10-Q - FFWM - Equibles

Table of Contents F

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, 2021

☐	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<br>of incorporation or organization)		(I.R.S. Employer<br>Identification Number)

200 Crescent Court , Suite 1400 ** Dallas , Texas**		75201
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: ( 469 ) 638-9636

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	****	Trading Symbol(s)	****	Name of each exchange on which registered
Common Stock		FFWM		NASDAQ Global Market

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 3, 2021, the registrant had 45,070,936 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents FIRST FOUNDATION INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS


		Page No.
Part I. Financial Information
Item 1.	Financial Statements	1
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43

Part II. Other Information
Item 1A	Risk Factors	44
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6	Exhibits	45

SIGNATURES		S-1

(i)

Table of Contents PART I — FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

FIRST FOUNDATION INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	September 30,		December 31,
	2021		2020
		(unaudited)
ASSETS
Cash and cash equivalents	$	783,376	$	629,707
Securities available-for-sale ("AFS")		901,746		814,671
Allowance for credit losses - investments		(10,098)		(7,245)
Net securities		891,648		807,426

Loans held for sale		501,433		505,404

Loans held for investment		5,308,959		4,803,799
Allowance for credit losses - loans		(20,985)		(24,200)
Net loans		5,287,974		4,779,599

Investment in FHLB stock		17,250		17,250
Deferred taxes		11,247		8,603
Premises and equipment, net		8,091		8,012
Goodwill and intangibles		94,083		95,296
Other assets		139,961		105,863
Total Assets	$	7,735,063	$	6,957,160

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	6,844,978	$	5,913,433
Borrowings		12,500		269,000
Accounts payable and other liabilities		110,754		79,016
Total Liabilities		6,968,232		6,261,449

Shareholders’ Equity
Common Stock		45		45
Additional paid-in-capital		436,835		433,941
Retained earnings		321,184		247,638
Accumulated other comprehensive income (loss)		8,767		14,087
Total Shareholders’ Equity		766,831		695,711
Total Liabilities and Shareholders’ Equity	$	7,735,063	$	6,957,160

(See accompanying notes to the consolidated financial statements)

Table of Contents FIRST FOUNDATION INC.

CONSOLIDATED INCOME STATEMENTS - UNAUDITED

(In thousands, except share and per share amounts)


	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Interest income:
Loans	$	56,781	$	55,231	$	166,291	$	165,249
Securities AFS		4,606		6,107		14,739		19,643
FHLB stock, fed funds sold and interest-bearing deposits		602		353		1,500		1,069
Total interest income		61,989		61,691		182,530		185,961

Interest expense:
Deposits		2,753		7,988		10,763		33,548
Borrowings		49		2,086		441		7,481
Total interest expense		2,802		10,074		11,204		41,029

Net interest income		59,187		51,617		171,326		144,932

Provision for credit losses		(417)		1,548		(13)		6,979

Net interest income after provision for credit losses		59,604		50,069		171,339		137,953

Noninterest income:
Asset management, consulting and other fees		9,313		7,368		26,410		21,863
Gain on sale of loans		18,135		15,140		21,459		15,140
Other income		3,232		1,133		8,754		6,282
Total noninterest income		30,680		23,641		56,623		43,285

Noninterest expense:
Compensation and benefits		23,241		17,914		64,970		56,059
Occupancy and depreciation		6,427		6,052		18,297		17,419
Professional services and marketing costs		2,700		2,077		8,729		5,880
Customer service costs		2,512		1,723		6,635		5,717
Other expenses		3,514		2,829		9,891		9,329
Total noninterest expense		38,394		30,595		108,522		94,404

Income before taxes on income		51,890		43,115		119,440		86,834
Taxes on income		14,664		12,177		33,805		24,831
Net income	$	37,226	$	30,938	$	85,635	$	62,003

Net income per share:
Basic	$	0.83	$	0.69	$	1.91	$	1.39
Diluted	$	0.83	$	0.69	$	1.90	$	1.38
Shares used in computation:
Basic		44,819,743		44,625,668		44,773,683		44,638,634
Diluted		45,002,937		44,885,776		44,977,863		44,883,612

(See accompanying notes to the consolidated financial statements)

Table of Contents FIRST FOUNDATION INC.

CONSOLIDATED STATEMENT OF CHANGES

IN SHAREHOLDERS’ EQUITY - UNAUDITED

(In thousands, except share amounts)


	****	Common Stock				****	Additional		****			****	Accumulated Other		****
		Number					Paid-in			Retained			Comprehensive
	****	of Shares	****	Amount		****	Capital		****	Earnings		****	Income (Loss)		****	Total
Balance: December 31, 2020		44,667,650		$	45		$	433,941		$	247,638		$	14,087		$	695,711
Net income		—			—			—			85,635			—			85,635
Other comprehensive income (loss)		—			—			—			—			(5,320)			(5,320)
Stock based compensation		—			—			2,202			—			—			2,202
Cash dividend		—			—			—			(12,089)			—			(12,089)
Issuance of common stock:
Exercise of options		211,203			—			1,880			—			—			1,880
Stock grants – vesting of restricted stock units		117,223			—			—			—			—			—
Repurchase of shares from restricted shares vesting		(40,937)			—			(1,188)			—			—			(1,188)
Balance: September 30, 2021		44,955,139		$	45		$	436,835		$	321,184		$	8,767		$	766,831

Balance: June 30, 2021		44,819,743		$	45		$	435,201		$	287,997		$	10,775		$	734,018
Net income		—			—			—			37,226			—			37,226
Other comprehensive income (loss)		—			—			—			—			(2,008)			(2,008)
Stock based compensation		—			—			573			—			—			573
Cash dividend		—			—			—			(4,039)			—			(4,039)
Issuance of common stock:
Exercise of options		135,396			—			1,062			—			—			1,062
Balance: September 30, 2021		44,955,139		$	45		$	436,835		$	321,184		$	8,767		$	766,831

Balance: December 31, 2019		44,670,743		$	45		$	433,775		$	175,773		$	4,276		$	613,869
Net income		—			—			—			62,003			—			62,003
Other comprehensive income (loss)		—			—			—			—			11,956			11,956
Stock based compensation		—			—			1,660			—			—			1,660
Cash dividend		—			—			—			(9,380)			—			(9,380)
Issuance of common stock:
Exercise of options		87,000			—			652			—			—			652
Stock grants – vesting of restricted stock units		92,915			—			—			—			—			—
Repurchase of shares from restricted shares vesting		(224,334)			—			(2,824)			—			—			(2,824)
Balance: September 30, 2020		44,626,324		$	45		$	433,263		$	228,396		$	16,232		$	677,936

Balance: June 30, 2020		44,625,324		$	45		$	432,791		$	200,582		$	5,303		$	638,721
Net income		—			—			—			30,938			—			30,938
Other comprehensive income (loss)		—			—			—			—			10,929			10,929
Stock based compensation		—			—			465			—			—			465
Cash dividend		—			—			—			(3,124)			—			(3,124)
Issuance of common stock:
Exercise of options		1,000			—			7			—			—			7
Balance: September 30, 2020		44,626,324		$	45		$	433,263		$	228,396		$	16,232		$	677,936

(See accompanying notes to the consolidated financial statements)

Table of Contents FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME - UNAUDITED

(In thousands)


	Quarter Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	37,226	$	30,938	$	85,635	$	62,003
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities arising during the period		(2,837)		15,448		(7,519)		16,898
Other comprehensive income (loss) before tax		(2,837)		15,448		(7,519)		16,898
Income tax expense (benefit) related to items of other comprehensive income		(829)		4,519		(2,199)		4,942
Other comprehensive income (loss)		(2,008)		10,929		(5,320)		11,956
Total comprehensive income	$	35,218	$	41,867	$	80,315	$	73,959

(See accompanying notes to the consolidated financial statements)

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FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)


	For the Nine Months Ended
	September 30,
	2021		2020
Cash Flows from Operating Activities:
Net income	$	85,635	$	62,003
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses - loans		(2,865)		3,990
Provision for credit losses - securities AFS		2,853		8,049
Stock–based compensation expense		2,202		1,660
Depreciation and amortization		2,477		2,367
Deferred tax benefit		(445)		(1,020)
Amortization of premium on securities		750		—
Amortization of core deposit intangible		1,213		1,456
Amortization of mortgage servicing rights - net		1,370		1,034
Amortization of premiums on purchased loans - net		—		(4,169)
Gain on sale of loans		(21,459)		(15,140)
Valuation allowance on mortgage servicing rights - net		2,134		—
Increase in other assets		(34,876)		(4,689)
Increase (decrease) in accounts payable and other liabilities		31,151		(5,149)
Net cash provided by operating activities		70,140		50,392
Cash Flows from Investing Activities:
Net increase in loans		(1,063,500)		(625,373)
Proceeds from sale of loans		580,417		577,875
Purchase of premises and equipment		(2,556)		(2,277)
Recovery of allowance for credit losses		864		786
Purchases of securities AFS		(306,267)		(60,988)
Proceeds from sale of securities		3,500		—
Maturities of securities AFS		207,423		197,271
Sale of FHLB stock, net		—		4,269
Net cash (used in) provided by investing activities		(580,119)		91,563
Cash Flows from Financing Activities:
Increase in deposits		931,545		572,669
Net decrease in FHLB advances		(255,000)		(474,000)
Line of credit net change – borrowings, net		(1,500)		—
Dividends paid		(12,089)		(9,380)
Settlement of swap		—		(11,476)
Proceeds from exercise of stock options		1,880		652
Repurchase of stock		(1,188)		(2,824)
Net cash provided by financing activities		663,648		75,641
Increase in cash and cash equivalents		153,669		217,596
Cash and cash equivalents at beginning of year		629,707		65,387
Cash and cash equivalents at end of period	$	783,376	$	282,983
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes	$	27,683	$	19,369
Interest		12,873		41,500
Noncash transactions:
Transfer of loans to loans held for sale	$	555,085	$	567,618
Mortgage servicing rights from loan sales		2,726		3,853
Chargeoffs against allowance for credit losses		627		1,393

(See accompanying notes to the consolidated financial statements)

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

NOTE 1: BASIS OF PRESENTATION

The consolidated financial statements include First Foundation Inc. (“FFI”) and its wholly owned subsidiaries: First Foundation Advisors (“FFA”) and First Foundation Bank (“FFB” or the “Bank”) and the wholly owned subsidiaries of FFB, First Foundation Insurance Services (“FFIS”), Blue Moon Management, LLC, and First Foundation Public Finance (“FFPF”) (collectively referred to as the “Company”). FFI also has two inactive wholly owned subsidiaries, First Foundation Consulting and First Foundation Advisors, LLC. All intercompany 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 2021 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. These financial statements assume that readers 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, 2020.

Certain reclassifications have been made to the prior year consolidated financial statements to conform to the 2021 presentation.

Recent Accounting Pronouncements

In August 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-06, “Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946)”. ASU 2021-06 amends certain SEC guidance related to financial disclosures related to acquired and disposed businesses, and statistical disclosures for banks and savings and loan registrants, and is effective upon issuance. The adoption of ASU 2021-06 did not have a significant impact on the Company’s consolidated financial statements.

In October 2020, FASB issued ASU 2020-10, “Codification Improvements”. ASU 2020-10 amends certain guidance that may have been applied in an inconsistent manner by certain entities. The effective date for the amendments in this ASU are effective for annual periods after December 15, 2020. The adoption of ASU 2020-10 is not expected to have a significant impact on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. ASU 2020-04 provides optional guidance for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU are effective as of March 12, 2020 through December 31, 2022. The adoption of ASU 2020-04 is not expected to have a significant impact on the Company’s consolidated financial statements.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

NOTE 2: 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 other 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 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
(dollars in thousands)	Total		Level 1		Level 2		Level 3
September 30, 2021:
Investment securities available for sale:
Agency mortgage-backed securities	$	757,942	$	—	$	757,942	$	—
Beneficial interest – FHLMC securitizations		13,145		—		—		13,145
Corporate bonds		116,911		—		116,911		—
Other		3,650		497		3,153		—
Investment in equity securities		540		540		—		—
Total assets at fair value on a recurring basis	$	892,188	$	1,037	$	878,006	$	13,145


December 31, 2020:
Investment securities available for sale:
Agency mortgage-backed securities	$	723,995	$	—	$	723,995	$	—
Beneficial interest – FHLMC securitizations		23,463		—		—		23,463
Corporate bonds		58,358		—		58,358		—
Other		1,610		503		1,107		—
Investment in equity securities		338		338		—		—
Total assets at fair value on a recurring basis	$	807,764	$	841	$	783,460	$	23,463

The decrease in Level 3 assets from December 31, 2020 was due to securitization paydowns and to $2.9 million in provisions for credit losses in the first nine months of 2021. 7

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

Assets Measured at Fair Value on a Nonrecurring Basis

From time to time, we may be required to measure other assets at fair value on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Loans. Loans measured at fair value on a nonrecurring basis include collateral dependent loans held for investment. The specific reserves for these loans are based on collateral value, net of estimated disposition costs and other identified quantitative inputs. Collateral value is determined based on independent third-party appraisals or internally-developed discounted cash flow analyses. Internal discounted cash flow analyses are also utilized to estimate the fair value of these loans, which considers internally-developed, unobservable inputs such as discount rates, default rates, and loss severity. 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. The total collateral dependent impaired Level 3 loans were $10.2 million and $3.1 million at September 30, 2021 and December 31, 2020, respectively. There were $1.2 million and $1.1 million in specific reserves related to these loans at September 30, 2021 and December 31, 2020.

