FIRST FOUNDATION INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30, 2017~~MARCH 31, 2022

TABLE OF CONTENTS


						~~Exhibit~~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			2129

Item 3.		Quantitative and Qualitative Disclosures About Market Risk			41

~~Item 4.~~		~~Controls and Procedures~~	41
			47
Item 4.	Controls and Procedures			48

Part II. Other Information

~~Item 1A~~		~~Risk Factors~~	41

~~Item 6~~		~~Exhibits~~	42

~~SIGNATURES~~Item 1A	Risk Factors			48
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds			48
Item 6	Exhibits			49

SIGNATURES				S-1

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Table of Contents

P~~ART~~

PART I — FINANCIAL INFORMATION

I~~TEM 1.~~

ITEM 1.FINANCIAL STATEMENTS

FIRST FOUNDATION INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

September 30,
2017

December 31,
2016

(unaudited)

ASSETS

Cash and cash equivalents
$
123,210

$
597,946

Securities available-for-sale (“AFS”)

471,502

509,578

Loans held for sale

153,405

250,942

Loans, net of deferred fees

3,256,874

2,555,709

Allowance for loan and lease losses (“ALLL”)

(17,500
)

(15,400
)
Net loans

3,239,374

2,540,309

Investment in FHLB stock

17,250

33,750

Premises and equipment, net

6,732

6,730

Deferred taxes

14,925

16,811

Real estate owned (“REO”)

1,400

1,734

Goodwill and intangibles

2,021

2,177

Other assets

21,242

15,426

Total Assets
$
4,051,061

$
3,975,403

LIABILITIES AND SHAREHOLDERS’ EQUITY

Liabilities:

Deposits
$
3,268,726

$
2,426,795

Borrowings

421,000

1,250,000

Accounts payable and other liabilities

20,882

14,344

Total Liabilities

3,710,608

3,691,139

Commitments and contingencies

—

—

Shareholders’ Equity

Common Stock, par value $0.01: 70,000,000 shares authorized; 35,169,653 and 32,719,632 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

35

16

Additional paid-in-capital

260,626

232,428

Retained earnings

82,374

57,065

Accumulated other comprehensive loss, net of tax

(2,582
)

(5,245
)
Total Shareholders’ Equity

340,453

284,264

Total Liabilities and Shareholders’ Equity
$
4,051,061

$
3,975,403


	March 31,		December 31,
	2022		2021
		(unaudited)
ASSETS
Cash and cash equivalents	$	931,710	$	1,121,757
Securities available-for-sale ("AFS")		269,030		1,201,777
Securities held-to-maturity ("HTM")		920,408		—
Allowance for credit losses - investments		(10,743)		(10,399)
Net securities		1,178,695		1,191,378

Loans held for sale		501,424		501,436

Loans held for investment		7,397,464		6,906,728
Allowance for credit losses - loans		(32,822)		(33,776)
Net loans		7,364,642		6,872,952

Investment in FHLB stock		17,250		18,249
Deferred taxes		18,047		20,835
Premises and equipment, net		35,904		37,920
Real Estate Owned ("REO")		6,210		6,210
Goodwill and intangibles		223,239		222,125
Other assets		197,675		203,342
Total Assets	$	10,474,796	$	10,196,204

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	8,957,518	$	8,811,960
Borrowings		325,969		210,127
Accounts payable and other liabilities		108,734		110,066
Total Liabilities		9,392,221		9,132,153

Shareholders’ Equity
Common Stock		57		56
Additional paid-in-capital		720,846		720,744
Retained earnings		365,604		340,976
Accumulated other comprehensive (loss) income		(3,932)		2,275
Total Shareholders’ Equity		1,082,575		1,064,051
Total Liabilities and Shareholders’ Equity	$	10,474,796	$	10,196,204

(See accompanying notes to the consolidated financial statements)

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Table of Contents

FIRST FOUNDATION INC.

CONSOLIDATED INCOME STATEMENTS - UNAUDITED

(In thousands, except share and per share amounts)

Quarter Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Interest income:

Loans
$
31,236

$
22,231

$
87,709

$
61,362

Securities AFS

3,023

3,202

9,180

9,423

Fed funds sold, FHLB stock and deposits

619

571

2,001

1,490

Total interest income

34,878

26,004

98,890

72,275

Interest expense:

Deposits

4,899

2,426

12,103

6,194

Borrowings

1,539

415

4,394

1,636

Total interest expense

6,438

2,841

16,497

7,830

Net interest income

28,440

23,163

82,393

64,445

Provision for loan losses

701

1,231

1,862

2,881

Net interest income after provision for loan losses

27,739

21,932

80,531

61,564

Noninterest income:

Asset management, consulting and other fees

6,900

6,141

19,672

18,127

Gain on sale of loans

1,962

7,238

4,312

7,238

Gain (loss) on capital markets activities

—

997

—

(1,043
)
Other income

1,001

703

3,359

2,652

Total noninterest income

9,863

15,079

27,343

26,974

Noninterest expense:

Compensation and benefits

14,117

12,059

42,855

36,707

Occupancy and depreciation

3,801

3,072

11,094

8,783

Professional services and marketing costs

1,479

3,525

5,115

7,808

Other expenses

3,996

2,880

11,251

7,505

Total noninterest expense

23,393

21,536

70,315

60,803

Income before taxes on income

14,209

15,475

37,559

27,735

Taxes on income

4,629

6,417

12,250

10,949

Net income
$
9,580

$
9,058

$
25,309

$
16,786

Net income per share:

Basic
$
0.28

$
0.28

$
0.75

$
0.52

Diluted
$
0.27

$
0.27

$
0.73

$
0.50

Shares used to compute net income per share:

Basic

34,565,949

32,514,016

33,671,327

32,264,224

Diluted

35,259,632

33,575,894

34,599,813

33,365,614


	Three Months Ended
	March 31,
	2022		2021
Interest income:
Loans	$	72,027	$	53,531
Securities AFS		6,360		5,206
FHLB Stock, fed funds sold and interest-bearing deposits		757		401
Total interest income		79,144		59,138

Interest expense:
Deposits		3,358		4,623
Borrowings		1,292		286
Total interest expense		4,650		4,909

Net interest income		74,494		54,229

Provision for credit losses		(792)		360

Net interest income after provision for credit losses		75,286		53,869

Noninterest income:
Asset management, consulting and other fees		10,197		8,349
Other income		5,230		3,559
Total noninterest income		15,427		11,908

Noninterest expense:
Compensation and benefits		29,821		21,526
Occupancy and depreciation		8,567		6,160
Professional services and marketing costs		3,417		2,122
Customer service costs		1,788		1,770
Other expenses		4,025		2,933
Total noninterest expense		47,618		34,511

Income before taxes on income		43,095		31,266
Taxes on income		12,259		8,911
Net income	$	30,836	$	22,355

Net income per share:
Basic	$	0.55	$	0.50
Diluted	$	0.55	$	0.50
Shares used in computation:
Basic		56,465,855		44,707,718
Diluted		56,565,845		45,012,205

(See accompanying notes to the consolidated financial statements)

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Table of Contents

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENT OF CHANGES

IN SHAREHOLDERS’ EQUITY - ~~Unaudited~~UNAUDITED

(In thousands, except share amounts)


	Common Stock			Additional				Accumulated Other
	Number			Paid-in		Retained		Comprehensive
	of Shares	Amount		Capital		Earnings		Income (Loss)		Total
Balance: December 31, 2020	44,667,650	$	45	$	433,941	$	247,638	$	14,087	$	695,711
Net income	—		—		—		22,355		—		22,355
Other comprehensive loss	—		—		—		—		(18)		(18)
Stock based compensation	—		—		995		—		—		995
Cash dividend	—		—		—		(4,023)		—		(4,023)
Issuance of common stock:
Exercise of options	47,000		—		354		—		—		354
Stock grants – vesting of restricted stock units	108,085		—		—		—		—		—
Stock repurchase	(40,580)		—		(944)		—		—		(944)
Balance: March 31, 2021	44,782,155	$	45	$	434,346	$	265,970	$	14,069	$	714,430

Balance: December 31, 2021	56,432,070	$	56	$	720,744	$	340,976	$	2,275	$	1,064,051
Net income	—		—		—		30,836		—		30,836
Other comprehensive loss	—		—		—		—		(6,207)		(6,207)
Stock based compensation	—		—		1,204		—		—		1,204
Cash dividend	—		—		—		(6,208)		—		(6,208)
Issuance of common stock:
Exercise of options	2,000		—		18		—		—		18
Stock grants – vesting of restricted stock units	122,700		1		—		—		—		1
Repurchase of shares from restricted shares vesting	(42,602)		—		(1,120)		—		—		(1,120)
Balance: March 31, 2022	56,514,168	$	57	$	720,846	$	365,604	$	(3,932)	$	1,082,575

Common Stock

Accumulated Other

Number
of Shares

Amount

Additional
Paid-in Capital

Retained Earnings

Comprehensive Income (Loss)

Total
Balance: December 31, 2016

32,719,632

$
16

$
232,428

$
57,065

$
(5,245
)

$
284,264

Effect of stock split

—

16

(16
)

—

—

—

Net income

—

—

—

25,309

—

25,309

Other comprehensive income

—

—

—

—

2,663

2,663

Stock based compensation

—

—

912

—

—

912

Issuance of common stock:

Exercise of options

1,059,000

1

5,469

—

—

5,470

Issuance of restricted stock

64,961

—

—

—

—

—

Capital raise

1,326,060

2

21,833

21,835

Balance: September 30, 2017

35,169,653

$
35

$
260,626

$
82,374

$
(2,582
)

$
340,453

(See accompanying notes to the consolidated financial statements)

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FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME - UNAUDITED

(In thousands)


	Three Months Ended March 31,
	2022		2021
Net income	$	30,836	$	22,355
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities arising during the period		(7,731)		(25)
Other comprehensive income (loss) before tax		(7,731)		(25)
Income tax benefit (expense) related to items of other comprehensive income		1,524		7
Other comprehensive income (loss)		(6,207)		(18)
Total comprehensive income	$	24,629	$	22,337

Quarter Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Net income
$
9,580

$
9,058

$
25,309

$
16,786

Other comprehensive income:

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

1,057

(1,033
)

4,526

9,805

Other comprehensive income before tax

1,057

(1,033
)

4,526

9,805

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

435

(413
)

1,863

4,033

Other comprehensive income (loss)

622

(620
)

2,663

5,772

Reclassification adjustment for gains (losses) included in net
earnings

—

(997
)

—

1,043

Income tax expense (benefit) related to reclassification adjustment

—

413

—

(412
)
Reclassification adjustment for gains (losses) included in net earnings, net of tax

—

(584
)

—

631

Other comprehensive income (loss), net of tax

622

(1,204
)

2,663

6,403

Total comprehensive income
$
10,202

$
7,854

$
27,972

$
23,189

(See accompanying notes to the consolidated financial statements)

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Table of Contents

FIRST FOUNDATION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)

For the Nine Months
Ended September 30,

2017

2016

Cash Flows from Operating Activities:

Net income
$
25,309

$
16,786

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

Provision for loan losses

1,862

2,881

Stock–based compensation expense

912

712

Depreciation and amortization

1,765

1,338

Deferred tax expense

23

758

Accretion of discounts on purchased loans, net

(430
)

(755
)
Gain on sale of loans

(4,312
)

(7,238
)
Gain on sale of capital market activities

—

(1,307
)
Gain on sale of REO

(104
)

—

Increase in other assets

(3,934
)

(1,429
)
Increase in accounts payable and other liabilities

6,538

1,970

Net cash provided by operating activities

27,629

13,716

Cash Flows from Investing Activities:

Net increase in loans (including changes in loans held for sale)

(889,326
)

(1,008,136
)
Proceeds from sale of loans

288,724

270,005

Proceeds from sale of REO

438

4,442

Purchases of premises and equipment

(1,767
)

(4,027
)
Purchases of securities AFS

(10,338
)

(130,829
)
Proceeds from sale of securities AFS

—

104,146

Maturities/payments – securities AFS

53,168

60,715

Purchases (net of redemptions) of FHLB stock

16,500

(4,185
)
Net cash used in investing activities

(542,601
)

(707,869
)

Cash Flows from Financing Activities:

Increase in deposits

841,931

816,561

FHLB Advances – net (decrease) increase

(844,000
)

155,000

Proceeds – term note

15,000

—

Proceeds from sale of stock, net

27,305

3,657

Net cash provided by financing activities

40,236

975,218

Increase (decrease) in cash and cash equivalents

(474,736
)

281,065

Cash and cash equivalents at beginning of year

597,946

215,748

Cash and cash equivalents at end of period
$
123,210

$
496,813

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest
$
15,353

$
7,334

Income taxes

11,135

10,050

Noncash transactions:

Transfer of loans to loans held for sale
$
189,928

$
468,743

Mortgage servicing rights created from loan sales

1,954

1,945

Chargeoffs (recoveries) against allowance for loans losses

238

119

Transfer of loans to REO

—

950


	For the Three Months Ended
	March 31,
	2022		2021
Cash Flows from Operating Activities:
Net income	$	30,836	$	22,355
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses - loans		(1,136)		(1,273)
Provision for credit losses - securities AFS		344		1,633
Stock–based compensation expense		1,204		995
Depreciation and amortization		974		823
Deferred tax benefit		3,431		1,669
Amortization of premium (discount) on securities		(351)		131
Amortization of core deposit intangible		509		432
Amortization of mortgage servicing rights - net		549		479
Valuation allowance on mortgage servicing rights - net		(201)		(37)
Increase in other assets		5,318		4,786
(Decrease) increase in accounts payable and other liabilities		(1,138)		626
Net cash provided by operating activities		40,339		32,619
Cash Flows from Investing Activities:
Net increase in loans		(490,869)		(321,271)
Purchase of premises and equipment		(1,222)		(628)
Disposals of premises and equipment		3,375		—
Recovery of allowance for credit losses		134		406
Purchases of securities AFS		(400)		—
Purchases of securities HTM		(83,008)		—
Maturities of securities AFS		7,965		53,418
Maturities of securities HTM		79,660		—
Proceeds from redemption of securities		—		3,000
Sale of FHLB and FRB stock, net		999		—
Net cash used in investing activities		(483,366)		(265,075)
Cash Flows from Financing Activities:
Increase in deposits		145,558		332,388
Net decrease in FHLB advances		—		(250,000)
Line of credit net change – borrowings, net		(18,500)		(7,000)
Net increase in subordinated debt		147,592		—
Net decrease in repurchase agreements		(13,250)		—
Gain on sale leaseback		(1,111)		—
Dividends paid		(6,208)		(4,023)
Proceeds from exercise of stock options		19		354
Repurchase of stock		(1,120)		(944)
Net cash provided by financing activities		252,980		70,775
Decrease in cash and cash equivalents		(190,047)		(161,681)
Cash and cash equivalents at beginning of year		1,121,757		629,707
Cash and cash equivalents at end of period	$	931,710	$	468,026
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes	$	—	$	5,209
Interest		3,893		6,221
Noncash transactions:
Transfer of loans to loans held for sale	$	—	$	8,195
Transfer of securities from available-for-sale to held-to-maturity		916,777		—
Chargeoffs against allowance for credit losses		145		214
Goodwill acquisition adjustment		1,623		—

(See accompanying notes to the consolidated financial statements)

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Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2022 - UNAUDITED

NOTE 1: BASIS OF PRESENTATION

The consolidated financial statements include First Foundation Inc. (“FFI”) and its wholly owned subsidiaries: First Foundation Advisors (“FFA”) and First Foundation Bank (“FFB” or the “Bank”) and the wholly owned subsidiaries of FFB, First Foundation Insurance Services (“FFIS”) ~~and~~, Blue Moon Management, LLC, and First Foundation Public Finance (“FFPF”) (collectively referred to as the “Company”). FFI also has 2 inactive wholly owned subsidiaries, First Foundation Consulting and First Foundation Advisors, LLC. All ~~inter-company~~intercompany balances and transactions have been eliminated in consolidation. The results of operations reflect any interim adjustments, all of which are of a normal recurring nature and which, in the opinion of management, are necessary for a fair presentation of the results for the interim period presented. The results for the ~~2017~~2022 interim periods are not necessarily indicative of the results expected for the full year.

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

The accompanying unaudited consolidated financial statements include all information and footnotes required for interim financial statement presentation. These financial statements assume that readers have read the most recent Annual Report on Form 10-K which contains the latest available audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2016.~~

On January 18, 2017, the Company completed a two-for-one stock split in the form of a stock dividend. Each stockholder of record at the close of business of January 4, 2017 received one additional share of common stock for every share held. All share and per share amounts included in the financial statements have been adjusted to reflect the effect of this stock split.2021.

Certain reclassifications have been made to the prior year consolidated financial statements to conform to the ~~2017~~2022 presentation.

New Accounting Pronouncements

In ~~February 2017,~~March 2022, the Financial Accounting Standards Board ~~(the “FASB”~~(“FASB”) issued ~~Accounting Standards Update~~ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings (“~~ASU”~~TDRs”) ~~2017-05~~ ~~“Other Income-Gains~~ and ~~Losses from~~Vintage Disclosures”. ASU 2022-02 eliminates the ~~Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting~~accounting guidance for ~~Partial Sales of Nonfinancial Assets”~~ ~~which clarifies that the guidance~~TDRs by creditors in Accounting Standards Codification (“ASC”) 610-20 on accounting for derecognition of a nonfinancial asset and in-substance nonfinancial asset applies only when the asset (or asset group) does not meet the definition of a businessSubtopic 310-40, Receivables – Troubled Debt Restructurings by Creditors and provides ~~guidance~~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. ASU 2022-02 also requires that entities disclose current-period gross write-offs by year of origination for ~~partial sales~~financing receivables within the scope of ~~nonfinancial assets.~~Subtopic 326-20. For entities that have adopted the amendments in Update 2016-13, the amendments in this ASU are effective for fiscal years beginning after December 15, 2022. The adoption of ASU ~~No. 2017-05~~2022-02 is not expected to have a ~~material~~significant impact on the Company’s consolidated financial statements.

In ~~January 2017,~~March 2020, the FASB issued ASU ~~2017-04~~ 2020-04, “~~Intangibles – Goodwill~~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 (Topic 350): Simplifying the Test for Goodwill Impairment”~~ ~~which provides updated guidance on how an entity is required~~other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to ~~test goodwill for impairment. This update is~~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 ~~for the Company for annual periods beginning after~~as of March 12, 2020 through December ~~15, 2019, and interim periods within those annual periods.~~31, 2022. The adoption of ASU ~~No. 2017-04~~2020-04 is not expected to have a ~~material~~significant impact on the Company’s consolidated financial statements.

~~In January 2017, the FASB issued~~ ~~ASU~~ ~~2017-01~~ ~~“Business Combinations (Topic 805): Clarifying the Definition~~

6

Table of ~~a Business”~~ which provides guidance in clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The adoption of ASU No. 2017-01 is not expected to have a material impact on the Company’s consolidated financial statements.Contents

~~In August 2016, the FASB issued~~ ~~ASU~~ ~~2016-15~~ ~~“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”~~ which provides guidance for eight specific cash flow issues. FASB issued the standard to clarify areas where GAAP has been either unclear or lacking in specific guidance. This update is effective for the Company for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The adoption of ASU No. 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements.

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

6

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED

NOTE 2: ACQUISITIONS

~~2019,~~On December 17, 2021, the Company completed the acquisition of TGR Financial, Inc. (“TGRF”) and ~~interim periods within those annual periods.~~ 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 ~~Company has begun analyzing~~acquisition was accounted for under the ~~data requirements needed~~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 ~~implement~~be deductible for income tax purposes.

