ffwm-10q_20160930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission File Number 001-36461

 

FIRST FOUNDATION INC.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

20-8639702

(State or other jurisdiction
of incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

 

 

18101 Von Karman Avenue, Suite 700 Irvine, CA 92612

 

92612

(Address of principal executive offices)

 

(Zip Code)

(949) 202-4160

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

 

As of November 7th, 2016, there were 16,327,658 shares of registrant’s common stock outstanding

 

 

 

 


 

FIRST FOUNDATION INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016

TABLE OF CONTENTS

 

 

  

 

 

Exhibit No.

 

 

 

Part I. Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

 

 

 

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

41

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

41

 

 

 

 

 

Part II. Other Information

 

 

 

 

 

 

 

Item 1A

 

Risk Factors

 

41

 

 

 

 

 

Item 6

 

Exhibits

 

42

 

 

 

 

 

SIGNATURES

 

S-1

 

 

 

 

 

EXHIBITS

 

E-1

 

 

 

(i)


 

PART I — FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

FIRST FOUNDATION INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

 

September 30,
2016

 

 

December 31,
2015

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

496,813

 

 

$

215,748

 

Securities available-for-sale (“AFS”)

 

542,703

 

 

 

565,135

 

Loans held for sale

 

200,002

 

 

 

 

 

Loans, net of deferred fees

 

 

2,308,829

 

 

 

1,765,483

 

Allowance for loan and lease losses (“ALLL”)

 

(13,600

)

 

 

(10,600

)

Net loans

 

2,295,229

 

 

 

1,754,883

 

 

 

 

 

 

 

 

 

Investment in FHLB stock

 

25,677

 

 

 

21,492

 

Premises and equipment, net

 

5,342

 

 

 

2,653

 

Deferred taxes

 

10,156

 

 

 

15,392

 

Real estate owned (“REO”)

 

544

 

 

 

4,036

 

Goodwill and intangibles

 

2,232

 

 

 

2,416

 

Other assets

 

14,970

 

 

 

10,824

 

Total Assets

$

3,593,668

 

 

$

2,592,579

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Deposits

$

2,338,737

 

 

$

1,522,176

 

Borrowings

 

951,000

 

 

 

796,000

 

Accounts payable and other liabilities

 

16,637

 

 

 

14,667

 

Total Liabilities

 

3,306,374

 

 

 

2,332,843

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

 

Common Stock, par value $0.001: 70,000,000 shares authorized;  16,300,833 and 15,980,526 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively

 

 

16

 

 

 

16

 

Additional paid-in-capital

 

231,631

 

 

 

227,262

 

Retained earnings

 

50,548

 

 

 

33,762

 

Accumulated other comprehensive income (loss), net of tax

 

5,099

 

 

 

(1,304

)

Total Shareholders’ Equity

 

287,294

 

 

 

259,736

 

 

 

 

 

 

 

 

 

Total Liabilities and Shareholders’ Equity

$

3,593,668

 

 

$

2,592,579

 

 

 

 

 

 

 

 

 

 

 

 

 

(See accompanying notes to the consolidated financial statements)

 

 

1


 

FIRST FOUNDATION INC.

CONSOLIDATED INCOME STATEMENTS - UNAUDITED

(In thousands, except share and per share amounts)

 

 

Quarter Ended

September  30,

 

 

Nine Months Ended

September  30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

$

22,231

 

 

$

15,634

 

 

$

61,362

 

 

$

41,097

 

Securities AFS

 

3,202

 

 

 

1,107

 

 

 

9,423

 

 

 

2,744

 

Fed funds sold, FHLB stock and deposits

 

571

 

 

 

367

 

 

 

1,490

 

 

 

1,418

 

Total interest income

 

26,004

 

 

 

17,108

 

 

 

72,275

 

 

 

45,259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

2,426

 

 

 

1,328

 

 

 

6,194

 

 

 

3,366

 

Borrowings

 

415

 

 

 

319

 

 

 

1,636

 

 

 

1,137

 

Total interest expense

 

2,841

 

 

 

1,647

 

 

 

7,830

 

 

 

4,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

23,163

 

 

 

15,461

 

 

 

64,445

 

 

 

40,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

1,231

 

 

 

570

 

 

 

2,881

 

 

 

1,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

21,932

 

 

 

14,891

 

 

 

61,564

 

 

 

39,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset management, consulting and other fees

 

6,141

 

 

 

5,870

 

 

 

18,127

 

 

 

17,642

 

Gain on sale of loans

 

7,238

 

 

 

205

 

 

 

7,238

 

 

 

205

 

Gain (loss) on capital markets activities

 