Real Estate Owned. The fair value of real estate owned is based on external appraised values that include adjustments for estimated selling costs and assumptions of market conditions that are not directly observable, resulting in a Level 3 classification.

Mortgage Servicing Rights. When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income, resulting in a Level 3 classification. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Significant assumptions in the valuation of these Level 3 mortgage servicing rights as of September 30, 2021 included prepayment rates ranging from 20% to 30% and discount rates ranging from 0.21% to 10%.

Fair Value of Financial Instruments

FASB ASC 825-10, “Disclosures about Fair Value of Financial Instruments” requires disclosure of the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate such value. The methodologies for estimating the fair value of financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis are discussed above. The estimated fair value amounts have been determined by management using available market information and appropriate valuation methodologies and are based on the exit price notion set forth by ASU 2016-01. In cases where quoted market prices are not available, fair values are based on estimates using present value or other market value techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The aggregate fair value amounts presented below do not represent the underlying value of the Company.

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 8

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

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 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.

Interest-Bearing Deposits with Financial Institutions. The fair values of interest-bearing deposits maturing within ninety days approximate their carrying values.

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 in FHLMC securitizations. Significant assumptions in the valuation of these Level 3 securities as of September 30, 2021 and December 31, 2020 included prepayment rates ranging from 30% to 35% and discount rates ranging from 6.70% 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 the 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. The fair value of loans held for sale is determined using secondary market pricing.

Loans Held for Investment. 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 or by reference to secondary market pricing. All loans have been adjusted to reflect changes in credit risk.

Deposits. The fair value of demand deposits, savings deposits, and money market deposits is defined as the amounts payable on demand. 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.

Borrowings. The fair value of 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, resulting in a Level 3 classification. 9

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

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, 2021:
Assets:
Cash and cash equivalents	$	783,376	$	783,376	$	—	$	—	$	783,376
Securities AFS, net		891,648		497		878,006		13,145		891,648
Loans held for sale		501,433		—		506,547		—		506,547
Loans, net		5,287,974		—		—		5,342,001		5,342,001
Investment in FHLB stock		17,250		—		17,250		—		17,250
Investment in equity securities		540		540		—		—		540
Liabilities:
Deposits	$	6,844,978	$	6,231,505	$	619,516	$	—	$	6,851,021
Borrowings		12,500		—		—		12,500		12,500

December 31, 2020:
Assets:
Cash and cash equivalents	$	629,707	$	629,707	$	—	$	—	$	629,707
Securities AFS, net		807,426		503		783,460		23,463		807,426
Loans held for sale		505,404		—		510,638		—		510,638
Loans, net		4,779,599		—		—		4,829,258		4,829,258
Investment in FHLB stock		17,250		—		17,250		—		17,250
Investment in equity securities		338		338		—		—		338
Liabilities:
Deposits	$	5,913,433	$	4,934,537	$	978,897	$	—	$	5,913,434
Borrowings		269,000		—		255,000		14,000		269,000

NOTE 3: SECURITIES

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


	Amortized		Gross Unrealized				Allowance for		Estimated
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Fair Value
September 30, 2021:
Agency mortgage-backed securities	$	749,029	$	9,914	$	(1,001)	$	—	$	757,942
Beneficial interests in FHLMC securitization		22,764		479		—		(10,098)		13,145
Corporate bonds		114,000		3,034		(123)		—		116,911
Other		3,561		91		(2)		—		3,650
Total	$	889,354	$	13,518	$	(1,126)	$	(10,098)	$	891,648
December 31, 2020:
Agency mortgage-backed securities	$	705,752	$	18,243	$	—	$	—	$	723,995
Beneficial interests in FHLMC securitization		30,497		211		—		(7,245)		23,463
Corporate bonds		57,000		1,358		—		—		58,358
Other		1,512		98		—		—		1,610
Total	$	794,761	$	19,910	$	—	$	(7,245)	$	807,426

US Treasury securities of $0.5 million as of September 30, 2021 and December 31, 2020 that are included in the table above as Other are pledged as collateral to the State of California to meet regulatory requirements related to the Bank’s trust operations. As of September 30, 2021, $169.7 million of agency mortgage-backed securities are pledged as 10

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

collateral as support for the Bank’s obligations under loan sales and securitization agreements entered into from 2018 through 2021.

The table below indicates, as of September 30, 2021, 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, 2021
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
Agency mortgage-backed securities	$	86,766	$	(1,001)	$	—	$	—	$	86,766	$	(1,001)
Corporate bonds		19,877		(123)		—		—		19,877		(123)
Other		497		(2)		—		—		497		(2)
Total temporarily impaired securities	$	107,140	$	(1,126)	$	—	$	—	$	107,140	$	(1,126)

There were no unrealized losses on our investments as of December 31, 2020.

Unrealized losses in agency mortgage backed securities, beneficial interests in FHLMC securitizations, and other securities 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.

The following is a roll forward of the Bank’s allowance for credit losses related to securities for the following periods:


(dollars in thousands)		Total

Three Months Ended September 30, 2021:
Beginning balance	$	9,116
Provision for credit losses		982
Balance: September 30, 2021	$	10,098

Nine Months Ended September 30, 2021:
Beginning balance	$	7,245
Provision for credit losses		2,853
Balance: September 30, 2021	$	10,098

Year Ended December 31, 2020:
Beginning balance	$	—
Provision for credit losses		7,245
Balance: December 31, 2020	$	7,245

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

The scheduled maturities of securities AFS and the related weighted average yields were as follows for the periods indicated:


	****	Less than		****	1 Through		****	5 Through		****	After		****			****
(dollars in thousands)		1 Year			5 years			10 Years			10 Years			Total		****
September 30, 2021
Amortized Cost:
Corporate bonds		$	—		$	—		$	109,000		$	5,000		$	114,000
Other			—			1,533			2,028			—			3,561
Total		$	—		$	1,533		$	111,028		$	5,000		$	117,561
Weighted average yield			—	%		2.03	%		4.37	%		3.38	%		4.30	%
Estimated Fair Value:
Corporate bonds		$	—		$	—		$	111,811		$	5,100		$	116,911
Other			—			1,619			2,031			—			3,650
Total		$	—		$	1,619		$	113,842		$	5,100		$	120,561


	****	Less than		****	1 Through		****	5 Through		****	After		****			****
(dollars in thousands)		1 Year			5 years			10 Years			10 Years			Total		****
December 31, 2020
Amortized Cost:
Corporate bonds		$	—		$	—		$	57,000		$	—		$	57,000
Other			500			1,012			—			—			1,512
Total		$	500		$	1,012		$	57,000		$	—		$	58,512
Weighted average yield			1.83	%		2.81	%		5.39	%		—	%		5.32	%
Estimated Fair Value:
Corporate bonds		$	—		$	—		$	58,358		$	—		$	58,358
Other			503			1,107			—			—			1,610
Total		$	503		$	1,107		$	58,358		$	—		$	59,968

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 as of September 30, 2021 and December 31, 2020 was 2.00% and 2.39%, respectively.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

NOTE 4: LOANS

The following is a summary of our loans as of:


	****	September 30,			December 31,
(dollars in thousands)	****	2021		****	2020
Outstanding principal balance:
Loans secured by real estate:
Residential properties:
Multifamily		$	2,518,151		$	2,247,542
Single family			818,968			806,014
Total real estate loans secured by residential properties			3,337,119			3,053,556
Commercial properties			669,912			747,807
Land and construction			63,706			55,832
Total real estate loans			4,070,737			3,857,195
Commercial and industrial loans			1,217,078			918,676
Consumer loans			9,468			18,888
Total loans			5,297,283			4,794,759
Premiums, discounts and deferred fees and expenses			11,676			9,040
Total		$	5,308,959		$	4,803,799

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


	Past Due and Still Accruing												Total Past
							90 Days						Due and
(dollars in thousands)	30–59 Days			60-89 Days			or More			Nonaccrual			Nonaccrual			Current		Total
September 30, 2021:
Real estate loans:
Residential properties	$	—		$	—		$	—		$	10,652		$	10,652		$	3,338,547	$	3,349,199
Commercial properties		2,947			—			—			1,573			4,520			665,806		670,326
Land and construction		—			—			—			—			—			63,701		63,701
Commercial and industrial loans		79			122			—			6,481			6,682			1,209,559		1,216,241
Consumer loans		1,142			—			—			—			1,142			8,350		9,492
Total	$	4,168		$	122		$	—		$	18,706		$	22,996		$	5,285,963	$	5,308,959

Percentage of total loans		0.08	%		0.00	%		—	%		0.35	%		0.43	%

December 31, 2020:
Real estate loans:
Residential properties	$	35		$	—		$	—		$	10,947		$	10,982		$	3,042,574	$	3,053,556
Commercial properties		951			240			—			4,544			5,735			742,072		747,807
Land and construction		—			—			—			—			—			55,832		55,832
Commercial and industrial loans		1,013			411			152			5,137			6,713			911,963		918,676
Consumer loans		—			—			—			—			—			18,888		18,888
Total	$	1,999		$	651		$	152		$	20,628		$	23,430		$	4,771,329	$	4,794,759

Percentage of total loans		0.04	%		0.01	%		0.00	%		0.43	%		0.49	%

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

The following table summarizes our nonaccrual loans as of:


	Nonaccrual			Nonaccrual
	with Allowance			with no Allowance
(dollars in thousands)	for Credit Losses		****	for Credit Losses
September 30, 2021:
Real estate loans:
Residential properties	$	2,943		$	7,709
Commercial properties		—			1,573
Commercial and industrial loans		1,845			4,636
Total	$	4,788		$	13,918

December 31, 2020:
Real estate loans:
Residential properties	$	2,987		$	7,959
Commercial properties		—			4,544
Commercial and industrial loans		2,581			2,557
Total	$	5,568		$	15,060

The following table presents the loans classified as troubled debt restructurings (“TDR”) by accrual and nonaccrual status as of:


	September 30, 2021						December 31, 2020
(dollars in thousands)	Accrual		Nonaccrual		Total		Accrual		Nonaccrual		Total
Residential loans	$	1,200	$	—	$	1,200	$	1,200	$	—	$	1,200
Commercial real estate loans		1,043		1,201		2,244		1,107		1,277		2,384
Commercial and industrial loans		863		2,100		2,963		1,041		2,832		3,873
Total	$	3,106	$	3,301	$	6,407	$	3,348	$	4,109	$	7,457

The following table provides information on loans that were modified as TDRs for the following periods:


		Outstanding Recorded Investment
(dollars in thousands)	Number of loans	Pre-Modification		Post-Modification		Financial Impact
Nine Months Ended September 30, 2021:
Commercial and industrial loans	1	$	346	$	346	$	—
Total	1	$	346	$	346	$	—

		Outstanding Recorded Investment
(dollars in thousands)	Number of loans	Pre-Modification		Post-Modification		Financial Impact
Year Ended December 31, 2020
Commercial and industrial loans	1	$	507	$	507		—
Total	1	$	507	$	507	$	—

All of these loans were classified as a TDR as a result of a reduction in required principal payments and an extension of the maturity date of the loans. These loans have been paying in accordance with the terms of their restructure.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

NOTE 5: ALLOWANCE FOR CREDIT LOSSES

The following is a roll forward of the Bank’s allowance for credit losses related to loans for the following periods:


	****	Beginning		Adoption of		****	Provision (benefit) for		****			****			****	Ending
(dollars in thousands)		Balance		ASC 326			Credit Losses			Charge-offs			Recoveries			Balance
Three Months Ended September 30, 2021:
Real estate loans:
Residential properties		$	7,236	$	—		$	(1,507)		$	—		$	—		$	5,729
Commercial properties			5,485		—		****	(148)			—			—			5,337
Land and construction			1,984		—		****	(258)			—			—			1,726
Commercial and industrial loans			7,458		—		****	492			(219)			355			8,086
Consumer loans			109		—		****	(2)			—			—			107
Total		$	22,272	$	—		$	(1,423)		$	(219)		$	355		$	20,985

