Item 2.02 Results of Operations and Financial Condition.
First Foundation Inc. ("we" or the "Company") expects to announce its results
for the quarter and year ended December 31, 2021 on January 31, 2022. However,
in connection with a proposed public offering of its subordinated notes, the
Company intends to file a preliminary prospectus supplement (the "Prospectus
Supplement") to the base prospectus included in its shelf registration statement
on Form S-3 (No. 333-239396), declared effective by the U.S. Securities and
Exchange Commission ("SEC") on July 2, 2020. The Prospectus Supplement describes
certain information related to the Company's financial condition and results of
operations for the period ended December 31, 2020, as set forth below.
While not final, and subject to adjustment as we complete our review, our
preliminary data indicates that net income and diluted earnings per share will
be higher than Wall Street consensus estimates for the fourth quarter 2021.
Revenue was down from the third quarter to the fourth quarter 2021. However,
revenue excluding gain on sale of loans was higher from the third quarter to the
fourth quarter 2021. Net income for the fourth quarter 2021 was lower than third
quarter 2021 but also exceeded Wall Street consensus estimates. Our net interest
margin increased from the third quarter to the fourth quarter 2021. We
experienced organic loan growth in the fourth quarter 2021 in addition to the
loans acquired in connection with the closing of the acquisition of TGR
Financial, Inc. on December 17, 2021. We experienced a slight outflow in legacy
deposits due, in part, to seasonal activity and strategic interest rate
adjustments, but we will report an overall increase in deposits as a result of
the TGR Financial, Inc. acquisition. Given asset quality trends, we do not
anticipate that any provision for credit losses is necessary for our legacy loan
portfolio. However, we will record a provision for credit losses in the fourth
quarter 2021 in connection with the TGR Financial, Inc. acquisition.
The information provided in this Item 2.02 is preliminary and remains subject to
change as we complete our financial statements and our auditors complete their
audit procedures. Our actual operating results for the fourth quarter and full
year ended December 31, 2021 may materially differ from this information. The
information provided in this Item 2.02 constitutes forward-looking statements,
and we caution you that these statements are subject to risks and uncertainties,
including those referred to under "Cautionary Note Regarding Forward-Looking
Statements" in this Current Report on Form 8-K and those other factors described
in reports we file with the SEC, including our Annual Report on Form 10-K for
the year ended December 31, 2020, filed with the SEC on February 26, 2021.
In accordance with General Instruction B.2 of Form 8-K, the information
contained in this Current Report on Form 8-K is being furnished and shall not be
deemed "filed" for purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that Section, and
such information shall not be deemed incorporated by reference in any filing
under the Securities Act of 1933, as amended.
Cautionary Note Regarding Forward-Looking Statements
This Current Report on Form 8-K includes forward-looking statements within the
meaning of the "Safe-Harbor" provisions of the Private Securities Litigation
Reform Act of 1995, including forward-looking statements regarding our
expectations and beliefs about our financial performance and financial
condition, as well as trends in our business and markets. Forward-looking
statements often include words such as "believe," "expect," "anticipate,"
"intend," "plan," "estimate," "project," "outlook," or words of similar meaning,
or future or conditional verbs such as "will," "would," "should," "could," or
"may." The forward-looking statements in this report are based on current
information and on assumptions that we make about future events and
circumstances that are subject to a number of risks and uncertainties that are
often difficult to predict and beyond our control. As a result of those risks
and uncertainties, our actual financial results in the future could differ,
possibly materially, from those expressed in or implied by the forward-looking
statements contained in this report and could cause us to make changes to our
future plans. Those risks and uncertainties include, but are not limited to, the
risk of incurring credit losses, which is an inherent risk of the banking
business; the negative impacts and disruptions resulting from the COVID-19
pandemic on our colleagues, clients, the communities we serve and the domestic
and global economy, which may have an adverse effect on our business, financial
position and results of operations; the risk that we will not be able to
continue our internal growth rate; the performance of loans currently on
deferral following the expiration of the respective deferral periods; the risk
that we will not be able to access the securitization market on favorable terms
or at all; changes in general economic conditions, either nationally or locally
in the areas in which we conduct or will conduct our business; risks associated
with the Federal Reserve Board taking actions with respect to interest rates,
which could adversely affect our interest income and interest rate margins and,
therefore, our future operating results; the risk that the performance of our
investment management business or of the equity and bond markets could lead
clients to move their funds from or close their investment accounts with us,
which would reduce our assets under management and adversely affect our
operating results; the risk that we may be unable or that our board of directors
may determine that it is inadvisable to pay future dividends; risks associated
with changes in income tax laws and regulations; risks associated with seeking
new client relationships and maintaining existing client relationships; and the
risk that subsequent events, closing procedures, additional information or other
circumstances could cause our actual financial results to vary materially from
the preliminary, unaudited operating results reported in this report.
Further, statements about the potential effects of the TGR Financial, Inc. ("TGR
Financial") acquisition on our business, financial results, and condition may
constitute forward-looking statements and are subject to the risk that the
actual effects may differ, possibly materially, from what is reflected in the
forward-looking statements due to factors and future developments which are
uncertain, unpredictable and in many cases beyond our control, including the
risk that the benefits from the acquisition may not be fully realized or may
take longer to realize than expected or be more costly to achieve, including as
a result of changes in general economic and market conditions, interest and
exchange rates, monetary policy, laws and regulations and their enforcement, and
the degree of competition in the geographic and business areas in which we and
TGR Financial operate; our ability to promptly and effectively integrate the
companies' businesses; reputational risks and the reaction of the companies'
customers, employees and counterparties to the acquisition; diversion of
management time on integration-related issues; and lower than expected revenues,
credit quality deterioration or a reduction in real estate values or a reduction
in net earnings.
Additional information regarding these and other risks and uncertainties to
which our business and future financial performance are subject is contained in
our 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2020
that we filed with the SEC on February 26, 2021, and other documents we file
with the SEC from time to time. We urge readers of this report to review those
reports and other documents we file with the SEC from time to time. Also, our
actual financial results in the future may differ from those currently expected
due to additional risks and uncertainties of which we are not currently aware or
which we do not currently view as, but in the future may become, material to our
business or operating results. Due to these and other possible uncertainties and
risks, readers are cautioned not to place undue reliance on the forward-looking
statements contained in this report, which speak only as of today's date, or to
make predictions based solely on historical financial performance. We also
disclaim any obligation to update forward-looking statements contained in this
report or in the above-referenced reports, whether as a result of new
information, future events or otherwise, except as may be required by law or
NASDAQ rules.
Additional Information and Where to Find It
The Company has filed a registration statement (including a prospectus) (File
No. 333-239396) with the SEC for the proposed offering. Before you invest, you
should read the prospectus and the other documents that the Company has filed
with the SEC for more complete information about the Company and the proposed
offering. You may get these documents for free by visiting EDGAR on the SEC's
website at www.sec.gov. Alternatively, the Company, any underwriter or any
dealer participating in the offering will arrange to send you copies of the
prospectus relating to the proposed offering if you request it by emailing Piper
Sandler & Co. at fsg-dcm@psc.com.
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