993

 

 

 

(2

)

 

 

(1,055

)

 

 

(28

)

Other income

 

707

 

 

 

795

 

 

 

2,664

 

 

 

1,673

 

Total noninterest income

 

15,079

 

 

 

6,868

 

 

 

26,974

 

 

 

19,492

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

12,059

 

 

 

10,870

 

 

 

36,707

 

 

 

29,440

 

Occupancy and depreciation

 

3,072

 

 

 

2,561

 

 

 

8,783

 

 

 

6,486

 

Professional services and marketing costs

 

3,525

 

 

 

1,481

 

 

 

7,808

 

 

 

4,051

 

Other expenses

 

2,880

 

 

 

2,044

 

 

 

7,505

 

 

 

4,311

 

Total noninterest expense

 

21,536

 

 

 

16,956

 

 

 

60,803

 

 

 

44,288

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before taxes on income

 

15,475

 

 

 

4,803

 

 

 

27,735

 

 

 

14,487

 

Taxes on income

 

5,800

 

 

 

2,041

 

 

 

10,949

 

 

 

6,157

 

Net income

$

9,675

 

 

$

2,762

 

 

$

16,786

 

 

$

8,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.60

 

 

$

0.22

 

 

$

1.04

 

 

$

0.87

 

Diluted

$

0.58

 

 

$

0.21

 

 

$

1.01

 

 

$

0.84

 

Shares used to compute net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

16,257,008

 

 

 

12,623,924

 

 

 

16,132,112

 

 

 

9,534,056

 

Diluted

 

16,787,947

 

 

 

13,074,935

 

 

 

16,682,807

 

 

 

9,929,445

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(See accompanying notes to the consolidated financial statements)

 

2


 

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENT OF CHANGES

IN SHAREHOLDERS’ EQUITY - Unaudited

(In thousands, except share amounts)

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

Number

of Shares

 

Amount

 

Additional

Paid-in Capital

 

Retained Earnings

 

Comprehensive Income (Loss)

 

Total

Balance: December 31, 2015

 

15,980,526 

 

$

16

 

 

$

227,262

 

 

$

33,762

 

 

$

(1,304

)

 

$

259,736

 

Net income

 

 

 

 

 

 

 

 

 

16,786

 

 

 

 

 

 

16,786

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

6,403

 

 

 

6,403

 

Stock based compensation

 

 

 

 

 

 

712

 

 

 

 

 

 

 

 

 

712

 

Issuance of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

293,471

 

 

 

 

 

3,657

 

 

 

 

 

 

 

 

 

3,657

 

Issuance of restricted stock

 

26,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance: September 30, 2016

 

16,300,833

 

$

16

 

 

$

231,631

 

 

$

50,548

 

 

$

5,099

 

 

$

287,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(See accompanying notes to the consolidated financial statements)

3


 

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME - UNAUDITED

(In thousands)

 

 

 

Quarter Ended

September 30,

 

 

Nine Months Ended

September  30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

9,675

 

 

$

2,762

 

 

$

16,786

 

 

$

8,330

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (loss) on securities arising during the period

 

(1,033

)

 

 

2,690

 

 

 

9,805

 

 

 

 

1,477

 

Other comprehensive income (loss) before tax

 

(1,033

)

 

 

2,690

 

 

 

9,805

 

 

 

1,477

 

Income tax (expense) benefit related to items of other comprehensive income

 

425

 

 

 

(1,107

)

 

 

(4,035

)

 

 

 

(607

)

Other comprehensive income (loss)

 

(608

)

 

 

1,583

 

 

 

5,770

 

 

 

870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Reclassification adjustment for gains (loss) included in net

earnings

 

(993

)

 

 

(2

)

 

 

1,055

 

 

 

(28

)

Income tax (expense) benefit related to reclassification adjustment

 

397

 

 

 

1

 

 

 

(422

)

 

 

12

 

Reclassification adjustment for gains included in net earnings, net of tax

 

(596

)

 

 

(1

)

 

 

633

 

 

 

(16

)

Other comprehensive income (loss), net of tax

 

(1,204

)

 

 

1,582

 

 

 

6,403

 

 

 

854

 

Total comprehensive income

$

8,471

 

 

$

4,344

 

 

$

23,189

 

 

$

9,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(See accompanying notes to the consolidated financial statements)

 

4


 

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)

 

 

For the Nine Months

Ended September 30,

 

 

2016

 

 

2015

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net income

$

16,786

 

 

$

8,330

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Provision for loan losses

 

2,881

 

 

 

1,473

 

Stock–based compensation expense

 

712

 

 

 

383

 

Depreciation and amortization

 

