First Foundation Inc. (“we,” “our,” “us,” “First Foundation” or
the “Company”) (NYSE: FFWM), a financial services company with two
wholly owned operating subsidiaries, First Foundation Advisors and
First Foundation Bank, today announced the reclassification of a
portion of its multifamily portfolio totaling $1.9 billion
principal balance from loans held to maturity to loans held for
sale (the “Loan Reclassification”).
“Our decision to transfer these multifamily loans to held for
sale marks an important next step in the Company's strategic
roadmap to fortify the balance sheet and embrace a more
offensive-minded posture,” said Scott F. Kavanaugh, CEO of First
Foundation Inc. “We believe this move will position the Company for
a return to its historical profitability and performance levels.
Based on recent Southern California-focused multifamily
transactions and renewed optimism for lower rates, we expect third
quarter-end fair-value pricing to surpass 92% of the $1.9 billion
principal balance. While the resulting write-down to fair value
will meaningfully impact third-quarter earnings and will reduce our
‘as converted’ tangible book value per share, we expect the move to
provide the flexibility needed to work with credit-minded
counterparties in exploring a variety of options for securitizing
or selling the loans and maximizing final execution pricing. Given
the relatively short time to repricing for this pool of loans,
which is between two and a half and three years, we expect final
pricing to exceed currently estimated fair values.”
The Company also announced today that, following its Special
Meeting of Stockholders held on September 30, 2024, all of the
issued and outstanding shares of the Company’s Series B
Noncumulative Convertible Preferred Stock (“Series B Preferred
Stock”) issued by the Company on July 8, 2024 in connection with
its previously announced capital raise (the “July 2024 Capital
Raise”) automatically converted into an aggregate of 14,490,000
shares of common stock, par value $0.001 per share, of the Company
(“Common Stock”) as of the close of business on October 2,
2024.
Following this conversion, the following securities of the
Company were issued and outstanding as of the close of business on
October 2, 2024: 82,345,084 shares of Common Stock; 29,811 shares
of the Company’s Series A Noncumulative Preferred Stock (“Series A
Preferred Stock” and, together with the Series B Preferred Stock,
the “Preferred Stock”), each share of which is automatically
convertible into 1,000 shares of Common Stock in the event of a
transfer by the holder thereof consistent with the rules and
limitations of Regulation Y and the Bank Holding Company Act of
1956, as amended, subject to certain limitations (a “Reg Y
Transfer”), and all of which shares of Series A Preferred Stock
represent the right (on an as converted basis) to receive
approximately 29,811,000 shares of Common Stock; and net-settled
warrants (the “Warrants”), which are not exercisable until January
5, 2025, affording the holder thereof the right, until July 8,
2031, to purchase a total of 22,239 shares of a new class of
non-voting, common-equivalent preferred stock of the Company
(“Series C NVCE Stock”), each share of which is convertible into
1,000 shares of Common Stock in a Reg Y Transfer, and all of which
shares of Series C NVCE Stock, upon issuance, will represent the
right (on an as converted basis) to receive 22,239,000 shares of
Common Stock.
The following table shows First Foundation’s pro forma tangible
book value as of June 30, 2024, as adjusted to reflect the July
2024 Capital Raise and the conversion of the shares of Series A
Preferred Stock and Series B Preferred Stock into shares of Common
Stock. The following table does not reflect the Loan
Reclassification, the issuance of Series C NVCE Stock upon exercise
of the Warrants or the issuance of Common Stock upon the conversion
of Series C NVCE Stock.
Pro Forma Tangible Book Value
Per Share (unaudited)
Shareholders’ Equity as of
June 30, 2024:
(in thousands, except per share
amounts and number of shares outstanding)
Shareholders’ Equity
$
933,244
Less: Intangible Assets
(4,222
)
Tangible Common Equity(1)
$
929,022
Add: July 2024 Capital Raise:
Series A Preferred Equity
$
87,888
Series B Preferred Equity
42,719
Common Equity(2)
84,446
Total Equity from July 2024
Capital Raise
$
215,053
Total Tangible Common Equity
(as adjusted)
$
1,144,075
Common Shares Outstanding as
of June 30, 2024:
56,543,382
Common Shares Issued in the July
2024 Capital Raise and upon Conversion of Preferred Shares:
Common Shares underlying the
Series A Preferred Shares
29,811,000
Common Shares underlying the
Series B Preferred Shares
14,490,000
Common Shares
11,308,676
Common Shares Outstanding (as
adjusted)(3)
112,153,058
Pro Forma Tangible Book Value
Per Share (as adjusted)
$
10.20
(1)
Non-GAAP financial measure
(2)
Includes common stock, additional
paid-in-capital and other non-preferred shareholders’ equity
accounts
(3)
Excludes (a) 22,239,000 shares of
common stock issuable upon conversion of 22,239 shares of Series C
Preferred Stock issuable upon exercise of the Warrants issued in
the July 2024 Capital Raise at the exercise price of $5,125 per
preferred share and (b) the dilutive effect of 8,825 shares related
to restricted stock unit awards outstanding as of June 30,
2024.
