First Foundation Inc ((FFWM)) has held its Q1 earnings call. Read on for the main highlights of the call.
First Foundation Inc’s recent earnings call painted a picture of cautious optimism as the company reported a significant return to profitability and improvements in key financial metrics. While challenges remain, particularly in asset management and deposits, the overall sentiment was balanced with a positive outlook on strategic initiatives.
Return to Profitability
First Foundation Inc reported a net income of $6.9 million, or $0.08 per share, marking a notable turnaround from the previous quarter’s net loss of $14.1 million. This shift underscores the company’s strategic progress and ability to navigate a challenging economic environment.
Net Interest Margin Expansion
The company achieved a net interest margin expansion of 9 basis points to 1.67%, complemented by a $5 million reduction in non-interest expenses. This improvement reflects First Foundation’s effective cost management and strategic focus on enhancing profitability.
Loan Portfolio Strategy
First Foundation funded $180 million in new loan balances at an average yield of 7.09%, with a significant 78% allocated to commercial and industrial (C&I) loans. The company continues to prioritize reducing its concentration in commercial real estate, aligning with its strategic objectives.
Credit Portfolio Improvement
Positive asset migration trends were evident, with past due and nonaccrual loans decreasing by 22% to $54.8 million. This improvement highlights the company’s efforts in strengthening its credit portfolio and managing risk effectively.
Capitalization and Liquidity
First Foundation remains well-capitalized, boasting a common equity Tier 1 ratio of 10.6% and a Tier 1 leverage ratio of 8.1%. With $3.7 billion in borrowing capacity, the company maintains ample liquidity to support its operations and strategic initiatives.
Decline in Assets Under Management
Assets under management saw a decline, ending the quarter at $5.1 billion compared to $5.4 billion at the end of the previous year. This reduction reflects ongoing challenges in asset management that the company aims to address.
Deposit Decline
Overall deposits experienced a modest decline to $9.6 billion, primarily due to a $400 million decrease in high-cost brokered deposits. Despite this, there was an increase in retail, specialty, and digital banking deposits, indicating a shift in the company’s deposit strategy.
Increased Criticized Assets
The level of criticized assets increased as the company continued stress testing for higher interest rates and potential impacts on commercial real estate cash flows. This highlights ongoing challenges in managing asset quality amidst a fluctuating economic landscape.
Forward-Looking Guidance
Looking ahead, First Foundation anticipates modest asset reductions and further margin expansion, targeting a net interest margin between 1.8% and 1.9% by the fourth quarter of 2025. The company expects continued improvements into 2026, driven by strategic initiatives and effective risk management.
In summary, First Foundation Inc’s earnings call reflects a balanced sentiment with optimism about strategic initiatives and financial improvements. While challenges remain, particularly in asset management and deposits, the company’s return to profitability and focus on margin expansion provide a positive outlook for the future.