1,338

 

 

 

995

 

Deferred tax provision

 

758

 

 

 

(1,068

)

Accretion of discounts on purchased loans, net

 

(755

)

 

 

(523

)

Gain on sale of loans

 

(7,238

)

 

 

(205

)

Gain on sale of capital market activities

 

(1,307

)

 

 

 

Increase in other assets

 

(1,429

)

 

 

(2,076

)

Increase (decrease) in accounts payable and other liabilities

 

1,970

 

 

 

(14

)

Net cash provided by operating activities

 

13,716

 

 

 

7,295

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Net increase in loans

 

(1,008,136

)

 

 

(402,543

)

Proceeds from sale of REO

 

4,442

 

 

 

2,205

 

Proceeds from sale of loans

 

270,005

 

 

 

 

Purchases of premises and equipment

 

(4,027

)

 

 

(1,142

)

Purchases of securities AFS

 

(130,829

)

 

 

(225,396

)

Proceeds from sale of securities AFS

 

104,146

 

 

 

 

Maturities / payments – securities AFS

 

60,715

 

 

 

11,648

 

Cash acquired in acquisition

 

 

 

 

38,081

 

Purchases (net of redemptions) of FHLB stock

 

(4,185

)

 

 

(5,307

)

Net cash used in investing activities

 

(707,869

)

 

 

(582,454

)

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

Increase in deposits

 

816,561

 

 

 

238,732

 

FHLB Advances – net increase

 

155,000

 

 

 

397,000

 

Proceeds – term note

 

 

 

 

10,114

 

Principal payments – term note

 

 

 

 

(30,000

)

Proceeds from sale of stock, net

 

3,657

 

 

 

135,959

 

Net cash provided by financing activities

 

975,218

 

 

 

751,805

 

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

281,065

 

 

 

176,646

 

Cash and cash equivalents at beginning of year

 

215,748

 

 

 

29,692

 

Cash and cash equivalents at end of period

$

496,813

 

 

$

206,338

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

$

7,334

 

 

$

4,444

 

Income taxes

$

10,050

 

 

$

7,650

 

Noncash transactions:

 

 

 

 

 

 

 

Recoveries (net of chargeoffs) added to allowance for loans losses

$

119

 

 

$

323

 

Transfer of loans to REO

$

950

 

 

$

 

Transfer of loans to loans held for sale

$

468,743

 

 

$

113,325

 

Mortgage servicing rights created from sale of loans

$

1,945

 

 

$

 

 

 

 

(See accompanying notes to the consolidated financial statements)

 

5


 

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 - UNAUDITED

 

NOTE 1: BASIS OF PRESENTATION

The consolidated financial statements include First Foundation Inc. (“FFI”) and its wholly owned subsidiaries: First Foundation Advisors (“FFA”), First Foundation Bank (“FFB” or the “Bank”) and First Foundation Insurance Services (“FFIS”), a wholly owned subsidiary of FFB (collectively referred to as the “Company”). All inter-company balances and transactions have been eliminated in consolidation. The results of operations reflect any interim adjustments, all of which are of a normal recurring nature and which, in the opinion of management, are necessary for a fair presentation of the results for the interim period presented. The results for the 2016 interim periods are not necessarily indicative of the results expected for the full year.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and prevailing practices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates.

The accompanying unaudited consolidated financial statements include all information and footnotes required for interim financial statement presentation. Those financial statements assume that readers of this Report have read the most recent Annual Report on Form 10-K which contains the latest available audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2015.

Certain reclassifications have been made to the prior year consolidated financial statements to conform to the 2016 presentation.

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting. The new standard contains several amendments that will simplify the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The changes in the new standard eliminate the accounting for excess tax benefits to be recognized in additional paid-in capital and tax deficiencies recognized either in the income tax provision or in additional paid-in capital. The Company elected early adoption of ASU 2016-09 in the third quarter of 2016 which was applied using a modified retrospective approach. For the quarter and nine months ended September 30, 2016, we recognized all excess tax benefits and tax deficiencies that occurred in 2016 as income tax expense or benefit as a discrete event. An income tax benefit of approximately $0.8 million was recognized for the quarter and nine months ended September 30, 2016 as a result of the adoption of ASU 2016-09. There was no change to retained earnings with respect to excess tax benefits, as this is not applicable to the Company. In addition there was no cumulative effect on retained earnings as a result of the election by the Company to adopt an accounting policy to account for forfeitures as they occur. With the early adoption of 2016-09, we have elected to present the cash flow statement on a prospective transition method and no prior periods have been adjusted. ASU 2016-09 requires the recognition of any tax benefits or deficiencies to be recognized in the period in which they occur. As a result of the adoption of ASU 2016-09, our effective tax rate for the quarter and nine months ended September 30, 2016 was decreased by 4.5% and 2.5%, respectively.

