- Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to First Foundation's Third Quarter 2022 Earnings Conference Call. Today's call is being recorded. At this time, all participants are placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] Speaking today will be Scott Kavanaugh, First Foundation's Chief Executive Officer; Kevin Thompson, Chief Financial Officer; and David DePillo, President.

Before I hand the call over to Scott, please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the company's performance and financial results. made earnings the release. are included harbor statements today's in forward-looking subject safe to statement These

In include non-GAAP some financial addition, of measures. the discussion may

Scott uncertainties over company's results now to more could reconciliations any Commission. Kavanaugh. of a complete And measures, of I to the and risks For turn see Securities financial the Exchange discussion forward-looking statements like cause with the differ could and actual CEO, non-GAAP materially filings call from would the that and

Scott Kavanaugh

welcome. this and joining our third had banking the on over the question morning, our meaningful for Good Thank The months That a X with our notable last impact built the of clients. quarter no you the call. relationships said, conference Fed's results strength have sector. the is have that core and actions XXXX morning earnings businesses we we reported reflect there

to third -- $X.XX an As Total quarter, year-over-year. am second I increase earnings million for second increase pleased against a or XXXX of quarter million the our XX% $XX the X% the backdrop for that per were were $XX.X the report for from revenues that and share. quarter

share quarter ended value at $XX.XX. higher Our book tangible per the

of and third declared paid We also share. quarter $X.XX cash our dividend per

Our quality. strong fundamentals remain with excellent credit

the for the quarter. X.XX% NIM quarter Our for was

services. continue to We experience a banking, wealth steady and trust across management pipeline

success, in is we grateful trust are our success and us. place Our continue clients' to for the they

deposits balance valuable the heading of building focus continued fourth Our strategic pursuing protecting is into the and clients. sheet, around quarter liquidity, competitively centered the retention

with as lending credit fantastic maintaining $X.X in with strong for team does loan the billion. high quarter quarter coming our lending Our the points activity our NPAs low remained basis for at a standards. job XX was originations

well. We that a to loan portfolio balanced perform continues have established

growth next emphasize, managing ahead will to look quarters, loan the I we forward. loan we capital must strategically growth what our decision it for in we is quarters macroeconomic the by bolster With in coming we This and that, experienced Dave clients, portfolio anticipate liquidity we than the preserve current be intend slower going not few quarters. As products and the the on given a a later cycle, the more in record of touch or the certainly offer. recent we serve prudent loan the call. composition will reflection of industries our have is

Looking at deposits.

in it's I tough we out and no it's have banking sector. There's recognize fight. before, outflows mentioned a the there, As question there dog overall are

$X.X our and some retail am channels, has to billion I attract been fight able our team new to proud we're clients continuing commercial. base including However, that to through and online, of maintain attractive very

Our and provide business wealth meaningful the firm. to contributions trust continued management to

clients new We most successful attracting to that have in times market It's retaining turn and ones. existing volatile guidance. the is when these been for us like clients

communicating been and have managing them as proactively We their strategically portfolios with necessary.

As seeing a our result, client wealth retention strong entire platform. we across are management

saw manage benchmarks, the Assets management significant under the to S&P composite declines the and even at we well ended XXX relatively as respect the billion. with The our portfolios for clients all-weather their NASDAQ during quarter. $X.X performed quarter

am responses the first Upon the to locations our future Naples, closed employees Avenue of we continuity immediately learning locations our which branch for reopened our were of storm, about safe, all with I which Let storm, from to for our all be Once well. extremely and following to in will the a foreseeable Fifth activated made exception of we we accounted repair the as disaster pleased newly acquired report landfall discuss Naples, minute and performed damages. we and our me have Florida. plans. take recovery Hurricane the our Ian, business that

potential loan only it a to meaningful portfolio are to provisions impact see setting and expect do not losses. our for relates our to As aside clients, we small

with community assessment our rebuilds. Along impacted. the also clients be we can these in we good, we any lines, to while contact assess way looks to have deposit While clients been might any initial been have our helpful want to who with

Fed cycles, been been outpouring are clients leadership my are have most among navigate that seen. touched experiencing. the of environments, team generosity recovery. community. And To road I to the that within local rate interest has resolved employees, or rate our fund this reiterate Many fully by want I We one to the economic like the environment rising we perhaps we remarks, aggressive opening believe we've through many including ever are help a conclude the although the actions and to

valuable solutions Our And clients in conditions. moment of to finally, business. a business designed in that honor an take talented marks this to I anniversary of organization. month journey It to note dedicated be is serving financial group First offering to that their we established time, a and to model results building XXth continues be And lead our market and the want committed Foundation. have any great a financial amazing of clients over this whenever professionals might they deliver to

the over CFO, Now turn our me to call let Kevin Thompson.

