Executive Summary

Q4 2019 delivered solid results: total revenues were $54.0M (+8% YoY) and diluted EPS was $0.34, with net income of $15.2M; NIM held at 2.88% and efficiency ratio improved to 58.6% .
Sequentially, revenues declined versus Q3’s securitization-driven peak ($57.1M in Q3), and EPS fell from $0.39 to $0.34 as noninterest income normalized; Banking income before taxes decreased from $24.9M to $21.9M .
Management guided to a stable-to-slightly higher NIM in 2020 with aspirational ~3% and efficiency ratio trending to the high-50s, supported by falling deposit/customer service costs and liquidity deployment .
Capital return stepped up: the quarterly cash dividend was raised 40% to $0.07 for Q1 2020 (from $0.05), a potential stock catalyst, with $9M returned in 2019 .
Credit quality strengthened: NPAs fell to 0.20% of total assets and NPA ratio improved from 0.33% in Q3; loan originations hit $553M in Q4 (record $1.9B for the year) .

What Went Well and What Went Wrong

What Went Well
- Strong annual performance: “2019 was another strong year across all aspects of our business,” with EPS $1.25 (+24% YoY) and efficiency ratio improving to 61.9% for the year .
- Strategic balance sheet actions supporting margin: securities remix and liquidity deployment; management expects NIM stable-to-up toward ~3% in 2020 and deposit costs trending down (overall deposit costs 1.24% in Q4, down from 1.40% in Q2) .
- Digital initiatives and franchise growth: enhanced digital banking, elevated brand presence, and record trust revenues; AUM increased to $4.4B (+$504M in 2019) .
What Went Wrong
- Noninterest income normalization post-Q3 securitization: Banking noninterest income fell from $8.173M in Q3 to $4.206M in Q4 as the $4.2M gain on loan sale did not recur .
- Seasonal deposit mix pressure: noninterest-bearing deposits declined from $1.53B at 9/30 to $1.19B at 12/31, modestly pressuring NIM (management noted seasonality and early Q1 rebuild) .
- Provision and expense dynamics: provision rose to $0.694M (vs $0.172M in Q3), and customer service costs remain cyclical; personnel expenses expected to step up seasonally in Q1 (payroll taxes, 401(k), raises) .

Financial Results

Metric	Q2 2019	Q3 2019	Q4 2019
Total Revenues ($USD Millions)	$51.0	$57.1	$54.0
Diluted EPS ($USD)	$0.28	$0.39	$0.34
Net Income ($USD Millions)	$12.410	$17.356	$15.214
Net Interest Income ($USD Millions)	$41.887	$43.132	$43.888
Noninterest Income ($USD Millions)	$9.131	$13.982	$10.198
Net Yield on Interest-Earning Assets (NIM %)	2.84%	2.89%	2.88%
Efficiency Ratio (%)	63.5%	59.5%	58.6%
ROA (% annualized)	0.81%	1.10%	0.96%

Segment results (Income before taxes):

Segment	Q2 2019	Q3 2019	Q4 2019
Banking ($USD Millions)	$18.425	$24.890	$21.906
Wealth Management ($USD Millions)	$0.415	$0.738	$0.839
Other & Eliminations ($USD Millions)	$(1.335)	$(1.380)	$(1.026)

Key KPIs:

KPI	Q2 2019	Q3 2019	Q4 2019
Loan Originations ($USD Millions)	$493.572	$485.817	$553.212
AUM (end of period, $USD Millions)	$4,236.132	$4,244.079	$4,438.252
Nonperforming Assets / Total Assets (%)	0.25%	0.33%	0.20%
Noninterest-Bearing Deposits ($USD Millions)	$1,279.218	$1,532.105	$1,192.481
Loan-to-Deposit Ratio (%)	110.7%	94.3%	103%
Net Interest Rate Spread (%)	2.30%	2.27%	2.33%
Avg Deposit Cost (Total, %)	1.40%	1.31%	1.24%

YoY references: In Q4 2019 vs Q4 2018, EPS was $0.34 vs $0.31 and revenues rose 8% .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin	FY 2020	NIM flat in Q4; 3% target reachable next year	Stable to slightly up; aspirational ~3%	Maintained/clarified
Efficiency Ratio	FY 2020	Trending down from 2019 levels (61.9% actual)	High-50s for 2020; bank already in 50s	Improved
Customer Service Costs	FY 2020	Elevated in Q3 on higher balances; cyclical	Decrease 5%–10%, mostly in first 3 quarters	Lowered
Deposit Costs	1H 2020	No specific prior	10–20 bps decrease on time deposits; lower MM/savings rates	Lowered
Tax Rate	FY 2020	No specific prior	~29% expected	Set outlook
CECL Day 1 Impact	Q1 2020	Preparing analysis (later in 2019)	Additional charge $1M–$3M	Clarified
Securitization Plan	Q3 2020	~$500M likely	Planning ~$500–$600M in September	Maintained/expanded
Dividend	Q1 2020	$0.05 quarterly in Q3 2019	$0.07 quarterly (40% increase)	Raised

