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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, 2019
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 |
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20-8639702 |
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(State or other jurisdiction
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(I.R.S. Employer
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18101 Von Karman Avenue, Suite 700 Irvine, CA 92612 |
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92612 |
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(Address of principal executive offices) |
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(Zip Code) |
(949) 202-4160
(Registrant’s telephone number, including area code)
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 |
☐ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
|
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|
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 ☒
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
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|
|
|
|
Common Stock |
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FFWM |
|
NASDAQ Global Market |
As of May 6, 2019, there were 44,620,831 shares of registrant’s common stock outstanding
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED March 31, 2019
TABLE OF CONTENTS
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Page No. |
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Item 1. |
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1 |
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Item 2 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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24 |
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Item 3. |
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38 |
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Item 4. |
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38 |
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Item 1A |
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38 |
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Item 2 |
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38 |
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Item 6 |
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39 |
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S-1 |
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(i)
P ART I — FINANCIAL INFORMATION
FIRST FOUNDATION INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
|
|
March 31, 2019 |
|
|
December 31,
|
|
||
|
|
|
(unaudited) |
|
|
|
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|
|
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
80,693 |
|
|
$ |
67,312 |
|
|
Securities available-for-sale (“AFS”) |
|
788,160 |
|
|
|
809,569 |
|
|
Loans held for sale |
|
613,528 |
|
|
|
507,643 |
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|
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|
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|
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|
|
|
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Loans, net of deferred fees |
|
4,336,065 |
|
|
|
4,293,669 |
|
|
Allowance for loan and lease losses (“ALLL”) |
|
(19,200 |
) |
|
|
(19,000 |
) |
|
Net loans |
|
4,316,865 |
|
|
|
4,274,669 |
|
|
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|
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|
|
|
|
|
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Investment in FHLB stock |
|
22,734 |
|
|
|
20,307 |
|
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Deferred taxes |
|
12,832 |
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13,251 |
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Premises and equipment, net |
|
9,259 |
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|
9,145 |
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Real estate owned (“REO”) |
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465 |
|
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|
815 |
|
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Goodwill and intangibles |
|
98,852 |
|
|
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99,482 |
|
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Other assets |
|
57,816 |
|
|
|
38,219 |
|
|
Total Assets |
$ |
6,001,204 |
|
|
$ |
5,840,412 |
|
|
|
|
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|
|
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|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
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Liabilities: |
|
|
|
|
|
|
|
|
Deposits |
$ |
4,568,702 |
|
|
$ |
4,532,968 |
|
|
Borrowings |
|
800,000 |
|
|
|
708,000 |
|
|
Accounts payable and other liabilities |
|
64,259 |
|
|
|
40,260 |
|
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Total Liabilities |
|
5,432,961 |
|
|
|
5,281,228 |
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Commitments and contingencies |
|
— |
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— |
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Shareholders’ Equity |
|
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Common Stock, par value $0.001: 70,000,000 shares authorized; 44,620,831 and 44,496,007 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively |
|
44 |
|
|
|
44 |
|
|
Additional paid-in-capital |
|
432,621 |
|
|
|
431,832 |
|
|
Retained earnings |
|
137,490 |
|
|
|
128,461 |
|
|
Accumulated other comprehensive loss, net of tax |
|
(1,912 |
) |
|
|
(1,153 |
) |
|
Total Shareholders’ Equity |
|
568,243 |
|
|
|
559,184 |
|
|
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|
|
|
|
|
|
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Total Liabilities and Shareholders’ Equity |
$ |
6,001,204 |
|
|
$ |
5,840,412 |
|
(See accompanying notes to the consolidated financial statements)
1
CONSOLIDATED INCOME STATEMENTS - UNAUDITED
(In thousands, except share and per share amounts)
|
|
For the Quarter Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
|
Interest income: |
|
|
|
|
|
|
|
|
Loans |
$ |
53,835 |
|
|
$ |
38,971 |
|
|
Securities |
|
6,165 |
|
|
|
3,422 |
|
|
FHLB stock, fed funds sold and interest-bearing deposits |
|
544 |
|
|
|
926 |
|
|
Total interest income |
|
60,544 |
|
|
|
43,319 |
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
Deposits |
|
15,448 |
|
|
|
5,872 |
|
|
Borrowings |
|
4,049 |
|
|
|
3,179 |
|
|
Total interest expense |
|
19,497 |
|
|
|
9,051 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
41,047 |
|
|
|
34,268 |
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses |
|
540 |
|
|
|
1,688 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
40,507 |
|
|
|
32,580 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
|
Asset management, consulting and other fees |
|
6,794 |
|
|
|
7,181 |
|
|
Gain on sale of loans |
|
— |
|
|
|
545 |
|
|
Other income |
|
1,671 |
|
|
|
1,256 |
|
|
Total noninterest income |
|
8,465 |
|
|
|
8,982 |
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense: |
|
|
|
|
|
|
|
|
Compensation and benefits |
|
18,902 |
|
|
|
17,169 |
|
|
Occupancy and depreciation |
|
4,868 |
|
|
|
4,171 |
|
|
Professional services and marketing costs |
|
2,004 |
|
|
|
2,489 |
|
|
Customer service costs |
|
3,389 |
|
|
|
2,771 |
|
|
Other expenses |
|
3,782 |
|
|
|
2,388 |
|
|
Total noninterest expense |
|
32,945 |
|
|
|
28,988 |
|
|
|
|
|
|
|
|
|
|
|
Income before taxes on income |
|
16,027 |
|
|
|
12,574 |
|
|
Taxes on income |
|
4,768 |
|
|
|
3,598 |
|
|
Net income |
$ |
11,259 |
|
|
$ |
8,976 |
|
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.25 |
|
|
$ |
0.23 |
|
|
Diluted |
$ |
0.25 |
|
|
$ |
0.23 |
|
|
Shares used in computation: |
|
|
|
|
|
|
|
|
Basic |
|
44,540,865 |
|
|
|
38,577,271 |
|
|
Diluted |
|
44,798,306 |
|
|
|
39,124,732 |
|
(See accompanying notes to the consolidated financial statements)
2
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS’ EQUITY - UNAUDITED
(In thousands, except share amounts)
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
||||||
|
|
|
Number of Shares |
|
Amount |
|
Additional Paid-in Capital |
|
Retained Earnings |
|
Comprehensive Income (Loss) |
|
Total |
||||||||||
|
Balance: December 31, 2018 |
|
44,496,007 |
|
$ |
44 |
|
|
$ |
431,832 |
|
|
$ |
128,461 |
|
|
$ |
(1,153 |
) |
|
$ |
559,184 |
|
|
Net income |
|
— |
|
|
— |
|
|
|
— |
|
|
|
11,259 |
|
|
|
— |
|
|
|
11,259 |
|
|
Other comprehensive income |
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(759 |
) |
|
|
(759 |
) |
|
Stock based compensation |
|
— |
|
|
— |
|
|
|
692 |
|
|
|
— |
|
|
|
— |
|
|
|
692 |
|
|
Cash dividend |
|
— |
|
|
— |
|
|
|
— |
|
|
|
(2,230 |
) |
|
|
— |
|
|
|
(2,230 |
) |
|
Issuance of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options |
|
13,000 |
|
|
— |
|
|
|
97 |
|
|
|
— |
|
|
|
— |
|
|
|
97 |
|
|
Stock grants – vesting of Restricted Stock Units |
|
111,824 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Balance: March 31, 2019 |
|
44,620,831 |
|
$ |
44 |
|
|
$ |
432,621 |
|
|
$ |
137,490 |
|
|
$ |
(1,912 |
) |
|
$ |
568,243 |
|
|
Balance: December 31, 2017 |
|
38,207,766 |
|
$ |
38 |
|
|
$ |
314,501 |
|
|
$ |
85,503 |
|
|
$ |
(5,091 |
) |
|
$ |
394,951 |
|
|
Net income |
|
— |
|
|
— |
|
|
|
— |
|
|
|
8,976 |
|
|
|
— |
|
|
|
8,976 |
|
|
Other comprehensive income |
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,264 |
) |
|
|
(5,264 |
) |
|
Stock based compensation |
|
— |
|
|
— |
|
|
|
1,165 |
|
|
|
— |
|
|
|
— |
|
|
|
1,165 |
|
|
Issuance of common stock: |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of options |
|
123,000 |
|
|
|
|
|
|
944 |
|
|
|
— |
|
|
|
— |
|
|
|
944 |
|
|
Stock grants – vesting of Restricted Stock Units |
|
99,940 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Raise |
|
625,730 |
|
|
— |
|
|
|
11,341 |
|
|
|
— |
|
|
|
— |
|
|
|
11,342 |
|
|
Balance: March 31, 2018 |
|
39,056,436 |
|
$ |
38 |
|
|
$ |
327,951 |
|
|
$ |
94,479 |
|
|
$ |
(10,355 |
) |
|
$ |
412,114 |
|
(See accompanying notes to the consolidated financial statements)
3
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME - UNAUDITED
(In thousands)
|
|
For the Quarter Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
11,259 |
|
|
$ |
8,976 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on securities arising during the period |
|
(1,074 |
) |
|
|
(7,440 |
) |
|
Other comprehensive income (loss) before tax |
|
(1,074 |
) |
|
|
(7,440 |
) |
|
Income tax expense (benefit) related to items of other comprehensive income |
|
(315 |
) |
|
|
(2,176 |
) |
|
Other comprehensive income (loss) |
|
(759 |
) |
|
|
(5,264 |
) |
|
Total comprehensive income |
$ |
10,500 |
|
|
$ |
3,712 |
|
(See accompanying notes to the consolidated financial statements)
4
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
|
|
For the Three Months Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income |
$ |
11,259 |
|
|
$ |
8,976 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Provision for loan losses |
|
540 |
|
|
|
1,688 |
|
|
Stock–based compensation expense |
|
692 |
|
|
|
1,165 |
|
|
Depreciation and amortization |
|
738 |
|
|
|
664 |
|
|
Deferred tax expense |
|
734 |
|
|
|
390 |
|
|
Amortization of core deposit intangible |
|
630 |
|
|
|
325 |
|
|
Amortization of mortgage servicing rights – net |
|
320 |
|
|
|
234 |
|
|
Amortization of discounts (premiums) on purchased loans – net |
|
(2,171 |
) |
|
|
(654 |
) |
|
Gain on sale of loans |
|
— |
|
|
|
(545 |
) |
|
Gain on sale of REO |
|
(118 |
) |
|
|
— |
|
|
Loss (gain) from hedging activities |
|
(291 |
) |
|
|
— |
|
|
(Increase) decrease in other assets |
|
887 |
|
|
|
(2,336 |
) |
|
Increase (decrease) in accounts payable and other liabilities |
|
(2,028 |
) |
|
|
169 |
|
|
Net cash provided by operating activities |
|
11,192 |
|
|
|
10,076 |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Net increase in loans |
|
(141,346 |
) |
|
|
(296,711 |
) |
|
Proceeds from sale of loans |
|
— |
|
|
|
52,376 |
|
|
Proceeds from sale of REO |
|
468 |
|
|
|
755 |
|
|
Purchase of premises and equipment |
|
(852 |
) |
|
|
(799 |
) |
|
Recovery of allowance for loan losses |
|
208 |
|
|
|
— |
|
|
Purchases of AFS securities |
|
— |
|
|
|
(20,000 |
) |
|
Maturities of AFS securities |
|
20,537 |
|
|
|
18,880 |
|
|
Sale (purchases) of FHLB stock, net |
|
(2,427 |
) |
|
|
(3,566 |
) |
|
Net cash used in investing activities |
|
(123,412 |
) |
|
|
(249,065 |
) |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Increase in deposits |
|
35,734 |
|
|
|
192,665 |
|
|
FHLB Advances – net increase (decrease) |
|
92,000 |
|
|
|
111,000 |
|
|
Line of credit net change – borrowings (paydowns), net |
|
— |
|
|
|
(20,000 |
) |
|
Dividends paid |
|
(2,230 |
) |
|
|
— |
|
|
Proceeds from sale of stock, net |
|
97 |
|
|
|
12,286 |
|
|
Net cash provided by financing activities |
|
125,601 |
|
|
|
295,951 |
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
13,381 |
|
|
|
56,962 |
|
|
Cash and cash equivalents at beginning of year |
|
67,312 |
|
|
|
120,394 |
|
|
Cash and cash equivalents at end of period |
$ |
80,693 |
|
|
$ |
177,356 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Income taxes |
$ |
149 |
|
|
$ |
18 |
|
|
Interest |
|
17,447 |
|
|
|
8,534 |
|
|
Noncash transactions: |
|
|
|
|
|
|
|
|
Transfer of loans to (from) loans held for sale |
$ |
101,397 |
|
|
$ |
46,338 |
|
|
Mortgage servicing rights created from loan sales |
|
— |
|
|
|
317 |
|
|
Chargeoffs (recoveries) against allowance for loans losses |
|
548 |
|
|
|
88 |
|
|
Acquisition reconciliation – goodwill/deferred taxes |
|
— |
|
|
|
300 |
|
(See accompanying notes to the consolidated financial statements)
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 - 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”) and Blue Moon Management, LLC (collectively referred to as the “Company”). 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 2019 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, 2018.
Certain reclassifications have been made to the prior year consolidated financial statements to conform to the 2019 presentation.
In March 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-01, Codification Improvements to Topic 842, Leases . ASU 2019-01 provides improvements to clarify ASU 2016-02, Leases (Topic 842) , or to correct unintended application of guidance. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The adoption of ASU 2019-01 is not expected to have a significant impact on the Company's consolidated financial statements.
In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses . ASU 2018-19 provides improvements to clarify the guidance in the amendments in ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) , or to correct unintended application of guidance. We expect the adoption of ASU 2018-19 will impact the Company’s accounting for credit losses in the same manner as the guidance in ASU 2016-13 described below.
In August 2018, the FASB issued guidance within ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement . The amendments within ASU 2018-13 remove, modify, and supplement the disclosure requirements for fair value measurements. Disclosure requirements that were removed include: the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additional disclosure requirements include: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. With the exception of the above additional disclosure requirements, which will be applied prospectively, all other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The adoption of ASU 2018-13 is not expected to have a significant impact on the Company's consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment which provides updated guidance on how an entity is required to test goodwill for impairment. This update is effective for the Company for annual periods beginning after December 15, 2019, and interim periods within those annual periods. The adoption of ASU 2017-04 is not expected to have a material effect on the Company’s consolidated financial statements .
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which introduces new guidance for the accounting for credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The new model, referred to as the current expected credit losses (CECL) model, will apply to financial assets subject to credit losses and measured at amortized cost, and certain
6
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
off-balance shee t credit exposures. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure. This update is effective for the Company for annual periods beginning after December 15, 20 19, and interim periods within those annual periods. The Company has begun analyzing the data requirements needed to implement the adoption of ASU 2016-13 and we expect that the adoption of ASU 2016-13 may have a significant impact on the Company’s recordi ng of its allowance for loan losses. The financial statement impact of the implementation of ASU 2016-13 is undeterminable at this time .
NOTE 2: ACQUISITIONS
On June 1, 2018, the Company completed the acquisition of PBB Bancorp and its wholly owned subsidiary Premier Business Bank (collectively “PBB”), through a merger of PBB with and into the Bank, in exchange for 5,234,593 shares of its common stock with a fair value of $19.39 per share. The primary reason for acquiring PBB was to expand our operations in Southern California.
The acquisition is 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 of $61 million, which is not tax deductible, is included in intangible assets in the table below.