In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” which provides guidance for eight specific cash flow issues. FASB issued the standard to clarify areas where GAAP has been either unclear or lacking in specific guidance. This update is effective for the Company for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company is currently evaluating the effects of ASU 2016-15 on its financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13 “Financial Instruments – Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments” which introduces new guidance for the accounting for credit losses on certain types of financial instruments.  It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.  The new model, referred to as the current expected credit losses (CECL) model, will apply to financial assets subject to credit losses and measured at amortized cost, and certain off-balance sheet credit exposures.  Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure.  This update is effective for the Company for annual periods beginning after December 15, 2019, and interim periods within those annual periods. The Company is currently evaluating the effects of ASU 2016-13 on its financial statements and disclosures.

On February 25, 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases,

6


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

which is generally defined as a lease term of less than 12 months.  This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases currently accounted for as operating leases under current lease accounting guidance.  The amendments in this update are effective for interim and annual periods beginning after December 15, 2018.  The Company is currently evaluating the effects of ASU 2016-02 on its financial statements and disclosures.

On January 5, 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10).  Changes made to the current measurement model primarily affect the accounting for equity securities with readily determinable fair values, where changes in fair value will impact earnings instead of other comprehensive income.  The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged.  The update also changes the presentation and disclosure requirements for financial instruments including a requirement that public business entities use exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes.  This update is generally effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The adoption of ASU No. 2016-01 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

In September, 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments.  The amendments in this update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.  For public companies, this update is effective for interim and annual periods beginning after December 15, 2015, including interim periods within those fiscal periods.  The adoption of ASU No. 2015-16 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

 

 

 

NOTE 2: ACQUISITIONS

On June 16, 2015, the Company completed the acquisition of Pacific Rim Bank (“PRB”), through a merger of PRB with and into the Bank, in exchange for 621,345 shares of its common stock with a fair value of $19.00 per share and $543,000 in cash, which was paid to dissenting shareholders. The primary reason for acquiring PRB was to expand our operations into Hawaii.

The acquisition is accounted for under the purchase method of accounting. The acquired assets, assumed liabilities and identifiable intangible assets are recorded at their respective acquisition date fair values. Goodwill of $1.3 million, which is not tax deductible, is included in intangible assets in the table below.  

7


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

The following table represents the assets acquired and liabilities assumed of PRB as of June 16, 2015 and the fair value adjustments and amounts recorded by the Bank in 2015 under the acquisition method of accounting:

 

 

PRB Book Value

 

Fair Value Adjustments

 

Fair Value

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

Assets Acquired:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

38,624

 

 

$

 

 

$

38,624

 

Securities AFS

 

7,179

 

 

 

115

 

 

 

7,294

 

Loans, net of deferred fees

 

80,192

 

 

 

(2,419

)

 

 

77,773

 

Allowance for loan losses

 

(2,034

)

 

 

2,034

 

 

 

 

Premises and equipment, net

 

251

 

 

 

(188

)

 

 

63

 

Investment in FHLB stock

 

152

 

 

 

 

 

 

152

 

Deferred taxes

 

 

 

 

2,258

 

 

 

2,258

 

REO

 

4,374

 

 

 

(672

)

 

 

3,702

 

Goodwill

 

 

 

 

1,300

 

 

 

1,300

 

Core deposit intangible

 

 

 

 

1,099

 

 

 

1,099

 

Other assets

 

269

 

 

 

 

 

 

269

 

Total assets acquired

$

129,007

 

 

$

3,527

 

 

$

132,534

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities Assumed:

 

 

 

 

 

 

 

 

 

 

 

Deposits

$

119,663

 

 

$

178

 

 

$

119,841

 

Accounts payable and other liabilities

 

442

 

 

 

(98

)

 

 

344

 

Total liabilities assumed

 

120,105

 

 

 

80

 

 

 

120,185

 

Excess of assets acquired over liabilities assumed

 

8,902

 

 

 

3,447

 

 

 

12,349

 

Total

$

129,007

 

 

$

3,527

 

 

$

132,534

 

 

 

 

 

 

 

 

 

 

 

 

 

Consideration:

 

 

 

 

 

 

 

 

 

 

 

Stock issued

 

 

 

 

 

 

 

 

$

11,806

 

Cash paid

 

 

 

 

 

 

 

 

 

543

 

Total

 

 

 

 

 

 

 

 

$

12,349

 

 

 

 

 

 

 

 

 

 

 

 

 

In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates. The most significant category of assets for which this procedure was used was that of acquired loans. The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with FASB Accounting Standards Codification (“ASC”) 310-20.

