Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- First Foundation Inc (FFWM, Financial) completed a $228 million capital raise, improving capital ratios.
- The company increased its net interest margin to 1.5% from 1.36% in the previous quarter.
- First Foundation Advisors closed the quarter with near-record assets under management, maintaining strong profitability.
- Non-interest-bearing demand deposits increased to 21% of total deposits, indicating a healthier deposit mix.
- The company has a strong liquidity position with $4.3 billion available, enhancing financial stability.
Negative Points
- First Foundation Inc (FFWM) reported a net loss attributable to common shareholders of $82.2 million for the quarter.
- The reclassification of $1.9 billion in multi-family loans to held for sale resulted in a significant paper loss of $117.5 million.
- Non-performing assets increased to 0.33% of total assets, up from 0.18% in the previous quarter.
- The efficiency ratio worsened to 98.1%, indicating higher operational costs relative to income.
- Total deposits decreased to $10.3 billion from $10.8 billion in the previous quarter, reflecting a decline in deposit base.
Q & A Highlights
Q: Can you provide a timeline for optimizing the loans moved to held for sale and the upcoming securitizations?
A: We don't have a set timeline but are aiming to complete the securitization of approximately $500 million by the end of the year. We are also considering additional securitizations in 2025. The flexibility from moving loans to held for sale allows us to ensure the best execution for our shareholders. - James Britton, CFO
Q: How do ECR deposits respond to rate cuts, and what impact do they have on expenses?
A: ECR deposits reprice aggressively downward in response to rate cuts, similar to how they increased when rates were rising. This results in significant benefits as rates decrease. - Scott Kavanaugh, CEO; Christopher Naghibi, COO
Q: What is the plan for the proceeds from the planned securitization of loans?
A: We intend to use the proceeds to reduce our exposure to wholesale funding, such as brokered deposits and home loan bank advances, aiming for a dollar-for-dollar reduction. - Scott Kavanaugh, CEO; James Britton, CFO
Q: What percentage of your loan book is truly floating rate, and how will it be affected by the recent Fed rate cut?
A: Approximately 20% of our loan book is adjustable rate, with varying adjustment periods. The majority are three to six-month adjustables, which will be impacted by the Fed rate cut. - James Britton, CFO
Q: How does the current reserve ratio compare to peers, and what are your plans for the ACL?
A: We aim to gradually increase our ACL to align with peers, which we identified as having reserve ratios between 65 and 70 basis points. This will be a pragmatic process over time. - Christopher Naghibi, COO; Scott Kavanaugh, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