The following table represents the ~~adoption~~assets acquired and liabilities assumed of ~~ASU 2016-13 and we expect that the adoption~~TGRF as of ~~ASU 2016-13 may have a significant impact on the Company’s recording of its allowance for loan losses. Management is continuing to evaluate the effects of 2016-13~~December 17, 2021 and the ~~impact~~fair value adjustments and amounts recorded by the Company in 2021 under the acquisition method of ~~its implementation is undeterminable~~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 ~~this time.~~

~~On February 25, 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~.appropriate market rates. The most significant ~~change~~category of assets for ~~lessees is~~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 requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases, which is generally defined as a lease term of less than 12 months. This change will result in lessees recognizing right-of-use assets and lease liabilities for most leases accounted for as operating leases under current lease accounting guidance. The amendments in this update are effective for interim and annual periods beginning after December 15, 2018. We expect the adoption of ASU 2016-02 to impact the Company’s accounting for its building leases at each of its locations and the ~~Company is evaluating the effects of the adoption of ASU 2016-02 on its financial statements and disclosures.~~Three Months Ended March 31, 2022 - UNAUDITED

~~On January 5, 2016, the FASB issued~~ ~~ASU 2016-01,Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10)~~. Changes made to the current measurement model primarily affect the accounting for equity securities with readily determinable fair values, where changes in fair value will impact earnings instead of other comprehensive income. The accounting for other financial instruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. This update also changes the presentation and disclosure requirements for financial instruments including a requirement that public business entities use exit price when measuring

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 Three Months Ended March 31, 2022 - UNAUDITED

Pro Forma Information (unaudited)

The following table presents unaudited pro forma information for the three months ended March 31, 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 $0.5 million in net income for the three months ended March 31, 2021. The unaudited pro forma financial instruments measured at amortized cost for disclosure purposes. This update is generally effective for public business entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. ~~The adoption of ASU No. 2016-01~~information is not ~~expected to~~necessarily indicative of the results of operations that would have ~~a material impact~~occurred had the transaction been effected on the ~~Company’s consolidated financial statements~~.assumed dates.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 660): Summary and Amendments that Create Revenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40)”. The guidance in this update supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the codification. ~~This update is effective for annual reporting periods beginning on or after December 15, 2017 and interim periods therein and requires expanded disclosures.~~ ~~Management is continuing to evaluate the effects of 2014-09 and the impact of its implementation is undeterminable at this time.~~


	Three Months
	Ended March 31,
(dollars in thousands)	2021
Net interest income	$	68,481
Provision for credit losses		5,943
Noninterest income		13,012
Noninterest expenses		58,190
Income before taxes		17,360
Taxes on income		4,645
Net income	$	12,715

Net income per share:
Basic	$	0.23
Diluted	$	0.23

NOTE 2: 3: FAIRVALUEMEASUREMENTS

Assets Measured at Fair Value on a Recurring Basis

F~~air~~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~~Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

7

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - 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
	Total		Level 1		Level 2		Level 3

											Fair Value Measurement Level
(dollars in thousands)									Total		Level 1		Level 2		Level 3
September 30, 2017:
March 31, 2022:
Investment securities available for sale:
US Treasury securities	$	495	$	495	$	—	$	—
Collateralized mortgage obligations									$	11,184	$	—	$	11,184	$	—
Agency mortgage-backed securities		432,448		—		432,448		—		10,078		—		10,078		—
Beneficial interest – FHLMC securitizations		38,559		—		—		38,559
Municipal bonds										48,514		—		48,514		—
SBA securities										25,672		—		25,672		—
Beneficial interests in FHLMC securitization										10,222		—		—		10,222
Corporate bonds										151,763		—		151,763		—
U.S. Treasury										854		854		—		—
Investment in equity securities										8,569		—		—		8,569
Total assets at fair value on a recurring basis	$	471,502	$	495	$	432,448	$	38,559	$	266,856	$	854	$	247,211	$	18,791

December 31, 2016:


December 31, 2021:
Investment securities available for sale:
US Treasury securities	$	297	$	297	$	—	$	—
Collateralized mortgage obligations									$	13,825	$	—	$	13,825	$	—
Agency mortgage-backed securities		468,909		—		468,909		—		928,989		—		928,989		—
Beneficial interest – FHLMC securitizations		40,372		—		—		40,372
Municipal bonds										52,146		—		52,146		—
SBA securities										27,972		—		27,972		—
Beneficial interests in FHLMC securitization										11,580		—		—		11,580
Corporate bonds										156,376		—		156,376		—
U.S. Treasury										490		490		—		—
Investment in equity securities										16,025		16,025		—		—
Total assets at fair value on a recurring basis	$	509,578	$	297	$	468,909	$	40,372	$	1,207,403	$	16,515	$	1,179,308	$	11,580

The decrease in ~~level~~Level 3 assets from December 31, ~~2016~~2021 was due to ~~beneficial interest – FHLMC~~ securitization ~~maturities.~~

~~Fair Value of Financial Instruments~~

~~We have elected to use fair value measurements to record fair value adjustments to certain assets and liabilities~~paydowns and to ~~determine fair value disclosures. Securities available~~$0.3 million in provisions for sale are measured at fair value on a recurring basis. Additionally, from time to time, we may be required to measure at fair value other assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

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.~~

~~Investment Securities Available for Sale~~. Investment securities available-for-sale are measured at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. When a market is illiquid or there is a lack of transparency around the inputs to valuation, the securities are classified as Level 3 and reliance is placed upon internally developed models, and management judgment and evaluation for valuation. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include beneficial interests – FHLMC securitization. Significant assumptionslosses in the ~~valuation~~first three months of ~~these Level 3 securities as of September 30, 2017 included a prepayment rate of 15% and discount rates ranging from 4.0% to 10%.~~2022.

8

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Nine Months Ended September 30, 2017 – UNAUDITED~~

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

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

~~Loans Held For Sale~~. Loans held for sale are accounted for at the lower of amortized cost or fair value. The fair value of loans held for sale is generally based on observable market prices from other loans in the secondary market that have similar collateral, credit, and interest rate characteristics. If quoted market prices are not readily available, the Company may consider other observable market data such as dealer quotes for similar loans or forward sale commitments. In certain cases, the fair value may be based on a discounted cash flow model.

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

~~Borrowings~~. The fair value of $421 million in borrowings is the carrying value of overnight FHLB advances that approximate fair value because of the short-term maturity of this instrument, resulting in a Level 2 classification. The fair value of term borrowings is derived by calculating the discounted value of future cash flows expected to be paid out by the Company. The $25 million holding company line of credit is a variable rate loan for which the rate adjusts quarterly, and as such, its fair value is based on its carrying value resulting in a Level 3 classification.

Assets Measured at Fair Value on a Nonrecurring Basis

~~Impaired~~ 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. ~~ASC 820-10 applies~~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 ~~loans measured for impairment in accordance with ASC 310-10, “Accounting by Creditors for Impairment of a Loan”, at~~estimate the fair value of ~~the loan’s collateral (if the loan is collateral dependent) less estimated selling costs.~~these loans, which considers internally-developed, unobservable inputs such as discount rates, default rates, and loss severity. When the fair value of the collateral is based on an observable market price or a current appraised value, we measure the impaired loan at nonrecurring Level 2. When an appraised value is not available, or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price or a discounted cash flow has been used to determine the fair value, we measure the impaired loan at nonrecurring Level 3. The total collateral dependent impaired Level 3 loans were ~~$14.4~~$5.6 million and ~~$9.0~~$2.8 million at ~~September 30, 2017~~March 31, 2022 and ~~December 31, 2016, respectively. There were no specific reserves related to these loans at September 30, 2017 and December 31, 2016.~~

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED

December 31, 2021, respectively. There were 0 specific reserves related to these loans at March 31, 2022 and December 31, 2021.

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. As

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 ~~September 30, 2017~~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 ~~December~~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 March 31, ~~2016,~~2022 included prepayment rates ranging from 20% to 30% and a discount rate ranging from 1.43% to 10%.

Fair Value of Financial Instruments

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

Fair value estimates are made at a discrete point in time based on relevant market information and other information about the financial instruments. Because no active market exists for a significant portion of our financial instruments, fair value estimates are based in large part on judgments we make primarily regarding current economic conditions, risk characteristics of various financial instruments, prepayment rates, and future expected loss experience. These estimates are subjective in nature and invariably involve some inherent uncertainties. Additionally, unexpected 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 was $1.4 million~~owned.

The following methods and ~~$1.7 million, respectively.~~assumptions were used to estimate the fair value of financial instruments:

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

Investment Securities. Investment securities are measured at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. When a market is illiquid or there is a lack of transparency around the inputs to valuation, the securities are classified as Level 3

11

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 - UNAUDITED

and reliance is placed upon internally developed models, and management judgment and evaluation for valuation. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include beneficial interests in FHLMC securitizations. Significant assumptions in the valuation of these Level 3 securities as of March 31, 2022 and December 31, 2021 included prepayment rates ranging from 30% to 35% and discount rates ranging from 7.11% to 12.20%.

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.

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 and subordinated debt are the carrying amounts. The fair value of borrowings is the carrying value of overnight FHLB advances that approximate fair value because of the short-term maturity of this instrument, resulting in a Level 2 classification. The fair value of term borrowings is derived by calculating the discounted value of future cash flows expected to be paid out by the Company.

12

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 - 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
September 30, 2017:
March 31, 2022:
Assets:
Cash and cash equivalents	$	123,210	$	123,210	$	—	$	—	$	123,210	$	931,710	$	931,710	$	—	$	—	$	931,710
Securities AFS		471,502		495		432,448		38,559		471,502
Loans		3,239,374		—		—		3,381,237		3,381,237
Securities AFS, net												258,287		854		247,211		10,222		258,287
Securities HTM												920,408		—		880,751		—		880,751
Loans held for sale		153,405		—		—		155,246		155,246		501,424		—		515,965		—		515,965
Loans, net												7,364,642		—		—		7,578,756		7,578,756
Investment in FHLB stock		17,250		—		17,250		—		17,250		17,250		—		17,250		—		17,250

Investment in equity securities												8,569		—		—		8,569		8,569
Liabilities:
Deposits		3,268,726		2,385,687		883,359		—		3,269,046	$	8,957,518	$	8,317,757	$	639,761	$	—	$	8,957,518
Borrowings		421,000		—		406,000		15,000		421,000		325,969		152,680		—		173,289		325,969

December 31, 2016:

December 31, 2021:
Assets:
Cash and cash equivalents	$	597,946	$	597,946	$	—	$	—	$	597,946	$	1,121,757	$	1,121,757	$	—	$	—	$	1,121,757
Securities AFS		509,578		297		468,909		40,372		509,578
Securities AFS, net												1,191,378		490		1,179,308		11,580		1,191,378
Loans held for sale												501,436		—		515,978		—		515,978
Loans, net		2,540,309		—		—		2,529,360		2,529,360		6,872,952		—		—		7,072,878		7,072,878
Loans held for sale		250,942		—		—		253,953		253,953
Investment in FHLB stock		33,750		—		33,750		—		33,750		18,249		—		18,249		—		18,249

Investment in equity securities												16,025		16,025		—		—		16,025
Liabilities:
Deposits		2,426,795		1,797,329		629,594		—		2,426,923	$	8,811,960	$	8,143,473	$	668,487	$	—	$	8,811,960
Borrowings		1,250,000		—		1,250,000		—		1,250,000		210,127		165,930		—		44,197		210,127

13

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FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 - UNAUDITED

NOTE 3:4: SECURITIES

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

	Amortized		Gross Unrealized					Estimated

										Amortized		Gross Unrealized				Allowance for		Estimated
(dollars in thousands)	Cost		Gains		Losses			Fair Value		Cost		Gains		Losses		Credit Losses		Fair Value
September 30, 2017:
US Treasury securities	$	499	$	—	$	(4	)	$	495
March 31, 2022:
Collateralized mortgage obligations										$	11,761	$	—	$	(577)	$	—	$	11,184
Agency mortgage-backed securities		436,415		497		(4,464	)		432,448		10,376		8		(306)		—		10,078
Municipal bonds											50,737		21		(2,244)		—		48,514
SBA securities											25,692		1		(21)		—		25,672
Beneficial interests in FHLMC securitization		38,975		1,756		(2,172	)		38,559		20,631		334		—		(10,743)		10,222
Corporate bonds											153,451		1,105		(2,793)		—		151,763
U.S. Treasury											897		—		(43)		—		854
Total	$	475,889	$	2,253	$	(6,640	)	$	471,502	$	273,545	$	1,469	$	(5,984)	$	(10,743)	$	258,287

December 31, 2016:
US Treasury securities	$	300	$	—	$	(3	)	$	297

December 31, 2021:
Collateralized mortgage obligations										$	13,862	$	—	$	(37)	$	—	$	13,825
Agency mortgage-backed securities		476,163		160		(7,414	)		468,909		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		42,028		711		(2,367	)		40,372		21,606		373		—		(10,399)		11,580
Corporate bonds											154,027		2,441		(92)		—		156,376
U.S. Treasury											499		—		(9)		—		490
Total	$	518,491	$	871	$	(9,784	)	$	509,578	$	1,198,562	$	9,473	$	(6,258)	$	(10,399)	$	1,191,378

~~The~~

As of March 31, 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.~~operations, $216.3 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 $163.9 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:

10


	Amortized		Gross Unrecognized				Allowance for		Estimated
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Fair Value
March 31, 2022:
Agency mortgage-backed securities	$	920,408	$	—	$	(39,657)	$	—	$	880,751
Total	$	920,408	$	—	$	(39,657)	$	—	$	880,751

There were 0 securities HTM as of December 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 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 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.

14

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED

We monitor the credit quality of these securities 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 March 31, 2022, 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~~ ~~belo~~w~~indicate~~,asof~~September~~ 30~~, 2017~~ table below indicates, as of March 31, 2022 and December 31, ~~2016,~~the~~gros~~s~~unrealize~~d~~losse~~sand~~fai~~r~~value~~sofour~~investments~~,~~aggregate~~dby~~investmen~~t~~categor~~y2021, the gross unrealized losses and ~~lengt~~hof~~tim~~e~~tha~~tthe~~individua~~l~~securitie~~s~~hav~~e~~bee~~ninfair values of our investments AFS, aggregated by investment category and length of time that the individual securities have been in a ~~continuou~~s~~unrealize~~d~~los~~s continuous unrealized loss position.

Securities with Unrealized Loss at September 30, 2017

Less than 12 months

12 months or more

Total

(dollars in thousands)

Fair Value

Unrealized
Loss

Fair Value

Unrealized
Loss

Fair Value

Unrealized
Loss

US Treasury securities

$
495

$
(4
)

$
—

$
—

$
495

$
(4
)
Agency mortgage backed securities

287,342

(2,670
)

58,044

(1,794
)

345,386

(4,464
)
Beneficial interests in FHLMC securitization

—

—

9,347

(2,172
)

9,347

(2,172
)
Total temporarily impaired securities

$
287,837

$
(2,674
)

$
67,391

$
(3,966
)

$
355,228

$
(6,640
)


	Securities with Unrealized Loss at March 31, 2022
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
Collateralized mortgage obligations	$	11,182	$	(577)	$	—	$	—	$	11,182	$	(577)
Agency mortgage-backed securities		8,577		(306)		—		—		8,577		(306)
Municipal bonds		47,446		(2,244)		—		—		47,446		(2,244)
SBA securities		23,038		(21)		—		—		23,038		(21)
Corporate bonds		93,155		(2,793)		—		—		93,155		(2,793)
U.S. Treasury		854		(43)		—		—		854		(43)
Total temporarily impaired securities	$	184,252	$	(5,984)	$	—	$	—	$	184,252	$	(5,984)

Securities with Unrealized Loss at December 31, 2016

Less than 12 months

12 months or more

Total

(dollars in thousands)

Fair Value

Unrealized
Loss

Fair Value

Unrealized
Loss

Fair Value

Unrealized
Loss

US Treasury securities

297

(3
)

—

—

297

(3
)
Agency mortgage backed securities

445,591

(7,414
)

—

—

445,591

(7,414
)
Beneficial interests in FHLMC securitization

18,636

(2,367
)

—

—

18,636

(2,367
)
Total temporarily impaired securities

$
464,524

$
(9,784
)

$
—

$
—

$
464,524

$
(9,784
)


	Securities with Unrealized Loss at December 31, 2021
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(dollars in thousands)	Value		Loss		Value		Loss		Value		Loss
Collateralized mortgage obligations	$	12,971	$	(37)	$	—	$	—	$	12,971	$	(37)
Agency mortgage-backed securities		434,973		(5,051)		36,136		(1,069)		471,109		(6,120)
Corporate bonds		47,880		(92)		—		—		47,880		(92)
U.S. Treasury		491		(9)		—		—		491		(9)
Total temporarily impaired securities	$	496,315	$	(5,189)	$	36,136	$	(1,069)	$	532,451	$	(6,258)

The table below indicates, as of March 31, 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 March 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	$	844,511	$	(37,873)	$	36,240	$	(1,784)	$	880,751	$	(39,657)
Total temporarily impaired securities	$	844,511	$	(37,873)	$	36,240	$	(1,784)	$	880,751	$	(39,657)

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

Unrealized losses in agency mortgage backed securities, ~~and~~ 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

15

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 - UNAUDITED

recovery, and the decline in fair value is largely due to changes in discount rates and assumptions regarding future interest rates. The fair value is expected to recover as the bonds approach maturity.

The following is a rollforward of the Bank’s allowance for credit losses related to investments for the following periods:


(dollars in thousands)		Total

Three Months Ended March 31, 2022:
Beginning balance	$	10,399
Provision for credit losses		344
Balance: March 31, 2022	$	10,743

Three Months Ended March 31, 2021:
Beginning balance	$	7,245
Provision for credit losses		1,633
Balance: March 31, 2021	$	8,878

Due to a change in expected cash flows of interest only strip securities, $0.3 million and $1.6 million in allowances were taken in the three months ended March 31, 2022 and 2021, respectively. The allowances were included as a charge in provision for credit losses on the consolidated income statement.

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, 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.

16

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 - UNAUDITED

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


	Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total
March 31, 2022
Amortized Cost:
Collateralized mortgage obligations	$	—		$	319		$	742		$	10,700		$	11,761
Agency mortgage-backed securities		—			4,545			4,123			1,708			10,376
Municipal bonds		—			1,630			37,565			11,542			50,737
SBA securities		39			1,326			2,610			21,717			25,692
Beneficial interests in FHLMC securitization		—			11,125			—			9,506			20,631
Corporate bonds		9,526			10,019			128,371			5,535			153,451
U.S. Treasury		—			897			—			—			897
Total	$	9,565		$	29,861		$	173,411		$	60,708		$	273,545
Weighted average yield		1.06	%		1.99	%		3.34	%		1.90	%		2.80	%
Estimated Fair Value:
Collateralized mortgage obligations	$	—		$	319		$	703		$	10,162		$	11,184
Agency mortgage-backed securities		—			4,431			3,984			1,663			10,078
Municipal bonds		—			1,645			36,217			10,652			48,514
SBA securities		39			1,323			2,607			21,703			25,672
Beneficial interests in FHLMC securitization		—			11,125			—			9,840			20,965
Corporate bonds		9,519			9,748			127,257			5,239			151,763
U.S. Treasury		—			854			—			—			854
Total	$	9,558		$	29,445		$	170,768		$	59,259		$	269,030

17

Table of ~~September 30, 2017:~~Contents

(dollars in thousands)
Less than
1 Year

1 Through
5 years

5 Through
10 Years

After 10
Years

Total

Amortized Cost:

US Treasury securities
$
—

$
499

$
—

$
—

$
499

Weighted average yield

—
%

1.03
%

—
%

—
%

1.03
%

Estimated Fair Value:

US Treasury Securities
$
—

$
495

$
—

$
—

$
495

Agency mortgage backed securities and beneficial interests in FHLMC securitizations are excluded from the above table because such securities are not due at a single maturity date. The weighted average yield of the agency mortgage backed securities and beneficial interests as of September 30, 2017 was 2.54%.

11

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED


	Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total
December 31, 2021
Amortized Cost:
Collateralized mortgage obligations	$	—		$	710		$	802		$	12,350		$	13,862
Agency mortgage-backed securities		—			4,990			24,568			898,988			928,546
Municipal bonds		—			1,625			38,853			11,574			52,052
SBA securities		70			1,613			2,952			23,335			27,970
Beneficial interests in FHLMC securitization		—			11,902			—			9,704			21,606
Corporate bonds		9,534			10,519			128,438			5,536			154,027
U.S. Treasury		—			499			—			—			499
Total	$	9,604		$	31,858		$	195,613		$	961,487		$	1,198,562
Weighted average yield		(2.28)	%		2.06	%		3.03	%		1.63	%		1.84	%
Estimated Fair Value:
Collateralized mortgage obligations	$	—		$	710		$	799		$	12,316		$	13,825
Agency mortgage-backed securities		—			5,082			25,056			898,851			928,989
Municipal bonds		—			1,704			38,865			11,577			52,146
SBA securities		70			1,613			2,953			23,336			27,972
Beneficial interests in FHLMC securitization		—			11,902			—			10,077			21,979
Corporate bonds		9,529			10,499			130,754			5,594			156,376
U.S. Treasury		—			490			—			—			490
Total	$	9,599		$	32,000		$	198,427		$	961,751		$	1,201,777

~~NOTE 4: LOANS~~

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

(dollars in thousands)
September 30,
2017

December 31,
2016

Outstanding principal balance:

Loans secured by real estate:

Residential properties:

Multifamily
$
1,784,061

$
1,178,003

Single family

616,478

602,886

Total real estate loans secured by residential properties

2,400,539

1,780,889

Commercial properties

529,590

476,959

Land and construction

31,304

24,100

Total real estate loans

2,961,433

2,281,948

Commercial and industrial loans

259,958

237,941

Consumer loans

28,469

32,127

Total loans

3,249,860

2,552,016

Premiums, discounts and deferred fees and expenses

7,014

3,693

Total
$
3,256,874

$
2,555,709


	Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total
March 31, 2022
Amortized Cost:
Agency mortgage-backed securities	$	—		$	—		$	18,793		$	901,615		$	920,408
Total	$	—		$	—		$	18,793		$	901,615		$	920,408
Weighted average yield		—	%		—	%		0.82	%		1.77	%		1.75	%

Estimated Fair Value:
Agency mortgage-backed securities	$	—		$	—		$	17,934		$	862,817		$	880,751
Total	$	—		$	—		$	17,934		$	862,817		$	880,751

As

There were 0 securities HTM as of ~~September 30, 2017 and~~ December 31, ~~2016, the principal balances shown above are net~~2021.