Certain loans, for which specific credit-related deterioration since origination was identified, are recorded at fair value reflecting the present value of the amounts expected to be collected. Income recognition on these “purchased credit impaired” loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on nonaccrual status and have no accretable yield. All purchased credit impaired loans were classified as accruing loans as of and subsequent to the acquisition date.

 

In accordance with generally accepted accounting principles there was no carryover of the allowance for loan losses that had been previously recorded by PRB.

The Company recorded a deferred income tax asset of $2.3 million related to PRB’s operating loss carry-forward and other tax attributes of PRB, along with the effects of fair value adjustments resulting from applying the purchase method of accounting.

The fair value of savings and transaction deposit accounts acquired from PRB were assumed to approximate their carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit accounts were valued by comparing the contractual cost of the portfolio to an identical portfolio bearing current market rates. The portfolio was segregated into pools based on remaining maturity. For each pool, the projected cash flows from maturing certificates were then calculated based on contractual rates and prevailing market rates. The valuation adjustment for each pool is equal to the present value of the difference of

8


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

these two cash flows, discounted at the assumed market rate for a certificate with a corresponding maturity. This valuation adjustment will be accreted to reduce interest expense over the remaining maturities of the respective pools. The Company also recorded a core deposit intangible, which represents the value of the deposit relationships acquired from PRB, of $1.1 million. The core deposit intangible will be amortized over a period of 7 years.

Pro Forma Information (unaudited)

The following table presents unaudited pro forma information as if the acquisition of PRB had occurred on January 1, 2015, for the nine months period ending September 30, 2015, after giving effect to certain adjustments. The unaudited pro forma information for these periods includes adjustments for interest income on loans acquired, amortization of intangibles arising from the transaction, adjustments for interest expense on deposits acquired, and the related income tax effects of all these items and the income tax benefits derived from PRB’s loss before taxes. The net effect of these pro forma adjustments was an increase of $0.2 million in net income for the nine months ended September 30, 2015. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.

 

 

 

 

Pro Forma

(dollars in thousands)

 

 

 

Net interest income

 

$

42,386

Provision for loan losses

 

 

1,473

Noninterest income

 

 

19,610

Noninterest expenses

 

 

47,050

Income before taxes

 

 

13,473

Taxes on income

 

 

5,728

Net income

 

$

7,745

 

 

 

 

Net income per share:

 

 

 

Basic

 

$

0.76

Diluted

 

$

0.73

 

 

 

 

The revenues (net interest income and noninterest income) and net income for the period from June 16, 2015 to September 30, 2015 related to the operations acquired from PRB and included in the results of operations for 2015 was approximately $1.6 million and $0.5 million, respectively.

9


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

NOTE 3: FAIR VALUE MEASUREMENTS

Assets Measured at Fair Value on a Recurring Basis

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Current accounting guidance establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  There are three levels of inputs that may be used to measure fair values:

 

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

 

Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3: Significant unobservable inputs that reflect the Company's own assumptions requiring significant judgment or estimation about the assumptions that market participants would use in pricing an asset or liability.

 

The following tables show the recorded amounts of assets and liabilities measured at fair value on a recurring basis as of:

 

 

 

 

Fair Value Measurement Level

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury securities

$

300

 

 

$

300

 

 

$

 

 

$

 

Agency mortgage-backed securities

 

498,886

 

 

 

 

 

 

498,886

 

 

 

 

Beneficial interest – FHLMC securitizations

 

43,517

 

 

 

 

 

 

 

 

 

43,517

 

Total assets at fair value on a recurring basis

$

542,703

 

 

$

300

 

 

$

498,886

 

 

$

43,517

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury securities

$

300

 

 

$

300

 

 

$

 

 

$

 

FNMA and FHLB Agency notes

 

16,013

 

 

 

 

 

 

16,013

 

 

 

 

Agency mortgage-backed securities

 

536,148

 

 

 

 

 

 

536,148

 

 

 

 

Beneficial interest – FHLMC securitizations

 

12,674

 

 

 

 

 

 

 

 

 

12,674

 

Total assets at fair value on a recurring basis

$

565,135

 

 

$

300

 

 

$

552,161

 

 

$

12,674

 

 

The increase in level 3 assets from December 31, 2015 was due to Beneficial interest – FHLMC securitization purchases.  The Company did not have any material assets measured at fair value on a nonrecurring basis as of September 30, 2016 and December 31, 2015.

