ | | $ | | $ | | $ | | $ | | ||||||
Net income |
| — |
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| — |
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| — |
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Other comprehensive loss |
| — |
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| — |
| ( |
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Stock based compensation |
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Cash dividend | — |
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| ( |
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Issuance of common stock: |
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Exercise of options |
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Stock grants – vesting of restricted stock units |
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Repurchase of shares from restricted shares vesting |
| ( |
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| ( |
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| ( | |||||
Stock repurchase | ( | — | ( | — | — | ( | |||||||||||
Balance: June 30, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
Balance: March 31, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
Net income |
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Other comprehensive loss |
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| ( |
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Stock based compensation |
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Cash dividend |
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| ( |
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Issuance of common stock: |
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Exercise of options |
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Stock grants – vesting of restricted stock units |
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| ( |
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Repurchase of shares from restricted shares vesting |
| ( |
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Stock repurchase | ( | — | ( | — | — | ( | |||||||||||
Balance: June 30, 2022 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
Balance: December 31, 2020 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income |
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Other comprehensive loss |
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| ( |
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Stock based compensation |
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Cash dividend |
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| ( |
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Issuance of common stock: |
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Exercise of options |
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Stock grants – vesting of restricted stock units |
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Repurchase of shares from restricted shares vesting |
| ( |
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| ( |
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Balance: June 30, 2021 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Balance: March 31, 2021 |
| | $ | | $ | | $ | | $ | | $ | | |||||
Net income |
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Other comprehensive loss |
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| ( |
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Stock based compensation |
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Cash dividend |
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| ( |
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Issuance of common stock: |
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Exercise of options |
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Stock grants – vesting of restricted stock units |
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Repurchase of shares from restricted shares vesting |
| ( |
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| ( |
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Balance: June 30, 2021 |
| | $ | | $ | | $ | | $ | | $ | |
(See accompanying notes to the consolidated financial statements)
3
FIRST FOUNDATION INC.
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME - UNAUDITED
(In thousands)
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||
Net income |
| $ | | $ | |
| $ | | $ | | |||
Other comprehensive income (loss): |
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Unrealized holding gains (losses) on securities arising during the period |
| ( |
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Other comprehensive income (loss) before tax |
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Income tax benefit (expense) related to items of other comprehensive income |
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Other comprehensive income (loss) |
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Total comprehensive income | $ | | $ | | $ | | $ | |
(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, | |||||||
2022 | 2021 | ||||||
Cash Flows from Operating Activities: |
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Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Provision for credit losses - loans |
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Provision for credit losses - securities AFS | | | |||||
Stock–based compensation expense |
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Depreciation and amortization |
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Deferred tax expense |
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Amortization of premium (discount) on securities | | | |||||
Amortization of core deposit intangible |
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Amortization of mortgage servicing rights - net |
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Gain on sale of loans |
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Amortization of OCI - securities transfer to HTM | ( | — | |||||
Valuation allowance on mortgage servicing rights - net | ( | | |||||
Increase in other assets |
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Increase (decrease) in accounts payable and other liabilities |
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Net cash provided by operating activities |
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Cash Flows from Investing Activities: |
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Net increase in loans |
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Proceeds from sale of loans |
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Purchase of premises and equipment |
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Disposals of premises and equipment | | — | |||||
Recovery of allowance for credit losses |
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Purchases of securities AFS |
| ( |
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Purchases of securities HTM | ( | — | |||||
Proceeds from sale of securities |
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Maturities of securities AFS |
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Maturities of securities HTM | | — | |||||
Sale of FHLB and FRB stock, net |
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Net cash used in investing activities |
| ( |
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Cash Flows from Financing Activities: |
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Increase in deposits |
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Net increase (decrease) in FHLB advances |
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Line of credit net change – borrowings, net |
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Net increase in subordinated debt | | — | |||||
Net increase in repurchase agreements | | — | |||||
Gain on sale leaseback |
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Dividends paid |
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Proceeds from exercise of stock options |
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Repurchase of stock |
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Net cash provided by financing activities |
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Increase (decrease) in cash and cash equivalents |
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Cash and cash equivalents at beginning of year |
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Cash and cash equivalents at end of period | $ | | $ | | |||
Supplemental disclosures of cash flow information: |
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Cash paid during the period for: |
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Income taxes | $ | | $ | | |||
Interest | | | |||||
Noncash transactions: |
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Transfer of loans to loans held for sale | $ | — | $ | | |||
Transfer of securities from available-for-sale to held-to-maturity | | — | |||||
Goodwill acquisition adjustment | | — | |||||
Operating lease liabilities recognized | | — |
(See accompanying notes to the consolidated financial statements)
5
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2022 - UNAUDITED
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements include First Foundation Inc. (“FFI”) and its wholly owned subsidiaries: First Foundation Advisors (“FFA”) and First Foundation Bank (“FFB” or the “Bank”) and the wholly owned subsidiaries of FFB, First Foundation Insurance Services (“FFIS”), Blue Moon Management, LLC, and First Foundation Public Finance (“FFPF”) (collectively referred to as the “Company”). FFI also has
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and prevailing practices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates.
The accompanying unaudited consolidated financial statements include all information and footnotes required for interim financial statement presentation. These financial statements assume that readers have read the most recent Annual Report on Form 10-K which contains the latest available audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2021.
Certain reclassifications have been made to the prior year consolidated financial statements to conform to the 2022 presentation.
New Accounting Pronouncements
In March 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures”. ASU 2022-02 eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors and provides amendments to ASU 2016-13, Financial Instruments – Credit Losses on Financial Instruments by enhancing existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. ASU 2022-02 also requires that entities disclose current-period gross write-offs by year of origination for financing receivables within the scope of Subtopic 326-20. For entities that have adopted the amendments in Update 2016-13, the amendments in this ASU are effective for fiscal years beginning after December 15, 2022. The adoption of ASU 2022-02 is not expected to have a significant impact on the Company’s consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. ASU 2020-04 provides optional guidance for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022. The adoption of ASU 2020-04 is not expected to have a significant impact on the Company’s consolidated financial statements.
6
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2022 - UNAUDITED
NOTE 2: ACQUISITIONS
On December 17, 2021, the Company completed the acquisition of TGR Financial, Inc. (“TGRF”) and its wholly owned subsidiary, First Florida Integrity Bank, through a merger of TGRF with and into FFI followed immediately by the merger of First Florida Integrity Bank with and into FFB, in exchange for
The acquisition was accounted for under the purchase method of accounting. The acquired assets, assumed liabilities and identifiable intangible assets are recorded at their respective acquisition date fair values. Goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining TGRF into FFI.
The following table represents the assets acquired and liabilities assumed of TGRF as of December 17, 2021 and the fair value adjustments and amounts recorded by the Company in 2021 under the acquisition method of accounting:
| TGRF Book |
| Fair Value |
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(dollars in thousands) | Value | Adjustments | Fair Value | ||||||
Assets Acquired: |
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Cash and cash equivalents | $ | | $ | | $ | | |||
Securities AFS |
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Securities held-to-maturity | | | | ||||||
Loans, net of deferred fees |
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Investment in FHLB stock |
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