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What changed in First Foundation Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of First Foundation Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+420 added−387 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in First Foundation Inc.'s 2023 10-K

420 paragraphs added · 387 removed · 252 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

86 edited+24 added−17 removed146 unchanged
Biggest changeA bank holding company’s failure to meet these requirements will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve’s regulations or both, which could lead to the imposition of restrictions (including restrictions on growth) on, or a regulatory enforcement order against, the bank holding company.
Biggest changeA bank holding company’s failure to meet these requirements will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve’s regulations or both, which could lead to the imposition of restrictions (including restrictions on growth) on, or a regulatory enforcement order against, the bank holding company. 9 Table of Contents Additionally, among its powers, the Federal Reserve may require any bank holding company to terminate an activity or terminate control of, or liquidate or divest itself of, any subsidiary or affiliated company that the Federal Reserve determines constitutes a significant risk to the financial safety, soundness or stability of the bank holding company or any of its banking subsidiaries.
FFA is a California corporation that began operating as a fee-based registered investment advisor under the 1 Table of Contents Investment Advisers Act of 1940 (“Investment Advisers Act”) in 1990, and is subject to regulation by the Securities and Exchange Commission, (“SEC”), under that Act.
FFA is a California corporation that began operating 1 Table of Contents as a fee-based registered investment advisor under the Investment Advisers Act of 1940 (“Investment Advisers Act”) in 1990, and is subject to regulation by the Securities and Exchange Commission, (“SEC”), under that Act.
These loans generally are adjustable rate loans with interest rates tied to a variety of independent indexes; although in many cases these loans have initial fixed rate periods ranging from 3 to 10 years and adjust thereafter based on an applicable index. These loans generally have interest rate floors, payment caps, and prepayment penalties.
These loans generally are adjustable-rate loans with interest rates tied to a variety of independent indexes; although in many cases these loans have initial fixed-rate periods ranging from 3 to 10 years and adjust thereafter based on an applicable index. These loans generally have interest rate floors, payment caps, and prepayment penalties.
The loans are underwritten based on a variety of underwriting criteria, including an evaluation of the subject real estate collateral cash flow, the character and creditworthiness of the borrower and guarantors, loan-to-value and debt service coverage ratios, borrower liquidity and credit history.
The loans are underwritten based on a variety of underwriting criteria, including an evaluation of the subject real estate collateral cash flow, the character and creditworthiness of the borrower and guarantors, loan-to-value and debt service coverage ratios, borrower liquidity and credit history.
In addition, we perform stress testing for changes in interest rates, capitalization rates and other factors and review general economic trends such as lease rates, values and absorption rates. We typically require full recourse from the owners of the entities to which we make such loans.
In addition, we perform stress testing for changes in interest rates, capitalization rates and other factors and review general economic trends such as lease rates, values and absorption rates. We typically require full recourse from the owners of the entities to which we make such loans.
In addition, we perform stress testing for changes in interest rates, capitalization rates and other factors and review general economic trends such as lease rates, values and absorption rates. We typically require full recourse from the owners of the entities to which we make such loans.
In addition, we perform stress testing for changes in interest rates, capitalization rates and other factors and review general economic trends such as lease rates, values and absorption rates. We typically require full recourse from the owners of the entities to which we make such loans.
We have also established a small balance portfolio loan program, up to a maximum loan amount of $250,000, to meet the requirements of our small business clients through a streamlined underwriting process. Consumer Channel: The consumer channel for FFB offers single family residential loans, home equity lines of credit, personal lines of credit and other consumer related products.
We have also established a small balance portfolio loan program, up to a maximum loan amount of $250,000, to meet the requirements of our small business clients through a streamlined underwriting process. Consumer Loan Channel: The consumer channel for FFB offers single family residential loans, home equity lines of credit, personal lines of credit and other consumer related products.
The bank offers checking, savings, and CDs, as well as complementary products such as ATM/debit cards and eStatements through the system. Deposit Delivery Channe ls : Our deposit products and services are delivered through the following delivery channels: ● Retail Banking: The retail banking delivery channel is made up of 29 banking offices located throughout our market areas.
The bank offers checking, savings, money market and CDs, as well as complementary products such as ATM/debit cards and eStatements through the system. Deposit Delivery Channe ls: Our deposit products and services are delivered through the following delivery channels: ● Retail Banking: The retail banking delivery channel is made up of 29 banking offices located throughout our market areas.
Those banks and investment advisory and wealth management firms generally have much greater financial and capital resources than we do and as a result of their ability to conduct extensive advertising campaigns and their relatively long histories of operating in our markets, are generally better known than us.
Those banks and investment advisory and wealth management firms generally have much greater financial and capital resources than we do and as a result of both their ability to conduct extensive advertising campaigns and their relatively long histories of operating in our markets, are generally better known than us.
Bank Secrecy Act and USA Patriot Act The Company and FFB are subject to the Bank Secrecy Act, as amended by the USA PATRIOT Act, which gives the federal government powers to address money laundering and terrorist threats through enhanced domestic security measures, expanded surveillance powers and mandatory transaction reporting obligations.
Bank Secrecy Act and USA Patriot Act The Company and Bank are subject to the Bank Secrecy Act, as amended by the USA PATRIOT Act, which gives the federal government powers to address money laundering and terrorist threats through enhanced domestic security measures, expanded surveillance powers and mandatory transaction reporting obligations.
An insured depository institution’s capital category depends upon whether its capital levels meet these capital thresholds shown in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11 Table of Contents ​ ​ Well- ​ Adequately ​ ​ ​ ​ Significantly Capital Measure Capitalized Capitalized Undercapitalized Undercapitalized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 leverage ratio ​ ​ 5% or greater ​ ​ 4% or greater ​ ​ Less than 4% ​ ​ Less than 3% CET1 ratio ​ 6.5% or greater ​ 4.5% or greater ​ Less than 4.5% ​ Less than 3% Tier 1 risk-based capital ratio ​ 8% or greater ​ 6% or greater ​ Less than 6% ​ Less than 4% Total risk-based capital ratio ​ 10% or greater ​ 8% or greater ​ Less than 8% ​ Less than 6% ​ A bank that is classified as “critically undercapitalized” if its tangible equity was equal to or less than 2% of average quarterly tangible assets.
An insured depository institution’s capital category depends upon whether its capital levels meet these capital thresholds shown in the table below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Well- ​ Adequately ​ ​ ​ ​ Significantly Capital Measure Capitalized Capitalized Undercapitalized Undercapitalized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 leverage ratio ​ ​ 5% or greater ​ ​ 4% or greater ​ ​ Less than 4% ​ ​ Less than 3% CET1 risk-based capital ratio ​ 6.5% or greater ​ 4.5% or greater ​ Less than 4.5% ​ Less than 3% Tier 1 risk-based capital ratio ​ 8% or greater ​ 6% or greater ​ Less than 6% ​ Less than 4% Total risk-based capital ratio ​ 10% or greater ​ 8% or greater ​ Less than 8% ​ Less than 6% ​ A bank that is classified as “critically undercapitalized” if its tangible equity was equal to or less than 2% of average quarterly tangible assets.
As a bank holding company, we are subject to regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board” or “FRB”) and the Federal Reserve Bank of Dallas (“FRBD”) under delegated authority from the FRB.
As a bank holding company, we are subject to regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board” or “FRB”) and the Federal Reserve Bank of Dallas under delegated authority from the FRB.
Our lending platform is focused on three primary channels: 1) Commercial Real Estate (“CRE”), defined as multifamily residential, non-owner occupied commercial real estate, land and construction; 2) Commercial and Industrial (“C&I”) defined as term and revolving credit/lines of credit for small to moderate-sized businesses and professional firms, and owner occupied commercial real estate; and 3) Consumer defined as loan products to individuals, including single family residential real estate loans and home equity lines of credit and other consumer-related loans focused on the current and prospective clients of our platform.
Our lending platform is focused on three primary channels: 1) Commercial Real Estate (“CRE”), defined as multifamily residential, owner and non-owner occupied commercial real estate, land and construction; 2) Commercial and Industrial (“C&I”), defined as term and revolving credit/lines of credit for small to moderate-sized businesses, professional firms, and municipal agencies; 3) Consumer defined as loan products to individuals, including single family residential real estate loans and home equity lines of credit and other consumer-related loans focused on the current and prospective clients of our platform.
Those laws and regulations include: ● The Home Ownership and Equity Protection Act of 1994, which requires additional disclosures and consumer protections to borrowers designed to protect them against certain lending practices, such as practices deemed to constitute “predatory lending.” ● The Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, which requires banking institutions and financial services businesses to adopt practices and procedures designed to help deter identity theft, including developing appropriate fraud response programs, and provides consumers with greater control of their credit data. ● The Truth in Lending Act which requires that credit terms be disclosed in a meaningful and consistent way so that consumers may compare credit terms more readily and knowledgeably. ● The Equal Credit Opportunity Act, which generally prohibits, in connection with any consumer or business credit transactions, discrimination on the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), or the fact that a borrower is receiving income from public assistance programs. ● The Fair Housing Act, which regulates many lending practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status. ● The Home Mortgage Disclosure Act, which includes a “fair lending” aspect that requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. ● The Real Estate Settlement Procedures Act, which requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits certain abusive practices, such as kickbacks. ● The National Flood Insurance Act, which requires homes in flood-prone areas with mortgages from a federally regulated lender to have flood insurance. ● The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which requires mortgage loan originator employees of federally insured institutions to register with the Nationwide Mortgage Licensing System and Registry, a database created by the states to support the licensing of mortgage loan originators, prior to originating residential mortgage loans.
Those laws and regulations include: ● The Home Ownership and Equity Protection Act of 1994, which requires additional disclosures and consumer protections to borrowers designed to protect them against certain lending practices, such as practices deemed to constitute “predatory lending.” ● The Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, which requires banking institutions and financial services businesses to adopt practices and procedures designed to help deter identity theft, including developing appropriate fraud response programs, and provides consumers with greater control of their credit data. ● The Truth in Lending Act, which requires that credit terms be disclosed in a meaningful and consistent way so that consumers may compare credit terms more readily and knowledgeably. ● The Truth in Savings Act, which governs disclosure of account terms and costs to consumer depositors. ● The Equal Credit Opportunity Act, which generally prohibits, in connection with any consumer or business credit transactions, discrimination on the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), or the fact that a borrower is receiving income from public assistance programs. 17 Table of Contents ● The Fair Housing Act, which regulates many lending practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status. ● The Home Mortgage Disclosure Act, which includes a “fair lending” aspect that requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes. ● The Real Estate Settlement Procedures Act, which requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits certain abusive practices, such as kickbacks. ● The National Flood Insurance Act, which requires homes in flood-prone areas with mortgages from a federally regulated lender to have flood insurance. ● The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which requires mortgage loan originator employees of federally insured institutions to register with the Nationwide Mortgage Licensing System and Registry, a database created by the states to support the licensing of mortgage loan originators, prior to originating residential mortgage loans.
Commercial 4 Table of Contents lines of credit are adjustable rate loans with interest rates usually tied to the Wall Street Journal prime rate, are made for terms ranging from one to two years, and contain various covenants, including possible requirements that the borrower reduce its credit line borrowings to zero for specified time periods during the term of the line of credit, maintains liquidity requirements with advances tied to periodic reviews and approved based upon a percentage of accounts receivable, and inventory or unmonitored lines for very small lines or credit or those with significant financial strength and liquidity.
Commercial lines of credit are adjustable-rate loans with interest rates usually tied to the Wall Street Journal prime rate, are made for terms ranging from one to two years, and contain various covenants, including possible requirements that the borrower reduce its credit line borrowings to zero for specified time periods during the term of the line of credit, maintains liquidity requirements with advances tied to periodic reviews and approved based upon a percentage of accounts receivable, and inventory or unmonitored lines for very small lines or credit or those with significant financial strength and liquidity.
This team possesses a thorough understanding of legal documentation for complex organizations and legal and regulatory banking requirements for niche industries, balance bank control accounts, ledger posting, and funds disbursement. ● Digital Bank: The digital bank channel offers consumers high-yield savings accounts, low cost checking accounts, and certificates of deposits through our online account opening.
This team possesses a thorough understanding of legal documentation for complex organizations and legal and regulatory banking requirements for niche industries, balance bank control accounts, ledger posting, and funds disbursement. ● Digital Bank: The digital bank channel offers consumers high-yield savings accounts, low-cost checking accounts, money market accounts, and certificates of deposits through our online account opening.
Equipment Financing: We offer equipment financing to provide financing solutions, including equipment finance agreements and leases for a full range of business equipment, and sourcing the business through third party originators, including equipment brokers, lessors and other referral sources. The majority of the equipment financing business will be for acquiring machines, tools, vehicles, furniture, tenant improvement remodeling/expansion/upgrade and computers.
Equipment Financing: We offer equipment financing to provide financing solutions, including equipment finance agreements and leases for a full range of business equipment, and source the business through third party originators, including equipment brokers, lessors and other referral sources. The majority of the equipment financing business will be for acquiring machines, tools, vehicles, furniture, tenant improvement remodeling/expansion/upgrade and computers.
Each regional Federal Home Loan Bank is financed primarily from the sale of consolidated obligations of the overall Federal Home Loan Bank system. As an FHLB member, FFB is required to own a certain amount of capital stock in the FHLB. At December 31, 2022, FFB was in compliance with the FHLB’s stock ownership requirement.
Each regional Federal Home Loan Bank is financed primarily from the sale of consolidated obligations of the overall Federal Home Loan Bank system. As an FHLB member, FFB is required to own a certain amount of capital stock in the FHLB. At December 31, 2023, FFB was in compliance with the FHLB’s stock ownership requirement.
The substance or impact of pending or future legislation or regulations, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital or modify our business strategy, 18 Table of Contents limit our ability to pursue business opportunities or activities or alter the competitive balance between banks and non-bank financial service providers.
The substance or impact of pending or future legislation or regulations, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital or modify our business strategy, limit our ability to pursue business opportunities or activities or alter the competitive balance between banks and non-bank financial service providers.
We also provide trust services to clients using our California, Nevada, and Florida trust powers. Those services, which consist primarily of the management of trust assets, complement the investment and wealth management services that FFA offers to our clients. Additionally, trust service fees provide additional sources of noninterest income for us.
We also provide trust services to clients using our California, Hawaii, Nevada, Florida, and Texas trust powers. Those services, which consist primarily of the management of trust assets, complement the investment and wealth management services that FFA offers to our clients. Additionally, trust service fees provide additional sources of noninterest income for us.
In addition, by virtue of their greater total capitalization, the large banks have substantially higher lending limits than we do, which enables them to make much larger loans and to offer loan products that we are not able to offer to our clients.
In addition, by virtue of their greater total capitalization, the large banks have substantially higher lending limits than we do, which enable them to make much larger loans and to offer loan products that we are not able to offer to our clients.
If a bank is classified as critically undercapitalized, FDICIA requires the bank to be placed into conservatorship or receivership within 90 days, unless its federal banking regulatory agency determines that there are other measures that would enable the bank, within a relatively short period of time, to increase its capital in an amount sufficient to improve its capital classification under the prompt corrective action framework.
If a bank is classified as critically undercapitalized, FDICIA requires the bank to be placed 12 Table of Contents into conservatorship or receivership within 90 days, unless its federal banking regulatory agency determines that there are other measures that would enable the bank, within a relatively short period of time, to increase its capital in an amount sufficient to improve its capital classification under the prompt corrective action framework.
We compete with these much larger banks and investment advisory and wealth management firms primarily on the basis of the personal and “one-on-one” service that we provide to our clients, which many of these competitors are unwilling or unable to provide, other than to their wealthiest clients, due to costs involved or their “one size fits all” approaches to providing financial services to their clients.
We compete with these much larger banks and investment advisory and wealth management firms primarily on the basis of the personal and “one-on-one” service that we provide to our clients, which many of these competitors are unwilling or unable to provide, other than to their wealthiest clients, due to costs involved or their “one size fits all” 8 Table of Contents approaches to providing financial services to their clients.
Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; 16 Table of Contents requires the development of standards for evaluating technology and internal processes for Bank Secrecy Act compliance; and expands enforcement and investigative authority, including increasing available sanctions for certain Bank Secrecy Act violations and instituting Bank Secrecy Act whistleblower incentives and protections.
Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for Bank Secrecy Act compliance; and expands enforcement and investigative authority, including increasing available sanctions for certain Bank Secrecy Act violations and instituting Bank Secrecy Act whistleblower incentives and protections.
We believe that our principal competitive advantage is our ability to offer our services through one integrated platform, enabling us to provide our clients with the efficiencies and 8 Table of Contents benefits of dealing with a cohesive group working together to assist our clients to meet their personal investment and financial goals.
We believe that our principal competitive advantage is our ability to offer our services through one integrated platform, enabling us to provide our clients with the efficiencies and benefits of dealing with a cohesive group working together to assist our clients to meet their personal investment and financial goals.
Consumer Laws and Regulations The Company and FFB are subject to a broad range of federal and state consumer protection laws and regulations prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition.
Consumer Laws and Regulations The Company and Bank are subject to a broad range of federal and state consumer protection laws and regulations prohibiting unfair or fraudulent business practices, untrue or misleading advertising and unfair competition.
To qualify for such loans, prospective borrowers generally must have operating cash flow sufficient to meet their obligations as they become due, good payment histories, proper balance sheet oversight of key cash flow drivers, and experienced management.
To qualify for such loans, prospective borrowers generally must have operating cash flow sufficient to meet their obligations as they become due, 4 Table of Contents good payment histories, proper balance sheet oversight of key cash flow drivers, and experienced management.
Changes in these laws or regulations could have a material adverse impact on the profitability and mode of operations of FFI and its subsidiaries.
Changes in these laws or regulations could have a material adverse impact on the profitability and mode of operations of the Company and its subsidiaries.
In addition, while we also compete with many local and regional banks and numerous local and regional investment advisory and wealth management firms, we believe that only a very few of these banks offer investment advisory or wealth management services and that a very few of these investment advisory and wealth management firms offer banking services.
In addition, while we also compete with many local and regional banks and numerous local and regional investment advisory and wealth management firms, we believe that only a very few of the banks offer integrated investment advisory or wealth management services and that very few of the investment advisory and wealth management firms offer banking services.
A lower CRA rating may be the basis for requiring the applicant’s bank subsidiary to take corrective actions to improve its CRA performance as a condition to the approval of the acquisition or as a basis for denying the application altogether.
A lower CRA rating may be the 16 Table of Contents basis for requiring the applicant’s bank subsidiary to take corrective actions to improve its CRA performance as a condition to the approval of the acquisition or as a basis for denying the application altogether.
Any failure to meet the requirements of the Bank Secrecy Act can result in the imposition of substantial penalties and in adverse regulatory action against the offending bank. FFI and FFB have each adopted policies and procedures to comply with the Bank Secrecy Act.
Any failure to meet the requirements of the Bank Secrecy Act can result in the imposition of substantial penalties and in adverse regulatory action against the offending bank. The Company and Bank have each adopted policies and procedures to comply with the Bank Secrecy Act.
We typically focus on multi-tenant industrial, office and retail real estate collateral with strong, stable tenancy, strong, stable historical cash flow and located in stable, submarket 3 Table of Contents locations with strong demand. We will consider special-purpose lending on a limited basis for our existing client base.
We typically focus on multi-tenant industrial, office and retail real estate collateral with strong, stable tenancy, strong, stable historical cash flow and located in stable, submarket locations with strong demand. We will consider special-purpose lending on a limited basis for our existing client base.
Dividends and Stock Repurchases It is the policy of the Federal Reserve that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the holding company’s expected future needs for capital and liquidity and to maintain its financial condition.
See “Consumer Financial Protection Bureau.” Dividends and Stock Repurchases It is the policy of the Federal Reserve that bank holding companies should generally pay dividends on common stock only out of income available over the past year, and only if prospective earnings retention is consistent with the holding company’s expected future needs for capital and liquidity and to maintain its financial condition.
FFA’s operations comprise the investment advisory and wealth management segment of our business. As of December 31, 2022, FFA had $5.0 billion of AUM. Banking Products and Services Through FFB, we offer a wide range of loan products, deposit products, treasury management products and services, and trust services.
FFA’s operations comprise the investment advisory and wealth management segment of our business. As of December 31, 2023, FFA had $5.2 billion of AUM. Banking Products and Services Through FFB, we offer a wide range of loan products, deposit products, treasury management products and services, and trust services.
In addition, the exemption from Section 23A for transactions with financial subsidiaries has been eliminated. California law also imposes restrictions with respect to transactions involving the Company and any other persons that may be deemed under that law to control FFB.
In addition, the exemption from Section 23A for transactions with financial subsidiaries has been eliminated. 15 Table of Contents California law also imposes restrictions with respect to transactions involving the Company and any other persons that may be deemed under that law to control FFB.
FFB is a California state chartered bank and is subject to regulation and examination by the Federal Deposit Insurance Corporation (“FDIC”) and the California Department of Financial Protection & Innovation (“DFPI”).
FFB is a California state-chartered bank and is subject to regulation and examination by the Federal Deposit Insurance Corporation (“FDIC”) and the California Department of Financial Protection & Innovation (“DFPI”) and the Consumer Financial Protection Bureau (“CFPB”).
Those guidelines set forth operational and managerial 12 Table of Contents standards relating to such matters as internal controls, information systems and internal audit systems; risk management; loan documentation; credit underwriting; asset growth; earnings; and compensation, fees and benefits.
Those guidelines set forth operational and managerial standards relating to such matters as internal controls, information systems and internal audit systems; risk management; loan documentation; credit underwriting; asset growth; earnings; and compensation, fees and benefits.
FFB’s operations comprise the banking and trust segments of our business. At December 31, 2022, FFB had $13.0 billion of total assets, $10.7 billion of loans, $10.4 billion of deposits and $1.3 billion of trust AUA.
FFB’s operations comprise the banking and trust segments of our business. At December 31, 2023, FFB had $13.3 billion of total assets, $10.1 billion of loans, $10.7 billion of deposits and $1.3 billion of trust AUA.
Our investment advisory and wealth management and trust services provide us with a stable source of diversified, fee-based, recurring revenues, and accounted for approximately 11% of total revenue in 2022.
Our investment advisory and wealth management and trust services provide us with a stable source of diversified, fee-based, recurring revenues, and accounted for approximately 14% of total revenue in 2023.
These digital bank products are offered to consumers across all 50 states and enables FFB to target Millennial, Gen Z, and more digitally savvy prospects with increased efficiency and is supported by a dedicated digital bank operations team. Trust Services: FFB is licensed to provide trust services to clients in California, Florida, Nevada and Hawaii.
These digital bank products are offered to consumers across all 50 states and enable FFB to target Millennial, Gen Z, and more digitally savvy prospects with increased efficiency and are supported by a dedicated digital bank operations team. 7 Table of Contents Trust Services: FFB is licensed to provide trust services to clients in California, Florida, Hawaii, Nevada, and Texas.
In addition, we perform stress testing for changes in interest rates and other factors and review general economic trends such as market values.
In addition, we perform stress testing for changes in interest rates, capitalization rates and other factors and review general economic trends such as rental rates, values and vacancy rates.
