On October 29, 2024, First Foundation Inc (FFWM, Financial) released its 8-K filing detailing its third-quarter financial results. The company, a financial services provider specializing in investment management and financial planning, reported a net loss of $82.2 million, or $1.23 per share, significantly missing the analyst estimate of -$0.57 per share. This loss was primarily driven by a $117.5 million LOCOM adjustment related to the reclassification of multifamily loans.
Company Overview
First Foundation Inc is engaged in offering a range of financial services, including banking and wealth management, to high-net-worth individuals and various institutions. The company also provides loans for multifamily residential and commercial real estate properties, alongside business banking services.
Performance and Challenges
The third quarter of 2024 presented significant challenges for First Foundation Inc. The company's net interest income was $49.1 million, a decrease from $52.1 million in the same quarter last year. Noninterest income was notably negative at ($105.6) million due to the LOCOM adjustment. The company's net interest margin improved slightly to 1.50% from 1.36% in the previous quarter, yet it remains below the 1.66% margin from a year ago.
Financial Achievements
Despite the challenges, First Foundation Inc maintained a strong liquidity position with $4.3 billion in liquidity resources. The company's total risk-based capital ratio increased to 14.21%, reflecting a solid capital base crucial for financial institutions. The average shareholders' equity to average total assets ratio also improved to 8.10%.
Key Financial Metrics
The company's total loans stood at $9.9 billion, with a loan-to-deposit ratio of 95.9%. Total deposits were $10.3 billion, a decrease from the previous quarter. The cost of deposits decreased slightly to 3.41%. The efficiency ratio, a measure of noninterest expense to revenue, was 98.1%, indicating high operational costs relative to income.
| Metric | 3Q24 | 2Q24 | 3Q23 |
|---|---|---|---|
| Net Interest Income | $49.1 million | $43.8 million | $52.1 million |
| Noninterest Income | ($105.6) million | $13.7 million | $11.7 million |
| Net Income | ($82.2) million | $3.1 million | $2.2 million |
| Earnings Per Share | ($1.23) | $0.05 | $0.04 |
Strategic Adjustments and Commentary
The reclassification of $1.9 billion in multifamily loans to loans held for sale was a strategic move to enhance balance sheet flexibility. This decision, while impacting earnings, is expected to provide opportunities for securitizing or selling the loans.
I am proud to share the tremendous work and success of our team throughout the third quarter of 2024," said Scott F. Kavanaugh, CEO of First Foundation, Inc. "Despite the impact on our third-quarter earnings, we remain optimistic as the fair-value pricing for the multifamily portfolio surpassed initial estimates."
We are pleased with the stabilization we have driven in our core performance," conveyed Jamie Britton, Chief Financial Officer. "Reclassifying a portion of our multifamily portfolio to loans held for sale was a significant first step in those efforts."
Analysis and Outlook
First Foundation Inc's third-quarter results highlight the challenges faced in the current economic environment, particularly with the strategic reclassification of loans. While the net loss is concerning, the company's strong liquidity and capital ratios provide a buffer against future uncertainties. The focus on strategic adjustments and capital management indicates a proactive approach to navigating the financial landscape.
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Explore the complete 8-K earnings release (here) from First Foundation Inc for further details.
