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 ~~June 30, 2022~~March 31, 2023

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

For the transition period from to

Commission File Number 001-36461

FIRST FOUNDATION INC.

(Exact name of Registrant as specified in its charter)


Delaware		20-8639702
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

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 ~~August 3, 2022,~~May 1, 2023, the registrant had ~~56,387,671~~56,424,276 shares of common stock, $0.001 par value per share, outstanding.

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FIRST FOUNDATION INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

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	3028
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5146
Item 4.	Controls and Procedures	5147

Part II. Other Information
Item 1A	Risk Factors	5247
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	5248
Item 6	Exhibits	5349

SIGNATURES		S-1

(i)

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PART I — FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

FIRST FOUNDATION INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	June 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
		(unaudited)				(unaudited)
ASSETS
Cash and cash equivalents	$	173,524	$	1,121,757	$	1,317,129	$	656,494

Securities available-for-sale ("AFS")		251,496		1,201,777		223,612		237,597
Securities held-to-maturity ("HTM")		930,562		—		847,036		862,544
Allowance for credit losses - investments		(11,226)		(10,399)		(12,288)		(11,439)
Net securities		1,170,832		1,191,378		1,058,360		1,088,702

Loans held for sale		485,296		501,436

Loans held for investment		8,938,841		6,906,728		10,669,803		10,726,193
Allowance for credit losses - loans		(33,165)		(33,776)		(31,095)		(33,731)
Net loans		8,905,676		6,872,952		10,638,708		10,692,462

Investment in FHLB stock		17,250		18,249		58,716		25,358
Deferred taxes		21,471		20,835		22,763		24,198
Premises and equipment, net		37,160		37,920		37,530		36,140
Real estate owned ("REO")		6,210		6,210		6,210		6,210
Goodwill and intangibles		222,749		222,125		221,401		221,835
Other assets		209,072		203,342		255,367		262,780
Total Assets	$	11,249,240	$	10,196,204	$	13,616,184	$	13,014,179

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	9,538,744	$	8,811,960	$	10,051,706	$	10,362,612
Borrowings		493,728		210,127		2,294,600		1,369,936
Accounts payable and other liabilities		113,859		110,066		136,140		147,253
Total Liabilities		10,146,331		9,132,153		12,482,446		11,879,801

Shareholders’ Equity
Common Stock		56		56		56		56
Additional paid-in-capital		719,222		720,744		719,261		719,606
Retained earnings		392,704		340,976		428,956		426,659
Accumulated other comprehensive (loss) income		(9,073)		2,275		(14,535)		(11,943)
Total Shareholders’ Equity		1,102,909		1,064,051		1,133,738		1,134,378
Total Liabilities and Shareholders’ Equity	$	11,249,240	$	10,196,204	$	13,616,184	$	13,014,179

(See accompanying notes to the consolidated financial statements)

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FIRST FOUNDATION INC.

CONSOLIDATED INCOME STATEMENTS - UNAUDITED

(In thousands, except share and per share amounts)


	Quarter Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2022		2021		2022		2021		2023		2022
Interest income:
Loans	$	82,032	$	55,979	$	154,059	$	109,510	$	120,643	$	72,027
Securities		6,621		4,927		12,981		10,133		6,891		6,360
FHLB Stock, fed funds sold and interest-bearing deposits		1,318		497		2,075		898		9,466		757
Total interest income		89,971		61,403		169,115		120,541		137,000		79,144

Interest expense:
Deposits		6,340		3,387		9,698		8,010		62,140		3,358
Borrowings		1,826		106		3,118		392		16,105		1,292
Total interest expense		8,166		3,493		12,816		8,402		78,245		4,650

Net interest income		81,805		57,910		156,299		112,139		58,755		74,494

Provision for credit losses		173		44		(619)		404		417		(792)

Net interest income after provision for credit losses		81,632		57,866		156,918		111,735		58,338		75,286

Noninterest income:
Asset management, consulting and other fees		9,893		8,748		20,090		17,097		8,796		10,197
Gain on sale of loans		—		3,324		—		3,324
Other income		3,507		1,963		8,737		5,522		2,902		5,230
Total noninterest income		13,400		14,035		28,827		25,943		11,698		15,427

Noninterest expense:
Compensation and benefits		27,634		20,203		57,455		41,729		25,286		29,821
Occupancy and depreciation		8,814		5,710		17,381		11,870		8,897		8,567
Professional services and marketing costs		3,030		3,907		6,447		6,029		4,295		3,417
Customer service costs		4,611		2,353		6,399		4,123		16,715		1,788
Other expenses		4,716		3,444		8,741		6,377		4,147		4,025
Total noninterest expense		48,805		35,617		96,423		70,128		59,340		47,618

Income before taxes on income		46,227		36,284		89,322		67,550		10,696		43,095
Taxes on income		12,911		10,230		25,170		19,141		2,200		12,259
Net income	$	33,316	$	26,054	$	64,152	$	48,409	$	8,496	$	30,836

Net income per share:
Basic	$	0.59	$	0.58	$	1.14	$	1.08	$	0.15	$	0.55
Diluted	$	0.59	$	0.58	$	1.13	$	1.07	$	0.15	$	0.55
Shares used in computation:
Basic		56,471,470		44,792,358		56,468,678		44,750,272		56,376,669		56,465,855
Diluted		56,519,669		45,101,958		56,543,492		45,057,330		56,410,416		56,565,845

(See accompanying notes to the consolidated financial statements)

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FIRST FOUNDATION INC.

CONSOLIDATED STATEMENT OF CHANGES

IN SHAREHOLDERS’ EQUITY - UNAUDITED

(In thousands, except share amounts)


	Common Stock			Additional				Accumulated Other				Common Stock			Additional				Accumulated Other
	Number			Paid-in		Retained		Comprehensive				Number			Paid-in		Retained		Comprehensive
	of Shares	Amount		Capital		Earnings		Income (Loss)		Total		of Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance: December 31, 2021	56,432,070	$	56	$	720,744	$	340,976	$	2,275	$	1,064,051	56,432,070	$	56	$	720,744	$	340,976	$	2,275	$	1,064,051
Net income	—		—		—		64,152		—		64,152	—		—		—		30,836		—		30,836
Other comprehensive loss	—		—		—		—		(11,348)		(11,348)	—		—		—		—		(6,207)		(6,207)
Stock based compensation	—		—		2,037		—		—		2,037	—		—		1,204		—		—		1,204
Cash dividend	—		—		—		(12,424)		—		(12,424)	—						(6,208)				(6,208)
Issuance of common stock:
Exercise of options	2,000		—		18		—		—		18	2,000		—		18		—		—		18
Stock grants – vesting of restricted stock units	133,374		—		—		—		—		—	122,700		1		—		—		—		1
Repurchase of shares from restricted shares vesting	(42,947)		—		(1,120)		—		—		(1,120)	(42,602)				(1,120)						(1,120)
Stock repurchase	(137,583)		—		(2,457)		—		—		(2,457)
Balance: June 30, 2022	56,386,914	$	56	$	719,222	$	392,704	$	(9,073)	$	1,102,909
Balance: March 31, 2022												56,514,168	$	57	$	720,846	$	365,604	$	(3,932)	$	1,082,575

Balance: March 31, 2022	56,514,168	$	57	$	720,846	$	365,604	$	(3,932)	$	1,082,575
Balance: December 31, 2022												56,325,242	$	56	$	719,606	$	426,659	$	(11,943)	$	1,134,378
Net income	—		—		—		33,316		—		33,316	—		—		—		8,496		—		8,496
Other comprehensive loss	—		—		—		—		(5,141)		(5,141)	—		—		—		—		(2,592)		(2,592)
Stock based compensation	—		—		833		—		—		833	—		—		32		—		—		32
Cash dividend	—		—		—		(6,216)		—		(6,216)	—		—		—		(6,199)		—		(6,199)
Issuance of common stock:
Exercise of options	—		—		—		—		—		—	19,500		—		157		—		—		157
Stock grants – vesting of restricted stock units	10,674		(1)		—		—		—		(1)	114,592		—		—		—		—		—
Repurchase of shares from restricted shares vesting	(345)		—		—		—		—		—	(35,058)		—		(534)		—		—		(534)
Stock repurchase	(137,583)		—		(2,457)		—		—		(2,457)
Balance: June 30, 2022	56,386,914	$	56	$	719,222	$	392,704	$	(9,073)	$	1,102,909

Balance: December 31, 2020	44,667,650	$	45	$	433,941	$	247,638	$	14,087	$	695,711
Net income	—		—		—		48,409		—		48,409
Other comprehensive loss	—		—		—		—		(3,312)		(3,312)
Stock based compensation	—		—		1,629		—		—		1,629
Cash dividend	—		—		—		(8,050)		—		(8,050)
Issuance of common stock:
Exercise of options	75,807		—		819		—		—		819
Stock grants – vesting of restricted stock units	117,223		—		—		—		—		—
Repurchase of shares from restricted shares vesting	(40,937)		—		(1,188)		—		—		(1,188)
Balance: June 30, 2021	44,819,743	$	45	$	435,201	$	287,997	$	10,775	$	734,018

Balance: March 31, 2021	44,782,155	$	45	$	434,346	$	265,970	$	14,069	$	714,430
Net income	—		—		—		26,054		—		26,054
Other comprehensive loss	—		—		—		—		(3,294)		(3,294)
Stock based compensation	—		—		634		—		—		634
Cash dividend	—		—		—		(4,027)		—		(4,027)
Issuance of common stock:
Exercise of options	28,807		—		465		—		—		465
Stock grants – vesting of restricted stock units	9,138		—		—		—		—		—
Repurchase of shares from restricted shares vesting	(357)		—		(244)		—		—		(244)
Balance: June 30, 2021	44,819,743	$	45	$	435,201	$	287,997	$	10,775	$	734,018
Balance: March 31, 2023												56,424,276	$	56	$	719,261	$	428,956	$	(14,535)	$	1,133,738

(See accompanying notes to the consolidated financial statements)

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FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME - UNAUDITED

(In thousands)


	Quarter Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
Net income	$	33,316	$	26,054	$	64,152	$	48,409	$	8,496	$	30,836
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities arising during the period		(6,612)		(4,657)		(14,343)		(4,682)		(4,535)		(7,731)
Other comprehensive income (loss) before tax		(6,612)		(4,657)		(14,343)		(4,682)		(4,535)		(7,731)
Income tax benefit (expense) related to items of other comprehensive income		1,471		1,363		2,995		1,370		1,943		1,524
Other comprehensive income (loss)		(5,141)		(3,294)		(11,348)		(3,312)		(2,592)		(6,207)
Total comprehensive income	$	28,175	$	22,760	$	52,804	$	45,097	$	5,904	$	24,629

(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 Six Months Ended					For the Three Months Ended
	June 30,					March 31,
	2022			2021		2023		2022
Cash Flows from Operating Activities:
Net income	$	64,152		$	48,409	$	8,496	$	30,836
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses - loans		(1,446)			(1,467)
Reversal of provision for credit losses - loans							(432)		(1,136)
Provision for credit losses - securities AFS		827			1,871		849		344
Stock–based compensation expense		2,037			1,629		32		1,204
Depreciation and amortization		2,019			1,655		1,104		974
Deferred tax expense		1,941			355		2,761		3,431
Amortization of premium (discount) on securities		1,677			399		(173)		(351)
Amortization of core deposit intangible		999			842		434		509
Amortization of mortgage servicing rights - net		1,070			935		599		549
Gain on sale of loans		—			(3,324)
Amortization of OCI - securities transfer to HTM		(591)			—		616		—
Valuation allowance on mortgage servicing rights - net		(319)			1,309		(672)		(201)
Increase in other assets		(6,482)			(10,695)
Increase (decrease) in accounts payable and other liabilities		4,476			(1,264)
Decrease in other assets							7,657		5,318
Decrease in accounts payable and other liabilities							(11,792)		(1,138)
Net cash provided by operating activities		70,360			40,654		9,479		40,339
Cash Flows from Investing Activities:
Net increase in loans		(2,016,119)			(841,088)
Proceeds from sale of loans		—			142,000
Net (increase) decrease in loans							54,387		(490,869)
Purchase of premises and equipment		(3,523)			(1,826)		(2,494)		(1,222)
Disposals of premises and equipment		3,388			—		—		3,375
Recovery of allowance for credit losses		298			509		306		134
Purchases of securities AFS		(398)			(83,372)		—		(400)
Purchases of securities HTM		(171,852)			—		—		(83,008)
Proceeds from sale of securities		—			3,400
Maturities of securities AFS		18,524			143,712		9,184		7,965
Maturities of securities HTM		156,811			—		15,948		79,660
Sale of FHLB and FRB stock, net		999			—
Net cash used in investing activities		(2,011,872)			(636,665)
Sale (purchase) of FHLB and FRB stock, net							(33,358)		999
Net cash provided by (used in) investing activities							43,973		(483,366)
Cash Flows from Financing Activities:
Increase in deposits		726,784	��		1,193,369
Net increase (decrease) in FHLB advances		149,000			(255,000)
Increase (decrease) in deposits							(310,906)		145,558
Net increase in FHLB & other advances							995,000		—
Line of credit net change – borrowings, net		(18,500)			6,000		—		(18,500)
Net increase in subordinated debt		147,608			—		15		147,592
Net increase in repurchase agreements		5,493			—
Net decrease in repurchase agreements							(70,351)		(13,250)
Gain on sale leaseback		(1,123)			—		—		(1,111)
Dividends paid		(12,424)			(8,050)		(6,199)		(6,208)
Proceeds from exercise of stock options		18			819		158		19
Repurchase of stock		(3,577)			(1,188)		(534)		(1,120)
Net cash provided by financing activities		993,279			935,950		607,183		252,980
Increase (decrease) in cash and cash equivalents		(948,233)			339,939		660,635		(190,047)
Cash and cash equivalents at beginning of year		1,121,757			629,707		656,494		1,121,757
Cash and cash equivalents at end of period	$	173,524		$	969,646	$	1,317,129	$	931,710
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes	$	22,500		$	17,424	$	—	$	—
Interest		10,563			10,019		65,720		3,893
Noncash transactions:
Transfer of loans to loans held for sale	$	—		$	132,521
Transfer of securities from available-for-sale to held-to-maturity		916,777			—		—		916,777
Goodwill acquisition adjustment		1,623			—		—		1,623
Operating lease liabilities recognized		5,428			—
Right of use lease assets and liabilities recognized							172		—
Chargeoffs against allowance for credit losses							2,003		145

(See accompanying notes to the consolidated financial statements)

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 - UNAUDITED

NOTE 1: ~~BASIS~~SUMMARY OF ~~PRESENTATION~~SIGNIFICANT ACCOUNTING POLICIES

~~The consolidated financial statements include~~ Nature of Operations and Principles of Consolidation

First Foundation Inc. (“FFI”) ~~and~~is a financial services holding company whose operations are conducted through 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 Public Finance (“FFPF”), First Foundation Insurance Services (“FFIS”), and Blue Moon Management, LLC ~~and First Foundation Public Finance (“FFPF”)~~ (collectively ~~referred to as~~ the “Company”). FFI also has 2two inactive wholly owned subsidiaries, First Foundation Consulting and First Foundation Advisors, LLC. ~~All intercompany balances and transactions have been eliminated~~In addition, FFA has set up a limited liability company, which is not included in ~~consolidation. The results of operations reflect any interim adjustments, all of which are of~~these consolidated financial statements, as a ~~normal recurring nature and which,~~private investment fund to provide an investment vehicle for its clients. FFI is incorporated in the ~~opinion~~state of ~~management, are necessary~~Delaware. The corporate headquarters for FFI is located in Dallas, Texas. The Company provides a ~~fair presentation~~comprehensive platform of ~~the results for the interim period presented. The results for the 2022 interim periods are not necessarily indicative of the results expected for the full year.~~financial services to individuals, businesses and other organizations and has offices in California, Nevada, Florida, Texas, and Hawaii.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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 the accounts of the Company as of March 31, 2023 and December 31, 2022, and for the three months ended March 31, 2023 and 2022, and include all information and footnotes required for interim financial ~~statement~~reporting presentation. All intercompany accounts and transactions have been eliminated in consolidation. The results for the 2023 interim periods are not necessarily indicative of the results expected for the full year. These financial statements assume that readers have read the most recent Annual Report on Form 10-K filed with the SEC which contains the latest available audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2021.~~2022.

~~Certain reclassifications have been made to~~Significant Accounting Policies

The accounting and reporting policies of the ~~prior year consolidated financial statements to~~Company are based upon GAAP and conform to predominant practices within the ~~2022 presentation.~~banking industry. We have not made any changes in our significant accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

New Accounting Pronouncements

~~In March 2022,~~On January 1, 2023, the ~~Financial Accounting Standards Board (“FASB”) issued~~Company adopted ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures”. ASU 2022-02 eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors and provides amendments to ASU 2016-13, Financial Instruments – Credit Losses on Financial Instruments by enhancing existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. These disclosures are presented within Note 4: “Loans” in the accompanying unaudited financial statements. ASU 2022-02 also requires that entities disclose current-period gross write-offs by year of origination for financing receivables within the scope of Subtopic 326-20. ~~For entities that have adopted~~This information is presented as part of the ~~amendments~~disclosure for risk categories of loans based on year of origination within Note 5: ‘Allowance for Credit Losses’ in ~~Update 2016-13,~~ the ~~amendments in this ASU are effective for fiscal years beginning after December 15, 2022. The adoption of ASU 2022-02 is not expected to have a significant impact on the Company’s consolidated~~accompanying unaudited financial statements.

In March 2020, the ~~FASB~~Financial Accounting Standards Board (“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

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

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~~Company has permanently ceased originating any new loans or entering into any transaction that would increase its LIBOR-based exposure. For all new variable-rate loans and transactions, the Company primarily offers Prime and SOFR as the variable-rate index. For all LIBOR-based loans and transactions that mature after December 31, 2022, the Company has implemented procedures to identify and amend such loans and transactions to convert the base rate of ~~ASU 2020-04 is~~the contract to a Prime or SOFR-based rate. The Company will also continue to assess impacts to its operations, financial models, data and technology as part of its transition plan. The Company does not ~~expected~~expect the impact of this transition to have a ~~significant~~material impact on ~~the Company’s~~its consolidated financial statements.

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~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

~~NOTE 2: ACQUISITIONS~~

On December 17, 2021, the Company completed the acquisition of TGR Financial, Inc. (“TGRF”) and its wholly owned subsidiary, First Florida Integrity Bank, through a merger of TGRF with and into FFI followed immediately by the merger of First Florida Integrity Bank with and into FFB, in exchange for 11,352,232 shares of FFI common stock with a fair value of $24.93 per share.

The acquisition was accounted for under the purchase method of accounting. The acquired assets, assumed liabilities and identifiable intangible assets are recorded at their respective acquisition date fair values. Goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining TGRF into FFI. NaN of the goodwill recognized is expected to be deductible for income tax purposes.

The following table represents the assets acquired and liabilities assumed of TGRF as of December 17, 2021 and the fair value adjustments and amounts recorded by the Company in 2021 under the acquisition method of accounting:

TGRF Book

Fair Value


(dollars in thousands)

Value

Adjustments

Fair Value
Assets Acquired:






Cash and cash equivalents

$
1,145,335

$
5

$
1,145,340
Securities AFS

147,739

109

147,848
Securities held-to-maturity

71,790

2,115

73,905
Loans, net of deferred fees

1,045,193

(5,387)

1,039,806
Investment in FHLB stock

4,510

—

4,510
Premises and equipment, net

34,199

(4,180)

30,019
Goodwill and intangibles

181

129,850

130,031
Bank owned life insurance

46,163

—

46,163
Deferred taxes

3,414

738

4,152
Other assets

13,562

(298)

13,264
Total assets acquired

$
2,512,086

$
122,952

$
2,635,038

Liabilities Assumed:






Deposits

$
2,170,676

$
313

$
2,170,989
Borrowings

177,114

1,929

179,043
Accounts payable and other liabilities

7,386

182

7,568
Total liabilities assumed

2,355,176

2,424

2,357,600
Excess of assets acquired over liabilities assumed

156,910

120,528

277,438
Total

$
2,512,086

$
122,952

$
2,635,038

Consideration:






Stock issued





$
283,011
Cash paid

10
Total consideration ⁽¹⁾

$
283,021

~~(1)~~The difference between total consideration and the excess of assets acquired over liabilities assumed relates to the recognition of a credit loss reserve for non-PCD loans of $5.6 million, which is recognized as an expense in the consolidated income statement on the acquisition date.

In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates. The most significant category of assets for which this procedure was used was that of acquired loans. The excess of expected cash

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~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

flows above the fair value (Level 3 inputs) of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with Accounting Standards Codification (“ASC”) 310-20. The fair values are estimates and are subject to adjustment for up to one year after the merger date.

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

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

The Company recorded a deferred income tax asset of $4.2 million related to the acquisition of TGRF, including operating loss carry-forwards of $0.1 million that are subject to limitation under Section 382 of the Internal Revenue Code.

The fair value of savings and transaction deposit accounts acquired from TGRF were assumed to approximate their carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit accounts were valued by comparing the contractual cost of the portfolio to an identical portfolio bearing current market rates (Level 2 inputs). The portfolio was segregated into pools based on remaining maturity. For each pool, the projected cash flows from maturing certificates were then calculated based on contractual rates and prevailing market rates. The valuation adjustment for each pool is equal to the present value of the difference of these two cash flows, discounted at the assumed market rate for a certificate with a corresponding maturity. This valuation adjustment will be accreted to reduce interest expense over the remaining maturities of the respective pools. The Company also recorded a core deposit intangible, which represents the value of the deposit relationships acquired from TGRF, of $3.3 million. The core deposit intangible will be amortized over a period of 10 years.

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~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

~~Pro Forma Information (unaudited)~~

The following table presents unaudited pro forma information for the six months ended June 30, 2021, as if the acquisition of TGRF had occurred on January 1, 2021, after giving effect to certain adjustments. The unaudited pro forma information for this period includes adjustments for interest income on loans acquired, amortization of intangibles arising from the transaction, adjustments for interest expense on deposits acquired, and the related income tax effects of all these items and the income tax costs or benefits derived from the income or loss before taxes of TGRF. The net effect of these pro forma adjustments was an increase of $1.0 million in net income for the six months ended June 30, 2021. The unaudited pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.