About First Foundation
First Foundation Inc. (NYSE: FFWM) and its subsidiaries offer
personal banking, business banking, and private wealth management
services, including investment, trust, insurance, and philanthropy
services. This comprehensive platform of financial services is
designed to help clients at any stage in their financial journey.
The broad range of financial products and services offered by First
Foundation are more consistent with those offered by larger
financial institutions, while its high level of personalized
service, accessibility, and responsiveness to clients is more
aligned with community banks and boutique wealth management firms.
This combination of an integrated platform of comprehensive
financial products and personalized service differentiates First
Foundation from many of its competitors and has contributed to the
growth of its client base and business. Learn more at
firstfoundationinc.com or connect with us on LinkedIn and
Twitter.
Forward-Looking Statements
This press release includes forward-looking statements within
the meaning of the “Safe-Harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including forward-looking
statements regarding our expectations and beliefs about the
quarter-end fair-value pricing of the loans transferred to held for
sale, potential loans sales and our future financial performance,
financial condition and plans. Forward-looking statements often
include words such as "believe," "expect," "anticipate," "intend,"
"plan," "estimate," "project," "outlook," or words of similar
meaning, or future or conditional verbs such as "will," "would,"
"should," "could," or "may." The forward-looking statements in this
press release are based on current information and on assumptions
that we make about future events and circumstances that are subject
to a number of risks and uncertainties that are often difficult to
predict and beyond our control. As a result of those risks and
uncertainties, our actual financial results and activities in the
future could differ, possibly materially, from those expressed in
or implied by the forward-looking statements contained in this
press release and could cause us to make changes to our future
plans. Those risks and uncertainties include, but are not limited
to, the risk of incurring credit losses, which is an inherent risk
of the banking business; the quality and quantity of our deposits;
adverse developments in the financial services industry generally
such as bank failures and any related impact on depositor behavior
or investor sentiment; risks related to the sufficiency of
liquidity; risk that we will not be able to grow at historic rates
or at all; the risk that we will not be able to access the
securitization market or otherwise sell loans on favorable or
anticipated terms or at all; changes in general economic
conditions, including real estate values, either nationally or
locally in the areas in which we conduct or will conduct our
business; risks associated with changes in interest rates, which
could adversely affect our interest income, interest rate margins,
and the value of our interest-earning assets, and therefore, our
future operating results; the risk that the performance of our
investment management business or of the equity and bond markets
could lead clients to move their funds from or close their
investment accounts with us, which would reduce our assets under
management and adversely affect our operating results; negative
impacts of news or analyst reports about us or the financial
services industry; the impacts of inflation on us and our
customers; results of examinations by regulatory authorities and
the possibility that such regulatory authorities may, among other
things, limit our business activities or our ability to pay
dividends, or impose fines, penalties or sanctions; the risk that
we may be unable or that our board of directors may determine that
it is inadvisable to pay future dividends at historic levels or at
all; risks associated with changes in income tax laws and
regulations; and risks associated with seeking new client
relationships and maintaining existing client relationships.
Additional information regarding these and other risks and
uncertainties to which our business and future financial
performance are subject is contained in our Annual Report on Form
10-K for the fiscal year ended December 31, 2023, and other
documents we file with the SEC from time to time. We urge readers
of this report to review those reports and other documents we file
with the SEC from time to time. Also, our actual financial results
in the future may differ from those currently expected due to
additional risks and uncertainties of which we are not currently
aware or which we do not currently view as, but in the future may
become, material to our business or operating results. Due to these
and other possible uncertainties and risks, readers are cautioned
not to place undue reliance on the forward-looking statements
contained in this report, which speak only as of today's date, or
to make predictions based solely on historical financial
performance. We also disclaim any obligation to update
forward-looking statements contained in this report or in the
above-referenced reports, whether as a result of new information,
future events or otherwise, except as may be required by law or
NYSE rules.
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version on businesswire.com: https://www.businesswire.com/news/home/20241003427621/en/
Investor contact: Jamie Britton, CFO, jbritton@ff-inc.com, (949)
476-0300
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