The following table represents the assets acquired and liabilities assumed of PBB as of June 1, 2018 and the fair value adjustments and amounts recorded by the Bank in 2018 under the acquisition method of accounting:
|
(dollars in thousands) |
|
PBB Book Value |
|
Fair Value Adjustments |
|
Fair Value |
|||||
|
Assets Acquired: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
47,582 |
|
|
$ |
— |
|
|
$ |
47,582 |
|
|
Securities AFS |
|
10,072 |
|
|
|
(90 |
) |
|
|
9,982 |
|
|
Loans, net of deferred fees |
|
537,885 |
|
|
|
(14,986 |
) |
|
|
522,899 |
|
|
Allowance for loan losses |
|
(3,011 |
) |
|
|
3,011 |
|
|
|
— |
|
|
Premises and equipment, net |
|
3,811 |
|
|
|
(1,536 |
) |
|
|
2,275 |
|
|
Investment in FHLB stock |
|
3,229 |
|
|
|
— |
|
|
|
3,229 |
|
|
Deferred taxes |
|
1,451 |
|
|
|
2,398 |
|
|
|
3,849 |
|
|
REO |
|
934 |
|
|
|
(109 |
) |
|
|
825 |
|
|
Goodwill and Core deposit intangible |
|
634 |
|
|
|
66,615 |
|
|
|
67,249 |
|
|
Other assets |
|
6,634 |
|
|
|
(566 |
) |
|
|
6,068 |
|
|
Total assets acquired |
$ |
609,221 |
|
|
$ |
54,737 |
|
|
$ |
663,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities Assumed: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
$ |
477,366 |
|
|
$ |
219 |
|
|
$ |
477,585 |
|
|
Borrowings |
|
79,911 |
|
|
|
(341 |
) |
|
|
79,570 |
|
|
Accounts payable and other liabilities |
|
5,204 |
|
|
|
100 |
|
|
|
5,304 |
|
|
Total liabilities assumed |
|
562,481 |
|
|
|
(22 |
) |
|
|
562,459 |
|
|
Excess of assets acquired over liabilities assumed |
|
46,740 |
|
|
|
54,759 |
|
|
|
101,499 |
|
|
Total |
$ |
609,221 |
|
|
$ |
54,737 |
|
|
$ |
663,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued |
|
|
|
|
|
|
|
|
$ |
101,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates. The most significant category of assets for which this procedure was used was that of acquired loans. The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with FASB Accounting Standards Codification (“ASC”) 310-20.
Certain loans, for which specific credit-related deterioration since origination was identified, are recorded at fair value reflecting the present value of the amounts expected to be collected. Income recognition on these “purchased credit impaired” loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered
7
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
collateral dependent, with the timing of the sale of loan collateral inde terminate, remain on nonaccrual status and have no accretable yield. All purchased credit impaired loans were classified as accruing loans as of and subsequent to the acquisition date.
In accordance with generally accepted accounting principles there was no carryover of the allowance for loan losses that had been previously recorded by PBB.
The Company recorded a deferred income tax asset of $3.8 million related to PBB’s operating loss carry-forward and other tax attributes of PBB, along with the effects of fair value adjustments resulting from applying the purchase method of accounting.
The fair value of savings and transaction deposit accounts acquired from PBB were assumed to approximate their carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit accounts were valued by comparing the contractual cost of the portfolio to an identical portfolio bearing current market rates. The portfolio was segregated into pools based on remaining maturity. For each pool, the projected cash flows from maturing certificates were then calculated based on contractual rates and prevailing market rates. The valuation adjustment for each pool is equal to the present value of the difference of these two cash flows, discounted at the assumed market rate for a certificate with a corresponding maturity. This valuation adjustment will be accreted to reduce interest expense over the remaining maturities of the respective pools. The Company also recorded a core deposit intangible, which represents the value of the deposit relationships acquired from PBB, of $6.7 million. The core deposit intangible will be amortized over a period of 10 years.
Pro Forma Information (unaudited)
The following table presents unaudited pro forma information for the three months periods ending March 31, 2018 as if the acquisition of PBB had occurred on January 1, 2018, after giving effect to certain adjustments. The unaudited pro forma information for this period includes adjustments for interest income on loans acquired, amortization of intangibles arising from the transaction, adjustments for interest expense on deposits acquired, acquisition costs, and the related income tax effects of all these items. The net effect of these pro forma adjustments was an increase of $0.4 million in net income for the three months ended March 31, 2018. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed date.
|
(dollars in thousands) |
|
Three Months Ended March 31, 2018 |
|
||
|
Net interest income |
|
$ |
41,063 |
|
|
|
Provision for loan losses |
|
|
1,688 |
|
|
|
Noninterest income |
|
|
9,524 |
|
|
|
Noninterest expenses |
|
|
32,868 |
|
|
|
Income before taxes |
|
|
16,031 |
|
|
|
Taxes on income |
|
|
4,624 |
|
|
|
Net income |
|
$ |
11,407 |
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
Basic |
|
$ |
0.26 |
|
|
|
Diluted |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
NOTE 3 : FAIR VALUE MEASUREMENTS
Assets Measured at Fair Value on a Recurring Basis
F air 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 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:
8
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
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 effective with the adoption of ASU 2016-01 on January 1, 2018, 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, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities |
|
$ |
701,612 |
|
|
$ |
— |
|
|
$ |
701,612 |
|
|
$ |
— |
|
|
Beneficial interest – FHLMC securitizations |
|
|
30,616 |
|
|
|
— |
|
|
|
— |
|
|
|
30,616 |
|
|
Corporate bonds |
|
|
54,427 |
|
|
|
— |
|
|
|
54,427 |
|
|
|
— |
|
|
Other |
|
|
1,505 |
|
|
|
499 |
|
|
|
1,006 |
|
|
|
— |
|
|
Investment in equity securities |
|
|
399 |
|
|
|
399 |
|
|
|
— |
|
|
|
— |
|
|
Total assets at fair value on a recurring basis |
|
$ |
788,559 |
|
|
$ |
898 |
|
|
$ |
757,045 |
|
|
$ |
30,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
10,196 |
|
|
|
— |
|
|
|
10,196 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities |
|
$ |
721,669 |
|
|
|
— |
|
|
|
388,527 |
|
|
|
333,142 |
|
|
Beneficial interest – FHLMC securitizations |
|
|
32,086 |
|
|
|
— |
|
|
|
— |
|
|
|
32,086 |
|
|
Corporate bonds |
|
|
54,344 |
|
|
|
— |
|
|
|
54,344 |
|
|
|
— |
|
|
Other |
|
|
1,470 |
|
|
|
497 |
|
|
|
973 |
|
|
|
— |
|
|
Investment in equity securities |
|
|
352 |
|
|
|
352 |
|
|
|
— |
|
|
|
— |
|
|
Total assets at fair value on a recurring basis |
|
$ |
809,921 |
|
|
$ |
849 |
|
|
$ |
443,844 |
|
|
$ |
365,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
5,175 |
|
|
|
— |
|
|
|
5,175 |
|
|
|
— |
|
The decrease in Level 3 assets from December 31, 2018 was due to a change in pricing methodology of agency mortgage-backed securities. The December 31, 2018 agency mortgage-backed securities Level 2 and Level 3 values have been adjusted to reflect a correction to the amounts previously reported. The total amount of agency mortgage-backed securities at December 31, 2018 did not change.
9
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
Ass ets 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.
Impaired Loans . ASC 820-10 applies to loans measured for impairment in accordance with ASC 310-10, Accounting by Creditors for Impairment of a Loan , at the fair value of the loan’s collateral (if the loan is collateral dependent) less estimated selling costs. 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 $21.9 million and $12.8 million at March 31, 2019 and December 31, 2018, respectively. There were no specific reserves related to these loans at March 31, 2019 and December 31, 2018.
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. As of March 31, 2019 and December 31, 2018, the fair value of real estate owned was $0.5 million and $0.8 million, respectively.
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.
Fair Value of Financial Instruments
FASB ASC 825, “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 2016-1. 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.
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.
10
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
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 o ther 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 trans parency 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, s uch 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, mun icipal bonds and corporate debt securities. Securities classified as L evel 3 include beneficial interests – FHLMC securitization. Significant assumptions in the valuation of these Level 3 securities as of March 31, 2019 and December 31, 2018 included a pre payment rate of 15% and discount rates ranging from 4.0% 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, Other than Impaired Loans . 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. 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.
Interest rate swaps . Interest rate swaps are reported at an estimated fair value utilizing Level 2 inputs including LIBOR rates from overnight to one year and U.S. swap rates from one year to thirty years.
11
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – 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, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
80,693 |
|
|
$ |
80,693 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
80,693 |
|
|
Securities AFS |
|
|
788,160 |
|
|
|
499 |
|
|
|
757,045 |
|
|
|
30,616 |
|
|
|
788,160 |
|
|
Loans held for sale |
|
|
613,528 |
|
|
|
— |
|
|
|
607,631 |
|
|
|
— |
|
|
|
607,631 |
|
|
Loans, net |
|
|
4,316,865 |
|
|
|
— |
|
|
|
— |
|
|
|
4,361,565 |
|
|
|
4,361,565 |
|
|
Investment in FHLB stock |
|
|
22,734 |
|
|
|
— |
|
|
|
22,734 |
|
|
|
— |
|
|
|
22,734 |
|
|
Investment in equity securities |
|
|
399 |
|
|
|
399 |
|
|
|
— |
|
|
|
— |
|
|
|
399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
4,568,702 |
|
|
|
2,598,436 |
|
|
|
1,963,623 |
|
|
|
— |
|
|
|
4,562,059 |
|
|
Borrowings |
|
|
800,000 |
|
|
|
— |
|
|
|
795,000 |
|
|
|
5,000 |
|
|
|
800,000 |
|
|
Interest rate swaps |
|
|
10,196 |
|
|
|
— |
|
|
|
10,196 |
|
|
|
— |
|
|
|
10,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
67,312 |
|
|
$ |
67,312 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
67,312 |
|
|
Securities AFS |
|
|
809,569 |
|
|
|
497 |
|
|
|
443,844 |
|
|
|
365,228 |
|
|
|
809,569 |
|
|
Loans held for sale |
|
|
507,643 |
|
|
|
— |
|
|
|
517,273 |
|
|
|
— |
|
|
|
517,273 |
|
|
Loans, net |
|
|
4,274,669 |
|
|
|
— |
|
|
|
— |
|
|
|
4,408,788 |
|
|
|
4,408,788 |
|
|
Investment in FHLB stock |
|
|
20,307 |
|
|
|
— |
|
|
|
20,307 |
|
|
|
— |
|
|
|
20,307 |
|
|
Investment in equity securities |
|
|
352 |
|
|
|
352 |
|
|
|
— |
|
|
|
— |
|
|
|
352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
4,532,968 |
|
|
|
2,582,758 |
|
|
|
1,943,635 |
|
|
|
— |
|
|
|
4,526,393 |
|
|
Borrowings |
|
|
708,000 |
|
|
|
— |
|
|
|
703,000 |
|
|
|
5,000 |
|
|
|
708,000 |
|
|
Interest rate swaps |
|
|
5,175 |
|
|
|
— |
|
|
|
5,175 |
|
|
|
— |
|
|
|
5,175 |
|
NOTE 4: SECURITIES
The following table provides a summary of the Company’s securities AFS portfolio as of:
|
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Estimated |
|
||||||
|
(dollars in thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities |
$ |
704,262 |
|
|
$ |
4,338 |
|
|
$ |
(6,988 |
) |
|
$ |
701,612 |
|
|
Beneficial interests in FHLMC securitization |
|
31,136 |
|
|
|
1,308 |
|
|
|
(1,828 |
) |
|
|
30,616 |
|
|
Corporate bonds |
|
54,000 |
|
|
|
497 |
|
|
|
(70 |
) |
|
|
54,427 |
|
|
Other |
|
1,465 |
|
|
|
41 |
|
|
|
(1 |
) |
|
|
1,505 |
|
|
Total |
$ |
790,863 |
|
|
$ |
6,184 |
|
|
$ |
(8,887 |
) |
|
$ |
788,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities |
$ |
723,597 |
|
|
$ |
11,883 |
|
|
$ |
(13,811 |
) |
|
$ |
721,669 |
|
|
Beneficial interests in FHLMC securitization |
|
32,143 |
|
|
|
1,756 |
|
|
|
(1,813 |
) |
|
|
32,086 |
|
|
Corporate bonds |
|
54,000 |
|
|
|
638 |
|
|
|
(294 |
) |
|
|
54,344 |
|
|
Other |
|
1,458 |
|
|
|
15 |
|
|
|
(3 |
) |
|
|
1,470 |
|
|
Total |
$ |
811,198 |
|
|
$ |
14,292 |
|
|
$ |
(15,921 |
) |
|
$ |
809,569 |
|
US Treasury securities of $0.5 million as of March 31, 2019 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 trust operations. As of March 31, 2019, $78 million of agency mortgage-backed securities are pledged as collateral as support for the Banks’s obligations under a loan sales and securitization agreement entered into in 2018.
12
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
The table s belo w indicate , a s o f March 31 , 201 9 and December 31, 201 8 , th e gros s unrealize d losse s an d fai r value s o f ou r investments , aggregate d b y investmen t categor y and lengt h o f tim e tha t th e individua l securitie s hav e bee n i n a continuou s unrealize d los s position.
|
|
|
Securities with Unrealized Loss at March 31, 2019 |
|
|||||||||||||||||||||
|
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|||||||||||||||
|
(dollars in thousands) |
|
Fair Value |
|
|
|
Unrealized
|
|
|
Fair Value |
|
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized
|
|
||||
|
Agency mortgage-backed securities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
356,193 |
|
|
$ |
(6,988 |
) |
|
$ |
356,193 |
|
|
$ |
(6,988 |
) |
|
Beneficial interests in FHLMC securitization |
|
|
— |
|
|
|
— |
|
|
|
6,605 |
|
|
|
(1,828 |
) |
|
|
6,605 |
|
|
|
(1,828 |
) |
|
Corporate bonds |
|
|
3,930 |
|
|
|
(70 |
) |
|
|
— |
|
|
|
— |
|
|
|
3,930 |
|
|
|
(70 |
) |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
299 |
|
|
|
(1 |
) |
|
|
299 |
|
|
|
(1 |
) |
|
Total temporarily impaired securities |
|
$ |
3,930 |
|
|
|
(70 |
) |
|
$ |
363,097 |
|
|
$ |
(8,817 |
) |
|
$ |
367,027 |
|
|
$ |
(8,887 |
) |
|
|
|
Securities with Unrealized Loss at December 31, 2018 |
|
|||||||||||||||||||||
|
(dollars in thousands) |
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|||||||||||||||
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|||||||
|
Agency mortgage-backed securities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
387,151 |
|
|
$ |
(13,811 |
) |
|
$ |
387,151 |
|
|
$ |
(13,811 |
) |
|
Beneficial interests in FHLMC securitization |
|
|
429 |
|
|
|
(11 |
) |
|
|
7,038 |
|
|
|
(1,802 |
) |
|
|
7,467 |
|
|
|
(1,813 |
) |
|
Corporate bonds |
|
|
38,706 |
|
|
|
(294 |
) |
|
|
— |
|
|
|
— |
|
|
|
38,706 |
|
|
|
(294 |
) |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
497 |
|
|
|
(3 |
) |
|
|
497 |
|
|
|
(3 |
) |
|
Total temporarily impaired securities |
|
$ |
39,135 |
|
|
$ |
(305 |
) |
|
$ |
394,686 |
|
|
$ |
(15,616 |
) |
|
$ |
433,821 |
|
|
$ |
(15,921 |
) |
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.