18

Table of ~~unaccreted discount related to loans acquired in an acquisition of $1.1 million and $1.6 million, respectively.~~Contents

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

(dollars in thousands)
September 30, 2017

December 31,
2016

Outstanding principal balance:

Total real estate loans
$
285

$
295

Commercial and industrial loans

2,416

4,258

Consumer loans

—

17

Total loans

2,701

4,570

Unaccreted discount on purchased credit impaired loans

(884
)

(1,197
)
Total
$
1,817

$
3,373

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

(dollars in thousands)
Nine Months Ended September 30, 2017

Year Ended December 31,
2016

Beginning balance
$
289

$
582

Accretion of income

(82
)

(185
)
Reclassifications from nonaccretable difference

66

—

Disposals

—

(108
)
Ending balance
$
273

$
289

12

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED

NOTE 5: LOANS

The following is a summary of our loans as of:


	March 31,		December 31,
(dollars in thousands)	2022		2021
Outstanding principal balance:
Loans secured by real estate:
Residential properties:
Multifamily	$	3,284,003	$	2,886,055
Single family		911,438		933,445
Total real estate loans secured by residential properties		4,195,441		3,819,500
Commercial properties		1,264,221		1,309,200
Land and construction		159,533		156,028
Total real estate loans		5,619,195		5,284,728
Commercial and industrial loans		1,754,279		1,598,422
Consumer loans		9,760		10,834
Total loans		7,383,234		6,893,984
Premiums, discounts and deferred fees and expenses		14,230		12,744
Total	$	7,397,464	$	6,906,728

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, 2022:
Real estate loans:
Residential properties	$	1,748		$	—		$	—		$	3,186		$	4,934		$	4,204,812	$	4,209,746
Commercial properties		2,892			936			—			4,401			8,229			1,256,568		1,264,797
Land and construction		—			—			—			—			—			159,231		159,231
Commercial and industrial loans		967			105			—			3,256			4,328			1,749,572		1,753,900
Consumer loans		10			—			—			—			10			9,780		9,790
Total	$	5,617		$	1,041		$	—		$	10,843		$	17,501		$	7,379,963	$	7,397,464

Percentage of total loans		0.08	%		0.01	%		—	%		0.15	%		0.24	%

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	%

Past Due and Still Accruing

Total Past

(dollars in thousands)

30–59 Days

60-89 Days

90 Days
or More

Nonaccrual

Due and
Nonaccrual

Current

Total

September 30, 2017:

Real estate loans:

Residential properties

$
53

$
—

$
—

$
—

$
53

$
2,400,486

$
2,400,539

Commercial properties

762

—

1,330

1,278

3,370

526,220

529,590

Land and construction

—

—

—

—

—

31,304

31,304

Commercial and industrial loans

10,926

—

815

5,216

16,957

243,001

259,958

Consumer loans

—

—

—

—

—

28,469

28,469

Total

$
11,741

$
—

$
2,145

$
6,494

$
20,380

$
3,229,480

$
3,249,860

Percentage of total loans

0.36
%

—
%

0.07
%

0.20
%

0.63
%

December 31, 2016:

Real estate loans:

Residential properties

$
—

$
—

$
—

$
3,759

$
3,759

$
1,777,130


$
1,780,889

Commercial properties

—

—

2,128

1,120

3,248

473,711



476,959

Land and construction

—

—

—

—

—

24,100



24,100

Commercial and industrial loans

—

2

3,800

3,359

7,161

230,780



237,941

Consumer loans

—

—

—

—

—

32,127



32,127

Total

$
—

$
2

$
5,928

$
8,238

$
14,168

$
2,537,848


$
2,552,016

Percentage of total loans

—
%

0.00
%

0.23
%

0.32
%

0.56
%

19

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 - UNAUDITED

The ~~level of delinquent loans and~~following table summarizes our nonaccrual loans ~~have been adversely impacted by~~as of:


	Nonaccrual		Nonaccrual
	with Allowance		with no Allowance
(dollars in thousands)	for Credit Losses		for Credit Losses
March 31, 2022:
Real estate loans:
Residential properties	$	—	$	3,186
Commercial properties		—		4,401
Commercial and industrial loans		1,227		2,029
Total	$	1,227	$	9,616

December 31, 2021:
Real estate loans:
Residential properties	$	—	$	3,280
Commercial properties		—		1,529
Commercial and industrial loans		1,733		1,788
Total	$	1,733	$	6,597

The following table presents the loans acquired from acquisitions. As of September 30, 2017, of the $8.6 million in loans over 90 days past due, including loans on nonaccrual, $3.1 million, or 36% were loans acquired from acquisitions.

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 sixty days or more with respect to principal or interest. The accrual of interest may be continued on a well-secured loan contractually past due sixty days or more with respect to principal or interest if the loan is in the process of collection or collection of the principal and interest is deemed probable. The Bank considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The determination of past due, nonaccrual or impairment status of loans acquired in an acquisition, other than loans deemed purchased impaired, is the same as loans we originate.

~~During the first nine months of 2017 the Company did not have any additional~~ loans classified as troubled debt restructurings (“TDR”)~~. As~~ by accrual and nonaccrual status as of:


	March 31, 2022						December 31, 2021
(dollars in thousands)	Accrual		Nonaccrual		Total		Accrual		Nonaccrual		Total
Residential loans	$	—	$	—	$	—	$	1,200	$	—	$	1,200
Commercial real estate loans		998		1,148		2,146		1,021		1,174		2,195
Commercial and industrial loans		32		1,856		1,888		493		2,030		2,523
Total	$	1,030	$	3,004	$	4,034	$	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
Year Ended December 31, 2021
Commercial and industrial loans	1	$	346	$	346	$	—
Total	1	$	346	$	346	$	—

There were 0 loans modified as TDRs for the first three months of September 30, 2017 and December 31, 2016, the Company had five loans classified as TDR which are included as nonaccrual in the table below. These loans have been paying in accordance with the terms2022.

All of ~~their restructure.~~

September 30, 2017

December 31, 2016

(dollars in thousands)

Accrual

Nonaccrual

Total

Accrual

Nonaccrual

Total

Commercial and industrial

$
225

$
2,522

$
2,747

$
317

$
3,109

$
3,426

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

20

13Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED

NOTE 5:6: ALLOWANCE FOR ~~LOAN~~CREDIT LOSSES

The following is a ~~roll forward~~rollforward of the Bank’s allowance for ~~loan~~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 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

Three Months Ended March 31, 2021:
Real estate loans:
Residential properties	$	5,115	$	918	$	—	$	—	$	—	$	6,033
Commercial properties		8,711		(2,755)		—		—		—		5,956
Land and construction		892		3,070		—		—		—		3,962
Commercial and industrial loans		9,249		(2,379)		—		(214)		406		7,062
Consumer loans		233		(66)		—		—		—		167
Total	$	24,200	$	(1,212)	$	—	$	(214)	$	406	$	23,180

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

(dollars in thousands)

Beginning
Balance

Provision for
Loan Losses

Charge-offs

Recoveries

Ending
Balance

Quarter Ended September 30, 2017:

Real estate loans:

Residential properties

$
8,851

$
469

$
—

$
—

$
9,320

Commercial properties

3,285

281

—

—

3,566

Land and construction

287

66

—

—

353

Commercial and industrial loans

4,093

(119
)

—

(1
)

3,973

Consumer loans

284

4

—

—

288

Total

$
16,800

$
701

$
—

$
(1
)

$
17,500

Nine Months Ended September 30, 2017:

Real estate loans:

Residential properties

$
6,669

$
2,651

$
—

$
—

$
9,320

Commercial properties

2,983

583

—

—

3,566

Land and construction

233

120

—

—

353

Commercial and industrial loans

5,227

(1,492
)

—

238

3,973

Consumer loans

288

—

—

—

288

Total

$
15,400

$
1,862

$
—

$
238

$
17,500

Year Ended December 31, 2016:

Real estate loans:

Residential properties

$
6,799

$
(130
)

$
—

$
—

$
6,669

Commercial properties

1,813

1,051

(50
)

169

2,983

Land and construction

103

130

—

—

233

Commercial and industrial loans

1,649

3,578

—

—

5,227

Consumer loans

236

52

—

—

288

Total

$
10,600

$
4,681

$
(50
)

$
169

$
15,400

21

14Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED

The following table presents the balance in the allowance for ~~loan~~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
March 31, 2022:
Allowance for credit losses:
Real estate loans:
Residential properties	$	110	$	3,088	$	3,198
Commercial properties		7,662		7,974		15,636
Land and construction		69		1,699		1,768
Commercial and industrial loans		1,615		10,515		12,130
Consumer loans		—		90		90
Total	$	9,456	$	23,366	$	32,822
Loans:
Real estate loans:
Residential properties	$	8,524	$	4,201,222	$	4,209,746
Commercial properties		41,664		1,223,133		1,264,797
Land and construction		698		158,533		159,231
Commercial and industrial loans		10,220		1,743,680		1,753,900
Consumer loans		—		9,790		9,790
Total	$	61,106	$	7,336,358	$	7,397,464

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

(dollars in thousands)

Allowance for Loan Losses

Unaccreted
Credit

Evaluated for Impairment

Purchased

Component

Individually

Collectively

Impaired

Total

Other Loans

September 30, 2017:

Allowance for loan losses:

Real estate loans:

Residential properties

$
—

$
9,320

$
—

$
9,320

$
84

Commercial properties

—

3,566

—

3,566

78

Land and construction

—

353

—

353

—

Commercial and industrial loans

1,413

2,560

—

3,973

89

Consumer loans

—

288

—

288

6

Total

$
1,413

$
16,087

$
—

$
17,500

$
257

Loans:

Real estate loans:

Residential properties

$
—

$
2,400,539

$
—

$
2,400,539

$
9,043

Commercial properties

3,603

525,822

165

529,590

10,290

Land and construction

—

31,304

—

31,304

—

Commercial and industrial loans

10,747

247,559

1,652

259,958

14,771

Consumer loans

—

28,469

—

28,469

760

Total

$
14,350

$
3,233,693

$
1,817

$
3,249,860

$
34,864

December 31, 2016:

Allowance for loan losses:

Real estate loans:

Residential properties

$
—

$
6,669

$
—

$
6,669

$
128

Commercial properties

—

2,983

—

2,983

136

Land and construction

—

233

—

233

2

Commercial and industrial loans

—

5,227

—

5,227

147

Consumer loans

—

288

—

288

19

Total

$
—

$
15,400

$
—

$
15,400

$
432

Loans:

Real estate loans:

Residential properties

$
6,093

$
1,774,796

$
—

$
1,780,889

$
12,373

Commercial properties

2,148

474,634

177

476,959

24,796

Land and construction

—

24,100

—

24,100

437

Commercial and industrial loans

753

233,992

3,196

237,941

20,165

Consumer loans

—

32,127

—

32,127

1,266

Total

$
8,994

$
2,539,649

$
3,373

$
2,552,016

$
59,037

22

~~The column labeled “Unaccreted Credit Component Other Loans” represents the amount~~Table of unaccreted credit component discount for loans acquired in an acquisition that were not classified as purchased impaired or individually evaluated for impairment as of the dates indicated, and the stated principal balance of the related loans. The unaccreted credit component discount is equal to 0.74% and 0.73% of the stated principal balance of these loans as of September 30, 2017 and December 31, 2016, respectively. In addition to this unaccreted credit component discount, an additional $0.1 million and $0.5 million of the ALLL has been provided for these loans as of September 30, 2017 and December 31, 2016, respectively.Contents

15

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED

The ~~Bank categorizes loans into~~following tables present risk categories of loans based on ~~relevant information about the ability~~year 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 Bank analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as loans secured 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 Bank 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.

~~Impaired:~~ 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 at the time they are restructured. Purchased credit impaired 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.~~

~~Based on the most recent analysis performed, the risk category of loans by class of loans is as follows~~origination, as of:


													Revolving
(dollars in thousands)	2022		2021		2020		2019		2018		Prior		Loans		Total
March 31, 2022:
Loans secured by Real Estate:
Residential
Multifamily
Pass	$	550,899	$	1,090,423	$	842,736	$	371,305	$	223,541	$	217,085	$	—	$	3,295,989
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	550,899	$	1,090,423	$	842,736	$	371,305	$	223,541	$	217,085	$	—	$	3,295,989

Single Family
Pass	$	47,217	$	298,721	$	111,237	$	46,046	$	54,166	$	275,813	$	72,007	$	905,207
Special Mention		—		—		—		—		—		—		26		26
Substandard		—		—		—		—		—		8,296		228		8,524
Total	$	47,217	$	298,721	$	111,237	$	46,046	$	54,166	$	284,109	$	72,261	$	913,757

Commercial Real Estate
Pass	$	42,530	$	186,500	$	109,749	$	144,150	$	175,153	$	514,500	$	—	$	1,172,582
Special Mention		—		—		2		15,872		12,888		12,889		—		41,651
Substandard		—		—		872		13,637		11,054		25,001		—		50,564
Total	$	42,530	$	186,500	$	110,623	$	173,659	$	199,095	$	552,390	$	—	$	1,264,797

Land and construction
Pass	$	11,784	$	45,496	$	34,478	$	36,069	$	21,438	$	9,268	$	—	$	158,533
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		698		—		—		—		—		698
Total	$	11,784	$	45,496	$	35,176	$	36,069	$	21,438	$	9,268	$	—	$	159,231

Commercial
Pass	$	190,819	$	450,214	$	206,463	$	99,132	$	46,572	$	53,223	$	686,999	$	1,733,422
Special Mention		—		—		941		466		—		—		4,854		6,261
Substandard		4		—		2,734		1,677		1,048		2,766		5,988		14,217
Total	$	190,823	$	450,214	$	210,138	$	101,275	$	47,620	$	55,989	$	697,841	$	1,753,900

Consumer
Pass	$	54	$	1,126	$	28	$	691	$	765	$	159	$	6,829	$	9,652
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		138		—		—		—		138
Total	$	54	$	1,126	$	28	$	829	$	765	$	159	$	6,829	$	9,790

Total loans
Pass	$	843,303	$	2,072,480	$	1,304,691	$	697,393	$	521,635	$	1,070,048	$	765,835	$	7,275,385
Special Mention		—		—		943		16,338		12,888		12,889		4,880		47,938
Substandard		4		—		4,304		15,452		12,102		36,063		6,216		74,141
Total	$	843,307	$	2,072,480	$	1,309,938	$	729,183	$	546,625	$	1,119,000	$	776,931	$	7,397,464

(dollars in thousands)

Pass

Special
Mention

Substandard

Impaired

Total

September 30, 2017:

Real estate loans:

Residential properties

$
2,398,246

$
—

$
2,293

$
—

$
2,400,539

Commercial properties

519,931

5,131

925

3,603

529,590

Land and construction

31,304

—

—

—

31,304

Commercial and industrial loans

246,499

815

1,897

10,747

259,958

Consumer loans

28,469

—

—

—

28,469

Total

$
3,224,449

$
5,946

$
5,115

$
14,350

$
3,249,860

December 31, 2016:

Real estate loans:

Residential properties

$
1,773,296

$
1,500

$
—

$
6,093

$
1,780,889

Commercial properties

470,484

1,913

2,414

2,148

476,959

Land and construction

24,100

—

—

—

24,100

Commercial and industrial loans

219,676

3,625

13,887

753

237,941

Consumer loans

32,127

—

—

—

32,127

Total

$
2,519,683

$
7,038

$
16,301

$
8,994

$
2,552,016

23

16Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED


													Revolving
(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Loans		Total
December 31, 2021:
Loans secured by Real Estate:
Residential
Multifamily
Pass	$	1,092,903	$	868,483	$	418,346	$	265,872	$	141,433	$	108,529	$	—	$	2,895,566
Special Mention		—		—		1,177		—		—		—		—		1,177
Substandard		—		—		—		—		—		—		—		—
Total	$	1,092,903	$	868,483	$	419,523	$	265,872	$	141,433	$	108,529	$	—	$	2,896,743

Single Family
Pass	$	278,337	$	122,530	$	52,995	$	60,559	$	57,174	$	280,216	$	74,934	$	926,745
Special Mention		—		—		—		—		—		—		26		26
Substandard		—		—		—		—		1,873		6,830		278		8,981
Total	$	278,337	$	122,530	$	52,995	$	60,559	$	59,047	$	287,046	$	75,238	$	935,752

Commercial Real Estate
Pass	$	114,678	$	39,135	$	59,426	$	94,930	$	115,614	$	804,295	$	—	$	1,228,078
Special Mention		—		—		23,495		—		—		30,389		—		53,884
Substandard		—		—		2,934		—		2,217		22,462		—		27,613
Total	$	114,678	$	39,135	$	85,855	$	94,930	$	117,831	$	857,146	$	—	$	1,309,575

Land and construction
Pass	$	14,738	$	—	$	17,692	$	31,952	$	2,529	$	88,321	$	—	$	155,232
Special Mention		—		—		—		—		—		694		—		694
Substandard		—		—		—		—		—		—		—		—
Total	$	14,738	$	—	$	17,692	$	31,952	$	2,529	$	89,015	$	—	$	155,926

Commercial
Pass	$	471,431	$	191,405	$	88,050	$	20,709	$	5,531	$	167,201	$	636,507	$	1,580,834
Special Mention		883		1,101		833		—		—		1,370		2,790		6,977
Substandard		—		1,535		1,765		982		192		2,688		2,892		10,054
Total	$	472,314	$	194,041	$	90,648	$	21,691	$	5,723	$	171,259	$	642,189	$	1,597,865

Consumer
Pass	$	54	$	—	$	—	$	1,174	$	—	$	2,617	$	7,022	$	10,867
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Total	$	54	$	—	$	—	$	1,174	$	—	$	2,617	$	7,022	$	10,867

Total loans
Pass	$	1,972,141	$	1,221,553	$	636,509	$	475,196	$	322,281	$	1,451,179	$	718,463	$	6,797,322
Special Mention		883		1,101		25,505		—		—		32,453		2,816		62,758
Substandard		—		1,535		4,699		982		4,282		31,980		3,170		46,648
Total	$	1,973,024	$	1,224,189	$	666,713	$	476,178	$	326,563	$	1,515,612	$	724,449	$	6,906,728

24

~~Impaired loans evaluated individually and any related allowance are as follows as of:~~

With No Allowance Recorded

With an Allowance Recorded

(dollars in thousands)

Unpaid Principal Balance

Recorded Investment

Unpaid Principal Balance

Recorded Investment

Related Allowance

September 30, 2017:

Real estate loans:

Commercial properties

$
3,603

$
3,603

$
—

$
—

$
—

Commercial and industrial loans

501

501

10,246

10,246

1,413

Total

$
4,104

$
4,104

$
10,246

$
10,246

$
1,413

December 31, 2016:

Real estate loans:

Residential properties

$
6,093

$
6,093

$
—

$
—

$
—

Commercial properties

2,148

2,148

—

—

—

Commercial and industrial loans

753

753

—

—

—

Consumer loans

—

—

—

—

—

Total

$
8,994

$
8,994

$
—

$
—

$
—

~~The weighted average annualized average balance~~Table of ~~the recorded investment for impaired loans, beginning from when the loan became impaired, and any interest income recorded on impaired loans after they became impaired is as follows for the:~~Contents

Nine months Ended
September 30, 2017

Year Ended
December 31, 2016

(dollars in thousands)

Average Recorded Investment

Interest Income after Impairment

Average Recorded Investment

Interest Income after Impairment

Real estate loans:

Residential properties

$
2,427

$
20

$
1,970

$
14

Commercial properties

2,201

16

2,252

17

Commercial and industrial loans

3,792

13

1,673

20

Consumer loans

—

—

4

—

Total

$
8,420

$
49

$
5,899

$
51

~~There was no interest income recognized on a cash basis in either 2017 or 2016 on impaired loans.~~

~~NOTE 6: LOAN SALES AND MORTGAGE SERVICING RIGHTS~~

During the first nine months of 2017, FFB recognized $4.3 million of gains on the sale of $286 million of multifamily loans and recorded mortgage servicing rights of $2.0 million on the sale of those loans. As of September 30, 2017 and December 31, 2016, mortgage servicing rights were $3.8 million and $2.2 million, respectively, and the amount of loans serviced for others totaled $620 million and $382 million, respectively. Servicing fees collected in the first nine months of 2017 and in all of 2016 were $0.8 million and $0.3 million, respectively.

17

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September 30, 2017 –~~March 31, 2022 - UNAUDITED

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


					Equipment/					ACL
(dollars in thousands)	Real Estate		Cash		Receivables		Total			Allocation
March 31, 2022:
Loans secured by Real Estate:
Residential properties
Single family	$	2,488	$	—	$	—	$	2,488	$	—
Commercial real estate loans		2,918		—		—		2,918		—
Commercial loans		—		250		—		250		—
Total	$	5,406	$	250	$	—	$	5,656	$	—

December 31, 2021:
Loans secured by Real Estate:
Residential properties
Single family	$	2,568	$	—	$	—	$	2,568	$	—
Commercial loans		—		250		—		250		—
Total	$	2,568	$	250	$	—	$	2,818	$	—

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 the sales of multifamily loans in 2021, FFB retained servicing rights for the majority of these loans and recognized mortgage servicing rights as part of the transactions. As of March 31, 2022 and December 31, 2021, mortgage servicing rights were $9.5 million and $6.8 million, respectively. The mortgage servicing rights as of March 31, 2022 and December 31, 2021 are net of $3.1 million and $1.9 million valuation allowances, respectively. The amount of loans serviced for others totaled $1.2 billion and $1.7 billion at March 31, 2022 and December 31, 2021, respectively. Servicing fees for the first three months of 2022 and 2021 were $0.5 million and $0.5 million, respectively.

