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Table of Contents

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 March 31, 2021

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

NASDAQ Global Market

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 May 3, 2021, the registrant had 44,782,155 shares of common stock, $0.001 par value per share, outstanding

Table of Contents

FIRST FOUNDATION INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

40

Part II. Other Information

Item 1A

Risk Factors

41

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 6

Exhibits

42

SIGNATURES

S-1

(i)

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

FIRST FOUNDATION INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

March 31, 

December 31, 

2021

2020

(unaudited)

ASSETS

    

  

    

  

Cash and cash equivalents

$

468,026

$

629,707

Securities available-for-sale

 

758,097

 

814,671

Allowance for credit losses - investments

(8,878)

(7,245)

Net securities

749,219

807,426

Loans held for sale

 

513,054

 

505,404

Loans held for investment

 

5,117,206

 

4,803,799

Allowance for credit losses - loans

 

(23,180)

 

(24,200)

Net loans

 

5,094,026

 

4,779,599

Investment in FHLB stock

17,250

 

17,250

Deferred taxes

 

6,941

 

8,603

Premises and equipment, net

 

7,817

 

8,012

Goodwill and intangibles

 

94,864

 

95,296

Other assets

 

100,635

 

105,863

Total Assets

$

7,051,832

$

6,957,160

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

  

 

Liabilities:

 

  

 

Deposits

$

6,245,821

$

5,913,433

Borrowings

 

12,000

 

269,000

Accounts payable and other liabilities

 

79,581

 

79,016

Total Liabilities

 

6,337,402

 

6,261,449

Shareholders’ Equity

 

  

 

Common Stock

 

45

 

45

Additional paid-in-capital

 

434,346

 

433,941

Retained earnings

 

265,970

 

247,638

Accumulated other comprehensive income (loss)

 

14,069

 

14,087

Total Shareholders’ Equity

 

714,430

 

695,711

Total Liabilities and Shareholders’ Equity

$

7,051,832

$

6,957,160

(See accompanying notes to the consolidated financial statements)

1

Table of Contents

FIRST FOUNDATION INC.

CONSOLIDATED INCOME STATEMENTS - UNAUDITED

(In thousands, except share and per share amounts)

Three Months Ended

March 31, 

2021

2020

Interest income:

  

    

  

Loans

$

53,531

$

54,884

Securities

 

5,206

 

6,997

FHLB stock, fed funds sold and interest-bearing deposits

 

401

 

457

Total interest income

 

59,138

 

62,338

Interest expense:

 

Deposits

 

4,623

 

14,646

Borrowings

 

286

 

2,824

Total interest expense

 

4,909

 

17,470

Net interest income

 

54,229

 

44,868

Provision for credit losses

 

360

 

4,079

Net interest income after provision for credit losses

 

53,869

 

40,789

Noninterest income:

Asset management, consulting and other fees

 

8,349

 

7,762

Other income

 

3,559

 

2,913

Total noninterest income

 

11,908

 

10,675

Noninterest expense:

 

  

 

Compensation and benefits

 

21,526

 

19,857

Occupancy and depreciation

 

6,160

 

5,512

Professional services and marketing costs

 

2,122

 

1,754

Customer service costs

 

1,770

 

2,372

Other expenses

 

2,933

 

3,362

Total noninterest expense

 

34,511

 

32,857

Income before taxes on income

 

31,266

 

18,607

Taxes on income

 

8,911

 

5,396

Net income

$

22,355

$

13,211

Net income per share:

 

 

Basic

$

0.50

$

0.30

Diluted

$

0.50

$

0.29

Shares used in computation:

 

  

 

  

Basic

 

44,707,718

 

44,669,661

Diluted

 

45,012,205

 

44,952,669

(See accompanying notes to the consolidated financial statements)

2

Table of Contents

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENT 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, 2019

 

44,670,743

$

45

$

433,775

$

175,773

$

4,276

$

613,869

Net income

 

 

 

 

13,211

 

 

13,211

Other comprehensive income

 

 

 

 

 

547

 

547

Stock based compensation

 

 

 

767

 

 

 

767

Cash dividend

(3,132)

(3,132)

Issuance of common stock:

 

  

 

  

 

  

 

  

 

  

 

  

Exercise of options

 

86,000

 

 

645

 

 

 