Nine Months Ended September 30, 2021:
Real estate loans:
Residential properties		$	5,115	$	—		$	614		$	—		$	—		$	5,729
Commercial properties			8,711		—		****	(3,374)			—			—			5,337
Land and construction			892		—		****	834			—			—			1,726
Commercial and industrial loans			9,249		—		****	(1,400)			(627)			864			8,086
Consumer loans			233		—		****	(126)			—			—			107
Total		$	24,200	$	—		$	(3,452)		$	(627)		$	864		$	20,985

Year Ended December 31, 2020:
Real estate loans:
Residential properties		$	8,423	$	363		$	(3,671)		$	—		$	—		$	5,115
Commercial properties			4,166		3,760			785			—			—			8,711
Land and construction			573		92			227			—			—			892
Commercial and industrial loans			7,448		—			2,642			(1,844)			1,003			9,249
Consumer loans			190		—			43			—			—			233
Total		$	20,800	$	4,215		$	26		$	(1,844)		$	1,003		$	24,200

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

The following table presents the balance in the allowance for credit losses and the recorded investment in loans by impairment method as of:


	Allowance for Credit Losses
	Loans Evaluated
(dollars in thousands)	Individually		Collectively		Total
September 30, 2021:
Allowance for credit losses:
Real estate loans:
Residential properties	$	1,174	$	4,555	$	5,729
Commercial properties		411		4,926		5,337
Land and construction		—		1,726		1,726
Commercial and industrial loans		590		7,496		8,086
Consumer loans		—		107		107
Total	$	2,175	$	18,810	$	20,985
Loans:
Real estate loans:
Residential properties	$	16,417	$	3,332,782	$	3,349,199
Commercial properties		13,931		656,395		670,326
Land and construction		—		63,701		63,701
Commercial and industrial loans		7,611		1,208,630		1,216,241
Consumer loans		—		9,492		9,492
Total	$	37,959	$	5,271,000	$	5,308,959

December 31, 2020:
Allowance for credit losses:
Real estate loans:
Residential properties	$	1,059	$	4,056	$	5,115
Commercial properties		374		8,337		8,711
Land and construction		—		892		892
Commercial and industrial loans		956		8,293		9,249
Consumer loans		—		233		233
Total	$	2,389	$	21,811	$	24,200
Loans:
Real estate loans:
Residential properties	$	12,414	$	3,041,142	$	3,053,556
Commercial properties		17,304		730,503		747,807
Land and construction		—		55,832		55,832
Commercial and industrial loans		6,472		912,204		918,676
Consumer loans		—		18,888		18,888
Total	$	36,190	$	4,758,569	$	4,794,759

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

The following tables present risk categories of loans based on year of origination, as of:


													Revolving
(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Loans		Total
September 30, 2021:
Loans secured by Real Estate:
Residential
Multifamily
Pass	$	552,257	$	887,859	$	492,189	$	305,631	$	174,156	$	114,690	$	—	$	2,526,782
Special Mention		—		—		1,182		—		—		—		—		1,182
Substandard		—		—		—		—		—		—		—		—
Total	$	552,257	$	887,859	$	493,371	$	305,631	$	174,156	$	114,690	$	—	$	2,527,964

Single Family
Pass	$	222,918	$	132,447	$	57,672	$	71,626	$	59,101	$	239,357	$	21,671	$	804,792
Special Mention		—		—		—		—		—		—		26		26
Substandard		—		—		—		—		1,887		11,269		3,261		16,417
Total	$	222,918	$	132,447	$	57,672	$	71,626	$	60,988	$	250,626	$	24,958	$	821,235

Commercial Real Estate
Pass	$	55,894	$	39,467	$	76,225	$	93,801	$	120,021	$	242,375	$	—	$	627,783
Special Mention		—		—		10,595		10,674		—		5,895		—		27,164
Substandard		—		—		5,861		—		2,252		7,266		—		15,379
Total	$	55,894	$	39,467	$	92,681	$	104,475	$	122,273	$	255,536	$	—	$	670,326

Land and construction
Pass	$	4,360	$	(13)	$	17,208	$	31,060	$	10,505	$	581	$	—	$	63,701
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	4,360	$	(13)	$	17,208	$	31,060	$	10,505	$	581	$	—	$	63,701

Commercial
Pass	$	357,032	$	206,077	$	99,384	$	24,709	$	7,014	$	22,685	$	483,029	$	1,199,930
Special Mention		—		1,383		904		824		—		51		1,241		4,403
Substandard		—		1,969		1,847		1,007		214		2,564		4,307		11,908
Total	$	357,032	$	209,429	$	102,135	$	26,540	$	7,228	$	25,300	$	488,577	$	1,216,241

Consumer
Pass	$	39	$	1,142	$	—	$	1,249	$	—	$	81	$	6,981	$	9,492
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	39	$	1,142	$	—	$	1,249	$	—	$	81	$	6,981	$	9,492

Total loans
Pass	$	1,192,500	$	1,266,979	$	742,678	$	528,076	$	370,797	$	619,769	$	511,681	$	5,232,480
Special Mention		—		1,383		12,681		11,498		—		5,946		1,267		32,775
Substandard		—		1,969		7,708		1,007		4,353		21,099		7,568		43,704
Total	$	1,192,500	$	1,270,331	$	763,067	$	540,581	$	375,150	$	646,814	$	520,516	$	5,308,959

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED


													Revolving
(dollars in thousands)	2020		2019		2018		2017		2016		Prior		Loans		Total
December 31, 2020:
Loans secured by Real Estate:
Residential
Multifamily
Pass	$	774,701	$	638,237	$	469,866	$	218,470	$	82,941	$	63,328	$	—	$	2,247,543
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	774,701	$	638,237	$	469,866	$	218,470	$	82,941	$	63,328	$	—	$	2,247,543

Single Family
Pass	$	173,563	$	83,311	$	110,560	$	95,888	$	107,568	$	196,692	$	25,014	$	792,596
Special Mention		—		—		—		986		—		—		—		986
Substandard		—		—		—		1,946		—		7,134		3,351		12,431
Total	$	173,563	$	83,311	$	110,560	$	98,820	$	107,568	$	203,826	$	28,365	$	806,013

Commercial Real Estate
Pass	$	46,260	$	100,432	$	120,230	$	129,120	$	119,719	$	194,533	$	—	$	710,294
Special Mention		—		743		16,278		—		2,333		157		—		19,511
Substandard		—		5,929		—		2,336		2,515		7,222		—		18,002
Total	$	46,260	$	107,104	$	136,508	$	131,456	$	124,567	$	201,912	$	—	$	747,807

Land and construction
Pass	$	257	$	15,923	$	27,792	$	10,532	$	706	$	622	$	—	$	55,832
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	257	$	15,923	$	27,792	$	10,532	$	706	$	622	$	—	$	55,832

Commercial
Pass	$	377,500	$	146,279	$	54,910	$	15,868	$	13,180	$	16,823	$	270,604	$	895,164
Special Mention		2,058		3,922		1,868		579		297		448		6,107		15,279
Substandard		1,226		316		1,188		259		2,459		281		2,504		8,233
Total	$	380,784	$	150,517	$	57,966	$	16,706	$	15,936	$	17,552	$	279,215	$	918,676

Consumer
Pass	$	2,557	$	—	$	1,321	$	3	$	6,784	$	100	$	8,123	$	18,888
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	2,557	$	—	$	1,321	$	3	$	6,784	$	100	$	8,123	$	18,888

Total loans
Pass	$	1,374,838	$	984,182	$	784,679	$	469,881	$	330,898	$	472,098	$	303,741	$	4,720,317
Special Mention		2,058		4,665		18,146		1,565		2,630		605		6,107		35,776
Substandard		1,226		6,245		1,188		4,541		4,974		14,637		5,855		38,666
Total	$	1,378,122	$	995,092	$	804,013	$	475,987	$	338,502	$	487,340	$	315,703	$	4,794,759

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses and the related allowance for credit losses (“ACL”) allocated to these loans:


					Equipment/					ACL
(dollars in thousands)	Real Estate		Cash		Receivables		Total			Allocation
September 30, 2021:
Loans secured by Real Estate:
Residential properties
Single family	$	9,918	$	—	$	—	$	9,918	$	1,157
Commercial loans		—		250		—		250		—
Total	$	9,918	$	250	$	—	$	10,168	$	1,157

December 31, 2020:
Loans secured by Real Estate:
Residential properties
Single family	$	10,144	$	—	$	—	$	10,144	$	1,051
Commercial loans		—		250		122		372		44
Total	$	10,144	$	250	$	122	$	10,516	$	1,095

NOTE 6: LOAN SALES AND MORTGAGE SERVICING RIGHTS

FFB sold $580 million of multifamily loans for the nine months ended September 30, 2021 and recognized a gain of $21.5 million. In 2020, FFB sold $553 million of multifamily loans and recognized a gain of $15.1 million. For sales of multifamily loans, FFB retained servicing rights for the majority of these loans and recognized mortgage servicing rights as part of the transactions. As of September 30, 2021 and December 31, 2020, mortgage servicing rights were $10.7 million and $7.9 million, respectively. The amount of loans serviced for others totaled $1.5 billion as of September 30, 2021 and December 31, 2020. The mortgage servicing rights as of September 30, 2021 and December 31, 2020 are net of $3.6 million and $1.4 million valuation allowances, respectively. Excluding $3.1 million in valuation provisions on mortgage servicing rights taken in the nine months ended September 30, 2021, servicing fees for the first nine months ended September 30, 2021 were $2.3 million, while servicing fees were $0.3 million for the nine months ended September 30, 2020.

NOTE 7: DEPOSITS

The following table summarizes the outstanding balance of deposits and average rates paid thereon as of:


	September 30, 2021				December 31, 2020
			Weighted				Weighted
(dollars in thousands)	Amount		Average Rate		Amount		Average Rate
Demand deposits:
Noninterest-bearing	$	2,995,570	—		$	1,655,847	—
Interest-bearing		945,654	0.241	%		871,289	0.372	%
Money market and savings		2,290,380	0.319	%		2,407,401	0.549	%
Certificates of deposits		613,374	0.229	%		978,896	0.591	%
Total	$	6,844,978	0.161	%	$	5,913,433	0.376	%

At September 30, 2021, of the $344 million of certificates of deposits over $250,000, $342 million mature within one year and $2 million mature after one year. Of the $269 million of certificates of deposit of $250,000 or less, $260 million mature within one year and $9 million mature after one year. At December 31, 2020, of the $416 million of certificates of deposits of $250,000 or more, $409 million mature within one year and $7 million mature after one year. 19

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED

Of the $563 million of certificates of deposit of less than $250,000, $520 million mature within one year and $43 million mature after one year.

NOTE 8: BORROWINGS

At September 30, 2021, our borrowings consisted of $12.5 million of borrowings under a holding company line of credit. At December 31, 2020, our borrowings consisted of $255 million of overnight FHLB advances at the Bank and $14 million of borrowings under a holding company line of credit. At September 30, 2021, the interest rate on the holding company line of credit was 3.64%.

FHLB advances are collateralized primarily by loans secured by single family, multifamily, and commercial real estate properties with a carrying value of $3.8 billion as of September 30, 2021. As a matter of practice, the Bank provides substantially all of its qualifying loans as collateral to the FHLB or the Federal Reserve Bank. The Bank’s total borrowing capacity from the FHLB at September 30, 2021 was $2.5 billion. The Bank had in place $275 million of letters of credit from the FHLB, as of September 30, 2021 which are used to meet collateral requirements for borrowings from the State of California and local agencies.

During 2017, FFI entered into a loan agreement with an unaffiliated lender that provides for a revolving line of credit for up to $40 million. The loan agreement matures in five years, with an option to extend the maturity date subject to certain conditions, and bears interest at 90 day LIBOR plus 350 basis points (3.50%). FFI’s obligations under the loan agreement are secured by, among other things, a pledge of all of its equity in FFB. We are required to meet certain financial covenants during the term of the loan, including minimum capital levels and limits on classified assets. As of September 30, 2021 and December 31, 2020, FFI was in compliance with the covenants on this loan agreement.

The Bank also has $195 million available borrowing capacity through unsecured fed funds lines, ranging in size from $20 million to $100 million, with five other financial institutions, and a $204 million secured line with the Federal Reserve Bank, secured by single family loans. None of these lines had outstanding borrowings as September 30, 2021. Combined, the Bank’s unused lines of credit as of September 30, 2021 and December 31, 2020 were $2.9 billion and $2.4 billion, respectively. The average balance of overnight borrowings during all of 2020 was $56 million.