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 & Q3)	Current Period (Q4)	Trend
NIM outlook & margin drivers	NIM flat in Q4; benefits expected from securities remix and seasonal deposit changes; target ~3% next year	Stable-to-slightly up NIM toward ~3%; cost of funds trending down; liquidity deployment	Improving/stable
Securitization strategy	Completed $551M multifamily securitization in Q3 with $4.2M gain; plan to use again	Planning ~$500–$600M securitization in September 2020	Ongoing utilization
Deposit/customer service costs	Q3 costs elevated; FDIC $1.2M refund in Q3; seasonality expected	Customer service costs expected to decrease 5%–10% in first 3 quarters; deposit costs declining	Declining costs
Digital banking/technology	Limited prior detail; Q2 emphasized platform scalability; AUM growth	Enhanced digital delivery, brand presence, and tech investments to better serve clients	Accelerating initiatives
Credit quality	NPAs 0.25% (Q2) → 0.33% (Q3)	NPAs down to 0.20%; strong credit; minimal migration to substandard	Improving
Tax & regulatory	CECL modeling in progress (Q3)	CECL day-1 impact $1M–$3M; 2020 tax ~29%	Increased clarity
M&A	Not highlighted	Quiet market; valuation gaps make accretion difficult; prefer organic growth	Cautious stance

Management Commentary

“2019 was another strong year across all aspects of our business… We have been able to elevate our brand through successful digital marketing efforts and our financial performance is a reflection of the valuable franchise we have created…” — CEO Scott F. Kavanaugh .
“Our overall deposit costs were 1.24% in the fourth quarter of 2019… borrowing costs came down from a high of 2.58% in the first quarter of 2019 to 1.8% in the fourth quarter of 2019.” — CFO John Michel .
“During 2019, we originated $1.9 billion of loans, a record year for us… deposit growth remains strong with $358 million increase in balances in 2019.” — President David DePillo .
“We increased that quarterly dividend for the first quarter of 2020 by 40% from $0.05 to $0.07 per share.” — CEO Scott F. Kavanaugh ; corroborated by 8-K .

Q&A Highlights

Originations mix and 2020 pipeline: C&I represented ~37% of Q4 originations; management targets ~one-third of the book in C&I and expects slightly higher originations in 2020 with robust pipelines; planning a ~$500–$600M securitization in September .
Margin trajectory: New money yields ~3.80% in multifamily; C&I yields down ~40–75 bps vs year start, modeled to keep NIM relatively stable; management aspires to ~3% NIM in 2020 .
Deposit dynamics: Noninterest-bearing deposits dip seasonally in Q4, rebuilding early Q1; time deposits expected to reprice lower by 10–20 bps; overall deposit costs continue to decline .
Expense outlook: Customer service costs expected to decrease 5%–10% mainly in first three quarters; personnel expenses seasonally higher in Q1 (taxes, 401(k), raises); continued efficiency gains .
CECL and tax: Day-1 CECL impact estimated at $1M–$3M; 2020 tax rate ~29% .
M&A: Quiet environment; seller valuation expectations remain high versus FFWM’s growth and returns, limiting accretive opportunities .

Estimates Context

S&P Global consensus estimates for Q4 2019 were unavailable; as a result, vs-estimates comparisons are not included. We attempted to source Primary EPS Consensus Mean and Revenue Consensus Mean but could not retrieve due to data limitations. Where estimates would normally be shown, we rely on reported company results .

Metric	Q4 2019 Estimate (S&P Global)	Q4 2019 Actual	Surprise
EPS ($USD)	Unavailable	$0.34	n/a
Total Revenues ($USD Millions)	Unavailable	$54.0	n/a

Key Takeaways for Investors

Margin stability with potential upside: deposit and borrowing costs are falling; management targets NIM ~3% in 2020, supporting EPS resilience despite lower gain-on-sale cadence .
Efficiency improves: cost discipline and scale benefits should push the efficiency ratio into the high-50s in 2020, aiding operating leverage even as originations grow ~10–15% organically .
Continued securitization capability: plan for ~$500–$600M multifamily securitization in Q3 2020 provides balance sheet flexibility and potential fee income, though quarterly noninterest income will be lumpy .
Credit quality tailwind: NPAs down to 0.20% with modest net charge-offs; management expects continued improvement, reducing credit cost volatility .
Dividend signal: 40% increase to $0.07 quarterly underscores confidence in earnings power and may broaden investor appeal; watch capital ratios and payout trajectory .
Near-term modeling notes: incorporate CECL day-1 charge ($1M–$3M) in Q1 2020 and seasonal Q1 expense uptick; assume tax rate ~29% in 2020 .
Trading implication: Without consensus data, use sequential normalization of noninterest income and improving efficiency to gauge core run-rate; dividend increase and margin guidance are positive sentiment levers .

First Foundation Inc. (FFWM)·Q4 2019 Earnings Summary