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2023 ReportMorningstar® Document Research℠ FORM 10-KFirst Foundation Inc. - FFWMFiled: March 15, 2016 (period: December 31, 2015)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015 Commission file number: 001-36461 FIRST FOUNDATION INC.(Exact name of registrant as specified in its charter) Delaware 20-8639702(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 18101 Von Karman Avenue, Suite 700Irvine, CA 92612 92612(Address of principal executive offices) (Zip Code)(949) 202-4160(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:Common Stock, par value $0.001 per share NASDAQ Global Stock Market(Title of each class) (Name of exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x.Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x.Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “largeaccelerated filer” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):¨ Large accelerated filerx Accelerated filer o Non-accelerated filer (Do not check if a smaller reporting company)o Smaller reporting companyIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No xAs of June 30, 2015, the aggregate market value of the common stock held by non-affiliates of the registrant, computed by reference to the average high and low sales priceson the NASDAQ Global Stock Market as of the close of business on June 30, 2015, was approximately $111 million.As of March 11, 2016, there were 16,016,326 shares of registrant’s common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCENone. Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2015TABLE OF CONTENTS Page No.FORWARD-LOOKING STATEMENTS ii PART I Item 1 Business 1Item 1A Risk Factors 20Item 1B Unresolved Staff Comments 34Item 2 Properties 34Item 3 Legal Proceedings 34Item 4 Mine Safety Disclosures 34 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 35Item 6 Selected Financial Data 38Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 41Item 8 Financial Statements and Supplementary Data 66Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 106Item 9A Controls and Procedures 106Item 9B Other Information 109 PART III Item 10 Directors and Executive Officers of the Registrant 110Item 11 Executive Compensation 116Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 126Item 13 Certain Relationships and Related Transactions and Director Independence 127Item 14 Principal Accountant Fees and Services 128 PART IV Item 15 Exhibits and Financial Statements and Schedules 130Signatures S-1Index to Exhibits E-1 iSource: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FORWARD-LOOKING STATEMENTSIn addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-lookingstatements are those that predict or describe future events or trends or that do not relate solely to historical matters. However, our actual results and financialperformance in the future will be affected by known and currently unknown risks, uncertainties and other factors that may cause our actual results or financialperformance in the future to differ materially from the results or financial performance that may be expressed, predicted or implied by such forward-lookingstatements. Such risks, uncertainties and other factors include, among others, those set forth below in Item 1.A Risk Factors, and readers of this report areurged to read the cautionary statements contained in that section of this report. In some cases, you can identify forward-looking statements by words like“may,” “will,” “should,” “could,” “believes,” “intends,” “expects,” “anticipates,” “plans,” “estimates,” “predicts,” “potential,” “project” and “continue” andsimilar expressions. Readers of this report are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the respectivedates on which such statements were made and which are subject to risks, uncertainties and other factors that could cause actual results and the timing ofcertain events to differ materially from future results expressed or implied by such forward-looking statements.First Foundation Inc. expressly disclaims any intent or any obligation to release publicly any revisions or updates to any of the forward-lookingstatements contained in this report to reflect events or circumstances after the date of this report or the occurrence of currently unanticipated events ordevelopments or to conform such forward-looking statements to actual results or to changes in its opinions or expectations, except as may be required byapplicable law. iiSource: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IItem 1.BusinessOverviewUnless we state otherwise or the context otherwise requires, references in this Annual Report on Form 10-K to “we,” “our,” and “us” refer toFirst Foundation Inc., a Delaware corporation, (“FFI” or the “Company”) and its consolidated subsidiaries, First Foundation Advisors (“FFA”) and FirstFoundation Bank (“FFB” or “Bank”), and FFB’s wholly owned subsidiary, First Foundation Insurance Services (“FFIS”).We are a California based financial services company that provides a comprehensive platform of personalized financial services to high net-worthindividuals and their families, family businesses and other affiliated organizations. We consider high net-worth individuals to be individuals with net worth,excluding their primary residence, of over $1.0 million. Our integrated platform provides investment management, wealth planning, consulting, trust,banking products and services, life insurance services and property and casualty insurance services to effectively and efficiently meet the financial needs ofour clients. We have also established a lending platform that offers loans to individuals and entities that own and operate multifamily residential andcommercial real estate properties. In addition, we provide business banking products and services to small to moderate-sized businesses and professionalfirms, and consumer banking products and services to individuals and families who would not be considered high net-worth. As of December 31, 2015, wehad $3.47 billion of assets under management (or AUM), $2.59 billion of total assets, $1.77 billion of loans and $1.57 billion of deposits. Our investmentmanagement, wealth planning, consulting, and trust services provide us with substantial, fee-based, recurring revenues, such that in 2015, our non-interestincome was 35% of our total revenues.Our strategy is focused on expanding our strong and stable client relationships by delivering high quality, coordinated investment management,wealth planning, consulting, trust and banking products and services. We are able to maintain a client-focused approach by recruiting and retainingexperienced and qualified staff, including highly qualified relationship managers, bankers and financial planners.We intend to continue to grow our business by (i) cross-selling our services among our wealth management and banking clients; (ii) obtaining newclient referrals from existing clients, attorney and accountant referral sources and through referral agreements with asset custodial firms; (iii) marketing ourservices directly to prospective new clients; (iv) adding experienced relationship managers and bankers who may have established client relationships thatwe can serve; (v) establishing de novo offices in select markets, both within and outside our existing market areas; and (vi) making opportunistic acquisitionsof complementary businesses.As a bank holding company, we are subject to regulation and examination by the Board of Governors of the Federal Reserve System (the “FederalReserve Board” or “FRB”) and the Federal Reserve Bank of San Francisco (“FRBSF”) under delegated authority from the FRB. As an Federal DepositInsurance Corporation (“FDIC”) insured, California state chartered bank, FFB is subject to regulation and examination by the FDIC and the CaliforniaDepartment of Business Oversight (“DBO”). FFB also is a member of the Federal Home Loan Bank of San Francisco (“FHLB”), which provides it with asource of funds in the form of short-term and long-term borrowings. FFA is a registered investment adviser under the Investment Advisers Act of 1940,(“Investment Advisers Act”), and is subject to regulation by the Securities and Exchange Commission, (“SEC”), under that Act.On October 28, 2015, we changed our state of incorporation from California to Delaware. Other than the change in corporate domicile, thereincorporation did not result in any change in the business, physical location, management, assets, liabilities or total shareholders’ equity of the Company,nor did it result in any change in location of the Company’s employees, including the Company’s management. Additionally, the reincorporation did notalter any shareholder’s percentage ownership interest or number of shares owned in the Company.Our broad range of financial product and services are more consistent with those offered by larger financial institutions, while our high level ofpersonalized service, accessibility and responsiveness to our clients are more typical of the services offered by boutique investment management firms andcommunity banks. We believe this combination of an integrated platform of comprehensive financial services and products and personalized and responsiveservice differentiates us from many of our competitors and has contributed to the growth of our client base and our business.Overview of Our Banking BusinessFFB is engaged in private and commercial banking, offering a broad range of personal and business banking products and services and trustservices to its clients. Its banking services include a variety of deposit products, including personal checking, savings and money market deposits andcertificates of deposit, single family real estate loans, and consumer loans. FFB also provides 1Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. the convenience of online and other personal banking services to its clients. FFB’s business banking products and services include multifamily andcommercial real estate loans, commercial term loans and lines of credit, transaction and other deposit accounts, online banking, mobile banking andenhanced business services. FFB has also established a lending platform that offers loans to individuals and entities who own and operate multifamilyresidential and commercial real estate properties. In addition, FFB provides its products and services to individuals and families who would not be consideredhigh net-worth, small to moderate sized businesses and professional firms. FFIS was established to provide life, property and casualty agency insuranceservices as part of the platform of financial products and services. FFIS provides insurance risk management solutions to individuals, families and businesses.Clients are obtained through relationships/referrals from existing FFI clients and newly generated clients via prospecting. At December 31, 2015, FFB had$2.59 billion of total assets, $1.77 billion of loans and $1.52 billion of deposits. FFB’s operations comprise the trust and banking segment of our business.Overview of our Investment Advisory and Wealth Management BusinessFFA is a fee-based investment adviser which provides investment advisory services primarily to high net-worth individuals, their families and theirfamily businesses, and other affiliated organizations. FFA strives to provide its clients with a high level of personalized service by its staff of experiencedrelationship managers. As of December 31, 2015, FFA had total $3.47 billion of AUM. FFA’s operations comprise the investment management, wealthplanning and consulting segment of our business.Relationship Managers and BankersOur operating strategy has been to build strong and stable long-term client relationships, one at a time, by delivering high quality, coordinatedinvestment management, wealth planning, consulting, trust and banking products and services. The success of this strategy is largely attributable to ourexperienced and high quality client relationship managers and bankers. The primary role of our relationship managers and bankers, in addition to attractingnew clients, is to develop and maintain a strong relationship with their clients and to coordinate the services we provide to their clients. We believe we cancontinue to attract and retain experienced and client-focused relationship managers and bankers.Banking Products and ServicesThrough FFB, we offer a wide range of loan products, deposit products, business and personal banking services and trust services. Our loanproducts are designed to meet the credit needs of our clients in a manner that, at the same time, enables us to effectively manage the credit and interest raterisks inherent in our lending activities. Additional loan products offered to the broader markets we serve include commercial lending and commercial realestate lending, predominantly on multifamily properties. Deposits represent our principal source of funds for making loans and investments and acquiringother interest-earning assets. The yields we realize on our loans and other interest-earning assets and the interest rates we pay to attract and retain deposits arethe principal determinants of our banking revenues. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”elsewhere in this Annual Report on Form 10-K.Our lending activities serve the credit needs of high net-worth individuals and their businesses, owners of multifamily and commercial real estateproperties, individuals and families who would not be considered high net-worth, small to moderate size businesses and professional firms in our marketareas. As a result we offer a variety of loan products consisting of multifamily and single family residential real estate loans, commercial real estate loans,commercial term loans and lines of credit, and consumer loans. We handle all loan processing, underwriting and servicing at our administrative office inIrvine, California. 2Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following table sets forth information regarding the types of loans that we make, by amounts and as a percentage of our total loans outstandingat December 31: 2015 2014 (dollars in thousands) Balance % of Total Balance % of Total Recorded Investment balance: Loans secured by real estate: Residential properties: Multifamily $627,311 35.5% $481,491 41.3%Single family 533,257 30.2% 360,644 30.9%Total loans secured by residential properties 1,160,568 65.7% 842,135 72.2%Commercial properties 358,791 20.3% 205,320 17.6%Land 12,320 0.7% 4,309 0.4%Total real estate loans 1,531,679 86.7% 1,051,764 90.2%Commercial and industrial loans 196,584 11.1% 93,537 8.0%Consumer loans 37,206 2.2% 21,125 1.8%Total loans $1,765,469 100.0% $1,166,426 100.0%Residential Mortgage Loans – Multi-family: We make multi-family residential mortgage loans for terms up to 30 years primarily for propertieslocated in California. These loans generally are adjustable rate loans with interest rates tied to a variety of independent indexes; although in some cases theseloans have fixed interest rates for periods ranging from 3 to 10 years and adjust thereafter based on an applicable index. These loans generally have interestrate floors, payment caps, and prepayment penalties. The loans are underwritten based on a variety of underwriting criteria, including an evaluation of thecharacter and creditworthiness of the borrower and guarantors, loan-to-value and debt service coverage ratios, borrower liquidity and credit history. Inaddition, 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 personal guarantees from the owners of the entities to which we make such loans.Residential Mortgage Loans – Single-family: We offer single family residential mortgage loans primarily as an accommodation to our existingclients. In most cases, these take the form of non-conforming jumbo and super jumbo loans and FFB does not currently sell or securitize any of its singlefamily residential mortgage loan originations. FFB does not originate loans defined as high cost by state or federal banking regulators. The majority of FFB’ssingle family residential loan originations are collateralized by first mortgages on real properties located in Southern California. These loans are generallyadjustable rate loans with fixed terms ranging from 3 to 10 years and terms of the loan not exceeding 30 years. These loans generally have interest rate floorsand payment caps. The loans are underwritten based on a variety of underwriting criteria, including an evaluation of the character and creditworthiness of theborrower and guarantors, loan-to-value and debt to income ratios, borrower liquidity, income verification and credit history. In addition, we perform stresstesting for changes in interest rates and other factors and review general economic trends such as market values.Commercial Real Estate Loans -Owner Occupied: Owner occupied commercial real estate loans are generally made to businesses that havedemonstrated a history of profitable operations. To qualify for such loans, prospective borrowers generally must have operating cash flow sufficient to meettheir obligations as they become due, and good payment histories. Our commercial real estate loans are secured by first trust deeds on nonresidential realproperty. These loans generally are adjustable rate loans with interest rates tied to a variety of independent indexes; although in some cases these loans havefixed interest rates for periods ranging from 3 to 10 years and adjust thereafter based on an applicable index. These loans generally have terms of 10 years,interest rate floors, payment caps, and prepayment penalties. The loans are underwritten based on a variety of underwriting criteria, including an evaluationof the character and creditworthiness of the borrower and guarantors, loan-to-value and debt service coverage ratios, borrower liquidity and credit history. Inaddition, we perform stress testing for changes in interest rates, cap rates and other factors and review general economic trends such as lease rates, values andabsorption rates. We typically require personal guarantees from the owners of the entities to which we make such loans.Commercial Loans: We offer commercial term loans and commercial lines of credit to our clients. Commercial loans generally are made tobusinesses that have demonstrated a history of profitable operations. To qualify for such loans, prospective borrowers generally must have operating cashflow sufficient to meet their obligations as they become due, and good payment histories. Commercial term loans are either fixed rate loans or adjustable rateloans with interest rates tied to a variety of independent indexes and are made for terms ranging from 1 to 5 years. Commercial lines of credit are adjustablerate loans with interest rates usually tied to the Wall Street Journal prime rate or LIBOR rates, are made for terms ranging from 1 to 2 years, and containvarious covenants, including a requirement that the borrower reduce its credit line borrowings to zero for specified time periods during the term of the line ofcredit. The loans are underwritten based on a variety of underwriting criteria, including an evaluation of the character and creditworthiness of the borrowerand guarantors, debt service coverage ratios, historical and projected client income, 3Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. borrower liquidity and credit history. In addition, we perform stress testing for changes in interest rates and other factors and review general economic trendsin the client’s industry. We typically require personal guarantees from the owners of the entities to which we make such loans.Equipment financing: