First Foundation Inc.

Greetings and welcome to FIRST Foundation's first quarter 2021 earnings conference call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchstone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We ask that you please pick up your handset to allow optimal sound quality. Speaking today will be Scott Kavanaugh, First Foundation's Chief Executive Officer, Kevin Thompson, Chief Financial Officer, and David DiPello, President of First Foundation. Before I hand the call over to Scott, please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the company's performance and financial results. These forward-looking statements are made subject to the Safe Harbor Statement included in today's earnings release. In addition, some of the discussion may include non-GAAP financial measures. For more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures, see the company's filings with the Securities and Exchange Commission. And now I will turn the call over to Scott Cavanaugh.

Hi, good morning and thank you for joining us. We would like to welcome all of you to our first quarter 2021 earnings conference call. We will be providing some prepared comments regarding our activities, and then we will respond to questions. Our earnings for the first quarter were 22.4 million or 50 cents per share. This represents a 69% increase over the first quarter of 2020. Total revenues were $66.1 million for the quarter, a 19% increase from the first quarter of 2020. Our tangible book value per share ended the quarter higher at $13.84. We declared and paid our first quarter cash dividend of 9 cents per share. As many of you have heard me say, our business model is designed to help clients wherever they are in their financial lives. And today's results indicate that our model is working very well across the diverse and dynamic markets we serve. During the quarter, as we previously announced, we expanded into Texas, which included the move of our principal executive office, as well as the addition of new employees to our team in the Dallas-Fort Worth Metroplex. We believe this move solidifies our positioning as a regional commercial bank. We are seeking further expansion in the area, including building out our team, having a retail branch presence, and eventually adding trust powers in the state. There is an enormous opportunity for growth in Texas, and we are excited to be here. Our operations in California, Nevada, and Hawaii will remain unchanged. We think our regional presence across all four states that we operate in is a great fit for the products and services we offer. We are in areas that have great opportunities for everything from wealth management to lending to business and personal banking. Related specifically to the profile of our bank, We had record loan originations of $765 million for the quarter, with 53% of those originations coming from CNI. MPAs remained low at 24 basis points for the quarter. We continue to have a well-balanced loan portfolio that Dave will touch on in more detail later on in the call. Deposits increased by $322 million for the quarter and our loan to deposit ratio was 90.1% at the end of the quarter, driven in part by our ability to continue to attract high quality commercial clients. All of this speaks to the strength of our deposit team. Over the last year, our core funding has increased from 73% to 98%. We continue to reduce our broker deposits and we will not have a need for a home loan bank borrowings for the foreseeable future. Our wealth management and trust business continue to provide meaningful contributions to the success of the firm. The wealth management business is continuing to gain scale and the combined pre-tax profit margin for trust and wealth management was 16% for the quarter. We generated 101 million in new assets under management for the quarter, and Om ended at record levels, eclipsing $5 billion. Our private wealth management business serves our clients with high touch and sophisticated investment and planning solutions. They, along with our trust department, were very instrumental in retaining and attracting new clients during some volatile times last year and have experienced a great start to this year. our new business pipelines across our entire platform remain remarkably strong as we continue to attract new clients to all facets of our offering. And with our recently announced strategic investment in the institutional Bitcoin provider, NYDIG, we are seeking ways to add Bitcoin-related solutions to our platform. And a first such partnership of its kind, this strategic investment helps lay the foundation for building the infrastructure required to offer safe and reliable access to digital assets. We believe cryptocurrencies and blockchain technology will play a critical role in the future of finance, and we are pleased to be the catalyst to bring digital assets into traditional financial services. There are many ways we can participate in this important asset class, and we are very excited about what we will be able to offer our clients. With the support of our partners, NYDIG, and our processing provider, Fiserv, we are looking to bring digital assets into the forefront. Before I hand the call over, I want to take a moment to thank all of our employees for their extraordinary efforts over the past quarter. We have some of the best employees in the business, And I am also very grateful to our clients who entrust us with their financial needs. Now, let me turn the call over to our CFO, Kevin Thompson.

Thank you, Scott. Earnings per diluted share of 50 cents in the first quarter is flat to last quarter and a 47% increase over first quarter 2020. As a result of this momentum, our tangible book value per share increased 3% to $13.84 in the quarter, The return on assets was strong at 1.25% with a return on tangible equity of 14.9%. The net interest margin contracted three basis points to 3.16% in the quarter as a result of high average cash balances from the success we have had in increasing core deposits. For the month of March, our NIM increased to 3.24% following the deployment of excess cash through our pay down of higher cost funding sources and growth in loans in the second half of the quarter. We maintain discipline in loan production, with the average yield on loans dropping just two basis points to 3.99%. And we continue our efforts to lower deposit pricing, bringing the cost of deposits down from 41 to 31 basis points. With the strong C&I loan production and increasing core deposits over the past several quarters, our balance sheet is trending less liability-sensitive. We recognized 1.2 million of PPP fee income, or 20% of the total net PPP fees, bringing the total fees realized to 76% from the 171 million of the first round of PPP loans funded. Excluding the effects of PPP, the NIM would have been 3.13% for the quarter. Credit metrics remain strong in all our loan portfolios, and the allowance for credit losses for loans decreased to 45 basis points of total loans. This was primarily a result of the improvement in the economic scenario we utilized for the CECL calculation. We had net recoveries of one basis point, and non-performing assets remained low at 24 basis points to total assets. The allowance for credit losses for investments increased by $1.6 million as a result of the lower interest rate environment and faster-than-expected prepayments that negatively impacted the projected cash flows on our interest-only securities. Asset management fees were strong with revenues of $8.3 million, and our advisory and trust divisions achieved a combined pre-tax profit margin of 16% in the quarter. Assets under management at FFA increased to $5 billion, while trust assets under advisement at FFB increased to $1.2 billion. Our non-interest expense increased due to merit increases that were effective at the beginning of the year and annual bonus and commission payouts in the first quarter. The efficiency ratio for the quarter was 51.5%. With strong expense management and the investments we have made in our infrastructure, we are seeing growing benefits from operational leverage and efficiencies. I will now turn the call over to David DePille.