Proposed rules were issued in 2011 but have not become final. 14 Table of Contents The Company has adopted an incentive compensation clawback policy that provides, among other things, that if any of the Company’s previously published financial statements are restated due to material noncompliance with any financial reporting requirements under the federal securities laws, the Company will seek to recover the amount by which any incentive compensation paid in the previous three years to any executive officer exceeds the incentive compensation that the Company’s audit committee determines would have been paid to such executive officer had such compensation been determined on the basis of the restated financial statements.
The Company has adopted an incentive compensation clawback policy that provides, among other things, that if any of the Company’s previously published financial statements are restated due to material noncompliance with any financial reporting requirements under the federal securities laws, the Company will seek to recover the amount by which any incentive compensation paid in the previous three years to any executive officer exceeds the incentive compensation that the Company’s audit committee determines would have been paid to such executive officer had such compensation been determined on the basis of the restated financial statements.
As of December 31, 2022, we had $13.0 billion of total assets, $10.7 billion of loans, $10.4 billion of deposits, $5.0 billion of assets under management (“AUM”), and $1.3 billion of trust assets under advisement (“AUA”).
As of December 31, 2023, we had $13.3 billion of total assets, $10.1 billion of loans, $10.7 billion of deposits, $5.2 billion of assets under management (“AUM”), and $1.3 billion of trust assets under advisement (“AUA”).
This enables us to compete effectively for clients who are dissatisfied with the level of service provided at larger financial institutions, and are not able to receive an integrated platform of comprehensive financial services from other regional or local financial services organizations.
Since very few of our competitors are able to provide such an integrated platform of comprehensive financial services to their clients, this enables us to compete effectively for clients who are dissatisfied with the level of service provided at larger financial institutions, and are not able to receive an integrated platform of comprehensive financial services from other regional or local financial services organizations.
As of December 31, 2022, FFB exceeded the minimum regulatory capital requirements necessary to be considered “well-capitalized” under the prompt corrective action requirements currently in effect.
As of December 31, 2023, FFB exceeded the minimum regulatory capital requirements necessary to be considered “well-capitalized” under the prompt corrective action requirements.
Those services, which consist primarily of the management of trust assets, complement the investment advisory and wealth management services that FFA offers to our clients and, as a result, provide us with cross-selling opportunities.
Those services, which consist primarily of the management of trust assets, complement the investment advisory and wealth management services that FFA offers to our clients and, as a result, provide us with cross-selling opportunities. As of December 31, 2023, trust AUA totaled $1.3 billion.
Under these arrangements, the asset custodial firms provide referrals of prospective new clients whose wealth warrants the more personalized and expansive breadth of financial services that we are able to provide in exchange for a fee. This fee is either a percentage of the fees we charge to the client or a percentage of the AUM of the client.
Under these arrangements, the asset custodial firms provide referrals of prospective new clients whose wealth warrants the more personalized and expansive breadth of financial services that we are able to provide in exchange for a fee.
To qualify for such loans, prospective borrowers generally must have operating cash flow sufficient to meet their obligations as they become due, good payment histories, proper balance sheet oversight of key cash flow drivers, and experienced management.
These loans generally are made to businesses that have demonstrated a history of profitable operations. To qualify for such loans, prospective borrowers generally must have operating cash flow sufficient to meet their obligations as they become due, good payment histories, proper balance sheet oversight of key cash flow drivers, and experienced management.
As a result of the Dodd-Frank Act, the base for insurance assessments is now consolidated average assets less average tangible equity. Assessment rates are calculated using formulas that take into account the risk of the institution being assessed. FDIC deposit insurance expense also includes FICO assessments related to outstanding FICO bonds.
As a result of the Dodd-Frank Act, the base for insurance assessments is now consolidated average assets less average tangible equity. Assessment rates are calculated using formulas that take into account the risk of the institution being assessed.
If a banking organization does not maintain a capital conservation buffer consisting of an additional 2.5% of CET-1 on top of the minimum risk-weighted asset ratios, it faces constraints on dividends, equity repurchases and executive compensation, depending on the amount of the shortfall. The Capital Rules provide for a number of deductions from and adjustments to CET-1.
If a banking organization does not maintain a capital conservation buffer consisting of an additional 2.5% of CET1 on top of the minimum risk-weighted asset ratios, it faces constraints on dividends, equity repurchases and executive compensation, depending on the amount of the shortfall.
We do not have a separate marketing program for this channel, rather this channel is directed to a limited amount of fully-vetted broker relationships and as an accommodation for clients or prospective clients of our platform. We expect single family loans to comprise a substantial majority of the balances in this channel.
We do not have a separate marketing program for this channel; rather this channel is directed to a limited amount of fully-vetted broker relationships and as an accommodation for clients or prospective clients of our platform.
If such a concentration exists, the guidelines call for the bank (i) to implement heightened risk assessment and risk management practices, including board and management oversight and strategic planning, (ii) to implement and maintain stringent loan underwriting standards, and to use market analyses and stress testing tools to monitor the condition of the bank’s commercial real estate loan portfolio and to assess the impact that adverse economic conditions affecting the real estate markets could have on the bank’s financial condition, and (iii) if determined to be necessary on the basis of the results of such stress tests, to increase its allowance for credit losses and its capital. 15 Table of Contents Technology Risk Management and Consumer Privacy Federal and state banking regulatory agencies have issued various policy statements focusing on the importance of technology risk management and supervision in evaluating the safety and soundness of the banks they regulate.
If such a concentration exists, the guidelines call for the bank (i) to implement heightened risk assessment and risk management practices, including board and management oversight and strategic planning, (ii) to implement and maintain stringent loan underwriting standards, and to use market analyses and stress testing tools to monitor the condition of the bank’s commercial real estate loan portfolio and to assess the impact that adverse economic conditions affecting the real estate markets could have on the bank’s financial condition, and (iii) if determined to be necessary on the basis of the results of such stress tests, to increase its allowance for credit losses and its capital.
Deposit Services: Our deposit services include the following: ● Treasury Management: Our comprehensive suite of Treasury Management (“TM”) products and services provide our customers the tools to bank with us conveniently without having the need to visit one of our 6 Table of Contents offices and are necessary to attract complex commercial and specialty deposit clients.
Our pricing strategy is intended to complement our other products and services so that we can attract and retain clients without always paying the highest rates. 6 Table of Contents Deposit Services: Our deposit services include the following: ● Treasury Management: Our comprehensive suite of Treasury Management (“TM”) products and services provide our customers the tools to bank with us conveniently without having the need to visit one of our offices and are necessary to attract complex commercial and specialty deposit clients.
Community Reinvestment Act The Community Reinvestment Act (“CRA”) requires the federal banking regulatory agencies to evaluate the record of a bank in meeting the credit needs of its local communities, including those of low and moderate income neighborhoods in its service area.
Additionally, the federal banking agencies are authorized to issue regulations as necessary to implement those notice requirements and non-disclosure restrictions. Community Reinvestment Act The Community Reinvestment Act (“CRA”) requires the federal banking regulatory agencies to evaluate the record of a bank in meeting the credit needs of its local communities, including those of low-and moderate-income neighborhoods in its service area.
Prompt Corrective Action The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), established a framework for regulation of federally insured depository institutions, including banks, and their parent holding companies and other affiliates, by their federal banking regulators.
The impact of Basel IV on us will depend on the manner in which it is implemented by the federal bank regulators. Prompt Corrective Action The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), established a framework for regulation of federally insured depository institutions, including banks, and their parent holding companies and other affiliates, by their federal banking regulators.
As of December 31, 2022, trust AUA totaled $1.3 billion. 7 Table of Contents Wealth Management Products and Services FFA is a fee-based investment advisor which provides investment advisory and wealth management services primarily for individuals and their families, family businesses and other affiliated organizations (including public and closely-held corporations, family foundations and private charitable organizations).
Wealth Management Products and Services FFA is a fee-based investment advisor which provides investment advisory and wealth management services primarily for individuals and their families, family businesses and other affiliated organizations (including public and closely-held corporations, family foundations and private charitable organizations).
The Company held no investment positions at December 31, 2022, that were subject to the Volcker rule. Regulation of First Foundation Advisors FFA is a registered investment advisor under the Investment Advisers Act and the SEC’s regulations promulgated thereunder. The Investment Advisers Act imposes numerous obligations on registered investment advisors, including fiduciary, recordkeeping, operational, and disclosure obligations.
The Company held no investment positions at December 31, 2023, that were subject to the Volcker rule. 18 Table of Contents Regulation of First Foundation Advisors FFA is a registered investment advisor under the Investment Advisers Act and the SEC’s regulations promulgated thereunder.
To a large degree, our success therefore depends on the personal relationships of our employees and the quality of service they provide. We strive to attract, develop and retain employees who can further our business strategy and build long-term stockholder value. To do so, we offer compensation, benefits, and training designed to attract, develop and retain quality employees.
To compete with other financial institutions, our business strategy emphasizes customer relationships and personalized service. To a large degree, our success therefore depends on the personal relationships of our employees and the quality of service they provide. We strive to attract, develop and retain employees who can further our business strategy and build long-term stockholder value.
Regulation of First Foundation Bank FFB is subject to primary supervision, periodic examination and regulation by the FDIC, which is its primary federal banking regulator, and the DFPI, because FFB is a California state chartered bank. Various requirements and restrictions under federal and California banking laws affect the operations of FFB.
Regulation of First Foundation Bank FFB is subject to primary supervision, periodic examination and regulation by the FDIC, which is its primary federal banking regulator, and the DFPI, because FFB is a California state-chartered bank. The CFPB has examination and supervision authority over FFB with respect to federal consumer laws with respect to FFB.
FFB’s banking platform is focused on program-specific products and clients, with an emphasis on digital delivery. ​ 2 Table of Contents The following table sets forth information regarding the types of loans that we make, by principal amounts and as a percentage of our total loans outstanding at December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 (dollars in thousands) Balance % of Total Balance % of Total Recorded Investment balance: ​ ​ ​ Loans secured by real estate: ​ ​ ​ Residential properties: ​ ​ ​ Multifamily ​ $ 5,341,596 49.9 % $ 2,886,055 41.8 % Single family ​ 1,016,498 9.5 % 933,445 13.5 % Total loans secured by residential properties ​ 6,358,094 59.4 % 3,819,500 55.3 % Commercial properties ​ 1,203,292 11.2 % 1,309,200 19.0 % Land and construction ​ 158,565 1.5 % 156,028 2.3 % Total real estate loans ​ 7,719,951 72.1 % 5,284,728 76.6 % Commercial and industrial loans ​ 2,984,748 27.9 % 1,598,422 23.2 % Consumer loans ​ 4,481 0.0 % 10,834 0.2 % Total loans ​ ​ 10,709,180 100.0 % ​ 6,893,984 100.0 % Premiums, discounts and deferred fees and expenses ​ 17,013 ​ ​ ​ 12,744 ​ ​ ​ Total ​ $ 10,726,193 ​ ​ ​ $ 6,906,728 ​ ​ ​ ​ We have established a lending platform that provides financing solutions to our strong and stable client relationships, including individuals, businesses, and other entities.
FFB’s banking platform is focused on program-specific products and clients, with an emphasis on digital delivery. ​ 2 Table of Contents Loan Products and Services The following table sets forth information regarding the types of loans that we make, by principal amounts and as a percentage of our total loans outstanding at December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 (dollars in thousands) Balance % of Total Balance % of Total Recorded Investment balance: ​ ​ ​ Loans secured by real estate: ​ ​ ​ Residential properties: ​ ​ ​ Multifamily ​ $ 5,227,885 51.5 % $ 5,341,596 49.9 % Single family ​ 950,712 9.4 % 1,016,498 9.5 % Total loans secured by residential properties ​ 6,178,597 60.8 % 6,358,094 59.4 % Commercial properties ​ 987,596 9.7 % 1,203,292 11.2 % Land and construction ​ 137,298 1.4 % 158,565 1.5 % Total real estate loans ​ 7,303,491 71.9 % 7,719,951 72.1 % Commercial and industrial loans ​ 2,856,228 28.1 % 2,984,748 27.9 % Consumer loans ​ 1,328 0.0 % 4,481 0.0 % Total loans ​ ​ 10,161,047 100.0 % ​ 10,709,180 100.0 % Premiums, discounts and deferred fees and expenses ​ 16,755 ​ ​ ​ 17,013 ​ ​ ​ Total ​ $ 10,177,802 ​ ​ ​ $ 10,726,193 ​ ​ ​ ​ We have established a lending platform that provides financing solutions to our strong and stable client relationships, including individuals, businesses, and other entities.
The FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
As a result of the new rule, the FDIC insurance costs of insured depository institutions, including the Bank, will generally increase. 14 Table of Contents The FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
Available Information The Company’s annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are accessible for free at the Investor Relations section of our website at www.ff-inc.com as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.
In 2023, the program resulted in approximately $359,000 of grants and donations distributed by the Company; 2,875 volunteer hours contributed by our employees, and a total of 212 organizations supported. ​ 19 Table of Contents Available Information The Company’s annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are accessible for free at the Investor Relations section of our website at www.firstfoundationinc.com as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the SEC.
Under California law the DFPI has many of these same remedial powers with respect to FFB.
Under California law the DFPI has many of these same remedial powers with respect to FFB. The CFPB has similar enforcement authority for federal consumer laws with respect to FFB.
Residential Mortgage Loans – Single-family: We offer single family residential mortgage loans that in most cases take the form of non-conforming jumbo and super-jumbo loans. We do not currently sell or securitize any of our single family residential mortgage loan originations. We do not originate loans defined as high cost by state or federal banking 5 Table of Contents regulators.
Single-family loans comprise a substantial majority of the balances in this channel. 5 Table of Contents Residential Mortgage Loans – Single-family: We offer single family residential mortgage loans that in most cases take the form of non-conforming jumbo and super-jumbo loans. We do not currently sell or securitize any of our single family residential mortgage loan originations.
Deposit Products and Services The following table sets forth information regarding the type of deposits which our clients maintained with us and the average interest rates on those deposits as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Average ​ (dollars in thousands) Amount % of Total Rate Amount % of Total Rate Demand deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing ​ $ 2,736,691 ​ 26.4 % — ​ $ 3,280,455 ​ 37.2 % — Interest-bearing ​ 2,568,850 24.8 % 3.109 % ​ 2,242,684 25.5 % 0.070 % Money market and savings ​ 3,178,230 30.7 % 2.373 % ​ 2,620,336 29.7 % 0.275 % Certificates of deposit ​ 1,878,841 18.1 % 3.741 % ​ 668,485 7.6 % 0.145 % Total ​ $ 10,362,612 100.0 % 2.177 % $ 8,811,960 100.0 % 0.111 % ​ Deposit Products: We offer a wide range of deposit products, including personal and business checking, savings accounts, interest-bearing demand deposit accounts, money market accounts and time certificates of deposit.
Deposit Products and Services The following table sets forth information regarding the type of deposits which our clients maintained with us and the average interest rates on those deposits as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Average ​ (dollars in thousands) Amount % of Total Rate Amount % of Total Rate Demand deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing ​ $ 1,467,806 ​ 13.7 % — ​ $ 2,736,691 ​ 26.4 % — Interest-bearing ​ 2,881,786 27.0 % 2.94 % ​ 2,568,850 24.8 % 2.91 % Money market and savings ​ 3,195,670 29.9 % 3.81 % ​ 3,178,230 30.7 % 2.37 % Certificates of deposit ​ 3,143,670 29.4 % 4.87 % ​ 1,878,841 18.1 % 3.74 % Total ​ $ 10,688,932 100.0 % 3.36 % $ 10,362,612 100.0 % 2.13 % ​ Deposit Products : We offer a wide range of deposit products, including personal and business checking, savings accounts, interest-bearing demand deposit accounts, money market accounts and time certificates of deposit.
Among other things, FDICIA requires the relevant federal banking regulator to take “prompt corrective action” with respect to a depository institution if that institution does not meet certain capital adequacy standards, including requiring the prompt submission by that bank of an acceptable capital restoration plan if its bank regulator has concluded that it needs additional capital.
Among other things, FDICIA requires the relevant federal banking regulator to take “prompt corrective action” with respect to a depository institution if that institution does not meet certain capital adequacy standards, including requiring the prompt submission by that bank of an acceptable capital restoration plan if its bank regulator has concluded that it needs additional capital. 11 Table of Contents Supervisory actions by a bank’s federal regulator under the prompt corrective action rules generally depend upon an institution’s classification within one of five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.
Shared National Credits Lending: We will participate in multi-bank transactions referred to as Shared National Credits or Participations where a financial institution determines an individual loan is too large for it to be made alone. These loans are typically originated and led by other larger banks and FFB will be a participant in the transaction.
Shared National Credits Lending: We may participate in multi-bank transactions referred to as Shared National Credits or Participations where a financial institution determines an individual loan is too large for it to be made alone.
The Capital Rules require that trust preferred securities be phased out from Tier 1 capital by January 1, 2016, except in the case of banking organizations with total consolidated assets of less than $15 billion, which will be permitted to include trust preferred securities issued prior to May 19, 2010 in Tier 1 capital, subject to a limit of 25% of tier 1 capital elements.
The table below summarizes the minimum capital ratios plus the applicable increment of the capital conservation buffer that are applicable to the Company and the Bank: ​ ​ ​ ​ CET1 risk-based capital ratio 7.00 % Tier 1 risk-based capital ratio 8.50 % Total risk-based capital ratio 10.50 % ​ The Capital Rules required that trust preferred securities be phased out from Tier 1 capital by January 1, 2016, except in the case of banking organizations with total consolidated assets of less than $15 billion, which will be permitted to include trust preferred securities issued prior to May 19, 2010 in Tier 1 capital, subject to a limit of 25% of tier 1 capital elements.
These laws and the implementing regulations can determine the extent of supervisory control to which a bank will be subject by its federal and state bank regulators.
See “Consumer Financial Protection Bureau.” Various requirements and restrictions under federal and California banking laws affect the operations of FFB. These laws and the implementing regulations can determine the extent of supervisory control to which a bank will be subject by its federal and state bank regulators.
A relatively small number of major national and regional banks, operating over wide geographic areas, including Wells Fargo, JP Morgan Chase, US Bank, Comerica Bank, Union Bank, Bank of America, and Fifth Third Bank dominate our banking markets. Those banks, or their affiliates, may also offer investment advisory and wealth management services.
A relatively small number of major national and regional banks, operating over wide geographic areas, dominate our banking markets. Those banks, or their affiliates, may also offer investment advisory and wealth management services. We also compete with large, well-known banking and wealth management firms.
The Dodd-Frank Act also imposes a variety of requirements on entities that service mortgage loans. 17 Table of Contents Consumer Financial Protection Bureau The Dodd-Frank Act created a new, independent federal agency, called the Consumer Financial Protection Bureau (the “CFPB”), which has been granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the GLBA and certain other statutes.
The CFPB has broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the GLBA and certain other statutes.
It is also a Federal Reserve policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of financial strength for their banking subsidiaries.
It is also a Federal 13 Table of Contents Reserve policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of financial strength for their banking subsidiaries. Under the Capital Rules discussed above, bank holding companies may not pay dividends on common stock unless they maintain minimum regulatory capital ratios.
CRE Loans – Non-owner Occupied : Our commercial real estate loans are secured by first trust deeds on nonresidential real property with terms generally up to 10 years.
We typically require full or limited recourse from the owners of the entities to which we make such loans. 3 Table of Contents CRE Loans – Non-owner Occupied : Our commercial real estate loans are secured by first trust deeds on nonresidential real property with terms generally up to 10 years.
We do not provide custodial services for our clients through FFA. Instead, client investment accounts are maintained under custodial arrangements with large, well-established brokerage firms, either directly or through FFB.
Changes in our AUM reflect additions from new clients, the gains or losses recognized from investment results, additional funds received from existing clients, withdrawals of funds by clients, and terminations. We do not provide custodial services for our clients through FFA. Instead, client investment accounts are maintained under custodial arrangements with large, well-established brokerage firms, either directly or through FFB.
Tier 1 capital consists principally of common stock and nonredeemable preferred stock and retained earnings. FDICIA regulations implementing the prompt corrective action framework, establish minimum capital thresholds for five capital categories based on the Capital Rules.
These are determined on the basis of a bank’s Tier 1 leverage ratio, Tier 1 capital ratio and total capital ratio. FDICIA regulations implementing the prompt corrective action framework establish minimum capital thresholds for five capital categories based on the Capital Rules.
These loans generally have interest rate floors and payment caps. The loans are underwritten based on a variety of underwriting criteria, including an evaluation of the character and creditworthiness of the borrower and guarantors, loan-to-value and debt to income ratios, borrower liquidity, income verification and credit history.
The loans are underwritten based on a variety of underwriting criteria, including an evaluation of the character and creditworthiness of the borrower and guarantors, loan-to-value and debt to income ratios, borrower liquidity, income verification and credit history. In addition, we perform stress testing for changes in interest rates and other factors and review general economic trends such as market values.
Competition The banking and investment advisory and wealth management businesses in California, Florida, Nevada, Hawaii, and Texas generally, and in our market areas, in particular, are highly competitive.
These referral agreements do not require the client to maintain their assets at the custodial firm and are fully disclosed to the client prior to our providing services to them. Competition The banking and investment advisory and wealth management businesses in California, Florida, Nevada, Hawaii, and Texas generally, and in our market areas, in particular, are highly competitive.
Human Capital Resources As of December 31, 2022, the Company had approximately 713 full-time employees. None of our employees are covered by a collective bargaining agreement. We believe relations with our employees are good. To compete with other financial institutions, our business strategy emphasizes customer relationships and personalized service.
Human Capital Resources As of December 31, 2023, the Company had approximately 567 full-time employees. None of our employees are covered by a collective bargaining agreement. We believe relations with our employees are good and have not experienced interruptions of operations due to labor disagreements. We expect our human capital resources are adequate for our current needs.
In addition, FFB must obtain the prior approval of the FDIC and the DFPI before acquiring or merging with any other depository institution.
In addition, FFB must obtain the prior approval of the FDIC and the DFPI before acquiring or merging with any other depository institution. 10 Table of Contents Capital Requirements Applicable to Banks and Bank Holding Companies Bank holding companies and banks are subject to similar regulatory capital requirements administered by federal and state regulatory agencies.
The majority of our single family residential loan originations are collateralized by first mortgages on real properties located in Southern California and in southwest Florida. These loans are generally adjustable rate loans with initial fixed rate periods ranging from 3 to 10 year terms and terms of the loan not exceeding 30 years.
These loans are generally adjustable-rate loans with initial fixed-rate periods ranging from 3 to 10 year terms and terms of the loan not exceeding 30 years. These loans generally have interest rate floors and payment caps.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurther, in times of significant financial disruption, as in 2008, hedging counterparties have been known to default on their obligations. At December 31, 2022, there were no outstanding hedge instruments. Loans secured by multifamily and commercial real estate represent a high percentage of the loans we make, making our results of operations vulnerable to downturns in the real estate market.
Biggest changeLoans secured by multifamily and commercial real estate represent a high percentage of the loans we make, making our results of operations vulnerable to downturns in the real estate market. At December 31, 2023, loans secured by multifamily and commercial real estate represented approximately 61% of our outstanding loans.
