First Foundation's Q4 2024: Analyzing Contradictions in Loan Strategies, Compensation Costs, and Deposit Expectations

These are the key contradictions discussed in First Foundation Inc.'s latest 2024Q4 earnings call, specifically including: Loan Sale and Portfolio Strategy, Compensation Costs, Balance Sheet Strategy and Optimization, and Customer Service Deposit Costs:



Balance Sheet and Loan Portfolio Strategy:
- First Foundation sold $489 million of multifamily loans in Q4, with plans to reduce its CRE concentration and dependence on high-cost funding.
- The primary goal is to improve risk profile and contribute to stronger financial performance in the future.

Net Interest Margin (NIM) Improvement:
- The company's NIM improved to 1.58% in Q4, 41 basis points above the year-ago period, driven by three rate cuts from the Fed.
- Proceeds from the securitization of multifamily loans were used to repay high-cost broker deposits, which also contributed to NIM improvement.

Credit Risk Management and Reserves:
- First Foundation recorded $17.1 million in net charge-offs, with a loss of $657,000 in its multifamily portfolio, a first for the company.
- The increase in reserve levels to 41 basis points reflects efforts to strengthen credit risk management practices in line with the company's size and complexity.

Expenses and Compensation Costs:
- Non-interest expenses increased by $7.9 million in Q4, primarily due to year-end bonuses and higher compensation-related expenses.
- The company is focused on strategic investments while maintaining expense management and aligning expenses with revenue growth.