NOTE 8: DEPOSITS

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

	September 30, 2017					December 31, 2016

											March 31, 2022				December 31, 2021
													Weighted				Weighted
(dollars in thousands)	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Average Rate		Amount		Average Rate

Demand deposits:
Noninterest-bearing	$	1,096,472		—		$	661,781		—		$	3,296,118	—		$	3,280,455	—
Interest-bearing		278,917		0.654	%		194,274		0.471	%		2,429,202	0.104	%		2,242,684	0.070	%
Money market and savings		1,010,298		0.854	%		941,344		0.677	%		2,592,437	0.271	%		2,620,336	0.275	%
Certificates of deposits		883,039		1.094	%		629,396		0.589	%		639,761	0.200	%		668,485	0.145	%
Total	$	3,268,726		0.615	%	$	2,426,795		0.453	%	$	8,957,518	0.121	%	$	8,811,960	0.111	%

At ~~September 30, 2017,~~March 31, 2022, of the ~~$266.7~~$357 million of certificates of deposits of $250,000 or more, ~~$186.9~~$352 million mature within one year and ~~$79.8~~$5 million mature after one year. Of the ~~$616.4~~$282 million of certificates of deposit of less than $250,000, ~~$534.5~~$223 million mature within one year and ~~$81.9~~$59 million mature after one year. At December 31, ~~2016,~~2021, of the ~~$189.9~~$367 million of certificates of deposits of $250,000 or more, ~~$182.8~~$361 million mature within one year and ~~$7.1~~$6 million mature after one year. Of the ~~$439.5~~$301 million of certificates of deposit of less than $250,000, ~~$416.3~~$229 million mature within one year and ~~$23.2~~$72 million mature after one year.

25

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2022 - UNAUDITED

NOTE 8:9: BORROWINGS

At ~~September 30, 2017,~~March 31, 2022, our borrowings consisted of ~~$406~~$173 million in subordinated notes and $153 million of ~~overnight FHLB advances at the Bank~~repurchase agreements. At December 31, 2021, our borrowings consisted of $26 million in subordinated notes, $166 million of repurchase agreements, and ~~$15~~$18.5 million of borrowings under a holding company line of credit. ~~At December~~As of March 31, ~~2016, our borrowings consisted~~2022, $150 million of ~~$1.3 billion~~the subordinated notes are fixed-to-floating rate notes that mature in February 2032. The notes will initially bear a rate of ~~overnight~~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. $23 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.

As a matter of practice, the Bank provides substantially all of its qualifying loans as collateral to the FHLB ~~advances. The~~or the Federal Reserve Bank. FHLB advances ~~were paid~~are collateralized primarily by loans secured by single family, multifamily, and commercial real estate properties with a carrying value of $4.4 billion as of March 31, 2022. The Bank’s total borrowing capacity from the FHLB at March 31, 2022 was $2.8 billion. The Bank had in ~~full in~~place $278 million of letters of credit from the ~~early part~~FHLB which are used to meet collateral requirements for borrowings from the State of ~~October 2017~~California and January 2017, respectively, and bore interest rates of 1.14% and 0.56%, respectively. Because the Bank utilizes overnight borrowings, the balance of outstanding borrowings fluctuates on a daily basis. The average balance of overnight borrowings during the first nine months of 2017 was $549.4 million, as compared to $507.0 million during all of 2016.local agencies.

During ~~the first quarter of~~ 2017, ~~the Company~~FFI entered into a loan agreement with an unaffiliated lender that provides for a revolving line of credit for up to ~~$25 million. This line of credit was amended in the second quarter of 2017 to increase the maximum loan amount to $50~~$20 million. The loan agreement matures in ~~five years,~~February 2023, with an option to extend the maturity date subject to certain conditions, and bears interest at ~~90 day LIBOR~~Prime rate, plus ~~350~~50 basis points ~~(3.50%~~(0.50%). FFI’s obligations under the loan agreement are secured by, among other things, a pledge of all of its equity in FFB. We are required to meet certain financial covenants during the term of the loan, including minimum capital levels and limits on classified assets. As of March 31, 2022 and December 31, 2021, FFI was in compliance with the covenants on this loan agreement.

The ~~Company’s obligations under~~Bank also has $245 million available borrowing capacity through unsecured fed funds lines, ranging in size from $20 million to $100 million, with 5 other financial institutions, and a $148 million secured line with the ~~loan agreement are~~Federal Reserve Bank, secured by ~~among other things, a pledge~~single family loans. NaN of ~~all~~these lines had outstanding borrowings at March 31, 2022 or December 31, 2021. Combined, the Bank’s unused lines of ~~its equity in FFB. As~~credit as of ~~September 30, 2017,~~March 31, 2022 and December 31, 2021 were $3.2 billion and $3.1 billion, respectively.

26

Table of Contents

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~balance was $15 million at a rate of 4.80%.~~Three Months Ended March 31, 2022 - UNAUDITED

NOTE 9:10: EARNINGS PER SHARE

Basic earnings per share excludes dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if contracts to issue common stock were exercised or converted into common stock that would then share in earnings. The following table sets forth the Company’s unaudited earnings per share calculations for the ~~periods indicated:~~three months ended March 31:

	Quarter Ended September 30, 2017				Quarter Ended September 30, 2016

									Three Months Ended				Three Months Ended
									March 31, 2022				March 31, 2021
(dollars in thousands, except per share amounts)	Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted

Net income	$	9,580	$	9,580	$	9,058	$	9,058	$	30,836	$	30,836	$	22,355	$	22,355

Basic common shares outstanding		34,565,949		34,565,949		32,514,016		32,514,016		56,465,855		56,465,855		44,707,718		44,707,718
Effect of contingent shares issuable				1,592				1,592
Effect of options and restricted stock				692,091				1,060,286
Effect of options, restricted stock and contingent shares issuable												99,990				304,487
Diluted common shares outstanding				35,259,632				33,575,894				56,565,845				45,012,205

Earnings per share	$	0.28	$	0.27	$	0.28	$	0.27	$	0.55	$	0.55	$	0.50	$	0.50

18

~~FIRST FOUNDATION INC.~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~For the Nine Months Ended September 30, 2017 – UNAUDITED~~

Nine Months Ended
September 30, 2017

Nine Months Ended
September 30, 2016

(dollars in thousands, except per share amounts)
Basic

Diluted

Basic

Diluted

Net income
$
25,309


$
25,309


$
16,786


$
16,786

Basic common shares outstanding

33,671,327

33,671,327

32,264,224

32,264,224

Effect of contingent shares issuable

1,592

1,592

Effect of options and restricted stock

926,894

1,099,798

Diluted common shares outstanding

34,599,813

33,365,614

Earnings per share
$
0.75

$
0.73

$
0.52

$
0.50

Based on a weighted average basis, stock options and restricted stock units to purchase ~~8,802~~99,990 and 102,708 shares of common stock were excluded for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2022 and 2021, respectively, because their effect would have been anti-dilutive.

NOTE ~~10:~~11: SEGMENT REPORTING

For the ~~quarter and nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, the Company had ~~two~~2 reportable business segments: Banking (FFB, FFIS, Blue Moon, and ~~FFIS)~~FFPF) and Wealth Management (FFA). The results of FFI and any elimination entries are included in the column labeled Other. The following tables show key operating results for each of our business segments used to arrive at our consolidated totals for the following periods:


			Wealth
(dollars in thousands)	Banking		Management		Other		Total
Three Months Ended March 31, 2022:
Interest income	$	79,144	$	—	$	—	$	79,144
Interest expense		3,413		—		1,237		4,650
Net interest income		75,731		—		(1,237)		74,494
Provision for credit losses		(792)		—		—		(792)
Noninterest income		7,531		8,345	��	(449)		15,427
Noninterest expense		40,101		6,644		873		47,618
Income (loss) before taxes on income	$	43,953	$	1,701	$	(2,559)	$	43,095

Three Months Ended March 31, 2021:
Interest income	$	59,138	$	—	$	—	$	59,138
Interest expense		4,848		—		61		4,909
Net interest income		54,290		—		(61)		54,229
Provision for credit losses		360		—		—		360
Noninterest income		5,309		6,923		(324)		11,908
Noninterest expense		28,579		5,731		201		34,511
Income (loss) before taxes on income	$	30,660	$	1,192	$	(586)	$	31,266

(dollars in thousands)

Banking

Wealth Management

Other

Total

Quarter ended September 30, 2017:

Interest income

$
34,877

$
1

$
—

$
34,878

Interest expense

6,210

—

228

6,438

Net interest income

28,667

1

(228
)

28,440

Provision for loan losses

701

—

—

701

Noninterest income

3,955

6,132

(224
)

9,863

Noninterest expense

17,333

5,096

964

23,393

Income (loss) before taxes on income

$
14,588

$
1,037

$
(1,416
)

$
14,209

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Quarter ended September 30, 2016:

Interest income

$
26,004

$
—

$
—

$
26,004

Interest expense

2,841

—

—

2,841

Net interest income

23,163

—

—

23,163

Provision for loan losses

1,231

—

—

1,231

Noninterest income

9,923

5,319

(163
)

15,079

Noninterest expense

16,134

4,697

705

21,536

Income (loss) before taxes on income

$
15,721

$
622

$
(868
)

$
15,475

19

FIRST FOUNDATION INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the ~~Nine~~Three Months Ended ~~September~~March 31, 2022 - UNAUDITED

NOTE 12: SUBSEQUENT EVENTS

Cash Dividend

On April 26, 2022, the Board of Directors of the Company declared a quarterly cash dividend of $0.11 per common share to be paid on May 16, 2022 to stockholders of record as of the close of business on May 6, 2022.

Stock Repurchase Program

On April 26, 2022, the Company announced that its Board of Directors authorized a stock repurchase program, pursuant to which the Company may repurchase up to $75 million of its common stock. This plan has no stated expiration date for the repurchases. This stock repurchase program replaces and supersedes the stock repurchase program approved by the Board of Directors on October 30, ~~2017 – UNAUDITED~~2018, which had authorized the Company to repurchase up to 2,200,000 shares of its common stock, and which 0 additional shares were repurchased during the quarter ended March 31, 2022.

Banking

Wealth Management

Other

Total

Nine months ended September 30, 2017:

Interest income

$
98,889

$
1

$
—

$
98,890

Interest expense

16,062

—

435

16,497

Net interest income

82,827

1

(435
)

82,393

Provision for loan losses

1,862

—

—

1,862

Noninterest income

10,636

17,334

(627
)

27,343

Noninterest expense

51,506

15,328

3,481

70,315

Income (loss) before taxes on income

$
40,095

$
2,007

$
(4,543
)

$
37,559

Nine months ended September 30, 2016:

Interest income

$
72,275

$
—

$
—

$
72,275

Interest expense

7,830

—

—

7,830

Net interest income

64,445

—

—

64,445

Provision for loan losses

2,881

—

—

2,881

Noninterest income

11,505

15,917

(448
)

26,974

Noninterest expense

43,746

14,536

2,521

60,803

Income (loss) before taxes on income

$
29,323

$
1,381

$
(2,969
)

$
27,735

I~~TEM 2.~~

28

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Table of Contents

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

The following discussion and analysis is intended to facilitate the understanding and assessment of significant changes and trends in our businesses that accounted for the changes in our results of operations in the ~~quarter and nine~~three months ended ~~September 30, 2017~~March 31, 2022 as compared to our results of operations in the ~~quarter and nine~~three months ended ~~September 30, 2016;~~March 31, 2021; and our financial condition at ~~September 30, 2017~~March 31, 2022 as compared to our financial condition at December 31, ~~2016.~~2021. 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, ~~2016,~~2021, and the notes thereto, which are set forth in Item 8 of our Annual Report on Form 10-K ~~(our “2016~~(“2021 10-K”) which we filed with the Securities and Exchange Commission (“SEC”) on ~~March 15, 2017.~~February 28, 2022.

Forward-Looking Statements

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

The principal risks and uncertainties to which our businesses are subject are discussed in ~~Item 1A in our 2016 10-K and in~~ this Item 2 ~~below.~~and under the heading “Risk Factors” in our 2021 10-K. Therefore, you are urged to read not only the information contained in this Item 2, but also the risk factors and other cautionary information contained under the heading “Risk Factors” in ~~Item 1A of~~ our ~~2016~~2021 10-K, which qualify the forward-looking statements contained in this report.

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

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 ~~2016~~2021 10-K, except as may otherwise be required by applicable law or government regulations.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and accounting practices in the banking industry. Certain of those accounting policies are considered critical accounting policies, because they require us to make estimates and assumptions regarding

29

Table of Contents

circumstances or trends that could materially affect the value of those assets, such as economic conditions or trends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets. Those estimates and assumptions are made based on current information available to us regarding those economic conditions or trends or other circumstances. If changes were to occur in the events, trends or other circumstances on which our estimates or assumptions were based, or other unanticipated events were to occur that might affect our operations, we may be required under GAAP to adjust our earlier estimates and to reduce the carrying values of the affected assets on our balance sheet, generally by means of charges against income, which could also affect our results of operations in the fiscal periods when those charges are recognized.

Allowance for Credit Losses – 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, 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, 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. We record as a “deferred tax asset” on our balance sheet an amount equal to the tax credit and tax loss carryforwards and tax deductions (collectively “tax benefits”) that we believe will be available to us to offset or reduce income taxes in future periods. Under applicable federal and state income tax laws and regulations, tax benefits related to tax loss carryforwards will expire if they cannot be used within specified periods of time. Accordingly, the ability to fully use our deferred tax asset related to tax loss carryforwards to reduce income taxes in the future depends on the amount of taxable income that we generate during those time periods. At least once each year, or more frequently, if warranted, we make estimates of future taxable income that we believe we are likely

30

Table of Contents

to generate during those future periods. If we conclude, on the basis of those estimates and the amount of the tax benefits available to us, that it is more likely than not that we will be able to fully utilize those tax benefits prior to their expiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we conclude on the basis of those estimates and the amount of the tax benefits available to us that it has become more likely than not that we will be unable to utilize those tax benefits in full prior to their expiration, then we would establish a valuation allowance to reduce

the deferred tax asset on our balance sheet to the amount with respect to which we believe it is still more likely than not that we will be able to use to offset or reduce taxes in the future. The establishment of such a valuation allowance, or any increase in an existing valuation allowance, would be effectuated through a charge to the provision for income taxes or a reduction in any income tax credit for the period in which such valuation allowance is established or increased.

~~Allowance for Loan and Lease Losses.~~ Our ALLL is established through a provision for loan 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 are charged against the ALLL when management believes that collectability of the principal is unlikely. The ALLL 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 ALLL may be necessary if there are significant changes in economic or other conditions that can affect the collectability in full of loans in our loan portfolio.

~~Adoption of new or revised accounting standards.~~ For some accounting standards, we may elect to take advantage of the extended transition period afforded by the JOBS Act, for the implementation of new or revised accounting standards. As a result, we may not be required to comply with new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies or we cease to be an “emerging growth” company as defined in the JOBS Act. As a result of this election, our financial statements may not be comparable to the financials statements of companies that comply with public company effective dates.

We have two business segments, “Banking” and ~~“Investment Management and Wealth Planning” (“Wealth Management”).~~“Wealth Management.” Banking includes the operations of FFB, FFIS, Blue Moon, and ~~FFIS 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 ~~and Overview~~

~~We experienced strong growth during~~Our results of operations for the first ~~nine~~three months of 2017 with loan originations of $1.2 billion, deposit growth of $842 million and a $585 million increase in our assets under management (“AUM”) in Wealth Management. Revenues and income before taxes continue to increase due to the higher level of interest earnings assets.2022 include:

●

Total loans, including loans held for sale, increased $491 million in the three months ended March 31, 2022 when compared to the three months ended March 31, 2021 as a result of $1.1 billion of originations, which was partially offset by payoffs or scheduled payments of $657 million.

●

During the three months ended March 31, 2022, total deposits increased by $146 million and total revenues (net interest income and noninterest income) increased by 36% when compared to the three months ended March 31, 2021.

During the ~~first nine months~~second quarter of ~~2017,~~2022, the Company ~~sold 1.3~~authorized a stock repurchase program, where the Company may repurchase up to $75 million ~~shares~~ of its common stock ~~through its ATM offering at an average price of $16.77 per share, generating net proceeds of $21.8 million.~~

~~After a determination that additional investment would not provide adequate returns,~~from time to time in open market transactions or in privately negotiated transactions as permitted under applicable rules and regulations. The extent to which the Company ~~has decided to discontinue~~repurchases its ~~property~~shares and ~~casualty insurance activities effective~~the timing of such repurchases will depend on market conditions and other considerations as may be considered in the ~~fourth quarter of 2017.~~Company’s sole discretion. The ~~Company~~stock repurchase program, which has no stated expiration date, does not ~~expect~~obligate the Company to ~~incur~~repurchase any ~~significant costs as a result~~specific number of ~~this action.~~shares and may be modified, suspended or discontinued at any time without notice.

Results of Operations

Our net income for the quarter and nine months ending September 30, 2017 was $9.6 million and $25.3 million, respectively as compared to $9.1 million and $16.8 million for the corresponding periods in 2016. Income before taxes for the quarter and nine months ending September 30, 2017 was $14.2 million and $37.6 million, respectively, as compared to $15.5 million and $27.7 million for the corresponding periods in 2016.

The effective tax rate for the first nine months of 2017 was 32.6% as compared to 39.5% for the first nine months of 2016, and as compared to a statutory rate of approximately 41.5%, as the Company benefited from reductions in taxes on income related to excess tax benefits resulting from the exercise of stock awards in both periods.

The primary sources of revenue for Banking are net interest income, fees from its deposits and trust ~~and insurance~~ services, gains on sales of loans, certain loan fees, and consulting fees. The primary ~~source~~sources of revenue for Wealth Management isare asset management fees assessed on the balance of ~~AUM.~~assets under management (“AUM”). Compensation and benefit costs, which represent the largest component of noninterest expense, accounted for ~~58%~~61% and 78%, respectively, of the total noninterest expense for Banking and Wealth Management in the ~~first nine~~three months ended March 31, 2022.

31

Table of ~~2017.~~Contents

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


												Wealth
(dollars in thousands)	Banking		Wealth Management		Other			Total		Banking		Management		Other		Total
2017:
2022:
Interest income	$	34,877	$	1	$	—		$	34,878	$	79,144	$	—	$	—	$	79,144
Interest expense		6,210		—		228			6,438		3,413		—		1,237		4,650
Net interest income		28,667		1		(228	)		28,440		75,731		—		(1,237)		74,494
Provision for loan losses		701		—		—			701
Provision for credit losses											(792)		—		—		(792)
Noninterest income		3,955		6,132		(224	)		9,863		7,531		8,345		(449)		15,427
Noninterest expense		17,333		5,096		964			23,393		40,101		6,644		873		47,618
Income (loss) before taxes on income	$	14,588	$	1,037	$	(1,416	)	$	14,209	$	43,953	$	1,701	$	(2,559)	$	43,095
2016:

2021:
Interest income	$	26,004	$	—	$	—		$	26,004	$	59,138	$	—	$	—	$	59,138
Interest expense		2,841		—		—			2,841		4,848		—		61		4,909
Net interest income		23,163		—		—			23,163		54,290		—		(61)		54,229
Provision for loan losses		1,231		—		—			1,231
Provision for credit losses											360		—		—		360
Noninterest income		9,923		5,319		(163	)		15,079		5,309		6,923		(324)		11,908
Noninterest expense		16,134		4,697		705			21,536		28,579		5,731		201		34,511
Income (loss) before taxes on income	$	15,721	$	622	$	(868	)	$	15,475	$	30,660	$	1,192	$	(586)	$	31,266

General. ~~Consolidated~~Our net income and income before taxes ~~for~~in the ~~third quarter of 2017 was $14.2~~three months ended March 31, 2022 were $30.8 million and $43.1 million, respectively, as compared to ~~$15.5~~$22.4 million ~~for~~and $31.3 million, respectively, in the ~~third quarter of 2016.~~three months ended March 31, 2021. The ~~decrease~~$11.8 million increase in income before taxes was the result of a ~~$1.1~~$13.3 million ~~decrease~~increase in income before taxes for Banking and a $0.5 million increase in corporate expenses which were partially offset by a $0.4 million increase in income before taxes for Wealth Management. The decrease in Banking was due to lower noninterest income and higher noninterest expenses which were partially offset by higher net interest income and a lower provision for loan losses.The increase in Wealth Management was due to higher noninterest income which was partially offset by higher noninterest expenses. Corporate interest expenses are related to the holding company line of credit which did not exist in 2016. Corporate noninterest expenses increased by $0.3 million due primarily to costs incurred related to the pending acquisition of Community 1st Bancorp. We expect to incur approximately $3.8 million in costs related to the acquisition of Community 1st Bancorp in the fourth quarter.