Six Months Ended
(dollars in thousands)

June 30, 2021
Net interest income

$
140,686
Provision for credit losses

11,572
Noninterest income

28,474
Noninterest expenses

117,319
Income before taxes

40,269
Taxes on income

16,451
Net income

$
23,818

Net income per share:

Basic

$
0.43
Diluted

$
0.42

NOTE 3:2: 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.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 - UNAUDITED

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								Fair Value Measurement Level
(dollars in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
June 30, 2022:
March 31, 2023:
Investment securities available for sale:
Collateralized mortgage obligations	$	10,005	$	—	$	10,005	$	—	$	8,511	$	—	$	8,511	$	—
Agency mortgage-backed securities		9,000		—		9,000		—		7,157		—		7,157		—
Municipal bonds		46,834		—		46,834		—		47,520		—		47,520		—
SBA securities		23,105		—		23,105		—		16,819		—		16,819		—
Beneficial interests in FHLMC securitization		8,990		—		—		8,990		6,830		—		—		6,830
Corporate bonds		141,499		—		141,499		—		123,243		—		123,243		—
U.S. Treasury		837		837		—		—		1,244		1,244		—		—
Investment in equity securities		16,025		—		—		16,025		9,758		—		—		9,758
Total assets at fair value on a recurring basis	$	256,295	$	837	$	230,443	$	25,015	$	221,082	$	1,244	$	203,250	$	16,588


December 31, 2021:
December 31, 2022:
Investment securities available for sale:
Collateralized mortgage obligations	$	13,825	$	—	$	13,825	$	—	$	8,615	$	—	$	8,615	$	—
Agency mortgage-backed securities		928,989		—		928,989		—		7,576		—		7,576		—
Municipal bonds		52,146		—		52,146		—		46,790		—		46,790		—
SBA securities		27,972		—		27,972		—		18,955		—		18,955		—
Beneficial interests in FHLMC securitization		11,580		—		—		11,580		7,981		—		—		7,981
Corporate bonds		156,376		—		156,376		—		135,013		—		135,013		—
U.S. Treasury		490		490		—		—		1,228		1,228		—		—
Investment in equity securities		16,025		16,025		—		—		9,767		—		—		9,767
Total assets at fair value on a recurring basis	$	1,207,403	$	16,515	$	1,179,308	$	11,580	$	235,925	$	1,228	$	216,949	$	17,748

The ~~increase~~decrease in Level 3 assets from December 31, ~~2021,~~2022 was primarily due to $0.3 million in securitization paydowns ~~a reclassification of investment in equity securities,~~ and to $0.8 million in provisions for credit losses in the first ~~six~~three months of 2022. The reclassification was due to additional factors and assumptions that management utilized to determine the Investment in equity securities amount should presented as Level 3 assets at June 30, 2022. This reclassification did not change the fair value amounts assigned to these securities.2023.

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

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~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

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 ~~$6.2~~$37.5 million and ~~$2.8~~$47.2 million at ~~June 30, 2022,~~March 31, 2023 and

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

December 31, ~~2021,~~2022, respectively. There were ~~$0.7 million in~~no specific reserves related to these loans at ~~June 30, 2022~~March 31, 2023 and ~~0 specific reserves at~~ December 31, ~~2021.~~2022.

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 ~~June 30, 2022~~March 31, 2023 included prepayment rates ranging from 20% to 30% and a discount rate ~~ranging from 2.56% to~~of 10%.

Fair Value of Financial Instruments

FASB ASC 825-10, “~~Disclosures~~“Disclosures about Fair Value of Financial ~~Instruments~~”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 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~~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~~

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 - UNAUDITED

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~~external third party models, and management judgment and evaluation for valuation. Level 1 investment 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 investment securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. ~~Securities~~Investment securities classified as Level 3 include beneficial interests in FHLMC ~~securitizations and investment in equity securities.~~securitizations. Significant assumptions in the valuation of these Level 3 securities as of ~~June 30, 2022,~~March 31, 2023 and December 31, ~~2021~~2022 included prepayment rates ranging from ~~30%~~35% to ~~45%~~34% and discount rates ranging from ~~7.11%~~8.92% to ~~12.20%~~10.0%.

Investment in Equity Securities. The fair value on investment in equity securities is the carrying amount and is evaluated for impairment on an annual basis.

Investment in 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 ~~on repurchase agreements~~of borrowings is the carrying ~~amount. The fair~~ value of overnight FHLB advances ~~is the carrying value~~and federal funds purchased that ~~approximates~~approximate fair value because of the short-term maturity of ~~this instrument,~~these instruments, resulting in a Level 21 classification. The fair value of term borrowings ~~and subordinated debt are~~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.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 - UNAUDITED

The carrying amounts and estimated fair values of financial instruments are as follows as of:


	Carrying		Fair Value Measurement Level								Carrying		Fair Value Measurement Level
(dollars in thousands)	Value		1		2		3		Total		Value		1		2		3		Total
June 30, 2022:
March 31, 2023:
Assets:
Cash and cash equivalents	$	173,524	$	173,524	$	—	$	—	$	173,524	$	1,317,129	$	1,317,129	$	—	$	—	$	1,317,129
Securities AFS, net		240,270		837		230,443		8,990		240,270		211,324		1,244		203,250		6,830		211,324
Securities HTM		930,562		—		859,636		—		859,636		847,036		—		766,907		—		766,907
Loans held for sale		485,296		—		485,053		—		485,053
Loans, net		8,905,676		—		—		8,901,213		8,901,213		10,638,708		—		—		10,302,070		10,302,070
Investment in FHLB stock		17,250		—		17,250		—		17,250		58,716		—		58,716		—		58,716
Investment in equity securities		16,025		—		—		16,025		16,025		9,758		—		—		9,758		9,758
Liabilities:
Deposits	$	9,538,744	$	8,882,941	$	652,524	$	—	$	9,535,465	$	10,051,706	$	7,625,291	$	2,409,187	$	—	$	10,034,478
Borrowings		493,728		320,423		—		161,446		481,869		2,294,600		2,020,000		—		153,121		2,173,121

December 31, 2021:
December 31, 2022:
Assets:
Cash and cash equivalents	$	1,121,757	$	1,121,757	$	—	$	—	$	1,121,757	$	656,494	$	656,494	$	—	$	—	$	656,494
Securities AFS, net		1,191,378		490		1,179,308		11,580		1,191,378		226,158		1,228		216,949		7,981		226,158
Loans held for sale		501,436		—		515,978		—		515,978
Securities HTM												862,544				773,061				773,061
Loans, net		6,872,952		—		—		7,072,878		7,072,878		10,692,462		—		—		10,354,052		10,354,052
Investment in FHLB stock		18,249		—		18,249		—		18,249		25,358		—		25,358		—		25,358
Investment in equity securities		16,025		16,025		—		—		16,025		9,767		—		—		9,767		9,767
Liabilities:
Deposits	$	8,811,960	$	8,143,473	$	668,487	$	—	$	8,811,960	$	10,362,612	$	8,483,770	$	1,865,502	$	—	$	10,349,272
Borrowings		210,127		165,930		—		44,197		210,127		1,369,936		1,176,601		—		153,121		1,329,722

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022 - UNAUDITED~~

~~NOTE 4: 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
June 30, 2022:

Collateralized mortgage obligations

$
10,941

$
—

$
(936)

$
—

$
10,005
Agency mortgage-backed securities

9,530

—

(530)

—

9,000
Municipal bonds

50,567

—

(3,733)

—

46,834
SBA securities

23,039

69

(3)

—

23,105
Beneficial interests in FHLMC securitization

20,015

201

—

(11,226)

8,990
Corporate bonds

147,635

191

(6,327)

—

141,499
U.S. Treasury

897

—

(60)

—

837
Total

$
262,624

$
461

$
(11,589)

$
(11,226)

$
240,270

December 31, 2021:

Collateralized mortgage obligations

$
13,862

$
—

$
(37)

$
—

$
13,825
Agency mortgage-backed securities

928,546

6,563

(6,120)

—

928,989
Municipal bonds

52,052

94

—

—

52,146
SBA securities

27,970

2

—

—

27,972
Beneficial interests in FHLMC securitization

21,606

373

—

(10,399)

11,580
Corporate bonds

154,027

2,441

(92)

—

156,376
U.S. Treasury

499

—

(9)

—

490
Total

$
1,198,562

$
9,473

$
(6,258)

$
(10,399)

$
1,191,378

As of June 30, 2022, US Treasury securities of $0.9 million included in the table above are pledged as collateral to the State of California to meet regulatory requirements related to the Bank’s trust operations, $239.8 million of agency mortgage-backed securities are pledged as collateral as support for the Bank’s obligations under loan sales and securitizations agreements entered into from 2018 and 2021, and $179.7 million of SBA securities are pledged as collateral for repurchase agreements obtained from the TGRF acquisition.

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

Amortized

Gross Unrecognized

Allowance for

Estimated
(dollars in thousands)

Cost

Gains

Losses

Credit Losses

Fair Value
June 30, 2022:

Agency mortgage-backed securities

$
930,562

$
—

$
(70,926)

$
—

$
859,636
Total

$
930,562

$
—

$
(70,926)

$
—

$
859,636

~~There were 0 securities HTM as of December~~March 31, ~~2021.~~

The Company reassessed classification of certain securities AFS and effective January 1, 2022, the Company transferred $917 million in securities AFS to securities HTM. The securities were transferred at their amortized cost basis, net of any remaining unrealized gain or loss reported in accumulated other comprehensive income. The related unrealized loss of $0.6 million included in other comprehensive income remained in other comprehensive income to be amortized, with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities. Subsequent to transfer, the ACL on these securities was evaluated under the accounting policy for securities HTM.

~~Table of Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022~~2023 - UNAUDITED

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
March 31, 2023:
Collateralized mortgage obligations	$	9,585	$	—	$	(1,074)	$	—	$	8,511
Agency mortgage-backed securities		7,627		—		(470)		—		7,157
Municipal bonds		50,093		1		(2,574)		—		47,520
SBA securities		16,947		2		(130)		—		16,819
Beneficial interests in FHLMC securitization		19,113		110		(105)		(11,315)		7,803
Corporate bonds		138,972		—		(15,729)		(973)		122,270
U.S. Treasury		1,298		3		(57)		—		1,244
Total	$	243,635	$	116	$	(20,139)	$	(12,288)	$	211,324

December 31, 2022:
Collateralized mortgage obligations	$	9,865	$	—	$	(1,250)	$	—	$	8,615
Agency mortgage-backed securities		8,161		—		(585)		—		7,576
Municipal bonds		50,232		—		(3,442)		—		46,790
SBA securities		19,090		3		(138)		—		18,955
Beneficial interests in FHLMC securitization		19,415		108		(103)		(11,439)		7,981
Corporate bonds		145,024		—		(10,011)		—		135,013
U.S. Treasury		1,298		1		(71)		—		1,228
Total	$	253,085	$	112	$	(15,600)	$	(11,439)	$	226,158

As of March 31, 2023, U.S. Treasury securities of $1.2 million included in the table above are pledged as collateral to the States of California and Florida to meet regulatory requirements related to the Bank’s trust operations, $231.9 million of agency mortgage-backed securities are pledged as collateral as support for the Bank’s obligations under loan sales and securitizations agreements entered into from 2018 and 2021. A total of $184.2 million in securities consisting of SBA securities, collateralized mortgage obligations, agency mortgage-backed securities, and municipal bonds are pledged as collateral for repurchase agreements. A total of $841.6 million in agency mortgage-backed securities, corporate bonds, and loans are pledged as collateral to the Federal Reserve’s discount window from which the Bank may borrow.

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


	Amortized		Gross Unrecognized				Allowance for		Estimated
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Fair Value
March 31, 2023:
Agency mortgage-backed securities	$	847,036	$	—	$	(80,129)	$	—	$	766,907
Total	$	847,036	$	—	$	(80,129)	$	—	$	766,907

December 31, 2022:
Agency mortgage-backed securities	$	862,544	$	—	$	(89,483)	$	—	$	773,061
Total	$	862,544	$	—	$	(89,483)	$	—	$	773,061

In 2022, the Company transferred $917 million in securities AFS to securities HTM. The securities were transferred at their amortized cost basis, net of any remaining unrealized gain or loss reported in accumulated other comprehensive income. The related unrealized gain (or loss) of $0.6 million included in other comprehensive income remained in other comprehensive income to be amortized, with an offsetting entry to interest income as a yield adjustment

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

through earnings over the remaining term of the securities. Subsequent to transfer, the ACL on these securities was evaluated under the accounting policy for securities HTM. The securities HTM portfolio consists solely of agency-backed MBS securities in which the Company has reason to believe the credit loss exposure is remote, as these securities are guaranteed by a U.S. government sponsored entity (“GSE”). As such, the ACL related to the securities HTM portfolio was zero at March 31, 2023 and December 31, 2022, respectively.

We monitor the credit quality of ~~these~~the securities in the investment portfolios by evaluating various quantitative attributes. The credit quality indicators the Company monitors include, but are not limited to, credit ratings of individual securities and the credit rating of government sponsored enterprises that guarantee the securities. Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, that is, those with ratings similar to BBB-/Baa3 or above, as defined by NRSROs, are generally considered by the rating agencies and market participants to be low credit risk. As of ~~June 30, 2022,~~March 31, 2023, all of the Company’s securities were either investment grade or were issued by a U.S. government agency or a U.S. government sponsored enterprise with an investment grade rating.

The tables below indicate ~~as of June 30, 2022 and December 31, 2021,~~ the gross unrealized losses and fair values of our ~~investments~~securities AFS portfolio, 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 June 30, 2022													Securities with Unrealized Loss at March 31, 2023
	Less than 12 months					12 months or more				Total				Less than 12 months				12 months or more				Total
	Fair		Unrealized			Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Loss			Value		Loss		Value		Loss		Value		Loss		Value		Loss		Value		Loss
Collateralized mortgage obligations	$	9,979	$	(936)		$	—	$	—	$	9,979	$	(936)	$	—	$	—	$	8,511	$	(1,074)	$	8,511	$	(1,074)
Agency mortgage-backed securities		9,000		(530)			—		—		9,000		(530)		1,407		(50)		5,750		(420)		7,157		(470)
Municipal bonds		46,835		(3,733)			—		—		46,835		(3,733)		1,796		(15)		42,108		(2,559)		43,904		(2,574)
SBA securities		2,016		(3)			—		—		2,016		(3)		14,823		(122)		912		(8)		15,735		(130)
Beneficial interests in FHLMC securitization															4,224		(105)		—		—		4,224		(105)
Corporate bonds		126,308		(6,327)	��		—		—		126,308		(6,327)		52,772		(1,228)		70,472		(14,501)		123,244		(15,729)
U.S. Treasury		838		(60)			—		—		838		(60)		—		—		841		(57)		841		(57)
Total temporarily impaired securities	$	194,976	$	(11,589)		$	—	$	—	$	194,976	$	(11,589)	$	75,022	$	(1,520)	$	128,594	$	(18,619)	$	203,616	$	(20,139)


	Securities with Unrealized Loss at December 31, 2021												Securities with Unrealized Loss at December 31, 2022
	Less than 12 months				12 months or more				Total				Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss		Value		Loss		Value		Loss		Value		Loss
Collateralized mortgage obligations	$	12,971	$	(37)	$	—	$	—	$	12,971	$	(37)	$	2	$	—	$	8,613	$	(1,250)	$	8,615	$	(1,250)
Agency mortgage-backed securities		434,973		(5,051)		36,136		(1,069)		471,109		(6,120)		6,882		(525)		696		(60)		7,578		(585)
Municipal bonds														44,971		(3,244)		1,819		(198)		46,790		(3,442)
SBA securities														17,237		(137)		121		(1)		17,358		(138)
Beneficial interests in FHLMC securitization														4,217		(103)		—		—		4,217		(103)
Corporate bonds		47,880		(92)		—		—		47,880		(92)		108,056		(6,476)		26,957		(3,535)		135,013		(10,011)
U.S. Treasury		491		(9)		—		—		491		(9)		376		(23)		451		(48)		827		(71)
Total temporarily impaired securities	$	496,315	$	(5,189)	$	36,136	$	(1,069)	$	532,451	$	(6,258)	$	181,741	$	(10,508)	$	38,657	$	(5,092)	$	220,398	$	(15,600)

The table below indicates, as of June 30, 2022, the gross unrealized losses and fair values of our investments HTM, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

Securities with Unrecognized Loss at June 30, 2022

Less than 12 months

12 months or more

Total

Fair

Unrecognized

Fair

Unrecognized

Fair

Unrecognized
(dollars in thousands)

Value

Loss

Value

Loss

Value

Loss
Agency mortgage-backed securities

$
827,772

$
(68,544)

$
31,864

$
(2,382)

$
859,636

$
(70,926)
Total temporarily impaired securities

$
827,772

$
(68,544)

$
31,864

$
(2,382)

$
859,636

$
(70,926)

~~There were 0 securities HTM as of December 31, 2021.~~

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.

1513

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 - UNAUDITED

The tables below indicate the gross unrecognized losses and fair values of our securities HTM portfolio, aggregated by investment category and length of time that the individual securities have been in a continuous unrecognized loss position.


	Securities with Unrecognized Loss at March 31, 2023
	Less than 12 months				12 months or more				Total
	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
Agency mortgage-backed securities	$	76,301	$	(6,768)	$	690,606	$	(73,361)	$	766,907	$	(80,129)
Total temporarily impaired securities	$	76,301	$	(6,768)	$	690,606	$	(73,361)	$	766,907	$	(80,129)


	Securities with Unrecognized Loss at December 31, 2022
	Less than 12 months				12 months or more				Total
	Fair		Unrecognized		Fair		Unrecognized		Fair		Unrecognized
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
Agency mortgage-backed securities	$	394,619	$	(37,418)	$	378,442	$	(52,065)	$	773,061	$	(89,483)
Total temporarily impaired securities	$	394,619	$	(37,418)	$	378,442	$	(52,065)	$	773,061	$	(89,483)

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


(dollars in thousands)		Total		Total

Three Months Ended June 30, 2022:
Three Months Ended March 31, 2023:
Beginning balance	$	10,743	$	11,439
Provision for credit losses		483		849
Balance: June 30, 2022	$	11,226
Balance: March 31, 2023			$	12,288

Six Months Ended June 30, 2022:
Three Months Ended March 31, 2022:
Beginning balance	$	10,399	$	10,399
Provision for credit losses		827		344
Balance: June 30, 2022	$	11,226

Year Ended December 31, 2021:
Beginning balance	$	7,245
Provision for credit losses		3,154
Balance: December 31, 2021	$	10,399
Balance: March 31, 2022			$	10,743

~~Due to a change in expected cash flows~~Provision for credit losses of ~~interest only strip securities, $0.5~~$0.8 million and ~~$0.8~~$0.3 million ~~in allowances~~ were taken in the three and six months ended June 30, 2022, respectively, and $0.2 million and $1.9 million in allowances were taken in the three and six months ended June 30, 2021, respectively. The allowances were included as a charge in provision for credit lossesrecorded on the consolidated income ~~statement.~~statements for the three month periods ended March 31, 2023 and 2022, respectively.

The ACL on investment securities is determined for both held-to-maturity and available-for-sale classifications of the investment portfolio in accordance with ASC 326, and is evaluated on a quarterly basis. The ACL for held-to-maturity investment securities is determined on a collective basis, based on shared risk characteristics, and is determined at the individual security level when the Company deems a security to no longer possess shared risk characteristics. Under ASC 326-20, for investment securities where the Company has reason to believe the credit loss exposure is remote, such as those guaranteed by the U.S. government or government sponsored entities, a zero loss expectation is applied and a company is not required to estimate and recognize an ACL.

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

in credit ratings; (iv) payment structure of the security, and (v) the ability of the issuer of the security to make scheduled principal and interest payments. If, after considering these factors, 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.

~~Table~~ In March 2023, the Company engaged with an independent third party to perform an analysis of ~~Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For~~expected credit losses for its municipal and corporate bond securities in order to supplement our own internal review. The analysis concluded and the ~~Six Months Ended June 30, 2022 - UNAUDITED~~Company concurred that seven corporate bond securities were impacted by credit loss totaling $973 thousand, which was recorded against the allowance.