Kevin Thompson

Thank you, Scott.

XX.X%. diluted per return was quarter. $X.XX share the in on third assets a points, on was common equity basis The tangible earnings mentioned, return with of XX As

balances. increases points yield in acquisitions, deposits of basis our X.XX% current sell points to as for to interest During the transferred the we to in points the for basis the XX basis result held the due reserve to to X.XX%. loans. rate metrics X.X% declined credit balance of XX by loan quarter, increased while related total points our by quarter points the losses in Credit average no quarter, The prior rates million, third the unprecedented increased for with decreased longer from all net basis release of loan to as a loans cost deteriorated held intend to the sale XX was loan loans XX from primarily interest rising the our basis loans $XXX,XXX of environment. loans investment reserves credit increased remained of for margin ratio loans The offset strong in decreased portfolios, $XXX.X specific to to purchased X allowance

to $XX.X Our income the increased million. million in to to rate due interest $X.X grew $XX.X net costs million environment. service from also increasing the Customer quarter X%

Our by of fees driven balance the $XX.X $XXX,XXX a management wealth management noninterest for million million, was and consulting result management income balances. million, banking-related primarily Wealth trust fees. revenues as asset and of the $X.X under $X.X revenues decreased quarter in administration lower in

trading the advisory expense million would Our excluding result balances. from the the have $XX.X loan quarter. been trust Compensation in on combined up $X.X profit the primarily in $X.X margin profit to expense the higher XX% increased $XX.X quarter. as a of a for related quarter, due costs. million, to in service of pretax increase second due originations the costs credit earnings costs as achieved million, funding and expense related of to divisions and the a result Efficiency decrease lower increased increased error, margin loan rates a deposit a Noninterest benefits was Customer quarter primarily million the XX%. in by the paid the $XXX,XXX ratio deferred to XX%,

decreased our the to quarter. compared prior tax Finally, for rate effective to XX.X% XX.X%

tax will our over several We benefits to the are turn from I continue David the just next now beginning that over to strategy years. realize to should call grow DePillo.

David DePillo

Kevin. you, Thank

billion the were $X.X quarter. Scott As loan for originations mentioned,

business adjustable we commercial, commercial the revolving are term owner-occupied originations of of public during finance during Looking real comprised The originated the multifamily, construction, new of and the of remaining the lines quarter follows: million quarter, of XX%; division as million breakdown commercial commercial estate X% $XXX million owner-occupied estate, commercial which X%; of commercial loans of during loans, $XX the million that million $XXX as credit. percentages our XX%; Contributing at land loans were commercial loans, $XX finance and loan X% of loans including loans. single-family, third equipment other. and the real C&I XX% to $XXX funded originations quarter, of

basis that accomplished As underwriting last to we without we public the the note our historical quarter. to in heightened our in $XXX high the to $XX million of million a July experienced XX of this of mentioned in and at quarter, end rate NPAs important normalized always of changing channel finance run August points about our originations that It's fell a low month. standards the

average which was quarter, specifically yields, achieved X.XX more loan about second substantially we weighted of on rate originations, a Speaking X.XX. the which from increased

relockdowns quarter, This the of to to see started of savor the in increase of lower-yielding higher the impact we end origination loan and have out our funded prior yields as due long yield curve the pipelines. on

multifamily As to nonoccupied and line held in XX, consumer of maturity XX% real business XX% loans, our September estate, single-family X% construction. include X% loans loans, loans, and commercial XX% commercial

are Well, we leaving system. the at is Scott are forward balance bank economic across steady working production across in held SFS deposits referenced, to uncertainty. Deposit deposits, anticipate tempered of our all funding the going channels. hard increased $X.X that as the the at growth the and given quarter. was as for competition is the loan growth deposits, billion an bolster liquidity reality effect to slowing we liquidity to banking And there deposit Looking experiencing bring

increase in line the to manage levels measured lows This forward, is ratio. actively loan represents experienced last as lower from of still Our loan-to-deposit levels. we XX. historical with production pre-COVID XXX% quarters, of during an going September few ratio but given our plan this

fourth the credit And our when to hand quality there reiterate excellent quarter. the At I it remains very service client Scott's a While matters to ready key and are delivering am to our uncertainty, time, take the most. grateful this back I'll heading operator. into to we questions, is comments, focus team's dedication to economic it