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

(dollars in thousands)

Banking

Wealth Management

Other

Total

2017:

Interest income

$
98,889

$
1

$
—

$
98,890

Interest expense

16,062

—

435

16,497

Net interest income

82,827

1

(435
)

82,393

Provision for loan losses

1,862

—

—

1,862

Noninterest income

10,636

17,334

(627
)

27,343

Noninterest expense

51,506

15,328

3,481

70,315

Income (loss) before taxes on income

$
40,095

$
2,007

$
(4,543
)

$
37,559

2016:

Interest income

$
72,275

$
—

$
—

$
72,275

Interest expense

7,830

—

—

7,830

Net interest income

64,445

—

—

64,445

Provision for loan losses

2,881

—

—

2,881

Noninterest income

11,505

15,917

(448
)

26,974

Noninterest expense

43,746

14,536

2,521

60,803

Income (loss) before taxes on income

$
29,323

$
1,381

$
(2,969
)

$
27,735

~~General.~~ Consolidated income before taxes for the first nine months of 2017 was $37.6 million as compared to $27.7 million for the first nine months of 2016. The increase in income before taxes was the result of a $10.8 million increase in income before taxes for Banking and a $0.6 million increase in income before taxes for Wealth Management, ~~which were~~offset partially ~~offset~~ by a ~~$1.4~~$2.0 million increase in corporate expenses.The increase in Banking was due to higher net interest income, higher noninterest income and a lower provision for ~~loan losses which was partially offset by lower noninterest income and higher noninterest expenses.~~credit losses. The increase in Wealth Management was due to higher noninterest ~~income which~~income. The increase in corporate expenses was ~~partially offset~~due to higher interest expense as a result of the subordinated notes assumed by the Company in connection with the TGRF acquisition in the fourth quarter of 2021, the $150 million of subordinated notes issued by the Company in the first quarter of 2022, and higher noninterest ~~expense. Corporate interest expenses are related to the holding company line~~expenses.

32

Table of credit which did not exist in 2016. Corporate noninterest expenses increased by $1.0 million due to costs related to strategic activities, including the Company’s at the market stock offering and the proposed acquisition of Community 1st Bancorp, higher charitable contributions and other increases in costs, including legal and marketing.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 ~~yield on interest-earning assets:~~interest margin:


	Three Months Ended March 31:
	2022						2021
	Average				Average		Average				Average
(dollars in thousands)	Balances		Interest		Yield /Rate		Balances		Interest		Yield /Rate
Interest-earning assets:
Loans	$	7,529,037	$	72,027	3.84	%	$	5,383,745	$	53,531	3.99	%
Securities AFS		1,197,859		6,360	2.12	%		772,204		5,206	2.70	%
FHLB stock, fed funds, and deposits		1,212,777		757	0.25	%		714,379		401	0.23	%
Total interest-earning assets		9,939,673		79,144	3.19	%		6,870,328		59,138	3.45	%
Noninterest-earning assets:
Nonperforming assets		10,124						18,153
Other		449,275						189,640
Total assets	$	10,399,072					$	7,078,121
Interest-bearing liabilities:
Demand deposits	$	2,359,334	$	1,051	0.18	%	$	970,431	$	874	0.37	%
Money market and savings		2,611,007		1,872	0.29	%		2,342,511		2,582	0.45	%
Certificates of deposit		654,279		435	0.27	%		861,048		1,167	0.55	%
Total interest-bearing deposits		5,624,620		3,358	0.24	%		4,173,990		4,623	0.45	%
Borrowings		301,236		1,292	1.74	%		206,085		286	0.56	%
Total interest-bearing liabilities		5,925,856		4,650	0.32	%		4,380,075		4,909	0.45	%
Noninterest-bearing liabilities:
Demand deposits		3,315,139						1,930,737
Other liabilities		94,484						66,854
Total liabilities		9,335,479						6,377,666
Shareholders’ equity		1,063,593						700,455
Total liabilities and equity	$	10,399,072					$	7,078,121
Net Interest Income			$	74,494					$	54,229
Net Interest Rate Spread					2.87	%					3.00	%
Net Interest Margin					3.00	%					3.16	%

Quarter Ended September 30:

2017

2016

(dollars in thousands)

Average
Balances

Interest

Average
Yield / Rate

Average
Balances

Interest

Average
Yield / Rate

Interest-earning assets:

Loans

$
3,345,159

$
31,236

3.73
%

$
2,357,956

$
22,231

3.77
%
Securities

481,741

3,023

2.51
%

508,193

3,202

2.52
%
Fed funds, FHLB stock, and deposits

103,960

619

2.36
%

77,731

571

2.92
%
Total interest-earning assets

3,930,860

34,878

3.55
%

2,943,880

26,004

3.53
%

Noninterest-earning assets:

Nonperforming assets

5,250

8,794

Other

31,869

38,379

Total assets

$
3,967,979

$
2,991,053

Interest-bearing liabilities:

Demand deposits

$
271,270

440

0.64
%

$
191,133

213

0.44
%
Money market and savings

1,027,892

2,194

0.85
%

761,778

1,307

0.68
%
Certificates of deposit

858,120

2,265

1.05
%

568,068

906

0.63
%
Total interest-bearing deposits

2,157,282

4,899

0.90
%

1,520,979

2,426

0.63
%
Borrowings

454,273

1,539

1.34
%

362,576

415

0.46
%
Total interest-bearing liabilities

2,61,555

6,438

0.98
%

1,883,555

2,841

0.60
%

Noninterest-bearing liabilities:

Demand deposits

1,013,753

806,861

Other liabilities

17,281

18,578

Total liabilities

3,642,589

2,708,994

Shareholders’ equity

325,390

282,059

Total liabilities and equity

$
3,967,979

$
2,991,053

Net Interest Income

$
28,440

$
23,163

Net Interest Rate Spread

2.57
%

2.93
%

Net Yield on Interest-earning Assets

2.90
%

3.15
%

33

Nine Months Ended September 30:

2017

2016

(dollars in thousands)

Average
Balances

Interest

Average
Yield / Rate

Average
Balances

Interest

Average
Yield / Rate

Interest-earning assets:

Loans

$
3,174,155

$
87,709

3.69
%

$
2,143,315

$
61,362

3.82
%
Securities

496,756

9,180

2.46
%

525,089

9,423

2.39
%
Fed funds, FHLB stock, and deposits

87,216

2,001

3.07
%

62,147

1,490

3.20
%
Total interest-earning assets

3,758,127

98,890

3.51
%

2,730,551

72,275

3.53
%

Noninterest-earning assets:

Nonperforming assets

6,227

6,682

Other

30,433

35,450

Total assets

$
3,794,787

$
2,772,683

Interest-bearing liabilities:

Demand deposits

$
259,660

1,100

0.57
%

$
223,490

779

0.47
%
Money market and savings

1,003,696

5,934

0.79
%

636,612

3,087

0.65
%
Certificates of deposit

780,228

5,069

0.87
%

509,790

2,328

0.61
%
Total interest-bearing deposits

2,043,584

12,103

0.79
%

1,369,892

6,194

0.60
%
Borrowings

588,590

4,394

1.00
%

499,191

1,636

0.44
%
Total interest-bearing liabilities

2,632,174

16,497

0.84
%

1,869,083

7,830

0.56
%

Noninterest-bearing liabilities:

Demand deposits

842,312

615,049

Other liabilities

15,233

15,573

Total liabilities

3,489,719

2,499,705

Shareholders’ equity

305,068

272,978

Total liabilities and equity

$
3,794,787

$
2,772,683

Net Interest Income

$
82,393

$
64,445

Net Interest Rate Spread

2.67
%

2.97
%

Net Yield on Interest-earning Assets

2.92
%

3.15
%

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 ~~quarter and nine~~three months ended ~~September 30, 2017,~~March 31, 2022, as compared to ~~corresponding periods in 2016:~~the three months ended March 31, 2021:

	Quarter Ended September 30, 2017 vs. 2016									Nine Months Ended September 30, 2017 vs. 2016



																			Increase (Decrease) due to				Net Increase
(dollars in thousands)	Increase (Decrease) due to:										Increase (Decrease) due to:								Volume		Rate		(Decrease)
		Volume			Rate			Total			Volume			Rate			Total
Interest earned on:
Loans	$	9,234		$	(229	)	$	9,005		$	28,572		$	(2,225	)	$	26,347		$	20,546	$	(2,050)	$	18,496
Securities		(167	)		(12	)		(179	)		(528	)		285			(243	)		2,437		(1,283)		1,154
Fed funds, FHLB stock, and deposits		170			(122	)		48			575			(64	)		511
Cash, FHLB stock, fed funds and deposits																				313		43		356
Total interest-earning assets		9,237			(363	)		8,874			28,619			(2,004	)		26,615			23,296		(3,290)		20,006
Interest paid on:
Demand deposits		107			120			227			144			177			321			794		(617)		177
Money market and savings		524			363			887			2,073			774			2,847			283		(992)		(709)
Certificates of deposit		595			764			1,359			1,523			1,218			2,741			(228)		(505)		(733)
Borrowings		143			981			1,124			347			2,411			2,758			172		834		1,006
Total interest-bearing liabilities		1,369			2,228			3,597			4,087			4,580			8,667			1,021		(1,280)		(259)
Net interest income	$	7,868		$	(2,591	)	$	5,277		$	24,532		$	(6,584	)	$	17,948		$	22,275	$	(2,010)	$	20,265

Net interest income ~~for Banking~~ increased ~~24%~~37% from ~~$23.2~~$54.2 million in the ~~third quarter of 2016,~~three months ended March 31, 2021, to ~~$28.7~~$74.5 million in the ~~third quarter of 2017~~three months ended March 31, 2022 due to a ~~34%~~45% increase in interest-earning assets ~~which was partially offset by a~~and decrease ~~in our net interest rate spread. The decrease in the net interest rate spread from 2.93% in the third quarter of 2016 to 2.57% in the third quarter of 2017 was due to an increase~~ in the cost of interest bearing liabilities. The cost of interest-bearing liabilities decreased, from ~~0.60%~~0.45% in the ~~third quarter of 2016~~three months ended March 31, 2021, to ~~0.98%~~0.32% in the ~~third quarter of 2017.~~three months ended March 31, 2022. The ~~yield on interest-earning assets increased due to a higher proportion of loans even though the yield on loans decreased slightly due to prepayments of higher yielding loans. The increase~~decrease in the cost of interest-bearing liabilities was due to ~~increased~~decreased costs of interest-bearing deposits, resulting from ~~increases~~decreases in deposit market rates, which were partially offset by an increase in borrowings. The average balance outstanding on borrowings increased from $206.1 million in the three months ended March 31, 2021, to $301.2 million in the three months ended March 31, 2022. The increase in borrowings was due to the issuance of $150 million in subordinated notes in the first quarter of 2022, and ~~increased costs~~the assumption of ~~borrowings~~$165 million in repurchase agreements and $23 million in subordinated notes as a result of the TGRF acquisition in the fourth quarter of 2021. The net interest margin decreased, from 3.16% in the three months ended March 31, 2021, to 3.00% in the three months ended March 31, 2022. The decrease in the interest margin was due to an increase in average excess liquidity during the quarter brought on by the acquisition of TGRF, bringing our average fed funds and cash deposit balances up by $498 million compared to the first three months of 2021, earning an average rate of 0.25%. The yield on ~~FHLB advances increased from 0.46%~~securities decreased due a decrease in ~~the third quarter of 2016 to 1.20% in the third quarter of 2017. In addition, the Company had~~market rates. The average balance outstanding ~~borrowings on its~~under the holding company line of credit ~~during the third quarter of 2017.~~

~~Net interest income for Banking increased 29%~~decreased from ~~$64.4~~$6.6 million in the ~~first nine~~three months ~~of 2016,~~ended March 31, 2021 to ~~$82.8~~$0.4 million in the ~~first nine~~three months of 2017 due to a 38% increase in interest-earning assets, which was partially offset by a decrease in our net interest rate spread. The decrease in the net interest rate spread from 2.97% in the first nine months of 2016 to 2.67% in the first nine months of 2017 was due to a decrease in the yield on interest-earning assets and an increase in the cost of interest-bearing liabilities. The yield on interest-earning assets decreased from 3.53% to 3.51% due to a decrease in the yield on loans due to prepayments of higher yielding loans and the addition of loans at market rates in the latter half of 2016 which were lower than the then-current yield on our loan portfolio. The cost of interest-bearing liabilities increased from 0.56% to 0.84% due to increased costs of interest-bearing deposits, resulting from increases in deposit market rates, and increased costs of borrowings as the average rate on FHLB advances increased from 0.44% in the first nine months of 2016 to 0.92% in the first nine months of 2017. In addition, the Company borrowed on its holding company line of credit during the first nine months of 2017. ended March 31, 2022.

Provision for ~~loan~~credit losses.The provision for ~~loan~~credit losses represents our estimate of the amount necessary to be charged against the current period’s earnings to maintain the ~~ALLL~~ACL for loans and investments at a level that we consider adequate in relation to the estimated losses inherent in the loan ~~portfolio.~~and investment portfolios. The provision for ~~loan~~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 reversal of provision for credit losses in the ~~quarter and nine~~three months ended ~~September 30, 2017, we recorded provisions for loan losses of $0.7~~March 31, 2022 was $0.8 million, and ~~$1.9 million, respectively, as compared to $1.2 million and $2.9 million, respectively,~~the provision for credit losses in the ~~quarter and nine~~three months ended ~~September 30, 2016.~~March 31, 2021 was $0.4 million. The ~~lower~~decrease in provision ~~recorded~~for credit losses in the ~~third quarter~~three months ended March 31, 2022 was a result of ~~2017 as compared to the corresponding period of 2016 reflected the 46% lower growth in outstanding loans~~improvement in the ~~third quarter~~economic scenario outlook.

34

Table of ~~2017 as compared to the third quarter of 2016. During the first nine months of 2017, the Bank realized $0.2 million of recoveries and experienced improving credit trends in its criticized loans.~~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 ~~quarter and nine~~three months ended ~~September 30:~~March 31, 2022 and 2021:


(dollars in thousands)	2017		2016			2022		2021
Quarter Ended September 30:

Three Months Ended March 31:
Trust fees	$	825	$	799		$	2,108	$	1,668
Loan related fees							2,562		2,944
Deposit charges							644		379
Gain on sale leaseback							1,123		—
Consulting fees		112		145			95		101
Deposit charges		100		105
Gain on capital markets activities		—		997
Gain on sale of loans		1,962		7,238
Gain on sale of REO		104		—
Prepayment fees		372		210
Other		480		429			999		217
Total noninterest income	$	3,955	$	9,923		$	7,531	$	5,309
Nine Months Ended September 30:
Trust fees	$	2,485	$	2,001
Consulting fees		334		536
Deposit charges		329		348
Loss on capital markets activities		—		(1,043	)
Gain on sale of loans		4,312		7,238
Gain on sale of REO		104		—
Prepayment fees		1,243		898
Other		1,829		1,527
Total noninterest income	$	10,636	$	11,505

Noninterest income in Banking was $5.9 million lower in the third quarter of 2017 as compared to the third quarter of 2016. During the third quarter of 2017, we realized $2.0 million in gains on the sale of $112 million of multifamily loans, while in the third quarter of 2016, we realized a gain of $7.2 million on the sale of $265 million of multifamily loans.

Noninterest income in Banking ~~decreased $0.9 million from $11.5 million~~ in the ~~first nine~~three months ~~of 2016~~ended March 31, 2022 was $2.2 million higher than the three months ended March 31, 2021 due primarily to ~~$10.6~~a $1.1 million gain on a sale leaseback transaction, a $0.4 million increase in ~~the first nine months of 2017. During the first nine months of 2016, we realized $7.2~~trust fees, and a $0.3 million increase in ~~gains on the sale of multifamily loans and $1.0 million in losses from capital activities as compared to $4.3 million in gains on sales of loans for the first nine months of 2017.~~deposit charges.

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 ~~a breakdown~~the amounts of noninterest income for Wealth Management for the ~~quarter and nine~~three months ended ~~September 30:~~March 31, 2022 and 2021:

(dollars in thousands)
2017

2016

Quarter Ended September 30:

Asset management fees
$
6,124

$
5,301

Financial consulting fees

16

22

Other

(8
)

(4
)
Total noninterest income
$
6,132

$
5,319


(dollars in thousands)	2022		2021
Noninterest income	$	8,345	$	6,923

Nine Months Ended September 30:

Asset management fees
$
17,290

$
15,856

Financial consulting fees

54

73

Other

(10
)

(12
)
Total noninterest income
$
17,334

$
15,917

Noninterest ~~revenue~~income for Wealth Management increased by ~~$0.8~~$1.4 million in the ~~third quarter and $1.4 million for the nine~~three months ended ~~September 30, 2017~~March 31, 2022 when compared to the corresponding ~~periods~~period in ~~2016~~2021 due primarily to higher levels of billable AUM ~~balances on which~~in the ~~asset management fees are calculated.~~quarter.

The following table summarizes the activity in our AUM ~~which totaled $4.2 billion at September 30, 2017, increased by $585~~for the periods indicated:


			Existing account
	Beginning		Additions/		New
(dollars in thousands)	Balance		Withdrawals		Accounts		Terminations		Performance		Ending balance
Three Months Ended March 31, 2022:
Equities	$	3,330,639	$	35,136	$	46,186	$	(29,451)	$	(285,233)	$	3,097,277
Fixed Income		1,303,760		22,003		44,040		(11,625)		(82,779)		1,275,399
Cash and other		1,046,206		(13,143)		32,975		(15,538)		32,566		1,083,066
Total	$	5,680,605	$	43,996	$	123,201	$	(56,614)	$	(335,446)	$	5,455,742

Year Ended December 31, 2021:
Equities	$	2,451,056	$	448,338	$	200,073	$	(156,809)	$	387,981	$	3,330,639
Fixed Income		1,474,479		(195,117)		71,181		(45,818)		(965)		1,303,760
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 $225 million decrease in AUM during the first ~~nine months~~quarter of ~~2017 as~~2022 was the net result of $123 million of new ~~account growth~~accounts, $335 million of ~~$355 million~~portfolio losses, and ~~portfolio gains~~terminations and net withdrawals of ~~$321 million were partially offset by net additions and account terminations~~$13 million.

35

Table of ~~$91 million.~~Contents

Noninterest Expense. The following table provides a breakdown of noninterest expense for Banking and Wealth Management for the ~~quarter and nine months ended September 30:~~periods indicated:

	Banking				Wealth Management

									Banking				Wealth Management
(dollars in thousands)	2017		2016		2017		2016		2022		2021		2022		2021
Quarter Ended September 30:

Three Months Ended March 31:
Compensation and benefits	$	9,863	$	8,252	$	3,928	$	3,576	$	24,276	$	16,823	$	5,212	$	4,447
Occupancy and depreciation		3,221		2,506		537		547		8,113		5,639		454		521
Professional services and marketing		560		2,797		485		421		2,343		1,771		815		639
Customer service costs										1,788		1,770		—		—
Other expenses		3,689		2,579		146		153		3,581		2,576		163		124
Total noninterest expense	$	17,333	$	16,134	$	5,096	$	4,697	$	40,101	$	28,579	$	6,644	$	5,731

Nine Months Ended September 30:
Compensation and benefits	$	29,913	$	24,887	$	11,956	$	11,068
Occupancy and depreciation		9,404		7,072		1,608		1,619
Professional services and marketing		2,320		5,511		1,320		1,397
Other expenses		9,869		6,276		444		452
Total noninterest expense	$	51,506	$	43,746	$	15,328	$	14,536

Noninterest expense in Banking increased from $16.1 million in the third quarter of 2016 to $17.3 million in the third quarter of 2017 due to increases in staffing and costs associated with the Bank’s expansion, the growth of its balances of loans and deposits, which was partially offset by lower legal costs. Compensation and benefits for Banking increased $1.6 million or 20% during the third quarter of 2017 as compared to the third quarter of 2016 as the number of full time equivalent employees (“FTE”) in Banking increased to 315.7 from 266.3 as a result of the increased staffing related to the December 2016 acquisition of two branches and additional personnel added to support the growth in loans and deposits. A $0.7 million increase in occupancy and depreciation for Banking in the third quarter of 2017 as compared to the third quarter of 2016 was due to costs associated with our expansion into additional corporate space and the acquisition and opening of new offices during 2016 and increases in our data processing costs due to increased volumes and the implementation of enhancements. Litigation related costs for Banking were $2.3 million lower in the

third quarter of 2017 as compared to the third quarter of 2016 due to the reimbursement from our insurance providers of previously incurred legal costs and costs incurred for a litigation matter in the third quarter of 2016. The $1.1 million increase in other expenses in Banking in the third quarter of 2017 as compared to the third quarter of 2016 was due to a $1.6 million increase in customer service costs related to the increases in noninterest demand deposits.