 

Fair Value of Financial Instruments

We have elected to use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale are measured at fair value on a recurring basis. Additionally, from time to time, we may be required to measure at fair value other assets on a nonrecurring basis, such as loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

 

 

 

10


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

Fair value estimates are made at a discrete point in time based on relevant market information and other information about the financial instruments. Because no active market exists for a significant portion of our financial instruments, fair value estimates are based in large part on judgments we make primarily regarding current economic conditions, risk characteristics of various financial instruments, prepayment rates, and future expected loss experience. These estimates are subjective in nature and invariably involve some inherent uncertainties. Additionally, unexpected changes in events or circumstances can occur that could require us to make changes to our assumptions and which, in turn, could significantly affect and require us to make changes to our previous estimates of fair value.

In addition, the fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of existing and anticipated future customer relationships and the value of assets and liabilities that are not considered financial instruments, such as premises and equipment and other real estate owned.

The Company does not currently have any material assets measured at fair value on a nonrecurring basis.

The following methods and assumptions were used to estimate the fair value of financial instruments.

Cash and Cash Equivalents. The fair value of cash and cash equivalents approximates its carrying value.

Investment Securities Available for Sale. Investment securities available-for-sale are measured at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. When a market is illiquid or there is a lack of transparency around the inputs to valuation, the securities are classified as Level 3 and reliance is placed upon internally developed models, and management judgment and evaluation for valuation. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as level 3 include beneficial interests – FHLMC securitization.  Significant assumptions in the valuation of these Level 3 securities as of September 30, 2016 included a prepayment rate of 15% and discount rates ranging from 4.0% to 10%.

Federal Home Loan Bank Stock. The Bank is a member of the Federal Home Loan Bank (the “FHLB”). As a member, we are required to own stock of the FHLB, the amount of which is based primarily on the level of our borrowings from this institution. The fair value of that stock is equal to the carrying amount, is classified as restricted securities and is periodically evaluated for impairment based on our assessment of the ultimate recoverability of our investments in that stock. Any cash or stock dividends paid to us on such stock are reported as income.

Loans Held for Sale. Mortgage loans originated or transferred and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors.  Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

Loans. The fair value for loans with variable interest rates is the carrying amount. The fair value of fixed rate loans is derived by calculating the discounted value of future cash flows expected to be received by the various homogeneous categories of loans. All loans have been adjusted to reflect changes in credit risk.

Impaired Loans. ASC 820-10 applies to loans measured for impairment in accordance with ASC 310-10, “Accounting by Creditors for Impairment of a Loan”, including impaired loans measured at an observable market price (if available), and at the fair value of the loan’s collateral (if the loan is collateral dependent) less estimated selling cost. The fair value of an impaired loan is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. When the fair value of the collateral is based on an observable market price or a current appraised value, we measure the impaired loan at nonrecurring Level 2. When an appraised value is not available, or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price or a discounted cash flow has been used to determine the fair value, we measure the impaired loan at nonrecurring Level 3.

11


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

Mortgage Servicing Rights. Fair values are measured using independent pricing models or other model-based valuation techniques that would incorporate assumptions that market participants would use in estimating the fair value of servicing. These assumptions might include estimates of prepayment speeds, discount rate, costs to service, escrow account earnings, contractual servicing fee income, prepayment and late fees, among other considerations.  Mortgage servicing rights are considered a Level 3 measurement at September 30, 2016 and are included in other assets in the accompanying consolidated balance sheets

Deposits. The fair value of demand deposits, savings deposits, and money market deposits is defined as the amounts payable on demand at quarter-end. The fair value of fixed maturity certificates of deposit is estimated based on the discounted value of the future cash flows expected to be paid on the deposits, using current market rates.

Borrowings. The fair value of $951 million in borrowings is the carrying value of overnight FHLB advances that approximate fair value because of the short-term maturity of this instrument, resulting in a Level 2 classification. The fair value of term borrowings is derived by calculating the discounted value of future cash flows expected to be paid out by the Company.  The carrying amounts and estimated fair values of financial instruments are as follows as of:

 

 

Carrying

 

 

Fair Value Measurement Level

 

(dollars in thousands)

Value

 

 

1

 

 

2

 

 

3

 

 

Total

 

September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

496,813

 

 

$

496,813

 

 

$

 

 

$

 

 

$

496,813

 

Securities AFS

 

542,703

 

 

 

300

 

 

 

498,886

 

 

 

43,517

 

 

 

542,703

 

Loans

 

2,295,229

 

 

 

 

 

 

 

 

 

2,313,425

 

 

 

2,313,425

 

Loans held for sale

 

200,002

 

 

 

 

 

 

 

 

 

