First Foundation Q2 2025 slides reveal adjusted profit despite CRE loan sale impact

First Foundation Inc (NASDAQ:NYSE:FFWM) presented its second quarter 2025 results on July 31, revealing a net loss driven by strategic commercial real estate (CRE) loan sales, but showing adjusted profitability when excluding these one-time charges. The company’s stock closed at $4.87 on July 30, down 1.22%, with premarket trading on July 31 showing a further decline of 1.44% to $4.80.

Quarterly Performance Highlights

First Foundation reported a GAAP net loss of $7.7 million (-$0.09 per share) for Q2 2025, primarily due to $12.1 million in pre-tax impacts from strategic loan sales. However, when adjusting for these one-time charges, the company posted a net income of $1.0 million ($0.01 per share).

As shown in the following results overview, the company’s performance was significantly affected by the loan transactions, with adjusted figures painting a more positive picture:

The company’s net interest margin (NIM) was 1.68% for the quarter, a slight improvement of 1 basis point quarter-over-quarter from the 1.67% reported in Q1 2025. First Foundation emphasized its strong credit performance, with net charge-offs of less than 1 basis point (0.00%) and an allowance for credit losses (ACL) on loans that increased 4 basis points to 0.50%.

The presentation highlighted several positive momentum themes for the quarter:

Strategic Initiatives

First Foundation continues to execute its strategic transformation plan focused on reducing CRE concentration, growing commercial banking, and accelerating wealth management growth. The company sold $858 million of CRE loans across two transactions during Q2 2025, significantly reducing its CRE exposure.

The company’s current status shows $11.6 billion in bank assets, $5.3 billion in assets under management, and $1.2 billion in trust assets under advisement, with 30 branch/office locations across five states. First Foundation emphasized its presence in attractive markets, particularly California and Florida.

A key component of the company’s strategy involves reducing its multifamily loan portfolio while focusing on repricing opportunities. The presentation outlined the borrower behavior following these strategic changes:

The company is also actively working to improve its deposit composition by reducing reliance on wholesale funding sources. During Q2, First Foundation exited $540 million of higher-cost MSR deposits and saw its total deposit cost decline by 14 basis points quarter-over-quarter.

Detailed Financial Analysis

First Foundation’s asset quality remains strong despite the strategic shifts in its loan portfolio. The company reported total nonperforming assets of $40.8 million, with 31% of past due and nonaccrual loans attributed to a single borrower relationship.

The company emphasized its strong liquidity and capital position, with a CET1 ratio of 11.08% and liquidity to uninsured and uncollateralized deposits of 2.70x. First Foundation reported that 85% of its total deposits are insured or collateralized.

Historical credit quality metrics show that First Foundation has maintained better-than-peer performance in terms of non-performing loans and net charge-offs:

The company’s adjusted tangible book value per share stands at $9.34, which management noted is significantly higher than the current stock price of $4.93, representing a price-to-tangible book value ratio of approximately 0.53.

Forward-Looking Statements

First Foundation expects its net interest margin to increase through fiscal year 2025, with acceleration in 2026 and beyond. This projection is based on anticipated lower funding costs and higher yields from loan repricing, particularly in the multifamily portfolio.

The company highlighted several investment reasons in its presentation, emphasizing its progress on strategic initiatives, strong credit quality, solid balance sheet, presence in growth markets, expense discipline, and attractive valuation.

This quarter’s results represent a shift from Q1 2025, when the company reported net income of $6.9 million ($0.09 per share). The temporary setback in Q2 appears to be a calculated move as part of the company’s longer-term strategic transformation to improve its balance sheet composition and position itself for sustainable profitability in future quarters.

Management expects to see continued improvement in NIM, with an exit run rate of 1.8-1.9% by Q4 2025 and further improvement to 2.1-2.2% by the end of 2026, assuming modest asset reduction and incorporating expectations for Federal Reserve rate cuts in the coming quarters.

Full presentation:

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