Noninterest expense in Banking increased from ~~$43.7~~$28.6 million in the ~~first nine~~three months ~~of 2016~~ended March 31, 2021 to ~~$51.5~~$40.1 million in the ~~first nine~~three months ~~of 2017~~ended March 31, 2022 primarily due to ~~increases~~higher compensation and benefits, occupancy and depreciation, professional services and marketing, and other expenses. Compensation and benefits in ~~staffing and costs~~Banking were $7.5 million higher in the first quarter of 2022 primarily due to a 41.0% increase in average FTE largely associated with the ~~Bank’s expansion, the growth of its balances of loans~~TGRF acquisition. Occupancy and ~~deposits, which was partially offset by lower legal costs. Compensation and benefits for Banking increased $5.0~~depreciation costs were $2.5 million ~~or 20% during the first nine months of 2017 as compared~~higher due primarily to ~~the first nine months of 2016 as the number of FTE in Banking increased to 303.8 from 256.2 as a result of the increased staffing~~higher core processing costs related to the December 2016 acquisition of two branches and additional personnel added to support the growth in loans and deposits. A $2.4 million increase in occupancy and depreciation for Banking in the first nine months of 2017 as compared to the first nine months of 2016 was due to costs associated with our expansion into additional corporate space, the acquisition and opening of new offices during 2016 and increases in our data processing costs due to increasedhigher volumes and ~~the implementation of enhancements. Litigation related costs for Banking were $3.1 million lower in the first nine months of 2017 as compared to the first nine months of 2016~~services and due to the ~~reimbursement from our insurance providers of $1.8~~TGRF acquisition. Noninterest expenses for Wealth Management increased by $0.9 million ~~of previously incurred legal costs which was offset by costs incurred for a trial in 2016. A $3.6 million increase in other expenses in Banking~~ in the ~~first nine~~three months ~~of 2017 as compared to the first nine months of 2016 was~~ended March 31, 2022 due to ~~a $3.2 million increase in customer service costs related to the increases in noninterest demand deposits and costs related to our growth, including deposit insurance.~~

The increases in noninterest expense in Wealth Management for the third quarter and nine months of 2017 as compared to the corresponding periods in 2016 were due to increases of $0.4 million and $0.9 million, respectively, in compensation and benefits. The increases inhigher compensation and benefits, ~~were due to increases in FTE~~ and ~~cost~~professional services and marketing expenses.

36

Table of ~~living increases.~~Contents

Financial Condition

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


													Wealth		Other and
(dollars in thousands)	Banking		Wealth Management			Other and Eliminations			Total		Banking		Management		Eliminations		Total
September 30, 2017:
March 31, 2022:
Cash and cash equivalents	$	123,030	$	3,837		$	(3,657	)	$	123,210	$	930,984	$	11,908	$	(11,182)	$	931,710
Securities AFS		471,502		—			—			471,502
Loans Held For Sale		153,405		—			—			153,405
Securities AFS, net												258,287		—		—		258,287
Securities HTM												920,408		—		—		920,408
Loans held for sale												501,424		—		—		501,424
Loans, net		3,239,374		—			—			3,239,374		7,364,642		—		—		7,364,642
FHLB Stock		17,250		—			—			17,250
Premises and equipment		5,600		996			136			6,732		35,402		366		136		35,904
Investment in FHLB Stock												17,250		—		—		17,250
Deferred taxes		14,857		161			(93	)		14,925		17,422		70		555		18,047
REO		1,400		—			—			1,400		6,210		—		—		6,210
Goodwill and intangibles		2,021		—			—			2,021		223,239		—		—		223,239
Other assets		18,015		264			2,963			21,242		173,610		386		23,679		197,675
Total assets	$	4,046,454	$	5,258		$	(651	)	$	4,051,061	$	10,448,878	$	12,730	$	13,188	$	10,474,796


Deposits	$	3,284,176	$	—		$	(15,450	)	$	3,268,726	$	9,037,219	$	—	$	(79,701)	$	8,957,518
Borrowings		406,000		—			15,000			421,000		152,680		—		173,289		325,969
Intercompany balances		3,490		(917	)		(2,573	)		—		3,037		565		(3,602)		—
Other liabilities		17,240		2,705			937			20,882		84,297		2,965		21,472		108,734
Shareholders’ equity		335,548		3,470			1,435			340,453		1,171,645		9,200		(98,270)		1,082,575
Total liabilities and equity	$	4,046,454	$	5,258		$	(651	)	$	4,051,061	$	10,448,878	$	12,730	$	13,188	$	10,474,796

December 31, 2016:

December 31, 2021:
Cash and cash equivalents	$	597,795	$	2,576		$	(2,425	)	$	597,946	$	1,121,089	$	3,195	$	(2,527)	$	1,121,757
Securities AFS		509,578		—			—			509,578
Securities AFS, net												1,191,378		—		—		1,191,378
Loans held for sale		250,942		—			—			250,942		501,436		—		—		501,436
Loans, net		2,540,309		—			—			2,540,309		6,872,952		—		—		6,872,952
FHLB Stock		33,750		—			—			33,750
Premises and equipment		5,603		991			136			6,730		37,373		411		136		37,920
Investment in FHLB Stock												18,249		—		—		18,249
Deferred taxes		16,602		283			(74	)		16,811		20,745		138		(48)		20,835
REO		1,734		—			—			1,734		6,210		—		—		6,210
Goodwill and Intangibles		2,177		—			—			2,177
Goodwill and intangibles												222,125		—		—		222,125
Other assets		13,270		445			1,711			15,426		179,385		365		23,592		203,342
Total assets	$	3,971,760	$	4,295		$	(652	)	$	3,975,403	$	10,170,942	$	4,109	$	21,153	$	10,196,204


Deposits	$	2,435,538	$	—		$	(8,743	)	$	2,426,795	$	8,836,250	$	—	$	(24,290)	$	8,811,960
Borrowings		1,250,000		—			—			1,250,000		165,930		—		44,197		210,127
Intercompany balances		3,019		539			(3,558	)		—		4,605		(8,204)		3,599		—
Other liabilities		11,670		2,744			(70	)		14,344		92,500		4,381		13,185		110,066
Shareholders’ equity		271,533		1,012			11,719			284,264		1,071,657		7,932		(15,538)		1,064,051
Total liabilities and equity	$	3,971,760	$	4,295		$	(652	)	$	3,975,403	$	10,170,942	$	4,109	$	21,153	$	10,196,204

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 ~~first nine~~three months ~~of 2017,~~ended March 31, 2022 total assets increased by $279 million primarily due to an increase in loans, which was partially offset by decreases in cash and ~~cash equivalents~~securities. During the three months ended March 31, 2022,

37

Table of Contents

total securities decreased by ~~$475~~$12 million ~~loans~~primarily due to payoffs of mortgage-backed securities. Loans and loans held for sale increased $491 million in the three months ended March 31, 2022, primarily as a result of $1.1 billion of originations, which were partially offset by ~~$604~~payoffs or scheduled payments of $657 million. The $146 million ~~and~~growth in deposits during the first three months of 2022 was due primarily to an increase in corporate deposits of $175 million, offset by a decrease in branch deposits of $31 million. Borrowings increased by ~~$842 million. Total borrowings, which included $15~~$116 million ~~outstanding~~during the three months ended March 31, 2022 due to the addition of $150 million in subordinated debt, offset partially by the $18.5 million paydown on ~~our holding company~~FFI’s credit line, ~~of credit, decreased by $829 million.~~and $13 million decrease in repurchase agreements.

Cash and cash equivalents, certificates of deposit and securities.Cash and cash equivalents, which primarily consist of funds held at the Federal Reserve Bank or at correspondent banks, including fed funds, decreased ~~$475~~by $190 million during the ~~first nine~~three months ~~of 2017.~~ended March 31, 2022. Changes in cash and cash equivalents are primarily affected by the funding of loans, investments in securities, and changes in our sources of funding: deposits, FHLB advances and FFI borrowings.

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

	Amortized		Gross Unrealized					Estimated

										Amortized		Gross Unrealized				Allowance for		Estimated
(dollars in thousands)	Cost		Gains		Losses			Fair Value		Cost		Gains		Losses		Credit Losses		Fair Value
September 30, 2017:
US Treasury security	$	499	$	—	$	(4	)	$	495
March 31, 2022:
Collateralized mortgage obligations										$	11,761	$	—	$	(577)	$	—	$	11,184
Agency mortgage-backed securities		436,415		497		(4,464	)		432,448		10,376		8		(306)		—		10,078
Municipal bonds											50,737		21		(2,244)		—		48,514
SBA securities											25,692		1		(21)		—		25,672
Beneficial interests in FHLMC securitization											20,631		334		—		(10,743)		10,222
Corporate bonds											153,451		1,105		(2,793)		—		151,763
U.S. Treasury											897		—		(43)		—		854
Total										$	273,545	$	1,469	$	(5,984)	$	(10,743)	$	258,287

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 interest – FHLMC securitization		38,975		1,756		(2,172	)		38,559		21,606		373		—		(10,399)		11,580
Corporate bonds											154,027		2,441		(92)		—		156,376
U.S. Treasury											499		—		(9)		—		490
Total	$	475,889	$	2,253	$	(6,640	)	$	471,502	$	1,198,562	$	9,473	$	(6,258)	$	(10,399)	$	1,191,378

December 31, 2016:
US Treasury security	$	300	$	—	$	(3	)	$	297
Agency mortgage-backed securities		476,163		160		(7,414	)		468,909
Beneficial interest – FHLMC securitization		42,028		711		(2,367	)		40,372
Total	$	518,491	$	871	$	(9,784	)	$	509,578

~~The~~

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

Excluding allowance for credit losses, the decrease in AFS securities in the first three months of 2022 was due primarily to the $920 million transfer of agency mortgage-backed securities to held-to-maturity.

38

Table of Contents

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


	Amortized		Gross Uncognized				Allowance for		Estimated
(dollars in thousands)	Cost		Gains		Losses		Credit Losses		Fair Value
March 31, 2022:
Agency mortgage-backed securities	$	920,408	$	—	$	(39,657)	$	—	$	880,751
Total	$	920,408	$	—	$	(39,657)	$	—	$	880,751

There were no securities HTM as of December 31, 2021.

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


	Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total
Amortized Cost:
Collateralized mortgage obligations	$	—		$	319		$	742		$	10,700		$	11,761
Agency mortgage-backed securities		—			4,545			4,123			1,708			10,376
Municipal bonds		—			1,630			37,565			11,542			50,737
SBA securities		39			1,326			2,610			21,717			25,692
Beneficial interests in FHLMC securitization		—			11,125			—			9,506			20,631
Corporate bonds		9,526			10,019			128,371			5,535			153,451
U.S. Treasury		—			897			—			—			897
Total	$	9,565		$	29,861		$	173,411		$	60,708		$	273,545
Weighted average yield		1.06	%		1.99	%		3.34	%		1.90	%		2.80	%
Estimated Fair Value:
Collateralized mortgage obligations	$	—		$	319		$	703		$	10,162		$	11,184
Agency mortgage-backed securities		—			4,431			3,984			1,663			10,078
Municipal bonds		—			1,645			36,217			10,652			48,514
SBA securities		39			1,323			2,607			21,703			25,672
Beneficial interests in FHLMC securitization		—			11,125			—			9,840			20,965
Corporate bonds		9,519			9,748			127,257			5,239			151,763
U.S. Treasury		—			854			—			—			854
Total	$	9,558		$	29,445		$	170,768		$	59,259		$	269,030

The scheduled maturities of securities HTM, and the related weighted average yield is as follows, as of ~~September 30, 2017:~~March 31, 2022:


	Less than			1 Through			5 Through			After
(dollars in thousands)	1 Year			5 years			10 Years			10 Years			Total
March 31, 2022
Amortized Cost:
Agency mortgage-backed securities	$	—		$	—		$	18,793		$	901,615		$	920,408
Total	$	—		$	—		$	18,793		$	901,615		$	920,408
Weighted average yield		—	%		—	%		0.82	%		1.77	%		1.75	%

Estimated Fair Value:
Agency mortgage-backed securities	$	—		$	—		$	17,934		$	862,817		$	880,751
Total	$	—		$	—		$	17,934		$	862,817		$	880,751

(dollars in thousands)
Less than
1 Year

1 Through
5 years

5 Through 10 Years

After 10 Years

Total

Amortized Cost:

US Treasury securities
$
—

$
499

$
—

$
—

$
499

Weighted average yield

—
%

1.03
%

—
%

—
%

1.03
%

Estimated Fair Value:

US Treasury securities
$
—

$
495

$
—

$
—

$
495

39

Agency mortgage backed securities and beneficial interest – FHLMC securitizations are excluded from the above table because such securities are not due at a single maturity date. The weighted average yieldTable of ~~the agency mortgage backed securities as of September 30, 2017 was 2.54%.~~Contents

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


					March 31,		December 31,
(dollars in thousands)	September 30, 2017		December 31, 2016		2022		2021
Outstanding principal balance:
Loans secured by real estate:
Residential properties:
Multifamily	$	1,784,061	$	1,178,003	$	3,284,003	$	2,886,055
Single family		616,478		602,886		911,438		933,445
Total real estate loans secured by residential properties		2,400,539		1,780,889		4,195,441		3,819,500
Commercial properties		529,590		476,959		1,264,221		1,309,200
Land and construction		31,304		24,100		159,533		156,028
Total real estate loans		2,961,433		2,281,948		5,619,195		5,284,728
Commercial and industrial loans		259,958		237,941		1,754,279		1,598,422
Consumer loans		28,469		32,127		9,760		10,834
Total loans		3,249,860		2,552,016		7,383,234		6,893,984
Premiums, discounts and deferred fees and expenses		7,014		3,693		14,230		12,744
Total	$	3,256,874	$	2,555,709	$	7,397,464	$	6,906,728

~~Total loans, including~~

Loans and loans held for sale increased ~~$604~~$491 million during the ~~first nine~~three months ~~of 2017~~ended March 31, 2022 primarily as a result of ~~$1.2~~$1.1 billion ofin originations, ~~and $8 million of purchases~~ which were partially offset by ~~the sale of $286 million of multifamily loans and~~ payoffs or scheduled payments of ~~$344~~$657 million.

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

	September 30, 2017					December 31, 2016

											March 31, 2022				December 31, 2021
													Weighted				Weighted
(dollars in thousands)	Amount		Weighted Average Rate			Amount		Weighted Average Rate			Amount		Average Rate		Amount		Average Rate

Demand deposits:
Noninterest-bearing	$	1,096,472		—		$	661,781		—		$	3,296,118	—		$	3,280,455	—
Interest-bearing		278,917		0.654	%		194,274		0.471	%		2,429,202	0.104	%		2,242,684	0.070	%
Money market and savings		1,010,298		0.854	%		941,344		0.677	%		2,592,437	0.271	%		2,620,336	0.275	%
Certificates of deposits		883,039		1.094	%		629,396		0.589	%		639,761	0.200	%		668,485	0.145	%
Total	$	3,268,726		0.615	%	$	2,426,795		0.453	%	$	8,957,518	0.121	%	$	8,811,960	0.111	%

During the first ~~nine~~three months of ~~2017, the~~2022, our deposit rates have moved in a manner consistent with overall deposit market rates. The weighted average rate of our interest-bearing deposits increased from ~~0.62%~~0.18% at December 31, ~~2016~~2021, to ~~0.93%~~0.19% at ~~September 30, 2017,~~March 31, 2022 due to increased costs of interest-bearing deposits, while the weighted average interest rates of both interest-bearing and noninterest-bearing deposits ~~increased~~have decreased from ~~0.45%~~0.15% at December 31, ~~2016~~2021 to ~~0.62%~~0.12% at ~~September 30, 2017.~~March 31, 2022. The ~~increase in the weighted average rate~~financial impact of our interest-bearing deposits was the result of increases in market rates and our success in attracting higher balance accounts which generally bear higher interest rates. The increase in our overall cost of deposits was less than the increase in ~~interest-bearing deposits as a result of a higher proportion of~~ noninterest-bearing deposits ~~at September 30, 2017 when compared to December 31, 2016.~~

~~The $842 million growth~~is reflected in ~~deposits during the first nine months of 2017 was primarily due to the organic growth~~customer service costs, which are included in ~~deposits from our specialty deposit group, which increased by 48%, and our branch offices, which increased by 21%.~~noninterest expenses.

The maturities of our ~~Certificates~~certificates of deposit of $100,000 or more were as follows as of ~~September 30, 2017:~~March 31, 2022:


(dollars in thousands)	(dollars in thousands)

3 months or less	$	132,215	$	302,445
Over 3 months through 6 months		93,875		65,581
Over 6 months through 12 months		80,358		111,750
Over 12 months		138,897		57,687
Total	$	445,345	$	537,463

FFB utilizes third party programs called CDARs and ICS which allows FFB to transfer funds of its clients in excess of the FDIC insurance limit (currently $250,000) to other institutions in exchange for an equal amount of funds from clients of these other institutions. This has allowed FFB to provide FDIC insurance coverage to its clients. Under certain regulatory guidelines, these deposits are considered brokered deposits.

From time to time, the Bank will utilize brokered deposits as a source of funding. As of ~~September 30, 2017~~March 31, 2022, the Bank held ~~$493~~$90 million of deposits which are classified as brokered ~~deposits, including $112 million~~deposits.

40

Table of ~~CDARs and ICS reciprocal deposits.~~Contents

Borrowings.At ~~September 30, 2017~~March 31, 2022, our borrowings consisted of ~~$406~~$173 million in ~~overnight FHLB advances~~subordinated notes and ~~$15~~$153 million of repurchase agreements. At December 31, 2021, our borrowings consisted of $26 million in subordinated notes, $166 million of repurchase agreements, and $18.5 million of borrowings ~~on our~~under a holding company line of credit. ~~At December~~As of March 31, ~~2016, our borrowings consisted~~2022, $150 million of ~~$1.3 billion~~the subordinated notes are fixed-to-floating rate notes that mature in ~~overnight FHLB advances.~~February 2032. The ~~FHLB advances~~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 ~~paid~~issued, plus 204 basis points (2.04%), payable quarterly in ~~full~~arrears on February 1, May 1, August 1, and November 1 of each year, commencing on May 1, 2027. $23 million of the subordinated notes mature in ~~the early parts of October 2017~~June 2030 and ~~January 2017, respectively. Because FFB utilizes overnight borrowings, the balance of outstanding borrowings fluctuates on~~bear a ~~daily basis. The average balance of overnight borrowings during the first nine months of 2017 was $549 million, as compared to $499 million during the first nine months of 2016. The weighted average~~fixed interest rate of 6.0%, until June 30, 2025, at which time they will convert to a floating rate based on ~~these overnight borrowings was 1.14% for the first nine months of 2017, as compared to 0.44% during 2016.~~three month SOFR, plus 590 basis points (5.90%), until maturity. The maximum amount of ~~overnight~~ borrowings at the Bank outstanding at any month-end during the ~~first nine~~three months ended March 31, 2022, and during all of ~~2017 and 2016~~2021, was ~~$818~~$177 million and ~~$951~~$255 million, respectively.

Delinquent Loans, Nonperforming Assets and Provision for Credit Losses

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


							90 Days						Total Past Due
(dollars in thousands)	30–59 Days			60-89 Days			or More			Nonaccrual			and Nonaccrual			Current		Total
March 31, 2022:
Real estate loans:
Residential properties	$	1,748		$	—		$	—		$	3,186		$	4,934		$	4,204,812	$	4,209,746
Commercial properties		2,892			936			—			4,401			8,229			1,256,568		1,264,797
Land and construction		—			—			—			—			—			159,231		159,231
Commercial and industrial loans		967			105			—			3,256			4,328			1,749,572		1,753,900
Consumer loans		10			—			—			—			10			9,780		9,790
Total	$	5,617		$	1,041		$	—		$	10,843		$	17,501		$	7,379,963	$	7,397,464
Percentage of total loans		0.08	%		0.01	%		—	%		0.15	%		0.24	%

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	%

Past Due and Still Accruing

Total Past

(dollars in thousands)

30–59 Days

60-89 Days

90 Days
or More

Nonaccrual

Due and Nonaccrual

Current

Total

September 30, 2017:

Real estate loans:

Residential properties

$
53

$
—

$
—

$
—

$
53

$
2,400,486

$
2,400,539

Commercial properties

762

—

1,330

1,278

3,370

526,220

529,590

Land and construction

—

—

—

—

—

31,304

31,304

Commercial and industrial loans

10,926

—

815

5,216

16,957

243,001

259,958

Consumer loans

—

—

—

—

—

28,469

28,469

Total

$
11,741

$
—

$
2,145

$
6,494

$
20,380

$
3,229,480

$
3,249,860

Percentage of total loans

0.36
%

—
%

0.07
%

0.20
%

0.63
%

December 31, 2016:

Real estate loans:

Residential properties

$
—

$
—

$
—

$
3,759

$
3,759

$
1,777,130

$
1,780,889

Commercial properties

—

—

2,128

1,120

3,248

473,711

476,959

Land and construction

—

—

—

—

—

24,100

24,100

Commercial and industrial loans

—

2

3,800

3,359

7,161

230,780

237,941

Consumer loans

—

—

—

—

—

32,127

32,127

Total

$
—

$
2

$
5,928

$
8,238

$
14,168

$
2,537,848

$
2,552,016

Percentage of total loans

—
%

0.00
%

0.23
%

0.32
%

0.56
%

41

Table of Contents

The following table summarizes our nonaccrual loans as of:


	Nonaccrual		Nonaccrual
	with Allowance		with no Allowance
(dollars in thousands)	for Credit Losses		for Credit Losses
March 31, 2022
Real estate loans:
Residential properties	$	—	$	3,186
Commercial properties		—		4,401
Commercial and industrial loans		1,227		2,029
Total	$	1,227	$	9,616

December 31, 2021
Real estate loans:
Residential properties	$	—	$	3,281
Commercial properties		—		1,529
Commercial and industrial loans		1,733		1,788
Total	$	1,733	$	6,598

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

	September 30, 2017							December 31, 2016

													March 31, 2022						December 31, 2021
(dollars in thousands)	Accrual			Nonaccrual	Total			Accrual	Nonaccrual		Total		Accrual		Nonaccrual		Total		Accrual		Nonaccrual		Total
Commercial and industrial	$	225	$	2,522	$	2,747	$	317	$	3,109	$	3,426
Residential loans													$	—	$	—	$	—	$	1,200	$	—	$	1,200
Commercial real estate loans														998		1,148		2,146		1,021		1,174		2,195
Commercial and industrial loans														32		1,856		1,888		493		2,030		2,523
Total													$	1,030	$	3,004	$	4,034	$	2,714	$	3,204	$	5,918

~~The following is~~These loans were classified as a ~~breakdown~~TDR as a result of ~~our loan portfolio by the risk category of loans as of:~~

(dollars in thousands)

Pass

Special
Mention

Substandard

Impaired

Total

September 30, 2017:

Real estate loans:

Residential properties

$
2,398,246

$
—

$
2,293

$
—

$
2,400,539

Commercial properties

519,931

5,131

925

3,603

529,590

Land and construction

31,304

—

—

—

31,304

Commercial and industrial loans

246,499

815

1,897

10,747

259,958

Consumer loans

28,469

—

—

—

28,469

Total

$
3,224,449

$
5,946

$
5,115

$
14,350

$
3,249,860

December 31, 2016:

Real estate loans:

Residential properties

$
1,773,296


$
1,500


$
—


$
6,093


$
1,780,889

Commercial properties

470,484



1,913



2,414



2,148



476,959

Land and construction

24,100



—



—



—



24,100

Commercial and industrial loans

219,676



3,625



13,887



753



237,941

Consumer loans

32,127



—



—



—



32,127

Total

$
2,519,683


$
7,038


$
16,301


$
8,994


$
2,552,016

~~We consider~~ a ~~loan to be impaired when, based upon current information and events, we believe that it is probable that we will be unable to collect all amounts due according to the contractual terms~~reduction in required principal payments, reductions in rates and/or an extension of the loan. We measure impairment using either the present value of the expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the properties collateralizing the loan, for collateral dependent loans. Impairment losses are included in the ALLL through a charge to provision for loan losses. Adjustments to impairment losses due to changes in the fair value of the property collateralizing an impaired loan are considered in computing the provision for loan losses. Loans collectively reviewed for impairment include all loans except for loans which are individually reviewed based on specific criteria, such as delinquency, debt coverage, adequacy of collateral and condition of property collateralizing the loans. Impaired loans include nonaccrual loans (excluding those collectively reviewed for impairment), certain restructured loans and certain performing loans less than 90 days delinquent (“other impaired loans”) which we believe are not likely to be collected in accordance with the contractual termsmaturity date of the loans.