Operator

coming first Instructions] from Clark [Operator Sandler. Piper Matthew Our from is question

Matthew Clark

ratio there. Maybe just the outlook loan-to-deposit the and on

ratio internal You outlook back planning or in should that couple there looking growth to for expect And Just of for your trend sense deposits. I manage the we to sub-XXX%? to get over limit? that of guess trying quarters? how kind get next Is mentioned an the it. here a down slower pace loan of to are you're you to XXX%

Scott Kavanaugh

Yes.

pipeline terms we're we close cautious pretty was XXX is XXX% feel we like of confident slowing to lending. growth that already know point would that the is over our under had we much on either I an you're was in will see a deposits our earnings continued what of we level, limit. full I say pretty it. would we're it that TAP. what But don't that taken say is say to quarters XXX% internal But the did the already I our we announcement, going quarter to great So up when I or to to goal. to very said, why there's it. to to a had giving in thought already strides there I what fruition. which pipeline continue And is to of that we more on Last much we've got did being not come that operate That just get several I back think loan a our next approach

David DePillo

we're looking the I would an at between say near XXX% XXX% in that future. range kind and operating of

and related we decent quarter some cyclical MSR our retail As are noted outflows in taxes have mentioned to is specifically during that years, the that starting fourth in that the some The online on our from some range. plan pretty range, we're the have news billion $X Scott $X.X that of previous had Current good receive and $X.X before, of due rate the production ahead in channels inflows some and that. from do billion rate period. $X we're clients to on larger basis. we're billion run to to is said, billion to run selling relative be historical currently down being of of $X.X what offset billion to the slightly That a

basis. originations to loan least planned slowing a still pretty at it's for going originations us forward. we're some relative although significant On going on basis, So a represent

Kevin Thompson

you rate is expected, I rising that have a as prepayments still We even a in decreased rising environments, turns And one of drastically. environment thing during over time over will a see, portfolio rate add often time.

Federal taking think I a the to a are pause Reserve see where borrowers goes. lot However, of

several next drastically, somewhat. Federal So speeds them that Reserve where have the things as quarters treadmill and again. increase over to headed, prepayment we slowed stabilize expect our start People on clue get we a the and is

the the ratio our between future. seasonal good So prepayments, the of slowing height for is had the production believe this quarter, of outflow we deposits, we foreseeable loan-to-deposit of this the

Scott Kavanaugh

Yes, agreed.

Operator

Our comes Division. from D.A. Gary Tenner next question from

Gary Tenner

But actively context growth you've the on loan I just mix commercial you David, going come up growth from? follow you see for kind Obviously, the to conversation, is business if you of bit. put it So slow might where into as -- been wonder could piece a the as that growing loan lending to loan from us of quite here. the growth,

David DePillo

point. good a That's

we X.X foreseeable that until increases, be seems loan to in high the and like Fed growth, the increases. X.X, when We emphasis we're an originating SOFR-based we're depending and like settling then to and in of going going issues movements Fed's a variable seems in not part the Fed low the rate the commercial be kind on that's majority sure future, rate at is a least Xs, the channel rate where property at and of face are have going will Xs on the And rate good income that the of a now until good forward. we're good

support going our continue to are we to So franchise.

income more property will growth an However, on and C&I emphasis there be emphasis growth. of of an less on

other At in and have is side, extremely still there's that's XX% to of high. least about free And demand in channels. still lot But flow are forecasting. XX% going cash and we're the doing companies So growth a well. commercial very probably we're what C&I

going more on the can to tend get we're Fed from we So the pace. when moderate to they're originations to their guidance going focus commercial some until