NOTE 9: EARNINGS PER SHARE

Basic earnings per share excludes dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if contracts to issue common stock were exercised or converted into common stock that would then share in earnings. The following table sets forth the Company’s unaudited earnings per share calculations for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended				Three Months Ended
	September 30, 2021				September 30, 2020
(dollars in thousands, except per share amounts)	Basic		Diluted		Basic		Diluted
Net income	$	37,226	$	37,226	$	30,938	$	30,938
Basic common shares outstanding		44,819,743		44,819,743		44,625,668		44,625,668
Effect of options, restricted stock and contingent shares issuable				183,194				260,108
Diluted common shares outstanding				45,002,937				44,885,776
Earnings per share	$	0.83	$	0.83	$	0.69	$	0.69

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED


	Nine Months Ended				Nine Months Ended
	September 30, 2021				September 30, 2020
(dollars in thousands, except share and per share amounts)	Basic		Diluted		Basic		Diluted
Net income	$	85,635	$	85,635	$	62,003	$	62,003
Basic common shares outstanding		44,773,683		44,773,683		44,638,634		44,638,634
Effect of options and restricted stock				204,180				244,978
Diluted common shares outstanding				44,977,863				44,883,612
Earnings per share	$	1.91	$	1.90	$	1.39	$	1.38

Based on a weighted average basis, restricted stock units to purchase 39,439 shares of common stock were excluded for the nine months ended September 30 2020, because their effect would have been anti-dilutive.

NOTE 10: SEGMENT REPORTING

For the three and nine months ended September 30, 2021 and 2020, the Company had two reportable business segments: Banking (FFB and FFIS) and Wealth Management (FFA). The results of FFI and any elimination entries are included in the column labeled “Other”. The following tables show key operating results for each of our business segments used to arrive at our consolidated totals for the following periods:


	****			****	Wealth		****			****
(dollars in thousands)		Banking			Management			Other			Total
Three Months Ended September 30, 2021:
Interest income		$	61,989		$	—		$	—		$	61,989
Interest expense			2,753			—			49			2,802
Net interest income			59,236			—			(49)			59,187
Provision for credit losses			(417)			—			—			(417)
Noninterest income			23,202			7,857			(379)			30,680
Noninterest expense			31,488			6,338			568			38,394
Income (loss) before taxes on income		$	51,367		$	1,519		$	(996)		$	51,890

Three Months Ended September 30, 2020:
Interest income		$	61,691		$	—		$	—		$	61,691
Interest expense			10,024			—			50			10,074
Net interest income			51,667			—			(50)			51,617
Provision for credit losses			1,548			—			—			1,548
Noninterest income			17,976			6,020			(355)			23,641
Noninterest expense			24,949			5,166			480			30,595
Income (loss) before taxes on income		$	43,146		$	854		$	(885)		$	43,115

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2021 - UNAUDITED


	****			****	Wealth		****			****
(dollars in thousands)		Banking			Management			Other			Total
Nine Months Ended September 30, 2021:
Interest income		$	182,530		$	—		$	—		$	182,530
Interest expense			10,988			—			216			11,204
Net interest income			171,542			—			(216)			171,326
Provision for credit losses			(13)			—			—			(13)
Noninterest income			35,710			22,020			(1,107)			56,623
Noninterest expense			88,935			17,441			2,146			108,522
Income (loss) before taxes on income		$	118,330		$	4,579		$	(3,469)		$	119,440

Nine Months Ended September 30, 2020:
Interest income		$	185,961		$	—		$	—		$	185,961
Interest expense			40,899			—			130			41,029
Net interest income			145,062			—			(130)			144,932
Provision for credit losses			6,979			—			—			6,979
Noninterest income			26,270			18,139			(1,124)			43,285
Noninterest expense			76,235			16,735			1,434			94,404
Income (loss) before taxes on income		$	88,118		$	1,404		$	(2,688)		$	86,834

NOTE 11: ACQUISITIONS

Acquisition of TGR Financial, Inc.

On June 2, 2021, FFI entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with TGR Financial, Inc. (“TGR Financial”), pursuant to which TGR Financial will merge with and into FFI (the “Merger”), with FFI as the surviving corporation. The Merger Agreement contemplates that immediately after the Merger, First Florida Integrity Bank, a Florida state-chartered bank and wholly-owned subsidiary of TGR Financial, will merge with and into FFB, with FFB as the surviving bank. Subject to the terms and conditions of the Merger Agreement, upon consummation of the Merger, each outstanding share of TGR Financial common stock will be converted into the right to receive 0.6068 (the “Exchange Ratio”) of a share of FFI common stock, and each outstanding share of TGR Financial preferred stock will be converted into the right to receive the number of shares of FFI common stock equal to the product of the number of shares of TGR Financial common stock into which such share of TGR Financial preferred stock is convertible in connection with, and as a result of, the Merger, multiplied by the Exchange Ratio. In addition, at the effective time of the Merger, FFI will cash out all outstanding stock options based on a formula using the average closing price of FFI’s common stock for a 20-day trading period prior to the closing of the Merger. Subject to regulatory approvals, the transaction is expected to close during the fourth quarter of 2021.

NOTE 12: SUBSEQUENT EVENTS

Cash Dividend

On October 26, 2021, the Board of Directors of the Company declared a quarterly cash dividend of $0.09 per common share to be paid on November 15, 2021 to stockholders of record as of the close of business on November 5, 2021.

Table of Contents ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to facilitate the understanding and assessment of significant changes and trends in our businesses that accounted for the changes in our results of operations in the three and nine months ended September 30, 2021 as compared to our results of operations in the three and nine months ended September 30, 2020; and our financial condition at September 30, 2021 as compared to our financial condition at December 31, 2020. This discussion and analysis is based on and should be read in conjunction with our consolidated financial statements and the accompanying notes thereto contained elsewhere in this report and our audited consolidated financial statements for the year ended December 31, 2020, and the notes thereto, which are set forth in Item 8 of our Annual Report on Form 10-K (as amended, our “2020 10-K”) which we filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021.

Forward-Looking Statements

Statements contained in this report that are not historical facts or that discuss our expectations, beliefs or views regarding our future financial performance or future financial condition, or financial or other trends in our business or in the markets in which we operate, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “forecast” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Such forward-looking statements are based on current information that is available to us, and on assumptions that we make, about future events or economic or financial conditions or trends over which we do not have control. In addition, our businesses and the markets in which we operate are subject to a number of risks and uncertainties. Those risks and uncertainties, and unexpected future events, could cause our financial condition or actual operating results in the future to differ, possibly significantly, from our expected financial condition and operating results that are set forth in the forward-looking statements contained in this report.

The principal risks and uncertainties to which our businesses are subject are discussed in this Item 2 and under the heading “Risk Factors” in our 2020 10-K. Therefore, you are urged to read not only the information contained in this Item 2, but also the risk factors and other cautionary information contained under the heading “Risk Factors” in our 2020 10-K, which qualify the forward-looking statements contained in this report.

The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and may continue to adversely affect, our business, operations, financial performance and prospects. Even after the COVID-19 pandemic subsides, it is possible that the U.S. and other major economies experience or continue to experience a prolonged recession, which could materially and adversely affect our business, operations, financial performance and prospects. Statements about the effects of the COVID-19 pandemic on our business, operations, financial performance and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and us.

Further, statements about the potential effects of the proposed acquisition of TGR Financial on our business, financial results, and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in the forward-looking statements due to factors and future developments which are uncertain, unpredictable and in many cases beyond our control, including the possibility that the proposed merger does not close when expected or at all because required regulatory or other approvals, financial tests or other conditions to closing are not received or satisfied on a timely basis or at all; changes in our or TGR Financial’s stock price before closing, including as a result of each company’s financial performance prior to closing or transaction-related uncertainty, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies; the occurrence of any event, change or other circumstance that could give risk to the right of one 23

Table of Contents or both of the parties to terminate the merger agreement; the risk that the benefits from the proposed merger may not be fully realized or may take longer to realize than expected or be more costly to achieve, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which we and TGR Financial operate; our ability to promptly and effectively integrate the companies’ businesses; reputational risks and the reaction of the companies' customers, employees and counterparties to the proposed merger; diversion of management time on merger-related issues; lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and that the COVID-19 pandemic, including uncertainty and volatility in financial, commodities and other markets, and disruptions to banking and other financial activity, could harm our or TGR Financial's business, financial position and results of operations, and could adversely affect the timing and anticipated benefits of the proposed merger.

Due to these risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements contained in this report and not to make predictions about our future financial performance based solely on our historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this report or in our 2020 10-K, except as may otherwise be required by applicable law or government regulations.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and accounting practices in the banking industry. Certain of those accounting policies are considered critical accounting policies, because they require us to make estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets. Those estimates and assumptions are made based on current information available to us regarding those economic conditions or trends or other circumstances. If changes were to occur in the events, trends or other circumstances on which our estimates or assumptions were based, or other unanticipated events were to occur that might affect our operations, we may be required under GAAP to adjust our earlier estimates and to reduce the carrying values of the affected assets on our balance sheet, generally by means of charges against income, which could also affect our results of operations in the fiscal periods when those charges are recognized.

Allowance for Credit Losses - Securities Available-for-Sale (“AFS”) - For securities AFS in an unrealized loss position, the Company first evaluates whether it intends to sell, or whether it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of these criteria regarding intent or requirement to sell is met, the security amortized cost basis is written down to fair value through income. If the criteria is not met, the Company is required to assess whether the decline in fair value has resulted from credit losses or noncredit-related factors. If the present value of expected cash flows to be collected is less than the amortized cost basis, a credit loss exists, and an allowance for credit loss is recorded through income as a component of provision for credit loss expense. If the assessment indicates that a credit loss does not exist, the Company records the decline in fair value through other comprehensive income, net of related income tax effects. The Company has made the election to exclude accrued interest receivable on securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met. See Note 3, Securities, for additional information related to the Company’s allowance for credit losses on securities AFS.

Allowance for Credit Losses - Loans. Our ACL for loans and investments are established through a provision for credit losses charged to expense and may be reduced by a recapture of previously established loss reserves, which are also reflected in the statement of income. Loans and investments are charged against the ACL when management believes that collectability of the principal is unlikely. The ACL for loans is an amount that management believes will be adequate to absorb estimated losses on existing loans that may become uncollectible based on an evaluation of the collectability of loans and prior loan loss experience. This evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, current economic conditions and certain other subjective factors that may affect the borrower’s ability to pay. While we use the best information available to make this evaluation, future adjustments to our ACL may be necessary if there are significant changes in 24

Table of Contents economic or other conditions that can affect the collectability in full of loans and investments in our loan or investment portfolios.

Utilization and Valuation of Deferred Income Tax Benefits. We record as a “deferred tax asset” on our balance sheet an amount equal to the tax credit and tax loss carryforwards and tax deductions (collectively “tax benefits”) that we believe will be available to us to offset or reduce income taxes in future periods. Under applicable federal and state income tax laws and regulations, tax benefits related to tax loss carryforwards will expire if they cannot be used within specified periods of time. Accordingly, the ability to fully use our deferred tax asset related to tax loss carryforwards to reduce income taxes in the future depends on the amount of taxable income that we generate during those time periods. At least once each year, or more frequently, if warranted, we make estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimates and the amount of the tax benefits available to us, that it is more likely than not that we will be able to fully utilize those tax benefits prior to their expiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we conclude on the basis of those estimates and the amount of the tax benefits available to us that it has become more likely than not that we will be unable to utilize those tax benefits in full prior to their expiration, then we would establish a valuation allowance to reduce the deferred tax asset on our balance sheet to the amount with respect to which we believe it is still more likely than not that we will be able to use to offset or reduce taxes in the future. The establishment of such a valuation allowance, or any increase in an existing valuation allowance, would be effectuated through a charge to the provision for income taxes or a reduction in any income tax credit for the period in which such valuation allowance is established or increased.

We have two business segments, “Banking” and “Wealth Management.” Banking includes the operations of FFB and FFIS, while Wealth Management includes the operations of FFA. The financial position and operating results of the stand-alone holding company, FFI, are included under the caption “Other” in certain of the tables that follow, along with any consolidation elimination entries.

Overview and Recent Developments

Our results of operations for the first nine months of 2021 include:

●	Total loans, including loans held for sale, increased $501 million in the nine months ended September 30, 2021 as a result of $2.7 billion of originations and $56 million of loan purchases, which was partially offset by payoffs or scheduled payments of $1.8 billion and loan sales of $419 million.
●	During the nine months ended September 30, 2021, total deposits increased by $932 million and total revenues (net interest income and noninterest income) increased by 21% when compared to the nine months ended September 30, 2020.
---	---

Proposed Merger with TGR Financial, Inc. On June 2, 2021, FFI entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with TGR Financial, Inc. (“TGR Financial”), pursuant to which TGR Financial will merge with and into FFI (the “Merger”), with FFI as the surviving corporation. The Merger Agreement contemplates that immediately after the Merger, First Florida Integrity Bank, a Florida state-chartered bank and wholly-owned subsidiary of TGR Financial, will merge with and into FFB, with FFB as the surviving bank. Subject to the terms and conditions of the Merger Agreement, upon consummation of the Merger, each outstanding share of TGR Financial common stock will be converted into the right to receive 0.6068 (the “Exchange Ratio”) of a share of FFI common stock, and each outstanding share of TGR Financial preferred stock will be converted into the right to receive the number of shares of FFI common stock equal to the product of the number of shares of TGR Financial common stock into which such share of TGR Financial preferred stock is convertible in connection with, and as a result of, the Merger, multiplied by the Exchange Ratio. In addition, at the effective time of the Merger, FFI will cash out all outstanding stock options based on a formula using the average closing price of FFI’s common stock for a 20-day trading period prior to the closing of the Merger. Subject to regulatory approvals, the transaction is expected to close during the fourth quarter of 2021.