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

June 30, 2022

Amortized Cost:











Collateralized mortgage obligations

$
—

$
—

$
740

$
10,201

$
10,941

Agency mortgage-backed securities

—

4,120

3,714

1,696

9,530

Municipal bonds

304

5,176

35,374

9,713

50,567

SBA securities

55

1,836

1,507

19,641

23,039

Beneficial interests in FHLMC securitization

—

10,546

—

9,469

20,015

Corporate bonds

6,018

10,412

125,671

5,534

147,635

U.S. Treasury

—

897

—

—

897

Total

$
6,377

$
32,987

$
167,006

$
56,254

$
262,624

Weighted average yield

1.97
%

1.98
%

3.48
%

2.00
%

2.94
%
Estimated Fair Value:











Collateralized mortgage obligations

$
—

$
—

$
687

$
9,318

$
10,005

Agency mortgage-backed securities

—

3,969

3,460

1,571

9,000

Municipal bonds

301

4,839

33,370

8,324

46,834

SBA securities

55

1,833

1,510

19,707

23,105

Beneficial interests in FHLMC securitization

—

10,546

—

9,670

20,216

Corporate bonds

5,985

9,877

120,654

4,983

141,499

U.S. Treasury

—

837

—

—

837

Total

$
6,341

$
31,901

$
159,681

$
53,573

$
251,496


	Less than			1 Through			5 Through			After						Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total			1 Year			5 years			10 Years			10 Years			Total
December 31, 2021
March 31, 2023
Amortized Cost:
Collateralized mortgage obligations	$	—		$	710		$	802		$	12,350		$	13,862		$	—		$	—		$	569		$	9,016		$	9,585
Agency mortgage-backed securities		—			4,990			24,568			898,988			928,546			—			5,969			—			1,658			7,627
Municipal bonds		—			1,625			38,853			11,574			52,052			300			9,280			35,064			5,449			50,093
SBA securities		70			1,613			2,952			23,335			27,970			5			1,101			1,108			14,733			16,947
Beneficial interests in FHLMC securitization		—			11,902			—			9,704			21,606			—			9,537			—			9,576			19,113
Corporate bonds		9,534			10,519			128,438			5,536			154,027			—			28,985			104,456			5,531			138,972
U.S. Treasury		—			499			—			—			499			—			1,298			—			—			1,298
Total	$	9,604		$	31,858		$	195,613		$	961,487		$	1,198,562		$	305		$	56,170		$	141,197		$	45,963		$	243,635
Weighted average yield		(2.28)	%		2.06	%		3.03	%		1.63	%		1.84	%		0.29	%		4.11	%		3.43	%		4.17	%		3.72	%
Estimated Fair Value:
Collateralized mortgage obligations	$	—		$	710		$	799		$	12,316		$	13,825		$	—		$	—		$	521		$	7,990		$	8,511
Agency mortgage-backed securities		—			5,082			25,056			898,851			928,989			—			5,665			—			1,492			7,157
Municipal bonds		—			1,704			38,865			11,577			52,146			300			8,944			33,682			4,594			47,520
SBA securities		70			1,613			2,953			23,336			27,972			5			1,094			1,103			14,617			16,819
Beneficial interests in FHLMC securitization		—			11,902			—			10,077			21,979			—			9,537			—			9,581			19,118
Corporate bonds		9,529			10,499			130,754			5,594			156,376			—			27,970			90,758			4,515			123,243
U.S. Treasury		—			490			—			—			490			—			1,244			—			—			1,244
Total	$	9,599		$	32,000		$	198,427		$	961,751		$	1,201,777		$	305		$	54,454		$	126,064		$	42,789		$	223,612

1715

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022 - UNAUDITED~~

~~The following is a summary of scheduled maturities of securities HTM and the related weighted average yields as of:~~

Less than

1 Through

5 Through

After


(dollars in thousands)

1 Year

5 years

10 Years

10 Years

Total

June 30, 2022

Amortized Cost:











Agency mortgage-backed securities

$
—

$
131

$
19,227

$
911,204

$
930,562

Total

$
—

$
131

$
19,227

$
911,204

$
930,562

Weighted average yield

—
%

0.28
%

1.05
%

1.72
%

1.70
%

Estimated Fair Value:











Agency mortgage-backed securities

$
—

$
123

$
17,937

$
841,576

$
859,636

Total

$
—

$
123

$
17,937

$
841,576

$
859,636

~~There were 0 securities HTM as of December~~March 31, ~~2021.~~

~~NOTE 5: LOANS~~

~~The following is a summary of our loans as of:~~

June 30,

December 31,
(dollars in thousands)

2022

2021
Outstanding principal balance:





Loans secured by real estate:




Residential properties:




Multifamily

$
3,953,717

$
2,886,055
Single family

958,348

933,445
Total real estate loans secured by residential properties

4,912,065

3,819,500
Commercial properties

1,237,664

1,309,200
Land and construction

170,887

156,028
Total real estate loans

6,320,616

5,284,728
Commercial and industrial loans

2,593,948

1,598,422
Consumer loans

10,845

10,834
Total loans

8,925,409

6,893,984
Premiums, discounts and deferred fees and expenses

13,432

12,744
Total

$
8,938,841

$
6,906,728

~~Table of Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

~~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
June 30, 2022:





















Real estate loans:














Residential properties

$
480

$
—

$
—

$
3,154

$
3,634

$
4,924,740

$
4,928,374
Commercial properties

1,932

343

2,877

4,246

9,398

1,226,767

1,236,165
Land and construction

—

—

—

—

—

169,722

169,722
Commercial and industrial loans

823

2,064

—

3,684

6,571

2,587,155

2,593,726
Consumer loans

170

—

—

—

170

10,684

10,854
Total

$
3,405

$
2,407

$
2,877

$
11,084

$
19,773

$
8,919,068

$
8,938,841

Percentage of total loans

0.04
%

0.03
%

0.03
%

0.12
%

0.22
%





December 31, 2021:














Real estate loans:














Residential properties

$
1,519

$
310

$
—

$
3,281

$
5,110

$
3,827,385

$
3,832,495
Commercial properties

2,934

—

—

1,529

4,463

1,305,112

1,309,575
Land and construction

—

—

—

—

—

155,926

155,926
Commercial and industrial loans

303

260

—

3,520

4,083

1,593,782

1,597,865
Consumer loans

—

—

—

—

—

10,867

10,867
Total

$
4,756

$
570

$
—

$
8,330

$
13,656

$
6,893,072

$
6,906,728

Percentage of total loans

0.07
%

0.01
%

—
%

0.12
%

0.20
%

~~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
June 30, 2022:


Real estate loans:

Residential properties

$
—

$
3,154
Commercial properties

—

4,246
Commercial and industrial loans

1,835

1,849
Total

$
1,835

$
9,249

December 31, 2021:


Real estate loans:

Residential properties

$
—

$
3,281
Commercial properties

—

1,529
Commercial and industrial loans

1,733

1,787
Total

$
1,733

$
6,597

~~Table of Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

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

June 30, 2022

December 31, 2021
(dollars in thousands)

Accrual

Nonaccrual
��
Total

Accrual

Nonaccrual

Total
Residential loans

$
—

$
—

$
—

$
1,200

$
—

$
1,200
Commercial real estate loans

976

1,121

2,097

1,021

1,174

2,195
Commercial and industrial loans

102

1,630

1,732

493

2,030

2,523
Total

$
1,078

$
2,751

$
3,829

$
2,714

$
3,204

$
5,918

~~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
Six Months Ended June 30, 2022:











Commercial and industrial loans

1

$
236

$
236

$
—
Total

1

$
236

$
236

$
—

Outstanding Recorded Investment

(dollars in thousands)

Number of loans

Pre-Modification

Post-Modification

Financial Impact
Year Ended December 31, 2021








Commercial and industrial loans

1

$
346

$
346

$
—
Total

1

$
346

$
346

$
—

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.

~~Table of Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

~~NOTE 6: 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:~~

Initial Allowance


Beginning

Provision for

on Acquired





Ending
(dollars in thousands)

Balance

Credit Losses

PCD Loans

Charge-offs

Recoveries

Balance
Three Months Ended June 30, 2022:










Real estate loans:










Residential properties

$
3,198

$
1,248

$
—

$
—

$
—

$
4,446
Commercial properties

15,636

(2,922)

—

—

—

12,714
Land and construction

1,768

(308)

—

—

—

1,460
Commercial and industrial loans

12,130

2,187

—

—

164

14,481
Consumer loans

90

(26)

—

—

—

��
64
Total

$
32,822

$
179

$

$
—

$
164

$
33,165

Six Months Ended June 30, 2022:










Real estate loans:










Residential properties

$
2,637

$
1,809

$
—

$
—

$
—

$
4,446
Commercial properties

17,049

(4,335)

—

—

—

12,714
Land and construction

1,995

(535)

—

—

—

1,460
Commercial and industrial loans

11,992

2,336

—

(145)

298

14,481
Consumer loans

103

(39)

—

—

—

64
Total

$
33,776

$
(764)

$
—

$
(145)

$
298

$
33,165

Year Ended December 31, 2021:










Real estate loans:










Residential properties

$
5,115

$
(1,453)

$
93

$
(1,118)

$
—

$
2,637
Commercial properties

8,711

774

7,564

—

—

17,049
Land and construction

892

1,051

52

—

—

1,995
Commercial and industrial loans

9,249

614

1,836

(706)

999

11,992
Consumer loans

233

(130)

—

—

—

103
Total

$
24,200

$
856

$
9,545

$
(1,824)

$
999

$
33,776

~~Table of Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - 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

June 30, 2022:

Allowance for credit losses:







Real estate loans:







Residential properties

$
79

$
4,367

$
4,446

Commercial properties

5,170

7,544

12,714

Land and construction

—

1,460

1,460

Commercial and industrial loans

2,225

12,256

14,481

Consumer loans

—

64

64

Total

$
7,474

$
25,691

$
33,165

Loans:







Real estate loans:







Residential properties

$
8,376

$
4,919,998

$
4,928,374

Commercial properties

40,646

1,195,519

1,236,165

Land and construction

—

169,722

169,722

Commercial and industrial loans

8,108

2,585,618

2,593,726

Consumer loans

—

10,854

10,854

Total

$
57,130

$
8,881,711

$
8,938,841

December 31, 2021:

Allowance for credit losses:







Real estate loans:







Residential properties

$
111

$
2,526

$
2,637

Commercial properties

7,967

9,082

17,049

Land and construction

52

1,943

1,995

Commercial and industrial loans

2,386

9,606

11,992

Consumer loans

—

103

103

Total

$
10,516

$
23,260

$
33,776

Loans:







Real estate loans:







Residential properties

$
9,593

$
3,822,902

$
3,832,495

Commercial properties

41,313

1,268,262

1,309,575

Land and construction

694

155,232

155,926

Commercial and industrial loans

9,963

1,587,902

1,597,865

Consumer loans

—

10,867

10,867

Total

$
61,563

$
6,845,165

$
6,906,728

~~Table of Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022~~2023 - UNAUDITED


	Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total
December 31, 2022
Amortized Cost:
Collateralized mortgage obligations	$	—		$	—		$	686		$	9,179		$	9,865
Agency mortgage-backed securities		—			4,384			2,107			1,670			8,161
Municipal bonds		301			8,002			34,501			7,428			50,232
SBA securities		14			1,402			1,278			16,396			19,090
Beneficial interests in FHLMC securitization		—			9,860			—			9,555			19,415
Corporate bonds		6,006			28,993			104,494			5,531			145,024
U.S. Treasury		—			1,298			—			—			1,298
Total	$	6,321		$	53,939		$	143,066		$	49,759		$	253,085
Weighted average yield		4.36	%		3.96	%		3.38	%		1.91	%		3.24	%
Estimated Fair Value:
Collateralized mortgage obligations	$	—		$	—		$	623		$	7,992		$	8,615
Agency mortgage-backed securities		—			4,133			1,960			1,483			7,576
Municipal bonds		299			7,565			32,690			6,236			46,790
SBA securities		14			1,395			1,272			16,274			18,955
Beneficial interests in FHLMC securitization		—			9,860			—			9,560			19,420
Corporate bonds		6,001			28,022			96,734			4,256			135,013
U.S. Treasury		—			1,228			—			—			1,228
Total	$	6,314		$	52,203		$	133,279		$	45,801		$	237,597

The scheduled maturities of securities HTM 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
March 31, 2023
Amortized Cost:
Agency mortgage-backed securities	$	—		$	574		$	18,925		$	827,537		$	847,036
Total	$	—		$	574		$	18,925		$	827,537		$	847,036
Weighted average yield		—	%		0.60	%		1.22	%		2.47	%		2.44	%

Estimated Fair Value:
Agency mortgage-backed securities	$	—		$	537		$	17,451		$	748,919		$	766,907
Total	$	—		$	537		$	17,451		$	748,919		$	766,907


	Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total
December 31, 2022
Amortized Cost:
Agency mortgage-backed securities	$	—		$	208		$	17,689		$	844,647		$	862,544
Total	$	—		$	208		$	17,689		$	844,647		$	862,544
Weighted average yield		—	%		0.36	%		1.12	%		2.31	%		2.28	%

Estimated Fair Value:
Agency mortgage-backed securities	$	—		$	192		$	16,148		$	756,721		$	773,061
Total	$	—		$	192		$	16,148		$	756,721		$	773,061

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

NOTE 4: LOANS

The following is a summary of our loans as of:


	March 31,		December 31,
(dollars in thousands)	2023		2022
Outstanding principal balance:
Loans secured by real estate:
Residential properties:
Multifamily	$	5,332,815	$	5,341,596
Single family		1,008,657		1,016,498
Total real estate loans secured by residential properties		6,341,472		6,358,094
Commercial properties		1,155,624		1,203,292
Land and construction		166,166		158,565
Total real estate loans		7,663,262		7,719,951
Commercial and industrial loans		2,985,984		2,984,748
Consumer loans		3,862		4,481
Total loans		10,653,108		10,709,180
Premiums, discounts and deferred fees and expenses		16,695		17,013
Total	$	10,669,803	$	10,726,193

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
March 31, 2023:
Real estate loans:
Residential properties	$	20,272		$	—		$	—		$	2,518		$	22,790		$	6,338,021	$	6,360,811
Commercial properties		5,561			—			217			3,969			9,747			1,144,772		1,154,519
Land and construction		521			6,835			—			—			7,356			157,860		165,216
Commercial and industrial loans		1,200			233			2,227			4,694			8,354			2,977,013		2,985,367
Consumer loans		10			—			—			—			10			3,880		3,890
Total	$	27,564		$	7,068		$	2,444		$	11,181		$	48,257		$	10,621,546	$	10,669,803

Percentage of total loans		0.26	%		0.07	%		0.02	%		0.10	%		0.45	%

December 31, 2022:
Real estate loans:
Residential properties	$	511		$	57		$	—		$	2,556		$	3,124		$	6,374,100	$	6,377,224
Commercial properties		15,000			946			1,213			4,547			21,706			1,180,357		1,202,063
Land and construction		—			—			—			—			—			157,630		157,630
Commercial and industrial loans		385			1,495			982			3,228			6,090			2,978,668		2,984,758
Consumer loans		—			167			—			—			167			4,351		4,518
Total	$	15,896		$	2,665		$	2,195		$	10,331		$	31,087		$	10,695,106	$	10,726,193
Percentage of total loans		0.15	%		0.02	%		0.02	%		0.10	%		0.29	%

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - 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
March 31, 2023:
Real estate loans:
Residential properties	$	—	$	2,518
Commercial properties		—		3,969
Commercial and industrial loans		3,672		1,022
Total	$	3,672	$	7,509

December 31, 2022:
Real estate loans:
Residential properties	$	—	$	2,556
Commercial properties		—		4,547
Commercial and industrial loans		2,016		1,212
Total	$	2,016	$	8,315

The Company adopted ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures on January 1, 2023. The amendments in this ASU eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The amendments in this ASU were applied prospectively, and therefore, loan modification and charge off information is provided for only those items occurring after the January 1, 2023 adoption date.

Based on the guidance in ASU 2022-02, a loan modification or refinancing results in a new loan if the terms of the new loan are at least as favorable to the lender as the terms with customers with similar collection risks that are not refinancing or restructuring their loans and the modification to the terms of the loan are more than minor. If a loan modification or refinancing does not result in a new loan, it is classified as a loan modification.

There are additional disclosures for modification of loans with borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows. The disclosures are applicable to situations where there is interest rate reduction, term extensions, principal forgiveness, other-than-insignificant payment delays, or a combination of any of these items. The Company had no loan modifications to borrowers experiencing financial difficulties in the first quarter of 2023 and there were no modifications to borrowers experiencing financial difficulties that were outstanding at March 31, 2023.

FASB has provided transition guidance to assist with the implementation of ASU 2022-02. Per this guidance, FASB expects that for comparative periods presented before adoption, current TDR disclosures should continue to be provided. As such, the following table presents the loans classified as TDRs by accrual and nonaccrual status as of the comparative period ended December 31, 2022:


	December 31, 2022
(dollars in thousands)	Accrual		Nonaccrual		Total
Residential loans	$	—	$	—	$	—
Commercial real estate loans		929		1,066		1,995
Commercial and industrial loans		166		1,412		1,578
Total	$	1,095	$	2,478	$	3,573

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

NOTE 5: ALLOWANCE FOR CREDIT LOSSES

The following is a rollforward of the allowance for credit losses related to loans for the following periods:


			Provision for
	Beginning		(Reduction of)						Ending
(dollars in thousands)	Balance		Credit Losses		Charge-offs		Recoveries		Balance
Three Months Ended March 31, 2023:
Real estate loans:
Residential properties	$	8,306	$	(43)	$	—	$	—	$	8,263
Commercial properties		8,714		(2,732)		(249)		—		5,733
Land and construction		164		152		—		—		316
Commercial and industrial loans		16,521		1,685		(1,752)		306		16,760
Consumer loans		26		(1)		(2)		—		23
Total	$	33,731	$	(939)	$	(2,003)	$	306	$	31,095

Three Months Ended March 31, 2022:
Real estate loans:
Residential properties	$	2,637	$	561	$	—	$	—	$	3,198
Commercial properties		17,049		(1,413)		—		—		15,636
Land and construction		1,995		(227)		—		—		1,768
Commercial and industrial loans		11,992		149		(145)		134		12,130
Consumer loans		103		(13)		—		—		90
Total	$	33,776	$	(943)	$	(145)	$	134	$	32,822

Year Ended December 31, 2022:
Real estate loans:
Residential properties	$	2,637	$	5,674	$	(5)	$	—	$	8,306
Commercial properties		17,049		(8,335)		—		—		8,714
Land and construction		1,995		(1,831)		—		—		164
Commercial and industrial loans		11,992		4,804		(711)		436		16,521
Consumer loans		103		(73)		(4)		—		26
Total	$	33,776	$	239	$	(720)	$	436	$	33,731

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

The following ~~tables present risk categories of~~table presents the balance in the allowance for credit losses and the recorded investment in loans ~~based on year of origination,~~by impairment method as of:

Revolving

(dollars in thousands)

2022

2021

2020

2019

2018

Prior

Loans

Total
June 30, 2022:

Loans secured by real estate:

Residential

Multifamily

Pass

$
1,364,976

$
1,081,884

$
817,796

$
320,841

$
179,739

$
202,422

$
—

$
3,967,658
Special mention

—

—

—

—

—

—

—

—
Substandard

—

—

—

—

—

—

—

—
Total

$
1,364,976

$
1,081,884

$
817,796

$
320,841

$
179,739

$
202,422

$
—

$
3,967,658

Single family

Pass

$
130,550

$
292,826

$
100,637

$
44,070

$
52,904

$
261,117

$
70,211

$
952,315
Special mention

—

—

—

—

—

—

26

26
Substandard

—

—

—

—

—

8,238

137

8,375
Total

$
130,550

$
292,826

$
100,637

$
44,070

$
52,904

$
269,355

$
70,374

$
960,716

Commercial real estate

Pass

$
143,795

$
226,528

$
142,764

$
119,380

$
171,603

$
351,594

$
—

$
1,155,664
Special mention

—

13,715

46

16,243

5,772

7,990

—

43,766
Substandard

5,963

9,200

829

10,279

—

10,464

—

36,735
Total

$
149,758

$
249,443

$
143,639

$
145,902

$
177,375

$
370,048

$
—

$
1,236,165

Land and construction

Pass

$
32,273

$
54,823

$
48,199

$
12,272

$
5,145

$
2,678

$
—

$
155,390
Special mention

—

—

—

—

14,332

—

—

14,332
Substandard

—

—

—

—

—

—

—

—
Total

$
32,273

$
54,823

$
48,199

$
12,272

$
19,477

$
2,678

$
—

$
169,722

Commercial

Pass

$
855,797

$
439,281

$
224,157

$
91,489

$
41,946

$
41,136

$
881,333

$
2,575,139
Special mention

—

—

1,441

419

—

—

7,025

8,885
Substandard

—

331

2,563

1,902

518

2,502

1,886

9,702
Total

$
855,797

$
439,612

$
228,161

$
93,810

$
42,464

$
43,638

$
890,244

$
2,593,726

Consumer

Pass

$
522

$
2,285

$
4

$
356

$
284

$
74

$
7,195

$
10,720
Special mention

—

—

—

—

—

—

—

—
Substandard

—

—

—

134

—

—

—

134
Total

$
522

$
2,285

$
4

$
490

$
284

$
74

$
7,195

$
10,854

Total loans

Pass

$
2,527,913

$
2,097,627

$
1,333,557

$
588,408

$
451,621

$
859,021

$
958,739

$
8,816,886
Special mention

—

13,715

1,487

16,662

20,104

7,990

7,051

67,009
Substandard

5,963

9,531

3,392

12,315

518

21,204

2,023

54,946
Total

$
2,533,876

$
2,120,873

$
1,338,436

$
617,385

$
472,243

$
888,215

$
967,813

$
8,938,841



	Allowance for Credit Losses
	Loans Evaluated
(dollars in thousands)	Individually		Collectively		Total
March 31, 2023:
Allowance for credit losses:
Real estate loans:
Residential properties	$	62	$	8,201	$	8,263
Commercial properties		1,044		4,689		5,733
Land and construction		—		316		316
Commercial and industrial loans		1,144		15,616		16,760
Consumer loans		—		23		23
Total	$	2,250	$	28,845	$	31,095
Loans:
Real estate loans:
Residential properties	$	3,428	$	6,357,383	$	6,360,811
Commercial properties		28,197		1,126,322		1,154,519
Land and construction		—		165,216		165,216
Commercial and industrial loans		5,875		2,979,492		2,985,367
Consumer loans		—		3,890		3,890
Total	$	37,500	$	10,632,303	$	10,669,803

December 31, 2022:
Allowance for credit losses:
Real estate loans:
Residential properties	$	87	$	8,219	$	8,306
Commercial properties		1,834		6,880		8,714
Land and construction		—		164		164
Commercial and industrial loans		3,122		13,399		16,521
Consumer loans		—		26		26
Total	$	5,043	$	28,688	$	33,731
Loans:
Real estate loans:
Residential properties	$	3,479	$	6,373,745	$	6,377,224
Commercial properties		34,278		1,167,785		1,202,063
Land and construction		—		157,630		157,630
Commercial and industrial loans		9,397		2,975,361		2,984,758
Consumer loans		—		4,518		4,518
Total	$	47,154	$	10,679,039	$	10,726,193

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as loans secured

2320

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 - UNAUDITED

by multifamily or commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:

Pass: Loans classified as pass are strong credits with no existing or known potential weaknesses deserving of management’s close attention.

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

A loan is considered impaired, when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Additionally, all loans classified as TDRs are considered impaired. Purchased credit deteriorated loans are not considered impaired loans for these purposes.

Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions above and smaller, homogeneous loans not assessed on an individual basis.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

The following tables present risk categories of loans based on year of origination, as of the periods shown. In accordance with the adoption of ASU 2022-02 in January 2023, gross charge-off information is disclosed by vintage year (year of origination) on a prospective basis beginning in 2023:


															Revolving																Revolving
(dollars in thousands)	2021			2020			2019		2018		2017		Prior		Loans		Total		2023		2022		2021		2020		2019		Prior		Loans		Total
December 31, 2021:
March 31, 2023:
Loans secured by real estate:
Residential
Multifamily
Pass	$	1,092,903		$	868,483		$	418,346	$	265,872	$	141,433	$	108,529	$	—	$	2,895,566	$	16,080	$	2,398,706	$	1,547,733	$	793,127	$	297,324	$	278,675	$	—	$	5,331,645
Special mention		—			—			1,177		—		—		—		—		1,177		—		—		—		—		5,637		11,248		—		16,885
Substandard		—			—			—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	1,092,903		$	868,483		$	419,523	$	265,872	$	141,433	$	108,529	$	—	$	2,896,743	$	16,080	$	2,398,706	$	1,547,733	$	793,127	$	302,961	$	289,923	$	—	$	5,348,530
Gross charge-offs																			$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Single family
Pass	$	278,337		$	122,530		$	52,995	$	60,559	$	57,174	$	280,216	$	74,934	$	926,745	$	9,505	$	269,712	$	274,013	$	95,026	$	39,831	$	253,304	$	67,462	$	1,008,853
Special mention		—			—			—		—		—		—		26		26		—		—		—		—		—		—		—		—
Substandard		—			—			—		—		1,873		6,830		278		8,981		—		—		—		—		—		3,398		30		3,428
Total	$	278,337		$	122,530		$	52,995	$	60,559	$	59,047	$	287,046	$	75,238	$	935,752	$	9,505	$	269,712	$	274,013	$	95,026	$	39,831	$	256,702	$	67,492	$	1,012,281
Gross charge-offs																			$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Pass	$	114,678		$	39,135		$	59,426	$	94,930	$	115,614	$	804,295	$	—	$	1,228,078	$	13,589	$	221,479	$	157,009	$	134,635	$	85,223	$	477,039	$	—	$	1,088,974
Special mention		—			—			23,495		—		—		30,389		—		53,884		—		—		—		2,324		7,040		19,138		—		28,502
Substandard		—			—			2,934		—		2,217		22,462		—		27,613		—		5,864		9,418		698		10,558		10,505		—		37,043
Total	$	114,678		$	39,135	��	$	85,855	$	94,930	$	117,831	$	857,146	$	—	$	1,309,575	$	13,589	$	227,343	$	166,427	$	137,657	$	102,821	$	506,682	$	—	$	1,154,519
Gross charge-offs																			$	—	$	—	$	—	$	—	$	—	$	249	$	—	$	249

Land and construction
Pass	$	14,738		$	—		$	17,692	$	31,952	$	2,529	$	88,321	$	—	$	155,232	$	4,205	$	41,435	$	62,677	$	48,764	$	842	$	7,293	$	—	$	165,216
Special mention		—			—			—		—		—		694		—		694		—		—		—		—		—		—		—		—
Substandard		—			—			—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	14,738		$	—		$	17,692	$	31,952	$	2,529	$	89,015	$	—	$	155,926	$	4,205	$	41,435	$	62,677	$	48,764	$	842	$	7,293	$	—	$	165,216
Gross charge-offs																			$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial
Pass	$	471,431		$	191,405		$	88,050	$	20,709	$	5,531	$	167,201	$	636,507	$	1,580,834	$	52,358	$	1,171,201	$	317,465	$	148,594	$	39,128	$	31,893	$	1,182,534	$	2,943,173
Special mention		883			1,101			833		—		—		1,370		2,790		6,977		—		—		20,671		4,739		192		—		4,824		30,426
Substandard		—			1,535			1,765		982		192		2,688		2,892		10,054		—		—		365		1,900		1,423		1,023		7,057		11,768
Total	$	472,314		$	194,041		$	90,648	$	21,691	$	5,723	$	171,259	$	642,189	$	1,597,865	$	52,358	$	1,171,201	$	338,501	$	155,233	$	40,743	$	32,916	$	1,194,415	$	2,985,367
Gross charge-offs																			$	—	$	375	$	193	$	86	$	51	$	—	$	1,047	$	1,752

Consumer
Pass	$	54		$	—		$	—	$	1,174	$	—	$	2,617	$	7,022	$	10,867	$	10	$	7	$	1,069	$	—	$	332	$	173	$	2,299	$	3,890
Special mention		—			—			—		—		—		—		—		—		—		—		—		—		—		—		—		—
Substandard		—			—			—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	54		$	—		$	—	$	1,174	$	—	$	2,617	$	7,022	$	10,867	$	10	$	7	$	1,069	$	—	$	332	$	173	$	2,299	$	3,890
Gross charge-offs																			$	—	$	—	$	—	$	—	$	—	$	—	$	2	$	2

Total loans
Pass	$	1,972,141		$	1,221,553		$	636,509	$	475,196	$	322,281	$	1,451,179	$	718,463	$	6,797,322	$	95,747	$	4,102,540	$	2,359,966	$	1,220,146	$	462,680	$	1,048,377	$	1,252,295	$	10,541,751
Special mention		883	��		1,101			25,505		—		—		32,453		2,816		62,758		—		—		20,671		7,063		12,869		30,386		4,824		75,813
Substandard		—			1,535			4,699		982		4,282		31,980		3,170		46,648		—		5,864		9,783		2,598		11,981		14,926		7,087		52,239
Total	$	1,973,024		$	1,224,189		$	666,713	$	476,178	$	326,563	$	1,515,612	$	724,449	$	6,906,728	$	95,747	$	4,108,404	$	2,390,420	$	1,229,807	$	487,530	$	1,093,689	$	1,264,206	$	10,669,803
Gross charge-offs																			$	—	$	375	$	193	$	86	$	51	$	249	$	1,049	$	2,003

2422

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 - UNAUDITED


													Revolving
(dollars in thousands)	2022		2021		2020		2019		2018		Prior		Loans		Total
December 31, 2022:
Loans secured by real estate:
Residential
Multifamily
Pass	$	2,399,360	$	1,552,311	$	795,263	$	301,025	$	145,675	$	146,622	$	—	$	5,340,256
Special mention		—		—		—		5,666		9,767		1,545		—		16,978
Substandard		—		—		—		—		—		—		—		—
Total	$	2,399,360	$	1,552,311	$	795,263	$	306,691	$	155,442	$	148,167	$	—	$	5,357,234

Single family
Pass	$	270,589	$	276,244	$	96,183	$	40,010	$	49,676	$	215,209	$	68,575	$	1,016,486
Special mention		—		—		—		—		—		—		25		25
Substandard		—		—		—		—		—		3,434		45		3,479
Total	$	270,589	$	276,244	$	96,183	$	40,010	$	49,676	$	218,643	$	68,645	$	1,019,990

Commercial real estate
Pass	$	223,503	$	158,363	$	144,105	$	93,960	$	171,460	$	325,048	$	—	$	1,116,439
Special mention		—		13,425		2,340		7,088		11,734		7,905		—		42,492
Substandard		5,919		14,376		742		10,661		—		11,434		—		43,132
Total	$	229,422	$	186,164	$	147,187	$	111,709	$	183,194	$	344,387	$	—	$	1,202,063

Land and construction
Pass	$	43,846	$	58,268	$	47,212	$	854	$	5,044	$	2,406	$	—	$	157,630
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	43,846	$	58,268	$	47,212	$	854	$	5,044	$	2,406	$	—	$	157,630

Commercial
Pass	$	1,176,851	$	369,775	$	182,889	$	62,767	$	16,306	$	17,558	$	1,133,998	$	2,960,144
Special mention		—		542		1,212		383		—		—		5,573		7,710
Substandard		—		380		2,125		1,810		—		2,736		9,853		16,904
Total	$	1,176,851	$	370,697	$	186,226	$	64,960	$	16,306	$	20,294	$	1,149,424	$	2,984,758

Consumer
Pass	$	456	$	1,092	$	—	$	471	$	133	$	69	$	2,297	$	4,518
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	456	$	1,092	$	—	$	471	$	133	$	69	$	2,297	$	4,518

Total loans
Pass	$	4,114,605	$	2,416,053	$	1,265,652	$	499,087	$	388,294	$	706,912	$	1,204,870	$	10,595,473
Special mention		—		13,967		3,552		13,137		21,501		9,450		5,598		67,205
Substandard		5,919		14,756		2,867		12,471		—		17,604		9,898		63,515
Total	$	4,120,524	$	2,444,776	$	1,272,071	$	524,695	$	409,795	$	733,966	$	1,220,366	$	10,726,193

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the operation or sale of the collateral. Collateral dependent loans are evaluated individually to determine expected credit losses and any allowance for credit losses (“ACL”) allocation is determined based upon the amount by which amortized costs exceed the estimated fair value of the collateral, adjusted

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

for estimated selling costs (if applicable). 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”)~~ACL allocated to these ~~loans:~~loans as of the dates indicated:


					Equipment/					ACL					Equipment/					ACL
(dollars in thousands)	Real Estate		Cash		Receivables		Total			Allocation	Real Estate		Cash		Receivables		Total			Allocation
June 30, 2022:
March 31, 2023:
Loans secured by real estate:
Residential properties
Single family	$	2,475	$	—	$	—	$	2,475	$	—	$	2,415	$	—	$	—	$	2,415	$	—
Commercial real estate loans		2,803		—		—		2,803		—		2,637		—		—		2,637		—
Commercial loans		—		250		700		950		700		—		250		—		250		—
Total	$	5,278	$	250	$	700	$	6,228	$	700	$	5,052	$	250	$	—	$	5,302	$	—

December 31, 2021:
December 31, 2022:
Loans secured by real estate:
Residential properties
Single family	$	2,568	$	—	$	—	$	2,568	$	—	$	2,435	$	—	$	—	$	2,435	$	—
Commercial real estate loans												3,171		—		—		3,171		—
Commercial loans		—		250		—		250		—		—		250		638		888		630
Consumer loans		—		—		—		—		—
Total	$	2,568	$	250	$	—	$	2,818	$	—	$	5,606	$	250	$	638	$	6,494	$	630

NOTE 6: GOODWILL AND INTANGIBLES

Goodwill is recorded upon completion of a business combination as the difference between the purchase price and the fair value of net identifiable assets acquired. Goodwill is deemed to have an indefinite useful life and as such is not subject to amortization and instead is tested for impairment annually unless a triggering event occurs thereby requiring an updated assessment. Our regular annual impairment assessment occurs in the fourth quarter. Impairment exists when the carrying value of the goodwill exceeds its fair value. An impairment loss would be recognized in an amount equal to that excess as a charge to noninterest expense in the consolidated statements of earnings. The goodwill recorded by the Company was recognized from prior acquisitions and was not considered impaired as of March 31, 2023 and December 31, 2022, respectively. Goodwill totaled $215.2 million at March 31, 2023 and December 31, 2022, respectively.

Other intangible assets are deemed to have definite useful lives and as such are amortized over their estimated useful lives to their estimated residual values. Other intangible assets consist of core deposit intangible assets arising from whole bank acquisitions and are amortized on an accelerated method over their estimated useful lives, ranging from 7 to 10 years. At March 31, 2023 and December 31, 2022, core deposit intangible assets totaled $6.2 million and $6.6 million, respectively, and we recognized $0.4 million and $0.5 million in core deposit intangible amortization expense for the three month periods ended March 31, 2023 and March 31, 2022, respectively.

NOTE 7: LOAN SALES AND MORTGAGE SERVICING RIGHTS

~~In 2021, FFB sold $559 million of multifamily loans and recognized a gain of $21.5 million. For sales of multifamily loans, FFB~~The Company retained servicing rights for the majority of ~~these~~the loans sold and recognized mortgage servicing rights ~~as part of the transactions.~~in connection with multifamily loan sale transactions that occurred in 2021 and prior. As of ~~June 30, 2022,~~March 31, 2023 and December 31, ~~2021,~~2022, mortgage servicing rights were ~~$9.0~~$5.9 million respectively, net of valuation allowances of $0.8 million and ~~$6.8~~$1.4 million, ~~respectively. The mortgage servicing rights as of June 30, 2022, and December 31, 2021, are net of $3.0 million and $1.9 million valuation allowances,~~ respectively. The amount of loans serviced for others totaled $1.0 billion and $1.1 billion ~~and $1.7 billion as of June 30, 2022,~~at March 31, 2023 and December 31, ~~2021,~~2022, respectively. Servicing fees collected for the first three months of 2023 and 2022 were $0.6 million and $0.9 million, ~~for both the six months ended June 30, 2022, and the six months ended June 30, 2021.~~respectively.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2023 - UNAUDITED

NOTE 8: DEPOSITS

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


	June 30, 2022				December 31, 2021				March 31, 2023				December 31, 2022
			Weighted				Weighted				Weighted				Weighted
(dollars in thousands)	Amount		Average Rate		Amount		Average Rate		Amount		Average Rate		Amount		Average Rate
Demand deposits:
Noninterest-bearing	$	3,587,375	—		$	3,280,455	—		$	2,263,412	—		$	2,736,691	—
Interest-bearing		2,425,847	0.930	%		2,242,684	0.070	%		2,364,213	3.380	%		2,568,850	3.109	%
Money market and savings		2,869,719	0.643	%		2,620,336	0.275	%		2,997,666	3.098	%		3,178,230	2.373	%
Certificates of deposits		655,803	0.581	%		668,485	0.145	%
Certificates of deposit										2,426,415	4.170	%		1,878,841	3.741	%
Total	$	9,538,744	0.470	%	$	8,811,960	0.111	%	$	10,051,706	2.726	%	$	10,362,612	2.177	%

At ~~June 30, 2022,~~March 31, 2023, of the ~~$391~~$461 million of certificates of deposits ~~over~~of $250,000 ~~$383~~or more, $442 million mature within one year and $8$19 million mature after one year. Of the ~~$264 million~~$2.0 billion of certificates of deposit of less than $250,000, ~~or less, $209 million~~$1.5 billion mature within one year and ~~$55~~$480 million mature after one year. At December 31, ~~2021,~~2022, of the ~~$367~~$436 million of certificates of deposits ~~over~~of $250,000 ~~$361~~or more, $409 million mature within one year and $6$27 million mature after one year. Of the

~~Table of Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

~~$301 million~~ $1.4 billion of certificates of deposit of less than $250,000, ~~or less, $229 million~~$1.1 billion mature within one year and ~~$72~~$345 million mature after one year.

NOTE 9: BORROWINGS

At ~~June 30, 2022,~~March 31, 2023, our borrowings consisted of ~~$149 million~~$1.0 billion in an overnight and $1.0 billion in short-term FHLB ~~advance~~advances at the Bank, $174 million in subordinated notes at ~~the holding company, and $171~~FFI, $101 million ~~of repurchase agreements at the Bank. At December 31, 2021, our borrowings consisted of $26 million~~ in ~~subordinated notes at FFI, $166 million of~~ repurchase agreements at the Bank, and ~~$18.5~~$20 million of borrowings under a holding company line of credit. At December 31, 2022 our borrowings consisted of $805 million in overnight FHLB advances at the Bank, $200 million in federal funds purchased at the Bank, $174 million in subordinated notes at FFI, $171 million in repurchase agreements at the Bank, and $20 million of borrowings under a holding company line of credit.

The overnight FHLB ~~overnight~~ advance outstanding at March 31, 2023 was paid in full in ~~the~~ early ~~part of July 2022~~April and bore an interest rate of ~~1.66%~~5.11%. AsThe short-term FHLB advance outstanding at March 31, 2023 was paid in full in early April and bore an interest rate of ~~June 30, 2022,~~5.08%. FHLB advances are collateralized primarily by loans secured by single family, multifamily, and commercial real estate properties with a carrying value of $5.4 billion as of March 31, 2023. The Bank’s total borrowing capacity from the FHLB as of March 31, 2023 was $930 million. The Bank had in place $315 million of letters of credit from the FHLB as of March 31, 2023, which are used to meet collateral requirements for borrowings from the State of California and local agencies.

The $174 million in subordinated notes consist of $150 million of ~~the subordinated notes are~~ fixed-to-floating rate notes that mature in February 2032. The notes ~~will~~ initially bear a rate of 3.50% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2022, until February 1, 2027. From and including February 1, 2027 to, but excluding February 1, 2032, or the date of earlier redemption, the notes will bear interest at a floating rate per annum equal to the Benchmark rate (which is expected to be Three-Month Term Secured Overnight Financing Rate, or “SOFR”), each as defined in and subject to the provisions of the indenture under which the notes were issued, plus 204 basis points (2.04%), payable quarterly in arrears on February 1, May 1, August 1, and November 1 of each year, commencing on May 1, 2027. The remaining $24 million ~~of the~~in subordinated notes mature in June 2030 and bear a fixed interest rate of 6.0%, until June 30, 2025, at which time they will convert to a floating rate based on ~~three month~~three-month SOFR, plus 590 basis points (5.90%), until maturity.

~~As a matter~~25

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Bank provides substantially all of its qualifying loans as collateral to the FHLB or the Federal Reserve Bank. FHLB advances are collateralized primarily by loans secured by single family, multifamily, and commercial real estate properties with a carrying value of $5.0 billion as of June 30, 2022. The Bank’s total borrowing capacity from the FHLB at June 30, 2022 was $2.9 billion. The Bank had in place $315 million of letters of credit from the FHLB, as of June 30, 2022 which are used to meet collateral requirements for borrowings from the State of California and local agencies.Three Months Ended March 31, 2023 - UNAUDITED

During 2017, FFI entered into a loan agreement with an unaffiliated lender that provides for a revolving line of credit for up to $20 ~~million.~~million maturing in February 2024. The loan ~~agreement matures in February 2023, with~~bears an ~~option to extend the maturity date subject to certain conditions, and bears~~ interest atrate of Prime rate, plus 50 basis points (0.50%). FFI’s obligations under the loan agreement are secured by, among other things, a pledge of all of its equity in ~~FFB.~~the Bank. 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 ~~June 30, 2022,~~March 31, 2023 and December 31, ~~2021,~~2022, FFI was in compliance with the covenants ~~on this~~contained in the loan agreement. As of March 31, 2023 and December 31, 2022, the balance outstanding under this line of credit agreement was $20 million. The weighted average interest rate paid on borrowings during the three months ended March 31, 2023, and December 31, 2022 was 8.05% and 8.0%, respectively.

The Bank ~~also~~ has a secured line of credit with the Federal Reserve Bank of San Francisco under which the Bank pledges collateral in the form of qualifying loans and securities. As of March 31, 2023, the Bank had secured borrowing capacity of $841.6 million under this agreement. As of March 31, 2023 and December 31, 2022, there were no balances outstanding.

The Bank has a total of $245 million ~~available~~in borrowing capacity through unsecured ~~fed~~federal funds lines, ranging in size from $20 million to $100 million, with 5five other financial ~~institutions, and a $133 million secured line with~~institutions. At March 31, 2023, there were no balances outstanding under these arrangements. At December 31, 2022, the ~~Federal Reserve~~ Bank ~~secured by single family loans. NaN of these lines~~ had outstanding borrowings with one of the five institutions under these arrangements totaling $100 million and an additional $100 million outstanding separate from these agreements with the same financial institution. The total $200 million outstanding at December 31, 2022 were in the form of federal funds purchased and were paid in full in early March, 2023.

The repurchase agreements are treated as ~~June 30, 2022. Combined,~~overnight borrowings with the ~~Bank’s unused lines~~obligations to repurchase securities sold reflected as a liability. The investment securities underlying these agreements remain in the Company’s securities AFS portfolio. As of ~~credit as of June 30, 2022,~~March 31, 2023 and December 31, ~~2021, were $3.2 billion~~2022, the repurchase agreements are collateralized by investment securities with a fair value of approximately $184.2 million and ~~$3.1 billion,~~$186.3 million, respectively. ~~The average balance of overnight borrowings during the first six months of 2022 was $3.4 million, as compared to $1 million during all of 2021.~~

~~Table of Contents~~

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

NOTE 10: EARNINGS PER SHARE

Basic earnings per share excludes dilution and is computed by dividing net income or loss available to common ~~stockholders~~shareholders 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 six~~ months ended ~~June 30, 2022 and 2021:~~March 31:


	Three Months Ended				Three Months Ended				Three Months Ended				Three Months Ended
	June 30, 2022				June 30, 2021				March 31, 2023				March 31, 2022
(dollars in thousands, except per share amounts)	Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income	$	33,316	$	33,316	$	26,054	$	26,054	$	8,496	$	8,496	$	30,836	$	30,836
Basic common shares outstanding		56,471,470		56,471,470		44,792,358		44,792,358		56,376,669		56,376,669		56,465,855		56,465,855
Effect of options, restricted stock and contingent shares issuable				48,199				309,600				33,747				99,990
Diluted common shares outstanding				56,519,669				45,101,958				56,410,416				56,565,845
Earnings per share	$	0.59	$	0.59	$	0.58	$	0.58	$	0.15	$	0.15	$	0.55	$	0.55

Based on a weighted average basis, restricted stock units to purchase 6,820 shares of common stock were excluded for the three months ended June 30, 2021, because their effect would have been anti-dilutive.

Six Months Ended

Six Months Ended

June 30, 2022

June 30, 2021
(dollars in thousands, except share and per share amounts)

Basic

Diluted

Basic

Diluted
Net income

$
64,152

$
64,152

$
48,409

$
48,409
Basic common shares outstanding

56,468,678

56,468,678

44,750,272

44,750,272
Effect of options, restricted stock and contingent shares issuable

74,814

307,058
Diluted common shares outstanding



56,543,492



45,057,330
Earnings per share

$
1.14

$
1.13

$
1.08

$
1.07

Based on a weighted average basis, restricted stock units to purchase 62,267 shares of common stock were excluded for the six months ended June 30, 2021, because their effect would have been anti-dilutive.

