First Foundation Inc. Q1 FY2024 earnings call

• Balance sheet improvement: Improved loan-to-deposit ratio, managed net interest margin despite contraction, core deposits grew, exited equipment finance for cost savings.
• Deposit situation: Total deposits slightly down, core non-brokered and noninterest-bearing demand deposits increased, deposit pipeline healthy.
• Wealth management: First Foundation Advisors AUM near record, trust department assets stable, management focused on increasing recurring revenue via strategies like adding investment securities and rate swaps.
• Branch network: Growth seen in Florida branches and overall network, optimistic about Q2 deposit pipeline.

For the first quarter, net income attributable to common shareholders was $793,000 or $0.014 per share. Tangible book value ended the quarter at $16.35. Pretax pre-provision revenue totaled $0.5 million. Interest income was $150.5 million. Net interest margin was 1.17% compared to 1.36% in Q4 2023. Loan-to-deposit ratio improved to 94.8%. Core non-brokered deposits increased to 64%, noninterest-bearing demand deposits to 17%. Total deposits were $10.64 billion in Q1 vs $10.69 billion in Q4. Exited equipment finance operations, providing $1.5 million in annualized cost saves. First Foundation Advisors had near record assets under management, trust department had good quarter.

Net interest income expected to benefit from increasing noninterest-bearing deposit balances in Q2, and actions to improve recurring revenue will continue to enhance balance sheet contribution. Optimistic about the year ahead, will monitor rate environment for opportunities to pivot towards sustainable long-term interest rate risk profile.

• Interest rate fluctuations could impact net interest margin and interest income.
• Market uncertainty may affect deposit costs and asset quality.
• Economic changes could influence loan demand and asset quality.

Q: David Feaster asked about loan repricing and deposit strategies.

A: Christopher Naghibi and Scott Kavanaugh discussed loan repricing being more significant than slides suggest and focus on relationship-based deposit gathering.

Q: Gary Tenner inquired about customer service cost deposits.

A: Jamie Britton mentioned average customer service cost deposits were in $500 - $600 million range for MSR and another $300 - $400 million for other, and customer service costs will increase as deposits return.

Q: Andrew Terrell asked about net interest income trough and customer service cost seasonality.

A: Jamie Britton said net interest income is troughing in Q1, and customer service costs expected to build in Q2 with several million off Q1 number