First Foundation Q1 2025 slides: return to profitability amid strategic transformation

Introduction & Market Context

First Foundation Inc . (NASDAQ:NYSE:FFWM) presented its first quarter 2025 results on April 30, highlighting a return to profitability and progress on its strategic transformation. The financial institution, which operates across five states including California and Florida, reported positive earnings after posting a loss in the previous quarter.

The company’s stock responded positively to the presentation, rising 4.63% to $5.20 during the trading session, continuing its recovery from a 52-week low of $4.42. Despite recent improvements, First Foundation’s valuation remains significantly below its peer group, trading at approximately 0.52 times its adjusted tangible book value per share of $9.42, compared to peer valuations ranging from 1.2 to 1.9 times.

Quarterly Performance Highlights

First Foundation reported a return to profitability in Q1 2025, posting earnings per share of $0.08, a significant improvement from the $0.17 loss per share in Q4 2024. The company generated pre-provision net revenue (PPNR) of $9.7 million, driven by an expanding net interest margin (NIM) of 1.67%, up from 1.58% in the previous quarter.

Credit quality showed marked improvement with negligible net charge-offs and a normalized provision for credit losses of $3.4 million. Total (EPA:TTEF) nonperforming assets decreased to $44.9 million, representing just 0.36% of total assets, with 40% of past due and nonaccrual loans attributed to a single borrower relationship.

As shown in the following chart of key quarterly performance metrics:

The company also made significant progress in strengthening its capital position, increasing its Common Equity Tier 1 (CET1) ratio by over 50 basis points to 10.63%. The adjusted tangible book value per share stood at $9.42, highlighting the gap between market valuation and underlying book value.

Strategic Initiatives

First Foundation outlined its strategic transformation, which is progressing through a two-phase approach. The company has completed several near-term actions including raising capital to solidify its balance sheet and moving multifamily loans to held-for-sale status. Medium and long-term initiatives focus on leveraging the company’s presence in attractive markets, diversifying the loan portfolio, accelerating wealth management growth, and enhancing operational capabilities.

The company’s strategic priorities are illustrated in this comprehensive overview:

A key element of First Foundation’s strategy involves reducing its commercial real estate concentration, particularly in multifamily loans. The company decreased its multifamily exposure from $5.23 billion to $4.79 billion through a combination of loan sales and principal payments, while limiting new originations.

The following chart demonstrates the company’s progress in reducing multifamily loan balances:

Balance Sheet Improvements

First Foundation made substantial progress in improving its funding mix during the quarter. The company reduced brokered deposits by $400 million while increasing core deposits by $71 million, reflecting a strategic shift toward more stable funding sources.

The deposit strategy transformation is illustrated in this chart showing the reduction in wholesale funding:

On the asset side, gross loans held for investment decreased by $256.8 million quarter-over-quarter, contributing to the reduction in commercial real estate concentration to 435%. The company maintained strong liquidity with a ratio of liquid assets to uninsured and uncollateralized deposits of 2.18 times.

The company’s capital and liquidity position is summarized in the following chart:

Asset quality metrics also showed improvement, with past due and nonaccrual loans decreasing from $70.4 million to $54.8 million. The composition of these loans spans multiple categories, with significant portions in residential and commercial relationships.

The following chart details the company’s asset quality improvements:

Forward-Looking Statements

First Foundation expects its net interest margin to continue improving throughout 2025 and beyond, driven by loan repricing opportunities and the strategic shift in its deposit mix. The company projects accelerating NIM expansion as higher-rate loans become a larger portion of the portfolio and lower-cost core deposits replace more expensive wholesale funding.

The company’s investment thesis emphasizes several key factors: the earnings inflection point and return to profitability, a solidified balance sheet with strong capital ratios, improving credit quality, presence in attractive markets, disciplined expense management, and a valuation gap versus peers.

As shown in this summary of the company’s investment case:

Management highlighted that "Phase 2" strategic initiatives are already underway, including key hires in Southwest Florida to capitalize on growth opportunities in that market. The company remains focused on expense discipline throughout all phases of its strategy while maintaining a steadfast focus on profitability.

First Foundation’s long-term NIM outlook suggests continued improvement, as illustrated in this forward-looking projection:

With its return to profitability, strengthened balance sheet, and clear strategic direction, First Foundation appears positioned for improved performance in coming quarters, though investors will be closely monitoring the execution of its strategic transformation and continued progress in diversifying its loan portfolio.

Full presentation:

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