First Foundation Inc. (FFI) reported significant financial developments for the quarter and nine months ended September 30, 2024, reflecting a challenging operating environment. The company experienced a net loss of $82.2 million for Q3 2024, a stark contrast to a net income of $2.2 million in the same quarter of 2023. This loss was primarily driven by a $117.5 million Lower of Cost or Market (LOCOM) adjustment related to the reclassification of $1.9 billion in multifamily loans from loans held for investment to loans held for sale.

Total interest income for Q3 2024 increased to $157.2 million, up from $144.8 million in Q3 2023, while interest expense rose significantly to $108.0 million from $92.7 million. Consequently, net interest income decreased to $49.1 million from $54.1 million year-over-year. The net interest margin for the quarter was 1.50%, down from 1.66% in Q3 2023.

For the nine-month period, total interest income rose to $458.5 million from $427.1 million in the prior year, but net interest income fell to $131.3 million from $159.8 million. The net loss for the nine months was $78.3 million, an improvement from a net loss of $201.6 million in the same period of 2023.

FFI's total assets as of September 30, 2024, were $13.4 billion, slightly up from $13.3 billion at the end of 2023. However, total loans decreased to $8.1 billion from $10.2 billion, with loans held for investment dropping to $8.1 billion from $10.2 billion. The company’s deposits also fell to $10.3 billion from $10.7 billion, attributed to declines in interest-bearing demand accounts and certificates of deposit.

In terms of capital structure, total shareholders’ equity increased to $1.1 billion from $925.3 million, bolstered by a $228 million capital raise in July 2024. The company’s Common Equity Tier 1 Ratio stood at 10.31%, exceeding regulatory requirements.

FFI's noninterest income for Q3 2024 was significantly impacted by the LOCOM adjustment, resulting in a loss of $112.9 million in the Banking segment. Conversely, Wealth Management reported a slight increase in noninterest income, reflecting growth in assets under management (AUM), which rose to $5.5 billion.

The company also reported a provision for credit losses of $282,000 for Q3 2024, compared to a reversal of provision in the prior year. The allowance for credit losses related to loans held for investment was $29.3 million, consistent with previous periods.

Overall, First Foundation Inc. navigated a complex financial landscape, marked by increased interest rates and strategic adjustments in its loan portfolio, while also focusing on capital management and operational efficiency.