Beginning in 2016, we are offering equipment financing to provide financing solutions to third party originators, includingequipment brokers, lessors and other referral sources. We expect that a majority of the equipment financing business will be small in nature, typicallyaveraging below $250,000, will have terms ranging from 3 to 7 years, will carry fixed rates and will be secured by the underlying equipment and theoperations of the borrower.Small Business Lending and USDA Lending: The Bank is approved as a SBA lender and as a USDA lender. The Bank intends to expand its use ofboth the SBA and USDA lending programs as it identifies opportunities to serve existing clients and potential clients. As government guaranteed programs,the Bank will need to comply with underwriting guidelines and terms and conditions set forth under the related programs.Consumer Loans: We offer a variety of consumer loans and credit products, including personal installment loans and lines of credit, and homeequity lines of credit designed to meet the needs of our clients. Consumer loans are either fixed rate loans or adjustable rate loans with interest rates tied to avariety of independent indexes and are made for terms ranging from 1 to 10 years. The loans are underwritten based on a variety of underwriting criteria,including an evaluation of the character creditworthiness and credit history of the borrower and guarantors, debt to income ratios, borrower liquidity, incomeverification, and the value of any collateral securing the loan. Consumer loan collections are dependent on the borrower’s ongoing cash flows and financialstability and, as a result, generally pose higher credit risks than the other loans that we make.For all of our loan offerings, we utilize a comprehensive approach in our underwriting process. This includes the requirement that all factorsconsidered in our underwriting be appropriately documented. In our underwriting, our primary focus is always on the borrower’s ability to repay. However,because our underwriting process allows us to view the totality of the borrower’s capacity to repay, concerns or issues in one area can be compensated for byother favorable financial criteria. This personalized and detailed approach allows us to better understand and meet our clients’ lending needs.Bank Deposit Products: We offer a wide range of deposit products, including personal and business checking, savings accounts, interest-bearingnegotiable order of withdrawal accounts, money market accounts and time certificates of deposit. The following table sets forth information regarding thetype of deposits which our clients maintained with us and the average interest rates on those deposits as of December 31: 2015 2014 (dollars in thousands) Amount % of Total Weighted AverageRate Amount % of Total WeightedAverageRate Demand deposits: Noninterest-bearing $299,794 19.7% — $246,137 25.6% — Interest-bearing 260,167 17.1% 0.359% 291,509 30.3% 0.504%Money market and savings 492,015 32.3% 0.531% 171,958 17.8% 0.499%Certificates of deposits 470,200 30.9% 0.554% 253,350 26.3% 0.606%Total $1,522,176 100.0% 0.404% $962,954 100.0% 0.398%As of December 31, 2015, our 6 largest bank depositors accounted for, in the aggregate, 24% of our total deposits. See Item 1A—Risk Factors.Trust Services: FFB is licensed to provides trust services to clients in California, Nevada and Hawaii. Those services, which consist primarily of themanagement of trust assets, complement the investment and wealth management services that FFA offers to our clients and, as a result, provide us with cross-selling opportunities. Additionally, trust service fees provide an additional source of noninterest income for us. At December 31, 2015, trust AUMtotaled $1.03 billion.Insurance Services: Through FFIS, we offer life insurance products provided by unaffiliated insurance carriers from whom we collect a brokeragefee.Wealth Management Products and ServicesFFA is a fee-based investment advisor which provides investment advisory services and wealth management and consulting services primarily forhigh net-worth individuals and their families, family businesses and other affiliated organizations (including public and closely-held corporations, familyfoundations and private charitable organizations). FFA provides high net-worth clients 4Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. with personalized services designed to enable them to reach their personal and financial goals by coordinating FFA’s investment advisory and wealthmanagement services with risk management and estate and tax planning services that are provided by outside service providers, for which FFA does notreceive commissions or referral fees. FFA’s clients benefit from certain cost efficiencies available to institutional managers, such as block trading, access toinstitutionally priced no-load mutual funds, ability to seek competitive bid/ask pricing for bonds, low transaction costs and investment management feescharged as a percentage of the assets managed, with tiered pricing for larger accounts.FFA’s investment management team strives to create diversified investment portfolios for its clients that are individually designed, monitored andadjusted based on the discipline of fundamental investment analysis. FFA focuses on creating investment portfolios that are commensurate with a client’sobjectives, risk preference and time horizon, using traditional investments such as individual stocks and bonds and mutual funds. FFA also providescomprehensive and ongoing advice and coordination regarding estate planning, retirement planning, charitable and business ownership issues, and issuesfaced by executives of publicly-traded companies.AUM at FFA has grown at a compound annual growth rate of 12% over the three year period ending December 31, 2015. Changes in our AUMreflects additions from new clients, the gains or losses recognized from investment results, additional funds received from existing clients, withdrawals offunds by clients, and terminations. During the 3 year period ending December 31, 2015, additions from new clients and net gains from investment resultswere 83% and 17%, respectively, of the total of additions from new clients and net gains from investment results.FFA does not provide custodial services for its clients. Instead, client investment accounts are maintained under custodial arrangements with large,well established brokerage firms, either directly or through FFB. However, FFA advises its clients that they are not obligated to use those services and thatthey are free to select securities brokerage firms and custodial service providers of their own choosing. FFA has entered into referral agreements with certainof the asset custodial firms that provide custodial services to our clients. Under these arrangements, the asset custodial firms provide referrals of prospectivenew clients whose increase in wealth warrants a more personalized and expansive breadth of financial services that we are able to provide in exchange for afee. This fee is either a percentage of the fees we charge to the client or a percentage of the AUM of the client. The asset custodial firms are entitled tocontinue to receive these fees for as long as we continue to provide services to the referral client. These referral agreements do not require the client tomaintain their assets at the custodial firm and are fully disclosed to the client prior to our providing services to them.FFA also provides wealth management services, consisting of financial, investment and economic advisory and related services, to high-net-worthindividuals and their families, family businesses, and other affiliated organizations (including public and closely-held corporations, family foundations andprivate charitable organizations). Those services include education, instruction and consultation on financial planning and management matters, andInternet-based data processing administrative support services involving the processing and transmission of financial and economic data primarily forcharitable organizations.CompetitionThe banking and investment and wealth management businesses in California, Nevada and Hawaii, generally, and in our market areas, inparticular, are highly competitive. A relatively small number of major national and regional banks, operating over wide geographic areas, including WellsFargo, JP Morgan Chase, US Bank, Comerica, Union Bank and Bank of America, dominate our banking markets. Those banks, or their affiliates, also offerbanking and investment and wealth management services. We also compete with large, well known banking and wealth management firms, including CityNational, First Republic, Northern Trust and Boston Private. Those banks and investment and wealth management firms generally have much greaterfinancial and capital resources than we do and as a result of their ability to conduct extensive advertising campaigns and their relatively long histories ofoperations in our markets, are generally better known than us. In addition, by virtue of their greater total capitalization, the large banks have substantiallyhigher 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.We compete with these much larger banks and investment 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 costsinvolved or their “one size fits all” approaches to providing financial services to their clients. We believe that our principal competitive advantage is ourability to offer our banking, trust, insurance, investment and wealth management services through one integrated platform, enabling us to provide our clientswith the efficiencies and benefits of dealing with a cohesive group of professional advisors and banking officers working together to assist our clients to meettheir personal investment and financial goals. We believe that only the largest financial institutions in our area provide similar integrated platforms ofproducts and services, which they sometimes reserve for their wealthiest and institutional clients. In addition, while we also compete with many local andregional banks and numerous local and regional investment advisory and wealth management firms, we believe that only a very few of these banks offerinvestment or wealth management services and that a very few of these investment 5Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. and wealth management firms offer banking services and, therefore, these competitors are not able to provide such an integrated platform of comprehensivefinancial services to their clients. This enables us to compete effectively for clients who are dissatisfied with the level of service provided at larger financialinstitutions, yet are not able to receive an integrated platform of comprehensive financial services from other regional or local financial servicesorganizations.While we provide our clients with the convenience of technological access services, such as remote deposit capture, internet banking and mobilebanking, we compete primarily by providing a high level of personal service. As a result, we do not try to compete exclusively on pricing. However, becausewe are located in a highly competitive market place and because we are seeking to grow our businesses, we attempt to maintain our pricing in line with ourprincipal competitors.Supervision and RegulationBoth federal and state laws extensively regulate bank holding companies and banks. Such regulation is intended primarily for the protection ofdepositors and the FDIC’s deposit insurance fund and is not for the benefit of shareholders. Set forth below are summary descriptions of the material laws andregulations that affect or bear on our operations. Those summaries are not intended, and do not purport, to be complete and are qualified in their entirety byreference to the laws and regulations that are summarized below.First Foundation Inc.GeneralFirst Foundation Inc. is a registered bank holding company subject to regulation under the Bank Holding Company Act of 1956, as amended (the“Holding Company Act”). Pursuant to the Holding Company Act, we are subject to supervision and periodic examination by, and are required to fileperiodic reports with the FRB.As a bank holding company, we are allowed to engage, directly or indirectly, only in banking and other activities that the Federal Reserve hasdetermined, or in the future may deem, to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Businessactivities which the Federal Reserve has designated as being closely related to banking include the provision of investment advisory, securities brokerage,insurance agency and data processing services, among others.As a bank holding company, we also are required to obtain the prior approval of the FRB for the acquisition of more than 5% of the outstandingshares of any class of voting securities, or of substantially all of the assets, by merger or purchase, of (i) any bank or other bank holding company and (ii) anyother entities engaged in banking-related businesses or that provide banking-related services.Under FRB regulations, a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks andmay not conduct its operations in an unsafe or unsound manner. In addition, it is the FRB’s policy that a bank holding company, in serving as a source ofstrength to its subsidiary banks, should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods offinancial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiarybanks. For that reason, among others, the Federal Reserve requires all bank holding companies to maintain capital at or above certain prescribed levels. Abank holding company’s failure to meet these requirements will generally be considered by the Federal Reserve to be an unsafe and unsound bankingpractice or a violation of the FRB’s regulations or both, which could lead to the imposition of restrictions (including restrictions on growth) on, or aregulatory enforcement order against, the offending bank holding company.Additionally, among its powers, the Federal Reserve may require any bank holding company to terminate an activity or terminate control of, orliquidate or divest itself of, any subsidiary or affiliated company that the FRB determines constitutes a significant risk to the financial safety, soundness orstability of the bank holding company or any of its banking subsidiaries. The Federal Reserve also has the authority to regulate provisions of a bank holdingcompany’s debt, including authority to impose interest ceilings and reserve requirements on such debt. Subject to certain exceptions, bank holdingcompanies also are required to file written notice and obtain approval from the Federal Reserve prior to purchasing or redeeming their common stock or otherequity securities. A bank holding company and its non-banking subsidiaries also are prohibited from implementing so-called tying arrangements wherebyclients may be required to use or purchase services or products from the bank holding company or any of its non-bank subsidiaries in order to obtain a loan orother services from any of the holding company’s subsidiary banks.Financial Services Modernization ActThe Financial Services Modernization Act (the “Gramm-Leach-Bliley Act” or the “Modernization Act”), was enacted into law in 1999 primarily toestablish a comprehensive framework that would permit affiliations among commercial banks, insurance companies, securities and investment banking firms,and other financial service providers. Accordingly, the Modernization Act 6Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. amended the Holding Company Act to permit a bank holding company that meets certain eligibility requirements to qualify as a “financial holdingcompany,” and its non-bank affiliated companies to engage in a broader range of financial activities to foster greater competition among financial servicescompanies both domestically and internationally.The Modernization Act also contains provisions that expressly preempt and make unenforceable any state law restricting bank holding companiesor their affiliates from engaging in the insurance underwriting or related businesses. That Act also: ●broadened the activities that may be conducted by national banks, bank subsidiaries of bank holding companies, and their financialsubsidiaries; ●provided an enhanced framework for protecting the privacy of consumer information; ●adopted a number of provisions related to the capitalization, membership, corporate governance, and other measures designed to modernizethe Federal Home Loan Bank system; ●modified the laws governing the implementation of the Community Reinvestment Act (“CRA”), which is described in greater detail below;and ●addressed a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of banking institutions.According to current FRB regulations implementing the Modernization Act, activities that are financial in nature and may be engaged in byfinancial holding companies, through their non-bank subsidiaries, include ●securities underwriting, dealing and market making; ●sponsoring mutual funds and investment companies; ●engaging in insurance underwriting; and ●engaging in merchant banking activities.Before a bank holding company may engage in any of those financial activities, it must file an application with its Federal Reserve Bank thatconfirms that it meets certain qualitative eligibility requirements established by the FRB. A bank holding company that meets those qualifications and filessuch an application will be designated as a “financial holding company,” entitling it to affiliate with securities firms and insurance companies and engage inother activities, primarily through non-banking subsidiaries, that are financial in nature or are incidental or complementary to activities that are financial innature.A bank holding company that does not qualify as, or chooses not to submit an application to become, a financial holding company may notengage in such financial activities. Instead, as discussed above, it will be limited to engaging in banking and such other activities that have been determinedby the FRB to be closely related to banking.Acquisition of Control of a Bank Holding Company or a BankSubject to certain limited exemptions, the Holding Company Act and the Change in Bank Control Act of 1978, as amended (the “Change inControl Act”), together with their implementing regulations, require: ·the approval of the FRB before any person or company may acquire “control” of a bank holding company; and ·the approval of an insured depository institution’s federal bank regulator before any person or company may acquire “control” of theinstitution.Under the Change in Control Act, control of a bank holding company or a bank or other insured depository institution is conclusively presumed toexist if an individual or company (i) acquires 25% or more of any class of voting securities of the bank holding company or the depository institution, or(ii) has the direct or indirect power to direct or cause the direction of the management and policies of the bank holding company or the insured depositoryinstitution, whether through ownership of voting securities, by contract or otherwise; except that no individual will be deemed to control a bank holdingcompany or an insured depository institution solely on account of being one of its directors, officers or employees. The Change in Control Act alsoestablishes a presumption, which is rebuttable, that a person will be deemed to control a bank holding company or an insured depository institution if thatperson acquires 10% or more, but less than 25%, of any class of voting securities of a bank holding company which has a class