If we 27 Table of Contents are unable to detect or prevent a security breach or cyber-attack from occurring, then we and our clients could incur losses or damages; and we could sustain damage to our reputation, lose clients and business, suffer disruptions to our business and incur increased operating costs, and be exposed to additional regulatory scrutiny or penalties and to civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If we are unable to detect or prevent a security breach or cyber-attack from occurring, then we and our clients could incur losses or damages; and we could sustain damage to our reputation, lose clients and business, suffer disruptions to our business and incur increased operating costs, and be exposed to additional regulatory scrutiny or penalties and to civil litigation and 27 Table of Contents possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our allowance for credit losses may not be adequate to cover actual losses. In accordance with regulatory requirements and generally accepted accounting principles (“GAAP”) in the United States, we maintain an allowance for credit losses (“ACL”) to provide for loan and lease defaults and non-performance, and an ACL on securities.
Our allowance for credit losses may not be adequate to cover actual losses. In accordance with regulatory requirements and generally accepted accounting principles (“GAAP”) in the United States, we maintain an allowance for credit losses (“ACL”) to provide for loan defaults and non-performance, and an ACL on securities.
Regulatory agencies may take a number of different remedial actions, including the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the composition of our concentrations in portfolio or balance sheet assets, to assess civil monetary penalties against officers or directors, to remove 30 Table of Contents officers and directors and, if such conditions cannot be corrected or there is an imminent risk of loss to depositors, the FDIC may terminate our deposit insurance.
Regulatory agencies may take a number of different remedial actions, including the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the composition of our concentrations in portfolio or balance sheet assets, to assess civil monetary penalties against officers or directors, to remove officers and directors and, if such conditions cannot be corrected or there is an imminent risk of loss to depositors, the FDIC may terminate our deposit insurance.
Changes in monetary policy will, in particular, influence the origination and market value of and the yields we can realize on loans and investment securities and the interest we pay on deposits.
Changes in monetary policy will, in particular, influence the origination and market value of and the yields we can realize on loans and investment securities and the interest we pay on deposits and borrowings.
However, those systems and review processes and the judgments that accompany their application may 28 Table of Contents not be effective and, as a result, we may not anticipate every economic and financial outcome in all market environments or the specifics and timing of such outcomes, particularly in the event of the kinds of dislocations in market conditions experienced in recent years, which highlight the limitations inherent in using historical data to manage risk.
However, those systems and review processes and the judgments that accompany their application may not be effective and, as a result, we may not anticipate every economic and financial outcome in all market environments or the specifics and timing of such outcomes, particularly in the event of the kinds of dislocations in market conditions experienced in recent years, which highlight the limitations inherent in using historical data to manage risk.
If business and economic conditions weaken generally or specifically in the principal markets in which we do business, more of our borrowers may fail to perform in accordance with the terms of their loans, in which event loan chargeoffs and asset write-downs could increase, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If business and economic conditions weaken generally or specifically in the principal markets in which we do business, more of our borrowers may fail to perform in accordance with the terms of their loans, in which event loan charge-offs and asset write-downs could increase, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
See the section entitled “ Dividend Policy and Restrictions on the Payment of Dividends ” in Item 5 of this report below for additional information about our dividend policy and the dividend restrictions that apply to us and to FFB and FFA.
See the section entitled “ Dividend Policy and Restrictions on the Payment of Dividends ” in Item 5 of this report below for additional information about our dividend policy and the dividend restrictions that apply to us and to the Bank and FFA.
We believe that investment performance is one of the most important factors that affect the amount of assets under our management and, for that reason, the success of FFA’s business is heavily dependent on the quality and experience of our investment managers and their track records in terms of making investment decisions that result in 29 Table of Contents attractive investment returns for our clients.
We believe that investment performance is one of the most important factors that affect the amount of assets under our management and, for that reason, the success of FFA’s business is heavily dependent on the quality and experience of our investment managers and their track records in terms of making investment decisions that result in attractive investment returns for our clients.
These factors include, but are not limited to, rating agency actions in 26 Table of Contents respect of the investment securities in our portfolio, defaults by the issuers of such securities, concerns with respect to the enforceability of the payment or other key terms of such securities, changes in market interest rates and continued instability in the capital markets.
These factors include, but are not limited to, rating agency actions in respect of the investment securities in our portfolio, defaults by the issuers of such securities, concerns with respect to the enforceability of the payment or other key terms of such securities, changes in market interest rates and continued instability in the capital markets.
For example, if the rates of interest we pay on deposits, borrowings and other interest-bearing liabilities increase faster than we are able to increase the rates of interest we charge on loans or the yields we realize on investments and other interest-earning assets, our net interest income and, therefore, our earnings will 21 Table of Contents decrease.
For example, if the rates of interest we pay on deposits, borrowings and other interest-bearing liabilities increase faster than we are able to increase the rates of interest we charge on loans or the yields we realize on investments and other interest-earning assets, our net interest income and, therefore, our earnings will decrease.
Any of these factors, as well as others, could cause other-than-temporary impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could materially and adversely affect our business, results of operations, financial condition and prospects.
Any of these factors, as well as others, could cause other-than-temporary impairments 26 Table of Contents and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could materially and adversely affect our business, results of operations, financial condition and prospects.
Generally, these laws increase our costs of compliance and business operations and could reduce income from certain business initiatives as well as the risk that we could face enforcement actions from state or agencies agency or litigation brought by private parties.
Generally, these laws increase our costs of compliance and business operations and could reduce income from certain business initiatives as well as the risk that we 31 Table of Contents could face enforcement actions from state or agencies agency or litigation brought by private parties.
As a result, a material decrease in the volume of those deposits by a relatively small number of our depositors could reduce our liquidity, in which event it could become necessary for us to replace those deposits with higher-cost 23 Table of Contents deposits, the sale of securities or FHLB borrowings, which would adversely affect our net interest income and, therefore, our results of operations.
As a result, a material decrease in the volume of those deposits by a relatively small number of our depositors could reduce our liquidity, in which event it could become necessary for us to replace those deposits with higher-cost deposits, the sale of securities or borrowings, which would adversely affect our net interest income and, therefore, our results of operations.
On the other hand, increasing interest rates generally lead to increases in net interest income; however, such increases also may result in a reduction in loan originations, declines in loan prepayment rates and reductions in the ability of borrowers to repay their current loan obligations, which could result in increased loan defaults and chargeoffs and could require increases to our ACL, thereby offsetting either partially or totally the increases in net interest income resulting from the increase in interest rates.
On the other hand, increasing interest rates generally lead to longer term increases in net interest income; however, such increases also may result in a reduction in loan originations, declines in loan prepayment rates and reductions in the ability of borrowers to repay their current loan obligations, which could result in increased loan defaults and charge-offs and could require increases to our ACL, thereby offsetting either partially or totally the increases in net interest income resulting from the increase in interest rates.
Income and cash flows from our banking operations depend to a great extent on the difference or “spread” between the interest we earn on interest-earning assets, such as loans and investment securities, and the rates at which we pay interest on interest-bearing liabilities, such as deposits and borrowings.
Income and cash flows from our banking operations depend to a great extent on the difference or “spread” between the interest we earn on interest-earning assets, such as loans and investment securities, and the rates at which we 22 Table of Contents pay interest on interest-bearing liabilities, such as deposits and borrowings.
Moreover, based on their assessment of the financial condition of FFB or other factors, the FDIC or the DFPI could find that payment of cash dividends by FFB to us would constitute an unsafe or unsound banking practice, in which event they could restrict FFB from paying cash dividends, even if FFB meets the statutory requirements to do so.
Moreover, based on their assessment of the financial condition of the Bank or other factors, the FDIC or the DFPI could find that payment of cash dividends by the Bank to us 32 Table of Contents would constitute an unsafe or unsound banking practice, in which event they could restrict the Bank from paying cash dividends, even if the Bank meets the statutory requirements to do so.
Our principal sources of liquidity include earnings, deposits, FHLB borrowings, sales of loans or investment securities held for sale, repayments by clients of loans we have made to them, and the proceeds from sales by us of our equity securities or from borrowings that we may obtain.
Our 23 Table of Contents principal sources of liquidity include earnings, deposits, borrowings, sales of loans or investment securities held for sale, repayments by clients of loans we have made to them, and the proceeds from sales by us of our equity securities or from borrowings that we may obtain.
Historically, California, in which a substantial portion of our business is located, has been susceptible to natural disasters, such as earthquakes, drought, floods and wild fires. In addition to these risks, Florida and Hawaii experience tropical storms and hurricanes. Tornadoes also occasionally strike the area of Texas where our business is located.
A natural disaster could harm our business. Historically, California, in which a substantial portion of our business is located, has been susceptible to natural disasters, such as earthquakes, drought, floods and wildfires. In addition to these risks, Florida and Hawaii experience tropical storms and hurricanes. Tornadoes also occasionally strike the area of Texas where our business is located.
Our business activities and credit exposure, including real estate collateral for many of our loans, are concentrated in California, Florida, Nevada, Texas, and Hawaii. As of December 31, 2022, approximately 88% of the loans in our loan portfolio were made to borrowers who live and/or conduct business in California (73%), Florida (10%), Texas (4%), and Nevada (1%).
Our business activities and credit exposure, including real estate collateral for many of our loans, are concentrated in California, Florida, Nevada, Texas, and Hawaii. As of December 31, 2023, approximately 87% of the loans in our loan portfolio were made to borrowers who live and/or conduct business in California (73%), Florida (9%), Texas (4%), and Nevada (1%).
Also, we may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors. Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks, and uncertainties of any shareholder activism.
Also, we may be required to incur significant fees and other expenses related to activist shareholder matters, including for third-party advisors. Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks, and uncertainties of any shareholder activism. The market prices and trading volume of our common stock may be volatile.
If those systems and review processes prove to be ineffective in identifying and managing risks, we could be subjected to increased regulatory scrutiny and regulatory restrictions could be imposed on our business, including on our potential future business lines, as a result of which our business and operating results could be adversely affected. A natural disaster could harm our business.
If those systems and review processes prove to be ineffective in identifying and managing risks, we could be subjected to increased 28 Table of Contents regulatory scrutiny and regulatory restrictions could be imposed on our business, including on our potential future business lines, as a result of which our business and operating results could be adversely affected.
Risks Related to Our Regulatory Environment The banking industry is highly regulated, and legislative or regulatory actions taken now or in the future may have a significant adverse effect on our operations.
Regulatory and Compliance Risks The banking industry is highly regulated, and legislative or regulatory actions taken now or in the future may have a significant adverse effect on our operations.
Any regional or local economic downturn in the markets where we have geographic concentration or existing or prospective borrowers or property values in such markets may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically concentrated. Changes in interest rates could reduce our net interest margins and net interest income.
Any regional or local economic downturn in the markets where we have geographic concentration or existing or prospective borrowers or property values in such markets may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically concentrated.
Our ability (and the ability of FFB and FFA) to attract and retain clients and key employees could be adversely affected if our reputation is harmed.
Our ability to attract and retain clients and key employees could be adversely affected if our reputation is harmed.
Adverse economic conditions and government policy responses to such conditions could have a material adverse effect on our business, financial condition, results of operations and prospects. Our banking, investment advisory and wealth management operations are geographically concentrated in California, Florida, Nevada, Texas, and Hawaii, leading to significant exposure to those markets.
Any of these occurrences could have a material adverse effect on our business, financial condition, results of operations and prospects. Our banking, investment advisory and wealth management operations are geographically concentrated in California, Florida, Nevada, Texas, and Hawaii, leading to significant exposure to those markets.
Liquidity risk could adversely affect our ability to fund operations and hurt our financial condition. Liquidity is essential to our banking business, as we use cash to make loans and purchase investment securities and other interest-earning assets and to fund deposit withdrawals that occur in the ordinary course of our business.
Liquidity is essential to our banking business, as we use cash to make loans and purchase investment securities and other interest-earning assets and to fund deposit withdrawals that occur in the ordinary course of our business.
FFA does not provide custodial services for its clients. Instead, client investment accounts are maintained under custodial arrangements with large, well-established securities brokerage firms, either directly or through arrangements made by FFA with those firms.
We may be adversely affected by the soundness of certain securities brokerage firms. FFA does not provide custodial services for its clients. Instead, client investment accounts are maintained under custodial arrangements with large, well-established securities brokerage firms, either directly or through arrangements made by FFA with those firms.
An adverse resolution of any regulatory proceeding or lawsuit against FFA could result in substantial costs or reputational harm to FFA and, therefore, could have an adverse effect on the ability of FFA to retain key relationship and wealth managers, and to retain existing clients or attract new clients, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. 32 Table of Contents Risks Related to Ownership of Our Common Stock We may reduce or discontinue the payment of dividends on common stock.
An adverse resolution of any regulatory proceeding or lawsuit against FFA could result in substantial costs or reputational harm to FFA and, therefore, could have an adverse effect on the ability of FFA to retain key relationship and wealth managers, and to retain existing clients or attract new clients, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Moreover, the effect of any product change on the results of our business may not be fully ascertainable until the change has been in effect for some time, and, by that time, it may be too 25 Table of Contents late to make further modifications to such product without causing further harm to our business, results of operations, and financial condition.
Moreover, the effect of any product change on the results of our business may not be fully ascertainable until the change has been in effect for some time, and, by that time, it may be too late to make further modifications to such product without causing further harm to our business, results of operations, and financial condition. 25 Table of Contents We face intense competition from other banks and financial institutions and other wealth and investment management firms that could hurt our business.
Conversely, in a declining interest rate environment, our earnings could be adversely affected if the interest rates we are able to charge on loans or other investments decline more quickly than those we pay on deposits and borrowings. We may be adversely impacted by the transition from LIBOR as a reference rate.
Conversely, in a declining interest rate environment, our earnings could be adversely affected if the interest rates we are able to charge on loans or other investments decline more quickly than those we pay on deposits and borrowings. Changes in interest rates could increase our operating expenses.
From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts. We may invest significant time and resources in developing and marketing new lines of business and/or new products and services.
New lines of business or new products and services may subject us to additional risks. From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts.
In addition, we could become subject to investigations by NASDAQ, the SEC, the Federal Reserve, or other regulatory authorities, which could require us to expend additional financial and management resources.
In addition, we could become subject to investigations by New York Stock Exchange (“NYSE”), the SEC, the Federal Reserve, or other regulatory authorities, which could require us to expend additional financial and management 33 Table of Contents resources.
The amount of the reimbursement and the impact of interest rate increases may vary by client. 22 Table of Contents We may incur significant losses as a result of ineffective hedging of interest rate risk. From time to time, we may utilize financial derivative instruments to hedge the value of our multifamily loans held for sale.
The amount of the reimbursement and the impact of interest rate increases may vary by client. We may incur significant losses as a result of ineffective hedging of interest rate risk. From time to time, we may utilize financial derivative instruments to limit our exposure to interest rate risk.
If we are unable to maintain the effectiveness of our internal controls over financial reporting, we may be unable to report our financial results accurately and on a timely basis.
Our failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock prices. If we are unable to maintain the effectiveness of our internal controls over financial reporting, we may be unable to report our financial results accurately and on a timely basis.
While we believe our ACL is appropriate for the risk identified in our loan and lease portfolio, we cannot provide assurance that we will not further increase the ACL, that it will be sufficient to address losses, or that regulators will not 20 Table of Contents require us to increase this allowance.
In addition, regulators may impose additional capital buffers to absorb this volatility. While we believe our ACL is appropriate for the risk identified in our loan portfolio, we cannot provide assurance that we will not further increase the ACL, that it will be sufficient to address losses, or that regulators will not require us to increase this allowance.
As a result, the loss of a key investment manager to a competitor could jeopardize our relationships with some of our clients and lead to the loss of client accounts, which could have a material adverse effect on our business, financial condition, results of operations and prospects. We may be adversely affected by the soundness of certain securities brokerage firms.
As a result, the loss of a key investment manager to a 29 Table of Contents competitor could jeopardize our relationships with some of our clients and lead to the loss of client accounts, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
As an independent bureau within the Federal Reserve Board focused solely on consumer financial protection, the CFPB may impose requirements more strictly or severely than the FDIC. ​ Additionally, other regulatory requirements apply to insured depository institution holding companies and insured depository institutions with $10 billion or more in total consolidated assets, including the restrictions on proprietary trading and investment and sponsorship in hedge funds and private equity funds known as the Volcker Rule.
Additionally, other regulatory requirements apply to insured depository institution holding companies and insured depository institutions with $10 billion or more in total consolidated assets, including the restrictions on proprietary trading and investment and sponsorship in hedge funds and private equity funds known as the Volcker Rule.
We face intense competition from other banks and financial institutions and other wealth and investment management firms that could hurt our business. We conduct our business operations in markets where the banking business is highly competitive and is dominated by large multi-state and in-state banks with operations and offices covering wide geographic areas.
We conduct our business operations in markets where the banking business is highly competitive and is dominated by large multi-state and in-state banks with operations and offices covering wide geographic areas.
A reduction or discontinuance of dividends on our common stock could have a material adverse effect on our business, including the market price of our common stock. An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment.
An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment.
Our ability to pay dividends to our stockholders is restricted by Delaware and federal law and the policies and regulations of the Federal Reserve Board, which is our federal banking regulator.
Our stockholders are only entitled to receive such dividends as our Board may declare out of funds legally available for such payments. Our ability to pay dividends to our stockholders is restricted by Delaware and federal law and the policies and regulations of the Federal Reserve Board, which is our federal banking regulator.
Any of these occurrences could have a material adverse effect on our business, financial condition, results of operations and prospects. Our business and operations may be adversely affected in numerous and complex ways by economic conditions.
Adverse economic conditions and government policy responses to such conditions could have a material adverse effect on our business, financial condition, results of operations and prospects. Our business and operations may be adversely affected by the impacts of inflation on us and our customers.
The amount of future losses may also vary depending on changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control, and these losses may exceed current estimates.
Our ACL may not be adequate to absorb our actual or expected credit losses and future provisions for ACL could reduce our net income and materially and adversely affect our operating results. 21 Table of Contents The amount of future losses may also vary depending on changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control, and these losses may exceed current estimates.
Accordingly, our results of operations will be directly affected by the volume and timing of loan losses, which for a number of reasons can vary from period to period. The risks of loan losses are exacerbated by economic recessions and downturns, or by other events that can lead to local or regional business downturns.
The risks of loan losses are exacerbated by economic recessions and downturns, or by other events that can lead to local or regional business downturns.
FFA’s ability to pay cash dividends to us is restricted under California corporate law. FFB’s ability to pay dividends to us is limited by various banking statutes and regulations and California law.
FFA and the Bank are subject to separate statutory or regulatory dividend restrictions that can affect their ability to pay cash dividends to us. FFA’s ability to pay cash dividends to us is restricted under California corporate law. The Bank’s ability to pay dividends to us is limited by various banking statutes and regulations and California law.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Any such actions could have a material adverse effect on our business, financial condition, results of operations and prospects.
Any such actions could have a material adverse effect on our business, financial condition, results of operations and prospects. 31 Table of Contents We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
A regulatory action against us could have a material adverse effect on our business, results of operations, financial condition and prospects. We are subject to stringent capital requirements. The federal banking agencies require that we meet minimum leverage and risk-based capital requirements applicable to bank holding companies and insured depository institutions.
A regulatory action against us could have a material adverse effect on our business, results of operations, financial condition and prospects. 30 Table of Contents We are subject to increased regulation because we have more than $10 billion in total consolidated assets. ​ Federal law imposes heightened requirements on bank holding companies and depository institutions that exceed $10 billion in total consolidated assets.
An inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on our financial condition, results of operations and liquidity. New lines of business or new products and services may subject us to additional risks.
An inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on our financial condition, results of operations and liquidity. 24 Table of Contents The actions and commercial soundness of other financial institutions could affect our ability to engage in routine funding transactions.
FFB’s total consolidated assets exceeded this amount for the first time at December 31, 2021, and met the four consecutive quarter threshold for the quarter ended September 30, 2022.
The Bank’s total consolidated assets exceeded this amount for the first time at December 31, 2021, and met the four consecutive quarter threshold for the quarter ended September 30, 2022. As an independent bureau within the Federal Reserve Board focused solely on consumer financial protection, the CFPB may impose requirements more strictly or severely than the FDIC.
Loan defaults and the incurrence of losses on loans are inherent risks in our business. Loan losses necessitate loan chargeoffs and write-downs in the carrying values of our loans and, therefore, can reduce our net income and adversely affect our results of operations and financial condition.
Loan losses necessitate loan charge-offs and write-downs in the carrying values of our loans and, therefore, can reduce our net income and adversely affect our results of operations and financial condition. Accordingly, our results of operations will be directly affected by the volume and timing of loan losses, which for a number of reasons can vary from period to period.
Our ability to pay dividends to stockholders is also dependent on the payment to us of cash dividends by our subsidiaries, FFA and FFB, which are the primary sources of cash for our payment of dividends. FFA and FFB are subject to separate statutory or regulatory dividend restrictions that can affect their ability to pay cash dividends to us.
In this regard, we have agreed not to pay dividends to our stockholders without the Federal Reserve Board’s prior written consent. Our ability to pay dividends to stockholders is also dependent on the payment to us of cash dividends by our subsidiaries, FFA and the Bank, which are the primary sources of cash for our payment of dividends.
As of December 31, 2022, our five largest bank depositors accounted for, in the aggregate, 20% of our total deposits.
As of December 31, 2023, large depositor relationships, consisting of deposit relationships which exceed 2% of total deposits, accounted for, in the aggregate, approximately 12.5% of our total deposits.
However, Driver may pursue litigation that could ultimately lead to a contested election at the Company’s 2023 annual meeting of stockholders. 33 Table of Contents General Risk Factors The market prices and trading volume of our common stock may be volatile. The market prices and trading volumes of our common stock may fluctuate or decline significantly.
The market prices and trading volumes of our common stock may fluctuate or decline significantly.
Removed
Those risks and uncertainties, many of which are outside of our ability to control or prevent, include the following: Risks Related to the COVID-19 Pandemic Over the past three years, the COVID-19 pandemic and related government actions taken to reduce the spread of the virus have created significant economic uncertainty, reduced economic activity and changes in customer preferences and behaviors, including within our market areas.
Added
The risks identified below are not intended to be a comprehensive list of all risks we face, and additional risks that we may currently view as not material may also impair our financial condition and price performance of our common stock.
Removed
Our business depends on the willingness and ability of our customers and employees to conduct banking and other financial transactions.
Added
General Economic Conditions Risks Our business and operations may be adversely affected in numerous and complex ways by economic conditions.
Removed
Disruptions to our customers caused by the COVID-19 pandemic could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans, as well as reductions in loan demand, the liquidity of loan guarantors, loan collateral values (particularly in real estate), loan originations, interest and noninterest income and deposit availability.
Added
The strong demand for goods and services in recent years, supply chain constraints, and the impact of fiscal and monetary policy have contributed to higher levels of inflation throughout the U.S. economy, including within the Company’s market area. Inflation has resulted in higher prices for food, energy, housing, and various supply chain inputs, among others.
Removed
In addition to restrictions on travel and business operations, other governmental and regulatory actions in response to COVID-19 could affect us in substantial and unpredictable ways, such as the potential adverse impact on state and local moratoriums on evictions and our implementation of loan modifications and deferral programs consistent with recent regulatory guidance.