The scheduled maturities of securities AFS and the related weighted average yields were as follows for the periods indicated:
|
(dollars in thousands) |
|
Less than
|
|
|
1 Through
|
|
|
5 Through
|
|
|
After
|
|
|
Total |
|
|||||
|
March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
54,000 |
|
|
$ |
— |
|
|
$ |
54,000 |
|
|
Other |
|
|
500 |
|
|
|
— |
|
|
|
965 |
|
|
|
— |
|
|
|
1,465 |
|
|
Total |
|
|
500 |
|
|
|
— |
|
|
|
54,965 |
|
|
|
— |
|
|
|
55,465 |
|
|
Weighted average yield |
|
$ |
1.03 |
% |
|
|
— |
% |
|
|
5.29 |
% |
|
|
— |
% |
|
|
5.25 |
% |
|
Estimated Fair Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
54,427 |
|
|
$ |
— |
|
|
$ |
54,427 |
|
|
Other |
|
|
499 |
|
|
|
— |
|
|
|
1,006 |
|
|
|
— |
|
|
|
1,505 |
|
|
Total |
|
$ |
499 |
|
|
$ |
— |
|
|
$ |
55,433 |
|
|
$ |
— |
|
|
$ |
55,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
|
|
Less than
|
|
|
1 Through
|
|
|
5 Through
|
|
|
After
|
|
|
Total |
|
||||||
|
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
54,000 |
|
|
$ |
— |
|
|
$ |
54,000 |
|
|
Other |
|
|
500 |
|
|
|
— |
|
|
|
958 |
|
|
|
— |
|
|
|
1,458 |
|
|
Total |
|
|
500 |
|
|
|
— |
|
|
|
54,958 |
|
|
|
— |
|
|
|
55,458 |
|
|
Weighted average yield |
|
|
1.03 |
% |
|
|
— |
% |
|
|
5.29 |
% |
|
|
— |
% |
|
|
5.25 |
% |
|
Estimated Fair Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
54,344 |
|
|
$ |
— |
|
|
$ |
54,344 |
|
|
Other |
|
|
497 |
|
|
|
— |
|
|
|
973 |
|
|
|
— |
|
|
|
1,470 |
|
|
Total |
|
$ |
497 |
|
|
$ |
— |
|
|
$ |
55,317 |
|
|
$ |
— |
|
|
$ |
55,814 |
|
Agency mortgage-backed securities and beneficial interests in FHLMC securitizations are excluded from the above table because such securities are not due at a single maturity date. The weighted average yield of the agency mortgage-backed securities and beneficial interests as of March 31, 2019 was 2.92%.
NOTE 5: LOANS
The following is a summary of our loans as of:
|
(dollars in thousands) |
March 31, 2019 |
|
|
December 31,
|
|
||
|
Outstanding principal balance: |
|
|
|
|
|
|
|
|
Loans secured by real estate: |
|
|
|
|
|
|
|
|
Residential properties: |
|
|
|
|
|
|
|
|
Multifamily |
$ |
1,987,690 |
|
|
$ |
1,956,935 |
|
|
Single family |
|
903,992 |
|
|
|
904,828 |
|
|
Total real estate loans secured by residential properties |
|
2,891,682 |
|
|
|
2,861,763 |
|
|
Commercial properties |
|
902,060 |
|
|
|
869,169 |
|
|
Land |
|
59,917 |
|
|
|
80,187 |
|
|
Total real estate loans |
|
3,853,659 |
|
|
|
3,811,119 |
|
|
Commercial and industrial loans |
|
454,849 |
|
|
|
449,805 |
|
|
Consumer loans |
|
17,693 |
|
|
|
22,699 |
|
|
Total loans |
|
4,326,201 |
|
|
|
4,283,623 |
|
|
Premiums, discounts and deferred fees and expenses |
|
9,864 |
|
|
|
10,046 |
|
|
Total |
$ |
4,336,065 |
|
|
$ |
4,293,669 |
|
As of March 31, 2019 and December 31, 2018, the principal balances shown above are net of unaccreted discount related to loans acquired in an acquisition of $11.1 million and $13.3 million, respectively.
14
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
In 201 7 and 2018 the Company purchased loans, for which there was, at acquisition, evidence of deterioration of credit quali ty since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these purchased credit impaired loans is as follows as of :
|
(dollars in thousands) |
March 31, 2019 |
|
|
December 31,
|
|
||
|
Outstanding principal balance: |
|
|
|
|
|
|
|
|
Loans secured by real estate: |
|
|
|
|
|
|
|
|
Residential properties |
$ |
371 |
|
|
$ |
451 |
|
|
Commercial properties |
|
7,477 |
|
|
|
10,871 |
|
|
Land |
|
1,081 |
|
|
|
1,089 |
|
|
Total real estate loans |
|
8,929 |
|
|
|
12,411 |
|
|
Commercial and industrial loans |
|
1,434 |
|
|
|
1,150 |
|
|
Consumer loans |
|
9 |
|
|
|
10 |
|
|
Total loans |
|
10,372 |
|
|
|
13,571 |
|
|
Unaccreted discount on purchased credit impaired loans |
|
(4,861 |
) |
|
|
(6,490 |
) |
|
Total |
$ |
5,511 |
|
|
$ |
7,081 |
|
Accretable yield, or income expected to be collected on purchased credit impaired loans, and the related changes, is as follows for the periods indicated:
|
(dollars in thousands) |
Three Months Ended March 31, 2019 |
|
|
Year Ended December 31, 2018 |
|
||
|
|
|
|
|
|
|
|
|
|
Beginning balance |
$ |
767 |
|
|
$ |
850 |
|
|
Accretion of income |
|
(80 |
) |
|
|
(1,509 |
) |
|
Acquisition |
|
— |
|
|
|
1,887 |
|
|
Disposals |
|
(51 |
) |
|
|
(461 |
) |
|
Ending balance |
$ |
636 |
|
|
$ |
767 |
|
The following table summarizes our delinquent and nonaccrual loans as of:
|
|
|
Past Due and Still Accruing |
|
|
|
|
|
Total Past |
|
|
|
|
|
|
|
|||||||||||||
|
(dollars in thousands) |
|
30–59 Days |
|
|
60-89 Days |
|
|
90 Days
|
|
|
Nonaccrual |
|
|
Due and
|
|
|
Current |
|
|
Total |
|
|||||||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
— |
|
|
$ |
664 |
|
|
$ |
— |
|
|
$ |
1,811 |
|
|
$ |
2,475 |
|
|
$ |
2,889,207 |
|
|
$ |
2,891,682 |
|
|
Commercial properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,533 |
|
|
|
2,533 |
|
|
|
899,527 |
|
|
|
902,060 |
|
|
Land |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
697 |
|
|
|
697 |
|
|
|
59,220 |
|
|
|
59,917 |
|
|
Commercial and industrial loans |
|
|
4,521 |
|
|
|
610 |
|
|
|
— |
|
|
|
10,496 |
|
|
|
15,627 |
|
|
|
439,222 |
|
|
|
454,849 |
|
|
Consumer loans |
|
|
5 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
9 |
|
|
|
17,684 |
|
|
|
17,693 |
|
|
Total |
|
$ |
4,526 |
|
|
$ |
1,278 |
|
|
$ |
— |
|
|
$ |
15,537 |
|
|
$ |
21,341 |
|
|
$ |
4,304,860 |
|
|
$ |
4,326,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total loans |
|
|
0.10 |
% |
|
|
0.03 |
% |
|
|
— |
% |
|
|
0.36 |
% |
|
|
0.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
74 |
|
|
$ |
— |
|
|
$ |
499 |
|
|
$ |
651 |
|
|
$ |
1,224 |
|
|
$ |
2,860,539 |
|
|
$ |
2,861,763 |
|
|
Commercial properties |
|
|
440 |
|
|
|
117 |
|
|
|
— |
|
|
|
1,607 |
|
|
|
2,164 |
|
|
|
867,005 |
|
|
|
869,169 |
|
|
Land |
|
|
2,000 |
|
|
|
— |
|
|
|
— |
|
|
|
697 |
|
|
|
2,697 |
|
|
|
77,490 |
|
|
|
80,187 |
|
|
Commercial and industrial loans |
|
|
12,541 |
|
|
|
300 |
|
|
|
536 |
|
|
|
8,559 |
|
|
|
21,936 |
|
|
|
427,869 |
|
|
|
449,805 |
|
|
Consumer loans |
|
|
— |
|
|
|
7 |
|
|
|
— |
|
|
|
2 |
|
|
|
9 |
|
|
|
22,690 |
|
|
|
22,699 |
|
|
Total |
|
$ |
15,055 |
|
|
$ |
424 |
|
|
$ |
1,035 |
|
|
$ |
11,516 |
|
|
$ |
28,030 |
|
|
$ |
4,255,593 |
|
|
$ |
4,283,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total loans |
|
|
0.35 |
% |
|
|
0.01 |
% |
|
|
0.02 |
% |
|
|
0.27 |
% |
|
|
0.65 |
% |
|
|
|
|
|
|
|
|
15
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
The following table presents the loans classified as troubled debt restructurings (“TDR”) by accrual and nonaccrual status as of:
|
|
|
March 31, 2019 |
|
|
|
December 31, 2018 |
|
|||||||||||||||||
|
(dollars in thousands) |
|
Accrual |
|
|
|
Nonaccrual |
|
|
Total |
|
|
|
Accrual |
|
|
Nonaccrual |
|
|
Total |
|
||||
|
Commercial real estate loans |
|
$ |
1,245 |
|
|
$ |
1,464 |
|
|
$ |
2,709 |
|
|
$ |
1,264 |
|
|
$ |
1,491 |
|
|
$ |
2,755 |
|
|
Commercial and industrial loans |
|
|
— |
|
|
|
2,018 |
|
|
|
2,018 |
|
|
|
— |
|
|
|
2,096 |
|
|
|
2,096 |
|
|
Total |
|
|
1,245 |
|
|
|
3,482 |
|
|
|
4,727 |
|
|
|
1,264 |
|
|
|
3,587 |
|
|
|
4,851 |
|
The following table provides information on loans that were modified as TDRs for the following periods:
|
|
|
|
|
Outstanding Recorded Investment |
|
|
|
|
||||||
|
(dollars in thousands) |
|
Number of loans |
|
Pre-Modification |
|
Post-Modification |
|
Financial Impact |
||||||
|
Three Months Ended March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
— |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial loans |
|
1 |
|
|
49 |
|
|
|
49 |
|
|
|
— |
|
|
Total |
|
1 |
|
$ |
49 |
|
|
$ |
49 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Recorded Investment |
|
|
|
|
||||||
|
(dollars in thousands) |
|
Number of loans |
|
Pre-Modification |
|
Post-Modification |
|
Financial Impact |
||||||
|
Year Ended December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans |
|
1 |
|
$ |
1,264 |
|
|
$ |
1,264 |
|
|
$ |
— |
|
|
Commercial loans |
|
3 |
|
|
2,096 |
|
|
|
2,096 |
|
|
|
— |
|
|
Total |
|
4 |
|
$ |
3,360 |
|
|
$ |
3,360 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All of these loans were classified as a TDR as a result of a reduction in required principal payments and an extension of the maturity date of the loans. These loans have been paying in accordance with the terms of their restructure.
NOTE 6: ALLOWANCE FOR LOAN LOSSES
The following is a roll forward of the Bank’s allowance for loan losses for the quarters ended March 31:
|
(dollars in thousands) |
|
Beginning
|
|
|
Provision for
|
|
|
Charge-offs |
|
|
Recoveries |
|
|
Ending
|
|
|||||
|
2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
9,216 |
|
|
$ |
422 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,638 |
|
|
Commercial properties |
|
|
4,547 |
|
|
|
(232 |
) |
|
|
— |
|
|
|
— |
|
|
|
4,315 |
|
|
Land |
|
|
391 |
|
|
|
(149 |
) |
|
|
— |
|
|
|
— |
|
|
|
242 |
|
|
Commercial and industrial loans |
|
|
4,628 |
|
|
|
503 |
|
|
|
(543 |
) |
|
|
207 |
|
|
|
4,795 |
|
|
Consumer loans |
|
|
218 |
|
|
|
(4 |
) |
|
|
(5 |
) |
|
|
1 |
|
|
|
210 |
|
|
Total |
|
$ |
19,000 |
|
|
$ |
540 |
|
|
$ |
(548 |
) |
|
$ |
208 |
|
|
$ |
19,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
9,715 |
|
|
$ |
193 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,908 |
|
|
Commercial properties |
|
|
4,399 |
|
|
|
(9 |
) |
|
|
— |
|
|
|
— |
|
|
|
4,390 |
|
|
Land |
|
|
395 |
|
|
|
(60 |
) |
|
|
— |
|
|
|
— |
|
|
|
335 |
|
|
Commercial and industrial loans |
|
|
3,624 |
|
|
|
1,557 |
|
|
|
(88 |
) |
|
|
— |
|
|
|
5,093 |
|
|
Consumer loans |
|
|
267 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
274 |
|
|
Total |
|
$ |
18,400 |
|
|
$ |
1,688 |
|
|
$ |
(88 |
) |
|
$ |
— |
|
|
$ |
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by impairment method as of:
|
|
|
Allowance for Loan Losses |
|
Unaccreted
|
|
|||||||||||||||
|
|
|
Evaluated for Impairment |
|
|
Purchased |
|
|
|
|
|
Component |
|
||||||||
|
(dollars in thousands) |
|
Individually |
|
Collectively |
|
|
Impaired |
|
|
Total |
|
|
Other Loans |
|
||||||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
— |
|
|
$ |
9,638 |
|
|
$ |
— |
|
|
$ |
9,638 |
|
|
$ |
1,524 |
|
|
Commercial properties |
|
|
117 |
|
|
|
4,198 |
|
|
|
— |
|
|
|
4,315 |
|
|
|
1,589 |
|
|
Land |
|
|
— |
|
|
|
242 |
|
|
|
— |
|
|
|
242 |
|
|
|
47 |
|
|
Commercial and industrial loans |
|
|
507 |
|
|
|
4,288 |
|
|
|
— |
|
|
|
4,795 |
|
|
|
509 |
|
|
Consumer loans |
|
|
— |
|
|
|
210 |
|
|
|
— |
|
|
|
210 |
|
|
|
2 |
|
|
Total |
|
$ |
624 |
|
|
$ |
18,576 |
|
|
$ |
— |
|
|
$ |
19,200 |
|
|
$ |
3,671 |
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
1,811 |
|
|
$ |
2,889,871 |
|
|
$ |
— |
|
|
$ |
2,891,682 |
|
|
$ |
234,595 |
|
|
Commercial properties |
|
|
8,944 |
|
|
|
889,412 |
|
|
|
3,704 |
|
|
|
902,060 |
|
|
|
280,393 |
|
|
Land |
|
|
697 |
|
|
|
58,418 |
|
|
|
802 |
|
|
|
59,917 |
|
|
|
37,624 |
|
|
Commercial and industrial loans |
|
|
10,496 |
|
|
|
443,348 |
|
|
|
1,005 |
|
|
|
454,849 |
|
|
|
55,921 |
|
|
Consumer loans |
|
|
— |
|
|
|
17,693 |
|
|
|
— |
|
|
|
17,693 |
|
|
|
314 |
|
|
Total |
|
$ |
21,948 |
|
|
$ |
4,298,742 |
|
|
$ |
5,511 |
|
|
$ |
4,326,201 |
|
|
$ |
608,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
— |
|
|
$ |
9,216 |
|
|
$ |
— |
|
|
$ |
9,216 |
|
|
$ |
1,724 |
|
|
Commercial properties |
|
|
126 |
|
|
|
4,421 |
|
|
|
— |
|
|
|
4,547 |
|
|
|
1,779 |
|
|
Land |
|
|
— |
|
|
|
391 |
|
|
|
— |
|
|
|
391 |
|
|
|
84 |
|
|
Commercial and industrial loans |
|
|
290 |
|
|
|
4,338 |
|
|
|
— |
|
|
|
4,628 |
|
|
|
633 |
|
|
Consumer loans |
|
|
— |
|
|
|
218 |
|
|
|
— |
|
|
|
218 |
|
|
|
3 |
|
|
Total |
|
$ |
416 |
|
|
$ |
18,584 |
|
|
$ |
— |
|
|
$ |
19,000 |
|
|
$ |
4,223 |
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
651 |
|
|
$ |
2,861,112 |
|
|
$ |
— |
|
|
$ |
2,861,763 |
|
|
$ |
241,698 |
|
|
Commercial properties |
|
|
2,871 |
|
|
|
860,835 |
|
|
|
5,463 |
|
|
|
869,169 |
|
|
|
275,516 |
|
|
Land |
|
|
697 |
|
|
|
78,681 |
|
|
|
809 |
|
|
|
80,187 |
|
|
|
41,132 |
|
|
Commercial and industrial loans |
|
|
8,559 |
|
|
|
440,437 |
|
|
|
809 |
|
|
|
449,805 |
|
|
|
61,183 |
|
|
Consumer loans |
|
|
— |
|
|
|
22,699 |
|
|
|
— |
|
|
|
22,699 |
|
|
|
366 |
|
|
Total |
|
$ |
12,778 |
|
|
$ |
4,263,764 |
|
|
$ |
7,081 |
|
|
$ |
4,283,623 |
|
|
$ |
619,895 |
|
The column labeled “Unaccreted Credit Component Other Loans” represents the amount of unaccreted credit component discount for the other loans acquired in a business combination, and the stated principal balance of the related loans. The discount is equal to 0.60% and 0.68% of the stated principal balance of these loans as of March 31, 2019 and December 31, 2018, respectively. In addition to this unaccreted credit component discount, an additional $0.3 million and $0.4 million of ALLL has been provided for these loans as of March 31, 2019 and December 31, 2018, respectively.