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Six~~Three Months Ended ~~June 30, 2022~~March 31, 2023 - UNAUDITED

NOTE 11: SEGMENT REPORTING

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company had 2two reportable business segments: Banking ~~(FFB and FFIS, Blue Moon, and FFPF)~~(FFB) and Wealth Management (FFA). The results of FFI and any elimination entries are included in the column labeled ~~“Other”.~~Other. The reportable segments are determined by products and services offered and the corporate structure. Business segment earnings before taxes are the primary measure of the segment’s performance as evaluated by management. Business segment earnings before taxes include direct revenue and expenses of the segment as well as corporate and inter-company cost allocations. Allocations of corporate expenses, such as finance and accounting, data processing and human resources are calculated based on estimated activity or usage levels. The management accounting process measures the performance of the operating segments based on the Company’s management structure and is not necessarily comparable with similar information for other financial services companies. If the management structures and/or the allocation process changes, allocations, transfers, and assignments may change. 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								Wealth
(dollars in thousands)	Banking		Management		Other		Total		Banking		Management		Other		Total
Three Months Ended June 30, 2022:
Three Months Ended March 31, 2023:
Interest income	$	89,971	$	—	$	—	$	89,971	$	137,000	$	—	$	—	$	137,000
Interest expense		6,476		—		1,690		8,166		76,449		—		1,796		78,245
Net interest income		83,495		—		(1,690)		81,805		60,551		—		(1,796)		58,755
Provision for credit losses		173		—		—		173		417		—		—		417
Noninterest income		5,857		7,980		(437)		13,400		4,801		7,291		(394)		11,698
Noninterest expense		42,032		6,189		584		48,805		51,645		6,065		1,630		59,340
Income (loss) before taxes on income	$	47,147	$	1,791	$	(2,711)	$	46,227		13,290		1,226		(3,820)		10,696
Taxes on income										2,947		364		(1,111)		2,200
Net income (loss)									$	10,343	$	862	$	(2,709)	$	8,496

Three Months Ended June 30, 2021:
Three Months Ended March 31, 2022:
Interest income	$	61,403	$	—	$	—	$	61,403	$	79,144	$	—	$	—	$	79,144
Interest expense		3,387		—		106		3,493		3,413		—		1,237		4,650
Net interest income		58,016		—		(106)		57,910		75,731		—		(1,237)		74,494
Provision for credit losses		44		—		—		44		(792)		—		—		(792)
Noninterest income		7,199		7,240		(404)		14,035		7,531		8,345		(449)		15,427
Noninterest expense		28,868		5,372		1,377		35,617		40,101		6,644		873		47,618
Income (loss) before taxes on income	$	36,303	$	1,868	$	(1,887)	$	36,284		43,953		1,701		(2,559)		43,095
Taxes on income										12,715		493		(949)		12,259
Net income (loss)									$	31,238	$	1,208	$	(1,610)	$	30,836

Wealth




(dollars in thousands)

Banking

Management

Other
Total
Six Months Ended June 30, 2022:








Interest income

$
169,115

$
—

$
—

$
169,115
Interest expense

9,889

—

2,927

12,816
Net interest income

159,226

—

(2,927)

156,299
Provision for credit losses

(619)

—

—

(619)
Noninterest income

13,388

16,325

(886)

28,827
Noninterest expense

82,133

12,833

1,457

96,423
Income (loss) before taxes on income

$
91,100

$
3,492

$
(5,270)

$
89,322

Six Months Ended June 30, 2021:








Interest income

$
120,541

$
—

$
—

$
120,541
Interest expense

8,235

—

167

8,402
Net interest income

112,306

—

(167)

112,139
Provision for credit losses

404

—

—

404
Noninterest income

12,508

14,163

(728)

25,943
Noninterest expense

57,447

11,103

1,578

70,128
Income (loss) before taxes on income

$
66,963

$
3,060

$
(2,473)

$
67,550

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~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Six Months Ended June 30, 2022 - UNAUDITED~~

NOTE 12: SUBSEQUENT EVENTS

Cash Dividend

On ~~July 25, 2022,~~April 27, 2023, the Board of Directors of the Company declared a quarterly cash dividend of ~~$0.11~~$0.02 per common share to be paid on ~~August 16, 2022~~May 19, 2023 to ~~stockholders~~shareholders of record as of the close of business on ~~August 6, 2022.~~May 8, 2023.

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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 six~~ months ended ~~June 30, 2022~~March 31, 2023 as compared to our results of operations in the three ~~and six~~ months ended ~~June 30, 2021;~~March 31, 2022; and our financial condition at ~~June 30, 2022~~March 31, 2023 as compared to our financial condition at December 31, ~~2021.~~2022. 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, ~~2021,~~2022, and the notes thereto, which are set forth in Item 8 of our Annual Report on Form 10-K ~~(our “2021~~(as amended “2022 10-K”) which we filed with the Securities and Exchange Commission (“SEC”) on February 28, ~~2022.~~2023 and amended on May 1, 2023.

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~~As a result of those risks and uncertainties, ~~and unexpected future events, could cause~~ our ~~financial condition or~~ actual ~~operating~~financial results in the future tocould differ, possibly ~~significantly,~~materially, from ~~our expected financial condition and operating results that are set forth~~those expressed in or implied by the forward-looking statements contained in this ~~report.~~report and could cause us to make changes to our future plans.

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 ~~2021 10-K.~~2022 10-K and Item 1A of Part II of this report. 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 ~~2021~~2022 10-K and in Item 1A of Part II of this report, which qualify the forward-looking statements contained in this report.

~~The COVID-19 pandemic has created economic~~Also, our actual results in the future may differ from those currently expected due to additional risks and ~~financial disruptions that have adversely affected, and~~uncertainties of which we are not currently aware or which we do not currently view as, but in the future may ~~continue~~become, material 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.

operating results. 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 ~~2021~~2022 10-K, except as may otherwise be required by applicable law or government regulations.

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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

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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. Management has identified our most critical accounting policies and accounting estimates as: allowance for credit losses – investment securities, allowance for credit losses – loans, deferred income taxes, and business combinations.

Allowance for Credit Losses – Investment Securities – The ACL on investment securities is determined for both held-to-maturity and available-for-sale classifications of the investment portfolio in accordance with ASC 326, and is evaluated on a quarterly basis. The ACL for held-to-maturity investment securities is determined on a collective basis, based on shared risk characteristics, and is determined at the individual security level when the Company deems a security to no longer possess shared risk characteristics. Under ASC 326-20, for investment securities where the Company has reason to believe the credit loss exposure is remote, such as those guaranteed by the U.S. government or government sponsored entities, a zero loss expectation is applied and a company is not required to estimate and recognize an ACL.

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 neither criteria is met, the Company is required to assess whether the decline in fair value has resulted from credit losses or noncredit-related factors. In determining whether a security’s decline in fair value is credit related, the Company considers a number of factors including, but not limited to: (i) the extent to which the fair value of the investment is less than its amortized cost; (ii) the financial condition and near-term prospects of the issuer; (iii) downgrades in credit ratings; (iv) payment structure of the ~~security,~~security; and (v) the ability of the issuer of the security to make scheduled principal and interest payments. If, after considering these factors, 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 4, 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 is 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 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.~~Taxes. 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

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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

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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.

Business Combinations. We account for business combinations under the acquisition method of accounting, as required by Accounting Standards Codification (“ASC”) 805, Business Combinations. The acquired assets, assumed liabilities and identifiable intangible assets are recorded at their respective acquisition date fair values. Goodwill is recorded based on the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. Goodwill generated from business combinations are not subject to amortization and instead are tested for impairment annually, unless a triggering event occurs, which would require an updated assessment. Certain costs associated with business combinations are expensed as incurred.

We have two business segments, “Banking” and ~~“Wealth Management.”~~“Investment Management and Wealth Planning” (“Wealth Management”). Banking includes the operations of FFB, FFIS, FFPF, and Blue Moon Management LLC and ~~FFPF, 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~~At March 31, 2023, the Company had total assets of ~~operations~~$13.6 billion, including $10.6 billion of total loans, net of deferred fees and allowance for credit losses, $1.3 billion of cash and cash equivalents, $0.8 billion in investment securities held-to-maturity, and $0.2 billion in investment securities available-for-sale. This compares to total assets of $13.0 billion, including $10.7 billion of total loans, net of deferred fees and allowance for credit losses, $0.7 billion of cash and cash equivalents, $0.9 billion in investment securities held-to-maturity, and $0.2 billion in investment securities available-for-sale at December 31, 2022. Cash and cash equivalents, representing approximately 10% of total assets at March 31, 2023, largely accounted for the ~~first six~~overall increase in total assets as the Company further increased its on-balance sheet liquidity.

At March 31, 2023, the Company had total liabilities of $12.5 billion, including $10.1 billion in deposits and $2.3 billion in borrowings. This compares to total liabilities of $11.9 billion, including $10.4 billion in deposits and $1.4 billion in borrowings at December 31, 2022. The $0.6 billion increase in total liabilities is due to a $0.9 billion increase in borrowings offset by a $0.3 billion decrease in deposits. The increase in borrowings was primarily due to the addition of $1.2 billion in FHLB advances offset by a $200 million paydown of fed funds balances outstanding. Funds were utilized to increase on-balance sheet liquidity. The decrease in deposits was the result of deposit outflows largely occurring after the announced closures of Silicon Valley Bank and Signature Bank in mid-March, 2023. Deposit inflows and outflows normalized at the end of March, 2023, and the Bank is back to a normalized deposit pattern.

At March 31, 2023, the Company had total shareholders’ equity of $1.1 billion, unchanged from the amount at December 31, 2022. During the three months ended March 31, 2023, shareholder’s equity activity included $8.5 million in net income offset by $6.2 million in fourth quarter 2022 dividends paid to shareholders, and $2.6 million decrease in other comprehensive income (loss) due to net unrealized losses on investment securities arising during the period.

On April 27, 2023, the Board of ~~2022 include:~~

●

Total loans, including loans held for sale, increased $2 billion in the six months ended June 30, 2022 as a result of $3.4 billion of originations, which was partially offset by payoffs or scheduled payments of $1.4 billion.

●

During the six months ended June 30, 2022, total deposits increased by $727 million and total revenues (net interest income and noninterest income) increased by 34% when compared to the six months ended June 30, 2021.

Directors declared a quarterly cash dividend of $0.02 per common share to be paid on May 19, 2023 to shareholders of record as of the close of business on May 8, 2023.

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~~The largest component of noninterest expense is compensation and benefit costs, which accounted for ~~57% and 78%, respectively,~~43% of the total combined noninterest expense for Banking and Wealth Management in the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023.

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The following table shows key operating results for each of our business segments for the ~~three months~~quarter ended ~~June 30:~~March 31:


			Wealth								Wealth
(dollars in thousands)	Banking		Management		Other		Total		Banking		Management		Other		Total
2023:
Interest income									$	137,000	$	—	$	—	$	137,000
Interest expense										76,449		—		1,796		78,245
Net interest income										60,551		—		(1,796)		58,755
Provision for credit losses										417		—		—		417
Noninterest income										4,801		7,291		(394)		11,698
Noninterest expense										51,645		6,065		1,630		59,340
Income (loss) before taxes on income										13,290		1,226		(3,820)		10,696
Taxes on income										2,947		364		(1,111)		2,200
Net income (loss)									$	10,343	$	862	$	(2,709)	$	8,496

2022:
Interest income	$	89,971	$	—	$	—	$	89,971	$	79,144	$	—	$	—	$	79,144
Interest expense		6,476		—		1,690		8,166		3,413		—		1,237		4,650
Net interest income		83,495		—		(1,690)		81,805		75,731		—		(1,237)		74,494
Provision for credit losses		173		—		—		173		(792)		—		—		(792)
Noninterest income		5,857		7,980		(437)		13,400		7,531		8,345		(449)		15,427
Noninterest expense		42,032		6,189		584		48,805		40,101		6,644		873		47,618
Income (loss) before taxes on income	$	47,147	$	1,791	$	(2,711)	$	46,227		43,953		1,701		(2,559)		43,095
Taxes on income										12,715		493		(949)		12,259
Net income (loss)									$	31,238	$	1,208	$	(1,610)	$	30,836

2021:
Interest income	$	61,403	$	—	$	—	$	61,403
Interest expense		3,387		—		106		3,493
Net interest income		58,016		—		(106)		57,910
Provision for credit losses		44		—		—		44
Noninterest income		7,199		7,240		(404)		14,035
Noninterest expense		28,868		5,372		1,377		35,617
Income (loss) before taxes on income	$	36,303	$	1,868	$	(1,887)	$	36,284

First Quarter of 2023 Compared to First Quarter of 2022

~~General.~~ ~~Our~~Combined net income ~~and~~for the first quarter of 2023 was $8.5 million, compared to $30.8 million for the first quarter of 2022. Combined net income before taxes for the first quarter of 2023 was $10.7 million, compared to $43.1 million for the first quarter of 2022. The $32.4 million decrease in combined net income before taxes from the year-ago quarter was primarily due to a decrease in net income before taxes in the ~~three months ended June 30, 2022 were $33.3~~Banking segment of $30.7 million, and $46.2 million, respectively, as compared to $26.1 million and $36.3 million, respectively, in the three months ended June 30, 2021. The $9.9 million increase in income before taxes was the result ofresulting primarily from a ~~$10.8 million increase in income before taxes for Banking, which was partially offset by a $0.1 million~~ decrease in ~~Wealth Management and a $0.8 million increase in corporate expenses. The increase in Banking was due to higher~~ net interest income ~~which was partially offset by~~of $15.2 million, a decrease in noninterest income of $2.7 million, and an increase in noninterest ~~expenses.~~expense of $11.5 million. Net interest income, noninterest income, and noninterest expense are discussed in more detail in the tables that follow. The decrease in Wealth Management was due to higher noninterest expenses, which was partially offset by an increase in noninterest income. The increase in corporate expenses was due primarily to an increase in interest expense from subordinated debt acquired in the TGRF acquisition and the $150 million of subordinated notes issued by the Company in the first quarter of 2022.

~~Table of Contents~~

~~The following table shows key operating results for each of our business segments for the six months ended June 30:~~

Wealth




(dollars in thousands)

Banking

Management

Other

Total
2022:








Interest income

$
169,115

$
—

$
—

$
169,115
Interest expense

9,889

—

2,927

12,816
Net interest income

159,226

—

(2,927)

156,299
Provision for credit losses

(619)

—

—

(619)
Noninterest income

13,388

16,325

(886)

28,827
Noninterest expense

82,133

12,833

1,457

96,423
Income (loss) before taxes on income

$
91,100

$
3,492

$
(5,270)

$
89,322

2021:








Interest income

$
120,541

$
—

$
—

$
120,541
Interest expense

8,235

—

167

8,402
Net interest income

112,306

—

(167)

112,139
Provision for credit losses

404

—

—

404
Noninterest income

12,508

14,163

(728)

25,943
Noninterest expense

57,447

11,103

1,578

70,128
Income (loss) before taxes on income

$
66,963

$
3,060

$
(2,473)

$
67,550

~~General.~~ ~~Our~~ net ~~income and~~ income before taxes ~~in the six months ended June 30, 2022 were $64.2~~of $0.5 million and $89.3 million, respectively, as compared to $48.4 million and $67.6 million, respectively, in the six months ended June 30, 2021. The $21.7 million increase in income before taxes was the result of a $24.1 million increase in income before taxes for Banking and a $0.4 million increase in income before taxes for Wealth Management, which was partially offset by a $2.8 million increase in corporate 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. The increase in corporate expenses was due primarily to an increase in interest expense from subordinated debt acquired in the TGRF acquisition and the $150 million of subordinated notes issued by the Company in the first quarter of 2022.

~~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 June 30:


2022

2021

Average

Average

Average

Average

(dollars in thousands)

Balances

Interest

Yield /Rate

Balances

Interest

Yield /Rate


Interest-earning assets:













Loans

$
8,497,504

$
82,032

3.86
%
$
5,780,494

$
55,979

3.88
%

Securities AFS

267,634

2,006

3.00
%

741,967

4,927

2.66
%

Securities HTM

949,893

4,615

1.94
%

—

—

—
%

FHLB stock, fed funds, and deposits

569,002

1,318

0.93
%

727,053

497

0.27
%

Total interest-earning assets

10,284,033

89,971

3.50
%

7,249,514

61,403

3.39
%

Noninterest-earning assets:











Nonperforming assets

10,459



16,500





Other

437,320



193,334





Total assets

$
10,731,812



$
7,459,348





Interest-bearing liabilities:













Demand deposits

$
2,461,369

$
2,870

0.47
%
$
940,133

$
556

0.24
%

Money market and savings

2,643,388

2,700

0.41
%

2,271,899

2,137

0.38
%

Certificates of deposit

646,527

770

0.48
%

720,326

694

0.39
%

Total interest-bearing deposits

5,751,284

6,340

0.44
%

3,932,358

3,387

0.35
%

Borrowings

327,212

1,826

2.27
%

12,980

106

3.26
%

Total interest-bearing liabilities

6,078,496

8,166

0.54
%

3,945,338

3,493

0.35
%

Noninterest-bearing liabilities:













Demand deposits

3,479,847



2,751,013





Other liabilities

85,649



42,761





Total liabilities

9,643,992



6,739,112





Shareholders’ equity

1,087,820



720,236





Total liabilities and equity

$
10,731,812



$
7,459,348





Net Interest Income

$
81,805



$
57,910



Net Interest Rate Spread

2.96
%





3.04
%

Net Interest Margin

3.18
%





3.20
%

~~Table of Contents~~

Six Months Ended June 30:


2022

2021

Average

Average

Average

Average

(dollars in thousands)

Balances

Interest

Yield /Rate

Balances

Interest

Yield /Rate

Interest-earning assets:













Loans

$
8,015,946

$
154,059

3.85
%
$
5,583,216

$
109,510

3.93
%
Securities AFS

572,754

6,949

2.43
%

757,002

10,133

2.68
%
Securities HTM

634,994

6,032

1.90
%

—

—

—
%
FHLB stock, fed funds and deposits

889,110

2,075

0.47
%

720,750

898

0.25
%
Total interest-earning assets

10,112,804

169,115

3.35
%

7,060,968

120,541

3.42
%
Noninterest-earning assets:











Nonperforming assets

10,292



17,322





Other

443,265



191,498





Total assets

$
10,566,361



$
7,269,788





Interest-bearing liabilities:













Demand deposits

$
2,410,633

$
3,921

0.33
%
$
955,198

$
1,430

0.30
%
Money market and savings

2,627,287

4,572

0.35
%

2,307,010

4,719

0.41
%
Certificates of deposit

650,382

1,205

0.37
%

790,298

1,861

0.47
%
Total interest-bearing deposits

5,688,302

9,698

0.34
%

4,052,506

8,010

0.40
%
Borrowings

314,296

3,118

2.02
%

108,999

392

0.73
%
Total interest-bearing liabilities

6,002,598

12,816

0.43
%

4,161,505

8,402

0.41
%
Noninterest-bearing liabilities:













Demand deposits

3,397,948



2,343,141





Other liabilities

90,042



54,742





Total liabilities

9,490,588



6,559,388





Stockholders’ equity

1,075,773



710,400





Total liabilities and equity

$
10,566,361



$
7,269,788





Net Interest Income

$
156,299



$
112,139



Net Interest Rate Spread

2.92
%





3.01
%
Net Interest Margin

3.10
%





3.18
%

~~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 six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021:

Quarter Ended

Six Months Ended

June 30, 2022 vs. 2021

June 30, 2022 vs. 2021


Increase (Decrease) due to

Increase (Decrease) due to

(dollars in thousands)

Volume

Rate

Total

Volume

Rate

Total

Interest earned on:













Loans

$
26,217

$
(164)

$
26,053

$
46,711

$
(2,162)

$
44,549

Securities AFS

(3,484)

563

(2,921)

(2,306)

(878)

(3,184)

Securities HTM

2,307

2,308

4,615

3,041

2,991

6,032

Cash, FHLB stock, fed funds and deposits

(135)

956

821

246

931

1,177

Total interest-earning assets

24,905

3,663

28,568
��

47,692

882

48,574

Interest paid on:











Demand deposits

1,439

875

2,314

2,357

134

2,491

Money market and savings

370

193

563

607

(754)

(147)

Certificates of deposit

(77)

153

76

(298)

(358)

(656)

Borrowings

1,762

(42)

1,720

1,389

1,337

2,726

Total interest-bearing liabilities

3,494

1,179

4,673

4,055

359

4,414

Net interest income

$
21,411

$
2,484

$
23,895

$
43,637

$
523

$
44,160

Net interest income increased 41%, from $57.9 million in the three months ended June 30, 2021, to $81.8 million in the three months ended June 30, 2022, due to a 42% increase in interest-earning assets. On a consolidated basis our net interest margin decreased from 3.20% in the three months ended June 30, 2021, to 3.18% in the three months ended June 30, 2022, due to an increase in the cost of interest-bearing liabilities, from 0.35% in the three months ended June 30, 2021, to 0.54% in the three months ended June 30, 2022, which was partially offset by an increase in yield on interest-earning assets, from 3.39% in the three months ended June 30, 2021, to 3.50% in the three months ended June 30, 2022. The increase in interest-earning assets was due to a 47% increase in average loans, from $5.8 billion in the three months ended June 30, 2021, to $8.5 billion in the three months ended June 30, 2022. The increase in the cost of interest-bearing liabilities was due to increased costs of interest-bearing deposits, resulting from increases in deposit market rates, and an increase in borrowings. The average rate on interest-bearing deposits increased from 0.35% in the three months ended June 30, 2021, to 0.44% in the three months ended June 30, 2022, and the average balance increased from $3.9 billion in the three months ended June 30, 2021, to $5.8 billion in the three months ended June 30, 2022. The average balance outstanding on borrowings increased from $13$1.1 million in the three months ended June 30, 2021, to $327.2 million in the three months ended June 30, 2022. The increase in borrowings was due to the issuance of $150 million in subordinated notes in the first quarter of 2022, and the assumption of $165 million in repurchase agreements and $23 million in subordinated notes acquired from the TGRF acquisition in the fourth quarter of 2021. The average balance outstanding under the holding company subordinated debt was $173.3 million in the three months ended June 30, 2022.