Added
These inflationary pressures have persisted throughout 2023, resulting in higher costs for consumers and businesses. To address the persistent levels of inflation, the Federal Reserve’s Federal Open Market Committee (“FOMC”) took steps to tighten monetary policy through increases to the federal funds rate beginning in March 2022 and continuing into 2023.
Removed
While some of these measures have expired or been lifted, they could be implemented again. The risk and impacts of the pandemic may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even as COVID-19 pandemic subsides.
Added
The FOMC has stated that it remains committed to monetary policy measures that are designed to bring inflation down. The impact of these measures on the Company’s business, including future actions taken by the FOMC, are uncertain. Recent economic data indicates that the pace of inflation has moderated in recent months.
Removed
Given the ongoing and dynamic nature of the COVID-19 pandemic, we cannot predict the full extent of its continuing impacts on our business, our operations or the economy as a whole.
Added
However, the inflation rate remains above the FOMC’s 2% target.
Removed
However, its effects could have a material impact on our results of operations and heighten many of the other risk factors described in this report. 19 Table of Contents ​ Our participation in the Payroll Protection Program (“PPP”) exposes us to risks related to noncompliance with the PPP, which could have a material adverse impact on our business, financial condition and results of operations. ​ We are a participating lender in the PPP, a loan program administered through the SBA, that was created to help eligible businesses, organizations and self-employed persons fund their operational costs during the COVID-19 pandemic.
Added
Should the impacts of inflation persist, we anticipate it could have an impact on some or all of the following: 20 Table of Contents Loan growth and interest income – If economic activity begins to wane, it may have an impact on our borrowers, the businesses they operate, and their financial condition.
Removed
Under this program, the SBA guarantees 100% of the amounts loaned under the PPP. We may, however, be exposed to credit risk on PPP loans if a determination is made by the SBA that there was a deficiency in the manner in which the loan was originated, funded, or serviced.
Added
Our borrowers may have less demand for credit needed to invest in and expand their businesses, as well as demand for real estate and consumer loans. Such factors would place pressure on the level of interest-earning assets, which may negatively impact our interest income.
Removed
If a deficiency is identified, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from us. Risks Related to Our Financial Services Business We could incur losses on the loans we make.
Added
Credit quality – Should there be a decline in economic activity, the markets we serve could experience increases in unemployment, declines in consumer confidence, and a reluctance on the part of businesses to invest in and expand their operations, among other things.
Removed
Our ACL may not be adequate to absorb our actual or expected credit losses and future provisions for ACL could reduce our net income and materially and adversely affect our operating results.
Added
Such factors may result in weakened economic conditions, place strain on borrowers, and ultimately impact the credit quality of our loan portfolio. We expect this could result in increases in the level of past due, nonaccrual, and classified loans, as well as higher net charge-offs.
Removed
In addition, regulators may impose additional capital buffers to absorb this volatility.
Added
While economic conditions have generally been favorable thus far, notwithstanding higher levels of inflation, there can be no assurance favorable economic conditions will continue. In addition, a higher interest rate environment impacts the ability of borrowers with adjustable-rate loans to meet their debt service obligations.
Removed
The COVID-19 pandemic has caused and may continue to cause disruptions in the U.S. economy at large, and for small businesses in particular, and has resulted and may continue to result in disruptions to our customers’ businesses, and a decrease in consumer confidence and business generally.
Added
As such, should we experience future deterioration in the credit quality of our loan portfolio, it may contribute to the need for additional provisions for credit losses. Higher interest rates may also lower the rate of return on commercial real estate values that could result in higher charge-offs and provision for credit losses.
Removed
The United Kingdom’s Financial Conduct Authority announced that the publication of the most commonly used U.S. dollar London Interbank Offered Rate (“LIBOR”) settings will cease to be published or cease to be representative after June 30, 2023. The publication of all other LIBOR settings ceased to be published as of December 31, 2021.
Added
Deposits and deposit costs – Given the expectation in the near-term for interest rates to remain elevated through restrictive monetary policy by the FOMC, it is likely that deposit costs will continue to increase.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeEight of our office buildings are owned and the remaining are leased pursuant to non-cancelable operating leases that will 34 Table of Contents expire between 2023 and 2035. The building for the office in Auburn, California is owned by us and is on land that is leased under a non-cancellable lease that expires in 2028. ​
Biggest changeSix of our office buildings are owned and the remaining are leased pursuant to non-cancelable operating leases that will expire between 2024 and 2035. The building for the office in Auburn, California is owned by us and is on land that is leased under a non-cancellable lease that expires in 2028. ​
Item 2. Properties. FFI’s corporate headquarters is located in Dallas, Texas, at 200 Crescent Court, Suite 1400, Dallas, Texas 75201. The Company has 29 banking offices and 2 loan production offices in California, Nevada, Florida, Texas, and Hawaii.
Item 2. Properties. The Company’s corporate headquarters is located in Dallas, Texas, at 200 Crescent Court, Suite 1400, Dallas, Texas 75201. The Company has 29 banking offices and 2 loan production offices in California, Nevada, Florida, Texas, and Hawaii.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+5 added−1 removed11 unchanged
Biggest changeIn particular, under California law, cash dividends by a California state chartered bank may not exceed, the lesser of (i) the sum of its net income for the last three fiscal years (after deducting all dividends paid during the period), or (ii) the amount of its retained earnings. 35 Table of Contents Also, because the payment of cash dividends has the effect of reducing capital, capital requirements imposed on FFB by the DFPI and the FDIC may operate, as a practical matter, to preclude the payment, or limit the amount of, cash dividends that might otherwise be permitted to be made under California law; and the DFPI and the FDIC, as part of their supervisory powers, generally require insured banks to adopt dividend policies which limit the payment of cash dividends much more strictly than do applicable state laws.
Biggest changeAlso, because the payment of cash dividends has the effect of reducing capital, capital requirements imposed on FFB by the DFPI and the FDIC may operate, as a practical matter, to preclude the payment, or limit the amount of, cash dividends that might otherwise be permitted to be made under California law; and the DFPI and the FDIC, as part of their supervisory powers, generally require insured banks to adopt dividend policies which limit the payment of cash dividends much more strictly than do applicable state laws.
The stock performance graph assumes that $100 was invested in Company common stock at the close of market on December 31, 2018, and, at that same date, in the Russell 2000 Index, the Russell 3000 Index and the KBW Nasdaq Regional Bank Index and that any dividends paid in the indicated periods were reinvested.
The stock performance graph assumes that $100 was invested in Company common stock at the close of market on December 31, 2019, and, at that same date, in the Russell 2000 Index, the Russell 3000 Index and the KBW Nasdaq Regional Bank Index and that any dividends paid in the indicated periods were reinvested.
Shareholder returns shown in the stock performance graph are not necessarily indicative of future stock price performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending ​ 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Foundation Inc.
Shareholder returns shown in the stock performance graph are not necessarily indicative of future stock price performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending ​ 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Foundation Inc.
The following table provides information relating to the Company’s purchases of shares of its common stock during the fourth quarter of 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Approximate Dollar ​ ​ Total Number ​ ​ ​ Shares Purchased ​ Value of Shares That ​ ​ of Shares ​ Price Paid Per ​ as Part of Publicly ​ May Yet Be Purchased Purchase Dates Purchased Share Announced Program Under the Program October 1 to October 31, 2022 ​ ​ - $ - ​ - ​ $ 72,542,900 November 1 to November 30, 2022 ​ ​ 75,000 ​ 13.66 ​ 75,000 ​ ​ 71,518,400 December 1 to December 31, 2022 ​ ​ - ​ - ​ - ​ ​ 71,518,400 Total ​ ​ 75,000 ​ ​ ​ ​ ​ 75,000 ​ ​ ​ ​ 36 Table of Contents Stock Performance Graph The following graph shows a comparison from December 31, 2018 through December 31, 2022 of the cumulative total return for our common stock, compared against (i) the Russell 2000 Index, which measures the performance of the smallest 2,000 members, by market cap, (ii) the Russell 3000 Index, which measures the performance of the smallest 3,000 members, by market cap, of the Russell Index, and (iii) an index published by SNL Securities L.C.
The following table provides information relating to the Company’s purchases of shares of its common stock during the fourth quarter of 2023: ​ ​ 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Approximate Dollar ​ ​ Total Number ​ ​ ​ Shares Purchased ​ Value of Shares That ​ ​ of Shares ​ Price Paid Per ​ as Part of Publicly ​ May Yet Be Purchased Purchase Dates Purchased Share Announced Program Under the Program October 1 to October 31, 2023 ​ ​ - $ - ​ - ​ $ 71,518,400 November 1 to November 30, 2023 ​ ​ - ​ - ​ - ​ ​ 71,518,400 December 1 to December 31, 2023 ​ ​ - ​ - ​ - ​ ​ 71,518,400 Total ​ ​ - ​ ​ ​ ​ ​ - ​ ​ ​ ​ 37 Table of Contents Stock Performance Graph The following graph shows a comparison from December 31, 2019 through December 31, 2023 of the cumulative total return for our common stock, compared against (i) the Russell 2000 Index, which measures the performance of the smallest 2,000 members, by market cap, (ii) the Russell 3000 Index, which measures the performance of the smallest 3,000 members, by market cap, of the Russell Index, and (iii) an index published by SNL Securities L.C.
This stock repurchase program, which has no stated expiration date, replaced and superseded the stock repurchase program approved by the Board of Directors on October 30, 2018, which had authorized the Company to repurchase up to 2,200,000 shares of its common stock.
This stock repurchase program, which has no stated expiration date, replaced and superseded the stock repurchase program approved by the Board of Directors on October 30, 2018, which had authorized the Company to repurchase up to 2,200,000 shares of its common stock. During 2023, the Company did not repurchase any shares of common stock.
As of February 21, 2023, a total of 56,350,719 shares of our common stock were issued and outstanding which were held of record by approximately 10,861 shareholders. There were no sales of unregistered securities during the fiscal year ended December 31, 2022.
As of February 21, 2024, a total of 56,467,623 shares of our common stock were issued and outstanding which were held of record by approximately 8,927 shareholders. There were no sales of unregistered securities during the fiscal year ended December 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information On November 3, 2014, our common stock became listed and commenced trading on the NASDAQ Global Stock Market under the trading symbol “FFWM”.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the NYSE under the trading symbol “FFWM”. Previously, since 2014, our common stock traded on the NASDAQ Global Stock Market under the same symbol until we transferred the listing to the NYSE on August 22, 2023.
In addition, since we are a bank holding company subject to regulation by the FRB, it may become necessary for us to obtain the approval of the FRB before we can pay cash dividends to our stockholders.
In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, regardless of their historical book value. 35 Table of Contents In addition, since we are a bank holding company (“BHC”) subject to regulation by the FRB, it may become necessary for us to obtain the approval of the FRB before we can pay cash dividends to our stockholders.
(FFWM) 100.00 135.30 154.82 193.31 111.43 Russell 2000 Index 100.00 123.72 146.44 166.50 130.60 Russell 3000 Index 100.00 128.54 152.01 189.39 150.61 KBW Regional Bank Index 100.00 120.37 105.81 140.94 127.61 ​ The above performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act. ​ 37 Table of Contents
(FFWM) 100.00 114.43 142.87 82.36 55.63 Russell 2000 Index 100.00 118.36 134.57 105.56 121.49 Russell 3000 Index 100.00 118.26 147.35 117.17 145.24 KBW Regional Bank Index 100.00 87.90 117.08 106.02 101.77 ​ The above performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that section and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act. 38 Table of Contents
Removed
In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, regardless of their historical book value.
Added
Specifically, FRB guidelines stipulate that a BHC’s board of directors should inform the FRB and should eliminate, defer, or significantly reduce dividends if: (i) the BHC’s net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (ii) the BHC’s prospective rate of earnings retention is not consistent with the BHC’s capital needs and overall current and prospective financial condition; or (iii) the BHC will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
Added
It is also a Federal Reserve policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of financial strength for their banking subsidiaries.
Added
In particular, under California law, cash dividends by a California state-chartered bank may not exceed, the lesser of (i) the sum of its net income for the last three fiscal years (after deducting all dividends paid during the period), or (ii) the amount of its retained earnings.
Added
However, with the prior approval of the DFPI, a bank may pay cash dividends in an amount not to exceed the greatest of: (i) the bank’s retained earnings; (ii) net income of the bank for its last fiscal year; or (iii) net income of the bank for its current fiscal year.
Added
We have agreed that FFB will not pay dividends to the Company without the FDIC and DFPI’s prior written approval.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

100 edited+102 added−65 removed35 unchanged
Biggest changeNoninterest expenses for Wealth Management increased by $1.6 million for 2021, when compared to the comparable period in 2020, primarily due to increased compensation costs related to higher commissions. ​ 49 Table of Contents Financial Condition The following table shows the financial position for each of our business segments, and of Other and Elimination entries used to arrive at our consolidated totals which are included in the column labeled Other, at December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Wealth Other and ​ ​ (dollars in thousands) ​ Banking ​ Management ​ Eliminations ​ Total 2022: ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 656,247 ​ $ 16,757 ​ $ (16,510) ​ $ 656,494 Securities AFS, net ​ 226,158 ​ — ​ — ​ 226,158 Securities HTM, net ​ ​ 862,544 ​ ​ — ​ ​ — ​ ​ 862,544 Loans, net ​ 10,692,462 ​ — ​ — ​ 10,692,462 Premises and equipment ​ 35,788 ​ 216 ​ 136 ​ 36,140 FHLB Stock ​ 25,358 ​ — ​ — ​ 25,358 Deferred taxes ​ 19,671 ​ 78 ​ 4,449 ​ 24,198 REO ​ 6,210 ​ ​ — ​ ​ — ​ 6,210 Goodwill and Intangibles ​ 221,835 ​ — ​ — ​ 221,835 Other assets ​ 233,621 ​ 428 ​ 28,731 ​ 262,780 Total assets ​ $ 12,979,894 ​ $ 17,479 ​ $ 16,806 ​ $ 13,014,179 Deposits ​ $ 10,403,205 ​ $ — ​ $ (40,593) ​ $ 10,362,612 Borrowings ​ 1,176,601 ​ — ​ 193,335 ​ 1,369,936 Intercompany balances ​ 1,001 ​ 971 ​ (1,972) ​ — Other liabilities ​ 125,254 ​ 4,392 ​ 17,607 ​ 147,253 Shareholders’ equity ​ 1,273,833 ​ 12,116 ​ (151,571) ​ 1,134,378 Total liabilities and equity ​ $ 12,979,894 ​ $ 17,479 ​ $ 16,806 ​ $ 13,014,179 2021: ​ ​ ​ ​ Cash and cash equivalents ​ $ 1,121,089 ​ $ 3,195 ​ $ (2,527) ​ $ 1,121,757 Securities AFS ​ 1,191,378 ​ — ​ — ​ 1,191,378 Loans Held For Sale ​ 501,436 ​ — ​ — ​ 501,436 Loans, net ​ 6,872,952 ​ — ​ — ​ 6,872,952 Premises and equipment ​ 37,373 ​ 411 ​ 136 ​ 37,920 FHLB Stock ​ 18,249 ​ — ​ — ​ 18,249 Deferred taxes ​ 20,745 ​ 138 ​ (48) ​ 20,835 REO ​ ​ 6,210 ​ ​ — ​ ​ — ​ ​ 6,210 Goodwill and Intangibles ​ 222,125 ​ — ​ — ​ 222,125 Other assets ​ 179,385 ​ 365 ​ 23,592 ​ 203,342 Total assets ​ $ 10,170,942 ​ $ 4,109 ​ $ 21,153 ​ $ 10,196,204 Deposits ​ $ 8,836,250 ​ $ — ​ $ (24,290) ​ $ 8,811,960 Borrowings ​ 165,930 ​ — ​ 44,197 ​ 210,127 Intercompany balances ​ 4,605 ​ (8,204) ​ 3,599 ​ — Other liabilities ​ 92,500 ​ 4,381 ​ 13,185 ​ 110,066 Shareholders’ equity ​ 1,071,657 ​ 7,932 ​ (15,538) ​ 1,064,051 Total liabilities and equity ​ $ 10,170,942 ​ $ 4,109 ​ $ 21,153 ​ $ 10,196,204 2020: ​ ​ ​ ​ Cash and cash equivalents ​ $ 629,066 ​ $ 1,671 ​ $ (1,030) ​ $ 629,707 Securities AFS ​ 807,426 ​ — ​ — ​ 807,426 Loans Held For Sale ​ 505,404 ​ — ​ — ​ 505,404 Loans, net ​ 4,779,599 ​ — ​ — ​ 4,779,599 Premises and equipment ​ 7,313 ​ 563 ​ 136 ​ 8,012 FHLB Stock ​ 17,250 ​ — ​ — ​ 17,250 Deferred taxes ​ 8,663 ​ 186 ​ (246) ​ 8,603 Goodwill and Intangibles ​ 95,296 ​ — ​ — ​ 95,296 Other assets ​ 91,702 ​ 314 ​ 13,847 ​ 105,863 Total assets ​ $ 6,941,719 ​ $ 2,734 ​ $ 12,707 ​ $ 6,957,160 Deposits ​ $ 5,919,155 ​ $ — ​ $ (5,722) ​ $ 5,913,433 Borrowings ​ 255,000 ​ — ​ 14,000 ​ 269,000 Intercompany balances ​ 4,493 ​ (3,519) ​ (974) ​ — Other liabilities ​ 65,423 ​ 3,808 ​ 9,785 ​ 79,016 Shareholders’ equity ​ 697,648 ​ 2,445 ​ (4,382) ​ 695,711 Total liabilities and equity ​ $ 6,941,719 ​ $ 2,734 ​ $ 12,707 ​ $ 6,957,160 ​ Our consolidated balance sheet is primarily affected by changes occurring in our Banking operations as our Wealth Management operations do not maintain significant levels of assets.
Biggest changeNoninterest expenses for Wealth Management increased by $1.0 million for 2022, when compared to the comparable period in 2021, primarily due to increased compensation costs related to higher commission expense, resulting from the increase in the number of new accounts. 52 Table of Contents Financial Condition The following table shows the financial position for each of our business segments, and of Other and Elimination entries used to arrive at our consolidated totals which are included in the column labeled Other, at December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Wealth Other and ​ ​ (dollars in thousands) ​ Banking ​ Management ​ Eliminations ​ Total 2023: ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 1,326,237 ​ $ 4,746 ​ $ (4,354) ​ $ 1,326,629 Securities AFS, net ​ 703,226 ​ — ​ — ​ 703,226 Securities HTM, net ​ ​ 789,578 ​ ​ — ​ ​ — ​ ​ 789,578 Loans, net ​ 10,148,597 ​ — ​ — ​ 10,148,597 Accrued interest receivable ​ ​ 54,163 ​ ​ — ​ ​ — ​ ​ 54,163 Premises and equipment ​ 39,639 ​ 150 ​ 136 ​ 39,925 Investment in FHLB stock ​ 24,613 ​ — ​ — ​ 24,613 Deferred taxes ​ 26,917 ​ 183 ​ 2,042 ​ 29,142 Real estate owned ("REO") ​ 8,381 ​ ​ — ​ ​ — ​ 8,381 Core deposit intangibles ​ 4,948 ​ — ​ — ​ 4,948 Other assets ​ 172,305 ​ 533 ​ 25,208 ​ 198,046 Total assets ​ $ 13,298,604 ​ $ 5,612 ​ $ 23,032 ​ $ 13,327,248 Deposits ​ $ 10,708,549 ​ $ — ​ $ (19,617) ​ $ 10,688,932 Borrowings ​ 1,409,056 ​ — ​ — ​ 1,409,056 Subordinated debt ​ ​ — ​ ​ — ​ ​ 173,397 ​ ​ 173,397 Intercompany balances ​ 2,604 ​ (9,079) ​ 6,475 ​ — Accounts payable and other liabilities ​ 108,434 ​ 2,196 ​ 19,890 ​ 130,520 Shareholders’ equity ​ 1,069,961 ​ 12,495 ​ (157,113) ​ 925,343 Total liabilities and equity ​ $ 13,298,604 ​ $ 5,612 ​ $ 23,032 ​ $ 13,327,248 2022: ​ ​ ​ ​ Cash and cash equivalents ​ $ 656,247 ​ $ 16,757 ​ $ (16,510) ​ $ 656,494 Securities AFS, net ​ 226,158 ​ — ​ — ​ 226,158 Securities HTM, net ​ 862,544 ​ — ​ — ​ 862,544 Loans, net ​ 10,692,462 ​ — ​ — ​ 10,692,462 Accrued interest receivable ​ ​ 51,359 ​ ​ — ​ ​ — ​ ​ 51,359 Premises and equipment ​ 35,788 ​ 216 ​ 136 ​ 36,140 Investment in FHLB stock ​ 25,358 ​ — ​ — ​ 25,358 Deferred taxes ​ 19,671 ​ 78 ​ 4,449 ​ 24,198 Real estate owned ("REO") ​ ​ 6,210 ​ ​ — ​ ​ — ​ ​ 6,210 Goodwill ​ 215,252 ​ — ​ — ​ 215,252 Core deposit intangibles ​ ​ 6,583 ​ ​ — ​ ​ — ​ ​ 6,583 Other assets ​ 182,262 ​ 428 ​ 28,731 ​ 211,421 Total assets ​ $ 12,979,894 ​ $ 17,479 ​ $ 16,806 ​ $ 13,014,179 Deposits ​ $ 10,403,205 ​ $ — ​ $ (40,593) ​ $ 10,362,612 Borrowings ​ 1,176,601 ​ — ​ 20,000 ​ 1,196,601 Subordinated debt ​ ​ — ​ ​ — ​ ​ 173,335 ​ ​ 173,335 Intercompany balances ​ 1,001 ​ 971 ​ (1,972) ​ — Accounts payable and other liabilities ​ 125,254 ​ 4,392 ​ 17,607 ​ 147,253 Shareholders’ equity ​ 1,273,833 ​ 12,116 ​ (151,571) ​ 1,134,378 Total liabilities and equity ​ $ 12,979,894 ​ $ 17,479 ​ $ 16,806 ​ $ 13,014,179 ​ Our consolidated balance sheet is primarily affected by changes occurring in our Banking operations as our Wealth Management operations do not maintain significant levels of assets or liabilities.
The following table provides a breakdown of noninterest income for Banking for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2022 2021 ​ ​ ​ ​ ​ ​ ​ Year Ended December 31: ​ ​ ​ ​ ​ ​ Trust fees ​ $ 9,394 ​ $ 7,161 Loan related fees ​ 9,228 ​ 9,208 Deposit charges ​ 2,508 ​ 1,714 Gain on sale leaseback ​ ​ 1,061 ​ ​ — Gain on sale of loans ​ — ​ 21,459 Consulting fees ​ ​ 396 ​ ​ 409 Other ​ 3,561 ​ 1,117 Total noninterest income ​ $ 26,148 ​ $ 41,068 ​ Noninterest income in Banking in 2022 decreased $14.9 million from 2021 primarily due to a lack of loan sales during the year, resulting in a decrease of $21.5 million in gain on sale of loans income.