of equity securities registeredwith the SEC under the Exchange Act, or if no other person will own a greater percentage of that class of voting securities immediately after the transaction. However, as a bank holding company, we must obtain the prior approval of the FRB to acquire more than five percent of the outstanding shares ofvoting securities of a bank or another bank holding company. In addition, the Dodd-Frank Act, which is 7Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. discussed in greater detail below, provides that an acquisition by a bank holding company of a bank located outside the bank holding company’s home statemay not be approved, unless the FRB has determined that the bank holding company is well-capitalized and well managed.Capital Requirements Applicable to Bank Holding CompaniesBecause it requires bank holding companies to be a source of financial strength for their bank subsidiaries, the Federal Reserve has adoptedregulations that require bank holding companies to meet capital adequacy guidelines similar to those that apply to banks and other insured depositoryinstitutions. For additional information regarding these guidelines, see “First Foundation Bank – Capital Adequacy Guidelines” and First Foundation Bank– New Basel III Capital Requirements” below.DividendsIt is the policy of FRB that bank holding companies should generally pay dividends on common stock only out of income available over the pastyear, and only if prospective earnings retention is consistent with the holding company’s expected future needs for capital and liquidity and to maintain itsfinancial condition. It is also an FRB policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source offinancial strength for their banking subsidiaries. Additionally, due to the current financial and economic environment, the FRB has indicated that bankholding companies should carefully review their dividend policies and has discouraged dividend payment ratios that are at maximum allowable levels unlessboth asset quality and capital are very strong.The Dodd-Frank ActFrom time to time, federal and state legislation is enacted which can affect our operations and our operating results by materially increasing ourcosts of doing business, limiting or expanding the activities in which banks and other financial institutions may engage, or altering the competitive balancebetween banks and non-bank financial service providers.The recent economic recession and credit crisis that required, among other measures, the federal government to provide substantial financialsupport to many of the largest of the banks and other financial service organizations in the United States, led the U.S. Congress to adopt a number of newlaws, and the federal banking regulators, including the FRB and the FDIC, to take broad actions, to address systemic risks and volatility in the U.S. bankingsystem. Set forth below is a summary of some of the provisions of the most significant of these laws, the Dodd-Frank Wall Street Reform and ConsumerProtection Act of 2010 (the “Dodd-Frank Act”). The regulatory sweep of the Dodd-Frank Act is broad and its provisions apply not only to the regulation ofbank holding companies and insured depository institutions, but also to investment banking and other financial companies and to public companies that areregulated by the SEC. Accordingly, the following summary focuses primarily on the provisions of the Dodd-Frank Act that are applicable to bankingorganizations. It is not intended to be complete and is qualified in its entirety by reference to the Dodd-Frank Act itself and the regulations promulgatedthereunder.The Dodd-Frank Act has significantly changed federal regulation of bank holding companies and banks and other insured depository institutions(collectively, “banking institutions”). Among other things, the Dodd-Frank Act has created a new Financial Stability Oversight Council to identify systemicrisks in the country’s banking and financial system and gives federal banking regulators new authority to take control of and liquidate banking institutions,and large investment banking and other financial services firms, facing the prospect of imminent failure in any case where such failure would create systemicrisks to the U.S. banking or financial system. The Dodd-Frank Act also created the Consumer Financial Protection Bureau (the “CFPB”), which is a newindependent federal regulatory agency with broad powers and authority to adopt regulations under, and administer and regulate, federal consumer protectionlaws.Imposition of New Capital Standards on Bank Holding Companies. The Dodd-Frank Act required the Federal Reserve to apply consolidatedcapital requirements to bank holding companies that are no less stringent than those currently applied to insured depository institutions, such as FFB. TheFederal Reserve implemented this requirement by its adoption of the new Basel III capital rules in June 2015. See “First Foundation Bank — New Basel IIICapital Rules” below.Increase in Deposit Insurance and Changes Affecting the FDIC Deposit Insurance Fund. The Dodd-Frank Act permanently increased themaximum deposit insurance amount for banks, savings institutions and credit unions from $100,000 to $250,000 per depositor. The Dodd-Frank Act alsobroadened the base for FDIC insurance assessments which are used to fund the FDIC’s Deposit Insurance Fund (“DIF”) which, as a result, are now based on aninsured depository institution’s average consolidated total assets, less tangible equity capital, may lead to increases in FDIC insurance assessments for manyFDIC insured banks. The Dodd-Frank Act also requires the FDIC to increase the reserve ratio of the DIF from 1.15% to 1.35% of the total deposits insured bythe FDIC by 2020 and eliminates the requirement that the FDIC pay dividends to insured depository institutions when the reserve ratio exceeds certainthresholds. See also, “First Foundation Bank –The Deposit Insurance Fund and FDIC Insurance Premiums” below. 8Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Payment of Interest on Business Checking Accounts. The Dodd-Frank Act has eliminated a federal statutory prohibition against the paymentof interest on business checking accounts, which is expected to increase the competition for and interest that banks are prepared to pay on such accounts. Limitations on Conversion of Bank Charters. The Dodd-Frank Act prohibits a bank or other depository institution from converting from astate to federal charter or vice versa while it is subject to a cease and desist order or other formal enforcement action or a memorandum of understanding withrespect to a significant supervisory matter, unless the federal or state banking regulatory agency that issued the enforcement action does not object to theproposed conversion within 30 days following its receipt of a notice of that conversion.Interstate Banking. The Dodd-Frank Act authorizes national and state banks to establish branches in other states to the same extent as a bankchartered by that state would be permitted to establish a branch in that state. Previously, banks could only establish branches in other states if the host stateexpressly permitted out-of-state banks to establish branches in its state. Accordingly, banks will be able to enter new markets more freely.The Volcker Rule. Pursuant to the Dodd-Frank Act, the Federal Reserve and the FDIC have adopted regulations, which became effective onApril 1, 2014, to implement the “Volcker Rule” which prohibits insured depository institutions and companies affiliated with insured depository institutions(“banking organizations”) from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures, and options on theseinstruments, for their own account. Those regulations also impose limits on the investments that banking organizations may make in, and other relationshipsthat banking organizations may have with, hedge funds or private equity funds. Certain collateralized debt obligations, securities backed by trust preferredsecurities have been exempted from those prohibitions due to concerns that many community banks would otherwise have been required to recognizesignificant losses on such obligations and securities.These regulations provide exemptions for certain activities, including market making, underwriting, hedging, trading in government obligations,insurance company activities, and, under certain limited circumstances, organizing and offering hedge funds or private equity funds. The regulations alsoclarify that certain activities are not prohibited by the Volker Rule, including acting as agent, broker, or custodian. The compliance requirements under theregulations vary based on the size of the banking organization and the scope of its activities. Banking organizations with significant trading operations willbe required to establish detailed compliance programs and their CEOs will be required to attest that the programs are reasonably designed to achievecompliance with the final regulations. Independent testing and analyses of a banking organization’s compliance program also will be required. On the otherhand, the regulations reduce the burden on smaller, less-complex banking organizations by limiting their compliance and reportingrequirements. Additionally, a banking organization that does not engage in covered trading activities will not have to establish a compliance program.Neither the Company nor FFB held any investment positions at December 31, 2015 that were subject to these regulations. Therefore, theseregulations have not required us to make any material changes in our operations or businesses.Executive Compensation RestrictionsIn June 2010, the Federal Reserve and the FDIC issued comprehensive guidelines on incentive compensation policies intended to ensure that theincentive compensation policies of banking organizations do not undermine the safety and soundness of the organizations by encouraging excessive risk-taking. The guidelines apply to any employees of a banking organization that have the ability to materially affect the risk profile of a banking organization,either individually or as part of a group. Pursuant to these guidelines, each federal bank regulatory agency, as part of its regular, risk-focused examination of the banking organizations itregulates, assesses their incentive compensation arrangements based on the key principles their incentive compensation arrangements should (i) provideincentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effectiveinternal controls and risk management, and (iii) be supported by strong corporate governance principles and practices, including active and effectiveoversight by the banking organization’s board of directors. The federal banking regulatory agencies have the authority to bring enforcement actions againsta banking organization if the agency concludes that its incentive compensation arrangements, or related risk-management control or governance processes,pose an undue risk to the organization's safety and soundness and that the organization is not taking prompt and effective measures to correct thedeficiencies.In addition, the Dodd-Frank Act directs federal banking regulators to promulgate rules prohibiting incentive-based compensation arrangementsthat would encourage imprudent risk-taking by executives of depository institutions and their holding companies that have assets of more than $1.0 billion. Proposed rules were issued in 2011 but have not become final. 9Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Moreover, if an insured bank has been determined by its federal banking regulatory agency to be a “troubled” institution, it may not adopt anynew, or make any payments or awards under any existing, incentive compensation plans, or make any change in control payments, to its executive officerswithout first obtaining the approval of its federal banking regulatory agency to do so.In February 2014, the Company adopted an incentive compensation clawback policy. Among other things, that policy provides that, if any of theCompany’s previously published financial statements are restated due to a material noncompliance with any financial reporting requirements under thefederal securities laws, the Company will seek to recover the amount by which any incentive compensation paid in the previous three years to any executiveofficer exceeds the incentive compensation which the Company’s audit committee determines would have been paid to such executive officer had suchcompensation been determined on the basis of the restated financial statements.Sarbanes-Oxley Act of 2002The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) was enacted into law on July 30, 2002. The primary purposes of the Sarbanes-OxleyAct were to strengthen (i) the oversight of public accounting firms that audit, and (ii) the corporate governance policies and practices of, companies thecommon stock or other equity securities of which are publicly traded. The Sarbanes-Oxley Act granted authority, primarily to the Securities and ExchangeCommission (the “SEC”), to adopt rules for implementing that Act. Among other things, the Sarbanes-Oxley Act: ·provided for enhanced regulation of the independence, responsibilities and conduct of accounting firms which provide auditing services topublic companies; ·established an independent board, known as the Public Company Accounting Oversight Board (the “PCAOB”), with the authority to setauditing, quality and ethical standards for, and the power to investigate and discipline, public accounting firms; ·increased the criminal penalties for financial fraud committed by public company executives and public accounting firms or their keypersonnel; ·required enhanced monitoring of, and certifications by, the chief executive and chief financial officers of public companies of their financialdisclosures, internal financial controls and their audit processes; ·required accelerated disclosures of material information by public companies; and ·required enhanced disclosures by public companies of their corporate governance policies and practices.Additionally, pursuant to requirements of the Sarbanes-Oxley Act, the New York, American and NASDAQ Stock Exchanges promulgated rulesrequiring public companies to adopt and implement expanded corporate governance policies and practices as a condition to the listing, or continued listing,of their shares on those exchanges. Among other things, those rules (i) require public companies to expand the authority, role and responsibilities of theirboards of directors, (ii) require that a majority of the members of their boards of directors be independent of management and establish more stringentstandards that directors needed to meet to qualify as independent directors, (iii) require boards of directors to establish standing audit, compensation andnominating and corporate governance committees comprised of independent directors and (iv) increased the corporate transactions for which shareholderapproval is required.Regulation of the Company by the California Department of Business OversightBecause FFB is a California state chartered bank, the Company is deemed to be a bank holding company within the meaning of Section 1280 ofthe California Financial Code. As such, we are subject to examination by, and may be required to file reports with, the DBO.First Foundation BankGeneralFFB is subject to primary supervision, periodic examination and regulation by (i) the FDIC, which is its primary federal banking regulator, and(ii) the DBO, because FFB is a California state chartered bank. 10Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Various requirements and restrictions under Federal and California banking laws affect the operations of FFB. These laws and the implementingregulations, which are promulgated by federal and state bank regulatory agencies, can determine the extent of supervisory control to which a bank will besubject by its federal and state bank regulators. These laws and regulations cover most aspects of a bank’s operations, including: ●the reserves a bank must maintain against deposits and for possible loan losses and other contingencies; ●the types of and limits on loans and investments that a bank may make; ●the borrowings that a bank may incur; ●the opening of branch offices; ●the rate at which it may grow its assets and business; ●the acquisition and merger activities of a bank; ●the amount of dividends that a bank may pay; and ●the capital requirements that a bank must satisfy.If, as a result of an examination of a federally regulated bank, its federal banking regulatory agency, such as the FDIC, were to determine that thefinancial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of the bank’s operations had becomeunsatisfactory or that the bank or its management was in violation of any law or regulation, that agency would have the authority to take a number ofdifferent remedial actions as it deems appropriate under the circumstances. These actions include the power: ●to enjoin any “unsafe or unsound” banking practices; ●to require that affirmative action be taken to correct any conditions resulting from any violation of law or unsafe or unsound practice; ●to issue an administrative order that can be judicially enforced against the bank; ●to require the bank to increase its capital; ●to restrict the bank’s growth; ●to assess civil monetary penalties against the bank or its officers or directors; ●to remove officers and directors of the bank; and ●if the federal agency concludes that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate abank’s deposit insurance, which in the case of a California state chartered bank would result in revocation of its charter and require it to ceaseits banking operations.Additionally, under California law the DBO has many of these same remedial powers with respect to FFB.Permissible Activities and SubsidiariesCalifornia law permits state chartered commercial banks to engage in any activity permissible for national banks. Those permissible activitiesinclude conducting many so-called “closely related to banking” or “nonbanking” activities either directly or through their operating subsidiaries.Federal Home Loan Bank SystemFFB is a member of the FHLB. Among other benefits, each regional Federal Home Loan Bank serves as a reserve or central bank for its memberswithin its assigned region and makes available loans or advances to its member banks. Each regional Federal Home Loan Bank is financed primarily from thesale of consolidated obligations of the overall Federal Home Loan Bank system. As an FHLB member, FFB is required to own a certain amount of capitalstock in the FHLB. At December 31, 2015, FFB was in compliance with the FHLB’s stock ownership requirement. Historically, the FHLB has paid dividendson its capital stock to its members.Federal Reserve Board Deposit Reserve RequirementsThe FRB requires all federally-insured depository institutions to maintain reserves at specified levels against their transaction accounts. AtDecember 31, 2015, FFB was in compliance with these requirements. 11Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Limitations and Restrictions on the Payment of Dividends and Other Transfers of Funds by FFB Cash dividends from FFB are one of the principal sources of cash (in addition to any cash dividends that might be paid to us by FFA) that isavailable to the Company for its operations and to fund any cash dividends that our board of directors might declare in the future. We are a legal entityseparate and distinct from FFB and FFB is subject to various statutory and regulatory restrictions on its ability to pay cash dividends to us. Those restrictionswould prohibit FFB, subject to certain limited exceptions, from paying cash dividends in amounts that would cause FFB to become undercapitalized.Additionally, the FDIC and the DBO have the authority to prohibit FFB from paying cash dividends, if either of those agencies deems the payment ofdividends by FFB to be an unsafe or unsound practice.The FDIC also has established guidelines with respect to the maintenance of appropriate levels of capital by banks under its jurisdiction.Compliance with the standards set forth in those guidelines and the restrictions that are or may be imposed under the prompt corrective action provisions offederal law could limit the amount of dividends which FFB may pay.Restrictions on Transactions between FFB and the Company and its other AffiliatesFFB is subject to Sections 23A and 23B of, and FRB Regulation W under, the Federal Reserve Act, which impose restrictions on (i) any extensionsof credit to, or the issuance of a guarantee or letter of credit on behalf of, the Company or any of its other subsidiaries; (ii) the purchase of or investments inCompany stock or other Company securities; (iii) the taking of Company securities as collateral for the loans that FFB makes; (iv) the purchase of assets fromthe Company or any of its other subsidiaries and (v) transactions between a bank and its financial subsidiaries, as well as other affiliates. Thus, under the finalrule, transactions between a bank and its financial subsidiary, as well as other affiliates, are subject to the requirements of sections 23A and 23B. Theserestrictions prevent the Company and any of its subsidiaries from obtaining borrowings or extensions of credit from FFB, unless the borrowings are securedby marketable obligations in designated amounts, and such secured loans and any investments by FFB in the Company or any of its subsidiaries are limited,individually, to 10% of FFB’s capital and surplus (as defined by federal regulations), and in the aggregate are limited to 20%, of FFB’s capital andsurplus. California law also imposes restrictions with respect to transactions involving the Company and any other persons that may be deemed under thatlaw to control FFB.The Dodd-Frank Act extended the application of Section 23A of the Federal Reserve Act to derivative transactions, repurchase agreementsand securities lending and borrowing transactions that create credit exposure to an affiliate or an insider of a bank. Any such transactions with any affiliatesmust be fully secured. In addition, the exemption from Section 23A for transactions with financial subsidiaries has been eliminated. The Dodd-Frank Actalso expands the definition of “affiliate” for purposes of quantitative and qualitative limitations of Section 23A of the Federal Reserve Act to include mutualfunds advised by a depository institution or any of its affiliates. Safety and Soundness StandardsBanking institutions may be subject to potential enforcement actions by the federal banking regulators for unsafe or unsound practices or forviolating any law, rule, regulation, or any condition imposed in writing by its primary federal banking regulatory agency or any written agreement with thatagency. The federal banking agencies have adopted guidelines designed to identify and address potential safety and soundness concerns that could, if notcorrected, lead to deterioration in the quality of a bank’s assets, liquidity or capital. Those guidelines set forth operational and managerial standards relatingto 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.In addition, the federal banking agencies have adopted safety and soundness guidelines with respect to the quality of loans and other assets ofinsured depository institutions. These guidelines provide standards for establishing and maintaining a system to identify problem loans and other problemassets and to prevent those assets from deteriorating. Under these standards, an FDIC-insured depository institution is expected to: ●conduct periodic asset quality reviews to identify problem loans and any other problem assets, estimate the inherent losses in those loans andother assets and establish reserves that are sufficient to absorb those estimated losses; 12Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ●compare problem loans and other problem asset totals to capital; ●take appropriate corrective action to resolve problem loans and other problem assets; ●consider the size and potential risks of material asset concentrations; and ●provide periodic quality reports with respect to their loans and other assets which provide adequate information for the bank’s managementand the board of directors to assess the level of risk to its loans and other assets.These guidelines also establish standards for evaluating and monitoring earnings and for ensuring that earnings are sufficient for the maintenanceof adequate capital and reserves.Regulatory Guidelines for Commercial Real Estate Loan ConcentrationsThe Federal Reserve and the FDIC have published guidelines that call for the adoption of heightened risk mitigation measures by insured bankswith a concentration of commercial real estate loans in its loan portfolio. The guidelines provide that a bank will be deemed to have a concentration ofcommercial real estate loans if (i) the total reported loans for construction, land development and other land represent 100% or more of the bank's totalcapital, or (ii) the total reported loans secured by multifamily and non-farm residential properties, plus loans for construction, land development and otherland, represent 300% or more of the bank’s total capital and the bank’s commercial real estate loan portfolio has increased by 50% or more during the prior36 months. If such a concentration exists, the guidelines call for the bank (x) to implement heightened risk assessment and risk management practices,including board and management oversight and strategic planning, (y) to implement and maintain stringent loan underwriting standards, and to use marketanalyses and stress testing tools to monitor the condition of the bank’s commercial real estate loan portfolio and to assess the impact that adverse economicconditions affecting the real estate markets could have on the bank’s financial condition and (z) if determined to be necessary on the basis of the results ofsuch stress tests, to increase its allowance for loan losses and its capital.Single Borrower Loan LimitationsCalifornia law imposes on all California state-chartered banks, including FFB, “single borrower loan limitations” which consist of the following: ·unsecured borrowings of any customer of a California state-chartered bank, together with the borrowings of any family members or affiliatesof the customer, to the bank may not exceed 15% of the sum of the bank’s shareholders’ equity, allowance for loan losses, capital notes anddebentures; and ·the aggregate of secured and unsecured borrowings of any customer of a California state-chartered bank, together with the borrowings of anyfamily members or affiliates of the customer, to the bank may not exceed 25% of the sum of the bank’s shareholders’ equity, allowance forloan losses, capital notes and debentures. Technology Risk Management and Consumer PrivacyFederal and state banking regulatory agencies have issued various policy statements focusing on the importance of technology risk managementand supervision in evaluating the safety and soundness of the banks they regulate. According to those policy statements, the use by banking organizationsof technology-related products, services, processes and delivery channels, such as the internet, exposes them to a number of risks which include operational,compliance, security, privacy, and reputational risk. The banking regulators generally expect the banking organizations they regulate to prudently managetechnology-related risks as part of their comprehensive risk management policies in order to identify, monitor, measure and control risks associated with theuse of technology.Pursuant to the Modernization Act, the federal banking agencies have adopted rules and established standards to be followed in implementingsafeguards that are designed to ensure the security and confidentiality of customer records and information, protection against any anticipated threats orhazards to the security or integrity of such records and protection against unauthorized access to or use of such records or information in a way that couldresult in substantial harm or inconvenience to a customer. Among other requirements, these rules require each bank organization to implement acomprehensive written information security program that includes administrative, technical and physical safeguards relating to customer information.In addition, the Modernization Act requires banking organizations to provide each of their customers with a notice of their privacy policies andpractices and prohibits a banking organization from disclosing nonpublic personal information about a customer to nonaffiliated third parties unless thebanking organization satisfies various notice and “opt-out” requirements and the customer has not chosen to opt out of the disclosure. Additionally, thefederal banking agencies are authorized to issue regulations as necessary to implement those notice requirements and non-disclosure restrictions. Morespecifically, the Modernization Act privacy regulations 13Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. require all banking organizations to develop initial and annual privacy notices that describe in general terms the banking organization’s information sharingpractices. Any banking organization that shares nonpublic personal information about customers with nonaffiliated third parties must also provide customerswith notices advising them that, subject to certain limited exceptions, the customer has the opportunity and a reasonable time period to inform the bank thatit may not share the customer’s nonpublic personal information with nonaffiliates of the bank. These regulations also place limitations on the extent towhich a banking organization may disclose an account number or access code for credit card, deposit, or transaction accounts to any nonaffiliated third partyfor use in marketing such programs.Capital Adequacy and Prompt Corrective Action Provisions of the FDIC Improvement ActCapital Adequacy Guidelines. The Federal Deposit Insurance Corporation Improvement Act of 1991 (the “FDICIA”), established a frameworkfor regulation of federally insured depository institutions, including banks, and their parent holding companies and other affiliates, by their federal bankingregulators. Among other things, FDICIA requires the relevant federal banking regulator to take “prompt corrective action” with respect to a depositoryinstitution if that institution does not meet certain capital adequacy standards, including requiring the prompt submission by that bank of an acceptablecapital restoration plan if its bank regulator has concluded that it needs additional capital.Supervisory actions by a bank’s federal regulator under the prompt corrective action rules generally depend upon an institution’s classificationwithin one of five capital categories, which is determined on the basis of a bank’s Tier 1 leverage ratio, Tier 1 capital ratio and total capital ratio. Tier 1capital consists principally of common stock and nonredeemable preferred stock and retained earnings.Under FDICIA regulations, an insured depository institution’s capital category will depend upon how its capital levels compare with these capitalmeasures and the other factors established by the relevant federal banking regulator. Prior to January 1, 2015, those regulations provided that a bank wouldbe classified as: ●“well capitalized” if it had a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater and aTier 1 leverage ratio of 5.0% or greater, and was not subject to any order or written directive by any such regulatory agency to meet andmaintain a specific capital level for any capital measure; ●“adequately capitalized” if it had a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 4.0% or greater,and a Tier 1 leverage ratio of 4.0% or greater, but was not “well capitalized”; ●“undercapitalized” if it had a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio of less than 4.0% and aTier 1 leverage ratio of less than 4.0%; ●“significantly undercapitalized” if it had a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than3.0%, or a Tier 1 leverage ratio of less than 3.0%; and ●“critically undercapitalized” if its tangible equity was equal to or less than 2.0% of average quarterly tangible assets.Effective January 1, 2016, to be “well-capitalized” under FDICIA, a bank must also have a common equity Tier 1 risk-based capital ratio of at least6.5% and a Tier 1 ratio of 8.0% or greater. However, if a bank that was classified as “well-capitalized” is determined (after notice and opportunity for hearing), by its federal bankingregulator, to be in an unsafe or unsound condition or to be engaging in an unsafe or unsound practice, that agency could, under certain circumstances,reclassify the bank as adequately capitalized. The federal banking regulator of a bank that is classified as adequately capitalized or undercapitalized couldrequire the bank to comply with bank supervisory provisions and restrictions that would apply to a bank in the next lower capital classification, if thebanking regulator has obtained supervisory information regarding the bank (other than with respect to its capital levels) which raises safety or soundnessconcerns. However, a significantly undercapitalized bank may not be treated by its regulatory agency as critically undercapitalized by reason of such safetyor soundness concerns alone.The capital classification of a bank affects the frequency of examinations of the bank by its primary federal bank regulatory agency, impacts theability of the bank to engage in certain activities and affects the deposit insurance premiums that are payable by the bank. Under FDICIA, the federalbanking regulators are required to conduct a full-scope, on-site examination of every bank at least once every 12 months. Corrective Measures for Undercapitalized Banks. FDICIA generally prohibits a bank from paying any dividends or making any capitaldistributions or paying any management fee to its parent holding company if the bank would thereafter be “undercapitalized.” In addition“undercapitalized” banks are subject to growth limitations and are required to submit a capital 14Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. restoration plan for approval by its federal regulatory agency. However, that agency may not approve the bank’s capital restoration plan unless the agencydetermines, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the bank’s capital. An undercapitalized bank which fails to submit, or fails to obtain the approval by its federal banking regulator of a capital restoration plan will betreated as if it is “significantly undercapitalized.” In that event, the bank’s federal banking regulator may impose a number of additional requirements andrestrictions on the bank, including orders or requirements (i) to sell sufficient voting stock to become “adequately capitalized,” (ii) to reduce its total assets,and (iii) cease the receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver orconservator.If an undercapitalized bank is a subsidiary of a bank holding company, then, for its capital restoration plan to be approved, the bank’s parentholding company must guarantee that the bank will comply with, and provide assurances of the performance by the bank of, its capital restorationplan. Under such a guarantee and assurance of performance, if the bank fails to comply with its capital restoration plan, the parent holding company maybecome subject to liability for such failure in an amount up to the lesser of (i) 5.0% of its bank subsidiary’s total assets at the time it became undercapitalized,or (ii) the amount that is necessary (or would have been necessary) to bring the bank into compliance with all applicable capital standards as of the time itfailed to comply with the plan.Corrective Measures for Significantly and Critically Undercapitalized Banks. If a bank is classified as “significantly undercapitalized” or“critically undercapitalized,” its federal banking regulator would be required to take one or more prompt corrective actions that would, among other thingsrequire the bank to (i) raise additional capital by means of sales of common stock or nonredeemable preferred shares, (ii) improve its management, (iii) limitthe interest rates it may pay on deposits, (iv) altogether prohibit transactions by the bank with its affiliates, (v) terminate certain activities that pose undue orunreasonable risks, and (vi) restrict the compensation being paid to its executive officers. If a bank is classified as critically undercapitalized, FDICIArequires the bank to be placed into conservatorship or receivership within 90 days, unless its federal banking regulatory agency determines that there areother measures that would enable the bank, within a relatively short period of time, to increase its capital in an amount sufficient to improve its capitalclassification under the prompt corrective action framework.New Basel III Capital RulesPrior to 2015, the risk-based capital rules applicable to domestic banks and bank holding companies were based on the 1988 capital accord of theInternational Basel Committee on Banking Supervision (the “Basel Committee”), which is comprised of central banks and bank supervisors and regulatorsfrom the major industrialized countries. The Basel Committee develops broad policy guidelines for use by each country’s banking regulators in determiningthe banking supervisory policies and rules they apply. In December 2010, the Basel Committee issued a new set of international guidelines for determiningregulatory capital, known as “Basel III”. In June 2012, the FRB issued, for public comment, three notices of proposed rulemaking which, if adopted, wouldhave made significant changes, consistent with the Basel III guidelines, to the regulatory risk-based capital and leverage requirements for banks and bankholding companies in the United States.In July 2012, the FRB adopted final rules (the “New Capital Rules”) establishing a new comprehensive capital framework for U.S. bankingorganizations, and the FDIC subsequently adopted substantially identical rules. The rules implement the Basel Committee’s December 2010 framework forstrengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The New Capital Rules substantially revised the risk-basedcapital requirements applicable to U.S. banking organizations, including the Company and FFB, from the prior U.S. risk-based capital rules, redefined thecomponents of capital and addressed other issues affecting the capital ratios applicable to banking organizations. The New Capital Rules also replaced theexisting approach used in risk-weighting of a banking organization’s assets with a more risk-sensitive approach. The New Capital Rules became effective forthe Company and FFB on January 1, 2015 (subject, in the case of certain of those Rules, to phase-in periods).Among other things, the New Capital Rules (i) introduced a new capital measure called “Common Equity Tier 1” (“CET-1”), (ii) specified thatTier 1 capital consists of CET-1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) made most deductions and adjustments toregulatory capital measures applicable to CET-,1 and not to the other components of capital, and expanded the scope of the deductions and adjustments fromcapital as compared to the prior capital rules, thus potentially requiring banking organizations to achieve and maintain higher levels of CET-1 in order tomeet minimum capital ratios. 15Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Under the New Capital Rules, the minimum capital ratios (including the applicable increment of the capital conservation buffer discussed below)as of January 1, 2016 are as follows:CET-1 to risk-weighted assets 5.125%Tier 1 capital (i.e., CET-1 plus Additional Tier 1) to risk-weighted assets 6.625%Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets 8.625%Tier 1 capital-to-average consolidated assets as reported on consolidated financial statements(1) 4.0% (1)Commonly referred to as a banking institution’s “leverage ratio”.When fully phased in on January 1, 2019, the New Capital Rules also will require the Company and FFB, as well as most other bank holdingcompanies and banks, to maintain a 2.5% “capital conservation buffer,” on top of the minimum risk-weighted asset ratios set forth in the above table. Thiscapital conservation buffer will have the effect of increasing (i) the CET-1-to-risk-weighted asset ratio to 7.0%, (ii) the Tier 1 capital-to-risk-weighted assetratio to 8.5%, and (iii) the Total capital-to-risk weighted asset ratio to 10.5%.The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking organizations with risk-weighted assetratios above the minimum, but below the capital conservation buffer, will face constraints on dividends, equity repurchases and executive compensationbased on the amount of the shortfall. The implementation of the capital conservation buffer will begin on January 1, 2016 at 0.625%, and will increase by0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.The New Capital Rules provide for a number of deductions from and adjustments to CET-1. These include, for example, the requirement thatmortgage servicing rights, deferred tax assets dependent upon future taxable income, and significant investments in common equity issued bynonconsolidated financial entities, be deducted from CET-1 to the extent that any one such category exceeds 10% of CET-1 or all such categories, in theaggregate, exceed 15% of CET-1. Other deductions and adjustments to CET-1 will be phased in incrementally between January 1, 2015 and January 1,2018. On the other hand, the impact of these deductions and adjustments may be mitigated prior to or during the phase-in period by the determination ofother than temporary impairments (“OTTI”) and additional accumulation of retained earnings. Under current capital standards, the effects of certain items ofAccumulated Other Comprehensive Income (“AOCI”) included in capital are excluded for purposes of determining regulatory capital ratios. By contrast,under the New Capital Rules, the effects of certain items of AOCI will not be excluded. However, most banking organizations, including the Company andFFB, were entitled to make a one-time permanent election, not later than the call report for the quarter ended March 31, 2015, to continue to exclude theseitems from capital. In 2015, we elected to continue this exclusion.The New Capital Rules require that trust preferred securities be phased out from Tier 1 capital by January 1, 2016, except in the case of bankingorganizations with total consolidated assets of less than $15 billion, which will be permitted to include trust preferred securities issued prior to May 19, 2010in Tier 1 capital, subject to a limit of 25% of tier 1 capital elements.The New Capital Rules prescribe a standardized approach for calculating risk-weighted assets that expand the risk-weighting categories from theformer four Basel I-derived categories (0%, 20%, 50% and 100%) to larger and a greater number of risk-sensitive categories, depending on the nature of theassets, generally ranging from 0% for U.S. Government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for avariety of asset categories. In addition, the New Capital Rules also provide more advantageous risk weights for derivatives and repurchase-style transactionscleared through a qualifying central counterparty and increase the scope of eligible guarantors and eligible collateral for purposes of credit risk mitigation.The Deposit Insurance Fund and FDIC Deposit Insurance PremiumsThe FDIC insures the deposits of the customers of all FDIC insured depository institutions up to prescribed limits for each depositor through aDeposit Insurance Fund (the “DIF”), from which it makes deposit insurance payments to depositors of failed depository institutions and from which it fundsthe costs incurred and against which it charges the losses sustained in connection with the closure or other resolution of those institutions. Due to higherlevels of bank failures resulting from the recent recession and credit crisis, the insurance payments and the resolution costs increased significantly and largelydepleted the DIF. In order to restore the DIF to a statutorily mandated minimum of 1.35% of total deposits which it insures (as compared to 1.15% prior toDodd-Frank), the FDIC has increased deposit insurance premium rates. The FDIC uses a risk-based system to determine a depository institution’s insurancepremium rate based on the institution’s classification. Institutions assigned to higher risk classifications (that is, institutions that pose a higher risk of loss tothe DIF) pay premiums at higher rates than institutions that pose a lower risk. A depository institution’s risk classification is assigned based primarily on itscapital levels and the level of supervisory concern which the institution poses to the DIF. The FDIC also has the authority, under certain circumstances, tofurther increase the insurance premium rates of depository 16Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. institutions. Any increase in FDIC insurance premiums assessed on FFB in the future would increase our noninterest expense and thereby reduce ourprofitability.Additionally, all FDIC-insured institutions are required to pay assessments to the FDIC to fund interest payments on bonds issued by the FinancingCorporation (“FICO”), an agency of the Federal government established to recapitalize the predecessor to the DIF. The FICO assessment rates, which aredetermined quarterly, averaged 0.066% of insured deposits in fiscal 2015. These assessments will continue until the FICO bonds mature in 2017.Community Reinvestment Act and Fair Lending DevelopmentsLike all other federally regulated banks, FFB is subject to fair lending requirements and the evaluation of its small business operations under theCRA. The CRA generally requires the federal banking regulatory agencies to evaluate the record of a bank in meeting the credit needs of its localcommunities, including those of low and moderate income neighborhoods in its service area. A bank’s compliance with its CRA obligations is based on aperformance-based evaluation system which determines the bank’s CRA ratings on the basis of its community lending and community developmentperformance. A bank may have substantial penalties imposed on it and generally will be required to take corrective measures in the event it fails to meet itsobligations under the CRA. Federal banking agencies also may take compliance with the CRA and other fair lending laws into account when regulating andsupervising other activities of a bank or its bank holding company. Moreover, when a bank holding company files an application for approval to acquire abank or another bank holding company, the federal banking regulatory agency to which the application is assigned will review the CRA assessment of thesubsidiary bank or banks of the applicant bank holding company, and a low CRA rating may be the basis for requiring the applicant’s bank subsidiary to takecorrective actions to improve its CRA performance as a condition to the approval of the acquisition or as a basis for denying the application altogether.USA Patriot Act of 2001 and Bank Secrecy ActIn October 2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism of 2001(the “USA Patriot Act”) was enacted into law in response to the September 11, 2001 terrorist attacks. The USA Patriot Act was adopted to strengthen theability of U.S. law enforcement and intelligence agencies to work cohesively to combat terrorism on a variety of fronts. Of particular relevance to banks andother federally insured depository institutions are the USA Patriot Act’s sweeping anti-money laundering and financial transparency provisions and variousrelated implementing regulations that: ●establish due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts and foreigncorrespondent accounts; ●prohibit U.S. institutions from providing correspondent accounts to foreign shell banks; ●establish standards for verifying client identification at account opening; and ●set rules to promote cooperation among financial institutions, regulatory agencies and law enforcement entities in identifying parties thatmay be involved in terrorism or money laundering.Under implementing regulations issued by the U.S. Treasury Department, banking institutions are required to incorporate a client identificationprogram into their written money laundering plans that includes procedures for: ●verifying the identity of any person seeking to open an account, to the extent reasonable and practicable; ●maintaining records of the information used to verify the person’s identity; and ●determining whether the person appears on any list of known or suspected terrorists or terrorist organizations.The Company and FFB also are subject to the federal Bank Secrecy Act of 1970, as amended (the “Bank Secrecy Act”), which establishesrequirements for recordkeeping and reporting by banks and other financial institutions designed to help identify the source, volume and movement ofcurrency and monetary instruments into and out of the United States to help detect and prevent money laundering and other illegal activities. The BankSecrecy Act requires financial institutions to develop and maintain a program reasonably designed to ensure and monitor compliance with its requirements,to train employees to comply with and to test the effectiveness of the program. Any failure to meet the requirements of the Bank Secrecy Act can result in theimposition of substantial penalties and in adverse regulatory action against the offending bank. FFI and FFB have each adopted policies and procedures tocomply with the Bank Secrecy Act.Consumer Laws and Regulations 17Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company and FFB are subject to a broad range of federal and state consumer protection laws and regulations prohibiting unfair or fraudulentbusiness practices, untrue or misleading advertising and unfair competition. Those laws and regulations include: ●The Home Ownership and Equity Protection Act of 1994, which requires additional disclosures and consumer protections to borrowersdesigned 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 andfinancial services businesses to adopt practices and procedures designed to help deter identity theft, including developing appropriate fraudresponse 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 comparecredit terms more readily and knowledgeably. ●The Equal Credit Opportunity Act, which generally prohibits, in connection with any consumer or business credit transactions, discriminationon the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), or the fact that a borrower isreceiving 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 applicantand 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 realestate 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 floodinsurance. ●The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, which requires mortgage loan originator employees of federallyinsured institutions to register with the Nationwide Mortgage Licensing System and Registry, a database created by the states to support thelicensing of mortgage loan originators, prior to originating residential mortgage loans.Consumer Financial Protection BureauThe Dodd-Frank Act created a new, independent federal agency, called the Consumer Financial Protection Bureau, which has been granted broadrulemaking, 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 provisionsof the Gramm-Leach-Bliley Act and certain other statutes. The CFPB has examination and primary enforcement authority with respect to the compliance bydepository institutions with $10 billion or more in assets with federal consumer protection laws and regulations. Smaller institutions are subject to rulespromulgated by the CFPB, but continue to be examined and supervised by federal banking regulators for consumer compliance purposes. The CFPB hasauthority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial products. The Dodd-Frank Act also(i) authorizes the CFPB to establish certain minimum standards for the origination of residential mortgages, including a determination of the borrower’sability to repay, and (ii) will allow borrowers to raise certain defenses to foreclosure if they receive any loan other than a “qualified mortgage” as defined bythe CFPB. The Dodd-Frank Act permits states to adopt consumer protection laws and standards that are more stringent than those adopted at the federal leveland, in certain circumstances, permits state attorneys general to enforce compliance with both the state and federal financial consumer protection laws andregulations.In January 2013, the CFPB approved certain mortgage lending reform regulations impacting the Truth in Lending Act (the “TILA”) and the RealEstate Settlement Procedures Act (“RESPA”). Among other things, those reforms: ●expand the population of loans that are subject to higher cost loan regulations and additional disclosures; ●prohibit the payment of compensation to mortgage brokers based on certain fees or premiums, such as yield spread premiums, payable by orcharged to home borrowers; ●increase the regulation of mortgage servicing activities, including with respect to error resolution, forced-placement insurance and lossmitigation and collection activities; 18Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ●require financial institutions to make a reasonable and good faith determination that the borrower has the ability to repay the residentialmortgage loan before it is approved for funding and provides that the failure of a financial institution to make such a determination willentitle the borrower to assert that failure as a defense to any foreclosure action on the mortgage loan; and ●impose appraisal requirements for high cost loans and loans secured by first mortgage liens on residential real estate.The CFPB also issued final rules for residential mortgage lending, which became effective January 10, 2014, including definitions for “qualifiedmortgages” and detailed standards by which leaders must satisfy themselves of the borrower’s ability to repay the loan and revised forms of disclosure underthe TILA and RESPA. New CFPB disclosure rules for residential mortgages went into effect in October 2015.Debit Card FeesThe Dodd-Frank Act provides that the amount of any interchange fee charged by a debit card issuer with respect to a debit card transaction must bereasonable and proportional to the cost incurred by the card issuer and requires the FRB to establish standards for reasonable and proportional fees whichmay take into account the costs of preventing fraud. As a result, the FRB adopted a rule, effective October 1, 2011, which limits interchange fees on debitcard transactions to a maximum of 21 cents per transaction plus 5 basis points of the transaction amount. A debit card issuer may recover an additional onecent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements prescribed by the FRB. Although, as atechnical matter, this new limitation applies only to institutions with assets of more than $10 billion, it is expected that many smaller institutions will reducetheir interchange fees in order to remain competitive with the larger institutions that are required to comply with this new limitation.First Foundation AdvisorsRegistered Investment Adviser RegulationFFA is a registered investment adviser under the Investment Advisers Act and the SEC’s regulations promulgated thereunder. The Investment AdvisersAct imposes numerous obligations on registered investment advisers, including fiduciary, recordkeeping, operational, and disclosure obligations. FFA is alsosubject to regulation under the securities laws and fiduciary laws of certain states and to Employee Retirement Income Security Act of 1974 (“ERISA”), andto regulations promulgated thereunder, insofar as it is a “fiduciary” under ERISA with respect to certain of its clients. ERISA and the applicable provisions ofthe Code, impose certain duties on persons who are fiduciaries under ERISA, and prohibit certain transactions by the fiduciaries (and certain other relatedparties) to such plans. The foregoing laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit orrestrict FFA from conducting its business in the event that it fails to comply with such laws and regulations. Possible sanctions that may be imposed in theevent of such noncompliance include the suspension of individual employees, limitations on the business activities for specified periods of time, revocationof registration as an investment adviser and/or other registrations, and other censures and fines. Changes in these laws or regulations could have a materialadverse impact on the profitability and mode of operations of FFI and its subsidiaries.Future LegislationCongress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enactlegislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agenciesalso periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact ofpending or future legislation or regulations, or the application thereof, cannot be predicted, although enactment of the proposed legislation could impact theregulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us toincrease our regulatory capital, modify our business strategy and limit our ability to pursue business opportunities in an efficient manner.EmployeesAs of December 31, 2015, the Company had approximately 295 full-time employees.Available InformationThe Company’s annual reports on Form 10-K, the proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendmentsto 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 ourwebsite at www.ff-inc.com as soon as reasonably practicable after the Company 19Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. electronically files such material with, or furnishes it to, the SEC. These reports are also available for free on the SEC’s website at www.sec.gov. Additionally,these reports can be found and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549, or by calling the SEC at 1-800-SEC-0330. All website addresses given in this report are for information only and are not intended to be an active link or to incorporate any website informationinto this report. Item 1A.Risk FactorsOur business is subject to a number of risks and uncertainties that could prevent us from achieving our business objectives and could hurt ourfuture financial performance and the price performance of our common stock. Such risks and uncertainties also could cause our future financial condition andfuture financial performance to differ significantly from our current expectations, which are described in the forward-looking statements contained in thisreport. Those risks and uncertainties, many of which are outside of our ability to control or prevent, include the following:Risks Related to Our BusinessWe could incur losses on the loans we make.Loan defaults and the incurrence of losses on loans are inherent risks in our business. The incurrence of loan losses necessitate loan charge-offsand write-downs in the carrying values of a banking organization’s loans and, therefore, can adversely affect its results of operations and financialcondition. Accordingly, our results of operations will be directly affected by the volume and timing of loan losses, which for a number of reasons can varyfrom 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 regionalbusiness downturns. If there is a sustained weakness or further weakening in business and economic conditions generally or specifically in the principalmarkets 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 andasset write-downs could increase, 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 in the United States, we maintain an allowance for loanand lease losses (“ALLL”) to provide for loan and lease defaults and non-performance and a reserve for unfunded loan commitments, which, when combined,we refer to as the allowance for credit losses. Our allowance for credit losses may not be adequate to absorb actual credit losses, and future provisions forcredit losses could materially and adversely affect our operating results. Our allowance for credit losses is based on prior experience and an evaluation of therisks inherent in the current portfolio. 