645

Stock grants – vesting of restricted stock units

 

83,057

 

 

 

 

 

Stock repurchase

 

(224,334)

 

 

(2,824)

 

 

 

(2,824)

Balance: March 31, 2020

 

44,615,466

$

45

$

432,363

$

185,852

$

4,823

$

623,083

Balance: December 31, 2020

 

44,667,650

$

45

$

433,941

$

247,638

$

14,087

$

695,711

Net income

 

 

 

 

22,355

 

 

22,355

Other comprehensive income

 

 

 

 

 

(18)

 

(18)

Stock based compensation

 

 

 

995

 

 

 

995

Cash dividend

 

 

 

 

(4,023)

 

 

(4,023)

Issuance of common stock:

 

  

 

  

 

  

 

  

 

  

 

  

Exercise of options

 

47,000

 

 

354

 

 

 

354

Stock grants – vesting of restricted stock units

 

108,085

 

 

 

 

 

Repurchase of shares from restricted shares vesting

 

(40,580)

 

 

(944)

 

 

 

(944)

Balance: March 31, 2021

 

44,782,155

$

45

$

434,346

$

265,970

$

14,069

$

714,430

(See accompanying notes to the consolidated financial statements)

3

Table of Contents

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME - UNAUDITED

(In thousands)

Three Months Ended March 31, 

2021

2020

Net income

    

$

22,355

$

13,211

Other comprehensive income (loss):

 

  

 

  

Unrealized holding gains (losses) on securities arising during the period

 

(25)

 

772

Other comprehensive income (loss) before tax

 

(25)

 

772

Income tax expense (benefit) related to items of other comprehensive income

 

(7)

 

225

Other comprehensive income (loss)

 

(18)

 

547

Total comprehensive income

$

22,337

$

13,758

(See accompanying notes to the consolidated financial statements)

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Table of Contents

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)

For the Three Months Ended

March 31, 

2021

2020

Cash Flows from Operating Activities:

    

  

    

  

Net income

$

22,355

$

13,211

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Provision for credit losses - loans

 

(1,273)

 

2,279

Provision for credit losses - securities AFS

1,633

1,800

Stock–based compensation expense

 

995

 

767

Depreciation and amortization

 

823

 

763

Deferred tax expense

 

1,669

 

1,722

Amortization of premium on securities

131

Amortization of core deposit intangible

 

432

 

519

Amortization of mortgage servicing rights - net

 

479

 

361

Amortization of premiums on purchased loans - net

 

 

(4,174)

Gain from hedging activities

 

 

(36)

Valuation allowance on mortgage servicing rights - net

(37)

Decrease (increase) in other assets

 

4,786

 

(7,355)

Increase (decrease) in accounts payable and other liabilities

 

626

 

(8,973)

Net cash provided by operating activities

 

32,619

 

884

Cash Flows from Investing Activities:

 

  

 

  

Net increase in loans

 

(321,271)

 

(263,552)

Purchase of premises and equipment

 

(628)

 

(977)

Recovery of allowance for credit losses

 

406

 

451

Purchases of AFS securities

 

 

(3,000)

Maturities of AFS securities

 

53,418

 

55,443

Proceeds from redemption of securities

3,000

Sale of FHLB stock, net

 

 

351

Net cash used in investing activities

 

(265,075)

 

(211,284)

Cash Flows from Financing Activities:

 

  

 

  

Increase in deposits

 

332,388

 

139,683

Net (decrease) increase in FHLB advances

 

(250,000)

 

51,000

Line of credit net change – borrowings (paydowns), net

 

(7,000)

 

Dividends paid

 

(4,023)

 

(3,132)

Proceeds from exercise of stock options

 

354

 

645

Repurchase of stock

 

(944)

 

(2,824)

Net cash provided by financing activities

 

70,775

 

185,372

Decrease in cash and cash equivalents

 

(161,681)

 

(25,028)

Cash and cash equivalents at beginning of year

 

629,707

 

65,387

Cash and cash equivalents at end of period

$

468,026

$

40,359

Supplemental disclosures of cash flow information:

 

  

 

  

Cash paid during the period for:

 

  

 

  

Income taxes

$

5,209

$

Interest

6,221

19,804

Noncash transactions:

 

 

  

Transfer of loans to loans held for sale

$

8,195

$

10,163

Chargeoffs against allowance for credit losses

214

530

(See accompanying notes to the consolidated financial statements)

5

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 - 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 two inactive wholly owned subsidiaries, First Foundation Consulting (“FFC”) and First Foundation Advisors, LLC (“FFA LLC”). All intercompany balances and transactions have been eliminated in consolidation. The results of operations reflect any interim adjustments, all of which are of a normal recurring nature and which, in the opinion of management, are necessary for a fair presentation of the results for the interim period presented. The results for the 2021 interim periods are not necessarily indicative of the results expected for the full year.