The following table provides a breakdown of noninterest income for Banking for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2022 2021 Trust fees ​ $ 9,394 ​ $ 7,161 Loan related fees ​ 9,228 ​ 9,208 Deposit charges ​ 2,508 ​ 1,714 Gain on sale leaseback ​ 1,061 ​ — Gain on sale of loans ​ — ​ 21,459 Consulting fees ​ ​ 396 ​ ​ 409 Other ​ 3,561 ​ 1,117 Total noninterest income ​ $ 26,148 ​ $ 41,068 ​ Noninterest income in Banking in 2022 decreased $14.9 million from 2021 primarily due to a lack of loan sales during the year, resulting in a decrease of $21.5 million in gain on sale of loans income.
Provision for credit losses. The provision for credit losses represents our estimate of the amount necessary to be charged against the current period’s earnings to maintain the ACL for loans and investments at a level that we consider adequate in relation to the estimated losses inherent in the loan and investment portfolios.
The provision for credit losses represents our estimate of the amount necessary to be charged against the current period’s earnings to maintain the ACL for loans and investments at a level that we consider adequate in relation to the estimated losses inherent in the loan and investment portfolios.
The amount of the provision for loans also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, current economic conditions and certain other subjective factors that may affect the ability of borrowers to meet their repayment obligations to us.
The amount of the provision for loans also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, current economic conditions and certain other subjective factors that may affect the ability of borrowers to meet their repayment obligations to us.
The $2.0 million decrease in income before taxes was the result of a $12.8 million increase in income before taxes for Banking, offset by a $0.9 million decrease in income before taxes for Wealth Management, a $6.3 million valuation loss adjustment on the Company’s equity investment in NYDIG, $6.2 million increase in interest expense primarily attributable to the subordinated notes issued in January 2022, a $1.2 million decrease in corporate noninterest income, and a $0.2 million net increase in corporate expenses.
The $2.0 million decrease in combined net income before taxes was the result of a $12.8 million increase in income before taxes for Banking, offset by a $0.9 million decrease in income before taxes for Wealth Management, a $6.3 million valuation loss adjustment on the Company’s equity investment in NYDIG, a $6.2 million increase in interest expense primarily attributable to the subordinated notes issued in January 2022, a $1.2 million decrease in corporate noninterest income, and a $0.2 million net increase in corporate expenses.
The increase in trust fees was due primarily to higher levels of billable assets under advisement (“AUA”). The increase in other income was primarily due to a $1.5 million increase in bank owned life insurance (“BOLI”) income. Noninterest income for Wealth Management includes fees charged to high net-worth clients for managing their assets and for providing financial planning consulting services.
The increase in trust fees was due primarily to higher levels of billable assets under advisement. The increase in other income was primarily due to a $1.5 million increase in bank owned life insurance (“BOLI”) income. ​ Noninterest income for Wealth Management includes fees charged to high net-worth clients for managing their assets and for providing financial planning consulting services.
Our ACL for loans and investments are established through a provision for credit losses charged to expense and may be reduced by a recapture of previously established loss reserves, which are also reflected in the statement of income. Loans and investments are charged against the ACL when management believes that collectability of the principal is unlikely.
Our ACL for loans is established through a provision for credit losses charged to expense and may be reduced by a recapture of previously established loss reserves, which are also reflected in the statement of income. Loans are charged against the ACL when management believes that collectability of the principal is unlikely.
The required ratios for capital adequacy set forth in the above table do not include the Capital Rules’ additional capital conservation buffer, though each of the Company and FFB maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated.
The required ratios for capital adequacy set forth in the above table do not include the Capital Rules’ additional capital conservation buffer, though the Company and FFB maintained capital ratios necessary to satisfy the capital conservation buffer requirements as of the dates indicated.
Additionally, under the terms of the holding company line of credit agreement, FFI may only declare and pay a dividend if the total amount of dividends and stock repurchases during the current twelve months does not exceed 50% of FFI’s net income for the same twelve month 64 Table of Contents period.
Additionally, under the terms of the holding company line of credit agreement, FFI may only declare and pay a dividend if the total amount of dividends and stock repurchases during the 68 Table of Contents current twelve months does not exceed 50% of FFI’s net income for the same twelve-month period.
In addition, prompt correct action regulations place a federally insured depository institution, such as FFB, into one of five capital categories on the basis of its capital ratios: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) critically undercapitalized.
In addition, prompt corrective action regulations place a federally insured depository institution, such as FFB, into one of five capital categories on the basis of its capital ratios: (i) well-capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) critically undercapitalized.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis is intended to facilitate the understanding and assessment of significant changes and trends in our businesses that accounted for the changes in our results of operations in the year ended December 31, 2022, as compared to our results of operations in the year ended December 31, 2021; in our results of operations in the year ended December 31, 2021, as compared to our results of operations in the year ended December 31, 2020, and our financial condition at December 31, 2022 as compared to our financial condition at December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis is intended to facilitate the understanding and assessment of significant changes and trends in our businesses that accounted for the changes in our results of operations in the year ended December 31, 2023, as compared to our results of operations in the year ended December 31, 2022; in our results of operations in the year ended December 31, 2022, as compared to our results of operations in the year ended December 31, 2021, and our financial condition at December 31, 2023 as compared to our financial condition at December 31, 2022.
However, the accrual of interest may be continued on a well-secured loan contractually past due 90 days or more with respect to principal or 55 Table of Contents interest if the loan is in the process of collection or collection of the principal and interest is deemed probable.
However, the accrual of interest may be continued on a well-secured loan contractually past due 90 days or more with respect to principal or 59 Table of Contents interest if the loan is in the process of collection or collection of the principal and interest is deemed probable.
The establishment of such a valuation allowance, or any increase in an existing valuation allowance, would be effectuated through a charge to the provision for income taxes or a reduction in any income tax credit for the period in which such valuation allowance is established or increased. Business Combinations .
The establishment of such a valuation allowance, or any increase in an existing valuation allowance, would be effectuated through a charge to the provision for income taxes or a reduction in any income tax credit for the period in which such valuation allowance is established or increased.
The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain regulatory restrictions which are discussed in Item 1 “Business—Supervision and Regulation—Dividends and Stock Repurchases” in Part I above.
The amount and declaration of future cash dividends are subject to approval by our Board of Directors and certain regulatory restrictions which are discussed in Item 1 “Business——Dividends and Stock Repurchases” in Part I above.
The decrease in noninterest income was offset by increases in trust fees and deposit charges of $3.0 million, increase in other income of $2.4 million, and a $1.1 million gain on sale leaseback transaction related to the sale of two buildings containing retail branches of the Bank, and which are now leased as a result of the sale.
The decrease in gain on sale of loans income was offset by increases in trust fees and deposit charges of $3.0 million, an increase in other income of $2.4 million, and a $1.1 million gain on sale leaseback transaction related to the sale of two buildings containing retail branches of the Bank, which are now leased as a result of the sale.
The following table provides a breakdown of noninterest expense for Banking and Wealth Management for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Banking ​ Wealth Management (dollars in thousands) ​ 2022 ​ 2021 ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Compensation and benefits $ 90,186 $ 68,897 $ 18,705 $ 18,039 Occupancy and depreciation ​ 34,471 ​ 23,018 ​ 1,753 ​ 1,958 Professional services and marketing ​ 9,193 ​ 7,862 ​ 3,211 ​ 2,836 Customer service costs ​ 38,178 ​ 8,775 ​ — ​ — Other expenses ​ 16,591 ​ 12,823 ​ 702 ​ 516 Total noninterest expense ​ $ 188,619 ​ $ 121,375 ​ $ 24,371 ​ $ 23,349 ​ Noninterest expense in Banking increased $67.2 million to $188.6 million in 2022 from $121.4 million in 2021.
The following table provides a breakdown of noninterest expense for Banking and Wealth Management for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Banking ​ Wealth Management (dollars in thousands) ​ 2022 ​ 2021 ​ 2022 ​ 2021 Compensation and benefits $ 90,186 $ 68,897 $ 18,705 $ 18,039 Occupancy and depreciation ​ 34,471 ​ 23,018 ​ 1,753 ​ 1,958 Professional services and marketing ​ 9,193 ​ 7,862 ​ 3,211 ​ 2,836 Customer service costs ​ 38,178 ​ 8,775 ​ — ​ — Other expenses ​ 16,591 ​ 12,823 ​ 702 ​ 516 Total noninterest expense ​ $ 188,619 ​ $ 121,375 ​ $ 24,371 ​ $ 23,349 ​ Noninterest expense in Banking was $188.6 million for the year ended December 31, 2022, compared to $121.4 million for 2021, an increase of $67.2 million.
While we use the best information available to make this evaluation, future adjustments to our ACL may be necessary if there are significant changes in economic or other conditions that can affect the collectability in full of loans and investments in our loan or investment portfolios.
While we use the best information available to make this evaluation, future adjustments to our ACL may be necessary if there are significant changes in economic or other conditions that can affect the collectability in full of loans in our loan portfolios.
Compensation and benefits for Banking increased $21.3 million during 2022 as compared to 2021, due to salary increases and an increase in the average monthly FTE in Banking.
Compensation and benefits for Banking increased $21.3 million during 2022 as compared to 2021, due to salary increases and an increase in the average monthly FTEs in Banking.
During the year ended December 31, 2022, investing activities used net cash of $3.2 billion, primarily to fund a $3.3 billion net increase in loans and $173 million in purchases of securities HTM and AFS, offset partially by $253 million in principal collections of securities HTM and AFS.
During the year ended December 31, 2022, investing activities used net cash of $3.2 billion, primarily to fund a $3.3 billion net increase in loans and $173 million in purchases of securities HTM and AFS, offset partially by $253 million in principal collections of securities HTM and AFS. Cash Flow Provided by Financing Activities.
Cash Flow Provided by Financing Activities. During the year ended December 31, 2022, financing activities provided net cash of $2.7 billion, consisting primarily of a net increase of $1.6 billion in deposits, a net increase of $1.0 billion in FHLB and other advances, and $148 million net increase in subordinated debt, offset partially by $25 million in dividends paid.
During the year ended December 31, 2022, financing activities provided net cash of $2.7 billion, consisting primarily of a net increase of $1.6 billion in deposits, a net increase of $1.0 billion in FHLB and other advances, and $148 million net increase in subordinated debt, offset partially by $25 million in dividends paid. Ratio of Loans to Deposits.
The following tables set forth information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net interest margin for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31: ​ ​ 2022 2021 ​ ​ Average ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ Average ​ (dollars in thousands) ​ Balances Interest Yield /Rate Balances Interest Yield /Rate Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 9,139,349 ​ $ 370,078 4.05 % $ 5,846,315 ​ $ 224,823 3.85 % Securities AFS ​ 413,220 ​ 11,183 2.71 % 806,456 ​ 20,435 2.53 % Securities HTM ​ ​ 760,489 ​ ​ 15,228 ​ 2.00 ​ ​ — ​ ​ — ​ — ​ Cash, FHLB stock, and fed funds ​ 625,351 ​ 7,389 1.18 % 756,658 ​ 1,960 0.26 % Total interest-earning assets ​ 10,938,409 ​ 403,878 3.69 % 7,409,429 ​ 247,218 3.34 % Noninterest-earning assets: ​ ​ ​ ​ ​ Nonperforming assets ​ 10,609 ​ ​ ​ ​ 17,338 ​ ​ ​ ​ Other ​ 459,072 ​ ​ ​ ​ 220,367 ​ ​ ​ ​ Total assets ​ $ 11,408,090 ​ ​ ​ ​ $ 7,647,134 ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Demand deposits ​ $ 2,370,323 ​ 24,273 1.02 % $ 1,010,452 ​ 2,347 0.23 % Money market and savings ​ 2,783,825 ​ 24,565 0.88 % 2,318,619 ​ 8,385 0.36 % Certificates of deposit ​ 814,906 ​ 13,007 1.60 % 710,176 ​ 2,721 0.38 % Total interest-bearing deposits ​ 5,969,054 ​ 61,845 1.04 % 4,039,247 ​ 13,453 0.33 % Borrowings ​ 754,938 ​ 23,343 3.09 % 63,681 ​ 481 0.75 % Total interest-bearing liabilities ​ 6,723,992 ​ 85,188 1.27 % 4,102,928 ​ 13,934 0.34 % Noninterest-bearing liabilities: ​ ​ ​ ​ ​ Demand deposits ​ 3,474,657 ​ ​ ​ ​ 2,725,631 ​ ​ ​ ​ Other liabilities ​ 112,590 ​ ​ ​ ​ 75,112 ​ ​ ​ ​ Total liabilities ​ 10,311,239 ​ ​ ​ ​ 6,903,671 ​ ​ ​ ​ Shareholders’ equity ​ 1,096,851 ​ ​ ​ ​ 743,463 ​ ​ ​ ​ Total liabilities and equity ​ $ 11,408,090 ​ ​ ​ ​ $ 7,647,134 ​ ​ ​ ​ Net Interest Income ​ ​ ​ ​ $ 318,690 ​ ​ ​ ​ $ 233,284 ​ ​ Net Interest Rate Spread ​ ​ ​ ​ ​ 2.42 % ​ ​ ​ ​ 3.00 % Net Interest Margin ​ ​ ​ ​ ​ 2.91 % ​ ​ ​ ​ 3.15 % ​ 42 Table of Contents Net interest income is impacted by the volume (changes in volume multiplied by prior rate), interest rate (changes in rate multiplied by prior volume) and mix of interest-earning assets and interest-bearing liabilities.
Management’s Discussion and Analysis of Financial Condition . ​ The following tables set forth information regarding (i) the total dollar amount of interest income from interest-earning assets and the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearing liabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net interest margin for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 ​ ​ Average ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ Average ​ (dollars in thousands) Balances Interest Yield /Rate Balances Interest Yield /Rate Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans ​ $ 9,139,349 ​ $ 370,078 4.05 % $ 5,846,315 ​ $ 224,823 3.85 % Securities AFS ​ 413,220 ​ 11,183 2.71 % 806,456 ​ 20,435 2.53 % Securities HTM ​ ​ 760,489 ​ ​ 15,228 ​ 2.00 ​ ​ — ​ ​ — ​ — ​ Cash, FHLB stock, and fed funds ​ 625,351 ​ 7,389 1.18 % 756,658 ​ 1,960 0.26 % Total interest-earning assets ​ 10,938,409 ​ 403,878 3.69 % 7,409,429 ​ 247,218 3.34 % Noninterest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonperforming assets ​ 10,609 ​ ​ ​ ​ ​ 17,338 ​ ​ ​ ​ ​ Other ​ 459,072 ​ ​ ​ ​ ​ 220,367 ​ ​ ​ ​ ​ Total assets ​ $ 11,408,090 ​ ​ ​ ​ ​ ​ $ 7,647,134 ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ $ 2,370,323 ​ 24,273 1.02 % $ 1,010,452 ​ 2,347 0.23 % Money market and savings ​ 2,783,825 ​ 24,565 0.88 % 2,318,619 ​ 8,385 0.36 % Certificates of deposit ​ 814,906 ​ 13,007 1.60 % 710,176 ​ 2,721 0.38 % Total interest-bearing deposits ​ 5,969,054 ​ 61,845 1.04 % 4,039,247 ​ 13,453 0.33 % Borrowings ​ 590,934 ​ 16,977 2.87 % 63,681 ​ 481 0.75 % Subordinated debt ​ ​ 164,004 ​ ​ 6,366 ​ 3.88 % ​ — ​ ​ — ​ — % Total interest-bearing liabilities ​ 6,723,992 ​ 85,188 1.27 % 4,102,928 ​ 13,934 0.34 % Noninterest-bearing liabilities: ​ ​ ​ ​ ​ Demand deposits ​ 3,474,657 ​ ​ ​ 2,725,631 ​ ​ ​ Other liabilities ​ 112,590 ​ ​ ​ 75,112 ​ ​ ​ Total liabilities ​ 10,311,239 ​ ​ ​ 6,903,671 ​ ​ ​ Stockholders’ equity ​ 1,096,851 ​ ​ ​ 743,463 ​ ​ ​ Total liabilities and equity ​ $ 11,408,090 ​ ​ ​ ​ $ 7,647,134 ​ ​ ​ ​ Net Interest Income ​ ​ ​ ​ $ 318,690 ​ ​ ​ $ 233,284 ​ Net Interest Rate Spread ​ ​ ​ ​ ​ 2.42 % ​ ​ ​ ​ 3.00 % Net Interest Margin ​ ​ ​ ​ ​ 2.91 % ​ ​ ​ ​ 3.15 % ​ Net interest income is impacted by the volume (changes in volume multiplied by prior rate), interest rate (changes in rate multiplied by prior volume) and mix of interest-earning assets and interest-bearing liabilities.
The primary sources of revenue for Banking are net interest income, fees from its deposits and trust services, gains on sales of loans, certain loan fees, and consulting fees. The primary sources of revenue for Wealth Management are asset management fees assessed on the balance of AUM.
The primary sources of revenue for Banking are net interest income, fees from its deposits and trust services, certain loan fees, and consulting fees. The primary sources of revenue for Wealth Management are asset management fees assessed on the balance of AUM.
The following table provides the amounts of noninterest income for Wealth Management for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2022 2021 Noninterest income ​ $ 30,027 ​ $ 29,917 ​ Noninterest income for Wealth Management was unchanged in 2022 when compared to 2021.
The following table provides the amounts of noninterest income for Wealth Management for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2022 2021 Noninterest income ​ $ 30,027 ​ $ 29,917 ​ Noninterest income for Wealth Management was in line for 2022 when compared to 2021. ​ Noninterest Expense.
If the present value of expected cash flows to be collected is less than the amortized cost basis, a credit loss exists, and an allowance for credit loss is recorded through income as a component of provision for credit loss expense.
If, after considering these factors, the present value of expected cash flows to be collected is less than the amortized cost basis, a credit loss exists, and an allowance for credit loss is recorded through income as a component of provision for credit loss expense.
Occupancy and depreciation expense for Banking increased $11.5 million during 2022 as compared to 2021 primarily due to the TGRF acquisition and increases in higher core processing costs related to higher loan and deposit volumes and services.
Occupancy and depreciation expense for Banking increased $11.5 million during 2022 as compared to 2021 primarily due to the bank acquisition completed in late 2021 and increases in higher core processing costs related to higher loan and deposit volumes and services.
During the year ended December 31, 2022, operating activities provided net cash of $101 million, comprised primarily of our net income of $111 million and $16 million increase in other liabilities, offset partially by a $39 million increase in other assets.
During the year ended December 31, 2022, operating activities provided net cash of $101 million, comprised primarily of net income of $111 million and a $16 million increase in other liabilities, offset partially by a $39 million increase in other assets. Cash Flows Used in Investing Activities.
If either of these criteria regarding intent or requirement to sell is met, the security amortized cost basis is written down to fair value through income. If the criteria is not met, the Company is required to assess whether the decline in fair value has resulted from credit losses or noncredit-related factors.
If either of these criteria regarding intent or requirement to sell is met, the security amortized cost basis is written down to fair value through income. If neither criteria is met, we are required to assess whether the decline in fair value has resulted from credit losses or noncredit-related factors.
Our need for liquidity is affected by our loan activity, net changes in deposit levels and the maturities of our borrowings. The principal sources of our liquidity consist of deposits, loan interest and principal payments and prepayments, investment management and consulting fees, FHLB advances, federal funds purchased, and proceeds from borrowings and sales of FFI common stock.
Our need for liquidity is affected by our loan activity, net changes in deposit levels and the maturities of our borrowings. The principal sources of our liquidity consist of deposits, loan interest and principal payments and prepayments, investment management and consulting fees, proceeds from borrowings, and sales of FFI common stock.
The provision for credit losses for loans is impacted by changes in loan balances as well as changes in estimated loss assumptions and chargeoffs and recoveries.
The provision for credit losses for loans is impacted by changes in loan balances as well as changes in estimated loss assumptions and charge-offs and recoveries.
The provision for credit losses for loans is impacted by changes in loan balances as well as changes in estimated loss assumptions and chargeoffs and recoveries.
The provision for credit losses for loans is impacted by changes in loan balances as well as changes in estimated loss assumptions and charge-offs and recoveries.
The table below indicates, as of December 31, 2022, the gross unrealized losses and fair values of our securities AFS, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities with Unrealized Loss at December 31, 2022 ​ ​ Less than 12 months ​ 12 months or more ​ Total ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized (dollars in thousands) Value Loss Value Loss Value Loss Collateralized mortgage obligations ​ $ 2 ​ $ — ​ $ 8,613 ​ $ (1,250) ​ $ 8,615 ​ $ (1,250) Agency mortgage-backed securities ​ ​ 6,882 ​ ​ (525) ​ ​ 696 ​ ​ (60) ​ ​ 7,578 ​ ​ (585) Municipal bonds ​ ​ 44,971 ​ ​ (3,244) ​ ​ 1,819 ​ ​ (198) ​ ​ 46,790 ​ ​ (3,442) SBA securities ​ ​ 17,237 ​ ​ (137) ​ ​ 121 ​ ​ (1) ​ ​ 17,358 ​ ​ (138) Beneficial interests in FHLMC securitization ​ ​ 4,217 ​ ​ (103) ​ ​ — ​ ​ — ​ ​ 4,217 ​ ​ (103) Corporate bonds ​ ​ 108,056 ​ ​ (6,476) ​ ​ 26,957 ​ ​ (3,535) ​ ​ 135,013 ​ ​ (10,011) U.S.
Treasury ​ 397,942 ​ (534) ​ 848 ​ (51) ​ 398,790 ​ (585) Total temporarily impaired securities ​ $ 414,921 ​ $ (713) ​ $ 181,909 ​ $ (20,364) ​ $ 596,830 ​ $ (21,077) ​ The table below indicates, as of December 31, 2022, the gross unrealized losses and fair values of our securities AFS, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities with Unrealized Loss at December 31, 2022 ​ ​ Less than 12 months ​ 12 months or more ​ Total ​ ​ Fair ​ Unrealized ​ Fair ​ Unrealized ​ Fair ​ Unrealized (dollars in thousands) Value Loss Value Loss Value Loss Collateralized mortgage obligations ​ $ 2 ​ $ — ​ $ 8,613 ​ $ (1,250) ​ $ 8,615 ​ $ (1,250) Agency mortgage-backed securities ​ ​ 6,882 ​ ​ (525) ​ ​ 696 ​ ​ (60) ​ ​ 7,578 ​ ​ (585) Municipal bonds ​ ​ 44,971 ​ ​ (3,244) ​ ​ 1,819 ​ ​ (198) ​ ​ 46,790 ​ ​ (3,442) SBA securities ​ ​ 17,237 ​ ​ (137) ​ ​ 121 ​ ​ (1) ​ ​ 17,358 ​ ​ (138) Beneficial interests in FHLMC securitization ​ ​ 4,217 ​ ​ (103) ​ ​ — ​ ​ — ​ ​ 4,217 ​ ​ (103) Corporate bonds ​ ​ 108,056 ​ ​ (6,476) ​ ​ 26,957 ​ ​ (3,535) ​ ​ 135,013 ​ ​ (10,011) U.S.
Borrowings: At December 31, 2022, our borrowings consisted of $805 million in overnight FHLB advances at FFB, $200 million in federal funds purchased at FFB, $174 million in subordinated notes at the holding company, $171 million of repurchase agreements at FFB, and $20.0 million of borrowings under a holding company line of credit.
At December 31, 2022 our borrowings consisted of $805 million in overnight FHLB advances at the Bank, $200 million in federal funds purchased at the Bank, $171 million in repurchase agreements at the Bank, and $20 million of borrowings under a holding company line of credit.
Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest sensitivities to vary.
Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest 65 Table of Contents sensitivities to vary.
Changes in cash and cash equivalents are primarily affected by the funding of loans, investments in securities, and changes in our sources of funding: deposits, FHLB advances and FFI borrowings.
Changes in cash and cash equivalents are primarily affected by the funding of loans, investments in securities, and changes in our sources of funding including deposits and borrowings.
If the assessment indicates that a credit loss does not exist, the Company records the decline in fair value through other comprehensive income, net of related income tax effects. The Company has made the election to exclude accrued interest receivable on securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets.
If the assessment indicates that a credit loss does not exist, we record the decline in fair value through other comprehensive income, net of related income tax effects. We have elected to exclude accrued interest receivable on securities from the estimate of credit losses and report accrued interest separately on the consolidated balance sheets.
For 2022 and 2021, we recorded provisions for credit losses of $0.5 million and $3.9 million, respectively. The provision for credit losses in 2022 was due to growth in loan balances. The provision for credit losses in 2021 was due to the TGRF acquisition and growth in loan balances.
For 2022 and 2021, we recorded provisions for credit losses of $0.5 million and $3.9 million, respectively. The provision for credit losses in 2022 was due to growth in loan balances. The provision for credit losses in 2021 was due to a bank acquisition 50 Table of Contents in late 2021 and growth in loan balances.
As of December 31, 2022, FFI had $42.8 million of available capital and, therefore, has the ability and financial resources to contribute additional capital to FFB, if needed.
As of December 31, 2023, FFI had $13.5 million of available capital and, therefore, has the ability and financial resources to contribute additional capital to FFB, if needed.
Allowance for Credit Losses - Securities Available-for-Sale (“AFS”) . For securities AFS in an unrealized loss position, the Company first evaluates whether it intends to sell, or whether it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis.
For securities available-for-sale (“AFS”) in an unrealized loss position, we first evaluate whether we intend to sell, or whether it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis.
As of December 31, 2022, the amount of capital at FFB in excess of amounts required to be well capitalized for purposes of the prompt corrective action regulations was $414 million for the CET1 capital ratio, $447 million for the Tier 1 Leverage Ratio, $262 million for the Tier 1 risk-based capital ratio and $102 million for the Total risk-based capital ratio.
As of December 31, 2023, the amount of capital at FFB in excess of amounts required to be well-capitalized for purposes of the prompt corrective action regulations was $474 million for the CET1 risk-based capital ratio, $432 million for the Tier 1 Leverage Ratio, $336 million for the Tier 1 risk-based capital ratio and $186 million for the Total risk-based capital ratio.
The following table presents the balance in the ACL and the recorded investment in loans by impairment method at December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Evaluated for Impairment ​ ​ ​ ​ (dollars in thousands) Individually Collectively Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ Real estate loans: ​ ​ ​ Residential properties ​ $ 87 ​ $ 8,219 ​ $ 8,306 ​ Commercial properties ​ 1,834 ​ 6,880 ​ 8,714 ​ Land and construction ​ — ​ 164 ​ 164 ​ Commercial and industrial loans ​ 3,122 ​ 13,399 ​ 16,521 ​ Consumer loans ​ — ​ 26 ​ 26 ​ Total ​ $ 5,043 ​ $ 28,688 ​ $ 33,731 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 3,479 ​ $ 6,373,745 ​ $ 6,377,224 ​ Commercial properties ​ 34,278 ​ 1,167,785 ​ 1,202,063 ​ Land and construction ​ — ​ 157,630 ​ 157,630 ​ Commercial and industrial loans ​ 9,397 ​ 2,975,361 ​ 2,984,758 ​ Consumer loans ​ — ​ 4,518 ​ 4,518 ​ Total ​ $ 47,154 ​ $ 10,679,039 ​ $ 10,726,193 ​ 2021: ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 111 ​ $ 2,526 ​ $ 2,637 ​ Commercial properties ​ 7,967 ​ 9,082 ​ 17,049 ​ Land and construction ​ 52 ​ 1,943 ​ 1,995 ​ Commercial and industrial loans ​ 2,386 ​ 9,606 ​ 11,992 ​ 58 Table of Contents Consumer loans ​ — ​ 103 ​ 103 ​ Total ​ $ 10,516 ​ $ 23,260 ​ $ 33,776 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 9,593 ​ $ 3,822,902 ​ $ 3,832,495 ​ Commercial properties ​ 41,313 ​ 1,268,262 ​ 1,309,575 ​ Land and construction ​ 694 ​ 155,232 ​ 155,926 ​ Commercial and industrial loans ​ 9,963 ​ 1,587,902 ​ 1,597,865 ​ Consumer loans ​ — ​ 10,867 ​ 10,867 ​ Total ​ $ 61,563 ​ $ 6,845,165 ​ $ 6,906,728 ​ 2020: ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 1,059 ​ $ 4,056 ​ $ 5,115 ​ Commercial properties ​ 374 ​ 8,337 ​ 8,711 ​ Land and construction ​ — ​ 892 ​ 892 ​ Commercial and industrial loans ​ 956 ​ 8,293 ​ 9,249 ​ Consumer loans ​ — ​ 233 ​ 233 ​ Total ​ $ 2,389 ​ $ 21,811 ​ $ 24,200 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 12,414 ​ $ 3,041,142 ​ $ 3,053,556 ​ Commercial properties ​ 17,304 ​ 730,503 ​ 747,807 ​ Land and construction ​ — ​ 55,832 ​ 55,832 ​ Commercial and industrial loans ​ 6,472 ​ 912,204 ​ 918,676 ​ Consumer loans ​ — ​ 18,888 ​ 18,888 ​ Total ​ $ 36,190 ​ $ 4,758,569 ​ $ 4,794,759 ​ 2019: ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ — ​ $ 8,423 ​ $ 8,423 ​ Commercial properties ​ 107 ​ 4,059 ​ 4,166 ​ Land and construction ​ — ​ 573 ​ 573 ​ Commercial and industrial loans ​ 763 ​ 6,685 ​ 7,448 ​ Consumer loans ​ — ​ 190 ​ 190 ​ Total ​ $ 870 ​ $ 19,930 ​ $ 20,800 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 2,897 ​ $ 3,012,203 ​ $ 3,015,100 ​ Commercial properties ​ 6,689 ​ 827,353 ​ 834,042 ​ Land and construction ​ — ​ 70,257 ​ 70,257 ​ Commercial and industrial loans ​ 9,316 ​ 590,897 ​ 600,213 ​ Consumer loans ​ — ​ 16,273 ​ 16,273 ​ Total ​ $ 18,902 ​ $ 4,516,983 ​ $ 4,535,885 ​ 2018: ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ — ​ $ 9,216 ​ $ 9,216 ​ Commercial properties ​ 126 ​ 4,421 ​ 4,547 ​ Land and construction ​ — ​ 391 ​ 391 ​ Commercial and industrial loans ​ 290 ​ 4,338 ​ 4,628 ​ Consumer loans ​ — ​ 218 ​ 218 ​ Total ​ $ 416 ​ $ 18,584 ​ $ 19,000 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 651 ​ $ 2,861,112 ​ $ 2,861,763 ​ Commercial properties ​ 2,871 ​ 866,298 ​ 869,169 ​ Land and construction ​ 697 ​ 79,490 ​ 80,187 ​ Commercial and industrial loans ​ 8,559 ​ 441,246 ​ 449,805 ​ Consumer loans ​ ​ — ​ 22,699 ​ 22,699 ​ Total ​ $ 12,778 ​ $ 4,270,845 ​ $ 4,283,623 ​ ​ 59 Table of Contents Liquidity Liquidity management focuses on our ability to generate, on a timely and cost-effective basis, cash sufficient to meet the funding needs of current loan demand, deposit withdrawals, principal and interest payments with respect to outstanding borrowings as well as to pay operating expenses.
The following table presents the balance in the ACL and the recorded investment in loans by impairment method at December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Evaluated for Impairment ​ ​ ​ ​ (dollars in thousands) Individually Collectively Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ Real estate loans: ​ ​ ​ Residential properties ​ $ 56 ​ $ 9,865 ​ $ 9,921 ​ Commercial properties ​ 245 ​ 3,903 ​ 4,148 ​ Land and construction ​ — ​ 332 ​ 332 ​ Commercial and industrial loans ​ 1,639 ​ 13,157 ​ 14,796 ​ Consumer loans ​ — ​ 8 ​ 8 ​ Total ​ $ 1,940 ​ $ 27,265 ​ $ 29,205 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 986 ​ $ 6,196,558 ​ $ 6,197,544 ​ Commercial properties ​ 8,414 ​ 978,358 ​ 986,772 ​ Land and construction ​ — ​ 136,827 ​ 136,827 ​ Commercial and industrial loans ​ 9,287 ​ 2,845,975 ​ 2,855,262 ​ Consumer loans ​ — ​ 1,397 ​ 1,397 ​ Total ​ $ 18,687 ​ $ 10,159,115 ​ $ 10,177,802 ​ 2022: ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 87 ​ $ 8,219 ​ $ 8,306 ​ Commercial properties ​ 1,834 ​ 6,880 ​ 8,714 ​ Land and construction ​ — ​ 164 ​ 164 ​ Commercial and industrial loans ​ 3,122 ​ 13,399 ​ 16,521 ​ Consumer loans ​ — ​ 26 ​ 26 ​ Total ​ $ 5,043 ​ $ 28,688 ​ $ 33,731 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 3,479 ​ $ 6,373,745 ​ $ 6,377,224 ​ Commercial properties ​ 34,278 ​ 1,167,785 ​ 1,202,063 ​ Land and construction ​ — ​ 157,630 ​ 157,630 ​ Commercial and industrial loans ​ 9,397 ​ 2,975,361 ​ 2,984,758 ​ Consumer loans ​ — ​ 4,518 ​ 4,518 ​ Total ​ $ 47,154 ​ $ 10,679,039 ​ $ 10,726,193 ​ 2021: ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 111 ​ $ 2,526 ​ $ 2,637 ​ Commercial properties ​ 7,967 ​ 9,082 ​ 17,049 ​ Land and construction ​ 52 ​ 1,943 ​ 1,995 ​ Commercial and industrial loans ​ 2,386 ​ 9,606 ​ 11,992 ​ Consumer loans ​ — ​ 103 ​ 103 ​ Total ​ $ 10,516 ​ $ 23,260 ​ $ 33,776 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 9,593 ​ $ 3,822,902 ​ $ 3,832,495 ​ Commercial properties ​ 41,313 ​ 1,268,262 ​ 1,309,575 ​ Land and construction ​ 694 ​ 155,232 ​ 155,926 ​ 62 Table of Contents Commercial and industrial loans ​ 9,963 ​ 1,587,902 ​ 1,597,865 ​ Consumer loans ​ — ​ 10,867 ​ 10,867 ​ Total ​ $ 61,563 ​ $ 6,845,165 ​ $ 6,906,728 ​ 2020: ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 1,059 ​ $ 4,056 ​ $ 5,115 ​ Commercial properties ​ 374 ​ 8,337 ​ 8,711 ​ Land and construction ​ — ​ 892 ​ 892 ​ Commercial and industrial loans ​ 956 ​ 8,293 ​ 9,249 ​ Consumer loans ​ — ​ 233 ​ 233 ​ Total ​ $ 2,389 ​ $ 21,811 ​ $ 24,200 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 12,414 ​ $ 3,041,142 ​ $ 3,053,556 ​ Commercial properties ​ 17,304 ​ 730,503 ​ 747,807 ​ Land and construction ​ — ​ 55,832 ​ 55,832 ​ Commercial and industrial loans ​ 6,472 ​ 912,204 ​ 918,676 ​ Consumer loans ​ — ​ 18,888 ​ 18,888 ​ Total ​ $ 36,190 ​ $ 4,758,569 ​ $ 4,794,759 ​ 2019: ​ ​ ​ ​ Allowance for credit losses: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ — ​ $ 8,423 ​ $ 8,423 ​ Commercial properties ​ 107 ​ 4,059 ​ 4,166 ​ Land and construction ​ — ​ 573 ​ 573 ​ Commercial and industrial loans ​ 763 ​ 6,685 ​ 7,448 ​ Consumer loans ​ — ​ 190 ​ 190 ​ Total ​ $ 870 ​ $ 19,930 ​ $ 20,800 ​ Loans: ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ Residential properties ​ $ 2,897 ​ $ 3,012,203 ​ $ 3,015,100 ​ Commercial properties ​ 6,689 ​ 827,353 ​ 834,042 ​ Land and construction ​ — ​ 70,257 ​ 70,257 ​ Commercial and industrial loans ​ 9,316 ​ 590,897 ​ 600,213 ​ Consumer loans ​ ​ — ​ 16,273 ​ 16,273 ​ Total ​ $ 18,902 ​ $ 4,516,983 ​ $ 4,535,885 ​ ​ Liquidity Liquidity management focuses on our ability to generate, on a timely and cost-effective basis, cash sufficient to meet the funding needs of current loan demand, deposit withdrawals, principal and interest payments with respect to outstanding borrowings and to pay operating expenses.
On January 26, 2023, the Board of Directors declared a quarterly cash dividend of $0.11 per common share to be paid on February 16, 2023, to stockholders of record as of the close of business on February 6, 2023. It is our current intention to continue to pay quarterly dividends.
On January 25, 2024, the Board of Directors declared a quarterly cash dividend of $0.01 per common share to be paid on February 15, 2024, to stockholders of record as of the close of business on February 5, 2024. It is our current intention to continue to pay quarterly dividends.
The following tables show key operating results for each of our business segments for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Wealth ​ ​ ​ ​ (dollars in thousands) Banking Management Other Total 2022: ​ ​ ​ ​ Interest income ​ $ 403,878 ​ $ — ​ $ — ​ $ 403,878 Interest expense ​ 78,766 ​ — ​ 6,422 ​ 85,188 Net interest income ​ 325,112 ​ — ​ (6,422) ​ 318,690 Provision for credit losses ​ 532 ​ — ​ — ​ 532 Noninterest income ​ 26,148 ​ 30,027 ​ (7,941) ​ 48,234 Noninterest expense ​ 188,619 ​ 24,371 ​ 3,599 ​ 216,589 Income (loss) before taxes on income ​ $ 162,109 ​ $ 5,656 ​ $ (17,962) ​ $ 149,803 2021: ​ ​ ​ ​ Interest income ​ $ 247,218 ​ $ — ​ $ — ​ $ 247,218 Interest expense ​ 13,688 ​ — ​ 246 ​ 13,934 Net interest income ​ 233,530 ​ — ​ (246) ​ 233,284 Provision for credit losses ​ 3,866 ​ — ​ — ​ 3,866 Noninterest income ​ 41,068 ​ 29,917 ​ (532) ​ 70,453 Noninterest expense ​ 121,375 ​ 23,349 ​ 3,362 ​ 148,086 Income (loss) before taxes on income ​ $ 149,357 ​ $ 6,568 ​ $ (4,140) ​ $ 151,785 ​ General.
The following tables show key operating results for each of our business segments for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Wealth ​ ​ ​ ​ (dollars in thousands) Banking Management Other Total 2022: ​ ​ ​ ​ Interest income ​ $ 403,878 ​ $ — ​ $ — ​ $ 403,878 Interest expense ​ 78,766 ​ — ​ 6,422 ​ 85,188 Net interest income ​ 325,112 ​ — ​ (6,422) ​ 318,690 Provision for credit losses ​ 532 ​ — ​ — ​ 532 Noninterest income ​ 26,148 ​ 30,027 ​ (7,941) ​ 48,234 Noninterest expense ​ 188,619 ​ 24,371 ​ 3,599 ​ 216,589 Income (loss) before income taxes ​ ​ 162,109 ​ ​ 5,656 ​ ​ (17,962) ​ ​ 149,803 Income tax expense (benefit) ​ ​ 42,698 ​ ​ 1,660 ​ ​ (5,067) ​ ​ 39,291 Net income (loss) ​ $ 119,411 ​ $ 3,996 ​ $ (12,895) ​ $ 110,512 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021: ​ ​ ​ ​ Interest income ​ $ 247,218 ​ $ — ​ $ — ​ $ 247,218 Interest expense ​ 13,688 ​ — ​ 246 ​ 13,934 Net interest income ​ 233,530 ​ — ​ (246) ​ 233,284 Provision for credit losses ​ 3,866 ​ — ​ — ​ 3,866 Noninterest income ​ 41,068 ​ 29,917 ​ (532) ​ 70,453 Noninterest expense ​ 121,375 ​ 23,349 ​ 3,362 ​ 148,086 Income (loss) before income taxes ​ ​ 149,357 ​ ​ 6,568 ​ ​ (4,140) ​ ​ 151,785 Income tax expense (benefit) ​ ​ 42,144 ​ ​ 1,231 ​ ​ (1,101) ​ ​ 42,274 Net income (loss) ​ $ 107,213 ​ $ 5,337 ​ $ (3,039) ​ $ 109,511 ​ Combined net income for 2022 was $110.5 million, compared to net income of $109.5 million for 2021.
The increase in deposits included increases in wholesale, specialty, digital bank, and corporate deposits of $1.3 billion, $1.1 billion, $0.4 billion, and $0.2 billion respectively, offset by a decrease in retail branch deposits of $1.4 billion.
The increase in deposits included increases in wholesale, digital bank, and corporate deposits of $2.1 billion, $0.1 billion, and $0.5 billion respectively, offset by decreases in retail branch and specialty deposits of $0.9 billion and $1.5 billion, respectively.
For additional information regarding these Capital Rules, see Item 1 “Business —Supervision and Regulation—Capital Requirements Applicable to Banks and Bank Holding Companies” in Part I above.
For additional information regarding these Capital Rules, see Item 1 “ Business - Capital Requirements Applicable to Banks and Bank Holding Companies ” in Part I above.
Because we had a $5.1 billion net negative position at December 31, 2022 for the repricing period of less than one year, the result of this analysis indicates that we would be adversely impacted by a short term increase in interest rates and would benefit from a short term decrease in interest rates.
Because we had a $42 million net positive position at December 31, 2023 for the repricing period of less than one year, the result of this analysis indicates that we would benefit modestly by a short term increase in interest rates and would be similarly negatively impacted from a short term decrease in interest rates.
Noninterest income for Banking includes fees charged to clients for trust services and deposit services, consulting fees, prepayment and late fees charged on loans, gain on sale of loans, gain on sale leaseback, and gains and losses from capital market activities.
Noninterest income for Banking includes fees charged to clients for trust services and deposit services, consulting fees, prepayment and late fees charged on loans, gain on sale leaseback, and gain on sale of securities available-for-sale.
The average rate on borrowings increased from 0.75% in 2021 to 3.09% in 2022, an increase of 234 basis points. The average balance of borrowings outstanding increased $691.3 million from $63.7 million in 2021 to $754.9 million in 2022.
The average rate on borrowings increased from 0.75% in 2021 to 2.87% in 2022, an increase of 212 basis points. The average balance of borrowings outstanding increased from $63.7 million in 2021 to $590.9 million in 2022.
At each successive lower capital category, a depository institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency. 63 Table of Contents The following table sets forth the capital and capital ratios of FFI (on a consolidated basis) and FFB (on a stand-alone basis) as of the respective dates and as compared to the respective regulatory requirements applicable to them: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ To Be Well Capitalized ​ ​ ​ ​ ​ ​ ​ For Capital ​ Under Prompt Corrective ​ ​ ​ Actual ​ Adequacy Purposes ​ Action Provisions ​ (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio FFI ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ CET1 capital ratio ​ $ 931,125 9.18 % $ 456,603 4.50 % ​ ​ Tier 1 leverage ratio ​ 931,125 7.44 % 500,327 4.00 % ​ ​ Tier 1 risk-based capital ratio ​ 931,125 9.18 % 608,804 6.00 % ​ ​ Total risk-based capital ratio ​ 1,145,765 11.29 % 811,739 8.00 % ​ ​ December 31, 2021 ​ ​ ​ ​ CET1 capital ratio ​ $ 846,515 11.34 % $ 335,801 4.50 % ​ ​ Tier 1 leverage ratio ​ 846,515 8.43 % 401,645 4.00 % ​ ​ Tier 1 risk-based capital ratio ​ 846,515 11.34 % 447,735 6.00 % ​ ​ Total risk-based capital ratio ​ 887,821 11.90 % 596,980 8.00 % ​ ​ December 31, 2020 ​ ​ ​ ​ CET1 capital ratio ​ $ 589,276 11.55 % $ 229,400 4.50 % ​ ​ Tier 1 leverage ratio ​ 589,276 8.93 % 263,986 4.00 % ​ ​ Tier 1 risk-based capital ratio ​ 589,276 11.55 % 305,987 6.00 % ​ ​ Total risk-based capital ratio ​ 620,700 12.17 % 407,982 8.00 % ​ ​ FFB ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ CET1 capital ratio ​ $ 1,070,648 10.60 % $ 454,655 4.50 % $ 656,724 6.50 % Tier 1 leverage ratio ​ 1,070,648 8.59 % 498,725 4.00 % 623,406 5.00 % Tier 1 risk-based capital ratio ​ 1,070,648 10.60 % 606,207 6.00 % 808,276 8.00 % Total risk-based capital ratio ​ 1,111,952 11.01 % 808,276 8.00 % 1,010,345 10.00 % December 31, 2021 ​ ​ ​ ​ CET1 capital ratio ​ $ 854,075 11.49 % $ 334,608 4.50 % $ 483,323 6.50 % Tier 1 leverage ratio ​ 854,075 8.53 % 400,616 4.00 % 500,770 5.00 % Tier 1 risk-based capital ratio ​ 854,075 11.49 % 446,144 6.00 % 594,859 8.00 % Total risk-based capital ratio ​ 895,381 12.04 % 594,859 8.00 % 743,574 10.00 % December 31, 2020 ​ ​ ​ ​ CET1 capital ratio ​ $ 591,171 11.63 % $ 228,703 4.50 % $ 330,349 6.50 % Tier 1 leverage ratio ​ 591,171 8.98 % 263,330 4.00 % 329,162 5.00 % Tier 1 risk-based capital ratio ​ 591,171 11.63 % 304,938 6.00 % 406,583 8.00 % Total risk-based capital ratio ​ 622,595 12.25 % 406,583 8.00 % 508,229 10.00 % ​ As of each of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and FFB’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations.