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 federal and state regulators, as anintegral part of their examination process, review our loans and leases and allowance for credit losses. While we believe our allowance for credit losses isappropriate for the risk identified in our loan and lease portfolio, we cannot provide assurance that we will not further increase the allowance for credit losses,that it will be sufficient to address losses, or that regulators will not require us to increase this allowance. Any of these occurrences could materially andadversely affect our financial condition and results of operations.Our business and operations may be adversely affected in numerous and complex ways by weak economic conditions.Our businesses and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers inthe form of deposits and investing in securities, are sensitive to general business and economic conditions in the United States. If the United States economyweakens, our growth and profitability from our lending, deposit and investment operations could be constrained. Uncertainty about the federal fiscalpolicymaking process, the medium and long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers andinvestors in the United States. In addition, economic conditions in foreign countries could affect the stability of global financial markets, which could hinderUnited States economic growth. Weak economic conditions are characterized by deflation, fluctuations in debt and equity capital markets, a lack of liquidityand/or depressed prices in the secondary market for loans, increased delinquencies on mortgage, consumer and commercial loans, residential and commercialreal estate price declines and lower home sales and commercial activity. The current economic environment is also characterized by interest rates athistorically low levels, which impacts our ability to attract deposits and to generate attractive earnings through our investment portfolio. All of these factorsare detrimental to our business, and the interplay between these factors can be complex and unpredictable. Adverse economic conditions and governmentpolicy responses to such conditions could have a material adverse effect on our business, financial condition and results of operations. 20Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our banking, investment advisory and wealth management operations are geographically concentrated in California, Nevada and Hawaii,leading to significant exposure to those markets.Our business activities and credit exposure, including real estate collateral for many of our loans, are concentrated in California, Nevada andHawaii, as approximately 95% of the loans in our loan portfolio were made to borrowers who live and/or conduct business in those states. This geographicconcentration imposes risks from lack of geographic diversification. Difficult economic conditions, including state and local government deficits, inCalifornia, Nevada and Hawaii may affect our business, financial condition, results of operations and future prospects, where adverse economicdevelopments, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosurelosses on loans and reduce the value of our loans and loan servicing portfolio. Any regional or local economic downturn that affects California, Nevada orHawaii or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and more adversely thanour competitors whose operations are less geographically concentrated.Changes in interest rates could reduce our net interest margins and net interest income.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 andborrowings. However, interest rates are highly sensitive to many factors that are beyond our control, including (among others) general and regional and localeconomic conditions, the monetary policies of the Federal Reserve, bank regulatory requirements, competition from other banks and financial institutionsand a change over time in the mix of our loans, investment securities, on the one hand, and on our deposits and other liabilities, on the other hand. Changesin monetary policy will, in particular, influence the origination and market value of and the yields we can realize on loans and investment securities and theinterest we pay on deposits. Additionally, sustained low levels of market interest rates, as we have experienced during the past five years, could continue toplace downward pressure on our net interest margins and, therefore, on our earnings. Our net interest margins and earnings also could be adversely affected ifwe are unable to adjust our interest rates on loans and deposits on a timely basis in response to changes in economic conditions or monetary policies. Forexample, 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 ofinterest we charge on loans or the yields we realize on investments and other interest-earning assets, our net interest income and, therefore, our earnings willdecrease. On the other hand, increasing interest rates generally lead to increases in net interest income; however, such increases also may result in a reductionin loan originations, declines in loan prepayment rates and reductions in the ability of borrowers to repay their current loan obligations, which could result inincreased loan defaults and charge-offs and could require increases to our ALLL, thereby offsetting either partially or totally the increases in net interestincome resulting from the increase in interest rates. Additionally, we could be prevented from increasing the interest rates we charge on loans or fromreducing the interest rates we offer on deposits due to “price” competition from other banks and financial institutions with which we compete. Conversely, ina declining interest rate environment, our earnings could be adversely affected if the interest rates we are able to charge on loans or other investments declinemore quickly than those we pay on deposits and borrowings.Real estate loans represent a high percentage of the loans we make, making our results of operations vulnerable to downturns in the realestate market.At December 31, 2015, loans secured by multifamily and commercial real estate represented approximately 56% of our outstanding loans. Therepayment of such loans is highly dependent on the ability of the borrowers to meet their loan repayment obligations to us, which can be adversely affectedby economic downturns that can lead to (i) declines in the rents and, therefore, in the cash flows generated by those real properties on which the borrowersdepend to fund their loan payments to us, and (ii) decreases in the values of those real properties, which make it more difficult for the borrowers to sell thosereal properties for amounts sufficient to repay their loans in full. As a result, our operating results are more vulnerable to adverse changes in the real estatemarket than other financial institutions with more diversified loan portfolios and we could incur losses in the event of changes in economic conditions thatdisproportionately affect the real estate 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 assetsand to fund deposit withdrawals that occur in the ordinary course of our business. Our principal sources of liquidity include earnings, deposits, FHLBborrowings, 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 ofour equity securities or from borrowings that we may obtain. If the ability to obtain funds from these sources becomes limited or the costs of those fundsincrease, whether due to factors that affect us specifically, including our financial performance, or due to factors that affect the financial services industry ingeneral, including weakening economic conditions or negative views and expectations about the prospects for the financial services industry as a whole,then our ability to grow our banking and investment advisory and wealth management businesses would be harmed, which could have a material adverseeffect on our business, financial condition, results of operations and prospects. 21Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We may not be able to maintain a strong core deposit base or other low-cost funding sources.We depend on checking, savings and money market deposit account balances and other forms of customer deposits as our primary source offunding for our lending activities. Our future growth will largely depend on our ability to maintain and grow a strong deposit base. There is no assurance thatwe will be able to grow and maintain our deposit base. The account and deposit balances can decrease when customers perceive alternative investments,such as the stock market, as providing a better risk/return tradeoff. If customers move money out of bank deposits and into investments (or similar depositproducts at other institutions that may provide a higher rate of return), we could lose a relatively low cost source of funds, increasing our funding costs andreducing our net interest income and net income. Additionally, any such loss of funds could result in lower loan originations, which could materiallynegatively impact our growth strategy.Our 6 largest deposit clients account for 24% of our total deposits.As of December 31, 2015, our 6 largest bank depositors accounted for, in the aggregate, 24% of our total deposits. As a result, a material decrease inthe volume of those deposits by a relatively small number of our depositors could reduce our liquidity, in which event it could became necessary for us toreplace those deposits with higher-cost deposits, lower-yielding securities or FHLB borrowings, which would adversely affect our net interest income and,therefore, our results of operations.Although we plan to grow our business by acquiring other banks, there is no assurance that we will succeed in doing so.One of the key elements of our business plan is to grow our banking franchise and increase our market share, and for that reason, we intend to takeadvantage of opportunities to acquire other banks. However, there is no assurance that we will succeed in doing so. Our ability to execute on our strategy toacquire other banks may require us to raise additional capital and to increase FFB’s capital position to support the growth of our banking franchise, and willalso depend on market conditions, over which we have no control. Moreover, any bank acquisitions will require the approval of our bank regulators andthere can be no assurance that we will be able to obtain such approvals on acceptable terms, if at all.Our acquisitions may subject us to unknown risks.Certain events may arise after the date of an acquisition, or we may learn of certain facts, events or circumstances after the closing ofan acquisition, that may affect our financial condition or performance or subject us to risk of loss. These events include, but are not limited to:litigation resulting from circumstances occurring at the acquired entity prior to the date of acquisition; loan downgrades and credit loss provisionsresulting from underwriting of certain acquired loans determined not to meet our credit standards; personnel changes that cause instability within adepartment; delays in implementing new policies or procedures or the failure to apply new policies or procedures; and other events relating to theperformance of our business. Acquisitions involve inherent uncertainty and we cannot determine all potential events, facts and circumstances thatcould result in loss or increased costs or give assurances that our due diligence or mitigation efforts will be sufficient to protect against any suchloss or increased costs.Our ability to execute strategic activities successfully will depend on a variety of factors. These factors likely will vary based on thenature of the activity but may include our success in integrating the operations, services, products, personnel and systems of an acquiredcompany into our business, operating effectively with any partner with whom we elect to do business, retaining key employees, achievinganticipated synergies, meeting expectations and otherwise realizing the undertaking's anticipated benefits. Our ability to address these matterssuccessfully cannot be assured. In addition, our strategic initiatives may divert resources or management's attention from ongoing businessoperations and may subject us to additional regulatory scrutiny. If we do not successfully execute a strategic undertaking, it could adversely affectour business, financial condition, results of operations, reputation, regulatory relationships and growth prospects. In addition, if we determined thatthe value of an acquired business had decreased and that the related goodwill was impaired, an impairment of goodwill charge to earnings wouldbe recognized. To the extent we issue capital stock in connection with additional transactions, these transactions and related stock issuancesmay have a dilutive effect on book value, earnings per share and share ownership.Growing our banking business may not increase our profitability and may adversely affect our future operating results.Since we commenced our banking business in October 2007, we have grown our banking franchise and now have nine branch offices and threeloan production offices in California, Nevada and Hawaii. We plan to continue to grow our banking business both organically and through acquisitions ofother banks. However, the implementation of our growth strategy poses a number of risks for us, including: 22Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ●the risk that any newly established wealth management offices will not generate revenues in amounts sufficient to cover the start-up costs ofthose offices, which would reduce our earnings; ●the risk that any bank acquisitions we might consummate in the future will prove not to be accretive to or may reduce our earnings if we donot realize anticipated cost savings or if we incur unanticipated costs in integrating the acquired banks into our operations or if a substantialnumber of the clients of any of the acquired banks move their banking business to our competitors; ●the risk that such expansion efforts will divert management time and effort from our existing banking operations, which could adversely affectour future financial performance; and ●the risk that the additional capital which we may need to support our growth or the issuance of shares in any bank acquisitions will bedilutive of the investments that our existing stockholders have in the shares of our common stock that they own and in their respectivepercentage ownership interests they have in the Company.We may not have the ability to attract capital necessary to maintain regulatory ratios and fund growth.We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments andbusiness needs, particularly if our asset quality or earnings were to deteriorate. Our ability to raise additional capital, if needed, will depend on severalthings, especially conditions in the capital markets at that time, that are outside of our control, as well as our own financial performance. Economicconditions and the loss of confidence in financial institutions may increase our cost of funds and limit our access to some customary sources of capital. Wecannot provide assurances that such capital will be available on acceptable terms or at all. Any occurrence that may limit our access to the capital markets,such as a decline in the confidence of debt purchasers, our depositors, or counterparties participating in the capital markets may adversely affect our capitalcosts, ability to raise capital, and liquidity. Moreover, if we need to raise capital in the future, we may have to do so when many other financial institutionsare also seeking to raise capital which, in turn, would require that we compete with those other institutions for investors. An inability to raise additionalcapital on acceptable terms when needed could have a materially adverse effect on our financial condition and results of operations.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 aresubstantial risks and uncertainties associated with these efforts. We may invest significant time and resources in developing and marketing new lines ofbusiness and/or new products and services. Initial timetables for the introduction and development of new lines of business and/or new products or servicesmay not be achieved and price and profitability targets may not prove feasible or may be dependent on identifying and hiring a qualified person to lead thedivision. In addition, existing management personnel may not have the experience or capacity to provide effective oversight of new lines of business and/ornew products and services.External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successfulimplementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have asignificant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementationof new lines of business or new products or services could have a material adverse effect on our business, results of operations, financial condition andprospects.A reduction in demand for our products and our failure to adapt to such a reduction could adversely affect our business, results of operationsand financial condition.The demand for the products that we offer may be reduced due to a variety of factors, such as demographic patterns, changes in customerpreferences or financial conditions, regulatory restrictions that decrease customer access to particular products, or the availability of competing products.Should we fail to adapt to significant changes in our customers’ demand for, or access to, our products, our revenues could decrease significantly and ouroperations could be harmed. Even if we do make changes to existing products or introduce new products to fulfill customer demand, customers may resistsuch changes or may reject such products. Moreover, the effect of any product change on the results of our business may not be fully ascertainable until thechange 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 toour business, results of operations, and financial condition.We face intense competition from other banks and financial institutions and other wealth and investment management firms that could hurtour business. 23Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 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 also compete with other financial service businesses, including investmentadvisory and wealth management firms, mutual fund companies, and securities brokerage and investment banking firms that offer competitive banking andfinancial products and services as well as products and services that we do not offer. Larger banks and many of those other financial service organizationshave greater financial and marketing resources that enable them to conduct extensive advertising campaigns and to shift resources to regions or activities ofgreater potential profitability. They also have substantially more capital and higher lending limits, which enable them to attract larger clients and offerfinancial products and services that we are unable to offer, putting us at a disadvantage in competing with them for loans and deposits and investmentmanagement clients. If we are unable to compete effectively with those banking or other financial services businesses, we could find it more difficult toattract new and retain existing clients and our net interest margins, net interest income and investment management advisory fees could decline, which wouldadversely affect our results of operations and could cause us to incur losses in the future.In addition, our ability to successfully attract and retain investment advisory and wealth management clients is dependent on our ability tocompete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities. If we are notsuccessful in retaining existing and attracting new investment management clients, our business, financial condition, results of operations and prospects maybe materially and adversely affected.The loss of key personnel or inability to attract additional personnel could hurt our future financial performance.We currently depend heavily on the contributions and services provided by Rick Keller, our Executive Chairman, Scott Kavanaugh, ChiefExecutive Officer of FFI and FFB, David DePillo, President of FFB, John Hakopian, President of FFA, and John Michel, Chief Financial Officer of FFI, FFBand FFA, as well as a number of other key management personnel. Our future success also will depend, in part, on our ability to retain our existing, andattract additional, qualified private banking officers, relationship managers and investment advisory personnel. Competition for such personnel is intense. Ifwe are not successful in retaining and attracting key personnel, our ability to retain existing clients or attract new clients could be adversely affected and ourbusiness, financial condition, results of operations or prospects could as a result be significantly harmed.We are required to make significant estimates and assumptions in the preparation of our financial statements and our estimates andassumptions may not be accurate.The preparation of our consolidated financial statements in conformity with generally accepted accounted principles in the United States ofAmerica requires our management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures ofcontingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expense during the reportingperiods. Critical estimates are made by management in determining, among other things, the allowance for loan losses, amounts of impairment, and valuationof income taxes. If our underlying estimates and assumptions prove to be incorrect, our financial condition and results of operations may be materiallyadversely affected.The fair value of our investment securities can fluctuate due to factors outside of our control.As of December 31, 2015, the fair value of our investment securities portfolio was $565.1 million. Factors beyond our control can significantlyinfluence and cause adverse changes to occur in the fair values of securities in that portfolio. These factors include, but are not limited to, rating agencyactions in respect of the securities, defaults by the issuers of the securities, concerns with respect to the enforceability of the payment or other key terms of thesecurities, changes in market interest rates and continued instability in the capital markets. 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 andadversely affect our business, results of operations, financial condition and prospects. In addition, the process for determining whether an impairment of asecurity is other-than-temporary usually requires complex, subjective judgments, which could subsequently prove to have been wrong, regarding the futurefinancial performance and liquidity of the issuer of the security, the fair value of any collateral underlying the security and whether and the extent to whichthe principal of and interest on the security will ultimately be paid in accordance with its payment terms.A loss or material reduction of access to securitization markets for multifamily loans may adversely impact our business model, profitabilityand growth.We intend to sell multifamily loans through securitization market. The securitization market, along with credit markets in general, experiencedunprecedented disruptions during the recent economic downturn. Although market conditions have improved since 2009, for a number of years following theeconomic downturn, certain issuers experienced increased risk premiums while there was a relatively lower level of investor demand for certain asset-backedsecurities (particularly those securities backed by nonprime 24Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. collateral). In addition, the risk of volatility surrounding the global economic system and uncertainty surrounding regulatory reforms such as the Dodd-FrankAct continue to create uncertainty around access to the capital markets. As a result, there can be no assurance that we will continue to be successful in sellingmultifamily loans through the securitization market. Adverse changes in the securitization market generally could materially adversely affect our ability tosecuritize loans on a timely basis or upon terms acceptable to us. This could increase our cost of funding, reduce our margins or cause us to hold assets untilinvestor demand improves. Technology and marketing costs may negatively impact our future operating results.The financial services industry is constantly undergoing technological changes in the types of products and services provided to clients toenhance client convenience. Our future success will depend upon our ability to address the changing technological needs of our clients and to compete withother financial services organizations which have successfully implemented new technologies. The costs of implementing technological changes, newproduct development and marketing costs may increase our operating expenses without a commensurate increase in our business or revenues, in which eventour business, financial condition, results of operations and prospects could be materially and adversely affected.The occurrence of fraudulent activity, breaches of our information security, and cyber-security attacks could have a material adverse effecton our business, financial condition, results of operations or future prospects.As a financial institution, we are susceptible to fraudulent activity, information security breaches and cybersecurity-related incidents that may becommitted against us or our clients and that may result in financial losses or increased costs to us or our clients, disclosure or misuse of confidentialinformation belonging to us or personal or confidential information belonging to our clients, misappropriation of assets, litigation, or damage to ourreputation. Fraudulent activity may take many forms, including check “kiting” or fraud, electronic fraud, wire fraud, “phishing” and other dishonestacts. Information security breaches and cybersecurity-related incidents may include fraudulent or unauthorized access to data processing or data storagesystems used by us or by our clients, denial or degradation of service attacks, and malware or other cyber-attacks. We have been seeing increases inelectronic fraudulent activity, security breaches and cyber-attacks within the financial services industry, including in the commercial banking sector, ascyber-criminals have been targeting commercial bank and brokerage accounts on an increasing basis. Moreover, in recent periods, several large corporations,including financial service organizations and retail companies, have suffered major data breaches, in some cases exposing not only their confidential andproprietary corporate information, but also sensitive financial and other personal information of their clients or customers and their employees, andsubjecting those corporations to potential fraudulent activity and their clients and customers to identity theft and fraudulent activity in their credit card andbanking accounts. Therefore, security breaches and cyber-attacks can cause significant increases in operating costs, including the costs of compensatingclients and customers for any resulting losses they may incur and the costs and capital expenditures required to correct the deficiencies in and strengthen thesecurity of data processing and storage systems.Although we invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and we conduct periodictests of our security systems and processes, there is no assurance that we will succeed in anticipating or adequately protecting against or preventing allsecurity breaches and cyber-attacks from occurring due to a number of possible causes, many of which will be outside of our control, including the changingnature and increasing frequency of such attacks, the increasing sophistication of cyber-criminals, and possible weaknesses that go undetected in our datasystems notwithstanding the testing we conduct of those systems. 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 businessand incur increased operating costs, and be exposed to additional regulatory scrutiny or penalties and to civil litigation and possible financial liability, anyof which could have a material adverse effect on our business, financial condition, results of operations and future prospects.We rely on communications, information, operating and financial control systems technology and related services from third-party serviceproviders and there can be no assurance that we will not suffer an interruption in those systems.We rely heavily on third-party service providers for much of our communications, information, operating and financial control systemstechnology, including our internet banking services and data processing systems. Any failure or interruption of, or security breaches in, these systems couldresult in failures or interruptions in our operations or in the client services we provide. Additionally, interruptions in service and security breaches coulddamage our reputation, lead existing clients to terminate their business relationships with us, make it more difficult for us to attract new clients and subject usto additional regulatory scrutiny and possibly financial liability, any of which could have a material adverse effect on our business, financial condition,results of operations and prospects.Our ability to attract and retain clients and key employees could be adversely affected if our reputation is harmed. 25Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The ability of FFB and FFA to attract and retain clients and key employees could be adversely affected if our reputation is harmed. Any actual orperceived failure to address various issues could cause reputational harm, including a failure to address any of the following types of issues: legal andregulatory requirements; the proper maintenance or protection of the privacy of client and employee financial or other personal information; record keepingdeficiencies or errors; money-laundering; potential conflicts of interest and ethical issues. Moreover, any failure to appropriately address any issues of thisnature could give rise to additional regulatory restrictions, and legal risks, which could lead to costly litigation or subject us to enforcement actions, fines, orpenalties and cause us to incur related costs and expenses. In addition, our banking, investment advisory and wealth management businesses are dependenton the integrity of our banking personnel and our investment advisory and wealth managers. Lapses in integrity could cause reputational harm to ourbusinesses that could lead to the loss of existing clients and make it more difficult for us to attract new clients and, therefore, could have a material adverseeffect on our business, financial condition, results of operations and prospects.We may incur significant losses due to ineffective risk management processes and strategies.We seek to monitor and control our risk exposures through a risk and control framework encompassing a variety of separate but complementaryfinancial, credit, operational and compliance systems, and internal control and management review processes. However, those systems and review processesand the judgments that accompany their application may not be effective and, as a result, we may not anticipate every economic and financial outcome in allmarket environments or the specifics and timing of such outcomes, particularly in the event of the kinds of dislocations in market conditions experiencedover the last several years, which highlight the limitations inherent in using historical data to manage risk. If those systems and review processes prove to beineffective in identifying and managing risks, we could be subjected to increased regulatory scrutiny and regulatory restrictions could be imposed on ourbusiness, including on our growth, as a result of which our business and operating results could be adversely affected.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,floods and wild fires. The nature and level of natural disasters cannot be predicted. These natural disasters could harm our operations through interferencewith communications, including the interruption or loss of our computer systems, which could prevent or impede us from gathering deposits, originatingloans and processing and controlling our flow of business, as well as through the destruction of facilities and our operational, financial and managementinformation systems. Additionally, natural disasters could negatively impact the values of collateral securing borrowers’ loans and interrupt borrowers’abilities to conduct their business in a manner to support their debt obligations, either of which could result in losses and increased provisions for loan losses.We are exposed to risk of environmental liabilities with respect to real properties that we may acquire.From time to time, in the ordinary course of our business, we acquire, by or in lieu of foreclosure, real properties which collateralize nonperformingloans (“Real Estate Owned” or “REO”). As an owner of such properties, we could become subject to environmental liabilities and incur substantial costs forany property damage, personal injury, investigation and clean-up that may be required due to any environmental contamination that may be found to exist atany of those properties, even if we did not engage in the activities that led to such contamination and those activities took place prior to our ownership of theproperties. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties seeking damagesfor environmental contamination emanating from the site. If we were to become subject to significant environmental liabilities or costs, our business,financial condition, results of operations and prospects could be materially and adversely affected.Our investment advisory and wealth management business may be negatively impacted by changes in economic and market conditions.Our investment advisory and wealth management business may be negatively impacted by changes in general economic and market conditionsbecause the performance of that business is directly affected by conditions in the financial and securities markets. The performance of the financial marketsand the businesses operating in the securities industry can be highly volatile within relatively short periods of time and is directly affected by, among otherfactors, domestic and foreign economic conditions and general trends in business and finance, and by the threat, as well as the occurrence, of global conflicts,all of which are beyond our ability to control. We cannot assure you that broad market performance will be favorable in the future. Declines or a lack ofsustained growth in the financial markets may adversely affect the market value and performance of the investment securities that we manage, which couldlead to reductions in our investment management and advisory fees and, therefore, may result in a decline in the performance of our investment advisory andwealth management business. Additionally, if FFA’s performance were to decline, that could lead some of our clients to reduce their assets undermanagement by us and make it more difficult for us to retain existing clients and attract new clients. If any of these events or circumstances were to occur, theoperating results of our investment advisory and wealth management business and, therefore, our earnings could be materially and adversely affected. 26Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The investment management contracts we have with our clients are terminable without cause and on relatively short notice by our clients,which makes us vulnerable to short term declines in the performance of the securities under our management.Like most investment advisory and wealth management businesses, the investment advisory contracts we have with our clients are typicallyterminable by the client without cause upon less than 30 days’ notice. As a result, even short term declines in the performance of the securities we manage,which can result from factors outside our control, such as adverse changes in market or economic condition or the poor performance of some of theinvestments we have recommended to our clients, could lead some of our clients to move assets under our management to other asset classes such as broadindex funds or treasury securities, or to investment advisors which have investment product offerings or investment strategies different than ours. Therefore,our operating results are heavily dependent on the financial performance of our investment portfolios and the investment strategies we employ in ourinvestment advisory businesses and even short-term declines in the performance of the investment portfolios we manage for our clients, whatever the cause,could result in a decline in assets under management and a corresponding decline in investment management fees, which would adversely affect our results ofoperations.The market for investment managers is extremely competitive and the loss of a key investment manager to a competitor could adverselyaffect our investment advisory and wealth management business.We believe that investment performance is one of the most important factors that affect the amount of assets under our management and, for thatreason, the success of FFA’s business is heavily dependent on the quality and experience of our investment managers and their track records in terms ofmaking investment decisions that result in attractive investment returns for our clients. However, the market for such investment managers is extremelycompetitive and is increasingly characterized by frequent movement of investment managers among different firms. In addition, our individual investmentmanagers often have direct contact with particular clients, which can lead to a strong client relationship based on the client’s trust in that individualmanager. 