Gary Tenner

Fed cap all based of and customer because the as on the clarify rises? is wanted goes? where had as service increase there was But goes line, the I expected. basically sort -- the a question far through do Fed then than I the expense just as And any fees as those bigger broadly that think charge there or way that to to cost we participate Or

David DePillo

point. interesting an It's

they a that as for think the us. to not us dollar beta in -- have do most some Fed are in continue increased so of writing are to that that more cases, moderates expectation these been unfortunately, kind much dollars The to given tempering the the, of years continue clients And to going A that, on close necessarily people slowing protective take we the But very to I around of them should will banks anticipate have books pretty the have larger XXX% Fed are Fed that down. beta increases most to been start participating the beta space establish. increases to for and have valuable point we're growth clients. ride due probably their some they certain system. are in than have beyond But... liquidity XXX% I until moderating and of at as point, our related those think, But lot that because with to increase. operational the some

Scott Kavanaugh

Gary, the heightened demand I industry. out they're would peers just And obviously, got permeate a from the clients to talking say deposit to that it's with awareness for there, the think from higher goes clients, Fed And costs. my I throughout you've higher starting experiencing rates.

fight a best there. backwards out when said, to So as low trying more going our I can. think keep But or we're we think it's dog I accentuated. of retention it's becoming as deposits, I your talking in betas as about terms you're And

Kevin Thompson

eventually, the the Scott banks, -- quite sophisticated we've The relationship. more as has adapt, time and these to to Again, we've now, it they're process don't of past high of even this hasn't clients rate retain hard, and But clients. our hunker we will hard. between be support paying prudent. betas that seeing haven't great but and as but a to clients banks for maintain to down want sophisticated sites glad the Fed been clients these to types retain and reminder, center mentioned, on slower, to do, clients. be in most it's we're pushed stop, that beta types time great these money had rate cycles, have banks been we the at the fight cycle, able we And dog systems In really as we'll be as seen

David DePillo

other retail, deposit of the anticipating the of through channel kind commercial up comments we're growth higher for into is aren't are service the one we channel. to costs make that online that So our would other and we seeing significant pivoting in and make channels

and retail few you'll next So pivot I quarters. online the in towards more see think a

Operator

question next Our Instructions] from [Operator Andrew from Terrell Stephens. comes

Andrew Terrell

kind margin. top, I I've maybe a questions just lot got there's at be on starting -- of several the But it'd of moving the think pieces.

guys fourth of it'd the a you just be the you Do out quarter? margin helpful. range have think So in where settles

Kevin Thompson

It on depends several the as know. depends items, It -- Fed December. you in on acts how here what and February

growth. As we've are talked loan our strategically about, managing we

rate focus we'll higher quality, on so And loans. really high

as course, we're of deposit high-quality it that deposit as on to funding, lower bringing well our And maintaining a ensure have the prepayments on depends, strategy portfolio. We well. that working cost we're in

So we're we'll the include anticipate quarter know below that quarter. the next more currently working We'll this do will fourth I year. and X% for of But budgets on in fourth our year, soon. dip

David DePillo

do that middle locks fact of are as below and the the as up. that echo shifting end current fundings we've of fourth -- rate that Yes almost rate seen in have the we the at daily pushed curve quarter the that's market in still rates because

So the some at to higher it's then quarter. fourth just we'll the impact pipeline, balance get little funding but current it's size of of significant impact the even with the the even margin significantly the last of even large harder the -- quarter, larger funding the sheet. though we than step margin And overall bit out due into to of a

Kevin Thompson

are where just some have raising maybe adjustable banks rates have their And are add I immediately. are issues, C&I These unprecedented say, one don't as We with we times rates. these the -- would about, as Fed those issues short-term I'll thing. much talked as

immediately. that our about have on adjustable We $X billion books is

loan turn to time the of bit production. little to a ship takes get it So and

rising to settles, we're -- get date betas. over deposit our So up production benefit environment rate to to the actually our and once time, anticipate able we loan everything it's from this -- with dust

Andrew Terrell

near-term maybe of but kind So some pressure, there. expanding from

Kevin Thompson

right. That's

Andrew Terrell

guess, in any the costs, to reduce third around relatively it then And be consistent? Do going guys added quarter, end interest-bearing the the you of should of Or just the deposit either on FHLB, expect growth the some quarter? deposit have in spot the total quarter, FHLB fourth of I saw commentary you you the at would given position or I the forward?