~~In 2015, we purchased loans, for which there was, at acquisition, evidence~~

42

Table of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these purchased credit impaired loans is as follows as of:Contents

(dollars in thousands)
September 30,
2017

December 31,
2016

Outstanding principal balance:

Total real estate loans
$
285

$
295

Commercial and industrial loans

2,416

4,258

Consumer loans

—

17

Total loans

2,701

4,570

Unaccreted discount on purchased credit impaired loans

(884
)

(1,197
)
Total
$
1,817

$
3,373

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


																		Allowance
														Beginning		Provision for		on Acquired						Ending
(dollars in thousands)	Beginning Balance		Provision for Loan Losses			Charge-offs			Recoveries			Ending Balance		Balance		Credit Losses		PCD Loans		Charge-offs		Recoveries		Balance
Quarter ended September 30, 2017:
Three months ended March 31, 2022:
Real estate loans:
Residential properties	$	8,851	$	469		$	—		$	—		$	9,320	$	2,637	$	561	$	—	$	—	$	—	$	3,198
Commercial properties		3,285		281			—			—			3,566		17,049		(1,413)		—		—		—		15,636
Land and construction		287		66			—			—			353		1,995		(227)		—		—		—		1,768
Commercial and industrial loans		4,093		(119	)		—			(1	)		3,973		11,992		149		—		(145)		134		12,130
Consumer loans		284		4			—			—			288		103		(13)		—		—		—		90
Total	$	16,800	$	701		$	—		$	(1	)	$	17,500	$	33,776	$	(943)	$	—	$	(145)	$	134	$	32,822

Nine months ended September 30, 2017:

Three months ended March 31, 2021:
Real estate loans:
Residential properties	$	6,669	$	2,651		$	—		$	—		$	9,320	$	5,115	$	918	$	—	$	—	$	—	$	6,033
Commercial properties		2,983		583			—			—			3,566		8,711		(2,755)		—		—		—		5,956
Land and construction		233		120			—			—			353		892		3,070		—		—		—		3,962
Commercial and industrial loans		5,227		(1,492	)		—			238			3,973		9,249		(2,379)		—		(214)		406		7,062
Consumer loans		288		—			—			—			288		233		(66)		—		—		—		167
Total	$	15,400	$	1,862		$	—		$	238		$	17,500	$	24,200	$	(1,212)	$	—	$	(214)	$	406	$	23,180
Year ended December 31, 2016:

Year ended December 31, 2021:
Real estate loans:
Residential properties	$	6,799	$	(130	)	$	—		$	—		$	6,669	$	5,115	$	(1,453)	$	93	$	(1,118)	$	—	$	2,637
Commercial properties		1,813		1,051			(50	)		169			2,983		8,711		774		7,564		—		—		17,049
Land and construction		103		130			—			—			233		892		1,051		52		—		—		1,995
Commercial and industrial loans		1,649		3,578			—			—			5,227		9,249		614		1,836		(706)		999		11,992
Consumer loans		236		52			—			—			288		233		(130)		—		—		—		103
Total	$	10,600	$	4,681		$	(50	)	$	169		$	15,400	$	24,200	$	856	$	9,545	$	(1,824)	$	999	$	33,776

~~Excluding the~~

Our ACL related to loans ~~acquired in acquisitions, our ALLL~~ represented ~~0.54%,~~0.44% and ~~0.60%~~0.49% of total loans outstanding as of ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, respectively.

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

43

Table of Contents

necessary for us to incur additional, and possibly significant, charges to increase the ~~ALLL,~~ACL, which would have the effect of reducing our income.

In addition, the ~~FDIC~~Federal Deposit Insurance Corporation (“FDIC”) and the California Department of ~~Business Oversight,~~Financial Protection and Innovation, as an integral part of their examination processes, periodically review the adequacy of our ~~ALLL.~~ACL. These agencies may require us to make additional provisions for ~~loan~~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 ~~ALLL~~ACL and the recorded investment in loans by impairment method as of:


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

March 31, 2022:
Allowance for credit losses:
Real estate loans:
Residential properties	$	110	$	3,088	$	3,198
Commercial properties		7,662		7,974		15,636
Land and construction		69		1,699		1,768
Commercial and industrial loans		1,615		10,515		12,130
Consumer loans		—		90		90
Total	$	9,456	$	23,366	$	32,822
Loans:
Real estate loans:
Residential properties	$	8,524	$	4,201,222	$	4,209,746
Commercial properties		41,664		1,223,133		1,264,797
Land and construction		698		158,533		159,231
Commercial and industrial loans		10,220		1,743,680		1,753,900
Consumer loans		—		9,790		9,790
Total	$	61,106	$	7,336,358	$	7,397,464


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

(dollars in thousands)

Allowance for Loan Losses

Unaccreted Credit

Evaluated for Impairment

Purchased

Component

Individually

Collectively

Impaired

Total

Other Loans

September 30, 2017:

Allowance for loan losses:

Real estate loans:

Residential properties

$
—

$
9,320

$
—

$
9,320

$
84

Commercial properties

—

3,566

—

3,566

78

Land and construction

—

353

—

353

—

Commercial and industrial loans

1,413

2,560

—

3,973

89

Consumer loans

—

288

—

288

6

Total

$
1,413

$
16,087

$
—

$
17,500

$
257

Loans:

Real estate loans:

Residential properties

$
—

$
2,400,539

$
—

$
2,400,539

$
9,043

Commercial properties

3,603

525,822

165

529,590

10,290

Land and construction

—

31,304

—

31,304

—

Commercial and industrial loans

10,747

247,559

1,652

259,958

14,771

Consumer loans

—

28,469

—

28,469

760

Total

$
14,350

$
3,233,693

$
1,817

$
3,249,860

$
34,864

44

(dollars in thousands)

Allowance for Loan Losses

Unaccreted Credit

Evaluated for Impairment

Purchased

Component

Individually

Collectively

Impaired

Total

Other Loans

December 31, 2016:

Allowance for loan losses:

Real estate loans:

Residential properties

$
—


$
6,669


$
—


$
6,669


$
128

Commercial properties

—



2,983



—



2,983



136

Land and construction

—



233



—



233



2

Commercial and industrial loans

—



5,227



—



5,227



147

Consumer loans

—



288



—



288



19

Total

$
—


$
15,400


$
—


$
15,400


$
432

Loans:

Real estate loans:

Residential properties

$
6,093


$
1,774,796


$
—


$
1,780,889


$
12,373

Commercial properties

2,148



474,634



177



476,959



24,796

Land and construction

—



24,100



—



24,100



437

Commercial and industrial loans

753



233,992



3,196



237,941



20,165

Consumer loans

—



32,127



—



32,127



1,266

Total

$
8,994


$
2,539,649


$
3,373


$
2,552,016


$
59,037

~~The column labeled “Unaccreted Credit Component Other Loans” represents the amount~~Table of unaccreted credit component discount for loans acquired in an acquisition that were not classified as purchased credit impaired or individually evaluated for impairment as of the dates indicated, and the stated principal balances of the related loans. The unaccreted credit component discount is equal to 0.74% and 0.73% of the stated principal balances of these loans as of September 30, 2017 and December 31, 2016, respectively. In addition to this unaccreted credit component discount, an additional $0.1 million and $0.5 million of the ALLL were provided for these loans as of September 30, 2017 and December 31, 2016.Contents

Liquidity

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

We monitor our liquidity in accordance with guidelines established by our Board of Directors and applicable regulatory requirements. Our need for liquidity is affected by our loan activity, net changes in deposit levels and the maturities of our borrowings. The principal sources of our liquidity consist of deposits, loan interest and principal payments and prepayments, investment management and consulting fees, FHLB advances and proceeds from borrowings and sales of ~~shares by FFI.~~FFI common stock. The remaining balances of the ~~Bank’s~~Company’s lines of credit available to draw down totaled ~~$1.1~~$3.2 billion at ~~September 30, 2017.~~ March 31, 2022.

Cash Flows Provided by Operating Activities. During the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2022, operating activities provided net cash of ~~$28~~$40 million, ~~comprised~~ primarily ~~of our~~due to net income of ~~$25.3~~$31 million and ~~$6.5 million~~a net increase ~~in accounts payable and other liabilities, offset partially by $4.3~~of $5 million in ~~gains on sales of loans.~~other assets. During the ~~nine months~~quarter ended ~~September 30, 2016,~~March 31, 2021, operating activities provided net cash of ~~$13.7~~$33 million, ~~comprised~~ primarily ~~of our~~due to net income of ~~$16.8~~$22 million and ~~$5.7~~a net decrease of $5 million of non-cash charges, including provisions for loan losses, stock based compensation expense, depreciation and amortization and deferred income tax provision, offset partially by $8.5 gains on sales of loans and securities and a $1.4 million increase in other assets.

Cash Flows Used in Investing Activities. During the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2022, investing activities used net cash of ~~$543~~$483 million, primarily due to ~~fund~~ a ~~$889~~$491 million net increase in loans and $83 million in purchases of securities AFS, offset partially by $88 million in cash received in principal collection and maturities of securities. During the quarter ended March 31, 2021, investing activities used net cash of $265 million, primarily due to a $321 million net increase in loans, offset partially by ~~$289 million in loan sales and~~ $53 million in cash received in ~~proceeds from the sale,~~ principal collection and maturities of ~~securities. During the nine months ended September 30, 2016, investing activities used net cash of $708~~securities, and $3 million primarily to fund a $1 billion net increase in loans and $131 million of securities purchases, offset partially by $270 million in cash received from the sale of loans and $165 million in cash received in proceeds from ~~the sale, principal collection, and maturities~~a redemption of securities.

Cash ~~Flow~~Flows Provided by Financing Activities. During the ~~nine months~~quarter ended ~~September 30, 2017,~~March 31, 2022, financing activities provided net cash of $40 million, consisting primarily of $15 million in proceeds from a holding company line of credit and $27.3 million in proceeds from the sale of stock. During the nine months ended September 30, 2016, financing activities provided net cash of $975$253 million, consisting primarily of a net increase of ~~$817~~$146 million in deposits and ~~a $155~~$148 million net increase in subordinated debt, offset partially by $19 million net paydowns in our line of credit, $6 million in dividends paid, and a $13 million net decrease in repurchase agreements. During the quarter ended March 31, 2021, financing activities provided net cash of $71 million, consisting primarily of a net increase of $332 million in deposits, offset partially by a $250 million decrease in FHLB ~~advances.~~advances, $7 million net paydowns in our line of credit, and $4 million in dividends paid.

Ratio of Loans to Deposits.The relationship between gross loans and total deposits can provide a useful measure of a bank’s liquidity. Since repayment of loans tends to be less predictable than the maturity of investments and other liquid resources, the higher the loan-to-deposit ratio the less liquid are our assets. On the other hand, since we realize greater yields on loans than we do on other interest-earning assets, a lower loan-to-deposit ratio can adversely affect interest income and earnings. As a result, our goal is to achieve a loan-to-deposit ratio that appropriately balances the requirements of liquidity and the need to generate a fair return on our assets. At ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, the loan-to-deposit ratios at ~~the Bank~~FFB were ~~104%~~88% and ~~116%~~84%, respectively.

Off-Balance Sheet Arrangements

The following table provides the off-balance sheet arrangements of the Company as of ~~September 30, 2017:~~March 31, 2022:



(dollars in thousands)
Commitments to fund new loans	$	39,308	$	77,012
Commitments to fund under existing loans, lines of credit		191,768		1,223,173
Commitments under standby letters of credit		2,334		24,745

Some of the commitments to fund existing loans, lines of credit and letters of credit are expected to expire without being drawn upon. Therefore, the total commitments do not necessarily represent future cash requirements. As of ~~September 30, 2017, the Bank~~

45

Table of Contents

March 31, 2022, FFB was obligated on ~~$157~~$278 million of letters of credit to the FHLB which were being used as collateral for public fund deposits, including ~~$136~~$263 million of deposits from the State of California.

Capital Resources and Dividend Policy

On February 16, 2017, the Company and the Bank entered into an Equity Distribution Agreement (the “Distribution Agreement”) with FBR Capital Markets & Co., Raymond James & Associates, Inc., Sandler O’Neill & Partners, L.P., and D.A. Davidson & Co. (collectively, the “Distribution Agents”)The capital rules applicable to sell shares of the Company’s common stock, par value $0.001 per share (the “ATM Shares”), having an aggregate offering price of up to $80 million, from time to time, through an “at-the-market” equity offering program (the “ATM Program”).

The sales of the ATM Shares may be made in negotiated transactions or transactions that are deemed to be “at-the-market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through the NASDAQ Global Market, sales made to or through a market maker other than on an exchange, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such market prices, or any other method permitted by law. Subject to the terms and conditions of the Distribution Agreement, upon its acceptance of written instructions from the Company, the Distribution Agent designated by the Company to sell ATM Shares will use its commercially reasonable efforts to sell on the Company’s behalf all of the designated ATM Shares. The Company may also sell ATM Shares under the Distribution Agreement to each of the Distribution

Agents, as principals for their respective accounts, at a price per share agreed upon at the time of sale. Actual sales will depend on a variety of factors to be determined by the Company from time to time. The Company has no obligation to sell any of the ATM Shares under the Distribution Agreement, and may at any time suspend sales of the ATM Shares under the Distribution Agreement. The Company will pay the Distribution Agents’ commissions for their services in acting as agent in the sale of ATM Shares, and the Company advanced $90,000 to the Distribution Agents for their out-of-pocket legal fees incurred in connection with the ATM Program. The Distribution Agents will be entitled to compensation at a commission rate equal to 2.0% of the gross proceeds from the sale of ATM Shares pursuant to the Distribution Agreement; provided, however, that the compensation payable to each Distribution Agent upon the sale of ATM Shares pursuant to the Distribution Agreement will be reduced by $22,500 in a manner such that no compensation will be paid to a Distribution Agent until the amount of the commission earned by such Distribution Agent exceeds $22,500. The Distribution Agreement contains representations and warranties and covenants that are customary for transactions of this type. In addition, the Company has agreed to indemnify the Distribution Agents against certain liabilities on customary terms, subject to limitations on such arrangements imposed by applicable law and regulation.

~~During the second quarter of 2017, we commenced sales of common stock through the ATM Program. The details of the shares of common stock sold through the ATM Program during 2017 are as follows:~~

Month

Number of Shares Sold

Weighted Average Price

Net Proceeds

(in thousands, except share and per share amounts)

April, 2017

115,270

$
16.24

$
1,857

May, 2017

528,036

$
16.40

8,486

June, 2017

11,272

$
16.51

182

July, 2017

191,900

$
16.57

3,116

August, 2017

100,552

$
17.52

1,725

September, 2017

379,030

$
17.35

6,469

Total

1,326,060

$
16.77

$
21,835

As of September 30, 2017, the remaining dollar value of common stock we had available to sell under the ATM Program was $57.8 million. The actual number of shares of our common stock, if any, that may be sold under the ATM Program in the future will depend upon the sale price for such shares.

~~Under federal banking regulations that apply to all~~ United States based bank holding companies and federally insured ~~banks,~~depository institutions (“Capital Rules”) require the Company (on a consolidated basis) and FFB (on a stand-alone basis) ~~must~~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. ~~Under those~~In addition, prompt corrective action regulations ~~which are based primarily on those quantitative measures, each bank holding company must meet~~place a ~~minimum capital ratio and each~~ federally insured ~~bank is determined by its primary federal bank regulatory agency to come within~~depository institution, such as FFB, into one of ~~the following~~five capital ~~adequacy~~ categories on the basis of its capital ratios: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) critically undercapitalized.

~~Certain qualitative assessments also are made by a banking~~ A depository institution’s primary federal regulatory agency ~~that could lead the agency to~~may determine that, based on certain qualitative assessments, the ~~banking~~depository institution should be assigned to a lower capital category than the one indicated by ~~the quantitative measures used to assess the institution’s~~its capital ~~adequacy.~~ratios. At each successive lower capital category, a ~~banking~~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:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions

																								To Be Well Capitalized
																				For Capital				Under Prompt Corrective
																Actual				Adequacy Purposes				Action Provisions
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio		Amount		Ratio		Amount		Ratio
FFI
September 30, 2017
March 31, 2022:																						��
CET1 capital ratio	$	338,832		12.50	%	$	121,983		4.50	%						$	862,092	10.98	%	$	356,437	4.50	%
Tier 1 leverage ratio		338,832		8.54	%		158,711		4.00	%							862,092	8.52	%		408,396	4.00	%
Tier 1 risk-based capital ratio		338,832		12.50	%		162,644		6.00	%							862,092	10.98	%		475,249	6.00	%
Total risk-based capital ratio		356,932		13.17	%		216,859		8.00	%							902,747	13.68	%		633,665	8.00	%

December 31, 2016

December 31, 2021:
CET1 capital ratio	$	285,754		12.80	%	$	100,432		4.50	%						$	846,515	11.34	%	$	335,801	4.50	%
Tier 1 leverage ratio		285,754		8.76	%		130,525		4.00	%							846,515	8.43	%		401,645	4.00	%
Tier 1 risk-based capital ratio		285,754		12.80	%		133,910		6.00	%							846,515	11.34	%		447,735	6.00	%
Total risk-based capital ratio		301,664		13.52	%		178,547		8.00	%							887,821	11.90	%		596,980	8.00	%


FFB
September 30, 2017
March 31, 2022:
CET1 capital ratio	$	333,948		12.34	%	$	121,761		4.50	%	$	212,187		6.50	%	$	958,976	12.16	%	$	354,965	4.50	%	$	512,727	6.50	%
Tier 1 leverage ratio		333,948		8.42	%		158,575		4.00	%		175,373		5.00	%		958,976	9.14	%		419,807	4.00	%		524,759	5.00	%
Tier 1 risk-based capital ratio		333,948		12.34	%		162,348		6.00	%		171,600		8.00	%		958,976	12.16	%		473,286	6.00	%		631,048	8.00	%
Total risk-based capital ratio		352,048		13.01	%		216,464		8.00	%		135,584		10.00	%		999,631	12.67	%		631,048	8.00	%		788,810	10.00	%

December 31, 2016

December 31, 2021:
CET1 capital ratio	$	272,221		12.23	%	$	100,166		4.50	%	$	144,685		6.50	%	$	854,075	11.49	%	$	334,608	4.50	%	$	483,323	6.50	%
Tier 1 leverage ratio		272,221		8.36	%		130,305		4.00	%		162,881		5.00	%		854,075	8.53	%		400,616	4.00	%		500,770	5.00	%
Tier 1 risk-based capital ratio		272,221		12.23	%		133,555		6.00	%		178,074		8.00	%		854,075	11.49	%		446,144	6.00	%		594,859	8.00	%
Total risk-based capital ratio		288,131		12.94	%		178,074		8.00	%		222,592		10.00	%		895,381	12.04	%		594,859	8.00	%		743,574	10.00	%

As of each of the dates set forth in the above table, the Company ~~(on a consolidated basis)~~ exceeded the minimum required capital ratios applicable to it and ~~FFB (on a stand-alone basis) qualified~~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 ~~guidelines described above.~~

~~As of September 30, 2017,~~set forth in the ~~amount of capital at FFB in excess of amounts required to be Well Capitalized was $158.1 million for~~above table do not include the ~~CET-1 capital ratio, $135.7 million for the Tier 1 leverage ratio, $117.5 million for the Tier 1 risk-based capital ratio and $81.5 million for the Total risk-based capital ratio.~~

~~The “Basel III” rules adopted by the Federal Reserve Board and the FDIC (the “New~~ Capital ~~Rules”) introduced a~~Rules’ additional capital conservation buffer, which is an increment added to the minimum capital ratios. If a banking organization does not hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements, it will face constraints on dividends, equity repurchases and executive compensation based on the amountthough each of the ~~shortfall. The~~Company and FFB maintained capital ~~buffer is measured against risk weighted assets and is therefore not applicable~~ratios necessary to ~~the tier 1 leverage ratio. The implementation of~~satisfy the capital conservation buffer began on January 1, 2016 at 0.625%, and will increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019. The following table sets forth the minimum capital ratios plus the applicable increment of the capital conservation bufferrequirements as of the ~~current year and when it is fully implemented in 2019:~~dates indicated.