At each successive lower capital category, a depository institution is subject to greater operating restrictions and increased regulatory supervision by its federal bank regulatory agency. 67 Table of Contents The following table sets forth the capital and capital ratios of FFI (on a consolidated basis) and FFB (on a stand-alone basis) as of the respective dates and as compared to the respective regulatory requirements applicable to them: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ To Be Well-Capitalized ​ ​ ​ ​ ​ ​ ​ For Capital ​ Under Prompt Corrective ​ ​ ​ Actual ​ Adequacy Purposes ​ Action Provisions ​ (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio FFI ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ CET1 risk-based capital ratio ​ $ 931,272 10.02 % $ 418,142 4.50 % ​ ​ Tier 1 leverage ratio ​ 931,272 7.20 % 517,033 4.00 % ​ ​ Tier 1 risk-based capital ratio ​ 931,272 10.02 % 557,523 6.00 % ​ ​ Total risk-based capital ratio ​ 1,140,312 12.27 % 743,363 8.00 % ​ ​ December 31, 2022 ​ ​ ​ ​ CET1 risk-based capital ratio ​ $ 931,125 9.18 % $ 456,603 4.50 % ​ ​ Tier 1 leverage ratio ​ 931,125 7.44 % 500,327 4.00 % ​ ​ Tier 1 risk-based capital ratio ​ 931,125 9.18 % 608,804 6.00 % ​ ​ Total risk-based capital ratio ​ 1,145,765 11.29 % 811,739 8.00 % ​ ​ December 31, 2021 ​ ​ ​ ​ CET1 risk-based capital ratio ​ $ 846,515 11.34 % $ 335,801 4.50 % ​ ​ Tier 1 leverage ratio ​ 846,515 8.43 % 401,645 4.00 % ​ ​ Tier 1 risk-based capital ratio ​ 846,515 11.34 % 447,735 6.00 % ​ ​ Total risk-based capital ratio ​ 887,821 11.90 % 596,980 8.00 % ​ ​ FFB ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ CET1 risk-based capital ratio ​ $ 1,076,337 11.62 % $ 416,684 4.50 % $ 601,877 6.50 % Tier 1 leverage ratio ​ 1,076,337 8.35 % 515,753 4.00 % 644,691 5.00 % Tier 1 risk-based capital ratio ​ 1,076,337 11.62 % 555,579 6.00 % 740,772 8.00 % Total risk-based capital ratio ​ 1,111,979 12.01 % 740,772 8.00 % 925,965 10.00 % December 31, 2022 ​ ​ ​ ​ CET1 risk-based capital ratio ​ $ 1,070,648 10.60 % $ 454,655 4.50 % $ 656,724 6.50 % Tier 1 leverage ratio ​ 1,070,648 8.59 % 498,725 4.00 % 623,400 5.00 % Tier 1 risk-based capital ratio ​ 1,070,648 10.60 % 606,207 6.00 % 808,276 8.00 % Total risk-based capital ratio ​ 1,111,952 11.01 % 808,276 8.00 % 1,010,345 10.00 % December 31, 2021 ​ ​ ​ ​ CET1 risk-based capital ratio ​ $ 854,075 11.49 % $ 334,608 4.50 % $ 483,323 6.50 % Tier 1 leverage ratio ​ 854,075 8.53 % 400,616 4.00 % 500,770 5.00 % Tier 1 risk-based capital ratio ​ 854,075 11.49 % 446,144 6.00 % 594,859 8.00 % Total risk-based capital ratio ​ 895,381 12.04 % 594,859 8.00 % 743,574 10.00 % ​ As of each of the dates set forth in the above table, the Company exceeded the minimum required capital ratios applicable to it and FFB’s capital ratios exceeded the minimums necessary to qualify as a well-capitalized depository institution under the prompt corrective action regulations.
Average monthly Banking FTE increased to 647.2 in 2022, from 472.5 in 2021, due to increased staffing related to additional personnel from the TGRF acquisition and to support the growth in loans and deposits.
Average 51 Table of Contents monthly Banking FTEs increased to 647.2 in 2022, from 472.5 in 2021, due to increased staffing related to additional personnel from a bank acquisition completed in late 2021, and to support the growth in loans and deposits.
The $1.5 million increase in trust fees was due to an increase in clients. ​ Noninterest income for Wealth Management includes fees charged to high net-worth clients for managing their assets and for providing financial planning consulting services.
Noninterest income for Wealth Management includes fees charged to high net-worth clients for managing their assets and for providing financial planning consulting services.
The following table provides a breakdown of the changes in net interest income due to volume and rate changes between 2022 as compared to 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (Decrease) due to Net Increase (dollars in thousands) ​ Volume Rate (Decrease) Interest earned on: ​ ​ ​ ​ Loans ​ $ 132,767 ​ $ 12,488 ​ $ 145,255 Securities AFS ​ (10,561) ​ 1,309 ​ (9,252) Securities HTM ​ ​ 7,614 ​ ​ 7,614 ​ ​ 15,228 Cash, FHLB stock, and fed funds ​ (396) ​ 5,825 ​ 5,429 Total interest-earning assets ​ 129,424 ​ 27,236 ​ 156,660 Interest paid on: ​ ​ ​ Demand deposits ​ 6,207 ​ 15,719 ​ 21,926 Money market and savings ​ 1,977 ​ 14,203 ​ 16,180 Certificates of deposit ​ 458 ​ 9,828 ​ 10,286 Borrowings ​ 17,759 ​ 5,106 ​ 22,865 Total interest-bearing liabilities ​ 26,401 ​ 44,856 ​ 71,257 Net interest income ​ $ 103,023 ​ $ (17,620) ​ $ 85,403 ​ On a consolidated basis, the net interest margin (“NIM”) decreased 24 basis points to 2.91% in 2022 from 3.15% in 2021, as increases in the yield on interest bearing deposits exceeded the yield earned on interest earning assets.
The following table 49 Table of Contents provides a breakdown of the changes in net interest income due to volume and rate changes between 2022 as compared to 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (Decrease) due to Net Increase (dollars in thousands) Volume Rate (Decrease) Interest earned on: ​ ​ ​ Loans ​ $ 132,767 ​ $ 12,488 ​ $ 145,255 Securities AFS ​ (10,561) ​ 1,309 ​ (9,252) Securities HTM ​ ​ 7,614 ​ ​ 7,614 ​ ​ 15,228 Cash, FHLB stock, and fed funds ​ (396) ​ 5,825 ​ 5,429 Total interest-earning assets ​ 129,424 ​ 27,236 ​ 156,660 Interest paid on: ​ ​ ​ Demand deposits ​ 6,207 ​ 15,719 ​ 21,926 Money market and savings ​ 1,977 ​ 14,203 ​ 16,180 Certificates of deposit ​ 458 ​ 9,828 ​ 10,286 Borrowings ​ 12,296 ​ 4,203 ​ 16,499 Subordinated debt ​ ​ 3,183 ​ ​ 3,183 ​ ​ 6,366 Total interest-bearing liabilities ​ 24,121 ​ 47,136 ​ 71,257 Net interest income ​ $ 105,303 ​ $ (19,900) ​ $ 85,403 ​ Net interest income was $318.7 million for the year ended December 31, 2022, compared to $233.3 million for 2021.
Unrealized losses on agency notes and agency mortgage-backed securities have not been recognized into income because the issuer bonds are of high credit quality, management does not intend to sell and it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates.
Treasury ​ 376 ​ (23) ​ 451 ​ (48) ​ 827 ​ (71) Total temporarily impaired securities ​ $ 181,741 ​ $ (10,508) ​ $ 38,657 ​ $ (5,092) ​ $ 220,398 ​ $ (15,600) ​ Unrealized losses on agency notes and agency mortgage-backed securities have not been recognized into income because the issuers of the bonds are of high credit quality, management does not intend to sell and it is more likely than not that management would not be required to sell the securities prior to their anticipated recovery, and the declines in fair value are largely due to changes in interest rates.
In response to actual or anticipated changes in interest rates, we have various alternatives for managing and reducing FFB’s exposure to interest rate risk, such as entering into hedges and obtaining long-term fixed rate FHLB advances.
In response to actual or anticipated changes in interest rates, we have various alternatives for managing and reducing the Bank’s exposure to interest rate risk, such as entering into hedges and obtaining long-term fixed-rate FHLB advances. We believe our IRR management policy limits are consistent with prevailing practice in the regional banking industry.
The following table summarizes the activity in our ACL related to loans for the year ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ Adoption of ​ Provision for ​ on Acquired ​ ​ ​ ​ ​ ​ ​ Ending (dollars in thousands) Balance ​ ASC 326 Credit Losses ​ PCD Loans Chargeoffs Recoveries Balance 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 2,637 ​ $ — ​ $ 5,674 ​ $ — ​ $ (5) ​ $ — ​ $ 8,306 Commercial properties ​ 17,049 ​ — ​ (8,335) ​ — ​ — ​ — ​ 8,714 Land and construction ​ 1,995 ​ — ​ (1,831) ​ — ​ — ​ — ​ 164 Commercial and industrial loans ​ 11,992 ​ — ​ 4,804 ​ — ​ (711) ​ 436 ​ 16,521 Consumer loans ​ 103 ​ — ​ (73) ​ — ​ (4) ​ — ​ 26 Total ​ $ 33,776 ​ $ — ​ $ 239 ​ $ — ​ $ (720) ​ $ 436 ​ $ 33,731 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 5,115 ​ $ — ​ $ (1,453) ​ $ 93 ​ $ (1,118) ​ $ — ​ $ 2,637 Commercial properties ​ 8,711 ​ — ​ 774 ​ 7,564 ​ — ​ — ​ 17,049 Land and construction ​ 892 ​ — ​ 1,051 ​ 52 ​ — ​ — ​ 1,995 Commercial and industrial loans ​ 9,249 ​ — ​ 614 ​ 1,836 ​ (706) ​ 999 ​ 11,992 Consumer loans ​ 233 ​ — ​ (130) ​ — ​ — ​ — ​ 103 Total ​ $ 24,200 ​ $ — ​ $ 856 ​ $ 9,545 ​ $ (1,824) ​ $ 999 ​ $ 33,776 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 8,423 ​ $ 363 ​ $ (3,671) ​ $ — ​ $ — ​ $ — ​ $ 5,115 Commercial properties ​ 4,166 ​ 3,760 ​ 785 ​ — ​ — ​ — ​ 8,711 Land and construction ​ 573 ​ 92 ​ 227 ​ — ​ — ​ — ​ 892 Commercial and industrial loans ​ 7,448 ​ — ​ 2,642 ​ — ​ (1,844) ​ 1,003 ​ 9,249 Consumer loans ​ 190 ​ — ​ 43 ​ — ​ — ​ — ​ 233 Total ​ $ 20,800 ​ $ 4,215 ​ $ 26 ​ $ — ​ $ (1,844) ​ $ 1,003 ​ $ 24,200 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 9,216 ​ $ — ​ $ (793) ​ $ — ​ $ — ​ $ — ​ $ 8,423 Commercial properties ​ 4,547 ​ — ​ (381) ​ — ​ — ​ — ​ 4,166 Land and construction ​ 391 ​ — ​ 182 ​ — ​ — ​ — ​ 573 Commercial and industrial loans ​ 4,628 ​ — ​ 3,653 ​ — ​ (2,687) ​ 1,854 ​ 7,448 Consumer loans ​ 218 ​ ​ (24) ​ — ​ (5) ​ 1 ​ 190 Total ​ $ 19,000 ​ $ — ​ $ 2,637 ​ $ — ​ $ (2,692) ​ $ 1,855 ​ $ 20,800 2018: ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 9,715 ​ $ — ​ $ (499) ​ $ — ​ $ — ​ $ — ​ $ 9,216 Commercial properties ​ 4,399 ​ — ​ 359 ​ — ​ (211) ​ — ​ 4,547 Land and construction ​ 395 ​ — ​ (4) ​ — ​ — ​ — ​ 391 Commercial and industrial loans ​ 3,624 ​ — ​ 4,413 ​ — ​ (3,978) ​ 569 ​ 4,628 Consumer loans ​ 267 ​ — ​ (49) ​ — ​ — ​ — ​ 218 Total ​ $ 18,400 ​ $ — ​ $ 4,220 ​ $ — ​ $ (4,189) ​ $ 569 ​ $ 19,000 ​ 57 Table of Contents Excluding the loans acquired in an acquisition and any related allocated ACL for loans, our ACL related to loans represented 0.31% and 0.49% of total loans outstanding as of December 31, 2022, and December 31, 2021, respectively.
The following table summarizes the activity in our ACL related to loans for the year ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision ​ Allowance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ Adoption of ​ (Reversal) for ​ on Acquired ​ ​ ​ ​ ​ ​ ​ Ending (dollars in thousands) Balance ​ ASC 326 Credit Losses ​ PCD Loans Charge-offs Recoveries Balance 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 8,306 ​ $ — ​ $ 1,615 ​ $ — ​ $ — ​ $ — ​ $ 9,921 Commercial properties ​ 8,714 ​ — ​ (4,317) ​ — ​ (249) ​ — ​ 4,148 Land and construction ​ 164 ​ — ​ 168 ​ — ​ — ​ — ​ 332 Commercial and industrial loans ​ 16,521 ​ — ​ 1,171 ​ — ​ (4,998) ​ 2,102 ​ 14,796 Consumer loans ​ 26 ​ — ​ (18) ​ — ​ (2) ​ 2 ​ 8 Total ​ $ 33,731 ​ $ — ​ $ (1,381) ​ $ — ​ $ (5,249) ​ $ 2,104 ​ $ 29,205 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 2,637 ​ $ — ​ $ 5,674 ​ $ — ​ $ (5) ​ $ — ​ $ 8,306 Commercial properties ​ 17,049 ​ — ​ (8,335) ​ — ​ — ​ — ​ 8,714 Land and construction ​ 1,995 ​ — ​ (1,831) ​ — ​ — ​ — ​ 164 Commercial and industrial loans ​ 11,992 ​ — ​ 4,804 ​ — ​ (711) ​ 436 ​ 16,521 Consumer loans ​ 103 ​ — ​ (73) ​ — ​ (4) ​ — ​ 26 Total ​ $ 33,776 ​ $ — ​ $ 239 ​ $ — ​ $ (720) ​ $ 436 ​ $ 33,731 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 5,115 ​ $ — ​ $ (1,453) ​ $ 93 ​ $ (1,118) ​ $ — ​ $ 2,637 Commercial properties ​ 8,711 ​ — ​ 774 ​ 7,564 ​ — ​ — ​ 17,049 Land and construction ​ 892 ​ — ​ 1,051 ​ 52 ​ — ​ — ​ 1,995 Commercial and industrial loans ​ 9,249 ​ — ​ 614 ​ 1,836 ​ (706) ​ 999 ​ 11,992 Consumer loans ​ 233 ​ — ​ (130) ​ — ​ — ​ — ​ 103 Total ​ $ 24,200 ​ $ — ​ $ 856 ​ $ 9,545 ​ $ (1,824) ​ $ 999 ​ $ 33,776 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 8,423 ​ $ 363 ​ $ (3,671) ​ $ — ​ $ — ​ $ — ​ $ 5,115 Commercial properties ​ 4,166 ​ 3,760 ​ 785 ​ — ​ — ​ — ​ 8,711 Land and construction ​ 573 ​ 92 ​ 227 ​ — ​ — ​ — ​ 892 Commercial and industrial loans ​ 7,448 ​ — ​ 2,642 ​ — ​ (1,844) ​ 1,003 ​ 9,249 Consumer loans ​ 190 ​ — ​ 43 ​ — ​ — ​ — ​ 233 Total ​ $ 20,800 ​ $ 4,215 ​ $ 26 ​ $ — ​ $ (1,844) ​ $ 1,003 ​ $ 24,200 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 9,216 ​ $ — ​ $ (793) ​ $ — ​ $ — ​ $ — ​ $ 8,423 Commercial properties ​ 4,547 ​ — ​ (381) ​ — ​ — ​ — ​ 4,166 Land and construction ​ 391 ​ — ​ 182 ​ — ​ — ​ — ​ 573 Commercial and industrial loans ​ 4,628 ​ — ​ 3,653 ​ — ​ (2,687) ​ 1,854 ​ 7,448 Consumer loans ​ 218 ​ — ​ (24) ​ — ​ (5) ​ 1 ​ 190 Total ​ $ 19,000 ​ $ — ​ $ 2,637 ​ $ — ​ $ (2,692) ​ $ 1,855 ​ $ 20,800 ​ On January 1, 2020, we adopted a new accounting standard, commonly referred to as “CECL”, which replaces the “incurred loss” approach with an “expected loss” model over the life of the loan, as further described in Note 1: Summary of Significant Accounting Policies of the notes to the consolidated financial statements.
Net Interest Income Simulations (“NII”). Under this analysis, we use a simulation model to measure and evaluate potential changes in our net interest income resulting from changes in interest rates. This model measures the impact of instantaneous shocks of 100, 200, 300 and 400 basis points on our net interest income over a 12 month forecast period.
The NII simulation is used to measure and evaluate potential changes in our net interest income resulting from changes in interest rates. The model measures the impact over a range of instantaneous shocks in 100 basis points increments to our net interest income over a 12-months forecast period.
The financial position and operating results of the stand-alone holding company, FFI, are included under the caption “Other” in certain of the tables that follow, along with any consolidation elimination entries. Overview and Recent Developments Total assets increased $2.8 billion for the year ended December 31, 2022, to $13.0 billion, representing a 28% increase from the prior year.
The financial position and operating results of the stand-alone holding company, FFI, are included under the caption “Other” in certain of the tables that follow, along with any consolidation elimination entries. Overview and Recent Developments For the year ended December 31, 2023, the Company reported a net loss of $199.1 million, compared to net income of $110.5 million for 2022.
The average balance of FHLB overnight advances increased from $1.0 million in 2021 to $329.8 million in 2022, primarily due to the need to fund the increase in new loan volume. Provision for credit losses.
The increase in borrowings was due to an increase in FHLB advances and the assumption of $165 million in repurchase agreements from a bank acquisition in late 2021. The average balance of FHLB overnight advances increased from $1.0 million in 2021 to $329.8 million in 2022, primarily due to the need to fund the increase in new loan volume.
In addition, the FDIC and the DFPI, as an integral part of their examination processes, periodically review the adequacy of our ACL. These agencies may require us to make additional provisions for loan losses, over and above the provisions that we have already made, the effect of which would be to reduce our income.
These agencies may require us to make additional provisions for credit losses, over and above the provisions that we have already made, the effects of which would be to reduce our income.
The results of the EVE are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted. These could include, but are not limited to, non-parallel yield curve shifts, changes in market interest rate spreads and the actual reaction to changes in interest rate levels of interest-earning assets and interest-bearing liabilities.
These could include, but are not limited to, non-parallel yield curve shifts, changes in market interest rate spreads and the actual reaction to changes in interest rate levels of interest-earning assets and interest-bearing liabilities. It is not uncommon for rates on certain assets or liabilities to lag behind changes in the market rates of interest.
The following tables provide a summary of past due and nonaccrual loans as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Past Due and Still Accruing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 90 Days ​ ​ ​ ​ Total Past Due ​ ​ ​ ​ ​ ​ (dollars in thousands) 30–59 Days 60-89 Days or More Nonaccrual and Nonaccrual Current Total 2022: ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 511 ​ $ 57 ​ $ — ​ $ 2,556 ​ $ 3,124 ​ $ 6,374,100 ​ $ 6,377,224 Commercial properties ​ 15,000 ​ 946 ​ 1,213 ​ 4,547 ​ 21,706 ​ 1,180,357 ​ 1,202,063 Land and construction ​ — ​ — ​ — ​ — ​ — ​ 157,630 ​ 157,630 Commercial and industrial loans ​ 385 ​ 1,495 ​ 982 ​ 3,228 ​ 6,090 ​ 2,978,668 ​ 2,984,758 Consumer loans ​ — ​ 167 ​ — ​ — ​ 167 ​ 4,351 ​ 4,518 Total ​ $ 15,896 ​ $ 2,665 ​ $ 2,195 ​ $ 10,331 ​ $ 31,087 ​ $ 10,695,106 ​ $ 10,726,193 Percentage of total loans ​ 0.15 % 0.02 % 0.02 % 0.10 % 0.29 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021: ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 1,519 ​ $ 310 ​ $ — ​ $ 3,281 ​ $ 5,110 ​ $ 3,827,385 ​ $ 3,832,495 Commercial properties ​ 2,934 ​ — ​ — ​ 1,529 ​ 4,463 ​ 1,305,112 ​ 1,309,575 Land and construction ​ — ​ — ​ — ​ — ​ — ​ 155,926 ​ 155,926 Commercial and industrial loans ​ 303 ​ 260 ​ — ​ 3,520 ​ 4,083 ​ 1,593,782 ​ 1,597,865 Consumer loans ​ — ​ — ​ — ​ — ​ — ​ 10,867 ​ 10,867 Total ​ $ 4,756 ​ $ 570 ​ $ — ​ $ 8,330 ​ $ 13,656 ​ $ 6,893,072 ​ $ 6,906,728 Percentage of total loans ​ 0.07 % 0.01 % — % 0.12 % 0.20 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020: ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 35 ​ $ — ​ $ — ​ $ 10,947 ​ $ 10,982 ​ $ 3,042,574 ​ $ 3,053,556 Commercial properties ​ 951 ​ 240 ​ — ​ 4,544 ​ 5,735 ​ 743,072 ​ 748,807 Land and construction ​ — ​ — ​ — ​ — ​ — ​ 55,832 ​ 55,832 Commercial and industrial loans ​ 1,013 ​ 411 ​ 152 ​ 5,137 ​ 6,713 ​ 911,963 ​ 918,676 Consumer loans ​ — ​ — ​ — ​ — ​ — ​ 18,888 ​ 18,888 Total ​ $ 1,999 ​ $ 651 ​ $ 152 ​ $ 20,628 ​ $ 23,430 ​ $ 4,772,329 ​ $ 4,795,759 Percentage of total loans ​ 0.04 % 0.01 % — % 0.43 % 0.49 % ​ ​ The following table summarizes our nonaccrual loans as of: ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual ​ Nonaccrual ​ ​ with Allowance ​ with no Allowance (dollars in thousands) for Credit Losses for Credit Losses December 31, 2022 ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ Residential properties ​ $ — ​ $ 2,556 Commercial properties ​ ​ — ​ ​ 4,547 Commercial and industrial loans ​ 2,016 ​ 1,212 Total ​ $ 2,016 ​ $ 8,315 ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ Residential properties ​ $ — ​ $ 3,281 Commercial properties ​ ​ — ​ ​ 1,529 Commercial and industrial loans ​ 1,733 ​ 1,788 Total ​ $ 1,733 ​ $ 6,598 56 Table of Contents ​ The following table presents the composition of troubled debt restructurings (“TDRs”) by accrual and nonaccrual status as of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 December 31, 2021 (dollars in thousands) Accrual Nonaccrual Total Accrual Nonaccrual Total Residential loans ​ $ — ​ $ — ​ $ — ​ $ 1,200 ​ $ — ​ $ 1,200 Commercial real estate loans ​ 929 ​ 1,066 ​ 1,995 ​ 1,021 ​ 1,174 ​ 2,195 Commercial and industrial loans ​ 166 ​ 1,412 ​ 1,578 ​ 493 ​ 2,030 ​ 2,523 Total ​ $ 1,095 ​ $ 2,478 ​ $ 3,573 ​ $ 2,714 ​ $ 3,204 ​ $ 5,918 ​ These loans were classified as a TDR as a result of a reduction in required principal payments and/or an extension of the maturity date of the loans.
