First Foundation Inc.

Greetings and welcome to the FIRST Foundation's first quarter 2022 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 questions following the presentation. If you would like to ask a question at any time, please press star 1 on your touchtone 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 Cavanaugh, First Foundation's Chief Executive Officer, Kevin Thompson, Chief Financial Officer, and David DiPillo, President. 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 harbored statement, including today's earnings release. In addition, some of the discussion may include non-GAAP financial measures. For a more complete discussion of the risk and uncertainties that could cause actual results to differ materially from any forward-looking statements and the reconciliations of non-GAAP financial measures, see the company's filings with the Security and Exchange Commission. And now I would like to turn the call over to Scott Cavanaugh.

Hello, and thank you for joining us. We would like to welcome all of you to our first quarter 2022 earnings conference call. We will be providing some prepared comments regarding our activities, and then we will respond to questions. Let me start by saying a few words about how proud I am of everyone at First Foundation. The results we reported today are a testament to the hard work from everyone in our organization. The past few years have posed some interesting challenges for everyone, and yet we continue to generate strong, sustainable results quarter after quarter. This was another great quarter for FIRST Foundation and a fantastic start to the year. Our earnings for the first quarter were $30.8 million or 55 cents per share. This represents a 38% increase over the first quarter of 2021. Total revenues were 89.9 million for the quarter, a 36% increase from the first quarter of 2021. Tangible book value per share ended the quarter higher at $15.21. We declared and paid our first quarter cash dividend of 11 cents per share, which we increased last quarter. We also received authorization from our board of directors to purchase up to $75 million of our company stock. The favorable results we reported today reflect the strength of our institution and our continued positive outlook that our market model is working very well across the diverse and dynamic markets we serve. Loan originations continue to be at near record levels with $1.1 billion in new loans for the quarter. 42% of those originations came from CNI. MPAs remain low at 16 basis points for the quarter as our lending team does a fantastic job maintaining our high credit standards. We have established a well-balanced loan portfolio that continues to perform very well. Dave will touch more on this later in the call. Our deposit profile remains attractive with core deposits at 99% of total deposits. Deposits increased by 146 million in the quarter, and our loan-to-deposit ratio was 88% 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. Our wealth management and trust businesses continue to provide meaningful contributions to the success of the firm. Assets under management ended the quarter at $5.5 billion, largely due to volatile market conditions in the first few weeks of the year, yet rebounded in the last 30 days and to start the second quarter. The all-weather portfolios we manage for our clients fared well as the 4% decrease in total assets was less than the 5% decrease in the S&P 500 and the 9% decrease in NASDAQ. An important part of our wealth management offering is our in-house investment management capabilities. I am proud to share that the performance of our mutual funds has been very strong, with our total return fund earning a Morningstar five-star rating and coming in as a top percentile performing fund for the year. Even amidst all the volatility and changing market conditions, our pipeline continues to be strong and the demand for our wealth management services is at an all-time high. Last quarter, I referenced the many projects we are working on, including the acquisition of First Florida Integrity Bank, which will be complete when we take the final step of converting our core systems in May. This has been a tremendous effort by the team, and I am so grateful for everyone who has worked hard to make this happen. including all of our new colleagues in Florida. We are also now just weeks away from opening the doors of our new branch in Plano, Texas. Starting a de novo branch is never an easy feat, but again, our team did an amazing job and we are really pleased at how it turned out. It's very exciting to have a retail presence in Texas. Even as many of these projects near completion, We continue to invest in technology for the benefit of our clients and to enable our employees with solutions they need to meet client demand and provide exceptional client service. We are also investing in our compliance efforts, including adding people and systems to ensure we continue to exceed the expectations of regulators in our ever-changing environment. In addition to expanding our footprint, Adding to our technology stack and the building out of our teams, we have also expanded our product offering. This includes our recently revamped SBA lending offering, our expanded investment management offering, and of course, our efforts with Fiserv and NYDIG to bring Bitcoin into banking. These additional high-quality financial solutions are enhancements to our already robust offering and are important as we deepen relationships with existing clients. Many of our clients turn to us for a variety of their financial needs, especially when we are viewed as their primary bank of choice when it comes to their financial life. As we look ahead to a rising rate environment and perhaps even a transitioning economy, First Foundation remains well-positioned with a strong balance sheet and excellent credit. Demand for our services is at peak levels and our pipelines across all business lines are very robust. I'm very grateful for all that we have accomplished in the quarter and 2022 is off to a great start. Now I will turn the call over to Kevin, our CFO.

Thank you, Scott. Earnings per diluted share was 55 cents in the first quarter. The return on assets was strong at 1.18% with a return on tangible common equity of 14.7%. As a result of this good momentum, our tangible book value per share increased to $15.21 in the quarter. These were especially good metrics considering our first quarter generally has higher compensation expenses related to payroll taxes and bonuses. And we are carrying some duplicate merger related expenses until systems conversion in the second quarter. The net interest margin contracted 17 basis points to 3% in the quarter because of high average cash balances. From the success we have had in increasing core deposits and from the acquisition of TGR Financial, we have already begun to deploy much of that liquidity with our strong loan growth that continues into the current quarter. We maintain discipline in loan production with the average yield on loans increasing four basis points to 3.84%. At the same time, we were able to maintain our cost of deposits at 15 basis points for the quarter. We transferred $917 million of available for sale securities to held to maturity during the quarter since we have the intent to hold these securities through maturity. Credit metrics remain strong in all our loan portfolios and the allowance for credit losses for loans decreased slightly to 44 basis points of total loans. This decrease was primarily a result of the payoff of purchase credit deteriorated loans from specific reserves from prior acquisitions. Non-performing assets remain low at 16 basis points to total assets. Asset management fees were strong with revenues of $10.2 million and our advisory and trust divisions achieved a combined pre-tax profit margin of 21% in the quarter. Assets under Management at FFA ended the quarter at $5.5 billion, while trust assets under advisement at FFB were $1.3 billion. Other income included a $1.1 million gain related to a sell-leaseback transaction. This item is excluded from our efficiency ratio. Our non-interest expense increased due to higher compensation and benefits expenses, mostly related to a 20.5% increase in average FTE, as a result of our acquisition in the fourth quarter. Also contributing were merit increases that were effective at the beginning of the year. As I mentioned earlier, our first quarter generally has seasonally higher compensation expenses related to payroll taxes and bonuses. Finally, until we finish systems conversions of our recent acquisition in the second quarter, we are carrying extra costs associated with duplicate systems and some headcounts. The efficiency ratio for the quarter was still strong at 53%. I will now turn the call over to David DeFillo. Thank you, Kevin.