COVID-19 Update. Our business continues to be affected by the COVID-19 pandemic, which has caused economic and social disruption on an unprecedented scale. While some industries have been impacted more severely than 25

Table of Contents others, all businesses have been impacted to some degree. As restrictive measures were eased during the first nine months of 2021, commercial activity has improved but has not returned to the levels existing prior to the outbreak of the pandemic, and many businesses continue to operate under restricted measures and the ongoing risk that they will face further restrictions imposed in response to the pandemic, all of which may result in our customers’ inability to meet their loan obligations to us and reduce demand for loans and other services we offer. In addition, we continue to operate under our Pandemic Response Business Continuity Plan, under which approximately 20% of our corporate employees continue to working remotely. We continue to follow protocols for the safety of our clients and employees. Additional costs associated with the safety protocols, such as additional cleaning and supplies has been offset by reduced costs for parking, meals, entertainment and travel. We have implemented alternative procedures, such as electronic signatures and approvals, to maintain effective internal controls over our financial reporting processes. We continued to face other risk and uncertainties as a result of the COVID-19 pandemic, including those described in “Item 1A – Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, which we filed with the SEC on February 26, 2021.

Results of Operations

The primary sources of revenue for Banking are net interest income, fees from its deposits and trust services, gains on sales of loans, certain loan fees, and consulting fees. The primary sources of revenue for Wealth Management are asset management fees assessed on the balance of assets under management (“AUM”). Compensation and benefit costs, which represent the largest component of noninterest expense, accounted for 57% and 78%, respectively, of the total noninterest expense for Banking and Wealth Management in the nine months ended September 30, 2021.

The following table shows key operating results for each of our business segments for the three months ended September 30:


	****			****	Wealth		****			****
(dollars in thousands)	****	Banking		****	Management		****	Other		****	Total
2021:
Interest income		$	61,989		$	—		$	—		$	61,989
Interest expense			2,753			—			49			2,802
Net interest income			59,236			—			(49)			59,187
Provision for credit losses			(417)			—			—			(417)
Noninterest income			23,202			7,857			(379)			30,680
Noninterest expense			31,488			6,338			568			38,394
Income (loss) before taxes on income		$	51,367		$	1,519		$	(996)		$	51,890

2020:
Interest income		$	61,691		$	—		$	—		$	61,691
Interest expense			10,024			—			50			10,074
Net interest income			51,667			—			(50)			51,617
Provision for credit losses			1,548			—			—			1,548
Noninterest income			17,976			6,020			(355)			23,641
Noninterest expense			24,949			5,166			480			30,595
Income (loss) before taxes on income		$	43,146		$	854		$	(885)		$	43,115

General. Our net income and income before taxes in the three months ended September 30, 2021 were $37.2 million and $51.9 million, respectively, as compared to $30.9 million and $43.1 million, respectively, in the three months ended September 30, 2020. The $8.8 million increase in income before taxes was the result of a $8.2 million increase in income before taxes for Banking and a $0.7 million increase in income before taxes for Wealth Management, which was partially offset by a $0.1 million increase in corporate noninterest expenses. The increase in Banking was due to higher net interest income, higher noninterest income, and lower provision for credit losses. The increase in Wealth Management was due to higher noninterest income. 26

Table of Contents The following table shows key operating results for each of our business segments for the nine months ended September 30, 2021:


	****			****	Wealth		****			****
(dollars in thousands)	****	Banking		****	Management		****	Other		****	Total
2021:
Interest income		$	182,530		$	—		$	—		$	182,530
Interest expense			10,988			—			216			11,204
Net interest income			171,542			—			(216)			171,326
Provision for credit losses			(13)			—			—			(13)
Noninterest income			35,710			22,020			(1,107)			56,623
Noninterest expense			88,935			17,441			2,146			108,522
Income (loss) before taxes on income		$	118,330		$	4,579		$	(3,469)		$	119,440

2020:
Interest income		$	185,961		$	—		$	—		$	185,961
Interest expense			40,899			—			130			41,029
Net interest income			145,062			—			(130)			144,932
Provision for credit losses			6,979			—			—			6,979
Noninterest income			26,270			18,139			(1,124)			43,285
Noninterest expense			76,235			16,735			1,434			94,404
Income (loss) before taxes on income		$	88,118		$	1,404		$	(2,688)		$	86,834

General. Our net income and income before taxes in the nine months ended September 30, 2021 were $85.6 million and $119.4 million, respectively, as compared to $62.0 million and $86.8 million, respectively, in the nine months ended September 30, 2020. The $32.6 million increase in income before taxes was the result of a $30.2 million increase in income before taxes for Banking and a $3.2 million increase in income before taxes for Wealth Management, which was partially offset by a $0.7 million increase in corporate noninterest expenses. The increase in Banking was due to higher net interest income, higher noninterest income, and lower provision for credit losses. The increase in Wealth Management was due to higher noninterest income. 27

Table of Contents Net Interest Income. The following tables set forth, for the periods indicated, information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net interest margin:


	****	Three Months Ended September 30:
	****	2021								2020
		Average						Average		Average						Average
(dollars in thousands)	****	Balances		****	Interest		****	Yield /Rate	****	Balances		****	Interest		****	Yield /Rate	****
Interest-earning assets:
Loans		$	6,060,153		$	56,781		3.74	%	$	5,644,646		$	55,231		3.91	%
Securities AFS			715,505			4,606		2.58	%		840,593			6,107		2.91	%
FHLB stock, fed funds, and deposits			924,232			602		0.26	%		329,311			353		0.43	%
Total interest-earning assets			7,699,890			61,989		3.22	%		6,814,550			61,691		3.62	%
Noninterest-earning assets:
Nonperforming assets			16,105								16,506
Other			219,179								186,751
Total assets		$	7,935,174							$	7,017,807
Interest-bearing liabilities:
Demand deposits		$	1,036,278		$	463		0.18	%	$	425,674		$	369		0.35	%
Money market and savings			2,286,585			1,817		0.32	%		1,805,284			3,071		0.68	%
Certificates of deposit			653,194			473		0.29	%		1,538,377			4,548		1.18	%
Total interest-bearing deposits			3,976,057			2,753		0.27	%		3,769,335			7,988		0.84	%
Borrowings			5,393			49		3.38	%		698,860			2,086		1.19	%
Total interest-bearing liabilities			3,981,450			2,802		0.28	%		4,468,195			10,074		0.90	%
Noninterest-bearing liabilities:
Demand deposits			3,127,562								1,832,709
Other liabilities			84,227								75,555
Total liabilities			7,193,239								6,376,459
Shareholders’ equity			741,935								641,348
Total liabilities and equity		$	7,935,174							$	7,017,807
Net Interest Income					$	59,187							$	51,617
Net Interest Rate Spread								2.94	%							2.72	%
Net Interest Margin								3.07	%							3.03	%

Table of Contents


	****	Nine Months Ended September 30:
	****	2021								2020
		Average						Average		Average						Average
(dollars in thousands)	****	Balances		****	Interest		****	Yield /Rate	****	Balances		****	Interest		****	Yield /Rate	****
Interest-earning assets:
Loans		$	5,743,942		$	166,291		3.86	%	$	5,401,754		$	165,249		4.08	%
Securities AFS			743,018			14,739		2.64	%		919,712			19,643		2.85	%
FHLB stock, fed funds and deposits			789,323			1,500		0.25	%		182,558			1,069		0.78	%
Total interest-earning assets			7,276,283			182,530		3.35	%		6,504,024			185,961		3.81	%
Noninterest-earning assets:
Nonperforming assets			16,912								13,095
Other			200,825								180,735
Total assets		$	7,494,020							$	6,697,854
Interest-bearing liabilities:
Demand deposits		$	982,521		$	1,893		0.26	%	$	386,249			1,466		0.51	%
Money market and savings			2,300,127			6,536		0.38	%		1,554,295			10,595		0.91	%
Certificates of deposit			744,095			2,334		0.42	%		1,815,252			21,487		1.58	%
Total interest-bearing deposits			4,026,743			10,763		0.36	%		3,755,796			33,548		1.19	%
Borrowings			74,084			441		0.79	%		730,763			7,481		1.37	%
Total interest-bearing liabilities			4,100,827			11,204		0.37	%		4,486,559			41,029		1.22	%
Noninterest-bearing liabilities:
Demand deposits			2,607,488								1,514,954
Other liabilities			64,678								67,887
Total liabilities			6,772,993								6,069,400
Stockholders’ equity			721,027								628,454
Total liabilities and equity		$	7,494,020							$	6,697,854
Net Interest Income					$	171,326							$	144,932
Net Interest Rate Spread								2.98	%							2.59	%
Net Interest Margin								3.14	%							2.97	%

Table of Contents Net interest income is impacted by the volume (changes in volume multiplied by prior rate), interest rate (changes in rate multiplied by prior volume) and mix of interest-earning assets and interest-bearing liabilities. Variances attributable to both rate and volume changes, calculated by multiplying the change in rates by the change in average balances, have been allocated to the rate variance. The following table provides a breakdown of the changes in net interest income due to volume and rate changes for the three and nine months ended September 30, 2021, as compared to the three and nine months ended September 30, 2020:


	****	Quarter Ended										Nine Months Ended
		September 30, 2021 vs. 2020									September 30, 2021 vs. 2020
	****	Increase (Decrease) due to									Increase (Decrease) due to
(dollars in thousands)	****	Volume		****	Rate		****	Total		****	Volume		****	Rate		****	Total
Interest earned on:
Loans		$	3,997		$	(2,447)		$	1,550		$	10,101		$	(9,059)		$	1,042
Securities			(851)			(650)			(1,501)			(3,581)			(1,323)			(4,904)
FHLB stock, fed funds and deposits			433			(184)			249			1,558			(1,127)			431
Total interest-earning assets			3,579			(3,281)			298			8,078			(11,509)			(3,431)
Interest paid on:
Demand deposits			340			(246)			94			1,416			(988)			428
Money market and savings			668			(1,922)			(1,254)			3,733			(7,792)			(4,059)
Certificates of deposit			(1,774)			(2,301)			(4,075)			(8,541)			(10,613)			(19,154)
Borrowings			(3,395)			1,358			(2,037)			(4,792)			(2,248)			(7,040)
Total interest-bearing liabilities			(4,161)			(3,111)			(7,272)			(8,184)			(21,641)			(29,825)
Net interest income		$	7,740		$	(170)		$	7,570		$	16,262		$	10,132		$	26,394

Net interest income increased 15%, from $51.6 million in the three months ended September 30, 2020, to $59.2 million in the three months ended September 30, 2021 due to a 13% increase in interest-earning assets and an increase in the net interest rate spread. On a consolidated basis our net interest margin increased from 3.03% in the three months ended September 30, 2020 to 3.07% in the three months ended September 30, 2021 due to a decrease in the cost of interest-bearing liabilities, from 0.90% in the three months ended September 30, 2020, to 0.28% in the three months ended September 30, 2021, which was partially offset by a decrease in yield on interest-earning assets, from 3.62% in the three months ended September 30, 2020, to 3.22% in the three months ended September 30, 2021. The decrease in the cost of interest-bearing liabilities was due to decreased costs of interest-bearing deposits, resulting from decreases in deposit market rates, and decreased average balance of borrowings, as the average balance on FHLB advances and other borrowings decreased from $698.9 million in the three months ended September 30, 2020, to $5.4 million in the three months ended September 30, 2021. The average balance outstanding under the holding company line of credit increased from $5.3 million in the three months ended September 30, 2020 to $5.4 million in the three months ended September 30, 2021.