Net interest income increased 39%, from $112.1 million in the six months ended June 30, 2021, to $156.3 million in the six months ended June 30, 2022, due primarily to a 43% increase in interest-earning assets. On a consolidated basis our net interest margin was 3.10% for the six months ended June 30, 2022, as compared to 3.18% in the six months ended June 30, 2021. This decrease was due to a decrease in ~~the net interest rate spread, from 3.01% in the six months ended June 30, 2021, to 2.92% in the six months ended June 30, 2022. The~~asset management fee income, classified as part of noninterest income, offset by a $0.6 million decrease in the net interest rate spread was due to an increase in the cost of interest-bearing liabilities, from 0.41% in the six months ended June 30, 2021, to 0.43% in the six months ended June 30, 2022, and a decrease in yield on total interest-earning assets, from 3.42% in the six months ended June 30, 2021, to 3.35% in the six months ended June 30, 2022, which was offset partially by a 43.6% increase in average loans, from $5.6 billion in the six months ended June 30, 2021, to $8.0 billion in the six months ended June 30, 2022. The increase in the cost of interest-bearing liabilities was due to increased costs of interest-bearing deposits, resulting from increases in deposit market rates, and an increase in borrowings. The average balance outstanding on borrowings increased

~~Table of Contents~~

from $109 million in the six months ended June 30, 2021, to $314.3 million in the six months ended June 30, 2022. The average balance outstanding under the holding company subordinated debt was $154.5 million in the six months ended June 30, 2022. The average balance outstanding under the holding company line of credit decreased from $9.1 million in the six months ended June 30, 2021, to $0.2 million in the six months ended June 30, 2022.noninterest expense.

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. For the quarter ended March 31, 2023, we recorded provision for credit losses of $0.4 million, compared to a reversal of provision for credit losses in the amount of $0.8 million for the year-ago quarter. The provision for credit losses for the ~~three months~~quarter ended ~~June 30, 2022~~March 31, 2023, was ~~$0.2 million and~~due to a net ~~chargeoffs of $0.6 million for the six months ended June 30, 2022, compared to provisions of $44,000 and $0.4 million, for the three and six months ended June 30, 2021, respectively. Net recoveries~~increase in investment portfolio credit losses which were $0.2 million for the three and six months ended June 30, 2022, as compared to net chargeoffs of $0.1 million and net recoveries of $0.1 million for the three and six months ended June 30, 2021, respectively.offset by decreases in loan portfolio credit losses. The decrease in ~~the~~ provision for credit losses ~~for~~in the ~~six months ended June 30, 2022~~year-ago quarter was a result of improvement in the ~~release~~economic outlook at that time. For the quarter ended March 31, 2023, we recorded net charge-offs of ~~specific reserves related~~$1.7 million, compared to ~~purchase credit deteriorated~~$11,000 in the year-ago quarter.

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

Table of Contents

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 March 31:
	2023						2022
	Average				Average		Average				Average
(dollars in thousands)	Balances		Interest		Yield /Rate		Balances		Interest		Yield /Rate
Interest-earning assets:
Loans	$	10,691,615	$	120,643	4.54	%	$	7,529,037	$	72,027	3.84	%
Securities AFS		247,931		2,307	3.72	%		1,197,859		6,360	2.12	%
Securities HTM		852,459		4,584	2.15	%		—		—	—	%
Cash, FHLB stock, and fed funds		955,668		9,466	4.02	%		1,212,777		757	0.25	%
Total interest-earning assets		12,747,673		137,000	4.32	%		9,939,673		79,144	3.19	%
Noninterest-earning assets:
Nonperforming assets		11,420						10,124
Other		483,452						449,275
Total assets	$	13,242,545					$	10,399,072
Interest-bearing liabilities:
Demand deposits	$	2,572,870	$	19,386	3.06	%	$	2,359,334	$	1,051	0.18	%
Money market and savings		3,206,690		21,551	2.73	%		2,611,007		1,872	0.29	%
Certificates of deposit		2,132,298		21,203	4.03	%		654,279		435	0.27	%
Total interest-bearing deposits		7,911,858		62,140	3.19	%		5,624,620		3,358	0.24	%
Borrowings		1,390,068		16,105	4.70	%		301,236		1,292	1.74	%
Total interest-bearing liabilities		9,301,926		78,245	3.41	%		5,925,856		4,650	0.32	%
Noninterest-bearing liabilities:
Demand deposits		2,672,409						3,315,139
Other liabilities		133,280						94,484
Total liabilities		12,107,615						9,335,479
Shareholders’ equity		1,134,930						1,063,593
Total liabilities and equity	$	13,242,545					$	10,399,072
Net Interest Income			$	58,755					$	74,494
Net Interest Rate Spread					0.91	%					2.87	%
Net Interest Margin					1.83	%					3.00	%

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 months ended March 31, 2023, as compared to the three months ended March 31, 2022:


		Three Months Ended
	March 31, 2023 vs. 2022
	Increase (Decrease) due to
(dollars in thousands)	Volume		Rate		Total
Interest earned on:
Loans	$	34,019	$	14,597	$	48,616
Securities AFS		(4,743)		2,107		(2,636)
Securities HTM		2,834		333		3,167
Cash, FHLB stock, and fed funds		(196)		8,904		8,708
Total interest-earning assets		31,914		25,941		57,855
Interest paid on:
Demand deposits		104		18,231		18,335
Money market and savings		523		19,155		19,678
Certificates of deposit		2,892		17,876		20,768
Borrowings		10,070		4,744		14,814
Total interest-bearing liabilities		13,589		60,006		73,595
Net interest income	$	18,325	$	(34,065)	$	(15,740)

Net interest income was $58.8 million for the first quarter of 2023, compared to $74.5 million for the first quarter of 2022. Interest income increased to $137 million for the first quarter of 2023 compared to $79.1 million for first quarter of 2022. The increase in interest income was due to increases in both average interest-earning asset balances as well as average yields earned on such balances. Average interest-earning asset balances increased to $12.7 billion for the quarter ended March 31, 2023, compared to $9.9 billion for the quarter ended March 31, 2022. Yields on interest-earning assets averaged 4.32% for the first quarter of 2023, compared to 3.19% for the first quarter of 2022. Interest expense was $78.2 million for the first quarter of 2023, compared to $4.7 million for the first quarter of 2022. The increase in interest expense was due to increases in both average interest-bearing liability balances as well as average rates paid on such balances. Average interest-bearing liability balances, consisting of interest-bearing deposits and borrowings, increased to $9.3 billion for the quarter ended March 31, 2023, compared to $5.9 billion for the quarter ended March 31, 2022. Rates on interest-bearing liability balances averaged 3.41% for the first quarter of 2023, compared to 0.32% for the first quarter of 2022.

The 1.13% increase in average yield earned on interest-earning assets was offset by a 3.09% increase in average rate paid on interest-bearing liability balances, resulting in a contraction of net interest margin (“~~PCD”~~NIM”) ~~loans from prior acquisitions.~~for the quarter ended March 31, 2023. NIM was 1.83% for the first quarter of 2023 compared to 3.0% for the first quarter of 2022. The contraction of NIM is reflective of the interest rate environment over the past year, which has seen the Federal Reserve increase the benchmark federal funds rate by 4.75% in the past year in efforts to cool inflation. This has negatively impacted NIM as short-term interest rate increases more immediately affect the rates we pay on both our interest-bearing deposit accounts and our borrowings. Average borrowings outstanding for the quarter ended March 31, 2023 were $1.4 billion compared to $0.3 billion for the quarter ended March 31, 2022. The additional borrowings were utilized to increase on-balance sheet liquidity, notably in the wake of banking industry events that followed the announced closure of Silicon Valley Bank and Signature Bank in mid-March 2023.

Table of Contents

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 six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


(dollars in thousands)	2022		2021		2023		2022
Three Months Ended June 30:
Trust fees	$	2,149	$	1,763
Loan related fees		2,071		1,324
Deposit charges		665		397
Gain on sale of loans		—		3,324
Consulting fees		100		100
Other		872		291
Total noninterest income	$	5,857	$	7,199

Six Months Ended June 30:
Three Months Ended March 31:
Trust fees	$	4,257	$	3,431	$	1,719	$	2,108
Loan related fees		4,633		4,268		1,861		2,562
Deposit charges		1,309		776		501		644
Gain on sale leaseback		1,123		—		—		1,123
Gain on sale of loans		—		3,324
Consulting fees		195		201		88		95
Other		1,871		508		632		999
Total noninterest income	$	13,388	$	12,508	$	4,801	$	7,531

Noninterest income in Banking was $4.8 million for ~~Banking decreased~~the first quarter of 2023, compared to $7.5 million for the first quarter of 2022. The $2.7 million decrease in ~~the three months ended June 30, 2022, by $1.3 million~~noninterest income was due to a $3.3 million gain on sale of loans in the three months ended June 30, 2021, offset partially by increases in trust and loan related fees. Noninterest income for Banking increased by $0.9 million in the six months ended June 30, 2022, dueprimarily to a $1.1 million gain on a sale leaseback transaction recorded in the year-ago quarter, a $0.4 million ~~increase~~decrease in trust fees, a $0.8 million decrease in deposit charges and loan related fees, ~~$0.8 million increase in trust fees,~~ and a ~~$0.5~~$0.4 million ~~increase~~decrease in deposit charges, offset partially by the gain on sale of loans in the six months ended June 30, 3021. The increase in trust fees was due primarily to higher levels of billable assets under advisement (“AUA”). The increase in loan fees was primarily due to higher prepayment fees and higher servicing fees. The increase in deposit charges was due to higher levels of deposits.other noninterest income.

~~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 six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


(dollars in thousands)	2022		2021		2023		2022
Three Months Ended June 30:
Noninterest income	$	7,980	$	7,240	$	7,291	$	8,345

Six Months Ended June 30:
Noninterest income	$	16,325	$	14,163

Noninterest income for Wealth Management ~~increased by $0.7~~was $7.3 million ~~and $2.2 million in~~for the ~~three and six months ended June 30, 2022 when~~first quarter of 2023, compared to $8.3 million for the ~~corresponding periods~~first quarter of 2022. The $1.1 million decrease in ~~2021,~~noninterest income was due primarily to ~~higher~~lower levels of billable AUM in the quarter ~~and six months ended June 30, 2022.~~as total AUM decreased to $5.2 billion at March 31, 2023 from $5.5 billion in the year-ago quarter.

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


			Existing account												Existing account
	Beginning		Additions/		New								Beginning		Additions/		New
(dollars in thousands)	Balance		Withdrawals		Accounts		Terminations		Performance		Ending balance		Balance		Withdrawals		Accounts		Terminations		Performance		Ending balance
Three Months Ended June 30, 2022:
Three Months Ended March 31, 2023:
Fixed income	$	1,275,399	$	13,546	$	47,149	$	(6,503)	$	(73,712)	$	1,255,879	$	1,699,554	$	653,734	$	19,341	$	(12,558)	$	202,521	$	2,562,592
Equities		3,097,277		(76,582)		32,949		(23,635)		(555,498)		2,474,511		2,383,268		(575,301)		28,684		(6,483)		51,175		1,881,343
Cash and other		1,083,066		33,496		19,543		(19,101)		(25,615)		1,091,389		902,455		(173,349)		38,333		(5,895)		23,414		784,958
Total	$	5,455,742	$	(29,540)	$	99,641	$	(49,239)	$	(654,825)	$	4,821,779	$	4,985,277	$	(94,916)	$	86,358	$	(24,936)	$	277,110	$	5,228,893

Six Months Ended June 30, 2022:
Year Ended December 31, 2022:
Fixed income	$	1,303,760	$	35,549	$	91,189	$	(18,128)	$	(156,491)	$	1,255,879	$	1,303,760	$	451,841	$	154,827	$	(30,428)	$	(180,446)	$	1,699,554
Equities		3,330,639		(41,446)		79,135		(53,086)		(840,731)		2,474,511		3,330,639		(87,881)		108,003		(78,785)		(888,708)		2,383,268
Cash and other		1,046,206		20,353		52,518		(34,639)		6,951		1,091,389		1,046,206		(422,405)		305,747		(58,248)		31,155		902,455
Total	$	5,680,605	$	14,456	$	222,842	$	(105,853)	$	(990,271)	$	4,821,779	$	5,680,605	$	(58,445)	$	568,577	$	(167,461)	$	(1,037,999)	$	4,985,277

Year Ended December 31, 2021:
Fixed income	$	1,474,479	$	(195,117)	$	71,181	$	(45,818)	$	(965)	$	1,303,760
Equities		2,451,056		448,338		200,073		(156,809)		387,981		3,330,639
Cash and other		1,001,256		(209,727)		146,701		(84,213)		192,189		1,046,206
Total	$	4,926,791	$	43,494	$	417,955	$	(286,840)	$	579,205	$	5,680,605

The ~~$859~~$243.6 million ~~decrease~~increase in AUM during the ~~six months ended June 30, 2022,~~first quarter of 2023 was the net result of ~~$223~~$86.4 million of new accounts, ~~$990~~$277.1 million of portfolio ~~losses,~~gains, and terminations and net withdrawals of ~~$91~~$119.9 million.

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


	Banking				Wealth Management				Banking				Wealth Management
(dollars in thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Three Months Ended June 30:

Three Months Ended March 31:
Compensation and benefits	$	22,567	$	15,835	$	4,801	$	4,130	$	20,260	$	24,276	$	4,560	$	5,212
Occupancy and depreciation		8,356		5,268		458		442		8,403		8,113		494		454
Professional services and marketing		2,237		2,296		730		677		2,664		2,343		804		815
Customer service costs		4,611		2,353		—		—		16,715		1,788		—		—
Other expenses		4,261		3,116		200		123		3,603		3,581		207		163
Total noninterest expense	$	42,032	$	28,868	$	6,189	$	5,372	$	51,645	$	40,101	$	6,065	$	6,644

Six Months Ended June 30:
Compensation and benefits	$	46,843	$	32,658	$	10,013	$	8,577
Occupancy and depreciation		16,469		10,907		912		963
Professional services and marketing		4,580		4,067		1,545		1,316
Customer service costs		6,399		4,123		—		—
Other expenses		7,842		5,692		363		247
Total noninterest expense	$	82,133	$	57,447	$	12,833	$	11,103

Noninterest expense in Banking was $51.6 million for ~~Banking increased from $28.9~~the first quarter of 2023, compared to $40.1 million infor the three months ended June 30, 2021, to $42.0 million in the three months ended June 30, 2022, primarily due to higher compensation and benefits, occupancy and depreciation, customer service costs, and other expenses. Compensation and benefits were $6.7 million higher in the three months ended June 30, 2022, due to increases in FTE.first quarter of 2022. The FTE for Banking increased to 661.2 in the three months ended June 30, 2022, from 458.3 in the three months ended June 30, 2021, due to increased staffing related to additional personnel from the TGRF acquisition, and to support the growth in loans and deposits. The $3.1$11.5 million increase in ~~occupancy and depreciation expenses for~~noninterest expense in Banking ~~in the three months ended June 30, 2022, as compared to the three months ended June 30, 2021,~~ was largely due to ~~the TGRF acquisition and increases in higher core processing costs related to higher volumes and services. The $2.3~~a $14.9 million increase in customer service ~~costs for Banking~~cost, offset by a $4.0 million decrease in ~~the three months ended June 30, 2022, as compared to the three months ended June 30, 2021,~~compensation and benefits. The increase in customer service costs was due to higher earnings credits paid on ~~increases~~deposit balances earning such credits. The decrease in ~~deposit balances.~~compensation and benefit costs was primarily due to decreased staffing levels during the first quarter of 2023, compared to levels during the first quarter of 2022. Average quarterly Banking full-time equivalents (“FTEs”) were 601.8 for the first quarter of 2023, compared to 623.6 for the first quarter of 2022. The ~~$1.1 million increase~~reduction in ~~other expenses for Banking~~staffing occurred in two rounds within the first quarter and largely impacted those employees in the ~~three months ended June 30, 2022,~~lending and credit areas, as ~~compared~~efforts continued to optimize the three months ended June 30, 2021, were due to additional activities related to the acquisitions, primarily amortization of core deposit intangibles and FDIC insurance. Noninterest expenses for Wealth Management increased by $0.8 millionworkforce in the ~~second quarter~~face of ~~2022 when compared to the second quarter of 2021 due to higher compensation and benefits expenses.~~slowing loan growth.

Noninterest expense in Wealth Management was $6.1 million for ~~Banking increased from $57.4~~the first quarter of 2023, compared to $6.6 million for the first quarter of 2022. The $0.5 million decrease in ~~the six months ended June 30, 2021,~~noninterest expense in Wealth Management was largely due to ~~$82.1~~a $0.6 million decrease in ~~the six months ended June 30, 2022,~~compensation and benefits. The decrease in compensation and benefit costs was primarily due to ~~higher compensation and benefits, occupancy and depreciation, and customer service costs. Compensation and benefits for Banking increased~~a decrease in commission expense resulting from $32.7 million in the six months ended June 30, 2021, to $46.8 million in the six months ended June 30, 2022, due to increases in FTE. The FTE for Banking increased to 642.4 in the six months ended June 30, 2022, from 450.2 in the six months ended June 30, 2021, due to increased staffing related to additional personnel from the TGRF acquisition, and to support the growth in loans and deposits. The $5.6 million increase in occupancy and depreciation expenses for Banking in the six months ended June 30, 2022, asa fewer number of new accounts compared to the ~~six months ended June 30, 2021, was due to~~year-ago quarter. Average quarterly Wealth Management FTEs remained relatively constant at 66.4 for the TGRF acquisition and increases in higher core processing costs related to higher volumes and services. The $2.3 million increase in customer service costs for Banking in the six months ended June 30, 2022, asfirst quarter of 2023, compared to 65.8 for the six months ended June 30, 2021, was due to higher earnings credits paid on increases in deposit balances. The $2.2 million increase in other expenses for Banking in the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, were due to additional activities related to the acquisitions, primarily amortizationfirst quarter of core deposit intangibles and FDIC insurance. Noninterest expenses for Wealth Management increased by $1.7 million in the six months ended June 30, 2022, when compared to the six months ended June 30, 2021, primarily due to an increase in compensation and benefits expenses.2022.

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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						Wealth		Other and
(dollars in thousands)	Banking		Management		Eliminations		Total		Banking		Management		Eliminations		Total
June 30, 2022:
March 31, 2023:
Cash and cash equivalents	$	173,026	$	14,089	$	(13,591)	$	173,524	$	1,316,877	$	15,345	$	(15,093)	$	1,317,129
Securities AFS, net		240,270		—		—		240,270		211,324		—		—		211,324
Securities HTM		930,562		—		—		930,562		847,036		—		—		847,036
Loans held for sale		485,296		—		—		485,296
Loans, net		8,905,676		—		—		8,905,676		10,638,708		—		—		10,638,708
Premises and equipment		36,724		300		136		37,160		37,155		239		136		37,530
Investment in FHLB stock		17,250		—		—		17,250		58,716		—		—		58,716
Deferred taxes		19,410		87		1,974		21,471		20,777		61		1,925		22,763
REO		6,210		—		—		6,210
Real estate owned ("REO")										6,210		—		—		6,210
Goodwill and intangibles		222,749		—		—		222,749		221,401		—		—		221,401
Other assets		186,585		432		22,055		209,072		227,706		470		27,191		255,367
Total assets	$	11,223,758	$	14,908	$	10,574	$	11,249,240	$	13,585,910	$	16,115	$	14,159	$	13,616,184

Deposits	$	9,597,680	$	—	$	(58,936)	$	9,538,744	$	10,079,753	$	—	$	(28,047)	$	10,051,706
Borrowings		320,423		—		173,305		493,728		2,101,249		—		193,351		2,294,600
Intercompany balances		5,472		647		(6,119)		—		2,356		586		(2,942)		—
Other liabilities		98,690		3,749		11,420		113,859
Accounts payable and other liabilities										121,598		2,481		12,061		136,140
Shareholders’ equity		1,201,493		10,512		(109,096)		1,102,909		1,280,954		13,048		(160,264)		1,133,738
Total liabilities and equity	$	11,223,758	$	14,908	$	10,574	$	11,249,240	$	13,585,910	$	16,115	$	14,159	$	13,616,184

December 31, 2021:
December 31, 2022:
Cash and cash equivalents	$	1,121,089	$	3,195	$	(2,527)	$	1,121,757	$	656,247	$	16,757	$	(16,510)	$	656,494
Securities AFS, net		1,191,378		—		—		1,191,378		226,158		—		—		226,158
Loans held for sale		501,436		—		—		501,436
Securities HTM										862,544		—		—		862,544
Loans, net		6,872,952		—		—		6,872,952		10,692,462		—		—		10,692,462
Premises and equipment		37,373		411		136		37,920		35,788		216		136		36,140
Investment in FHLB stock		18,249		—		—		18,249		25,358		—		—		25,358
Deferred taxes		20,745		138		(48)		20,835		19,671		78		4,449		24,198
REO		6,210		—		—		6,210
Real estate owned ("REO")										6,210		—		—		6,210
Goodwill and intangibles		222,125		—		—		222,125		221,835		—		—		221,835
Other assets		179,385		365		23,592		203,342		233,621		428		28,731		262,780
Total assets	$	10,170,942	$	4,109	$	21,153	$	10,196,204	$	12,979,894	$	17,479	$	16,806	$	13,014,179

Deposits	$	8,836,250	$	—	$	(24,290)	$	8,811,960	$	10,403,205	$	—	$	(40,593)	$	10,362,612
Borrowings		165,930		—		44,197		210,127		1,176,601		—		193,335		1,369,936
Intercompany balances		4,605		(8,204)		3,599		—		1,001		971		(1,972)		—
Other liabilities		92,500		4,381		13,185		110,066
Accounts payable and other liabilities										125,254		4,392		17,607		147,253
Shareholders’ equity		1,071,657		7,932		(15,538)		1,064,051		1,273,833		12,116		(151,571)		1,134,378
Total liabilities and equity	$	10,170,942	$	4,109	$	21,153	$	10,196,204	$	12,979,894	$	17,479	$	16,806	$	13,014,179

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 ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, total assets increased by ~~$1.1 billion, primarily due to an increase in loans. During the six months ended June 30, 2022, securities decreased by $20~~$602 million primarily due to ~~paydowns~~a $660 million increase in cash and cash equivalents. Cash and cash equivalents represented approximately 10% of total assets for the quarter ended March 31, 2023, and the increase in such balances is consistent with strategic efforts to increase on-balance sheet liquidity, notably in the wake of banking industry events that followed the announced closure of Silicon

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~~mortgage backed~~Valley Bank and Signature Bank in mid-March 2023. Loans, net decreased $54 million, the result of $481 million in loan fundings for the quarter offset by loan payoffs of $535 million in the quarter. Combined investment securities (AFS and ~~corporate bonds. Loans~~HTM) balance of $1.1 billion was unchanged compared to December 31, 2022. Deposits decreased $311 million, the result of outflows experienced after the mid-March 2023 closures of Silicon Valley Bank and ~~loans held for sale~~Signature Bank. Borrowings increased ~~$2.0~~$925 million and consisted primarily of the addition of $1.2 billion in ~~the six months ended June 30, 2022, primarily as a result of $3.4 billion of originations, which was partially~~FHLB advances offset by payoffs or scheduled payments of $1.4 billion. The $727 million growth in deposits during the six months ended June 30, 2022, included increases in commercial deposits of $787 million, $297 million in corporate deposits, and $94 million in digital channel deposits, offset by a decrease in branch deposits of $451 million. Borrowings increased by $284 million during the six months ended June 30, 2022, primarily due an increase of $148 million in subordinated debt, $149 million increase in overnight borrowings due to increased loan volume, and an increase of $6 million in repurchase agreements, offset partially by the $18.5$200 million paydown ~~on FFI’s credit line.~~of fed funds balances outstanding at the end of the previous quarter. The additional borrowings for the quarter-ended March 31, 2023 were utilized to increase on-balance sheet liquidity, as noted previously.