17
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Bank analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as loans secured by multifamily or commercial real estate and commerc ial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Bank uses the following definitions for risk ratings:
Pass: Loans classified as pass are strong credits with no existing or known potential weaknesses deserving of management’s close attention.
Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Impaired: A loan is considered impaired, when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement.
Additionally, all loans classified as TDRs are considered impaired at the time they are restructured. Purchased credit impaired loans are not considered impaired loans for these purposes.
Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions above and smaller, homogeneous loans not assessed on an individual basis.
Based on the most recent analysis performed, the risk category of loans by class of loans is as follows as of:
|
(dollars in thousands) |
|
Pass |
|
|
Special
|
|
|
Substandard |
|
|
Impaired |
|
|
Total |
|
|||||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
2,886,943 |
|
|
$ |
2,928 |
|
|
$ |
— |
|
|
$ |
1,811 |
|
|
$ |
2,891,682 |
|
|
Commercial properties |
|
|
880,599 |
|
|
|
6,696 |
|
|
|
5,821 |
|
|
|
8,944 |
|
|
|
902,060 |
|
|
Land |
|
|
58,418 |
|
|
|
— |
|
|
|
802 |
|
|
|
697 |
|
|
|
59,917 |
|
|
Commercial and industrial loans |
|
|
440,126 |
|
|
|
918 |
|
|
|
3,309 |
|
|
|
10,496 |
|
|
|
454,849 |
|
|
Consumer loans |
|
|
17,693 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17,693 |
|
|
Total |
|
$ |
4,283,779 |
|
|
$ |
10,542 |
|
|
$ |
9,932 |
|
|
$ |
21,948 |
|
|
$ |
4,326,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
2,857,666 |
|
|
$ |
3,446 |
|
|
$ |
— |
|
|
$ |
651 |
|
|
$ |
2,861,763 |
|
|
Commercial properties |
|
|
845,672 |
|
|
|
13,024 |
|
|
|
7,602 |
|
|
|
2,871 |
|
|
|
869,169 |
|
|
Land |
|
|
78,681 |
|
|
|
— |
|
|
|
809 |
|
|
|
697 |
|
|
|
80,187 |
|
|
Commercial and industrial loans |
|
|
431,751 |
|
|
|
7,723 |
|
|
|
1,772 |
|
|
|
8,559 |
|
|
|
449,805 |
|
|
Consumer loans |
|
|
22,699 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22,699 |
|
|
Total |
|
$ |
4,236,469 |
|
|
$ |
24,193 |
|
|
$ |
10,183 |
|
|
$ |
12,778 |
|
|
$ |
4,283,623 |
|
18
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
Impaired loans evaluated individually and any related allowance are as follows as of:
|
|
|
With No Allowance Recorded |
|
|
With an Allowance Recorded |
|
||||||||||||||
|
(dollars in thousands) |
|
Unpaid Principal Balance |
|
|
Recorded Investment |
|
|
Unpaid Principal Balance |
|
|
Recorded Investment |
|
|
Related Allowance |
|
|||||
|
March 31, 2019 : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
1,835 |
|
|
$ |
1,811 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial properties |
|
|
7,816 |
|
|
|
7,699 |
|
|
|
1,245 |
|
|
|
1,245 |
|
|
|
117 |
|
|
Land |
|
|
697 |
|
|
|
697 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Commercial and industrial loans |
|
|
6,974 |
|
|
|
6,766 |
|
|
|
3,750 |
|
|
|
3,730 |
|
|
|
507 |
|
|
Total |
|
$ |
17,322 |
|
|
$ |
16,973 |
|
|
$ |
4,995 |
|
|
$ |
4,975 |
|
|
$ |
624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
651 |
|
|
$ |
651 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial properties |
|
|
1,607 |
|
|
|
1,607 |
|
|
|
1,264 |
|
|
|
1,264 |
|
|
|
126 |
|
|
Land |
|
|
697 |
|
|
|
697 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Commercial and industrial loans |
|
|
6,543 |
|
|
|
6,543 |
|
|
|
2,016 |
|
|
|
2,016 |
|
|
|
290 |
|
|
Total |
|
$ |
9,498 |
|
|
$ |
9,498 |
|
|
$ |
3,280 |
|
|
$ |
3,280 |
|
|
$ |
416 |
|
The weighted average annualized average balance of the recorded investment for impaired loans, beginning from when the loan became impaired, and any interest income recorded on impaired loans after they became impaired is as follows for the:
|
|
|
Three months Ended
|
|
|
Year Ended
|
|
||||||||||
|
(dollars in thousands) |
|
Average Recorded Investment |
|
|
Interest Income after Impairment |
|
|
Average Recorded Investment |
|
Interest Income after Impairment |
|
|||||
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
1,151 |
|
|
$ |
— |
|
|
$ |
276 |
|
|
$ |
— |
|
|
Commercial properties |
|
|
6,927 |
|
|
|
74 |
|
|
|
3,459 |
|
|
|
90 |
|
|
Land |
|
|
697 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Commercial and industrial loans |
|
|
9,499 |
|
|
|
— |
|
|
|
9,117 |
|
|
|
— |
|
|
Total |
|
$ |
18,274 |
|
|
$ |
74 |
|
|
$ |
12,852 |
|
|
$ |
90 |
|
There was no interest income recognized on a cash basis in either 2019 or 2018 on impaired loans.
NOTE 7: LOAN SALES AND MORTGAGE SERVICING RIGHTS
During the first three months of 2019, FFB did not have any loan sales. In 2018, FFB sold $674 million of multifamily loans to financial institutions and recognized a gain of $0.4 million.
For sales of multifamily loans, FFB retained servicing rights for the majority of these loans and recognized mortgage servicing rights as part of the transactions. As of March 31, 2019 and December 31, 2018, mortgage servicing rights were $6.1 million and $6.4 million, respectively and the amount of loans serviced for others totaled $1.3 billion at March 31, 2019 and December 31, 2018. Servicing fees for the three months ended March 31, 2019, and in 2018 were $0.4 million and $1.1 million, respectively.
19
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
The following table summarizes the outstanding balance of deposits and average rates paid thereon as of:
|
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||||||||||
|
(dollars in thousands) |
|
Amount |
|
|
Weighted
|
|
|
Amount |
|
|
Weighted
|
|
||||
|
Demand deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing |
|
$ |
1,114,596 |
|
|
|
— |
|
|
$ |
1,074,661 |
|
|
|
— |
|
|
Interest-bearing |
|
|
307,854 |
|
|
|
0.790 |
% |
|
|
317,380 |
|
|
|
0.798 |
% |
|
Money market and savings |
|
|
1,175,986 |
|
|
|
1.180 |
% |
|
|
1,190,717 |
|
|
|
1.115 |
% |
|
Certificates of deposits |
|
|
1,970,266 |
|
|
|
2.276 |
% |
|
|
1,950,210 |
|
|
|
2.142 |
% |
|
Total |
|
$ |
4,568,702 |
|
|
|
1.338 |
% |
|
$ |
4,532,968 |
|
|
|
1.270 |
% |
At March 31, 2019, of the $398 million of certificates of deposits of $250,000 or more, $376 million mature within one year and $22 million mature after one year. Of the $1.6 billion of certificates of deposit of less than $250,000, $1.5 billion mature within one year and $51 million mature after one year. At December 31, 2018, of the $360 million of certificates of deposits of $250,000 or more, $332 million mature within one year and $28 million mature after one year. Of the $1.6 billion of certificates of deposit of less than $250,000, $1.5 billion mature within one year and $53 million mature after one year.
NOTE 9: BORROWINGS
At March 31, 2019, our borrowings consisted of $795 million of overnight FHLB advances at the Bank and $5 million of borrowings outstanding on a holding company line of credit. At December 31, 2018, our borrowings consisted of $703 million of overnight FHLB advances at the Bank and $5 million of borrowings outstanding on a holding company line of credit. The overnight FHLB advances were paid in full in the early part of April 2019 and January 2019, respectively, and bore interest rates of 2.58% and 2.56%, respectively. At March 31, 2019, the interest rate on the holding company line of credit was 6.30%. Because the Bank utilizes overnight borrowings, the balance of outstanding borrowings fluctuates on a daily basis.
FHLB advances are collateralized primarily by loans secured by multifamily and commercial real estate properties with a carrying value of $3.1 billion as of March 31, 2019. As a matter of practice, the Bank provides substantially all of its qualifying loans as collateral to the FHLB. The Bank’s total borrowing capacity from the FHLB at March 31, 2019 was $2.3 billion. In addition to the $795 million borrowing at March 31, 2019, the Bank had in place $231 million of letters of credit from the FHLB which are used to meet collateral requirements for borrowings from the State of California and local agencies.
During 2017, FFI entered into a loan agreement with an unaffiliated lender that provides for a revolving line of credit for up to $75 million. The loan agreement matures in five years, with an option to extend the maturity date subject to certain conditions, and bears interest at 90 day LIBOR plus 350 basis points (3.50%). We are required to meet certain financial covenants during the term of the loan, including minimum capital levels and limits on classified assets. FFI’s obligations under the loan agreement are secured by, among other things, a pledge of all of its equity in FFB.
The Bank also has $120 million available borrowing capacity through unsecured fed funds lines, ranging in size from $20 million to $25 million, with five other financial institutions and a $57 million secured line with the Federal Reserve Bank. None of these lines had outstanding borrowings as of March 31, 2019. Combined, the Bank’s unused lines of credit as of March 31, 2019 and December 31, 2018 were $1.5 billion and $1.5 billion, respectively. The average balance of overnight borrowings during the first three months of 2019 was $636 million, as compared to $557 million during all of 2018.
NOTE 10: LEASES
The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, using the alternative transition method whereby comparative periods were not restated. No cumulative effect adjustment to the opening balance of retained earnings was required.
The Company leases certain facilities for its corporate offices and branch operations under non-cancelable operating leases that expire through 2026. All leases were classified as operating leases and therefore, were previously not recognized on the Company’s consolidated balance sheet. With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability.
20
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
Certain leases include options to renew, with renewal terms tha t can extend the lease term. The depreciable life of leased assets are limited by the expected lease term.
Adoption of this standard resulted in the Company recognizing a right of use asset of $21.1 million, a corresponding lease liability of $22.7 million on January 1, 2019 and eliminated a $1.6 million deferred rent liability recognized under previous accounting standards.
Supplemental lease information at or for the three months ended March 31, 2019 is as follows:
|
(dollars in thousands) |
|
|
|
|
|
Balance Sheet: |
|
|
|
|
|
Operating lease asset classified as other assets |
|
$ |
20,015 |
|
|
Operating lease liability classified as other liabilities |
|
|
21,644 |
|
|
|
|
|
|
|
|
Income Statement: |
|
|
|
|
|
Operating lease cost classified as occupancy and equipment expense |
|
$ |
1,188 |
|
|
|
|
|
|
|
|
Weighted average lease term, in years |
|
|
3.12 |
|
|
Weighted average discount rate |
|
|
5.53 |
|
|
Operating cash flows |
|
$ |
1,497 |
|
The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used.
The table below summarizes the maturity of remaining lease liabilities at March 31, 2019:
|
(dollars in thousands) |
|
|
|
|
|
2019 |
|
$ |
4,591 |
|
|
2020 |
|
|
6,052 |
|
|
2021 |
|
|
5,511 |
|
|
2022 |
|
|
4,607 |
|
|
2023 and after |
|
|
3,893 |
|
|
Total future minimum lease payments |
|
$ |
24,654 |
|
|
Discount on cash flows |
|
|
(3,010 |
) |
|
Total lease liability |
|
$ |
21,644 |
|
21
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
Basic earnings per share excludes dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if contracts to issue common stock were exercised or converted into common stock that would then share in earnings. The following table sets forth the Company’s unaudited earnings per share calculations for the quarters ended March 31:
|
|
2019 |
|
|
2018 |
|
||||||||||
|
(dollars in thousands, except per share amounts) |
Basic |
|
|
Diluted |
|
|
Basic |
|
|
Diluted |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
11,259 |
|
|
$ |
11,259 |
|
|
$ |
8,976 |
|
|
$ |
8,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic common shares outstanding |
|
44,540,865 |
|
|
|
44,540,865 |
|
|
|
38,577,271 |
|
|
|
38,577,271 |
|
|
Effect of contingent shares issuable |
|
|
|
|
|
1,592 |
|
|
|
|
|
|
|
1,592 |
|
|
Effect of options and restricted stock |
|
|
|
|
|
255,849 |
|
|
|
|
|
|
|
545,869 |
|
|
Diluted common shares outstanding |
|
|
|
|
|
44,798,306 |
|
|
|
|
|
|
|
39,124,732 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
$ |
0.25 |
|
|
$ |
0.25 |
|
|
$ |
0.23 |
|
|
$ |
0.23 |
|
22
FIRST FOUNDATION INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended March 31, 2019 – UNAUDITED
For the quarters ended March 31, 2019 and 2018, the Company had two reportable business segments: Banking (FFB and FFIS) and Wealth Management (FFA). The results of FFI and any elimination entries are included in the column labeled Other. The following tables show key operating results for each of our business segments used to arrive at our consolidated totals for the following periods:
|
(dollars in thousands) |
|
Banking |
|
|
Wealth Management |
|
|
Other |
|
|
Total |
|
||||
|
Quarter ended March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
60,544 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
60,544 |
|
|
Interest expense |
|
|
19,482 |
|
|
|
— |
|
|
|
15 |
|
|
|
19,497 |
|
|
Net interest income |
|
|
41,062 |
|
|
|
— |
|
|
|
(15 |
) |
|
|
41,047 |
|
|
Provision for loan losses |
|
|
540 |
|
|
|
— |
|
|
|
— |
|
|
|
540 |
|
|
Noninterest income |
|
|
2,994 |
|
|
|
5,731 |
|
|
|
(260 |
) |
|
|
8,465 |
|
|
Noninterest expense |
|
|
26,587 |
|
|
|
5,518 |
|
|
|
840 |
|
|
|
32,945 |
|
|
Income (loss) before taxes on income |
|
$ |
16,929 |
|
|
$ |
213 |
|
|
$ |
(1,115 |
) |
|
$ |
16,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
43,319 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
43,319 |
|
|
Interest expense |
|
|
8,520 |
|
|
|
— |
|
|
|
531 |
|
|
|
9,051 |
|
|
Net interest income |
|
|
34,799 |
|
|
|
— |
|
|
|
(531 |
) |
|
|
34,268 |
|
|
Provision for loan losses |
|
|
1,688 |
|
|
|
— |
|
|
|
— |
|
|
|
1,688 |
|
|
Noninterest income |
|
|
2,557 |
|
|
|
6,414 |
|
|
|
11 |
|
|
|
8,982 |
|
|
Noninterest expense |
|
|
21,811 |
|
|
|
5,817 |
|
|
|
1,360 |
|
|
|
28,988 |
|
|
Income (loss) before taxes on income |
|
$ |
13,857 |
|
|
$ |
597 |
|
|
$ |
(1,880 |
) |
|
$ |
12,574 |
|
NOTE 13: SUBSEQUENT EVENTS
Cash Dividend
On May 2, 2019, the Board of Directors of the Company declared an initial quarterly cash dividend of $0.05 per common share to be paid on June 17, 2019 to stockholders of record as of the close of business on June 3, 2019.