Net interest income increased 18%, from $144.9 million in the nine months ended September 30, 2020, to $171.3 million in the nine months ended September 30, 2021 due primarily to a 12% increase in interest-earning assets. On a consolidated basis our net interest margin was 3.14% for the nine months ended September 30, 2021 as compared to 2.97% in the nine months ended September 30, 2020. This increase was due to an increase in the net interest rate spread, from 2.59% in the nine months ended September 30, 2020 to 2.98% in the nine months ended September 30, 2021. The increase in the net interest rate spread was due to a decrease in the cost of interest-bearing liabilities, from 1.22% in the nine months ended September 30, 2020, to 0.37% in the nine months ended September 30, 2021, which was partially offset by a decrease in yield on total interest-earning assets, from 3.81% in the nine months ended September 30, 2020, to 3.35% in the nine months ended September 30, 2021. The decrease in the cost of interest-bearing liabilities was due to decreased costs of interest-bearing deposits, resulting from decreases in deposit market rates, and decreased costs of borrowings, as the average rate on FHLB advances and other overnight borrowings decreased from 1.37% in the nine months ended September 30, 2020 to 0.79% in the nine months ended September 30, 2021. The average balance outstanding under the holding company line of credit increased from $3.9 million in the nine months ended September 30, 2020 to $7.8 million in the nine months ended September 30, 2021. 30

Table of Contents Provision for credit losses. The provision for credit losses represents our estimate of the amount necessary to be charged against the current period’s earnings to maintain the ACL for loans and investments at a level that we consider adequate in relation to the estimated losses inherent in the loan and investment portfolios. The provision for credit losses for loans is impacted by changes in loan balances as well as changes in estimated loss assumptions and charge-offs and recoveries. The amount of the provision for loans also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, current economic conditions and certain other subjective factors that may affect the ability of borrowers to meet their repayment obligations to us. The reversal of provision for credit losses for the three and nine months ended September 30, 2021 was $417 thousand and $13 thousand, respectively, compared to provisions of $1.5 million and $7.0 million, for the three and nine months ended September 30, 2020. Net recoveries for the ACL were $0.1 million and $0.2 million for the three and nine months ended September 30, 2021, respectively, as compared to net chargeoffs of $0.1 million and $0.6 million for the three and nine months ended September 30, 2020, respectively. The decrease in the provision for credit losses for the three and nine months ended September 30, 2021 was a result of improvement in the economic scenario outlook and lower loan balances due to securitization activity.

Noninterest income. Noninterest income for Banking includes fees charged to clients for trust services and deposit services, consulting fees, prepayment and late fees charged on loans, gain on sale of loans, and gains and losses from capital market activities and insurance commissions. The following table provides a breakdown of noninterest income for Banking for the three and nine months ended September 30, 2021 and 2020:


(dollars in thousands)	****	2021		****	2020
Three Months Ended September 30:
Trust fees		$	1,737		$	1,504
Loan related fees			2,661			713
Deposit charges			440			326
Gain on sale of loans			18,135			15,140
Consulting fees			102			99
Other			127			194
Total noninterest income		$	23,202		$	17,976

Nine Months Ended September 30:
Trust fees		$	5,168		$	4,200
Loan related fees			6,929			5,104
Deposit charges			1,216			917
Gain on sale of loans			21,459			15,140
Consulting fees			303			299
Other			635			610
Total noninterest income		$	35,710		$	26,270

Noninterest income for Banking in the three and nine months ended September 30, 2021 were $5.2 million and $9.4 million higher than the three and nine months ended September 30, 2020, respectively, due to an increase in trust fees, loan related fees, and gains on sales of loans. The increase in trust fees was due primarily to higher levels of billable assets under advisement (“AUA”). Loan related fees are net of valuation allowances of $1.8 million and $3.1 million on mortgage servicing rights in the three and nine months ended September 30, 2021, respectively, when compared to the corresponding periods in 2020, due to an increase in prepayment speeds. 31

Table of Contents Noninterest income for Wealth Management includes fees charged to high net-worth clients for managing their assets and for providing financial planning consulting services. The following table provides the amounts of noninterest income for Wealth Management for the three and nine months ended September 30, 2021 and 2020:


(dollars in thousands)	****	2021		****	2020
Three Months Ended September 30:
Noninterest income		$	7,857		$	6,020

Nine Months Ended September 30:
Noninterest income		$	22,020		$	18,139

Noninterest income for Wealth Management increased by $1.8 million and $3.9 million in the three and nine months ended September 30, 2021 when compared to the corresponding periods in 2020, due primarily to higher levels of billable AUM in the quarter.

The following table summarizes the activity in our AUM for the periods indicated:


				Existing account
	Beginning			Additions/			New
(dollars in thousands)	Balance		****	Withdrawals		****	Accounts		****	Terminations		****	Performance		****	Ending balance
Three Months Ended September 30, 2021:
Fixed Income	$	1,409,393		$	(15,751)		$	20,061		$	(7,281)		$	(22,043)		$	1,384,379
Equities		2,960,111			152,768			31,489			(17,050)			(34,370)			3,092,948
Cash and other		950,358			(38,653)			21,580			(12,417)			30,542			951,410
Total	$	5,319,862		$	98,364		$	73,130		$	(36,748)		$	(25,871)		$	5,428,737

Nine Months Ended September 30, 2021:
Fixed Income	$	1,474,479		$	(135,745)		$	59,524		$	(33,293)		$	19,414		$	1,384,379
Equities		2,451,056			335,088			163,383			(99,834)			243,255			3,092,948
Cash and other		1,001,256			(199,529)			116,916			(74,129)			106,896			951,410
Total	$	4,926,791		$	(186)		$	339,823		$	(207,256)		$	369,565		$	5,428,737

Year Ended December 31, 2020:
Fixed Income	$	1,678,660		$	(334,302)		$	117,362		$	(42,907)		$	55,666		$	1,474,479
Equities		2,628,472			(645,341)			115,418			(83,292)			435,799			2,451,056
Cash and other		131,120			809,238			133,286			(50,799)			(21,589)			1,001,256
Total	$	4,438,252		$	(170,405)		$	366,066		$	(176,998)		$	469,876		$	4,926,791

The $502 million increase in AUM during the nine months ended September 30, 2021 was the net result of $344 million of new accounts, $362 million of portfolio gains, and terminations and net withdrawals of $204 million.

Table of Contents Noninterest Expense. The following table provides a breakdown of noninterest expense for Banking and Wealth Management for the periods indicated:


	Banking				Wealth Management
(dollars in thousands)	2021		2020		2021		2020
Three Months Ended September 30, 2021:
Compensation and benefits	$	18,078	$	13,696	$	4,946	$	3,897
Occupancy and depreciation		5,896		5,414		531		620
Professional services and marketing		1,849		1,595		724		544
Customer service costs		2,512		1,723		—		—
Other expenses		3,153		2,521		137		105
Total noninterest expense	$	31,488	$	24,949	$	6,338	$	5,166

Nine Months Ended September 30, 2021:
Compensation and benefits	$	50,736	$	42,376	$	13,523	$	12,567
Occupancy and depreciation		16,803		15,529		1,494		1,796
Professional services and marketing		5,916		4,287		2,040		1,961
Customer service costs		6,635		5,717		—		—
Other expenses		8,845		8,326		384		411
Total noninterest expense	$	88,935	$	76,235	$	17,441	$	16,735

Noninterest expense in Banking increased from $24.9 million in the three months ended September 30, 2020 to $31.5 million in the three months ended September 30, 2021 primarily due to higher compensation and benefits, professional services and marketing expenses, and customer service costs. Compensation and benefits were $4.4 million higher in the three months ended September 30, 2021 due to increases in FTE. The FTE in Banking increased to 485.0 in the three months ended September 30, 2021, from 424.8 in the three months ended September 30, 2020, due to increased staffing related to additional personnel added to support the growth in loans and deposits. Professional services and marketing were higher due primarily to $1.6 million of one-time merger expenses during the first nine months of 2021 related to the TGR Financial acquisition. The $0.8 million increase in customer service costs was due to higher earnings credits paid on increases in deposit balances. Noninterest expenses for Wealth Management increased by $1.2 million when compared to the third quarter of 2020 due to higher compensation and benefits expenses.

Noninterest expense in Banking increased from $76.2 million in the nine months ended September 30, 2020 to $88.9 million in the nine months ended September 30, 2021, primarily due to increases in compensation and benefits, occupancy and depreciation, and professional services and marketing. Compensation and benefits for Banking increased, from $42.4 million in the nine months ended September 30, 2020, to $50.7 million in the nine months ended September 30, 2021, due to increases in FTE. The FTE in Banking increased to 462.1 in the nine months ended September 30, 2021, from 431.1 in the nine months ended September 30, 2020, due to increased staffing related to additional personnel added to support the growth in loans and deposits. The $1.6 million increase in professional services and marketing for Banking in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 was due to primarily to $1.6 million of one-time merger expenses during the second and third quarters of 2021 related to the TGR Financial acquisition. Noninterest expenses for Wealth Management increased by $0.7 million in the nine months ended September 30, 2021, when compared to the nine months ended September 30, 2020, primarily due to an increase in compensation and benefits expenses.

Table of Contents Financial Condition

The following table shows the financial position for each of our business segments, and of FFI and elimination entries used to arrive at our consolidated totals which are included in the column labeled Other and Eliminations, as of:


	****			****	Wealth		****	Other and		****
(dollars in thousands)		Banking			Management			Eliminations			Total
September 30, 2021:
Cash and cash equivalents		$	782,760		$	1,566		$	(950)		$	783,376
Securities AFS, net			891,648			—			—			891,648
Loans held for sale			501,433			—			—			501,433
Loans, net			5,287,974			—			—			5,287,974
Premises and equipment			7,525			430			136			8,091
Investment in FHLB Stock			17,250			—			—			17,250
Deferred taxes			11,073			187			(13)			11,247
Goodwill and intangibles			94,083			—			—			94,083
Other assets			115,715			373			23,873			139,961
Total assets		$	7,709,461		$	2,556		$	23,046		$	7,735,063

Deposits		$	6,858,101		$	—		$	(13,123)		$	6,844,978
Borrowings			—			—			12,500			12,500
Intercompany balances			9,647			(6,816)			(2,831)			—
Other liabilities			85,677			3,605			21,472			110,754
Shareholders’ equity			756,036			5,767			5,028			766,831
Total liabilities and equity		$	7,709,461		$	2,556		$	23,046		$	7,735,063

December 31, 2020:
Cash and cash equivalents		$	629,066		$	1,671		$	(1,030)		$	629,707
Securities AFS, net			807,426			—			—			807,426
Loans held for sale			505,404			—			—			505,404
Loans, net			4,779,599			—			—			4,779,599
Premises and equipment			7,313			563			136			8,012
Investment in FHLB Stock			17,250			—			—			17,250
Deferred taxes			8,663			186			(246)			8,603
Goodwill and intangibles			95,296			—			—			95,296
Other assets			91,702			314			13,847			105,863
Total assets		$	6,941,719		$	2,734		$	12,707		$	6,957,160

Deposits		$	5,919,155		$	—		$	(5,722)		$	5,913,433
Borrowings			255,000			—			14,000			269,000
Intercompany balances			4,493			(3,519)			(974)			—
Other liabilities			65,423			3,808			9,785			79,016
Shareholders’ equity			697,648			2,445			(4,382)			695,711
Total liabilities and equity		$	6,941,719		$	2,734		$	12,707		$	6,957,160

Our consolidated balance sheet is primarily affected by changes occurring in our Banking operations, as our Wealth Management operations do not maintain significant levels of assets. Banking has experienced and is expected to continue to experience increases in its total assets as a result of our growth strategy.

During the nine months ended September 30, 2021 total assets increased by $778 million, primarily due to an increase in loans and in cash. During the nine months ended September 30, 2021, securities increased by $84 million primarily due to purchases of mortgage backed securities and corporate bonds. Loans and loans held for sale increased $501 million in the nine months ended September 30, 2021, primarily as a result of $2.7 billion of originations and $56 million in loan purchases, which were partially offset by payoffs or scheduled payments of $1.8 billion and $419 million 34

Table of Contents in loan sales. The $932 million growth in deposits during the nine months ended September 30, 2021 included increases in commercial deposits of $1.1 billion and branch deposits of $66 million, which were partially offset by a $223 million decrease in wholesale deposits and a $109 million decrease in digital channel deposits. Borrowings decreased by $257 million during the nine months ended September 30, 2021 as cash provided by the increase in deposits, which exceeded the growth in our assets, was used to pay down our borrowings at the Bank. At September 30, 2021 and December 31, 2020, the outstanding balances on the holding company line of credit were $12.5 million and $14 million, respectively.

Cash and cash equivalents, certificates of deposit and securities. Cash and cash equivalents, which primarily consist of funds held at the Federal Reserve Bank or at correspondent banks, including fed funds, increased by $154 million during nine months ended September 30, 2021. Changes in cash and cash equivalents are primarily affected by the funding of loans, investments in securities, and changes in our sources of funding: deposits, FHLB advances and FFI borrowings.