200,002

 

 

 

200,002

 

Investment in FHLB stock

 

25,677

 

 

 

 

 

 

25,677

 

 

 

 

 

 

25,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

2,338,737

 

 

 

1,787,742

 

 

 

551,051

 

 

 

 

 

 

2,338,737

 

Borrowings

 

951,000

 

 

 

 

 

 

951,000

 

 

 

 

 

 

951,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

215,748

 

 

$

215,748

 

 

$

 

 

$

 

 

$

215,748

 

Securities AFS

 

565,135

 

 

 

300

 

 

 

552,161

 

 

 

12,674

 

 

 

565,135

 

Loans

 

1,754,883

 

 

 

 

 

 

 

 

 

1,779,941

 

 

 

1,779,941

 

Investment in FHLB stock

 

21,492

 

 

 

 

 

 

21,492

 

 

 

 

 

 

21,492

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

1,522,176

 

 

 

1,051,976

 

 

 

470,128

 

 

 

 

 

 

1,522,104

 

Borrowings

 

796,000

 

 

 

 

 

 

796,000

 

 

 

 

 

 

796,000

 

 

 

12


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

NOTE 4: SECURITIES

The following table provides a summary of the Company’s securities AFS portfolio as of:

 

 

Amortized

 

 

Gross Unrealized

 

 

Estimated

 

(dollars in thousands)

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury securities

$

300

 

 

$

 

 

$

 

 

$

300

 

Agency mortgage-backed securities

 

489,233

 

 

 

9,749

 

 

 

(96

)

 

 

498,886

 

Beneficial interests in FHLMC securitization

 

44,505

 

 

 

121

 

 

 

(1,109

)

 

 

43,517

 

Total

$

534,038

 

 

$

9,870

 

 

$

(1,205

)

 

$

542,703

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury securities

$

300

 

 

$

 

 

$

 

 

$

300

 

FNMA and FHLB Agency notes

 

16,108

 

 

 

 

 

 

(95

)

 

 

16,013

 

Agency mortgage-backed securities

 

538,269

 

 

 

909

 

 

 

(3,030

)

 

 

536,148

 

Beneficial interests in FHLMC securitization

 

12,674

 

 

 

476

 

 

 

(476

)

 

 

12,674

 

Total

$

567,351

 

 

$

1,385

 

 

$

(3,601

)

 

$

565,135

 

The US Treasury securities are pledged as collateral to the State of California to meet regulatory requirements related to the Bank’s trust operations.

 

The tables below indicate, as of September 30, 2016 and December 31, 2015 the gross unrealized losses and fair values of our investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

 

 

 

Securities with Unrealized Loss at September 30, 2016

 

 

 

Less than 12 months

 

 

12 months or more

 

 

Total

 

(dollars in thousands)

 

Fair Value

 

 

 

Unrealized Loss

 

 

Fair Value

 

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

Agency and FHLB Agency notes

 

$

46,649

 

 

$

(96

)

 

$

 

 

$

 

 

$

46,649

 

 

$

(96

)

Beneficial interests in FHLMC securitization

 

 

31,645

 

 

 

(1,109

)

 

 

 

 

 

 

 

 

31,645

 

 

 

(1,109

 

)

 

 

$

78,294

 

 

$

(1,205

)

 

$

 

 

$

 

 

$

78,294

 

 

$

(1,205

)

 

 

 

Securities with Unrealized Loss at December 31, 2015

 

 

 

Less than 12 months

 

 

12 months or more

 

 

Total

 

(dollars in thousands)

 

Fair Value

 

 

 

Unrealized Loss

 

 

Fair Value

 

 

 

Unrealized Loss

 

 

Fair Value

 

 

Unrealized Loss

 

Agency notes

 

$

16,013

 

 

$

(95

)

 

$

 

 

$

 

 

$

16,013

 

 

$

(95

)

Agency mortgage backed securities

 

 

397,850

 

 

 

(3,030

)

 

 

 

 

 

 

 

 

397,850

 

 

 

(3,030

)

Beneficial interests in FHLMC securitization

 

 

12,674

 

 

 

(476

)

 

 

 

 

 

 

 

 

12,674

 

 

 

(476

 

)

 

 

$

426,537

 

 

$

(3,601

)

 

$

 

 

$

 

 

$

426,537

 

 

$

(3,601

)

 

Unrealized losses in agency and FHLB agency notes, agency mortgage backed securities, and beneficial interests in FHLMC securitizations have not been recognized into income because the issuer bonds are of high credit quality, management does not intend to sell, it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in discount rates and assumptions regarding future interest rates. The fair value is expected to recover as the bonds approach maturity.