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, 2020.

Certain reclassifications have been made to the prior year consolidated financial statements to conform to the 2021 presentation.

Recent Accounting Pronouncements

In October 2020, the FASB issued Accounting Standards Update ASU 2020-10, “Codification Improvements”. ASU 2020-10 amends certain guidance that may have been applied in an inconsistent manner by certain entities. The effective date for the amendments in this ASU are effective for annual periods after December 15, 2020. The adoption of ASU 2020-10 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.

NOTE 2: FAIR VALUE MEASUREMENTS

Assets Measured at Fair Value on a Recurring Basis

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Current accounting guidance establishes a fair value hierarchy, which requires an entity to maximize

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 - UNAUDITED

the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair values:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Securities available for sale and investments in equity securities are measured at fair value on a recurring basis depending upon whether the inputs are Level 1, 2 or 3 as described above.

The following tables show the recorded amounts of assets and liabilities measured at fair value on a recurring basis as of:

Fair Value Measurement Level

(dollars in thousands)

Total

Level 1

Level 2

Level 3

March 31, 2021:

    

  

    

  

    

  

    

  

Investment securities available for sale:

 

  

 

  

 

  

 

  

Agency mortgage-backed securities

$

673,164

$

$

673,164

$

Beneficial interest – FHLMC securitizations

 

17,893

 

 

 

17,893

Corporate bonds

 

56,554

 

 

56,554

 

Other

 

1,608

 

501

 

1,107

 

Investment in equity securities

 

434

 

434

 

 

Total assets at fair value on a recurring basis

$

749,653

$

935

$

730,825

$

17,893

December 31, 2020:

Investment securities available for sale:

 

  

 

  

 

  

 

  

Agency mortgage-backed securities

$

723,995

$

$

723,995

$

Beneficial interest – FHLMC securitizations

 

23,463

 

 

 

23,463

Corporate bonds

 

58,358

 

 

58,358

 

Other

 

1,610

 

503

 

1,107

 

Investment in equity securities

 

338

 

338

 

 

Total assets at fair value on a recurring basis

$

807,764

$

841

$

783,460

$

23,463

The decrease in Level 3 assets from December 31, 2020 was due to securitization paydowns and to $1.6 million in provisions for credit losses in the first three months of 2021.

Assets Measured at Fair Value on a Nonrecurring Basis

From time to time, we may be required to measure other assets at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 - UNAUDITED

Loans. Loans measured at fair value on a nonrecurring basis include collateral dependent loans held for investment. The specific reserves for these loans are based on collateral value, net of estimated disposition costs and other identified quantitative inputs. Collateral value is determined based on independent third-party appraisals or internally-developed discounted cash flow analyses. Internal discounted cash flow analyses are also utilized to estimate the fair value of these loans, which considers internally-developed, unobservable inputs such as discount rates, default rates, and loss severity. When the fair value of the collateral is based on an observable market price or a current appraised value, we measure the impaired loan at nonrecurring Level 2. When an appraised value is not available, or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price or a discounted cash flow has been used to determine the fair value, we measure the impaired loan at nonrecurring Level 3. The total collateral dependent impaired Level 3 loans were $3.0 million and $3.1 million at March 31, 2021 and December 31, 2020, respectively. There were $1.0 million and $1.1 million in specific reserves related to these loans at March 31, 2021 and December 31, 2020, respectively.

Real Estate Owned. The fair value of real estate owned is based on external appraised values that include adjustments for estimated selling costs and assumptions of market conditions that are not directly observable, resulting in a Level 3 classification.

Mortgage Servicing Rights. When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income, resulting in a Level 3 classification. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Significant assumptions in the valuation of these Level 3 mortgage servicing rights as of March 31, 2021 included prepayment rates ranging from 15% to 20% and a discount rate of 10%.