Kevin Thompson

less X.XX%. strategically And expensive. at well. some spot access rate funds. other wholesale that is branch we're flexible we in deposits In more broker interest-bearing is cases, on FHLB, to of are terms funding as course, And of and FHLB deposits The have we managing the other deposits our And portfolio. looking

So we more way lock are it. fund and still and... funding business broker FHLB being every We bring do strategic and needing We'll to probably and day next the wholesale funding to use best anticipate looking to some use some at the while. about down over in deposits really our smart rates

Scott Kavanaugh

this Yes, home bank the quarter. I next expect would over advances see to decline loan

David DePillo

Yes.

forecasting level I think high we're funded. -- us. is for XX% core for the we're that pretty the advances about much about this still

Kevin we environment probably rate I bring is point So high latter some broker solidify in the for But yes, say mentioned, this for, us. kind see up. room deposits the of until where have to we of to some would as some ends Fed a

Andrew Terrell

just more could Maybe sneak I if in. one

where pressure see margin quarter-on-quarter? it And what over be could kind it last expect ratio couple the of the pressured quarter, efficiency that ratio is on kind you'll to then it near fair of quarter, overall. magnitude I holding then ratio the going of a efficiency there? of is think fourth on rebound trajectory and should similar we as into of Just talking we about of about guess the pressure think standpoint efficiency know same the as could sounds term. kind I a be guess, next from it quarters I the from like kind

Kevin Thompson

the There's Obviously, that's that really correct. two have Yes, service higher is areas deposit cost impacted most us. material. the

we've probably deferral FASB deferral experienced average has of loan that. FASB in our size piece, our has on However, historically because what the we've -- double been of impacted been

service anticipate of kind on least if and move some can December, at you they November the in near-term and impact. costs customer it have potentially in So

Operator

Feaster David from James. Our Raymond next question comes from

David Feaster

the following expense good hike. pace do kind point. Could and guess for deferrals. including If all you slower together, the on which you that how guess us likelihood up this leads That's just November think you less a of as XXXX? take December I rate we run help about just originations, question. to of in do this I have

also We pressures. inflationary got some

think you about how start looking XXXX. into as expenses, curious Just especially we

David DePillo

overall It's part expense organization impacted to costs we've a service dramatic already hard Yes. impact is profile. cost customer efficiency an relatively that has we're -- increase a had started ratio. obviously, at our The our the as lean and looking

initiatives at including However, looking to that bank, delay potential we're the have G&A a material structure. would impact of every of area our

benefits in not structure is in staying and So us. I see significant comp necessarily huge that areas We're lines other down. maybe think what our you'll seeing of overall our relatively really even and cost impacts impacting stable, been have

expect and I number. So flows, The it's size On though it service. lower deferral the much have areas. may is a we a loans average relative back seen to other we'll boils think have normalize two One down we even deferral is basis, time, and ebbs to the what historically. of smaller really the volumes, over customer

in foreseeable that level a rest expect future. But the we've will the I customer line. relatively thoughtful and operating some don't over structure impact, significant point, at really think the been least At of stabilize. platform it's very out service So have to and efficient managing cost cost maintaining our

David Feaster

XXXX an the would you at based or continuing just around XXXX realistically Or there? forecast, when mid-XXXX some is about I you that current And that event? on then the touched reprice point expect more point the about NIM or trough? and higher. backdrop talking late is to I on to interesting mean, portfolio a guess Fed

Scott Kavanaugh

in first XXXX and No, the half event XXXX. a of I think probably it's

David Feaster

of and the then front? and how curious given about wealth in prepared growth challenges valuations there, new in in -- everything. markets you're trust you seeing some But services. could on Obviously, especially remarks you just talked your -- there's Texas market management the the And in in having opportunities Florida that and a just and the pipeline good

Scott Kavanaugh

to that some coming point, major which still Well, trust dealing think community, had is Hurricane like investment actually Florida to through with the fight Unfortunately, foremost, people us. and some and management join along is Ian people we fairly seem We've I first nicely. and things rebuilding, the that through trust this side say of been we significant, the going investment a on referrals pleased an over am like have event even added fairly management. given that. haven't either or a I at challenges Texas,