13


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

The scheduled maturities of securities AFS and the related weighted average yields were as follows as of September 30, 2016:

 

(dollars in thousands)

Less than
1 Year

 

 

1 Through
5 years

 

 

5 Through
10 Years

 

 

After 10
Years

 

 

Total

 

Amortized Cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury securities

$

 

 

$

300

 

 

$

 

 

$

 

 

$

300

 

Weighted average yield

 

%

 

 

0.90

%

 

 

%

 

 

%

 

 

0.90

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated Fair Value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury Securities

$

 

 

$

300

 

 

$

 

 

$

 

 

$

300

 

Agency mortgage backed securities and beneficial interests in FHLMC securitizations are excluded from the above table because such securities are not due at a single maturity date. The weighted average yield of the agency mortgage backed securities and beneficial interests in FHLMC securitizations as of September 30, 2016 was 2.59%.

 

NOTE 5: LOANS

The following is a summary of our loans as of:

 

(dollars in thousands)

September 30,
2016

 

 

December 31,
2015

 

Outstanding principal balance:

 

 

 

 

 

 

 

Loans secured by real estate:

 

 

 

 

 

 

 

Residential properties:

 

 

 

 

 

 

 

Multifamily

$

986,921

 

 

$

627,311

 

Single family

 

576,886

 

 

 

533,257

 

Total real estate loans secured by residential properties

 

1,563,807

 

 

 

1,160,568

 

Commercial properties

 

459,703

 

 

 

358,791

 

Land and construction

 

20,034

 

 

 

12,320

 

Total real estate loans

 

2,043,544

 

 

 

1,531,679

 

Commercial and industrial loans

 

228,579

 

 

 

196,584

 

Consumer loans

 

34,248

 

 

 

37,206

 

Total loans

 

2,306,371

 

 

 

1,765,469

 

Premiums, discounts and deferred fees and expenses

 

2,458

 

 

 

14

 

Total

$

2,308,829

 

 

$

1,765,483

 

As of September 30, 2016 and December 31, 2015, the principal balances shown above are net of unaccreted discount related to loans acquired in an acquisition of $2.1 million and $2.8 million, respectively.

In 2012 and 2015, the Company purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these purchased credit impaired loans is as follows as of:

 

(dollars in thousands)

September 30, 2016

 

 

December 31,
2015

 

Outstanding principal balance:

 

 

 

 

 

 

 

Loans secured by real estate:

 

 

 

 

 

 

 

Commercial properties

$

298

 

 

$

533

 

Land

 

 

 

 

1,616

 

Total real estate loans

 

298

 

 

 

2,149

 

Commercial and industrial loans

 

6,192

 

 

 

6,787

 

Consumer loans

 

5

 

 

 

14

 

Total loans

 

6,495

 

 

 

8,950

 

Unaccreted discount on purchased credit impaired loans

 

(1,625

)

 

 

(2,291

)

Total

$

4,870

 

 

$

6,659

 

14


FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2016 – UNAUDITED

 

Accretable yield, or income expected to be collected on purchased credit impaired loans, and the related changes, is as follows for the periods indicated:

 

(dollars in thousands)

Nine Months Ended September 30, 2016

 

 

Year Ended December 31,

2015

 

 

 

 

 

 

 

 

 

Beginning balance

$

582

 

 

$

130

 

Accretion of income

 

(155

)

 

 

(529

)

Reclassifications from nonaccretable difference

 

 

 

 

176

 

Acquisition

 

 

 

 

805

 

Disposals

 

(108

)

 

 

 

Ending balance

$

319

 

 

$

582

 

The following table summarizes our delinquent and nonaccrual loans as of:

 

 

 

Past Due and Still Accruing

 

 

 

 

 

Total Past

 

 

 

 

 

 

 

(dollars in thousands)

 

30–59 Days

 

 

60-89 Days

 

 

90 Days 
or More

 

 

Nonaccrual

 

 

Due and
Nonaccrual

 

 

Current

 

 

Total

 

September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential properties

 

$

 

 

$

 

 

$

 

 

$

4,021

 

 

$

4,021

 

 

$

1,559,786

 

 

$

1,563,807

 

Commercial properties

 

 

1,363

 

 

 

 

 

 

780

 

 

 

1,187

 

 

 

3,330

 

 

 

456,373

 

 

 

459,703

 

Land and construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,034

 

 

 

20,034

 

Commercial and industrial loans

 

 

4,145

 

 

 

5

 

 

 

3,136

 

 

 

4,184

 

 

 

11,470

 

 

 

217,109

 

 

 

228,579

 

Consumer loans

 

 

18