Cash and cash ~~equivalents, certificates of deposit and securities.~~equivalents. Cash and cash equivalents, ~~which~~consist primarily ~~consist~~ of funds held at the Federal Reserve Bank or at correspondent banks, including fed ~~funds, decreased by $948 million during the six months ended June 30, 2022.~~funds. 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. Cash and cash equivalents increased by $660 million during the three months ended March 31, 2023, compared to December 31, 2022 due to strategic efforts to increase on-balance sheet liquidity, notably in the wake of banking industry events that followed the announced closure of Silicon Valley Bank and Signature Bank in mid-March 2023.

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		Amortized		Gross Unrealized				Allowance for		Estimated
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Fair Value		Cost		Gains		Losses		Credit Losses		Fair Value
June 30, 2022:
March 31, 2023:
Collateralized mortgage obligations	$	10,941	$	—	$	(936)	$	—	$	10,005	$	9,585	$	—	$	(1,074)	$	—	$	8,511
Agency mortgage-backed securities		9,530		—		(530)		—		9,000		7,627		—		(470)		—		7,157
Municipal bonds		50,567		—		(3,733)		—		46,834		50,093		1		(2,574)		—		47,520
SBA securities		23,039		69		(3)		—		23,105		16,947		2		(130)		—		16,819
Beneficial interests in FHLMC securitization		20,015		201		—		(11,226)		8,990		19,113		110		(105)		(11,315)		7,803
Corporate bonds		147,635		191		(6,327)		—		141,499		138,972		—		(15,729)		(973)		122,270
U.S. Treasury		897		—		(60)		—		837		1,298		3		(57)		—		1,244
Total	$	262,624	$	461	$	(11,589)	$	(11,226)	$	240,270	$	243,635	$	116	$	(20,139)	$	(12,288)	$	211,324

December 31, 2021:
December 31, 2022:
Collateralized mortgage obligations	$	13,862	$	—	$	(37)	$	—	$	13,825	$	9,865	$	—	$	(1,250)	$	—	$	8,615
Agency mortgage-backed securities		928,546		6,563		(6,120)		—		928,989		8,161		—		(585)		—		7,576
Municipal bonds		52,052		94		—		—		52,146		50,232		—		(3,442)		—		46,790
SBA securities		27,970		2		—		—		27,972		19,090		3		(138)		—		18,955
Beneficial interest in FHLMC securitization		21,606		373		—		(10,399)		11,580		19,415		108		(103)		(11,439)		7,981
Corporate bonds		154,027		2,441		(92)		—		156,376		145,024		—		(10,011)		—		135,013
U.S. Treasury		499		—		(9)		—		490		1,298		1		(71)		—		1,228
Total	$	1,198,562	$	9,473	$	(6,258)	$	(10,399)	$	1,191,378	$	253,085	$	112	$	(15,600)	$	(11,439)	$	226,158

USAs of March 31, 2023, U.S. Treasury securities ~~that are~~of $1.2 million included in the table above are pledged as collateral to the ~~State~~States of California and Florida to meet regulatory requirements related to ~~FFB’s~~the Bank’s trust ~~operations. Agency~~operations, $231.9 million of agency mortgage-backed securities are pledged as collateral as support for the Bank’s obligations under loan sales and ~~securitization~~securitizations agreements entered into from 2018 ~~through~~and 2021. A total of $184.2 million in securities consisting of SBA securities, collateralized mortgage obligations, agency mortgage-backed securities, and municipal bonds are pledged as collateral for repurchase agreements. A total of $841.6 million in agency mortgage-backed securities, corporate bonds, and loans are pledged as collateral to the Federal Reserve’s discount window from which the Bank may borrow.

Excluding allowance for credit losses, the decrease in AFS securities in the first ~~six~~three months of ~~2022~~2023 was due primarily to principal payments and increases in the ~~$917 million transfer~~gross unrealized losses on the securities. There were no purchases of ~~agency mortgage-backed~~investment securities or other additions to ~~held-to-maturity.~~the portfolio during the quarter ended March 31, 2023.

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Securities held to maturity. The following table provides a summary of the Company’s HTM securities portfolio as of:


	Amortized		Gross Unrecognized				Allowance for		Estimated		Amortized		Gross Unrecognized				Allowance for		Estimated
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Fair Value		Cost		Gains		Losses		Credit Losses		Fair Value
June 30, 2022:
March 31, 2023:
Agency mortgage-backed securities	$	930,562	$	—	$	(70,926)	$	—	$	859,636	$	847,036	$	—	$	(80,129)	$	—	$	766,907
Total	$	930,562	$	—	$	(70,926)	$	—	$	859,636	$	847,036	$	—	$	(80,129)	$	—	$	766,907

December 31, 2022:
Agency mortgage-backed securities											$	862,544	$	—	$	(89,483)	$	—	$	773,061
Total											$	862,544	$	—	$	(89,483)	$	—	$	773,061

The decrease in HTM securities in the first three months of 2023 was due to principal payments received. There were no purchases of investment securities ~~HTM as of December~~or other additions to the portfolio during the quarter ended March 31, ~~2021.~~2023.

The scheduled maturities of securities AFS, ~~other than agency mortgage-backed securities, and~~as well as the related weighted average yield, isare as follows, as of ~~June 30, 2022:~~March 31, 2023:


	Less than			1 Through			5 Through			After						Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total			1 Year			5 years			10 Years			10 Years			Total
Amortized Cost:
Collateralized mortgage obligations	$	—		$	—		$	740		$	10,201		$	10,941		$	—		$	—		$	569		$	9,016		$	9,585
Agency mortgage-backed securities		—			4,120			3,714			1,696			9,530			—			5,969			—			1,658			7,627
Municipal bonds		304			5,176			35,374			9,713			50,567			300			9,280			35,064			5,449			50,093
SBA securities		55			1,836			1,507			19,641			23,039			5			1,101			1,108			14,733			16,947
Beneficial interests in FHLMC securitization		—			10,546			—			9,469			20,015			—			9,537			—			9,576			19,113
Corporate bonds		6,018			10,412			125,671			5,534			147,635			—			28,985			104,456			5,531			138,972
U.S. Treasury		—			897			—			—			897			—			1,298			—			—			1,298
Total	$	6,377		$	32,987		$	167,006		$	56,254		$	262,624		$	305		$	56,170		$	141,197		$	45,963		$	243,635
Weighted average yield		1.97	%		1.98	%		3.48	%		2.00	%		2.94	%		0.29	%		4.11	%		3.43	%		4.17	%		3.72	%
Estimated Fair Value:
Collateralized mortgage obligations	$	—		$	—		$	687		$	9,318		$	10,005		$	—		$	—		$	521		$	7,990		$	8,511
Agency mortgage-backed securities		—			3,969			3,460			1,571			9,000			—			5,665			—			1,492			7,157
Municipal bonds		301			4,839			33,370			8,324			46,834			300			8,944			33,682			4,594			47,520
SBA securities		55			1,833			1,510			19,707			23,105			5			1,094			1,103			14,617			16,819
Beneficial interests in FHLMC securitization		—			10,546			—			9,670			20,216			—			9,537			—			9,581			19,118
Corporate bonds		5,985			9,877			120,654			4,983			141,499			—			27,970			90,758			4,515			123,243
U.S. Treasury		—			837			—			—			837			—			1,244			—			—			1,244
Total	$	6,341		$	31,901		$	159,681		$	53,573		$	251,496		$	305		$	54,454		$	126,064		$	42,789		$	223,612

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The scheduled maturities of securities HTM, and the related weighted average yield is as follows, as of ~~June 30, 2022:~~March 31, 2023:


	Less than			1 Through			5 Through			After						Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total			1 Year			5 years			10 Years			10 Years			Total
June 30, 2022
March 31, 2023
Amortized Cost:
Agency mortgage-backed securities	$	—		$	131		$	19,227		$	911,204		$	930,562		$	—		$	574		$	18,925		$	827,537		$	847,036
Total	$	—		$	131		$	19,227		$	911,204		$	930,562		$	—		$	574		$	18,925		$	827,537		$	847,036
Weighted average yield		—	%		0.28	%		1.05	%		1.72	%		1.70	%		—	%		0.60	%		1.22	%		2.47	%		2.44	%

Estimated Fair Value:
Agency mortgage-backed securities	$	—		$	123		$	17,937		$	841,576		$	859,636		$	—		$	537		$	17,451		$	748,919		$	766,907
Total	$	—		$	123		$	17,937		$	841,576		$	859,636		$	—		$	537		$	17,451		$	748,919		$	766,907

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


	June 30,		December 31,		March 31,		December 31,
(dollars in thousands)	2022		2021		2023		2022
Outstanding principal balance:
Loans secured by real estate:
Residential properties:
Multifamily	$	3,953,717	$	2,886,055	$	5,332,815	$	5,341,596
Single family		958,348		933,445		1,008,657		1,016,498
Total real estate loans secured by residential properties		4,912,065		3,819,500		6,341,472		6,358,094
Commercial properties		1,237,664		1,309,200		1,155,624		1,203,292
Land and construction		170,887		156,028		166,166		158,565
Total real estate loans		6,320,616		5,284,728		7,663,262		7,719,951
Commercial and industrial loans		2,593,948		1,598,422		2,985,984		2,984,748
Consumer loans		10,845		10,834		3,862		4,481
Total loans		8,925,409		6,893,984		10,653,108		10,709,180
Premiums, discounts and deferred fees and expenses		13,432		12,744		16,695		17,013
Total	$	8,938,841	$	6,906,728	$	10,669,803	$	10,726,193

Loans ~~and loans held for sale increased by $2.0 billion during six months ended June 30, 2022 primarily as a~~decreased $56 million, the result of ~~$3.4 billion of originations, which was partially~~$481 million in loan fundings for the quarter offset by loan payoffs ~~or scheduled payments~~ of ~~$1.4 billion.~~$535 million in the quarter.

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


	June 30, 2022				December 31, 2021				March 31, 2023				December 31, 2022
			Weighted				Weighted				Weighted				Weighted
(dollars in thousands)	Amount		Average Rate		Amount		Average Rate		Amount		Average Rate		Amount		Average Rate
Demand deposits:
Noninterest-bearing	$	3,587,375	—		$	3,280,455	—		$	2,263,412	—		$	2,736,691	—
Interest-bearing		2,425,847	0.930	%		2,242,684	0.070	%		2,364,213	3.380	%		2,568,850	3.109	%
Money market and savings		2,869,719	0.643	%		2,620,336	0.275	%		2,997,666	3.098	%		3,178,230	2.373	%
Certificates of deposits		655,803	0.581	%		668,485	0.145	%
Certificates of deposit										2,426,415	4.170	%		1,878,841	3.741	%
Total	$	9,538,744	0.470	%	$	8,811,960	0.111	%	$	10,051,706	2.726	%	$	10,362,612	2.177	%

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During the ~~six~~first three months ~~ended June 30, 2022,~~of 2023, our deposit rates have moved in a manner consistent with overall deposit market ~~rates.~~rates and market rates continue to rise as a result of the actions taken by the Federal Reserve. The weighted average rate of our interest-bearing deposits increased from ~~0.18%~~2.96% at December 31, ~~2021,~~2022, to ~~0.75%~~3.52% at ~~June 30, 2022~~March 31, 2023 due to ~~increased costs of interest-bearing deposits,~~rising short-term interest rates during the period, while the weighted average interest rates of ~~both interest-bearing and noninterest-bearing~~total deposits increased from ~~0.15%~~2.18% at December 31, ~~2021~~2022 to ~~0.47%~~2.73% at ~~June 30, 2022. 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 June 30, 2022:~~

(dollars in thousands)

3 months or less

$
379,579
Over 3 months through 6 months

72,863
Over 6 months through 12 months

80,279
Over 12 months

55,509
Total

$
588,230

March 31, 2023.

From time to time, the Bank will utilize brokered deposits as a source of funding. As of ~~June 30, 2022,~~March 31, 2023, the Bank held ~~$90 million~~$1.9 billion of deposits, consisting of certificates of deposit, which are classified as brokered deposits.

~~Table~~The deposits held by the Bank are insured by the FDIC’s Deposit Insurance Fund (the “DIF”), up to applicable limits. The Dodd-Frank Act permanently increased the maximum deposit insurance amount for banks, savings institutions and credit unions to $250,000 per depositor. As of ~~Contents~~March 31, 2023, approximately 85% of the Bank’s deposit accounts were insured.

The maturities of our certificates of deposit of $100,000 or more were as follows as of March 31, 2023:


(dollars in thousands)
3 months or less	$	741,600
Over 3 months through 6 months		347,861
Over 6 months through 12 months		776,938
Over 12 months		491,956
Total	$	2,358,355

Borrowings. ~~As of June 30, 2022,~~At March 31, 2023, our borrowings consisted of ~~$149 million~~$1.0 billion in an overnight and $1.0 billion in short-term FHLB ~~advance~~advances at the Bank, $174 million in subordinated notes at ~~the holding company, and $171~~FFI, $101 million ~~of repurchase agreements at the Bank. As of December 31, 2021, our borrowings consisted of $26 million~~ in ~~subordinated notes at the holding company, $166 million of~~ repurchase agreements at the Bank, and ~~$18.5~~$20 million of borrowings under a holding company line of credit. ~~The~~At December 31, 2022 our borrowings consisted of $805 million in overnight FHLB overnight advance outstanding as of June 30, 2022, was paid in full in the early part of July 2022 and bore an interest rate of 1.66%. As of June 30, 2022, $150 million of the subordinated notes are fixed-to-floating rate notes that mature in February 2032. The notes will initially bear a rate of 3.50% per annum, payable semi-annually in arrears on February 1 and August 1 of each year, commencing on August 1, 2022 until February 1, 2027. From and including February 1, 2027 to, but excluding February 1, 2032, or the date of earlier redemption, the notes will bear interest at a floating rate per annum equal to the Benchmark rate (which is expected to be Three-Month Term Secured Overnight Financing Rate, or “SOFR”), each as defined in and subject to the provisions of the indenture under which the notes were issued, plus 204 basis points (2.04%), payable quarterly in arrears on February 1, May 1, August 1, and November 1 of each year, commencing on May 1, 2027. $24 million of the subordinated notes mature in June 2030 and bear a fixed interest rate of 6.0%, until June 30, 2025, at which time they will convert to a floating rate based on three month SOFR, plus 590 basis points (5.90%), until maturity. The maximum amount of borrowingsadvances at the Bank, ~~outstanding~~$200 million in federal funds purchased at ~~any month-end during~~ the ~~six months~~Bank, $174 million in subordinated notes at FFI, $171 million in repurchase agreements at the Bank, and $20 million of borrowings under a holding company line of credit.

The average balance of borrowings and the weighted average interest rate on such borrowings was $1.39 billion and 4.70%, respectively for the quarter ended ~~June 30, 2022,~~March 31, 2023. The average balance of borrowings and ~~during all of 2021, were $320 million~~the weighted average interest rate on such borrowings was $1.54 billion and ~~$255 million, respectively.~~3.79%, respectively for the quarter ended December 31, 2022.

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

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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													90 Days						Total Past Due
(dollars in thousands)	30–59 Days			60-89 Days			or More			Nonaccrual			and Nonaccrual			Current		Total		30–59 Days			60-89 Days			or More			Nonaccrual			and Nonaccrual			Current		Total
June 30, 2022:
March 31, 2023:
Real estate loans:
Residential properties	$	480		$	—		$	—		$	3,154		$	3,634		$	4,924,740	$	4,928,374	$	20,272		$	—		$	—		$	2,518		$	22,790		$	6,338,021	$	6,360,811
Commercial properties		1,932			343			2,877			4,246			9,398			1,226,767		1,236,165		5,561			—			217			3,969			9,747			1,144,772		1,154,519
Land and construction		—			—			—			—			—			169,722		169,722		521			6,835			—			—			7,356			157,860		165,216
Commercial and industrial loans		823			2,064			—			3,684			6,571			2,587,155		2,593,726		1,200			233			2,227			4,694			8,354			2,977,013		2,985,367
Consumer loans		170			—			—			—			170			10,684		10,854		10			—			—			—			10			3,880		3,890
Total	$	3,405		$	2,407		$	2,877		$	11,084		$	19,773		$	8,919,068	$	8,938,841	$	27,564		$	7,068		$	2,444		$	11,181		$	48,257		$	10,621,546	$	10,669,803
Percentage of total loans		0.04	%		0.03	%		0.03	%		0.12	%		0.22	%						0.26	%		0.07	%		0.02	%		0.10	%		0.45	%

December 31, 2021:
December 31, 2022:
Real estate loans:
Residential properties	$	1,519		$	310		$	—		$	3,281		$	5,110		$	3,827,385	$	3,832,495	$	511		$	57		$	—		$	2,556		$	3,124		$	6,374,100	$	6,377,224
Commercial properties		2,934			—			—			1,529			4,463			1,305,112		1,309,575		15,000			946			1,213			4,547			21,706			1,180,357		1,202,063
Land and construction		—			—			—			—			—			155,926		155,926		—			—			—			—			—			157,630		157,630
Commercial and industrial loans		303			260			—			3,520			4,083			1,593,782		1,597,865		385			1,495			982			3,228			6,090			2,978,668		2,984,758
Consumer loans		—			—			—			—			—			10,867		10,867		—			167			—			—			167			4,351		4,518
Total	$	4,756		$	570		$	—		$	8,330		$	13,656		$	6,893,072	$	6,906,728	$	15,896		$	2,665		$	2,195		$	10,331		$	31,087		$	10,695,106	$	10,726,193
Percentage of total loans		0.07	%		0.01	%		—	%		0.12	%		0.20	%						0.15	%		0.02	%		0.02	%		0.10	%		0.29	%

~~Table of Contents~~

The following table summarizes our nonaccrual loans as of:


	Nonaccrual		Nonaccrual		Nonaccrual		Nonaccrual
	with Allowance		with no Allowance		with Allowance		with no Allowance
(dollars in thousands)	for Credit Losses		for Credit Losses		for Credit Losses		for Credit Losses
June 30, 2022
March 31, 2023
Real estate loans:
Residential properties	$	—	$	3,154	$	—	$	2,518
Commercial properties		—		4,246		—		3,969
Commercial and industrial loans		1,835		1,849		3,672		1,022
Total	$	1,835	$	9,249	$	3,672	$	7,509

December 31, 2021
December 31, 2022
Real estate loans:
Residential properties	$	—	$	3,281	$	—	$	2,556
Commercial properties		—		1,529		—		4,547
Commercial and industrial loans		1,733		1,787		2,016		1,212
Total	$	1,733	$	6,597	$	2,016	$	8,315

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

June 30, 2022

December 31, 2021
(dollars in thousands)

Accrual

Nonaccrual

Total

Accrual

Nonaccrual

Total
Residential loans

$
—

$
—

$
—

$
1,200

$
—

$
1,200
Commercial real estate loans

976

1,121

2,097

1,021

1,174

2,195
Commercial and industrial loans

102

1,630

1,732

493

2,030

2,523
Total

$
1,078

$
2,751

$
3,829

$
2,714

$
3,204

$
5,918

~~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.~~

4641

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


					Allowance										Provision for
	Beginning		Provision for		on Acquired						Ending		Beginning		(Reduction of)						Ending
(dollars in thousands)	Balance		Credit Losses		PCD Loans		Charge-offs		Recoveries		Balance		Balance		Credit Losses		Charge-offs		Recoveries		Balance
Three months ended June 30, 2022:
Three months ended March 31, 2023:
Real estate loans:
Residential properties	$	3,198	$	1,248	$	—	$	—	$	—	$	4,446	$	8,306	$	(43)	$	—	$	—	$	8,263
Commercial properties		15,636		(2,922)		—		—		—		12,714		8,714		(2,732)		(249)		—		5,733
Land and construction		1,768		(308)		—		—		—		1,460		164		152		—		—		316
Commercial and industrial loans		12,130		2,187		—		—		164		14,481		16,521		1,685		(1,752)		306		16,760
Consumer loans		90		(26)		—		—		—		64		26		(1)		(2)		—		23
Total	$	32,822	$	179	$	—	$	—	$	164	$	33,165	$	33,731	$	(939)	$	(2,003)	$	306	$	31,095

Six months ended June 30, 2022:
Three months ended March 31, 2022:
Real estate loans:
Residential properties	$	2,637	$	1,809	$	—	$	—	$	—	$	4,446	$	2,637	$	561	$	—	$	—	$	3,198
Commercial properties		17,049		(4,335)		—		—		—		12,714		17,049		(1,413)		—		—		15,636
Land and construction		1,995		(535)		—		—		—		1,460		1,995		(227)		—		—		1,768
Commercial and industrial loans		11,992		2,336		—		(145)		298		14,481		11,992		149		(145)		134		12,130
Consumer loans		103		(39)		—		—		—		64		103		(13)		—		—		90
Total	$	33,776	$	(764)	$	—	$	(145)	$	298	$	33,165	$	33,776	$	(943)	$	(145)	$	134	$	32,822

Year ended December 31, 2021:
Year ended December 31, 2022:
Real estate loans:
Residential properties	$	5,115	$	(1,453)	$	93	$	(1,118)	$	—	$	2,637	$	2,637	$	5,674	$	(5)	$	—	$	8,306
Commercial properties		8,711		774		7,564		—		—		17,049		17,049		(8,335)		—		—		8,714
Land and construction		892		1,051		52		—		—		1,995		1,995		(1,831)		—		—		164
Commercial and industrial loans		9,249		614		1,836		(706)		999		11,992		11,992		4,804		(711)		436		16,521
Consumer loans		233		(130)		—		—		—		103		103		(73)		(4)		—		26
Total	$	24,200	$	856	$	9,545	$	(1,824)	$	999	$	33,776	$	33,776	$	239	$	(720)	$	436	$	33,731

On January 1, 2020, we adopted a new accounting standard, commonly referred to as “CECL”, which replaces the “incurred loss” approach with an “expected loss” model over the life of the loan, as further described in Note 1 Summary of Significant Accounting Policies of the notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022. The allowance for credit losses for loans totaled $31.1 million as of March 31, 2023, compared to $32.8 million as of March 31, 2022, and $33.7 million as of December 31, 2022. Our ACL ~~related to~~for loans represented ~~0.37% and 0.49%~~0.29% of total loans outstanding as of ~~June 30, 2022, and~~March 31, 2023 compared to 0.31% of total loans outstanding as of December 31, ~~2021, respectively.~~2022. The ACL for loans decreased $2.6 million as of March 31, 2023 compared to December 31, 2022. Activity for the three months ended March 31, 2023 included a reduction in provision for credit losses of $0.9 million, charge-offs of $2.0 million, and recoveries of $0.3 million. The reduction in provision for credit losses was due to a decrease in the ~~ACL is primarily~~aggregate reserve for purchased credit deteriorated (“PCD”) loans due to ~~adjustments in impairment assumptions.~~updated valuations.