23
The following discussion and analysis is intended to facilitate the understanding and assessment of significant changes and trends in our businesses that accounted for the changes in our results of operations in the quarter ended March 31, 2019 as compared to our results of operations in the quarter ended March 31, 2018; and our financial condition at March 31, 2019 as compared to our financial condition at December 31, 2018. This discussion and analysis is based on and should be read in conjunction with our consolidated financial statements and the accompanying notes thereto contained elsewhere in this report and our audited consolidated financial statements for the year ended December 31, 2018, and the notes thereto, which are set forth in Item 8 of our Annual Report on Form 10-K (our “2018 10-K”) which we filed with the Securities and Exchange Commission (“SEC”) on March 1, 2019.
Forward-Looking Statements
Statements contained in this report that are not historical facts or that discuss our expectations, beliefs or views regarding our future financial performance or future financial condition, or financial or other trends in our business or in the markets in which we operate, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “forecast” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Such forward-looking statements are based on current information that is available to us, and on assumptions that we make, about future events or economic or financial conditions or trends over which we do not have control. In addition, our businesses and the markets in which we operate are subject to a number of risks and uncertainties. Those risks and uncertainties, and unexpected future events, could cause our financial condition or actual operating results in the future to differ, possibly significantly, from our expected financial condition and operating results that are set forth in the forward-looking statements contained in this report.
The principal risks and uncertainties to which our businesses are subject are discussed in Item 1A in our 2018 10-K and in this Item 2 below. Therefore, you are urged to read not only the information contained in this Item 2, but also the risk factors and other cautionary information contained in Item 1A of our 2018 10-K, which qualify the forward-looking statements contained in this report.
Due to these risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements contained in this report and not to make predictions about our future financial performance based solely on our historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this report or in our 2018 10-K, except as may otherwise be required by applicable law or government regulations.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and accounting practices in the banking industry. Certain of those accounting policies are considered critical accounting policies, because they require us to make estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets. Those estimates and assumptions are made based on current information available to us regarding those economic conditions or trends or other circumstances. If changes were to occur in the events, trends or other circumstances on which our estimates or assumptions were based, or other unanticipated events were to occur that might affect our operations, we may be required under GAAP to adjust our earlier estimates and to reduce the carrying values of the affected assets on our balance sheet, generally by means of charges against income, which could also affect our results of operations in the fiscal periods when those charges are recognized.
Utilization and Valuation of Deferred Income Tax Benefits. We record as a “deferred tax asset” on our balance sheet an amount equal to the tax credit and tax loss carryforwards and tax deductions (collectively “tax benefits”) that we believe will be available to us to offset or reduce income taxes in future periods. Under applicable federal and state income tax laws and regulations, tax benefits related to tax loss carryforwards will expire if they cannot be used within specified periods of time. Accordingly, the ability to fully use our deferred tax asset related to tax loss carryforwards to reduce income taxes in the future depends on the amount of taxable income that we generate during those time periods. At least once each year, or more frequently, if warranted, we make estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimates and the amount of the tax benefits available to us, that it is more likely than not that we will be able to fully utilize those tax benefits prior to their expiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we conclude on the basis of those estimates and the amount of the tax benefits available to us that it has become more likely, than not, that we will be unable to utilize those tax benefits in full prior to their expiration, then, we would establish a valuation allowance to reduce the deferred tax asset on our balance sheet to the amount with respect to which we believe it is still more likely, than not, that we will
24
be able to use to offset or reduce taxes in the future. The establishment of such a valuation allowance, or any increase in an existing valuation allowance, would be effectuated through a charge to the provision for income taxes or a reduction in any income tax credit for the period in which such valuation allowance is established or increased.
Allowance for Loan and Lease Losses. Our ALLL is established through a provision for loan losses charged to expense and may be reduced by a recapture of previously established loss reserves, which are also reflected in the income statement. Loans are charged against the ALLL when management believes that collectability of the principal is unlikely. The ALLL is an amount that management believes will be adequate to absorb estimated losses on existing loans that may become uncollectible based on an evaluation of the collectability of loans and prior loan loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, current economic conditions and certain other subjective factors that may affect the borrower’s ability to pay. While we use the best information available to make this evaluation, future adjustments to our ALLL may be necessary if there are significant changes in economic or other conditions that can affect the collectability in full of loans in our loan portfolio.
We have two business segments, “Banking” and “Wealth Management”. Banking includes the operations of FFB and FFIS and Wealth Management includes the operations of FFA. The financial position and operating results of the stand-alone holding company, FFI, are included under the caption “Other” in certain of the tables that follow, along with any consolidation elimination entries.
Overview and Recent Developments
The Company declared and paid its first quarterly cash dividend of $0.05 per common share in the first quarter of 2019.
Total loans, including loans held for sale, increased $148 million in the first quarter of 2019 as a result of $400 million of originations and a $5 million increase in the mark to market for loans held for sale which were partially offset by payoffs or scheduled payments of $256 million. Total revenues (net interest income and noninterest income) increased by 14% in the first three months of 2019 when compared to the first three months of 2018.
Results of Operations
Consolidated net income and income before taxes in the first quarter of 2019 were $11.3 million and $16.0 million, respectively, as compared to $9.0 million and $12.6 million, respectively, in the first quarter of 2018.
The effective tax rate for the first quarter of 2019 was 29.7% as compared to 28.6% for the first quarter of 2018 and as compared to our statutory tax rate of 29.0%.
The primary sources of revenue for Banking are net interest income, fees from its deposits, trust, consulting and insurance services and loan fees. The primary source of revenue for Wealth Management is asset management fees assessed on the balance of assets under management (“AUM”). Compensation and benefit costs, which represent the largest component of noninterest expense, accounted for 54% and 77%, respectively, of the total noninterest expense for Banking and Wealth Management in the first quarter of 2019.
25
The following table shows key operating results for each of our business segments for the quarter ended March 31 :
|
(dollars in thousands) |
|
Banking |
|
|
Wealth Management |
|
|
Other |
|
|
Total |
|
||||
|
2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
60,544 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
60,544 |
|
|
Interest expense |
|
|
19,482 |
|
|
|
— |
|
|
|
15 |
|
|
|
19,497 |
|
|
Net interest income |
|
|
41,062 |
|
|
|
— |
|
|
|
(15 |
) |
|
|
41,047 |
|
|
Provision for loan losses |
|
|
540 |
|
|
|
— |
|
|
|
— |
|
|
|
540 |
|
|
Noninterest income |
|
|
2,994 |
|
|
|
5,731 |
|
|
|
(260 |
) |
|
|
8,465 |
|
|
Noninterest expense |
|
|
26,587 |
|
|
|
5,518 |
|
|
|
840 |
|
|
|
32,945 |
|
|
Income (loss) before taxes on income |
|
$ |
16,929 |
|
|
$ |
213 |
|
|
$ |
(1,115 |
) |
|
$ |
16,027 |
|
|
2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
43,319 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
43,319 |
|
|
Interest expense |
|
|
8,520 |
|
|
|
— |
|
|
|
531 |
|
|
|
9,051 |
|
|
Net interest income |
|
|
34,799 |
|
|
|
— |
|
|
|
(531 |
) |
|
|
34,268 |
|
|
Provision for loan losses |
|
|
1,688 |
|
|
|
— |
|
|
|
— |
|
|
|
1,688 |
|
|
Noninterest income |
|
|
2,557 |
|
|
|
6,414 |
|
|
|
11 |
|
|
|
8,982 |
|
|
Noninterest expense |
|
|
21,811 |
|
|
|
5,817 |
|
|
|
1,360 |
|
|
|
28,988 |
|
|
Income (loss) before taxes on income |
|
$ |
13,857 |
|
|
$ |
597 |
|
|
$ |
(1,880 |
) |
|
$ |
12,574 |
|
General. Consolidated income before taxes in the first quarter of 2019 was $16.0 million, as compared to $12.6 million in the first quarter of 2018. The $3.5 million increase in income before taxes was the result of a $3.1 million increase in income before taxes for Banking, a $0.4 million decrease for Wealth Management, a $0.5 million decrease in corporate interest expenses and a $0.3 million net decrease in other corporate income and expenses. The increase in Banking was due to higher net interest income and a lower provision for loan losses which was partially offset by higher noninterest expenses. The decrease in Wealth Management was due to lower noninterest income which was partially offset by lower noninterest expenses.
Net Interest Income. The following tables set forth, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net yield on interest-earning assets for the quarters ended March 31:
26
|
|
|
2019 |
|
|
2018 |
|
||||||||||||||||||
|
(dollars in thousands) |
|
Average
|
|
|
Interest |
|
|
Average
|
|
|
Average
|
|
|
Interest |
|
|
Average
|
|
||||||
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
4,835,920 |
|
|
$ |
53,835 |
|
|
|
4.46 |
% |
|
$ |
3,942,402 |
|
|
$ |
38,971 |
|
|
|
3.96 |
% |
|
Securities |
|
|
802,503 |
|
|
|
6,165 |
|
|
|
3.07 |
% |
|
|
519,259 |
|
|
|
3,422 |
|
|
|
2,64 |
% |
|
FHLB stock, fed funds, and deposits |
|
|
48,801 |
|
|
|
544 |
|
|
|
4.52 |
% |
|
|
158,425 |
|
|
|
926 |
|
|
|
2.37 |
% |
|
Total interest-earning assets |
|
|
5,687,224 |
|
|
|
60,544 |
|
|
|
4.27 |
% |
|
|
4,620,086 |
|
|
|
43,319 |
|
|
|
3.76 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets |
|
|
12,226 |
|
|
|
|
|
|
|
|
|
|
|
11,579 |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
184,081 |
|
|
|
|
|
|
|
|
|
|
|
66,751 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,883,531 |
|
|
|
|
|
|
|
|
|
|
$ |
4,698,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
$ |
313,084 |
|
|
$ |
732 |
|
|
|
0.95 |
% |
|
$ |
226,618 |
|
|
|
305 |
|
|
|
0.55 |
% |
|
Money market and savings |
|
|
1,173,837 |
|
|
|
3,350 |
|
|
|
1,16 |
% |
|
|
1,110,910 |
|
|
|
2,254 |
|
|
|
0.82 |
% |
|
Certificates of deposit |
|
|
2,018,270 |
|
|
|
11,366 |
|
|
|
2.28 |
% |
|
|
984,523 |
|
|
|
3,313 |
|
|
|
1.36 |
% |
|
Total interest-bearing deposits |
|
|
3,505,191 |
|
|
|
15,448 |
|
|
|
1.79 |
% |
|
|
2,322,051 |
|
|
|
5,872 |
|
|
|
1.03 |
% |
|
Borrowings |
|
|
637,036 |
|
|
|
4,049 |
|
|
|
2.58 |
% |
|
|
735,024 |
|
|
|
3,179 |
|
|
|
1.75 |
% |
|
Total interest-bearing liabilities |
|
|
4,142,227 |
|
|
|
19,497 |
|
|
|
1.91 |
% |
|
|
3,057,075 |
|
|
|
9,051 |
|
|
|
1.20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
$ |
1,124,318 |
|
|
|
|
|
|
|
|
|
|
$ |
1,220,435 |
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
58,077 |
|
|
|
|
|
|
|
|
|
|
|
21,650 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
5,324,622 |
|
|
|
|
|
|
|
|
|
|
|
4,299,160 |
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
|
558,909 |
|
|
|
|
|
|
|
|
|
|
|
399,256 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
5,883,531 |
|
|
|
|
|
|
|
|
|
|
$ |
4,698,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
|
|
|
|
|
$ |
41,047 |
|
|
|
|
|
|
|
|
|
|
$ |
34,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Rate Spread |
|
|
|
|
|
|
|
|
|
|
2.36 |
% |
|
|
|
|
|
|
|
|
|
|
2.56 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Yield on Interest-earning Assets |
|
|
|
|
|
|
|
|
|
|
2.88 |
% |
|
|
|
|
|
|
|
|
|
|
2.96 |
% |
Net interest income is impacted by the volume (changes in volume multiplied by prior rate), interest rate (changes in rate multiplied by prior volume) and mix of interest-earning assets and interest-bearing liabilities. The following table provides a breakdown of the changes in net interest income due to volume and rate changes for the first quarter ended March 31, 2019, as compared to the first quarter in 2018:
|
|
|
Increase (Decrease) due to |
|
|
Net Increase
|
|
||||||
|
(dollars in thousands) |
|
Volume |
|
|
Rate |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earned on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
$ |
9,613 |
|
|
$ |
5,251 |
|
|
$ |
14,864 |
|
|
Securities |
|
|
2,113 |
|
|
|
630 |
|
|
|
2,743 |
|
|
FHLB stock, fed funds and deposits |
|
|
(892 |
) |
|
|
510 |
|
|
|
(382 |
) |
|
Total interest-earning assets |
|
|
10,834 |
|
|
|
6,391 |
|
|
|
17,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
146 |
|
|
|
281 |
|
|
|
427 |
|
|
Money market and savings |
|
|
133 |
|
|
|
963 |
|
|
|
1,096 |
|
|
Certificates of deposit |
|
|
4,905 |
|
|
|
3,148 |
|
|
|
8,053 |
|
|
Borrowings |
|
|
(468 |
) |
|
|
1,338 |
|
|
|
870 |
|
|
Total interest-bearing liabilities |
|
|
4,716 |
|
|
|
5,730 |
|
|
|
10,446 |
|
|
Net interest income |
|
$ |
6,118 |
|
|
$ |
661 |
|
|
$ |
6,779 |
|
Net interest income for Banking increased 18% from $34.8 million in the first quarter of 2018, to $41.1 million in the first quarter of 2019 due to a 23% increase in interest-earning assets which was partially offset by a decrease in our net interest rate spread. The decrease in the net interest rate spread from 2.56% in the first quarter of 2018 to 2.36% in the first quarter of 2019 was due to an increase in the cost of interest-bearing liabilities from 1.20% in the first quarter of 2018 to 1.91% in the first quarter of 2019 which was partially offset by an increase in yield on total interest-earning assets from 3.76% in the first quarter of 2018 to 4.27% in the first quarter of 2019. The decrease in our net interest rate spread was offset by a larger benefit derived from noninterest-bearing funding
27
sources, including noninterest-bearing deposits and equity, as interest rates rise. As a result, our net yield on inter est- earning assets only decreased eight basis points from 2.96% in the first quarter of 2018 to 2.88% in the first quarter of 2019. The yield on interest-earning assets increased as new loans and securities added to the portfolio bear interest rates higher than the current portfolio rates as a result of increases in market rates. In addition, the realization of credit and yield discounts on the payoff of acquired loans was $1.7 million in the first quarter of 2019 as compared to $0.1 million in the first qu arter of 2018. The increase in the cost of interest-bearing liabilities was due to increased costs of interest-bearing deposits, resulting from increases in deposit market rates, and increased costs of borrowings as the average rate on FHLB advances increa sed from 1.55% in the first quarter of 2018 to 2.57% in the first quarter of 2019. The average balance outstanding under the holding company line of credit decreased from $41.7 million in the first quarter of 2018 to $1.1 million in the first quarter of 20 19, resulting in a $0.5 million decrease in corporate interest expense.