Securities available for sale. The following table provides a summary of the Company’s AFS securities portfolio as of:


	****	Amortized		****	Gross Unrealized						Allowance for			Estimated
(dollars in thousands)	****	Cost		****	Gains		****	Losses		****	Credit Losses		****	Fair Value
September 30, 2021:
Agency mortgage-backed securities		$	749,029		$	9,914		$	(1,001)		$	—		$	757,942
Beneficial interest – FHLMC securitization			22,764			479			—			(10,098)			13,145
Corporate bonds			114,000			3,034			(123)			—			116,911
Other			3,561			91			(2)			—			3,650
Total		$	889,354		$	13,518		$	(1,126)		$	(10,098)		$	891,648

December 31, 2020:
Agency mortgage-backed securities		$	705,752		$	18,243		$	—		$	—		$	723,995
Beneficial interest – FHLMC securitization			30,497			211			—			(7,245)			23,463
Corporate bonds			57,000			1,358			—			—			58,358
Other			1,512			98			—			—			1,610
Total		$	794,761		$	19,910		$	—		$	(7,245)		$	807,426

US Treasury Securities that are included in the table above are pledged as collateral to the State of California to meet regulatory requirements related to FFB’s trust operations. Agency mortgage-backed securities are pledged as collateral as support for the Bank’s obligations under loan sales and securitization agreements entered into from 2018 through 2021.

The scheduled maturities of securities AFS, other than agency mortgage-backed securities, and the related weighted average yield is as follows, as of September 30, 2021:


	****	Less than		****	1 Through		****	5 Through		****	After		****			****
(dollars in thousands)		1 Year			5 years			10 Years			10 Years			Total		****
Amortized Cost:
Corporate bonds		$	—		$	—		$	109,000		$	5,000		$	114,000
Other			—			1,533			2,028			—			3,561
Total		$	—		$	1,533		$	111,028		$	5,000		$	117,561
Weighted average yield			—	%		2.03	%		4.37	%		3.38	%		4.30	%
Estimated Fair Value:
Corporate bonds		$	—		$	—		$	111,811		$	5,100		$	116,911
Other			—			1,619			2,031			—			3,650
Total		$	—		$	1,619		$	113,842		$	5,100		$	120,561

Table of Contents Loans. The following table sets forth our loans, by loan category, as of:


	****	September 30,		****	December 31,
(dollars in thousands)	****	2021		****	2020
Outstanding principal balance:
Loans secured by real estate:
Residential properties:
Multifamily		$	2,518,151		$	2,247,542
Single family			818,968			806,014
Total real estate loans secured by residential properties			3,337,119			3,053,556
Commercial properties			669,912			747,807
Land and construction			63,706			55,832
Total real estate loans			4,070,737			3,857,195
Commercial and industrial loans			1,217,078			918,676
Consumer loans			9,468			18,888
Total loans			5,297,283			4,794,759
Premiums, discounts and deferred fees and expenses			11,676			9,040
Total		$	5,308,959		$	4,803,799

Loans and loans held for sale increased $501 million during nine months ended September 30, 2021 primarily as a result of $2.7 billion of originations and $56 million in loan purchases, which was partially offset by payoffs or scheduled payments of $1.8 billion and loan sales of $580 million.

Deposits. The following table sets forth information with respect to our deposits and the average rates paid on deposits, as of:


	****	September 30, 2021				****	December 31, 2020
					Weighted					Weighted
(dollars in thousands)	****	Amount		****	Average Rate	****	Amount		****	Average Rate	****
Demand deposits:
Noninterest-bearing		$	2,995,570		—		$	1,655,847		—
Interest-bearing			945,654		0.241	%		871,289		0.372	%
Money market and savings			2,290,380		0.319	%		2,407,401		0.549	%
Certificates of deposits			613,374		0.229	%		978,896		0.591	%
Total		$	6,844,978		0.161	%	$	5,913,433		0.376	%

During the nine months ended September 30, 2021, our deposit rates have moved in a manner consistent with overall deposit market rates. The weighted average rate of our interest-bearing deposits decreased from 0.52% at December 31, 2020, to 0.29% at September 30, 2021 due to decreased costs of interest-bearing deposits, while the weighted average interest rates of both interest-bearing and noninterest-bearing deposits have decreased from 0.38% at December 31, 2020 to 0.16% at September 30, 2021. The financial impact of the increase in noninterest-bearing deposits is reflected in customer service costs, which are included in noninterest expenses.

The maturities of our certificates of deposit of $100,000 or more were as follows as of September 30, 2021:


(dollars in thousands)
3 months or less	$	136,663
Over 3 months through 6 months		233,790
Over 6 months through 12 months		75,357
Over 12 months		7,481
Total	$	453,291

From time to time, the Bank will utilize brokered deposits as a source of funding. As of September 30, 2021, the Bank held $104 million of deposits, which are classified as brokered deposits. 36

Table of Contents Borrowings. At September 30, 2021, our borrowings consisted of $12.5 million of borrowings under a holding company line of credit. At December 31, 2020, our borrowings consisted of $255 million in FHLB term advances at the Bank, and $14 million of borrowings under a company line of credit. Because FFB generally utilizes overnight borrowings, the balance of outstanding borrowings may fluctuate on a daily basis. The average balance of FHLB advances outstanding during the nine months ended September 30, 2021 was $66 million, as compared to $727 million for the nine months ended September 30, 2020. The weighted average interest rate on these borrowings was 0.45% for nine months ended September 30, 2021 as compared to 1.35% for the nine months ended September 30, 2020. The maximum amount of borrowings at the Bank outstanding at any month-end during nine months ended September 30, 2021 and during all of 2020, were $255 million and $860 million, respectively.

Delinquent Loans, Nonperforming Assets and Provision for Credit Losses

Loans are considered past due following the date when either interest or principal is contractually due and unpaid. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest on loans is discontinued when reasonable doubt exists as to the full, timely collection of interest or principal and, generally, when a loan becomes contractually past due for 90 days or more with respect to principal or interest. However, the accrual of interest may be continued on a well-secured loan contractually past due 90 days or more with respect to principal or interest if the loan is in the process of collection or collection of the principal and interest is deemed probable. The following tables provide a summary of past due and nonaccrual loans as of:


								90 Days						Total Past Due
(dollars in thousands)	****	30–59 Days		****	60-89 Days		****	or More		****	Nonaccrual		****	and Nonaccrual		****	Current		****	Total
September 30, 2021:
Real estate loans:
Residential properties		$	—		$	—		$	—		$	10,652		$	10,652		$	3,338,547		$	3,349,199
Commercial properties			2,947			—			—			1,573			4,520			665,806			670,326
Land and construction			—			—			—			—			—			63,701			63,701
Commercial and industrial loans			79			122			—			6,481			6,682			1,209,559			1,216,241
Consumer loans			1,142			—			—			—			1,142			8,350			9,492
Total		$	4,168		$	122		$	—		$	18,706		$	22,996		$	5,285,963		$	5,308,959
Percentage of total loans			0.08	%		0.00	%		—	%		0.35	%		0.43	%

December 31, 2020:
Real estate loans:
Residential properties		$	35		$	—		$	—		$	10,947		$	10,982		$	3,042,574		$	3,053,556
Commercial properties			951			240			—			4,544			5,735			742,072			747,807
Land and construction			—			—			—			—			—			55,832			55,832
Commercial and industrial loans			1,013			411			152			5,137			6,713			911,963			918,676
Consumer loans			—			—			—			—			—			18,888			18,888
Total		$	1,999		$	651		$	152		$	20,628		$	23,430		$	4,771,329		$	4,794,759
Percentage of total loans			0.04	%		0.01	%		0.00	%		0.43	%		0.49	%

Table of Contents The following table summarizes our nonaccrual loans as of:


	Nonaccrual			Nonaccrual
	with Allowance			with no Allowance
(dollars in thousands)	for Credit Losses		****	for Credit Losses
September 30, 2021
Real estate loans:
Residential properties	$	2,943		$	7,709
Commercial properties		—			1,573
Commercial and industrial loans		1,845			4,636
Total	$	4,788		$	13,918

December 31, 2020
Real estate loans:
Residential properties	$	2,987		$	7,959
Commercial properties		—			4,544
Commercial and industrial loans		2,581			2,557
Total	$	5,568		$	15,060

The following table presents the composition of TDRs by accrual and nonaccrual status as of:


	****	September 30, 2021									December 31, 2020
(dollars in thousands)	****	Accrual		****	Nonaccrual		****	Total		****	Accrual		****	Nonaccrual		****	Total
Residential real estate loans		$	1,200		$	—		$	1,200		$	1,200		$	—		$	1,200
Commercial real estate loans			1,043			1,201			2,244			1,107			1,277			2,384
Commercial and industrial loans			863			2,100			2,963			1,041			2,832			3,873
Total		$	3,106		$	3,301		$	6,407		$	3,348		$	4,109		$	7,457

These loans were classified as a TDR as a result of a reduction in required principal payments, reductions in rates and/or an extension of the maturity date of the loans.

Table of Contents Allowance for Credit Losses. The following table summarizes the activity in our ACL related to loans for the periods indicated:


		Beginning		Adoption of			Provision for									Ending
(dollars in thousands)	****	Balance		ASC 326		****	Credit Losses		****	Charge-offs		****	Recoveries		****	Balance
Three months ended September 30, 2021:
Real estate loans:
Residential properties		$	7,236	$	—		$	(1,507)		$	—		$	—		$	5,729
Commercial properties			5,485		—			(148)			—			—			5,337
Land and construction			1,984		—			(258)			—			—			1,726
Commercial and industrial loans			7,458		—			492			(219)			355			8,086
Consumer loans			109		—			(2)			—			—			107
Total		$	22,272	$	—		$	(1,423)		$	(219)		$	355		$	20,985

Nine months ended September 30, 2021:
Real estate loans:
Residential properties		$	5,115	$	—		$	614		$	—		$	—		$	5,729
Commercial properties			8,711		—			(3,374)			—			—			5,337
Land			892		—			834			—			—			1,726
Commercial and industrial loans			9,249		—			(1,400)			(627)			864			8,086
Consumer loans			233		—			(126)			—			—			107
Total		$	24,200	$	—		$	(3,452)		$	(627)		$	864		$	20,985

Year ended December 31, 2020:
Real estate loans:
Residential properties		$	8,423	$	363		$	(3,671)		$	—		$	—		$	5,115
Commercial properties			4,166		3,760			785			—			—			8,711
Land and construction			573		92			227			—			—			892
Commercial and industrial loans			7,448		—			2,642			(1,844)			1,003			9,249
Consumer loans			190		—			43			—			—			233
Total		$	20,800	$	4,215		$	26		$	(1,844)		$	1,003		$	24,200

Our ACL related to loans represented 0.40% and 0.50% of total loans outstanding as of September 30, 2021 and December 31, 2020, respectively.

The amount of the ACL for loans is adjusted periodically by charges to operations (referred to in our income statement as the “provision for credit losses”) (i) to replenish the ACL after it has been reduced due to loan write-downs or charge-offs, (ii) to reflect increases in the volume of outstanding loans, and (iii) to take account of changes in the risk of potential loan losses due to a deterioration in the condition of borrowers, or in the value of property securing non–performing loans, or adverse changes in economic conditions. The amounts of the provisions we make for loan losses are based on our estimate of losses in our loan portfolio. In estimating such losses, we use economic and loss migration models that are based on bank regulatory guidelines and industry standards, and our historical charge-off experience and loan delinquency rates, local and national economic conditions, a borrower’s ability to repay its borrowings, and the value of any property collateralizing the loan, as well as a number of subjective factors. However, these determinations involve judgments about changes and trends in current economic conditions and other events that can affect the ability of borrowers to meet their loan obligations to us, and a weighting among the quantitative and qualitative factors we consider in determining the sufficiency of the ACL. Moreover, the duration and anticipated effects of prevailing economic conditions or trends can be uncertain and can be affected by a number of risks and circumstances that are outside of our control. If changes in economic or market conditions or unexpected subsequent events were to occur, or if changes were made to bank regulatory guidelines or industry standards that are used to assess the sufficiency of the ACL, it could become necessary for us to incur additional, and possibly significant, charges to increase the ACL, which would have the effect of reducing our income. 39

Table of Contents In addition, the Federal Deposit Insurance Corporation (“FDIC”) and the California Department of Financial Protection and Innovation, as an integral part of their examination processes, periodically review the adequacy of our ACL. These agencies may require us to make additional provisions for credit losses, over and above the provisions that we have already made, the effect of which would be to reduce our income.