2016

2019
CET-1 to risk-weighted assets

5.125
%

7.000
%
Tier 1 capital (i.e., CET-1 plus Additional Tier 1) to risk-weighted assets

6.625
%

8.500
%
Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets

8.625
%

10.500
%

46

~~During the nine months~~Table of ~~2017, and during the entirety of 2016, FFI made cash capital contributions to FFB of $35 million and $40 million, respectively.~~ Contents

As of ~~September 30, 2017,~~March 31, 2022, FFI had ~~$19.1~~$84.0 million of available ~~capital~~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.

~~We did not pay dividends~~As of March 31, 2022, the amount of capital at FFB in ~~2017 or 2016~~excess of amounts required to be well capitalized for purposes of the prompt corrective action regulations was $446 million for the CET1 capital ratio, $434 million for the Tier 1 Leverage Ratio, $328 million for the Tier 1 risk-based capital ratio and ~~we have no plans~~$211 million for the Total risk-based capital ratio.

The Company paid a quarterly cash dividend of $0.11 per common share in the first quarter of 2022. It is our current intention to continue to pay quarterly dividends. The amount and declaration of future cash dividends ~~at least~~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 ~~foreseeable future. Instead, it is our intention to retain internally generated cash flow to support our growth. Moreover,~~year ended December 31, 2021. Additionally, under the ~~payment~~terms of the holding company line of credit agreement, FFI may only declare and pay a dividend if the total amount of dividends ~~is subject to certain regulatory restrictions.~~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 million in dividends ($0.36 per share) in 2021.

We had no material commitments for capital expenditures as of ~~September 30, 2017.~~March 31, 2022. 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~~ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain financial risks, which are discussed in detail in ~~Management's~~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 ~~March 15, 2017.~~February 28, 2022. There have been no material changes to our quantitative and qualitative disclosures about market risk since December 31, ~~2016.~~2021.

I~~TEM 4.~~

47

Table of Contents

ITEM 4.CONTROLS AND PROCEDURES

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

In accordance with SEC rules, an evaluation was performed under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness, as of ~~September 30 2017,~~March 31, 2022, of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2017,~~March 31, 2022, 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.

There was no change in our internal control over financial reporting that occurred during the ~~quarter~~three months ended ~~September 30, 2017~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

~~PART II—OTHER INFORMATION~~

I~~TEM 1A.~~

ITEM 1A.RISK FACTORS

There have been no material changes in the risk factors that were disclosed in Item 1A, under the caption “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021, which we filed with the SEC on February 28, 2022.

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

On April 26, 2022, the Company announced that its Board of Directors authorized a stock repurchase program, pursuant to which the Company may repurchase up to $75 million of its common stock. This plan has no stated expiration date. This stock repurchase program replaces and 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, and which no additional shares were repurchased during the quarter ended March ~~15, 2017.~~31, 2022.

48

Table of Contents

ITEM 6.EXHIBITS

I~~TEM 6.~~

~~EXHIBITS~~

Exhibit No.		Description of Exhibit

~~31.1~~3.1		Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on October 29, 2015).

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

4.1		Indenture, dated January 24, 2022, between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on January 24, 2022).

4.2		First Supplemental Indenture, dated January 24, 2022, between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed on January 24, 2022).

4.3		Form of 3.50% Fixed-to-Floating Rate Subordinated Notes due 2032 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed on January 24, 2022).

10.1		Fifth Amendment to Loan Agreement, dated as of March 22, 2022, by and between the Company and NexBank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on March 24, 2022).

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

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

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

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

~~101~~101.INS		Inline XBRL ~~(eXtensive Business Reporting Language). The following financial materials from~~Instance Document - the ~~Company’s Quarterly Report on Form 10-Q for~~instance document does not appear in the period ended September 30, 2017, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

(1)	Filed herewith.

49

Table of Contents

S~~IGNATURES~~

SIGNATURES

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


	FIRST FOUNDATION INC.

Dated: ~~November 8, 2017~~	May 9, 2022	By:	/s/ ~~JOHN M. MICHEL~~KEVIN L. THOMPSON
			~~John M. Michel~~Kevin L. Thompson
			Executive Vice President and Chief Financial Officer

S-1


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

~~18101 Von Karman Avenue,~~ 200 Crescent Court, Suite ~~700 Irvine, CA 92612~~1400Dallas, Texas		~~92612~~75201
(Address of principal executive offices)		(Zip Code)


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



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

Emerging growth company	☒	☐

	Quarter Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Interest income:
Loans	$	31,236	$	22,231	$	87,709	$	61,362
Securities AFS		3,023		3,202		9,180		9,423
Fed funds sold, FHLB stock and deposits		619		571		2,001		1,490
Total interest income		34,878		26,004		98,890		72,275

Interest expense:
Deposits		4,899		2,426		12,103		6,194
Borrowings		1,539		415		4,394		1,636
Total interest expense		6,438		2,841		16,497		7,830

Net interest income		28,440		23,163		82,393		64,445

Provision for loan losses		701		1,231		1,862		2,881

Net interest income after provision for loan losses		27,739		21,932		80,531		61,564

Noninterest income:
Asset management, consulting and other fees		6,900		6,141		19,672		18,127
Gain on sale of loans		1,962		7,238		4,312		7,238
Gain (loss) on capital markets activities		—		997		—		(1,043	)
Other income		1,001		703		3,359		2,652
Total noninterest income		9,863		15,079		27,343		26,974

Noninterest expense:
Compensation and benefits		14,117		12,059		42,855		36,707
Occupancy and depreciation		3,801		3,072		11,094		8,783
Professional services and marketing costs		1,479		3,525		5,115		7,808
Other expenses		3,996		2,880		11,251		7,505
Total noninterest expense		23,393		21,536		70,315		60,803

Income before taxes on income		14,209		15,475		37,559		27,735
Taxes on income		4,629		6,417		12,250		10,949
Net income	$	9,580	$	9,058	$	25,309	$	16,786


Net income per share:
Basic	$	0.28	$	0.28	$	0.75	$	0.52
Diluted	$	0.27	$	0.27	$	0.73	$	0.50
Shares used to compute net income per share:
Basic		34,565,949		32,514,016		33,671,327		32,264,224
Diluted		35,259,632		33,575,894		34,599,813		33,365,614


	Common Stock								Accumulated Other
	Number of Shares	Amount		Additional Paid-in Capital			Retained Earnings		Comprehensive Income (Loss)			Total
Balance: December 31, 2016	32,719,632	$	16	$	232,428		$	57,065	$	(5,245	)	$	284,264
Effect of stock split	—		16		(16	)		—		—			—
Net income	—		—		—			25,309		—			25,309
Other comprehensive income	—		—		—			—		2,663			2,663
Stock based compensation	—		—		912			—		—			912
Issuance of common stock:
Exercise of options	1,059,000		1		5,469			—		—			5,470
Issuance of restricted stock	64,961		—		—			—		—			—
Capital raise	1,326,060		2		21,833								21,835
Balance: September 30, 2017	35,169,653	$	35	$	260,626		$	82,374	$	(2,582	)	$	340,453

	For the Nine Months Ended September 30,
	2017			2016
Cash Flows from Operating Activities:
Net income	$	25,309		$	16,786
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,862			2,881
Stock–based compensation expense		912			712
Depreciation and amortization		1,765			1,338
Deferred tax expense		23			758
Accretion of discounts on purchased loans, net		(430	)		(755	)
Gain on sale of loans		(4,312	)		(7,238	)
Gain on sale of capital market activities		—			(1,307	)
Gain on sale of REO		(104	)		—
Increase in other assets		(3,934	)		(1,429	)
Increase in accounts payable and other liabilities		6,538			1,970
Net cash provided by operating activities		27,629			13,716

Cash Flows from Investing Activities:
Net increase in loans (including changes in loans held for sale)		(889,326	)		(1,008,136	)
Proceeds from sale of loans		288,724			270,005
Proceeds from sale of REO		438			4,442
Purchases of premises and equipment		(1,767	)		(4,027	)
Purchases of securities AFS		(10,338	)		(130,829	)
Proceeds from sale of securities AFS		—			104,146
Maturities/payments – securities AFS		53,168			60,715
Purchases (net of redemptions) of FHLB stock		16,500			(4,185	)
Net cash used in investing activities		(542,601	)		(707,869	)

Cash Flows from Financing Activities:
Increase in deposits		841,931			816,561
FHLB Advances – net (decrease) increase		(844,000	)		155,000
Proceeds – term note		15,000			—
Proceeds from sale of stock, net		27,305			3,657
Net cash provided by financing activities		40,236			975,218

Increase (decrease) in cash and cash equivalents		(474,736	)		281,065
Cash and cash equivalents at beginning of year		597,946			215,748
Cash and cash equivalents at end of period	$	123,210		$	496,813

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	15,353		$	7,334
Income taxes		11,135			10,050
Noncash transactions:
Transfer of loans to loans held for sale	$	189,928		$	468,743
Mortgage servicing rights created from loan sales		1,954			1,945
Chargeoffs (recoveries) against allowance for loans losses		238			119
Transfer of loans to REO		—			950

	Securities with Unrealized Loss at September 30, 2017
	Less than 12 months					12 months or more					Total
(dollars in thousands)	Fair Value			Unrealized Loss		Fair Value			Unrealized Loss		Fair Value		Unrealized Loss
US Treasury securities	$	495	$	(4	)	$	—	$	—		$	495	$	(4	)
Agency mortgage backed securities		287,342		(2,670	)		58,044		(1,794	)		345,386		(4,464	)
Beneficial interests in FHLMC securitization		—		—			9,347		(2,172	)		9,347		(2,172	)
Total temporarily impaired securities	$	287,837	$	(2,674	)	$	67,391	$	(3,966	)	$	355,228	$	(6,640	)

(dollars in thousands)	Less than 1 Year			1 Through 5 years			5 Through 10 Years			After 10 Years			Total
Amortized Cost:
US Treasury securities	$	—		$	499		$	—		$	—		$	499
Weighted average yield		—	%		1.03	%		—	%		—	%		1.03	%

Estimated Fair Value:
US Treasury Securities	$	—		$	495		$	—		$	—		$	495

(dollars in thousands)	Nine Months Ended September 30, 2017			Year Ended December 31, 2016

Beginning balance	$	289		$	582
Accretion of income		(82	)		(185	)
Reclassifications from nonaccretable difference		66			—
Disposals		—			(108	)
Ending balance	$	273		$	289

	Past Due and Still Accruing												Total Past
(dollars in thousands)	30–59 Days			60-89 Days			90 Days or More			Nonaccrual			Due and Nonaccrual			Current		Total
September 30, 2017:
Real estate loans:
Residential properties	$	53		$	—		$	—		$	—		$	53		$	2,400,486	$	2,400,539
Commercial properties		762			—			1,330			1,278			3,370			526,220		529,590
Land and construction		—			—			—			—			—			31,304		31,304
Commercial and industrial loans		10,926			—			815			5,216			16,957			243,001		259,958
Consumer loans		—			—			—			—			—			28,469		28,469
Total	$	11,741		$	—		$	2,145		$	6,494		$	20,380		$	3,229,480	$	3,249,860

Percentage of total loans		0.36	%		—	%		0.07	%		0.20	%		0.63	%

December 31, 2016:
Real estate loans:
Residential properties	$	—		$	—		$	—		$	3,759		$	3,759		$	1,777,130	$	1,780,889
Commercial properties		—			—			2,128			1,120			3,248			473,711		476,959
Land and construction		—			—			—			—			—			24,100		24,100
Commercial and industrial loans		—			2			3,800			3,359			7,161			230,780		237,941
Consumer loans		—			—			—			—			—			32,127		32,127
Total	$	—		$	2		$	5,928		$	8,238		$	14,168		$	2,537,848	$	2,552,016

Percentage of total loans		—	%		0.00	%		0.23	%		0.32	%		0.56	%

(dollars in thousands)	Beginning Balance		Provision for Loan Losses			Charge-offs			Recoveries			Ending Balance
Quarter Ended September 30, 2017:
Real estate loans:
Residential properties	$	8,851	$	469		$	—		$	—		$	9,320
Commercial properties		3,285		281			—			—			3,566
Land and construction		287		66			—			—			353
Commercial and industrial loans		4,093		(119	)		—			(1	)		3,973
Consumer loans		284		4			—			—			288
Total	$	16,800	$	701		$	—		$	(1	)	$	17,500

Nine Months Ended September 30, 2017:
Real estate loans:
Residential properties	$	6,669	$	2,651		$	—		$	—		$	9,320
Commercial properties		2,983		583			—			—			3,566
Land and construction		233		120			—			—			353
Commercial and industrial loans		5,227		(1,492	)		—			238			3,973
Consumer loans		288		—			—			—			288
Total	$	15,400	$	1,862		$	—		$	238		$	17,500

Year Ended December 31, 2016:
Real estate loans:
Residential properties	$	6,799	$	(130	)	$	—		$	—		$	6,669
Commercial properties		1,813		1,051			(50	)		169			2,983
Land and construction		103		130			—			—			233
Commercial and industrial loans		1,649		3,578			—			—			5,227
Consumer loans		236		52			—			—			288
Total	$	10,600	$	4,681		$	(50	)	$	169		$	15,400

(dollars in thousands)	Allowance for Loan Losses								Unaccreted Credit
	Evaluated for Impairment				Purchased				Component
	Individually		Collectively		Impaired		Total		Other Loans
September 30, 2017:
Allowance for loan losses:
Real estate loans:
Residential properties	$	—	$	9,320	$	—	$	9,320	$	84
Commercial properties		—		3,566		—		3,566		78
Land and construction		—		353		—		353		—
Commercial and industrial loans		1,413		2,560		—		3,973		89
Consumer loans		—		288		—		288		6
Total	$	1,413	$	16,087	$	—	$	17,500	$	257
Loans:
Real estate loans:
Residential properties	$	—	$	2,400,539	$	—	$	2,400,539	$	9,043
Commercial properties		3,603		525,822		165		529,590		10,290
Land and construction		—		31,304		—		31,304		—
Commercial and industrial loans		10,747		247,559		1,652		259,958		14,771
Consumer loans		—		28,469		—		28,469		760
Total	$	14,350	$	3,233,693	$	1,817	$	3,249,860	$	34,864

December 31, 2016:
Allowance for loan losses:
Real estate loans:
Residential properties	$	—	$	6,669	$	—	$	6,669	$	128
Commercial properties		—		2,983		—		2,983		136
Land and construction		—		233		—		233		2
Commercial and industrial loans		—		5,227		—		5,227		147
Consumer loans		—		288		—		288		19
Total	$	—	$	15,400	$	—	$	15,400	$	432
Loans:
Real estate loans:
Residential properties	$	6,093	$	1,774,796	$	—	$	1,780,889	$	12,373
Commercial properties		2,148		474,634		177		476,959		24,796
Land and construction		—		24,100		—		24,100		437
Commercial and industrial loans		753		233,992		3,196		237,941		20,165
Consumer loans		—		32,127		—		32,127		1,266
Total	$	8,994	$	2,539,649	$	3,373	$	2,552,016	$	59,037

(dollars in thousands)	Pass		Special Mention		Substandard		Impaired		Total
September 30, 2017:
Real estate loans:
Residential properties	$	2,398,246	$	—	$	2,293	$	—	$	2,400,539
Commercial properties		519,931		5,131		925		3,603		529,590
Land and construction		31,304		—		—		—		31,304
Commercial and industrial loans		246,499		815		1,897		10,747		259,958
Consumer loans		28,469		—		—		—		28,469
Total	$	3,224,449	$	5,946	$	5,115	$	14,350	$	3,249,860

December 31, 2016:
Real estate loans:
Residential properties	$	1,773,296	$	1,500	$	—	$	6,093	$	1,780,889
Commercial properties		470,484		1,913		2,414		2,148		476,959
Land and construction		24,100		—		—		—		24,100
Commercial and industrial loans		219,676		3,625		13,887		753		237,941
Consumer loans		32,127		—		—		—		32,127
Total	$	2,519,683	$	7,038	$	16,301	$	8,994	$	2,552,016

	With No Allowance Recorded				With an Allowance Recorded
(dollars in thousands)	Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance		Recorded Investment		Related Allowance
September 30, 2017:
Real estate loans:
Commercial properties	$	3,603	$	3,603	$	—	$	—	$	—
Commercial and industrial loans		501		501		10,246		10,246		1,413
Total	$	4,104	$	4,104	$	10,246	$	10,246	$	1,413

December 31, 2016:
Real estate loans:
Residential properties	$	6,093	$	6,093	$	—	$	—	$	—
Commercial properties		2,148		2,148		—		—		—
Commercial and industrial loans		753		753		—		—		—
Consumer loans		—		—		—		—		—
Total	$	8,994	$	8,994	$	—	$	—	$	—

	Nine months Ended September 30, 2017				Year Ended December 31, 2016
(dollars in thousands)	Average Recorded Investment		Interest Income after Impairment		Average Recorded Investment		Interest Income after Impairment
Real estate loans:
Residential properties	$	2,427	$	20	$	1,970	$	14
Commercial properties		2,201		16		2,252		17
Commercial and industrial loans		3,792		13		1,673		20
Consumer loans		—		—		4		—
Total	$	8,420	$	49	$	5,899	$	51

	Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
(dollars in thousands, except per share amounts)	Basic		Diluted		Basic		Diluted

Net income	$	25,309	$	25,309	$	16,786	$	16,786

Basic common shares outstanding		33,671,327		33,671,327		32,264,224		32,264,224
Effect of contingent shares issuable				1,592				1,592
Effect of options and restricted stock				926,894				1,099,798
Diluted common shares outstanding				34,599,813				33,365,614

Earnings per share	$	0.75	$	0.73	$	0.52	$	0.50


Quarter ended September 30, 2016:
Interest income	$	26,004	$	—	$	—		$	26,004
Interest expense		2,841		—		—			2,841
Net interest income		23,163		—		—			23,163
Provision for loan losses		1,231		—		—			1,231
Noninterest income		9,923		5,319		(163	)		15,079
Noninterest expense		16,134		4,697		705			21,536
Income (loss) before taxes on income	$	15,721	$	622	$	(868	)	$	15,475

Nine Months Ended September 30:
Asset management fees	$	17,290		$	15,856
Financial consulting fees		54			73
Other		(10	)		(12	)
Total noninterest income	$	17,334		$	15,917

(dollars in thousands)	Allowance for Loan Losses								Unaccreted Credit
	Evaluated for Impairment				Purchased				Component
	Individually		Collectively		Impaired		Total		Other Loans
September 30, 2017:
Allowance for loan losses:
Real estate loans:
Residential properties	$	—	$	9,320	$	—	$	9,320	$	84
Commercial properties		—		3,566		—		3,566		78
Land and construction		—		353		—		353		—
Commercial and industrial loans		1,413		2,560		—		3,973		89
Consumer loans		—		288		—		288		6
Total	$	1,413	$	16,087	$	—	$	17,500	$	257
Loans:
Real estate loans:
Residential properties	$	—	$	2,400,539	$	—	$	2,400,539	$	9,043
Commercial properties		3,603		525,822		165		529,590		10,290
Land and construction		—		31,304		—		31,304		—
Commercial and industrial loans		10,747		247,559		1,652		259,958		14,771
Consumer loans		—		28,469		—		28,469		760
Total	$	14,350	$	3,233,693	$	1,817	$	3,249,860	$	34,864


Month	Number of Shares Sold	Weighted Average Price		Net Proceeds
(in thousands, except share and per share amounts)

April, 2017	115,270	$	16.24	$	1,857
May, 2017	528,036	$	16.40		8,486
June, 2017	11,272	$	16.51		182
July, 2017	191,900	$	16.57		3,116
August, 2017	100,552	$	17.52		1,725
September, 2017	379,030	$	17.35		6,469

Total	1,326,060	$	16.77	$	21,835


	2016		2019
CET-1 to risk-weighted assets	5.125	%	7.000	%
Tier 1 capital (i.e., CET-1 plus Additional Tier 1) to risk-weighted assets	6.625	%	8.500	%
Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets	8.625	%	10.500	%