Provision for loan losses. The provision for loan losses represents our estimate of the amount necessary to be charged against the current period’s earnings to maintain the ALLL at a level that we consider adequate in relation to the estimated losses inherent in the loan portfolio. The provision for loan losses is impacted by changes in loan balances as well as changes in estimated loss assumptions and charge-offs and recoveries. The amount of the provision also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, current economic conditions and certain other subjective factors that may affect the ability of borrowers to meet their repayment obligations to us. The provision for loan losses in the first quarter of 2019 and 2018 was $0.5 million and $1.7 million, respectively. The growth in loans subject to ALLL in the first quarter of 2018 was 65% higher than the growth in such loans the first quarter of 2019.
Noninterest income. The following table provides a breakdown of noninterest income for Banking for the quarters ended March 31:
|
(dollars in thousands) |
2019 |
|
|
2018 |
|
||
|
|
|
|
|
|
|
|
|
|
Trust fees |
$ |
1,185 |
|
|
$ |
822 |
|
|
Loan related fees |
|
1,145 |
|
|
|
564 |
|
|
Deposit charges |
|
202 |
|
|
|
120 |
|
|
Gain on sale of loans |
|
— |
|
|
|
545 |
|
|
Consulting fees |
|
106 |
|
|
|
118 |
|
|
Other |
|
356 |
|
|
|
388 |
|
|
Total noninterest income |
$ |
2,994 |
|
|
$ |
2,557 |
|
Noninterest income in Banking in the first quarter of 2019 was $0.4 million higher than the first quarter of 2018 as higher trust fees and loan fees, including prepayment and servicing fees, more than offset the decrease in gain on loans held for sale. During the first quarter of 2018 we realized $0.5 million in gains on the sale of $52 million of multifamily loans with no sales of loans in the first quarter of 2019.
Noninterest income for Wealth Management includes fees charged to high net-worth clients for managing their assets and for providing financial planning consulting services. The following table provides a breakdown of noninterest income for Wealth Management for the quarters ended March 31:
|
(dollars in thousands) |
2019 |
|
|
2018 |
|
||
|
|
|
|
|
|
|
|
|
|
Asset management fees |
$ |
5,731 |
|
|
$ |
6,414 |
|
Noninterest income for Wealth Management decreased by $0.7 million in the first quarter of 2019 when compared to the corresponding period in 2018 due primarily to lower levels of billable AUM.
Noninterest Expense . The following table provides a breakdown of noninterest expense for Banking and Wealth Management for the periods indicated:
|
|
|
Banking |
|
|
Wealth Management |
|
||||||||||
|
(dollars in thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
Quarter Ended March 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and benefits |
|
$ |
14,309 |
|
|
$ |
12,539 |
|
|
$ |
4,234 |
|
|
$ |
4,267 |
|
|
Occupancy and depreciation |
|
|
4,241 |
|
|
|
3,577 |
|
|
|
587 |
|
|
|
548 |
|
|
Professional services and marketing |
|
|
1,240 |
|
|
|
1,226 |
|
|
|
528 |
|
|
|
815 |
|
|
Customer service costs |
|
|
3,389 |
|
|
|
2,771 |
|
|
|
— |
|
|
|
— |
|
|
Other expenses |
|
|
3,408 |
|
|
|
1,698 |
|
|
|
169 |
|
|
|
187 |
|
|
Total noninterest expense |
|
$ |
26,587 |
|
|
$ |
21,811 |
|
|
$ |
5,518 |
|
|
$ |
5,817 |
|
28
Noninterest expense in Banking increased from $21.8 million in the first quarter of 2018 to $26.6 million in the first quarter of 2019, due to increases in staffing and other costs associated with the Bank’s expansion, including the acquisition of Premier Business Bank (“PBB”) in June 2018, the growth of its balances of loans and deposits and general increases in costs. Compensation and benefits for Banking increased $1.8 million or 14% during the first quarter of 2019 as compared to the first quart er of 2018 due to salary increases and an increase in the number of full time equivalent employees (“FTE”) in Banking, which increased to 425.0 in the first quarter of 2019 from 338.4 in the first quarter of 2018 as a result of the increased staffing relat ed to the PBB acquisition and additional personnel added to support the growth in loans and deposits. A $0.7 million increase in occupancy and depreciation for Banking in the first quarter of 2019 as compared to the first quarter of 2018 was due to costs r elated to the PBB acquisition and increases in our data processing costs due to increased volumes of loan and deposit activities . Customer service costs for Banking increased from $2.8 million in the first quarter of 2018 to $3.4 million in the first quart er of 2019 due to increases in the earnings credit rates paid on the balances which was partially offset by a decrease in balances. Other expenses increased by $1.7 million in the first quarter of 2019 when compared to the corresponding period in 2018 due to higher costs related to the acquisition of PBB, including the amortization of core deposit intangibles, and higher FDIC insurance costs related the higher deposit balances. The $0.3 million decrease in noninterest expense for Wealth Management was due t o decreases in legal related costs related to 2018 litigation matters.
Financial Condition
The following table shows the financial position for each of our business segments, and of FFI and elimination entries used to arrive at our consolidated totals which are included in the column labeled Other and Eliminations, as of:
|
(dollars in thousands) |
|
Banking |
|
|
Wealth Management |
|
|
Other and Eliminations |
|
|
Total |
|
||||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
80,443 |
|
|
$ |
1,666 |
|
|
$ |
(1,416 |
) |
|
$ |
80,693 |
|
|
Securities AFS |
|
|
788,160 |
|
|
|
— |
|
|
|
— |
|
|
|
788,160 |
|
|
Loans held for sale |
|
|
613,528 |
|
|
|
— |
|
|
|
— |
|
|
|
613,528 |
|
|
Loans, net |
|
|
4,316,865 |
|
|
|
— |
|
|
|
— |
|
|
|
4,316,865 |
|
|
Premises and equipment |
|
|
8,322 |
|
|
|
801 |
|
|
|
136 |
|
|
|
9,259 |
|
|
FHLB Stock |
|
|
22,734 |
|
|
|
— |
|
|
|
— |
|
|
|
22,734 |
|
|
Deferred taxes |
|
|
12,366 |
|
|
|
105 |
|
|
|
361 |
|
|
|
12,832 |
|
|
REO |
|
|
465 |
|
|
|
— |
|
|
|
— |
|
|
|
465 |
|
|
Goodwill and intangibles |
|
|
98,852 |
|
|
|
— |
|
|
|
— |
|
|
|
98,852 |
|
|
Other assets |
|
|
40,680 |
|
|
|
475 |
|
|
|
16,661 |
|
|
|
57,816 |
|
|
Total assets |
|
$ |
5,982,415 |
|
|
$ |
3,047 |
|
|
$ |
15,742 |
|
|
$ |
6,001,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
4,576,893 |
|
|
$ |
— |
|
|
$ |
(8,191 |
) |
|
$ |
4,568,702 |
|
|
Borrowings |
|
|
795,000 |
|
|
|
— |
|
|
|
5,000 |
|
|
|
800,000 |
|
|
Intercompany balances |
|
|
3,139 |
|
|
|
495 |
|
|
|
(3,634 |
) |
|
|
— |
|
|
Other liabilities |
|
|
39,709 |
|
|
|
1,553 |
|
|
|
22,997 |
|
|
|
64,259 |
|
|
Shareholders’ equity |
|
|
567,674 |
|
|
|
999 |
|
|
|
(430 |
) |
|
|
568,243 |
|
|
Total liabilities and equity |
|
$ |
5,982,415 |
|
|
$ |
3,047 |
|
|
$ |
15,742 |
|
|
$ |
6,001,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
67,148 |
|
|
$ |
4,636 |
|
|
$ |
(4,472 |
) |
|
$ |
67,312 |
|
|
Securities AFS |
|
|
809,569 |
|
|
|
— |
|
|
|
— |
|
|
|
809,569 |
|
|
Loans held for sale |
|
|
507,643 |
|
|
|
— |
|
|
|
— |
|
|
|
507,643 |
|
|
Loans, net |
|
|
4,274,669 |
|
|
|
— |
|
|
|
— |
|
|
|
4,274,669 |
|
|
Premises and equipment |
|
|
8,221 |
|
|
|
788 |
|
|
|
136 |
|
|
|
9,145 |
|
|
FHLB Stock |
|
|
20,307 |
|
|
|
— |
|
|
|
— |
|
|
|
20,307 |
|
|
Deferred taxes |
|
|
12,905 |
|
|
|
103 |
|
|
|
243 |
|
|
|
13,251 |
|
|
REO |
|
|
815 |
|
|
|
— |
|
|
|
— |
|
|
|
815 |
|
|
Goodwill and Intangibles |
|
|
99,482 |
|
|
|
— |
|
|
|
— |
|
|
|
99,482 |
|
|
Other assets |
|
|
35,906 |
|
|
|
605 |
|
|
|
1,708 |
|
|
|
38,219 |
|
|
Total assets |
|
$ |
5,836,665 |
|
|
$ |
6,132 |
|
|
$ |
(2,385 |
) |
|
$ |
5,840,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
4,544,168 |
|
|
$ |
— |
|
|
$ |
(11,200 |
) |
|
$ |
4,532,968 |
|
|
Borrowings |
|
|
703,000 |
|
|
|
— |
|
|
|
5,000 |
|
|
|
708,000 |
|
|
Intercompany balances |
|
|
3,689 |
|
|
|
467 |
|
|
|
(4,156 |
) |
|
|
— |
|
|
Other liabilities |
|
|
34,886 |
|
|
|
2,830 |
|
|
|
2,544 |
|
|
|
40,260 |
|
|
Shareholders’ equity |
|
|
550,922 |
|
|
|
2,835 |
|
|
|
5,427 |
|
|
|
559,184 |
|
|
Total liabilities and equity |
|
$ |
5,836,665 |
|
|
$ |
6,132 |
|
|
$ |
(2,385 |
) |
|
$ |
5,840,412 |
|
29
Our consolidated balance sheet is primarily affected by changes occurring in Banking , as Wealth Management does not maintain significant levels of assets. Banking has experienced and is expected to continue to experience increases in its total assets a s a result of our growth strategy.
During the first quarter of 2019, total assets increased by $161 million primarily due to increases in loans, including loans held for sale. Loans and loans held for sale increased $148 million in the first quarter of 2019 as a result of $400 million of originations and a $5 million increase in the mark to market for loans held for sale which were partially offset by payoffs or scheduled payments of $256 million. The $36 million growth in deposits during the first quarter of 2019 included increases in specialty deposits of $46 million and wholesale deposits of $58 million which were partially offset by a $68 million decrease in branch deposits. Borrowings increased by $92 million due primarily to the additional borrowings utilized to support our loan growth.
Cash and cash equivalents, certificates of deposit and securities. Cash and cash equivalents, which primarily consist of funds held at the Federal Reserve Bank or at correspondent banks, including fed funds, increased $13 million during the first three months of 2019. Changes in cash equivalents are primarily affected by the funding of loans, investments in securities, and changes in our sources of funding: deposits, FHLB advances and FFI borrowings.
Securities available for sale. The following table provides a summary of the Company’s AFS securities portfolio as of:
|
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Estimated |
|
|||||||
|
(dollars in thousands) |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities |
|
$ |
704,262 |
|
|
$ |
4,338 |
|
|
$ |
(6,988 |
) |
|
$ |
701,612 |
|
|
Beneficial interest – FHLMC securitization |
|
|
31,136 |
|
|
|
1,308 |
|
|
|
(1,828 |
) |
|
|
30,616 |
|
|
Corporate bonds |
|
|
54,000 |
|
|
|
497 |
|
|
|
(70 |
) |
|
|
54,427 |
|
|
Other |
|
|
1,465 |
|
|
|
41 |
|
|
|
(1 |
) |
|
|
1,505 |
|
|
Total |
|
$ |
790,863 |
|
|
$ |
6,184 |
|
|
$ |
(8,887 |
) |
|
$ |
788,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency mortgage-backed securities |
|
$ |
723,597 |
|
|
$ |
11,883 |
|
|
$ |
(13,811 |
) |
|
$ |
721,669 |
|
|
Beneficial interest – FHLMC securitization |
|
|
32,143 |
|
|
|
1,736 |
|
|
|
(1,813 |
) |
|
|
32,086 |
|
|
Corporate bonds |
|
|
54,000 |
|
|
|
638 |
|
|
|
(294 |
) |
|
|
54,344 |
|
|
Other |
|
|
1,458 |
|
|
|
15 |
|
|
|
(3 |
) |
|
|
1,470 |
|
|
Total |
|
$ |
811,198 |
|
|
$ |
14,292 |
|
|
$ |
(15,921 |
) |
|
$ |
809,569 |
|
US Treasury securities of $0.5 million as of March 31, 2019 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 trust operations. As of March 31, 2019, $78 million of agency mortgage-backed securities are pledged as collateral as support for the Banks’s obligations under a loan sales and securitization agreement entered into in 2018.
The scheduled maturities of securities AFS, other than agency mortgage-backed securities, and the related weighted average yield is as follows as of March 31, 2019:
|
(dollars in thousands) |
|
Less than
|
|
|
1 Through
|
|
|
5 Through 10 Years |
|
|
After 10 Years |
|
|
Total |
|
|||||
|
Amortized Cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
54,000 |
|
|
$ |
— |
|
|
$ |
54,000 |
|
|
Other |
|
|
500 |
|
|
|
— |
|
|
|
965 |
|
|
|
— |
|
|
|
1,465 |
|
|
Total |
|
$ |
500 |
|
|
|
— |
|
|
|
54,965 |
|
|
|
— |
|
|
|
55,465 |
|
|
Weighted average yield |
|
|
1.03 |
% |
|
|
— |
% |
|
|
5.29 |
% |
|
|
— |
% |
|
|
5.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair Value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
54,427 |
|
|
$ |
— |
|
|
$ |
54,427 |
|
|
Other |
|
|
499 |
|
|
|
— |
|
|
|
1,006 |
|
|
|
— |
|
|
|
1,505 |
|
|
Total |
|
$ |
499 |
|
|
$ |
— |
|
|
$ |
55,433 |
|
|
$ |
— |
|
|
$ |
55,932 |
|
Agency mortgage-backed securities and beneficial interest – FHLMC securitizations are excluded from the above table because such securities are not due at a single maturity date. The weighted average yield of the agency mortgage-backed securities and beneficial interests in FHLMC securitizations as of March 31, 2019 was 2.92%.
30
Loans. The following table sets forth our loans, by loan category, as of:
|
(dollars in thousands) |
|
March 31,
|
|
|
December 31,
|
|
||
|
Outstanding principal balance: |
|
|
|
|
|
|
|
|
|
Loans secured by real estate: |
|
|
|
|
|
|
|
|
|
Residential properties: |
|
|
|
|
|
|
|
|
|
Multifamily |
|
$ |
1,987,690 |
|
|
$ |
1,956,935 |
|
|
Single family |
|
|
903,992 |
|
|
|
904,828 |
|
|
Total real estate loans secured by residential properties |
|
|
2,891,682 |
|
|
|
2,861,763 |
|
|
Commercial properties |
|
|
902,060 |
|
|
|
869,169 |
|
|
Land |
|
|
59,917 |
|
|
|
80,187 |
|
|
Total real estate loans |
|
|
3,853,659 |
|
|
|
3,811,119 |
|
|
Commercial and industrial loans |
|
|
454,849 |
|
|
|
449,805 |
|
|
Consumer loans |
|
|
17,693 |
|
|
|
22,699 |
|
|
Total loans |
|
|
4,326,201 |
|
|
|
4,283,623 |
|
|
Premiums, discounts and deferred fees and expenses |
|
|
9,864 |
|
|
|
10,046 |
|
|
Total |
|
$ |
4,336,065 |
|
|
$ |
4,293,669 |
|
Total loans, including loans held for sale, increased $148 million during the first three months of 2019 as a result of $400 million of originations and a $5 million increase in the mark to market for loans held for sale which were partially offset by payoffs or scheduled payments of $256 million.