The following table presents the balance in the ACL and the recorded investment in loans by impairment method as of:


		Allowance for Credit Losses
		Loans Evaluated
(dollars in thousands)	****	Individually		****	Collectively		****	Total		****

September 30, 2021:
Allowance for credit losses:
Real estate loans:
Residential properties		$	1,174		$	4,555		$	5,729
Commercial properties			411			4,926			5,337
Land and construction			—			1,726			1,726
Commercial and industrial loans			590			7,496			8,086
Consumer loans			—			107			107
Total		$	2,175		$	18,810		$	20,985
Loans:
Real estate loans:
Residential properties		$	16,417		$	3,332,782		$	3,349,199
Commercial properties			13,931			656,395			670,326
Land and construction			—			63,701			63,701
Commercial and industrial loans			7,611			1,208,630			1,216,241
Consumer loans			—			9,492			9,492
Total		$	37,959		$	5,271,000		$	5,308,959


	****	Allowance for Credit Losses
		Loans Evaluated
(dollars in thousands)	****	Individually		****	Collectively		****	Total		****
December 31, 2020:
Allowance for credit losses:
Real estate loans:
Residential properties		$	1,059		$	4,056		$	5,115
Commercial properties			374			8,337			8,711
Land and construction			—			892			892
Commercial and industrial loans			956			8,293			9,249
Consumer loans			—			233			233
Total		$	2,389		$	21,811		$	24,200
Loans:
Real estate loans:
Residential properties		$	12,414		$	3,041,142		$	3,053,556
Commercial properties			17,304			730,503			747,807
Land and construction			—			55,832			55,832
Commercial and industrial loans			6,472			912,204			918,676
Consumer loans			—			18,888			18,888
Total		$	36,190		$	4,758,569		$	4,794,759

Table of Contents Liquidity

Liquidity management focuses on our ability to generate, on a timely and cost-effective basis, cash sufficient to meet the funding needs of current loan demand, deposit withdrawals, principal and interest payments with respect to outstanding borrowings and to pay operating expenses. Our liquidity management is both a daily and long-term function of funds management. Liquid assets are generally invested in marketable securities or held as cash at the Federal Reserve Bank of San Francisco or other financial institutions.

We monitor our liquidity in accordance with guidelines established by our Board of Directors and applicable regulatory requirements. Our need for liquidity is affected by our loan activity, net changes in deposit levels and the maturities of our borrowings. The principal sources of our liquidity consist of deposits, loan interest and principal payments and prepayments, investment management and consulting fees, FHLB advances and proceeds from borrowings and sales of FFI common stock. The remaining balances of the Company’s lines of credit available to draw down totaled $2.9 billion at September 30, 2021.

Cash Flows Provided by Operating Activities. During the nine months ended September 30, 2021, operating activities provided net cash of $70 million, primarily due to net income of $86 million, offset by $21 million in gains on sales of loans. During the nine months ended September 30, 2020, operating activities provided net cash of $50 million, primarily due to net income of $62 million, $7 million in provisions for credit losses, and a net decrease of $5 million in other liabilities, partially offset by a net increase of $5 million in other assets and $4 million in amortization of premiums on purchased loans.

Cash Flows Used in Investing Activities. During the nine months ended September 30, 2021, investing activities used net cash of $580 million, primarily due to a $1.1 billion net increase in loans and $306 million of securities purchases, offset partially by $207 million in cash received in principal collection and maturities of securities, and $580 million in proceeds from sales of loans. During the nine months ended September 30, 2020, investing activities provided net cash of $92 million, primarily from proceeds from sales of loans of $578 million and $197 million in cash received in principal collection and maturities of securities, offset partially by a $625 million net increase in loans and $61 million in securities purchases.

Cash Flows Provided by Financing Activities. During the nine months ended September 30, 2021, financing activities provided net cash of $664 million, consisting primarily of a net increase of $932 million in deposits, offset partially by a $255 million decrease in FHLB advances and $12 million in dividends paid. During the nine months ended September 30, 2020, financing activities provided net cash of $76 million, consisting primarily of a net increase of $573 million in deposits, offset partially by a $474 million decrease in FHLB advances, $9 million in dividends paid, and $11 million in the settlement of a swap transaction.

Ratio of Loans to Deposits. The relationship between gross loans and total deposits can provide a useful measure of a bank’s liquidity. Since repayment of loans tends to be less predictable than the maturity of investments and other liquid resources, the higher the loan-to-deposit ratio the less liquid are our assets. On the other hand, since we realize greater yields on loans than we do on other interest-earning assets, a lower loan-to-deposit ratio can adversely affect interest income and earnings. As a result, our goal is to achieve a loan-to-deposit ratio that appropriately balances the requirements of liquidity and the need to generate a fair return on our assets. At September 30, 2021 and December 31, 2020, the loan-to-deposit ratios at FFB were 84.9% and 89.8%, respectively.

Off-Balance Sheet Arrangements

The following table provides the off-balance sheet arrangements of the Company as of September 30, 2021:


(dollars in thousands)
Commitments to fund new loans	$	68,759
Commitments to fund under existing loans, lines of credit		670,470
Commitments under standby letters of credit		14,452

Table of Contents Some of the commitments to fund existing loans, lines of credit and letters of credit are expected to expire without being drawn upon. Therefore, the total commitments do not necessarily represent future cash requirements. As of September 30, 2021, FFB was obligated on $275 million of letters of credit to the FHLB which were being used as collateral for public fund deposits, including $263 million of deposits from the State of California.

Capital Resources and Dividend Policy

The capital rules applicable to United States based bank holding companies and federally insured depository institutions (“Capital Rules”) require the Company (on a consolidated basis) and FFB (on a stand-alone basis) to meet specific capital adequacy requirements that, for the most part, involve quantitative measures, primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices. In addition, prompt correct action regulations place a federally insured depository institution, such as FFB, into one of five capital categories on the basis of its capital ratios: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) critically undercapitalized. A depository institution’s primary federal regulatory agency may determine that, based on certain qualitative assessments, the depository institution should be assigned to a lower capital category than the one indicated by its capital ratios. At each successive lower capital category, a depository institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency.

The following table sets forth the capital and capital ratios of FFI (on a consolidated basis) and FFB as of the respective dates indicated below, as compared to the respective regulatory requirements applicable to them:


	****					****						To Be Well Capitalized
							For Capital					Under Prompt Corrective
		Actual					Adequacy Purposes					Action Provisions
(dollars in thousands)	****	Amount		****	Ratio	****	Amount		****	Ratio	****	Amount		****	Ratio	****
FFI
September 30, 2021:
CET1 capital ratio		$	666,681		11.31	%	$	265,187		4.50	%
Tier 1 leverage ratio			666,681		8.27	%		322,351		4.00	%
Tier 1 risk-based capital ratio			666,681		11.31	%		353,582		6.00	%
Total risk-based capital ratio			698,420		11.85	%		471,443		8.00	%

December 31, 2020:
CET1 capital ratio		$	589,276		11.55	%	$	229,490		4.50	%
Tier 1 leverage ratio			589,276		8.93	%		263,986		4.00	%
Tier 1 risk-based capital ratio			589,276		11.55	%		305,987		6.00	%
Total risk-based capital ratio			620,700		12.17	%		407,982		8.00	%

FFB
September 30, 2021:
CET1 capital ratio		$	655,460		11.17	%	$	264,042		4.50	%	$	381,395		6.50	%
Tier 1 leverage ratio			655,460		8.16	%		321,395		4.00	%		401,744		5.00	%
Tier 1 risk-based capital ratio			655,460		11.17	%		352,057		6.00	%		469,409		8.00	%
Total risk-based capital ratio			687,199		11.71	%		469,409		8.00	%		586,761		10.00	%

December 31, 2020:
CET1 capital ratio		$	591,171		11.63	%	$	228,703		4.50	%	$	330,349		6.50	%
Tier 1 leverage ratio			591,171		8.98	%		263,330		4.00	%		329,162		5.00	%
Tier 1 risk-based capital ratio			591,171		11.63	%		304,938		6.00	%		406,583		8.00	%
Total risk-based capital ratio			622,595		12.25	%		406,583		8.00	%		508,229		10.00	%

As of each of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and FFB’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations. The required ratios for capital adequacy set forth in the above 42

Table of Contents table do not include the Capital Rules’ additional capital conservation buffer, though each of the Company and FFB maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated.

As of September 30, 2021, FFI had $23.4 million of available liquidity as well as a revolving line of credit and, therefore, has the ability and financial resources to contribute additional capital to FFB, if needed.

As of September 30, 2021, the amount of capital at FFB in excess of amounts required to be well capitalized for purposes of the prompt corrective action regulations was $274 million for the CET1 capital ratio, $254 million for the Tier 1 Leverage Ratio, $186 million for the Tier 1 risk-based capital ratio and $100 million for the Total risk-based capital ratio.

The Company paid a quarterly cash dividend of $0.09 per common share in the first three quarters of 2021. It is our current intention to continue to pay quarterly dividends. The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain regulatory restrictions which are discussed in Item 1 “Business—Supervision and Regulation—Dividends and Stock Repurchases” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020. Additionally, under the terms of the holding company line of credit agreement, FFI may only declare and pay a dividend if the total amount of dividends and stock repurchases during the current twelve months does not exceed 50% of FFI’s net income for the same twelve month period. We paid $12.5 million in dividends ($0.28 per share) in 2020.

We had no material commitments for capital expenditures as of September 30, 2021, other than our proposed acquisition of TGR Financial. However, we intend to take advantage of opportunities that may arise in the future to grow our businesses, which may include opening additional offices or acquiring complementary businesses that we believe will provide us with attractive risk-adjusted returns. As a result, we may seek to obtain additional borrowings and to sell additional shares of our common stock to raise funds which we might need for these purposes. There is no assurance, however, that, if required, we will succeed in obtaining additional borrowings or selling additional shares of our common stock on terms that are acceptable to us, if at all, as this will depend on market conditions and other factors outside of our control, as well as our future results of operations.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain financial risks, which are discussed in detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the section titled Asset and Liability Management: Interest Rate Risk in our Annual Report on Form 10-K which we filed with the Securities and Exchange Commission on February 26, 2021. There have been no material changes to our quantitative and qualitative disclosures about market risk since December 31, 2020.

ITEM 4.CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

In accordance with SEC rules, an evaluation was performed under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness, as of September 30, 2021, of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2021, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our 43

Table of Contents reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting that occurred during the three months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1A.RISK FACTORS

There have been no material changes in the risk factors that were disclosed in Item 1A, under the caption “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2020, which we filed with the SEC on February 26, 2021.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company adopted a stock repurchase plan on October 30, 2018 for the repurchase of up to 2,200,000 shares of its common stock from time to time as market conditions allow. This plan has no stated expiration date for the repurchases. The Company did not repurchase any shares during the three months ended September 30, 2021. As of September 30, 2021, the maximum number of shares that may be purchased under the program was 1,938,600.

Table of Contents

ITEM 6.EXHIBITS


Exhibit No.		Description of Exhibit

3.1		Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on October 29, 2015).

3.2		Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on October 29, 2015).

31.1(1)		Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002

31.2(1)		Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002

32.1(1)		Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002

32.2(1)		Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002

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(1)	Filed herewith.
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Table of Contents SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	FIRST FOUNDATION INC.

Dated: November 5, 2021	By:	/s/ KEVIN L. THOMPSON
		Kevin L. Thompson
		Executive Vice President and<br>Chief Financial Officer

S-1

Exhibit 31.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Scott Kavanaugh, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of First Foundation Inc. for the quarter ended September 30, 2021;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: November 5, 2021


	/s/ SCOTT KAVANAUGH
	Scott Kavanaugh
	Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS OF CHIEF FINANCIAL OFFICER

UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Kevin Thompson, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of First Foundation Inc. for the quarter ended September 30, 2021;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
---	---
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
---	---
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: November 5, 2021

EVIN THOMPSON
	/s/ KEVN L. THOMPSON
	Kevin L.Thompson
	Executive Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

UNDER

SECTION 906 OF THE SARBANES-OXLEY ACT

FIRST FOUNDATION INC.

Quarterly Report on Form 10-Q

for the Quarter ended September 30, 2021

The undersigned, who is the Chief Executive Officer of First Foundation Inc (the “Company”), hereby certifies that (i) the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, as filed by the Company with the Securities and Exchange Commission (the “Quarterly Report”), to which this Certification is an Exhibit, fully complies with the applicable requirements of Section 13(a) and 15(d) of the Exchange Act; and (ii) the information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 5, 2021


	/s/ SCOTT KAVANAUGH
	Scott Kavanaugh
	Chief Executive Officer

	A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATIONS OF CHIEF FINANCIAL OFFICER

UNDER

SECTION 906 OF THE SARBANES-OXLEY ACT

FIRST FOUNDATION INC.

Quarterly Report on Form 10-Q

for the Quarter ended September 30, 2021

The undersigned, who is the Chief Financial Officer of First Foundation Inc. (the “Company”), hereby certifies that (i) the Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, as filed by the Company with the Securities and Exchange Commission (the “Quarterly Report”), to which this Certification is an Exhibit, fully complies with the applicable requirements of Section 13(a) and 15(d) of the Exchange Act; and (ii) the information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 5, 2021

EVIN THOMPSON
	/s/ KEVIN L. THOMPSON
	Kevin L. Thompson
	Executive Vice President and Chief Financial Officer

	A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.