Fair Value of Financial Instruments

FASB ASC 825-10, “Disclosures about Fair Value of Financial Instruments” requires disclosure of the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate such value. The methodologies for estimating the fair value of financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis are discussed above. The estimated fair value amounts have been determined by management using available market information and appropriate valuation methodologies and are based on the exit price notion set forth by ASU 2016-01. In cases where quoted market prices are not available, fair values are based on estimates using present value or other market value techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The aggregate fair value amounts presented below do not represent the underlying value of the Company.

Fair value estimates are made at a discrete point in time based on relevant market information and other information about the financial instruments. Because no active market exists for a significant portion of our financial instruments, fair value estimates are based in large part on judgments we make primarily regarding current economic conditions, risk characteristics of various financial instruments, prepayment rates, and future expected loss experience. These estimates are subjective in nature and invariably involve some inherent uncertainties. Additionally, unexpected changes in events or circumstances can occur that could require us to make changes to our assumptions and which, in turn, could significantly affect and require us to make changes to our previous estimates of fair value.

In addition, the fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of existing and anticipated future customer relationships and the value of assets and liabilities that are not considered financial instruments, such as premises and equipment and other real estate owned.

8

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 - UNAUDITED

The following methods and assumptions were used to estimate the fair value of financial instruments:

Cash and Cash Equivalents. The fair value of cash and cash equivalents approximates its carrying value.

Interest-Bearing Deposits with Financial Institutions. The fair values of interest-bearing deposits maturing within ninety days approximate their carrying values.

Investment Securities Available for Sale. Investment securities available-for-sale are measured at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. When a market is illiquid or there is a lack of transparency around the inputs to valuation, the securities are classified as Level 3 and reliance is placed upon internally developed models, and management judgment and evaluation for valuation. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include beneficial interests in FHLMC securitizations. Significant assumptions in the valuation of these Level 3 securities as of March 31, 2021 and December 31, 2020 included prepayment rates ranging from 25% to 35% and discount rates ranging from 8.33% to 10%.

Federal Home Loan Bank Stock. The Bank is a member of the Federal Home Loan Bank (the “FHLB”). As a member, we are required to own stock of the FHLB, the amount of which is based primarily on the level of our borrowings from this institution. The fair value of the stock is equal to the carrying amount, is classified as restricted securities and is periodically evaluated for impairment based on our assessment of the ultimate recoverability of our investments in that stock. Any cash or stock dividends paid to us on such stock are reported as income.

Loans Held For Sale. The fair value of loans held for sale is determined using secondary market pricing.

Loans Held for Investment. The fair value for loans with variable interest rates is the carrying amount. The fair value of fixed rate loans is derived by calculating the discounted value of future cash flows expected to be received by the various homogeneous categories of loans or by reference to secondary market pricing. All loans have been adjusted to reflect changes in credit risk.

Deposits. The fair value of demand deposits, savings deposits, and money market deposits is defined as the amounts payable on demand. The fair value of fixed maturity certificates of deposit is estimated based on the discounted value of the future cash flows expected to be paid on the deposits.

Borrowings. The fair value of borrowings is the carrying value of overnight FHLB advances that approximate fair value because of the short-term maturity of this instrument, resulting in a Level 2 classification. The fair value of term borrowings is derived by calculating the discounted value of future cash flows expected to be paid out by the Company.

9

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 - UNAUDITED

The carrying amounts and estimated fair values of financial instruments are as follows as of:

Carrying

Fair Value Measurement Level

(dollars in thousands)

Value

1

2

3

Total

March 31, 2021:

    

  

    

  

    

  

    

  

    

  

Assets:

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

468,026

$

468,026

$

$

$

468,026

Securities AFS, net

 

749,219

 

501

 

730,825

 

17,893

 

749,219

Loans held for sale

 

513,054

 

 

518,368

 

 

518,368

Loans, net

 

5,094,026

 

 

 

5,146,920

 

5,146,920

Investment in FHLB stock

 

17,250

 

 

17,250

 

 

17,250

Investment in equity securities

 

434

 

434

 

 

 

434

Liabilities:

 

  

 

  

 

  

 

  

 

  