Deposits. The following table sets forth information with respect to our deposits and the average rates paid on deposits, as of:
|
|
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||||||||||
|
(dollars in thousands) |
|
Amount |
|
|
Weighted Average Rate |
|
|
Amount |
|
|
Weighted Average Rate |
|
||||
|
Demand deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing |
|
$ |
1,114,596 |
|
|
|
— |
|
|
$ |
1,074,661 |
|
|
|
— |
|
|
Interest-bearing |
|
|
307,854 |
|
|
|
0.790 |
% |
|
|
317,380 |
|
|
|
0.798 |
% |
|
Money market and savings |
|
|
1,175,986 |
|
|
|
1.180 |
% |
|
|
1,190,717 |
|
|
|
1.115 |
% |
|
Certificates of deposits |
|
|
1,970,266 |
|
|
|
2.276 |
% |
|
|
1,950,210 |
|
|
|
2.142 |
% |
|
Total |
|
$ |
4,568,702 |
|
|
|
1.338 |
% |
|
$ |
4,532,968 |
|
|
|
1.270 |
% |
During the first quarter of 2019, our deposit rates increased slightly as we have raised rates to attract deposits. The weighted average rate of our interest bearing deposits increased from 1.67% at December 31, 2018 to 1.77% at March 31, 2019, while the weighted average interest rates of both interest-bearing and noninterest-bearing deposits have increased from 1.27% at December 31, 2018 to 1.34% at March 31, 2019.
The maturities of our certificates of deposit of $100,000 or more were as follows as of March 31, 2019:
|
(dollars in thousands) |
|
|
|
|
|
3 months or less |
|
$ |
284,087 |
|
|
Over 3 months through 6 months |
|
|
115,409 |
|
|
Over 6 months through 12 months |
|
|
162,714 |
|
|
Over 12 months |
|
|
59,274 |
|
|
Total |
|
$ |
621,484 |
|
From time to time, the Bank will utilize brokered deposits as a source of funding. As of March 31, 2019 the Bank held $1.3 billion of deposits which are classified as brokered deposits.
Borrowings. At March 31, 2019 our borrowings consisted of $795 million in overnight FHLB advances and $5 million of borrowings on our holding company line of credit. At December 31, 2018, our borrowings consisted of $703 million of overnight FHLB advances at FFB and $5 million of borrowings on our holding company line of credit. The FHLB overnight advances were paid in full in the early parts of April 2019 and January 2019, respectively. Because FFB primarily utilizes overnight borrowings, the balance of outstanding borrowings fluctuates on a daily basis. The average balance of FHLB advances outstanding during the first quarter of 2019 was $636 million, as compared to $693 million for the first quarter of 2018. The weighted average interest rate on these borrowings was 2.57% for the first quarter of 2019, as compared to 1.55% for the first quarter of 2018. The maximum amount of borrowings at the Bank outstanding at any month-end during the first quarter of 2019 and during all of 2018 was $795 million and $773 million, respectively.
31
D e linquent Loans, Nonperforming Assets and Provision for Credit Losses
Loans are considered past due following the date when either interest or principal is contractually due and unpaid. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest on loans is discontinued when reasonable doubt exists as to the full, timely collection of interest or principal and, generally, when a loan becomes contractually past due for 90 days or more with respect to principal or interest. However, the accrual of interest may be continued on a well-secured loan contractually past due 90 days or more with respect to principal or interest if the loan is in the process of collection or collection of the principal and interest is deemed probable. The following tables provide a summary of past due and nonaccrual loans as of:
|
(dollars in thousands) |
|
30–59 Days |
|
|
60-89 Days |
|
|
90 Days
|
|
|
Nonaccrual |
|
|
Total Past Due and Nonaccrual |
|
|
Current |
|
|
Total |
|
|||||||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
— |
|
|
$ |
664 |
|
|
$ |
— |
|
|
$ |
1,811 |
|
|
$ |
2,475 |
|
|
$ |
2,889,207 |
|
|
$ |
2,891,682 |
|
|
Commercial properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,533 |
|
|
|
2,533 |
|
|
|
899,527 |
|
|
|
902,060 |
|
|
Land |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
697 |
|
|
|
697 |
|
|
|
59,220 |
|
|
|
59,917 |
|
|
Commercial and industrial loans |
|
|
4,521 |
|
|
|
610 |
|
|
|
— |
|
|
|
10,496 |
|
|
|
15,627 |
|
|
|
439,222 |
|
|
|
454,849 |
|
|
Consumer loans |
|
|
5 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
9 |
|
|
|
17,684 |
|
|
|
17,693 |
|
|
Total |
|
$ |
4,526 |
|
|
$ |
1,278 |
|
|
$ |
— |
|
|
$ |
15,537 |
|
|
$ |
21,341 |
|
|
$ |
4,304,860 |
|
|
$ |
4,326,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total loans |
|
|
0.10 |
% |
|
|
0.03 |
% |
|
|
— |
% |
|
|
0.36 |
% |
|
|
0.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
74 |
|
|
$ |
— |
|
|
$ |
499 |
|
|
$ |
651 |
|
|
$ |
1,224 |
|
|
$ |
2,860,539 |
|
|
$ |
2,861,763 |
|
|
Commercial properties |
|
|
440 |
|
|
|
117 |
|
|
|
— |
|
|
|
1,607 |
|
|
|
2,164 |
|
|
|
867,005 |
|
|
|
869,169 |
|
|
Land |
|
|
2,000 |
|
|
|
— |
|
|
|
— |
|
|
|
697 |
|
|
|
2,697 |
|
|
|
77,490 |
|
|
|
80,187 |
|
|
Commercial and industrial loans |
|
|
12,541 |
|
|
|
300 |
|
|
|
536 |
|
|
|
8,559 |
|
|
|
21,936 |
|
|
|
427,869 |
|
|
|
449,805 |
|
|
Consumer loans |
|
|
— |
|
|
|
7 |
|
|
|
— |
|
|
|
2 |
|
|
|
9 |
|
|
|
22,690 |
|
|
|
22,699 |
|
|
Total |
|
$ |
15,055 |
|
|
$ |
424 |
|
|
$ |
1,035 |
|
|
$ |
11,516 |
|
|
$ |
28,030 |
|
|
$ |
4,255,593 |
|
|
$ |
4,283,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total loans |
|
|
0.35 |
% |
|
|
0.01 |
% |
|
|
0.02 |
% |
|
|
0.27 |
% |
|
|
0.65 |
% |
|
|
|
|
|
|
|
|
The following table presents the composition of TDRs by accrual and nonaccrual status as of:
|
|
|
March 31, 2019 |
|
|
|
December 31, 2018 |
|
|||||||||||||||||
|
(dollars in thousands) |
|
Accrual |
|
|
|
Nonaccrual |
|
|
Total |
|
|
|
Accrual |
|
|
Nonaccrual |
|
|
Total |
|
||||
|
Commercial real estate loans |
|
$ |
1,245 |
|
|
$ |
1,464 |
|
|
$ |
2,709 |
|
|
$ |
1,264 |
|
|
$ |
1,491 |
|
|
$ |
2,755 |
|
|
Commercial and industrial loans |
|
|
— |
|
|
|
2,018 |
|
|
|
2,018 |
|
|
|
— |
|
|
|
2,096 |
|
|
|
2,096 |
|
|
Total |
|
|
1,245 |
|
|
|
3,482 |
|
|
|
4,727 |
|
|
|
1,264 |
|
|
|
3,587 |
|
|
|
4,851 |
|
These loans were classified as a TDR as a result of a reduction in required principal payments, reductions in rates and/or an extension of the maturity date of the loans.
32
The following is a breakdown of our loan portfolio by the risk category of loans as of:
|
(dollars in thousands) |
|
Pass |
|
|
Special
|
|
|
Substandard |
|
|
Impaired |
|
|
Total |
|
|||||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
2,886,943 |
|
|
$ |
2,928 |
|
|
$ |
— |
|
|
$ |
1,811 |
|
|
$ |
2,891,682 |
|
|
Commercial properties |
|
|
880,599 |
|
|
|
6,696 |
|
|
|
5,821 |
|
|
|
8,944 |
|
|
|
902,060 |
|
|
Land |
|
|
58,418 |
|
|
|
— |
|
|
|
802 |
|
|
|
697 |
|
|
|
59,917 |
|
|
Commercial and industrial loans |
|
|
440,126 |
|
|
|
918 |
|
|
|
3,309 |
|
|
|
10,496 |
|
|
|
454,849 |
|
|
Consumer loans |
|
|
17,693 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17,693 |
|
|
Total |
|
$ |
4,283,779 |
|
|
$ |
10,542 |
|
|
$ |
9,932 |
|
|
$ |
21,948 |
|
|
$ |
4,326,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
2,857,666 |
|
|
$ |
3,446 |
|
|
$ |
— |
|
|
$ |
651 |
|
|
$ |
2,861,763 |
|
|
Commercial properties |
|
|
845,672 |
|
|
|
13,024 |
|
|
|
7,602 |
|
|
|
2,871 |
|
|
|
869,169 |
|
|
Land |
|
|
78,681 |
|
|
|
— |
|
|
|
809 |
|
|
|
697 |
|
|
|
80,187 |
|
|
Commercial and industrial loans |
|
|
431,751 |
|
|
|
7,723 |
|
|
|
1,772 |
|
|
|
8,559 |
|
|
|
449,805 |
|
|
Consumer loans |
|
|
22,699 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
22,699 |
|
|
Total |
|
$ |
4,236,469 |
|
|
$ |
24,193 |
|
|
$ |
10,183 |
|
|
$ |
12,778 |
|
|
$ |
4,283,623 |
|
We consider a loan to be impaired when, based upon current information and events, we believe that it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan. We measure impairment using either the present value of the expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the properties collateralizing the loan, for collateral dependent loans. Impairment losses are included in the ALLL through a charge to provision for loan losses. Adjustments to impairment losses due to changes in the fair value of the property collateralizing an impaired loan are considered in computing the provision for loan losses. Loans collectively reviewed for impairment include all loans except for loans which are individually reviewed based on specific criteria, such as delinquency, debt coverage, adequacy of collateral and condition of property collateralizing the loans. Impaired loans include nonaccrual loans (excluding those collectively reviewed for impairment), certain restructured loans and certain performing loans less than 90 days delinquent (“other impaired loans”) which we believe are not likely to be collected in accordance with the contractual terms of the loans.
In 2017 and 2018, we purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these purchased credit impaired loans is as follows as of:
|
(dollars in thousands) |
|
March 31, 2019 |
|
|
December 31,
|
|
||
|
Outstanding principal balance: |
|
|
|
|
|
|
|
|
|
Loans secured by real estate: |
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
371 |
|
|
$ |
451 |
|
|
Commercial properties |
|
|
7,477 |
|
|
|
10,871 |
|
|
Land |
|
|
1,081 |
|
|
|
1,089 |
|
|
Total real estate loans |
|
|
8,929 |
|
|
|
12,411 |
|
|
Commercial and industrial loans |
|
|
1,434 |
|
|
|
1,150 |
|
|
Consumer loans |
|
|
9 |
|
|
|
10 |
|
|
Total loans |
|
|
10,372 |
|
|
|
13,571 |
|
|
Unaccreted discount on purchased credit impaired loans |
|
|
(4,861 |
) |
|
|
(6,490 |
) |
|
Total |
|
$ |
5,511 |
|
|
$ |
7,081 |
|
33
Allowance for Loan Losses. The following table summarizes the activity in our ALLL for the periods indicated:
|
(dollars in thousands) |
|
Beginning Balance |
|
|
Provision for Loan Losses |
|
|
Charge-offs |
|
|
Recoveries |
|
|
Ending Balance |
|
|||||
|
Quarter ended March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
9,216 |
|
|
$ |
422 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,638 |
|
|
Commercial properties |
|
|
4,547 |
|
|
|
(232 |
) |
|
|
— |
|
|
|
— |
|
|
|
4,315 |
|
|
Land |
|
|
391 |
|
|
|
(149 |
) |
|
|
— |
|
|
|
— |
|
|
|
242 |
|
|
Commercial and industrial loans |
|
|
4,628 |
|
|
|
503 |
|
|
|
(543 |
) |
|
|
207 |
|
|
|
4,795 |
|
|
Consumer loans |
|
|
218 |
|
|
|
(4 |
) |
|
|
(5 |
) |
|
|
1 |
|
|
|
210 |
|
|
Total |
|
$ |
19,000 |
|
|
$ |
540 |
|
|
$ |
(548 |
) |
|
$ |
208 |
|
|
$ |
19,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
9,715 |
|
|
$ |
(499 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,216 |
|
|
Commercial properties |
|
|
4,399 |
|
|
|
359 |
|
|
|
(211 |
) |
|
|
— |
|
|
|
4,547 |
|
|
Land |
|
|
395 |
|
|
|
(4 |
) |
|
|
— |
|
|
|
— |
|
|
|
391 |
|
|
Commercial and industrial loans |
|
|
3,624 |
|
|
|
4,413 |
|
|
|
(3,978 |
) |
|
|
569 |
|
|
|
4,628 |
|
|
Consumer loans |
|
|
267 |
|
|
|
(49 |
) |
|
|
— |
|
|
|
— |
|
|
|
218 |
|
|
Total |
|
$ |
18,400 |
|
|
$ |
4,220 |
|
|
$ |
(4,189 |
) |
|
$ |
569 |
|
|
$ |
19,000 |
|
Excluding the loans acquired in acquisitions, our ALLL represented 0.51% of total loans outstanding as of both March 31, 2019 and December 31, 2018.
The amount of the ALLL is adjusted periodically by charges to operations (referred to in our income statement as the “provision for loan losses”) (i) to replenish the ALLL after it has been reduced due to loan write-downs or charge-offs, (ii) to reflect increases in the volume of outstanding loans, and (iii) to take account of changes in the risk of potential loan losses due to a deterioration in the condition of borrowers, or in the value of property securing non–performing loans, or adverse changes in economic conditions. The amounts of the provisions we make for loan losses are based on our estimate of losses in our loan portfolio. In estimating such losses, we use economic and loss migration models that are based on bank regulatory guidelines and industry standards, and our historical charge-off experience and loan delinquency rates, local and national economic conditions, a borrower’s ability to repay its borrowings, and the value of any property collateralizing the loan, as well as a number of subjective factors. However, these determinations involve judgments about changes and trends in current economic conditions and other events that can affect the ability of borrowers to meet their loan obligations to us and a weighting among the quantitative and qualitative factors we consider in determining the sufficiency of the ALLL. Moreover, the duration and anticipated effects of prevailing economic conditions or trends can be uncertain and can be affected by a number of risks and circumstances that are outside of our control. If changes in economic or market conditions or unexpected subsequent events were to occur, or if changes were made to bank regulatory guidelines or industry standards that are used to assess the sufficiency of the ALLL, it could become necessary for us to incur additional, and possibly significant, charges to increase the ALLL, which would have the effect of reducing our income.
In addition, the FDIC and the DBO, as an integral part of their examination processes, periodically review the adequacy of our ALLL. These agencies may require us to make additional provisions for loan losses, over and above the provisions that we have already made, the effect of which would be to reduce our income.