~~The amount of~~Under the CECL methodology, for which our ACL for loans is ~~adjusted periodically by charges to operations (referred to~~based, estimates of expected credit losses over the life of a loan are determined and utilized considering the effect of various major factors. The major factors considered 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 loanevaluating 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~~chargeoff experience, ~~and loan~~ delinquency rates, local and national economic conditions, athe borrower’s ability to repay ~~its borrowings,~~the loan and timing of repayments, and the value of any ~~property collateralizing the loan, as well as a number~~related collateral. Management’s estimate 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 sufficiencyfair value of the ~~ACL. Moreover, the duration~~collateral considers current 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~~future real estate market conditions, ~~or unexpected subsequent events were~~thereby causing these estimates to ~~occur, or if~~be particularly susceptible to changes ~~were made~~that could result in a material adjustment to ~~bank regulatory guidelines or industry standards that~~results of operations in the future. Provisions to credit losses are ~~used~~charged to ~~assess the sufficiency~~operations based on management’s evaluation 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.~~estimated losses in its loan portfolio.

~~Table of Contents~~

In addition, the ~~Federal Deposit Insurance Corporation (“FDIC”)~~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

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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						Allowance for Credit Losses
	Loans Evaluated						Loans Evaluated
(dollars in thousands)	Individually		Collectively		Total		Individually		Collectively		Total
December 31, 2021:

March 31, 2023:
Allowance for credit losses:
Real estate loans:
Residential properties	$	111	$	2,526	$	2,637	$	62	$	8,201	$	8,263
Commercial properties		7,967		9,082		17,049		1,044		4,689		5,733
Land and construction		52		1,943		1,995		—		316		316
Commercial and industrial loans		2,386		9,606		11,992		1,144		15,616		16,760
Consumer loans		—		103		103		—		23		23
Total	$	10,516	$	23,260	$	33,776	$	2,250	$	28,845	$	31,095
Loans:
Real estate loans:
Residential properties	$	9,593	$	3,822,902	$	3,832,495	$	3,428	$	6,357,383	$	6,360,811
Commercial properties		41,313		1,268,262		1,309,575		28,197		1,126,322		1,154,519
Land and construction		694		155,232		155,926		—		165,216		165,216
Commercial and industrial loans		9,963		1,587,902		1,597,865		5,875		2,979,492		2,985,367
Consumer loans		—		10,867		10,867		—		3,890		3,890
Total	$	61,563	$	6,845,165	$	6,906,728	$	37,500	$	10,632,303	$	10,669,803


	Allowance for Credit Losses
	Loans Evaluated
(dollars in thousands)	Individually		Collectively		Total
December 31, 2022:
Allowance for credit losses:
Real estate loans:
Residential properties	$	87	$	8,219	$	8,306
Commercial properties		1,834		6,880		8,714
Land and construction		—		164		164
Commercial and industrial loans		3,122		13,399		16,521
Consumer loans		—		26		26
Total	$	5,043	$	28,688	$	33,731
Loans:
Real estate loans:
Residential properties	$	3,479	$	6,373,745	$	6,377,224
Commercial properties		34,278		1,167,785		1,202,063
Land and construction		—		157,630		157,630
Commercial and industrial loans		9,397		2,975,361		2,984,758
Consumer loans		—		4,518		4,518
Total	$	47,154	$	10,679,039	$	10,726,193

~~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

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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, federal funds purchased, 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 ~~$3.2~~$2.0 billion at ~~June 30, 2022.~~March 31, 2023.

Cash Flows Provided by Operating Activities. During the ~~six months~~quarter ended ~~June 30,~~March 31, 2023, operating activities provided net cash of $9.4 million, primarily due to net income of $8.5 million. During the quarter ended March 31, 2022, operating activities provided net cash of ~~$70~~$40.3 million, primarily due to net income of ~~$64~~$31 million and a net decrease of $5 million ~~increase~~ in ~~accounts payable and~~ other liabilities. During the six months ended June 30, 2021, operating activities provided net cash of $41 million, primarily due to net income of $48 million, offset partially by $3 million in gains on sales of loans.assets.

Cash Flows Used in Investing Activities. During the ~~six months~~quarter ended ~~June 30,~~March 31, 2023, investing activities provided net cash of $44 million, primarily due to a $54 million net decrease in loans, $25 million in cash received in principal collection and maturities of securities, offset by $33 million in purchases of FHLB stock. During the quarter ended March 31, 2022, investing activities used net cash of ~~$2 billion,~~$483 million, primarily due to a ~~$2 billion~~$491 million net increase in loans, and ~~$172~~$83 million in purchases of securities ~~purchases,~~AFS, offset partially by ~~$175~~$88 million in cash received in principal collection and maturities of securities. During the six months ended June 30, 2021, investing activities used net cash of $637 million, primarily due to an $841 million net increase in loans and $83 million of securities purchases, offset partially by $144 million in cash received in principal collection and maturities of securities, and $142 million in proceeds from sales of loans.

Cash Flows Provided by Financing Activities. During the ~~six months~~quarter ended ~~June 30, 2022,~~March 31, 2023, financing activities provided net cash of ~~$993~~$607 million, consisting primarily of a net increase of ~~$727~~$995 million in FHLB and other advances offset by a decrease of $311 million in deposits, a ~~$149~~$70 million ~~increase~~net decrease in ~~FHLB advances,~~repurchase agreements, and ~~a $148 million increase in subordinated debt, offset partially by $12~~$6 million in dividends ~~paid and a $19 million decrease in other borrowings.~~paid. During the ~~six months~~quarter ended ~~June 30, 2021,~~March 31, 2022, financing activities provided net cash of ~~$936~~$253 million, consisting primarily of a net increase of ~~$1.19 billion~~$146 million in deposits and a $148 million net increase in subordinated debt, offset partially by $19 million net paydowns in our line of credit, $6 million in ~~proceeds from~~dividends paid, and a ~~holding company line of credit, offset partially by a $255~~$13 million net decrease in ~~FHLB advances and $8 million in dividends paid.~~repurchase agreements.

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 ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the loan-to-deposit ratios at FFB were ~~99%~~106.1% and ~~84%~~103.5%, respectively. The loan to deposit ratio measured 100.3% for the first quarter 2023 when calculated based on the average balances of loans and deposits for the quarter opposed to measuring such balances as of the last day of the quarter. This is more reflective of the actual management of the portfolios during the entire quarter, particularly in the wake of the banking industry events that followed the announced closure of Silicon Valley Bank and Signature Bank in mid-March, 2023.

Off-Balance Sheet Arrangements

The following table provides the off-balance sheet arrangements of the Company as of ~~June 30, 2022:~~March 31, 2023:


(dollars in thousands)
Commitments to fund new loans	$	144,273	$	2,140
Commitments to fund under existing loans, lines of credit		1,281,157		1,369,440
Commitments under standby letters of credit		24,780		25,321

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

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~~June 30, 2022,~~March 31, 2023, FFB was obligated on $315 million of letters of credit to the FHLB which were being used as collateral for public fund deposits, including $300 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 corrective 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												To Be Well Capitalized
					For Capital				Under Prompt Corrective								For Capital				Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions				Actual				Adequacy Purposes				Action Provisions
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
FFI
June 30, 2022:
March 31, 2023:
CET1 capital ratio	$	896,004	9.92	%	$	406,358	4.50	%					$	933,163	9.31	%	$	451,263	4.50	%
Tier 1 leverage ratio		896,004	8.50	%		421,597	4.00	%						933,163	7.16	%		521,678	4.00	%
Tier 1 risk-based capital ratio		896,004	9.92	%		541,811	6.00	%						933,163	9.31	%		601,683	6.00	%
Total risk-based capital ratio		1,110,094	12.29	%		722,414	8.00	%						1,146,984	11.44	%		802,245	8.00	%

December 31, 2021:
December 31, 2022:
CET1 capital ratio	$	846,515	11.34	%	$	335,801	4.50	%					$	931,125	9.18	%	$	456,603	4.50	%
Tier 1 leverage ratio		846,515	8.43	%		401,645	4.00	%						931,125	7.44	%		500,327	4.00	%
Tier 1 risk-based capital ratio		846,515	11.34	%		447,735	6.00	%						931,125	9.18	%		608,804	6.00	%
Total risk-based capital ratio		887,821	11.90	%		596,980	8.00	%						1,145,765	11.29	%		811,739	8.00	%

FFB
June 30, 2022:
March 31, 2023:
CET1 capital ratio	$	994,563	11.05	%	$	405,065	4.50	%	$	585,093	6.50	%	$	1,080,468	10.82	%	$	449,370	4.50	%	$	649,089	6.50	%
Tier 1 leverage ratio		994,563	8.81	%		451,478	4.00	%		564,348	5.00	%		1,080,468	8.31	%		520,330	4.00	%		650,413	5.00	%
Tier 1 risk-based capital ratio		994,563	11.05	%		540,086	6.00	%		720,115	8.00	%		1,080,468	10.82	%		599,159	6.00	%		798,879	8.00	%
Total risk-based capital ratio		1,035,348	11.50	%		720,115	8.00	%		900,144	10.00	%		1,120,938	11.23	%		798,879	8.00	%		998,599	10.00	%

December 31, 2021:
December 31, 2022:
CET1 capital ratio	$	854,075	11.49	%	$	334,608	4.50	%	$	483,323	6.50	%	$	1,070,648	10.60	%	$	454,655	4.50	%	$	656,724	6.50	%
Tier 1 leverage ratio		854,075	8.53	%		400,616	4.00	%		500,770	5.00	%		1,070,648	8.59	%		498,725	4.00	%		623,400	5.00	%
Tier 1 risk-based capital ratio		854,075	11.49	%		446,144	6.00	%		594,859	8.00	%		1,070,648	10.60	%		606,207	6.00	%		808,276	8.00	%
Total risk-based capital ratio		895,381	12.04	%		594,859	8.00	%		743,574	10.00	%		1,111,952	11.01	%		808,276	8.00	%		1,010,345	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 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.

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As of ~~June 30, 2022,~~March 31, 2023, FFI had ~~$65.6~~$31 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 ~~June 30, 2022,~~March 31, 2023, the amount of capital at FFB in excess of amounts required to be well capitalized for purposes of the prompt corrective action regulations was ~~$409~~$431 million for the CET1 capital ratio, $430 million for the Tier 1 Leverage Ratio, ~~$274~~$282 million for the Tier 1 risk-based capital ratio and ~~$135~~$122 million for the Total risk-based capital ratio.

~~The Company paid $12.4 million in~~On April 27, 2023, the Board of Directors declared a quarterly cash ~~dividends ($0.11~~dividend of $0.02 per common ~~share) and purchased $2.5 million~~share to be paid on May 19, 2023, to shareholders of ~~our common stock in~~record as of the ~~first six months~~close of ~~2022. It is our current intention to continue to pay quarterly dividends.~~business on May 8, 2023. The amount and declaration of future cash dividends ~~and stock repurchases~~ 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, ~~2021.~~2022. 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 ~~$16.1~~$24.8 million in dividends ($~~0.36~~0.44 per share) in ~~2021.~~2022.

We had no material commitments for capital expenditures as of ~~June 30, 2022.~~March 31, 2023. 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 28, ~~2022.~~2023 and amended on May 1, 2023. There have been no material changes to our quantitative and qualitative disclosures about market risk since December 31, ~~2021.~~2022.

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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 ~~June 30, 2022,~~March 31, 2023, 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 ~~June 30, 2022,~~March 31, 2023, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our 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.

~~Table of Contents~~

There was no change in our internal control over financial reporting that occurred during the three months ended ~~June 30, 2022~~March 31, 2023 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~~We disclosed certain risks and uncertainties that ~~were disclosed in Item 1A,~~we face under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, which we filed with the SEC on February 28, ~~2022.~~2023 and amended on May 1, 2023. The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in our 2022 Form 10-K.

Adverse developments affecting the banking industry have eroded customer confidence in the banking system and could have a material effect on our operations and/or stock price.

The recent high-profile failures of several depository institutions have generated significant market volatility among publicly traded bank holding companies. These developments have negatively impacted customer confidence in the safety and soundness of some regional and community banks. As a result, we face the risk that customers may choose to maintain deposits or trust assets with larger financial institutions or invest in short-term fixed income securities instead of bank deposits, any of which could materially and adversely impact our liquidity, cost of funding, capital, and results of operations. Media reports about other depository institutions, the financial services industry generally or us could exacerbate liquidity concerns. In addition, concerns about the banking industry’s operating environment and the public trading prices of bank holding companies are often correlated, particularly during times of financial stress, which could adversely impact the trading price of our stock.

If we are required to sell securities to meet liquidity needs, we could realize significant losses.

As a result of increases in interest rates over the last year, the market values of previously issued government and other debt securities have declined significantly, resulting in unrealized losses in our securities portfolio. While we do not expect or intend to sell these securities, if we were required to sell these securities to meet liquidity needs, we may incur significant losses, which could impair our capital and financial condition and adversely affect our results of

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operations. Further, while we have taken actions to maximize our sources of liquidity, there is no guarantee that such sources will be available or sufficient in the event of sudden liquidity needs.

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

~~The~~On April 26, 2022, the Company ~~adopted~~announced that its Board of Directors authorized a stock repurchase program, ~~on April 26, 2022,~~ pursuant to which the Company may repurchase up to $75 million of its common stock. This ~~stock repurchase program, which~~plan has no stated expiration ~~date, replaced~~date. This stock repurchase program replaces and ~~superseded~~supersedes the stock repurchase program approved by the Board of Directors on October 30, 2018, which had authorized the Company to repurchase up to 2,200,000 shares of its common ~~stock. The following table provides information relating to the Company’s purchases of~~stock, and which no additional shares ~~of its common stock~~were repurchased during the ~~second~~ quarter ~~of 2022:~~

Total Number of

Approximate Dollar

Total Number

Average

Shares Purchased

Value of Shares That

of Shares

Price Paid Per

as Part of Publicly

May Yet Be Purchased
Purchase Dates

Purchased

Share

Announced Program

Under the Program
April 1 to April 30, 2022

-

$
-

-

$
75,000,000
May 1 to May 31, 2022

54,742

21.19

54,742

73,839,900
June 1 to June 30, 2022

62,256

20.83

62,256

72,542,900
Total

116,998

116,998

ended March 31, 2023.

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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		Certificate of Amendment to 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 June 10, ~~2022).~~2022.

3.3		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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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: ~~August 8, 2022~~May 9, 2023	By:	/s/ ~~KEVIN L. THOMPSON~~AMY DJOU
		~~Kevin L. Thompson~~AMY DJOU
		Executive Vice President and Interim Chief Financial Officer

S-1


	TGRF Book		Fair Value
(dollars in thousands)	Value		Adjustments		Fair Value
Assets Acquired:
Cash and cash equivalents	$	1,145,335	$	5	$	1,145,340
Securities AFS		147,739		109		147,848
Securities held-to-maturity		71,790		2,115		73,905
Loans, net of deferred fees		1,045,193		(5,387)		1,039,806
Investment in FHLB stock		4,510		—		4,510
Premises and equipment, net		34,199		(4,180)		30,019
Goodwill and intangibles		181		129,850		130,031
Bank owned life insurance		46,163		—		46,163
Deferred taxes		3,414		738		4,152
Other assets		13,562		(298)		13,264
Total assets acquired	$	2,512,086	$	122,952	$	2,635,038

Liabilities Assumed:
Deposits	$	2,170,676	$	313	$	2,170,989
Borrowings		177,114		1,929		179,043
Accounts payable and other liabilities		7,386		182		7,568
Total liabilities assumed		2,355,176		2,424		2,357,600
Excess of assets acquired over liabilities assumed		156,910		120,528		277,438
Total	$	2,512,086	$	122,952	$	2,635,038

Consideration:
Stock issued					$	283,011
Cash paid						10
Total consideration ⁽¹⁾					$	283,021


		Outstanding Recorded Investment
(dollars in thousands)	Number of loans	Pre-Modification		Post-Modification		Financial Impact
Six Months Ended June 30, 2022:
Commercial and industrial loans	1	$	236	$	236	$	—
Total	1	$	236	$	236	$	—

		Outstanding Recorded Investment
(dollars in thousands)	Number of loans	Pre-Modification		Post-Modification		Financial Impact
Year Ended December 31, 2021
Commercial and industrial loans	1	$	346	$	346	$	—
Total	1	$	346	$	346	$	—


					Initial Allowance
	Beginning		Provision for		on Acquired						Ending
(dollars in thousands)	Balance		Credit Losses		PCD Loans		Charge-offs		Recoveries		Balance
Three Months Ended June 30, 2022:
Real estate loans:
Residential properties	$	3,198	$	1,248	$	—	$	—	$	—	$	4,446
Commercial properties		15,636		(2,922)		—		—		—		12,714
Land and construction		1,768		(308)		—		—		—		1,460
Commercial and industrial loans		12,130		2,187		—		—		164		14,481
Consumer loans		90		(26)		—		—		—	��	64
Total	$	32,822	$	179	$		$	—	$	164	$	33,165

Six Months Ended June 30, 2022:
Real estate loans:
Residential properties	$	2,637	$	1,809	$	—	$	—	$	—	$	4,446
Commercial properties		17,049		(4,335)		—		—		—		12,714
Land and construction		1,995		(535)		—		—		—		1,460
Commercial and industrial loans		11,992		2,336		—		(145)		298		14,481
Consumer loans		103		(39)		—		—		—		64
Total	$	33,776	$	(764)	$	—	$	(145)	$	298	$	33,165

Year Ended December 31, 2021:
Real estate loans:
Residential properties	$	5,115	$	(1,453)	$	93	$	(1,118)	$	—	$	2,637
Commercial properties		8,711		774		7,564		—		—		17,049
Land and construction		892		1,051		52		—		—		1,995
Commercial and industrial loans		9,249		614		1,836		(706)		999		11,992
Consumer loans		233		(130)		—		—		—		103
Total	$	24,200	$	856	$	9,545	$	(1,824)	$	999	$	33,776


	Quarter Ended								Six Months Ended
	June 30, 2022 vs. 2021							June 30, 2022 vs. 2021
	Increase (Decrease) due to							Increase (Decrease) due to
(dollars in thousands)	Volume		Rate		Total			Volume		Rate		Total
Interest earned on:
Loans	$	26,217	$	(164)	$	26,053		$	46,711	$	(2,162)	$	44,549
Securities AFS		(3,484)		563		(2,921)			(2,306)		(878)		(3,184)
Securities HTM		2,307		2,308		4,615			3,041		2,991		6,032
Cash, FHLB stock, fed funds and deposits		(135)		956		821			246		931		1,177
Total interest-earning assets		24,905		3,663		28,568	��		47,692		882		48,574
Interest paid on:
Demand deposits		1,439		875		2,314			2,357		134		2,491
Money market and savings		370		193		563			607		(754)		(147)
Certificates of deposit		(77)		153		76			(298)		(358)		(656)
Borrowings		1,762		(42)		1,720			1,389		1,337		2,726
Total interest-bearing liabilities		3,494		1,179		4,673			4,055		359		4,414
Net interest income	$	21,411	$	2,484	$	23,895		$	43,637	$	523	$	44,160


(dollars in thousands)
3 months or less	$	379,579
Over 3 months through 6 months		72,863
Over 6 months through 12 months		80,279
Over 12 months		55,509
Total	$	588,230


					Total Number of		Approximate Dollar
	Total Number		Average		Shares Purchased		Value of Shares That
	of Shares		Price Paid Per		as Part of Publicly		May Yet Be Purchased
Purchase Dates	Purchased		Share		Announced Program		Under the Program
April 1 to April 30, 2022		-	$	-		-	$	75,000,000
May 1 to May 31, 2022		54,742		21.19		54,742		73,839,900
June 1 to June 30, 2022		62,256		20.83		62,256		72,542,900
Total		116,998				116,998