Deposits

$

6,245,821

$

5,480,156

$

765,666

$

$

6,245,822

Borrowings

 

12,000

 

 

5,000

 

7,000

 

12,000

December 31, 2020:

Assets:

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

629,707

$

629,707

$

$

$

629,707

Securities AFS, net

 

807,426

 

503

 

783,460

 

23,463

 

807,426

Loans held for sale

 

505,404

 

 

510,638

 

 

510,638

Loans, net

 

4,779,599

 

 

 

4,829,258

 

4,829,258

Investment in FHLB stock

 

17,250

 

 

17,250

 

 

17,250

Investment in equity securities

 

338

 

338

 

 

 

338

Liabilities:

 

  

 

  

 

  

 

  

 

Deposits

$

5,913,433

$

4,934,537

$

978,897

$

$

5,913,434

Borrowings

 

269,000

 

 

255,000

 

14,000

 

269,000

NOTE 3: SECURITIES

The following table provides a summary of the Company’s securities AFS portfolio as of:

Amortized

Gross Unrealized

Allowance for

Estimated

(dollars in thousands)

Cost

Gains

Losses

Credit Losses

Fair Value

March 31, 2021:

Agency mortgage-backed securities

$

656,055

$

18,016

$

(907)

$

$

673,164

Beneficial interests in FHLMC securitization

 

26,637

 

134

 

 

(8,878)

 

17,893

Corporate bonds

 

54,000

 

2,554

 

 

 

56,554

Other

 

1,519

 

89

 

 

 

1,608

Total

$

738,211

$

20,793

$

(907)

$

(8,878)

$

749,219

December 31, 2020:

Agency mortgage-backed securities

$

705,752

$

18,243

$

$

$

723,995

Beneficial interests in FHLMC securitization

 

30,497

 

211

 

 

(7,245)

 

23,463

Corporate bonds

 

57,000

 

1,358

 

 

 

58,358

Other

 

1,512

 

98

 

 

 

1,610

Total

$

794,761

$

19,910

$

$

(7,245)

$

807,426

US Treasury securities of $0.5 million as of March 31, 2021 and December 31, 2020 that are included in the table above as Other are pledged as collateral to the State of California to meet regulatory requirements related to the Bank’s

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Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 - UNAUDITED

trust operations. As of March 31, 2021, $191.8 million of agency mortgage-backed securities are pledged as collateral as support for the Bank’s obligations under loan sales and securitization agreements entered into from 2018 through 2020.

The table below indicates, as of March 31, 2021, the gross unrealized losses and fair values of our investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

Securities with Unrealized Loss at March 31, 2021

Less than 12 months

12 months or more

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(dollars in thousands)

 

Value

 

Loss

 

Value

 

Loss

 

Value

 

Loss

Agency mortgage-backed securities

$

51,555

$

(907)

$

$

$

51,555

$

(907)

Total temporarily impaired securities

$

51,555

$

(907)

$

$

$

51,555

$

(907)

There were no unrealized losses on our investments as of December 31, 2020.

Unrealized losses in agency mortgage backed securities, beneficial interests in FHLMC securitizations, and other securities have not been recognized into income because the issuer bonds are of high credit quality, management does not intend to sell, it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in discount rates and assumptions regarding future interest rates. The fair value is expected to recover as the bonds approach maturity.

(dollars in thousands)

Total

Three Months Ended March 31, 2021:

Balance: December 31, 2020

    

$

7,245

Provision for credit losses

 

1,633

Balance: March 31, 2021

 

$

8,878

Three Months Ended March 31, 2020:

Balance: December 31, 2019

    

$

Provision for credit losses

 

1,800

Balance: March 31, 2020

 

$

1,800

Due to a change in expected cash flows of an interest only strip security, $1.6 million and $1.8 million in allowances were taken in the three months ended March 31, 2021 and 2020, respectively. The allowances were included as a charge in provision for credit losses on the consolidated income statement.

11

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2021 - UNAUDITED

The scheduled maturities of securities AFS and the related weighted average yields were as follows for the periods indicated:

    

Less than 

    

1 Through 

    

5 Through 

    

After

    

 

(dollars in thousands)

1 Year

5 years

10 Years

10 Years

Total

 

March 31, 2021

Amortized Cost:

 

  

 

  

 

  

 

  

 

  

Corporate bonds

$

$