34
The following table presents the balance in the ALLL and the recorded investment in loans by impairment method as of:
|
|
|
Allowance for Loan Losses |
|
Unaccreted Credit |
|
|||||||||||||||
|
|
|
Evaluated for Impairment |
|
|
Purchased |
|
|
|
|
|
|
Component |
|
|||||||
|
(dollars in thousands) |
|
Individually |
|
|
Collectively |
|
|
Impaired |
|
|
Total |
|
|
Other Loans |
|
|||||
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
— |
|
|
$ |
9,638 |
|
|
$ |
— |
|
|
$ |
9,638 |
|
|
$ |
1,524 |
|
|
Commercial properties |
|
|
117 |
|
|
|
4,198 |
|
|
|
— |
|
|
|
4,315 |
|
|
|
1,589 |
|
|
Land |
|
|
— |
|
|
|
242 |
|
|
|
— |
|
|
|
242 |
|
|
|
47 |
|
|
Commercial and industrial loans |
|
|
507 |
|
|
|
4,288 |
|
|
|
— |
|
|
|
4,795 |
|
|
|
509 |
|
|
Consumer loans |
|
|
— |
|
|
|
210 |
|
|
|
— |
|
|
|
210 |
|
|
|
2 |
|
|
Total |
|
$ |
624 |
|
|
$ |
18,576 |
|
|
$ |
— |
|
|
$ |
19,200 |
|
|
$ |
3,671 |
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
1,811 |
|
|
$ |
2,889,871 |
|
|
$ |
— |
|
|
$ |
2,891,682 |
|
|
$ |
234,595 |
|
|
Commercial properties |
|
|
8,944 |
|
|
|
889,412 |
|
|
|
3,704 |
|
|
|
902,060 |
|
|
|
280,393 |
|
|
Land |
|
|
697 |
|
|
|
58,418 |
|
|
|
802 |
|
|
|
59,917 |
|
|
|
37,624 |
|
|
Commercial and industrial loans |
|
|
10,496 |
|
|
|
443,348 |
|
|
|
1,005 |
|
|
|
454,849 |
|
|
|
55,921 |
|
|
Consumer loans |
|
|
— |
|
|
|
17,693 |
|
|
|
— |
|
|
|
17,693 |
|
|
|
314 |
|
|
Total |
|
$ |
21,948 |
|
|
$ |
4,298,742 |
|
|
$ |
5,511 |
|
|
$ |
4,326,201 |
|
|
$ |
608,847 |
|
|
|
|
Allowance for Loan Losses |
|
|
Unaccreted Credit |
|
||||||||||||||
|
|
|
Evaluated for Impairment |
|
|
Purchased |
|
|
|
|
|
|
Component |
|
|||||||
|
(dollars in thousands) |
|
Individually |
|
|
Collectively |
|
|
Impaired |
|
|
Total |
|
|
Other Loans |
|
|||||
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
— |
|
|
$ |
9,216 |
|
|
$ |
— |
|
|
$ |
9,216 |
|
|
$ |
1,724 |
|
|
Commercial properties |
|
|
126 |
|
|
|
4,421 |
|
|
|
— |
|
|
|
4,547 |
|
|
|
1,779 |
|
|
Land |
|
|
— |
|
|
|
391 |
|
|
|
— |
|
|
|
391 |
|
|
|
84 |
|
|
Commercial and industrial loans |
|
|
290 |
|
|
|
4,338 |
|
|
|
— |
|
|
|
4,628 |
|
|
|
633 |
|
|
Consumer loans |
|
|
— |
|
|
|
218 |
|
|
|
— |
|
|
|
218 |
|
|
|
3 |
|
|
Total |
|
$ |
416 |
|
|
$ |
18,584 |
|
|
$ |
— |
|
|
$ |
19,000 |
|
|
$ |
4,223 |
|
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential properties |
|
$ |
651 |
|
|
$ |
2,861,112 |
|
|
$ |
— |
|
|
$ |
2,861,763 |
|
|
$ |
241,698 |
|
|
Commercial properties |
|
|
2,871 |
|
|
|
860,835 |
|
|
|
5,463 |
|
|
|
869,169 |
|
|
|
275,516 |
|
|
Land |
|
|
697 |
|
|
|
78,681 |
|
|
|
809 |
|
|
|
80,187 |
|
|
|
41,132 |
|
|
Commercial and industrial loans |
|
|
8,559 |
|
|
|
440,437 |
|
|
|
809 |
|
|
|
449,805 |
|
|
|
61,183 |
|
|
Consumer loans |
|
|
— |
|
|
|
22,699 |
|
|
|
— |
|
|
|
22,699 |
|
|
|
366 |
|
|
Total |
|
$ |
12,778 |
|
|
$ |
4,263,764 |
|
|
$ |
7,081 |
|
|
$ |
4,283,623 |
|
|
$ |
619,895 |
|
The column labeled “Unaccreted Credit Component Other Loans” represents the amount of unaccreted credit component discount for the other loans acquired in prior acquisitions, and the stated principal balance of the related loans. The unaccreted credit component discount is equal to 0.60% and 0.68% of the stated principal balances of these loans as of March 31, 2019 and December 31, 2018, respectively. In addition to this unaccreted credit component discount, an additional $0.3 million and $0.4 million of the ALLL were provided for these loans as of March 31, 2019 and December 31, 2018, respectively.
Liquidity
Liquidity management focuses on our ability to generate, on a timely and cost-effective basis, cash sufficient to meet the funding needs of current loan demand, deposit withdrawals, principal and interest payments with respect to outstanding borrowings and to pay operating expenses. Our liquidity management is both a daily and long-term function of funds management. Liquid assets are generally invested in marketable securities or held as cash at the Federal Reserve Bank, or other financial institutions.
35
We monitor our liquidity in accordance with guidelines established by our Board of Directors and applicable regulatory requirements. Our need for liquidity is affected by our loan activity, net changes in deposit levels and the maturities of our borrowings. The principal sources of our liquidity co nsist of deposits, loan interest and principal payments and prepayments, investment management and consulting fees, FHLB advances and proceeds from borrowings and sales of shares by FFI. The remaining balances of the Bank ’s lines of credit available to dra w down totaled $ 1.5 b illion at March 31, 2019 .
Cash Flows Provided by Operating Activities. During the quarter ended March 31, 2019, operating activities provided net cash of $11 million, comprised primarily of our net income of $11 million. During the quarter ended March 31, 2018, operating activities provided net cash of $10 million, comprised primarily of our net income of $9 million.
Cash Flows Used in Investing Activities. During the quarter ended March 31, 2019, investing activities used net cash of $123 million, primarily to fund a $141 million net increase in loans and $2 million in FHLB stock purchases, offset partially by $21 million in cash received in proceeds from the sale, principal collection, and maturities of securities. During the quarter ended March 31, 2018, investing activities used net cash of $250 million, primarily to fund a $298 million net increase in loans and $20 million in purchases of securities, offset partially by $19 million in cash received from the sale, principal collection, and maturities of securities, and $52 million in loan sales.
Cash Flow Provided by Financing Activities. During the quarter ended March 31, 2019, financing activities provided net cash of $126 million, consisting primarily of net increases of $36 million in deposits and $92 million in FHLB advances, offset partially by $2 million in dividends paid. During the quarter ended March 31, 2018, financing activities provided net cash of $296 million, consisting primarily of net increases of $193 million in deposits and $111 million in FHLB advances, and $12 million in proceeds from the sale of stock, offset by a net decrease of $20 million in our line of credit.
Ratio of Loans to Deposits. The relationship between gross loans and total deposits can provide a useful measure of a bank’s liquidity. Since repayment of loans tends to be less predictable than the maturity of investments and other liquid resources, the higher the loan-to-deposit ratio, the less liquid are our assets. On the other hand, since we realize greater yields on loans than we do on other interest-earning assets, a lower loan-to-deposit ratio can adversely affect interest income and earnings. As a result, our goal is to achieve a loan-to-deposit ratio that appropriately balances the requirements of liquidity and the need to generate a fair return on our assets. At March 31, 2019 and December 31, 2018, the loan-to-deposit ratios at the Bank were 108% and 106%, respectively.
Off-Balance Sheet Arrangements
The following table provides the off-balance sheet arrangements of the Company as of March 31, 2019:
|
(dollars in thousands) |
|
|
|
|
Commitments to fund new loans |
|
$ |
45,950 |
|
Commitments to fund under existing loans, lines of credit |
|
|
380,230 |
|
Commitments under standby letters of credit |
|
|
11,695 |
Some of the commitments to fund existing loans, lines of credit and letters of credit are expected to expire without being drawn upon. Therefore, the total commitments do not necessarily represent future cash requirements. As of March 31, 2019, the Bank was obligated on $231 million of letters of credit to the FHLB which were being used as collateral for public fund deposits, including $213 million of deposits from the State of California.
Capital Resources and Dividend Policy
The capital rules applicable to United States based bank holding companies and federally insured depository institutions require the Company (on a consolidated basis) and FFB (on a stand-alone basis) to meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. In addition, prompt correct action regulations place a federally insured depository institution, such as FFB, into one of five capital categories on the basis of its capital ratios: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) critically undercapitalized. A depository institution’s primary federal regulatory agency may determine that, based on certain qualitative assessments, the depository institution should be assigned to a lower capital category than the one indicated by its capital ratios. At each successive lower capital category, a depository institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.
36
The following table sets forth the capital and capital ratios of FFI (on a consolidated basis) and FFB as of the respective dates indicated below, as compared to the respective regulatory requirements applicable to them:
|
|
|
Actual |
|
|
For Capital
|
|
|
To Be Well Capitalized Under Prompt Corrective Action Provisions |
|
|||||||||||||||
|
(dollars in thousands) |
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
|
FFI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CET1 capital ratio |
|
$ |
471,912 |
|
|
|
10.92 |
% |
|
$ |
194,456 |
|
|
|
4.50 |
% |
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio |
|
|
471,912 |
|
|
|
8.15 |
% |
|
|
231,658 |
|
|
|
4.00 |
% |
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital ratio |
|
|
471,912 |
|
|
|
10.92 |
% |
|
|
259,275 |
|
|
|
6.00 |
% |
|
|
|
|
|
|
|
|
|
Total risk-based capital ratio |
|
|
493,038 |
|
|
|
11.41 |
% |
|
|
345,699 |
|
|
|
8.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CET1 capital ratio |
|
$ |
460,600 |
|
|
|
10.67 |
% |
|
$ |
194,179 |
|
|
|
4.50 |
% |
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio |
|
|
460,600 |
|
|
|
8.39 |
% |
|
|
219,694 |
|
|
|
4.00 |
% |
|
|
|
|
|
|
|
|
|
Tier 1 risk-based capital ratio |
|
|
460,600 |
|
|
|
10.67 |
% |
|
|
258,906 |
|
|
|
6.00 |
% |
|
|
|
|
|
|
|
|
|
Total risk-based capital ratio |
|
|
481,476 |
|
|
|
11.16 |
% |
|
|
345,207 |
|
|
|
8.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CET1 capital ratio |
|
$ |
471,304 |
|
|
|
10.95 |
% |
|
$ |
193,619 |
|
|
|
4.50 |
% |
|
$ |
279,672 |
|
|
|
6.50 |
% |
|
Tier 1 leverage ratio |
|
|
471,304 |
|
|
|
8.17 |
% |
|
|
230,846 |
|
|
|
4.00 |
% |
|
|
288,558 |
|
|
|
5.00 |
% |
|
Tier 1 risk-based capital ratio |
|
|
471,304 |
|
|
|
10.95 |
% |
|
|
258,159 |
|
|
|
6.00 |
% |
|
|
344,212 |
|
|
|
8.00 |
% |
|
Total risk-based capital ratio |
|
|
492,430 |
|
|
|
11.44 |
% |
|
|
344,212 |
|
|
|
8.00 |
% |
|
|
430,264 |
|
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CET1 capital ratio |
|
$ |
453,248 |
|
|
|
10.51 |
% |
|
$ |
194,058 |
|
|
|
4.50 |
% |
|
$ |
280,306 |
|
|
|
6.50 |
% |
|
Tier 1 leverage ratio |
|
|
453,248 |
|
|
|
8.26 |
% |
|
|
219,568 |
|
|
|
4.00 |
% |
|
|
274,461 |
|
|
|
5.00 |
% |
|
Tier 1 risk-based capital ratio |
|
|
453,248 |
|
|
|
10.51 |
% |
|
|
258,744 |
|
|
|
6.00 |
% |
|
|
344,992 |
|
|
|
8.00 |
% |
|
Total risk-based capital ratio |
|
|
474,124 |
|
|
|
10.99 |
% |
|
|
344,992 |
|
|
|
8.00 |
% |
|
|
431,240 |
|
|
|
10.00 |
% |
As of each of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and FFB’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. The required ratios for capital adequacy set forth in the above table do not include the additional capital conservation buffer, though each of the Company and FFB maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated.
During the first quarter of 2019, FFI made capital contributions to FFB of $5 million. As of March 31, 2019, FFI had $11.6 million of available capital and, therefore, has the ability and financial resources to contribute additional capital to FFB, if needed.
As of March 31, 2019, the amount of capital at FFB in excess of amounts required to be Well Capitalized was $192 million for the CET-1 capital ratio, $183 million for the Tier 1 leverage ratio, $127 million for the Tier 1 risk-based capital ratio and $62 million for the Total risk-based capital ratio.
The Company paid its first quarterly cash dividend of $0.05 per common share in the first quarter of 2019. It is our current intention to continue to pay quarterly dividends. The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain regulatory restrictions which are discussed in Item 1 “Business—Supervision and Regulation—Dividends and Stock Repurchases” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2018. Additionally, under the terms of the holding company line of credit agreement, FFI may only declare and pay a dividend if the total amount of dividends and stock repurchases during the current twelve months does not exceed 50% of FFI’s net income for the same twelve month period. We did not pay dividends in 2018.
We had no material commitments for capital expenditures as of March 31, 2019. However, we intend to take advantage of opportunities that may arise in the future to grow our businesses, including by opening additional offices or acquiring complementary businesses that we believe will provide us with attractive risk-adjusted returns, although we do not have any immediate plans, arrangements or understandings relating to any material acquisition. As a result, we may seek to obtain additional borrowings and to sell additional shares of our common stock to raise funds which we might need for these purposes. There is no assurance, however, that, if required, we will succeed in obtaining additional borrowings or selling additional shares of our common stock on terms that are acceptable to us, if at all, as this will depend on market conditions and other factors outside of our control, as well as our future results of operations.
37
We are exposed to certain financial risks, which are discussed in detail in Management's Discussion and Analysis of Financial Condition and Results of Operations in the section titled Asset and Liability Management: Interest Rate Risk in our Annual Report on Form 10-K which we filed with the Securities and Exchange Commission on March 1, 2019. There have been no material changes to our quantitative and qualitative disclosures about market risk since December 31, 2018.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
In accordance with SEC rules, an evaluation was performed under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness, as of March 31, 2019, of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2019, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
There have been no material changes in the risk factors that were disclosed in Item 1A, under the caption “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2018, which we filed with the SEC on March 1, 2019.
The Company adopted a stock repurchase plan on October 30, 2018 for the repurchase of up to 2,200,000 shares of its common stock from time to time as market conditions allow. This plan has no stated expiration date for the repurchases. The Company did not repurchase any shares during the first quarter of 2019. As of March 31, 2019, the maximum number of shares that may be purchased under the program were 2,164,700.
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Exhibit No. |
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Description of Exhibit |
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3.1 |
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3.2 |
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31.1 |
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Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2 |
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Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 |
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101 |
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XBRL (eXtensive Business Reporting Language). The following financial materials from the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2019, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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FIRST FOUNDATION INC. |
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Dated: May 8, 2019 |
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By: |
/s/ JOHN M. MICHEL |
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John M. Michel |
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Executive Vice President and
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S-1
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
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| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
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No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|