We what continue million new I that say is, on that million and had we've to achieved would But we've side, or between the look. client already year million. staffing $XXX of this here, with it's $XXX $XXX assets

So quite a great. percent. we've not strong the new coming into at is the of backdrop where the down we've But but that's retention, S&P time, same also had system. assets bit And got only you a had XX-some-odd

us billion When with optimistic I this have more because under so and also in point the say, the to in used have been time, environment, that a have I'm $X.X declined rate think ended take around. way extremely losses rising would have time And we been assets this think $X.X we tough. impacted every new billion. at clients a But I on have the dollar, time unfortunately, in outflows management cycles we We've than to interest have, we very past had the we events. I

through -- a of can the those maintaining I front terms in are of job incredible clients, an doing retention. job are tremendous and all talking of is issues getting folks say in relationships, they've our it what done think I So

Kevin Thompson

that, XXXXs to suspect work may An crisis outflow wealth interesting houses. saw advisory when in trusted great to an phenomenon happened conservative. flow saw so that you bank the the Then who that again. financial market banks when was kind the clients of Customers more with banks. the wanted see the of good, they from early we felt happened after flow to as banks was back to back you I someone brokerage that with their

because the our outperformed XXX of S&P portfolio Our conservative approach. has

in advisory appreciate Our time business. to be may a a as clients really that. wealth be it And bank good the

Scott Kavanaugh

And CPAs, I a that side, attorneys, from attention bigger add, of David, a lot we're the firms. of on and trust might referrals garnering lot

you -- As Schwab. custody know, assets them most our are at under of management

unbelievable an earning with them. Charles constant with have and Schwab communication relationship We

am side very will and garner to believe the to I taken So continue that years build. hopeful that's that trust attention

David Feaster

in. across health competitive update some I was an landscape, on an on multifamily I've you give thoughts the could And with us think are the on the I multifamily the just on could just that misunderstandings on us was regional multifamily. hoping you hoping investors dynamics could If I just I maybe update give more one spoken a that just market. there's squeeze cautious bit or overall Coast of the other country. any insights on space? West and some

David DePillo

market. back than We've the in been same more past regional really they been relative have the a is Chase a noticed competitive a active On Sure. interesting JPMorgan players the competitive landscape, basis. it's in there's have kind on of little

service others a the So and us relatively then few they're well. the in market. There's strong demand still " are to and leader market continue the market

curve the of so up of kind borrowers. the However, some moving demand of has slowed the rate with end to due by shock long quickly, the the

we're what still need individuals is they So for seeing debt rate refinance demand there's high who rolling to that's refinance. fixed and over for have

go environment. people in a lock of that market maybe So playing of will continue Also fear up. the to because to there's scoring more versus they are kind rates to rates it's rate trying into have

X performance still is at California, been rates outpacing Sale activity accelerated. market kind the extremely demand at disruption standpoint, months, it, a there rate From point. somewhat demand least inflation the still appreciation or in month have call where so, rent relatively there's strong. still in the, is high X or a especially of But is has in market there. this due -- to the shock the of So we've last over last seen

We weakness in haven't any workforce the markets seen any predominantly serve we housing. of and serve that we

So that impact pricing hasn't sales we point. seen any this the see on -- and at even

extremely high. is borrowing So cash base, flow from the our durability of

that to believe, are expectations and to depleted the There costs savings be overall road, economy is we're seeing their will in rents as and of consumers down Our the get start we starting other impact certainly weaken some as them. aspects and the over time. impact

time -- see affordability So is moderation certain double in over time. to of to is We we That levels a which lead being tends occupancy want erode. growth actually as up good thing. rent said, in individually what feel to continues it to to

they've portfolios the modeling any So future. any performance our would as ever a show weakness that -- We see from standpoint, are foreseeable econometric as strong but cash flow been. don't in

Scott Kavanaugh

David. Sorry,

Our average I think LTV XX%. is confused. get people And

As which joke housing, upper are to average or probably And do rents. interest up state you firm. go California. we prices on decline said, get and continues not to And of that the end rents affordability -- the housing, as especially rates out there, know is have you Dave the go in workforce holding

I as rents think go that a to did food going got can't point at things because we same for that to -- tipping So be are. that moderate, they're continue the both are they that to costs think do rents other precipitously for up there's as on up multifamily, well time going yes, and