The following table provides a summary of past due and nonaccrual loans as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Past Due and Still Accruing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 90 Days ​ ​ ​ ​ Total Past Due ​ ​ ​ ​ ​ ​ (dollars in thousands) 30–59 Days 60-89 Days or More Nonaccrual and Nonaccrual Current Total 2023: ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 93 ​ $ 416 ​ $ — ​ $ 112 ​ $ 621 ​ $ 6,196,923 ​ $ 6,197,544 Commercial properties ​ 27,403 ​ 403 ​ 1,730 ​ 2,915 ​ 32,451 ​ 954,321 ​ 986,772 Land and construction ​ — ​ — ​ — ​ — ​ — ​ 136,827 ​ 136,827 Commercial and industrial loans ​ 525 ​ 88 ​ — ​ 8,804 ​ 9,417 ​ 2,845,845 ​ 2,855,262 Consumer loans ​ — ​ — ​ — ​ — ​ — ​ 1,397 ​ 1,397 Total ​ $ 28,021 ​ $ 907 ​ $ 1,730 ​ $ 11,831 ​ $ 42,489 ​ $ 10,135,313 ​ $ 10,177,802 Percentage of total loans ​ 0.28 % 0.01 % 0.02 % 0.12 % 0.42 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022: ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 511 ​ $ 57 ​ $ — ​ $ 2,556 ​ $ 3,124 ​ $ 6,374,100 ​ $ 6,377,224 Commercial properties ​ 15,000 ​ 946 ​ 1,213 ​ 4,547 ​ 21,706 ​ 1,180,357 ​ 1,202,063 Land and construction ​ — ​ — ​ — ​ — ​ — ​ 157,630 ​ 157,630 Commercial and industrial loans ​ 385 ​ 1,495 ​ 982 ​ 3,228 ​ 6,090 ​ 2,978,668 ​ 2,984,758 Consumer loans ​ — ​ 167 ​ — ​ — ​ 167 ​ 4,351 ​ 4,518 Total ​ $ 15,896 ​ $ 2,665 ​ $ 2,195 ​ $ 10,331 ​ $ 31,087 ​ $ 10,695,106 ​ $ 10,726,193 Percentage of total loans ​ 0.15 % 0.02 % 0.02 % 0.10 % 0.29 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021: ​ ​ ​ ​ ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ ​ Residential properties ​ $ 1,519 ​ $ 310 ​ $ — ​ $ 3,281 ​ $ 5,110 ​ $ 3,827,385 ​ $ 3,832,495 Commercial properties ​ 2,934 ​ — ​ — ​ 1,529 ​ 4,463 ​ 1,305,112 ​ 1,309,575 Land and construction ​ — ​ — ​ — ​ — ​ — ​ 155,926 ​ 155,926 Commercial and industrial loans ​ 303 ​ 260 ​ — ​ 3,520 ​ 4,083 ​ 1,593,782 ​ 1,597,865 Consumer loans ​ — ​ — ​ — ​ — ​ — ​ 10,867 ​ 10,867 Total ​ $ 4,756 ​ $ 570 ​ $ — ​ $ 8,330 ​ $ 13,656 ​ $ 6,893,072 ​ $ 6,906,728 Percentage of total loans ​ 0.07 % 0.01 % — % 0.12 % 0.20 % ​ ​ The following table summarizes our nonaccrual loans as of: ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual ​ Nonaccrual ​ ​ with Allowance ​ with no Allowance (dollars in thousands) for Credit Losses for Credit Losses December 31, 2023 ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ Residential properties ​ $ — ​ $ 112 Commercial properties ​ ​ — ​ ​ 2,915 Commercial and industrial loans ​ 7,406 ​ 1,398 Consumer loans ​ — ​ — Total ​ $ 7,406 ​ $ 4,425 ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ ​ Real estate loans: ​ ​ ​ ​ ​ ​ Residential properties ​ $ — ​ $ 2,556 Commercial properties ​ ​ — ​ ​ 4,547 Commercial and industrial loans ​ 2,016 ​ 1,212 Total ​ $ 2,016 ​ $ 8,315 60 Table of Contents Allowance for Credit Losses.
Securities available for sale (“AFS”): The following table provides a summary of the Company’s AFS securities portfolio at December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized Gross Unrealized Allowance for Estimated (dollars in thousands) Cost Gains Losses Credit Losses Fair Value 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collateralized mortgage obligations ​ $ 9,865 ​ $ — ​ $ (1,250) ​ $ — ​ $ 8,615 Agency mortgage-backed securities ​ ​ 8,161 ​ ​ — ​ ​ (585) ​ ​ — ​ ​ 7,576 Municipal bonds ​ ​ 50,232 ​ ​ — ​ ​ (3,442) ​ ​ — ​ ​ 46,790 SBA securities ​ ​ 19,090 ​ ​ 3 ​ ​ (138) ​ ​ — ​ ​ 18,955 Beneficial interests in FHLMC securitization ​ 19,415 ​ 108 ​ (103) ​ (11,439) ​ 7,981 Corporate bonds ​ 145,024 ​ — ​ (10,011) ​ — ​ 135,013 U.S.
Treasury ​ 399,375 ​ — ​ (585) ​ — ​ 398,790 Total ​ $ 731,489 ​ $ 1,034 ​ $ (21,077) ​ $ (8,220) ​ $ 703,226 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022: ​ ​ ​ ​ ​ ​ Collateralized mortgage obligations ​ $ 9,865 ​ $ — ​ $ (1,250) ​ $ — ​ $ 8,615 Agency mortgage-backed securities ​ ​ 8,161 ​ ​ — ​ ​ (585) ​ ​ — ​ ​ 7,576 Municipal bonds ​ ​ 50,232 ​ — ​ (3,442) ​ — ​ 46,790 SBA securities ​ ​ 19,090 ​ ​ 3 ​ ​ (138) ​ ​ — ​ ​ 18,955 Beneficial interests in FHLMC securitization ​ 19,415 ​ 108 ​ (103) ​ (11,439) ​ 7,981 Corporate bonds ​ 145,024 ​ — ​ (10,011) ​ — ​ 135,013 U.S.
The following table summarizes the activity in our AUM for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Existing account ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ Additions/ ​ New ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) Balance Withdrawals Accounts Terminations Performance Ending balance Year Ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ Fixed income ​ $ 1,303,760 ​ $ 451,841 ​ $ 154,827 ​ $ (30,428) ​ $ (180,446) ​ $ 1,699,554 Equities ​ ​ 3,330,639 ​ ​ (87,881) ​ ​ 108,003 ​ ​ (78,785) ​ ​ (888,708) ​ ​ 2,383,268 Cash and other ​ 1,046,206 ​ (422,405) ​ 305,747 ​ (58,248) ​ 31,155 ​ 902,455 Total ​ $ 5,680,605 ​ $ (58,445) ​ $ 568,577 ​ $ (167,461) ​ $ (1,037,999) ​ $ 4,985,277 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ Fixed income ​ $ 1,474,479 ​ $ (195,117) ​ $ 71,181 ​ $ (45,818) ​ $ (965) ​ $ 1,303,760 Equities ​ ​ 2,451,056 ​ ​ 448,338 ​ ​ 200,073 ​ ​ (156,809) ​ ​ 387,981 ​ ​ 3,330,639 Cash and other ​ 1,001,256 ​ (209,727) ​ ​ 146,701 ​ ​ (84,213) ​ ​ 192,189 ​ 1,046,206 Total ​ $ 4,926,791 ​ $ 43,494 ​ $ 417,955 ​ $ (286,840) ​ $ 579,205 ​ $ 5,680,605 ​ The $695.3 million decrease in AUM during the year ended December 31, 2022, was primarily due to $1.0 billion in portfolio losses.
The following table summarizes the activity in our AUM for the periods indicated: 46 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Existing account ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning ​ Additions/ ​ New ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) Balance Withdrawals Accounts Terminations Performance Ending balance Year Ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ Fixed income ​ $ 1,699,554 ​ $ 34,536 ​ $ 137,732 ​ $ (128,917) ​ $ 106,151 ​ $ 1,849,056 Equities ​ ​ 2,383,268 ​ ​ (164,461) ​ ​ 82,540 ​ ​ (231,240) ​ ​ 538,926 ​ ​ 2,609,033 Cash and other ​ 902,455 ​ (205,819) ​ 71,226 ​ (58,055) ​ 82,052 ​ 791,859 Total ​ $ 4,985,277 ​ $ (335,744) ​ $ 291,498 ​ $ (418,212) ​ $ 727,129 ​ $ 5,249,948 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ Fixed income ​ $ 1,303,760 ​ $ 451,841 ​ $ 154,827 ​ $ (30,428) ​ $ (180,446) ​ $ 1,699,554 Equities ​ ​ 3,330,639 ​ ​ (87,881) ​ ​ 108,003 ​ ​ (78,785) ​ ​ (888,708) ​ ​ 2,383,268 Cash and other ​ 1,046,206 ​ (422,405) ​ ​ 305,747 ​ ​ (58,248) ​ ​ 31,155 ​ 902,455 Total ​ $ 5,680,605 ​ $ (58,445) ​ $ 568,577 ​ $ (167,461) ​ $ (1,037,999) ​ $ 4,985,277 ​ AUM balances were $5.2 billion at December 31, 2023, compared to $5.0 billion at December 31, 2022.
The $6.3 million valuation loss adjustment recorded on the NYDIG equity investment was recorded as a component of noninterest income. Our effective tax rate for 2022 was 26.2% as compared to 27.9% for 2021 and as compared to our statutory tax rate of 29.0%. 41 Table of Contents Net Interest Income.
The $6.3 million valuation loss adjustment recorded on the NYDIG equity investment was recorded as a component of noninterest income. Net interest income, noninterest income, and noninterest expense are discussed in more detail in the tables that follow. Income tax expense for 2022 was $39.3 million, compared to $42.3 million for 2021.
For 2021 and 2020, we recorded provisions for credit losses of $3.9 million and $6.7 million, respectively. The provision for credit losses in 2021 and 2020 were due to the TGRF acquisition and growth in loan balances and $0.8 million of net chargeoffs in each year. ​ Noninterest income.
The provision for credit losses in 2022 was due to growth in loan balances. For 2023 and 2022, we recorded net charge-offs of $3.1 million and $0.3 million, respectively. Noninterest income.
During the year ended December 31, 2021, financing activities provided net cash of $474 million, consisting primarily of a net increase of $728 million in deposits and a net $17 million increase in our line of credit borrowing, offset partially by a $255 million decrease in FHLB advances and $16 million in dividends paid. Ratio of Loans to Deposits.
During the year ended December 31, 2023, financing activities provided net cash of $529 million, comprised primarily of a net increase in deposits of $326 million, and net increase in advances and borrowings of $340 million, offset by a net decrease in repurchase agreements of $108 million, a $20 million decrease in our line of credit, and $9.0 million in dividends paid.
Noninterest income for Banking includes fees charged to clients for trust services and deposit services, consulting fees, prepayment and late fees charged on loans, gain on sale of loans, and gains and losses from capital market activities.
For 2022 and 2021, we recorded net charge-offs of $0.3 million and $0.8 million, respectively. ​ Noninterest income. Noninterest income for Banking includes fees charged to clients for trust services and deposit services, consulting fees, prepayment and late fees charged on loans, gain on sale leaseback, and gain on sale of loans.
These cash flows may change depending on the assumed interest rate environment and the resulting changes in other assumptions, such as prepayment speeds.
EVE is based on all of the future cash flows expected to be generated by the Bank’s current balance sheet, discounted to derive the economic value of the Bank’s assets and liabilities. These cash flows may change depending on the assumed interest rate environment and the resulting changes in other assumptions, such as prepayment speeds.
During the year ended December 31, 2021, operating activities provided net cash of $97 million, comprised primarily of our net income of $110 million and $23 million increase in other liabilities, offset partially by a $39 million increase in other assets. Cash Flows Used in Investing Activities.
During the year ended December 31, 2023, operating activities provided net cash of $6 million, comprised primarily of net income of $16 million and an $11 million decrease in accrued interest receivable and other assets, offset partially by an $18 million decrease in accounts payable and other liabilities.
The following table sets forth our loans, by loan category, as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ (dollars in thousands) 2022 2021 ​ Outstanding principal balance: ​ ​ ​ Loans secured by real estate: ​ ​ ​ Residential properties: ​ ​ ​ Multifamily ​ $ 5,341,596 ​ $ 2,886,055 ​ Single family ​ 1,016,498 ​ 933,445 ​ Total real estate loans secured by residential properties ​ 6,358,094 ​ 3,819,500 ​ Commercial properties ​ 1,203,292 ​ 1,309,200 ​ Land and construction ​ 158,565 ​ 156,028 ​ Total real estate loans ​ 7,719,951 ​ 5,284,728 ​ Commercial and industrial loans ​ 2,984,748 ​ 1,598,422 ​ Consumer loans ​ 4,481 ​ 10,834 ​ Total loans ​ 10,709,180 ​ 6,893,984 ​ Premiums, discounts and deferred fees and expenses ​ 17,013 ​ 12,744 ​ Total ​ $ 10,726,193 ​ $ 6,906,728 ​ ​ Loans increased $3.3 billion in 2022 compared to 2021 as a result of $5.8 billion in originations, which was partially offset by payoffs or scheduled payments of $2.5 billion.
The following table sets forth our loans, by loan category, as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ Percentage of ​ (dollars in thousands) Amount ​ Total Loans ​ Amount ​ Total Loans ​ Outstanding principal balance: ​ ​ ​ ​ ​ ​ ​ Loans secured by real estate: ​ ​ ​ ​ ​ ​ ​ Residential properties: ​ ​ ​ ​ ​ ​ ​ Multifamily ​ $ 5,227,885 ​ 51.5 % $ 5,341,596 ​ 49.9 % Single family ​ 950,712 ​ 9.4 % 1,016,498 ​ 9.5 % Total real estate loans secured by residential properties ​ 6,178,597 ​ 60.8 % 6,358,094 ​ 59.4 % Commercial properties ​ 987,596 ​ 9.7 % 1,203,292 ​ 11.2 % Land and construction ​ 137,298 ​ 1.4 % 158,565 ​ 1.5 % Total real estate loans ​ 7,303,491 ​ 71.9 % 7,719,951 ​ 72.1 % Commercial and industrial loans ​ 2,856,228 ​ 28.1 % 2,984,748 ​ 27.9 % Consumer loans ​ 1,328 ​ 0.0 % 4,481 ​ 0.0 % Total loans ​ 10,161,047 ​ 100.0 % 10,709,180 ​ 100.0 % Premiums, discounts and deferred fees and expenses ​ 16,755 ​ ​ ​ 17,013 ​ ​ ​ Total ​ $ 10,177,802 ​ ​ ​ $ 10,726,193 ​ ​ ​ ​ Total loans decreased by $548.4 million, as a result of $1.5 billion in loan fundings, offset by loan payoffs and paydowns of $2.1 billion for the year ended December 31, 2023.
Certain costs associated with business combinations are expensed as incurred. We have two business segments, “Banking” and “Investment Management and Wealth Planning” (“Wealth Management”). Banking includes the operations of FFB, FFIS, FFPF, and Blue Moon Management LLC and Wealth Management includes the operations of FFA.
For complete discussion and disclosure of other accounting policies, see Note 1: Summary of Significant Accounting Policies of the Company’s consolidated financial statements. We have two business segments, “Banking” and “Investment Management and Wealth Planning” (“Wealth Management”). Banking includes the operations of FFB, FFIS, FFPF, and Blue Moon Management LLC and Wealth Management includes the operations of FFA.
Our net income and income before taxes in 2022 was $110.5 million and $149.8 million, respectively, as compared to $109.5 million and $151.8 million, respectively, in 2021.
Combined net income before taxes for 2022 was $149.8 million, compared to net income before taxes of $151.8 million for 2022.
The primary sources of revenue for Banking are net interest income, fees from its deposits and trust services, gains on sales of loans, certain loan fees, and consulting fees. The primary sources of revenue for Wealth Management are asset management fees assessed on the balance of AUM.
The primary sources of revenue for Wealth Management are asset management fees assessed on the balance of AUM.
See “Note 4: Securities” for additional information related to the Company’s allowance for credit losses on securities AFS. Allowance for Credit Losses - Loans.
See Note 3: Securities in the consolidated financial statements for additional information related to our allowance for credit losses on securities AFS. 40 Table of Contents Allowance for Credit Losses - Loans .
Therefore, the total commitments do not necessarily represent future cash requirements. As of December 31, 2022, FFB was obligated on $315 million of letters of credit to the FHLB which were being used as collateral for public fund deposits, including $300 million of deposits from the State of California.
As of December 31, 2023, FFB was obligated on $310 million of letters of credit to the FHLB which were being used as collateral for public fund deposits, including $300 million of deposits from the State of California. 64 Table of Contents Interest Rate Risk Management Interest rate risk (“IRR”) refers to the vulnerability of an institution’s financial condition to movements in interest rates.
The computed changes to our net interest income between hypothetical rising and declining rate scenarios for the twelve month period beginning December 31, 2022 are as follows: ​ ​ ​ ​ ​ ​ Estimated Increase ​ (Decrease) in Net ​ Assumed Instantaneous Change in Interest Rates Interest Income ​ + 100 basis points (5.34) % + 200 basis points (10.67) % + 300 basis points (16.55) % + 400 basis points (22.87) % - 100 basis points 5.25 % - 200 basis points 10.51 % ​ The modeled one year NII results indicate that the Bank would be adversely impacted in the up rate shock scenarios of 100 through 400 basis points.
The Board-approved limits on NII sensitivity and the actual computed changes to our NII based on the +/- 100 and +/- 200 basis points hypothetical interest rate scenarios as of December 31, 2023 are shown below: ​ ​ ​ ​ ​ ​ ​ ​ Estimated Increase ​ ​ ​ (Decrease) in Net ​ ​ ​ ​ Assumed Instantaneous Change in Interest Rates Interest Income ​ ​ Board Limits ​ + 100 basis points (10.65) % ​ (20.00) % + 200 basis points (19.75) % ​ (25.00) % - 100 basis points (1.27) % ​ (10.00) % - 200 basis points (3.58) % ​ (20.00) % ​ The modeled one year NII results indicate that the Bank is more earnings sensitive in the rising rate shock scenarios of 100 through 200 basis points.
Our effective tax rate for 2021 was 27.9% as compared to 29.0% for 2020 and as compared to our statutory tax rate of 29.0%. 46 Table of Contents Net Interest Income.
Annual effective tax rates for 2022 and 2021 were 26.2% and 27.9%, respectively. Our statutory tax rates were 29% for both 2023 and 2022. 48 Table of Contents Net Interest Income.
During the year ended December 31, 2021, investing activities used net cash of $79 million, primarily to fund a $1.6 billion net increase in loans and $455 million in purchases of securities AFS, offset partially by $1.1 billion in cash received from the TGRF acquisition, $580 million in proceeds from loan sales, and $268 million in principal collections of securities AFS.
During the year ended December 31, 2023, investing activities provided net cash of $135 million, primarily due to a $541 million net decrease in loans, $176 million in proceeds from the sale of securities AFS, $90 million cash received in principal collection and maturities of securities AFS and HTM, offset by $667 million (net of discount) in purchases of securities AFS.
The scheduled maturities, as of December 31, 2022, of the performing loans categorized as land and construction loans and as commercial and industrial loans, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans With a Scheduled ​ ​ Scheduled Maturity ​ Maturity After One Year ​ ​ ​ ​ ​ Due After One ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due in One Year ​ Year Through ​ Due After ​ Loans With ​ Loan With (dollars in thousands) ​ or Less Five Years ​ Five Years ​ Fixed Rates ​ Adjustable Rates Land and construction loans $ 54,076 $ 74,298 $ 30,191 $ 76,830 $ 27,659 Commercial and industrial loans ​ 264,508 ​ 1,493,524 ​ 1,226,716 ​ 2,507,975 ​ 212,265 ​ Deposits: The following table sets forth information with respect to our deposits and the average rates paid on deposits, as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ (dollars in thousands) ​ Amount Average Rate Amount Average Rate Amount Average Rate Demand deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing ​ $ 2,736,691 — ​ $ 3,280,455 — ​ $ 1,655,847 — ​ Interest-bearing ​ 2,568,850 3.109 % 2,242,684 0.070 % 871,289 0.372 % Money market and savings ​ 3,178,230 2.373 % 2,620,336 0.275 % 2,407,401 0.549 % Certificates of deposit ​ 1,878,841 3.741 % 668,485 0.145 % 978,896 0.591 % Total ​ $ 10,362,612 2.177 % $ 8,811,960 0.111 % $ 5,913,433 0.376 % ​ During 2022, deposits increased by $1.6 billion.
The scheduled maturities, as of December 31, 2023, of the performing loans categorized as land and construction loans and as commercial and industrial loans, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans With a Scheduled ​ ​ Scheduled Maturity ​ Maturity After One Year ​ ​ ​ ​ ​ Due After One ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Due in One Year ​ Year Through ​ Due After ​ Loans With ​ Loan With (dollars in thousands) ​ or Less Five Years ​ Five Years ​ Fixed-Rates ​ Adjustable-Rates Land and construction loans $ 44,892 $ 79,026 $ 13,380 $ 63,226 $ 29,180 Commercial and industrial loans ​ 230,285 ​ 1,555,884 ​ 1,070,059 ​ 1,514,182 ​ 1,111,761 ​ See Note 4: Loans of the notes to the consolidated financial statements for additional information on our loan portfolio. ​ Deposits: The following table sets forth information with respect to our deposits and the average rates paid on deposits, as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted ​ (dollars in thousands) ​ Amount Average Rate Amount Average Rate Demand deposits: ​ ​ ​ ​ ​ ​ ​ Noninterest-bearing ​ $ 1,467,806 - ​ $ 2,736,691 — ​ Interest-bearing ​ 2,881,786 2.94 % 2,568,850 2.91 % Money market and savings ​ 3,195,670 3.81 % 3,178,230 2.37 % Certificates of deposit ​ 3,143,670 4.87 % 1,878,841 3.74 % Total ​ $ 10,688,932 3.36 % $ 10,362,612 2.13 % ​ Total deposits increased by $326.3 million to $10.7 billion at December 31, 2023, compared to $10.4 billion at December 31, 2022.
The following table provides the amounts of noninterest income for Wealth Management for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2021 2020 Noninterest income ​ $ 29,917 ​ $ 24,510 ​ Noninterest income for Wealth Management increased in 2021 when compared to 2020, as the level of billable AUM increased by 21%. 48 Table of Contents ​ Noninterest Expense.
The following table provides the amounts of noninterest income for Wealth Management for the years ended December 31: ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands) 2023 2022 Noninterest income ​ $ 29,358 ​ $ 30,027 ​ Noninterest income for Wealth Management was $29.4 million for the year ended December 31, 2023, compared to $30.0 million for 2022.
On January 26, 2023, the Board of Directors declared a quarterly cash dividend of $0.11 per common share to be paid on February 16, 2023 to stockholders of record as of the close of business on February 6, 2023. 40 Table of Contents Results of Operations Years Ended December 31, 2022 and 2021.
On January 25, 2024, the Board of Directors declared a quarterly cash dividend of $0.01 per common share to be paid on February 15, 2024 to stockholders of record as of the close of business on February 5, 2024. 42 Table of Contents Results of Operations The primary sources of revenue for Banking are net interest income, fees from its deposits and trust services, certain loan fees, and consulting fees.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk For quantitative and qualitative disclosures regarding market risk in the Company’s portfolio, please see Item 7 “ Management’s Discussion and Analysis—Asset and Liability Management: Interest Rate Risk” in Part II above. ​ 65 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk For quantitative and qualitative disclosures regarding market risk in the Company’s portfolio, please see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Risk Management in Part II above. ​ 69 Table of Contents

Other FFWM 10-K year-over-year comparisons