David DePillo

rent other markets in markets. anecdotally pharma We in some throughout back that there is are necessarily participate don't the some coming the United that the seeing of States we concessions into

kind these of of, going being rapid we'd period. owners over management buying growth portfolio lot say, kind during and active this on in not accelerated necessarily more their a Our a and that markets around defensive little aggressively of

going we've pockets little immaterial, some is those of on in of a bit of there but impact to states that weakness markets. a some some the it's in relative -- seen basis, it's we're of So fairly have Sunbelt

to a in none exposure, those a little very markets. lot have little we of Fortunately,

to imbalances appear high markets for the where supply So to can't -- the demand demand to the we're create continue support satisfy demand. continue and future. going the to foreseeable to just supply going It's enough they

the So interest into estate obviously, market. pushed less owners real -- residential potential has become rates, and it rental because as of supportable, back has

does well into typically So that as to on real the temps them in push economy residential weakens, affordability where market. multifamily estate extremely times

very So we're it. still on bullish

of next more relative worrying us for trying going a about to where -- again find think to their is is it's to the not the sweet I issue spot Fed in without meeting. performance, aggressively lend biggest

to we're expectation versus yield more of a performance. more market cautious approach So going take around

Operator

from Matthew Sandler. from next Piper comes question Our Clark

Matthew Clark

give they Sorry you costs, we the sensitize. balances call quarter average average associated can earnings balances So to customer -- with the about those What credits? this were that, second the quarter? service can dropped. deposit versus average Back us on

Kevin Thompson

fairly They're about $X.X on flat at average. billion,

Matthew Clark

one in we And Timing this XXX of around first XQ. hikes is had a time assume little July, fair the the it or points expect with minus? going September, November, rate hikes a step-up different amount. XXX a in one of have or basis second another costs basis XXX should -- is to on service we're similar to plus similar mean I points customer we in December, in based

Kevin Thompson

what point. is we anticipate And That possible. to this we at strategically of as will lower work course, that

Matthew Clark

last me one expenses. on then just And for

in compensation. now? terms are the What quarter, your I think first manage year aggressively this and expenses your a seasonally magnitude more decent in increase thoughts in obviously to of up desire to given of coming given inflation first the step in tend the quarter, you have

Kevin Thompson

We a impacts, anticipate then of cetera. and et that have the paying We seasonal part quarter. do tax in first bonuses increase the still as

However, are the inflationary some in we pressure around compensation. sign seeing

there not I increasing think can ensure much. so work some too there's And we that strategic do to we're

offset, expenses the smart, and is we're helps very us board our being course, lower with well. that across But and of areas the loan control as production. that expenses course, approach, other by of strategic -- in loan As controlling

less loan expense. lower a We deferral of have a -- amount

negatively us impact well. will that as So

Operator

Our Andrew from Stephens. question from Terrell comes last

Andrew Terrell

inorganic I was just but capital target kind kind capital like guess done that for priorities position. will or where could of the of needs? some a of I you'd provide all remarks bolstering basis to? growth, you the you of Scott, be capital that know you prepared balance curious organic to of kind of any follow-up. then And I'm by do an doing of sheet a if kind one of foresee mentioned if in of kind you grow Thanks on slower pace

Scott Kavanaugh

as evaluating want out the beginning, our budgeting to or still question not than end mark would the a marketplace. but to We're We're towards more is go that. still we to of it whether process the

payoffs still the I growth but growth with that along slower having think given anticipate, fewer we of payoffs.

reasonable to accrete go there's think that. without I the a capital to evaluating but could chance that capital having still or markets, grow we're we

Operator

session. This the question-and-answer today's concludes back turn over Mr. call for to time our allotted remarks. I will for closing Scott Kavanaugh

Scott Kavanaugh

you for again Thank participating in today's call.

we well am of to positioned we year I XXXX, are As quarter entered end the last strong. confident the

strong place, a highly that business your Thank remainder in clients best markets competitive. and a team right you, in of great the is model and have the our day. have We

Operator

you, ladies today's gentlemen. and concludes Thank conference. This

disconnect. now may You

First Foundation (FFWM) 25 Oct 222022 Q3 Earnings call transcript