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 ofclient 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.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. As a result, the performance of, or evenrumors or questions about the integrity or performance of, any of those brokerage firms could adversely affect the confidence of FFA’s clients in the servicesprovided by those firms or otherwise adversely impact their custodial holdings. Such an occurrence could negatively impact the ability of FFA to retainexisting or attract new clients and, as a result, could have a material adverse effect on our business, financial condition, results of operations and prospects.Risks Related to Our Regulatory EnvironmentThe banking industry is highly regulated, and legislative or regulatory actions taken now or in the future may have a significant adverseeffect on our operations.The banking industry is extensively regulated and supervised under both federal and state laws and regulations that are intended primarily toprotect customers, depositors, the FDIC’s Deposit Insurance Fund, and the banking system as a whole, not our stockholders. We are subject to the regulationand supervision of the Federal Reserve Board, the FDIC and the California Department of Business Oversight. The banking laws, regulations and policiesapplicable to us govern matters ranging from the maintenance of adequate capital, safety and soundness, mergers and changes in control to the generalbusiness operations conducted by us, including permissible types, amounts and terms of loans and investments, the amount of reserves held against deposits,restrictions on dividends, imposition of specific accounting requirements, establishment of new offices and the maximum interest rate that may be charged onloans.We are subject to changes in federal and state banking statutes, regulations and governmental policies, or the interpretation or implementation ofthem, including regulations to be implemented as a result of the enactment of the Dodd-Frank Act. Any changes in any federal or state banking statute,regulation or governmental policy could affect us in substantial and unpredictable ways, including ways that may adversely affect our business, results ofoperations, financial condition or prospects. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations oftenimpose additional compliance costs. In addition, federal and state banking regulators have broad authority to supervise our banking business and that of oursubsidiaries, including the authority to prohibit activities that represent unsafe or unsound banking practices or constitute violations of statute, rule,regulation, or administrative order. Failure to comply with any such laws, regulations or regulatory policies could result in sanctions by regulatory agencies,restrictions on our business activities, civil money penalties or damage to our reputation, all of which could adversely affect our business, results ofoperations, financial condition or prospects. 27Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, andour failure to comply with any supervisory actions to which we are or becomes subject as a result of such examinations may adversely affect us.The Federal Reserve Board, the FDIC and the California Department of Business Oversight may conduct examinations of our business, includingfor compliance with applicable laws and regulations. As a result of an examination, regulatory agencies may determine that the financial condition, capitalresources, asset quality, asset concentrations, earnings prospects, management, liquidity, sensitivity to market risk, or other aspects of any of our operationsare unsatisfactory, or that we or our management are in violation of any law, regulation or guideline in effect from time to time. Regulatory agencies maytake a number of different remedial actions, including the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct anyconditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, torestrict our growth, to change the composition of our concentrations in portfolio or balance sheet assets, to assess civil monetary penalties against officers ordirectors, to remove officers and directors and, if such conditions cannot be corrected or there is an imminent risk of loss to depositors, the FDIC mayterminate our deposit insurance. A regulatory action against us could have a material adverse effect on our business, results of operations, financial conditionand prospects.The enactment of the Dodd-Frank Act may have a material effect on our operations.The enactment of the Dodd-Frank Act imposes significant regulatory and compliance changes on financial institutions and non-bank providers offinancial products. The Dodd-Frank Act has had and will have an impact on our business in the following ways: ·changes to regulatory capital requirements; ·creation of new government regulatory agencies (particularly the Consumer Financial Protection Bureau (the “CFPB”), which willdevelop and enforce rules for bank and non-bank providers of consumer financial products); ·changes to deposit insurance assessments; ·regulation of debit interchange fees we earn; ·changes in retail banking regulations, including potential limitations on certain fees we may charge; and ·changes in regulation of consumer mortgage loan origination and risk retention.In addition, the Dodd-Frank Act restricts the ability of banks to engage in certain proprietary trading or to sponsor or invest in private equity orhedge funds. The Dodd-Frank Act also contains provisions designed to limit the ability of insured depository institutions, their holding companies and theiraffiliates to conduct certain swaps and derivatives activities and to take certain principal positions in financial instruments. Some provisions of the Dodd-Frank Act have not been completely implemented. The changes resulting from the Dodd-Frank Act may impact the profitability of our business activities orotherwise adversely affect our business. Failure to comply with the requirements may negatively impact our results of operations and financialcondition. While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would haveon us, these changes could be materially adverse to investors in our equity securities.As a result of the Dodd-Frank Act and recent rulemaking, we will become subject to more stringent capital requirements.The Dodd-Frank Act required, among other things, that the federal banking agencies establish minimum leverage and risk-based capitalrequirements for insured banks and their holding companies. In July 2013, the federal banking agencies adopted final rules (the “Final Capital Rule”),implementing the Basel III capital standards and establishing the minimum capital levels required under the Dodd-Frank Act, which apply to all U.S. banks,subject to various transition periods. We were required to comply with the Final Capital Rule by January 1, 2015 with capital conservation buffer anddeductions from common equity tier 1 capital phased in through 2019. The Final Capital Rule establishes a common equity Tier 1 capital ratio of 6.5% ofrisk-weighted assets, tier 1 capital ratio of 8.0%, and total capital ratio of 10.0%, and leverage ratio of 5.0% for a financial institution to be considered “wellcapitalized” for regulatory purposes. Additionally, the Final Capital Rule requires an institution to maintain a 2.5% common equity Tier 1 capitalconservation buffer (phased in in annual increments of 0.625% beginning January 1, 2016) over the minimum risk-based capital requirement to avoidrestrictions on the ability to pay dividends, discretionary bonuses, and to engage in share repurchases. The Final Capital Rule increases the required capitalfor certain categories of assets, including high volatility construction real estate loans and certain exposures related to securitizations; however, the FinalCapital Rule retains the current capital treatment of residential mortgages. Under the Final Capital Rule, we made a one-time, permanent election to continueto exclude accumulated other 28Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. comprehensive income from capital. Implementation of these capital requirements, or any other new regulations, may adversely affect our ability to paydividends, or require us to reduce business levels or raise capital, including in ways that may adversely affect our results of operations, financial condition orprospects.New and future rulemaking by the CFPB and other regulators, as well as enforcement of existing consumer protection laws, may have amaterial effect on our operations and operating costs.The CFPB has the authority to implement and enforce a variety of existing federal consumer protection statutes and to issue new regulations but,with respect to institutions of our size, does not have primary examination and enforcement authority with respect to such laws and regulations. The authorityto examine depository institutions with $10.0 billion or less in assets, like us, for compliance with federal consumer laws remains largely with our primaryfederal regulator, the FDIC. However, the CFPB may participate in examinations of smaller institutions on a “sampling basis” and may refer potentialenforcement actions against such institutions to their primary regulators. In some cases, regulators such as the Federal Trade Commission and the Departmentof Justice also retain certain rulemaking or enforcement authority, and we also remain subject to certain state consumer protection laws. As an independentbureau within the Federal Reserve, the CFPB may impose requirements more severe than the previous bank regulatory agencies. The CFPB has placedsignificant emphasis on consumer complaint management and has established a public consumer complaint database to encourage consumers to filecomplaints they may have against financial institutions. We are expected to monitor and respond to these complaints, including those that we deemfrivolous, and doing so may require management to reallocate resources away from more profitable endeavors.We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, andfailure to comply with these laws could lead to a wide variety of sanctions.The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations imposenondiscriminatory lending requirements on financial institutions. The Department of Justice, the CFPB and other federal agencies are responsible forenforcing these laws and regulations. A successful regulatory challenge to an institution’s performance under the Community Reinvestment Act or fairlending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions onmergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability tochallenge an institution’s performance under fair lending laws in private class action litigation. Any such actions could have a material adverse effect on ourbusiness, financial condition, results of operations and prospects.We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes andregulations.The federal Bank Secrecy Act, the USA PATRIOT Act of 2001 and other laws and regulations require financial institutions, among other duties, toinstitute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The federalFinancial Crimes Enforcement Network, established by the Treasury to administer the Bank Secrecy Act, is authorized to impose significant civil moneypenalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, aswell as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. There is also increased scrutiny of compliance withthe rules enforced by the Office of Foreign Assets Control. If our policies, procedures and systems are deemed deficient or the policies, procedures andsystems of any financial institutions that we may acquire in the future are deficient, we would be subject to liability, including fines and regulatory actionssuch as restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan,which would negatively impact our business, financial condition and results of operations. Failure to maintain and implement adequate programs to combatmoney laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could materially and adversely affectour business, financial condition, results of operations and prospects.Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and usepersonal information and adversely affect our business opportunities.We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification,and we could be negatively impacted by these laws. For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things:(i) imposes certain limitations on our ability to share non-public personal information about our customers with non-affiliated third parties; (ii) requires thatwe provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of anyinformation sharing by us with non-affiliated third parties (with certain exceptions) and (iii) requires we develop, implement and maintain a writtencomprehensive information security program containing safeguards appropriate based on our size and complexity, the nature and scope of our activities, andthe sensitivity of customer information we process, as well as plans for responding to data security breaches. Various 29Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer,regulatory or law enforcement notification in certain circumstances in the event of a security breach. Moreover, legislators and regulators in the United Statesare increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our currentand planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of consumer oremployee information, and some of our current or planned business activities. This could also increase our costs of compliance and business operations andcould reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level, by the Federal TradeCommission, as well as at the state level, such as with regard to mobile applications.Compliance with current or future privacy, data protection and information security laws (including those regarding security breach notification)affecting customer or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to providecertain products and services, which could have a material adverse effect on our business, financial conditions or results of operations. Our failure to complywith privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions,litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results ofoperations.FFA’s business is highly regulated, and the regulators have the ability to limit or restrict, and impose fines or other sanctions on, FFA’sbusiness.FFA is registered as an investment adviser with the SEC under the Investment Advisers Act and its business is highly regulated. The InvestmentAdvisers Act imposes numerous obligations on registered investment advisers, including fiduciary, record keeping, operational and disclosureobligations. Moreover, the Investment Advisers Act grants broad administrative powers to regulatory agencies such as the SEC to regulate investmentadvisory businesses. If the SEC or other government agencies believe that FFA has failed to comply with applicable laws or regulations, these agencies havethe power to impose fines, suspensions of individual employees or other sanctions, which could include revocation of FFA’s registration under theInvestment Advisers Act. We are also subject to the provisions and regulations of ERISA to the extent that we act as a “fiduciary” under ERISA with respectto certain of our clients. ERISA and the applicable provisions of the federal tax laws, impose a number of duties on persons who are fiduciaries under ERISAand prohibit certain transactions involving the assets of each ERISA plan which is a client, as well as certain transactions by the fiduciaries (and certain otherrelated parties) to such plans. Additionally, like other investment advisory and wealth management companies, FFA also faces the risks of lawsuits byclients. The outcome of regulatory proceedings and lawsuits is uncertain and difficult to predict. An adverse resolution of any regulatory proceeding orlawsuit 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 retainkey 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.Changes in legal, regulatory, accounting, tax and compliance requirements also could adversely affect FFA’s operations and financial results, by,among other things, increasing its operating expenses and placing restrictions on the marketing of certain investment products. Recently, the ObamaAdministration directed the U.S. Department of Labor to adopt new rules that would require some financial advisors to act as “fiduciaries” for their clients inconnection with the management of 401-K retirement plan and IRA investments, which is a higher standard than currently applies to investment managersand brokers when managing investments in 401-K retirement plans and IRAs. We cannot predict whether these new rules will be adopted and we do not haveenough information at this time to determine whether these proposed new rules, if adopted, will apply to FFA or will have an impact on FFA’s business oroperating results. However, we expect that these rules, if adopted, would apply primarily to investment advisors and brokers who receive commissions fromthe issuers of investment securities that are purchased, based on the advice of such advisors or brokers, for the accounts of their clients. FFA, by contrast, iscompensated for its services primarily by investment advisory fees paid directly by its clients based on the market value of the investment securities that aremanaged by FFA for them and not by commissions paid by issuers of those investment securities.Risks Related to Ownership of Our Common StockWe do not plan to pay dividends for at least the foreseeable future. Additionally, our ability to pay dividends is subject to statutory, regulatoryand other restrictions.In order to support and fund the growth of our banking business, it is our policy to retain cash rather than pay dividends. As a result, we have notpaid any cash dividends since FFB commenced its banking operations in October 2007 and we have no plans to pay cash dividends at least for theforeseeable future. Additionally, our ability to pay dividends to our stockholders is restricted by Delaware and federal law and the policies and regulations ofthe Federal Reserve, which is our federal banking regulator. 30Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our ability to pay dividends to stockholders is also dependent on the payment to us of cash dividends by FFA and FFB. FFA and FFB arecorporations that are separate and distinct from us and, as a result, they are subject to separate statutory or regulatory dividend restrictions that can affect theirability to pay cash dividends to us. FFA’s ability to pay cash dividends to us is restricted under California corporate law. FFB’s ability to pay dividends tous is limited by various banking statutes and regulations. Moreover, based on their assessment of the financial condition of FFB or other factors, the FDIC orthe DBO could find that payment of cash dividends by FFB to us would constitute an unsafe or unsound banking practice, in which event they could restrictFFB from paying cash dividends, even if FFB meets the statutory requirements to do so. See the section entitled “Dividend Policy and Restrictions on thePayment of Dividends” in Item 5 of this report below for additional information about our dividend policy and the dividend restrictions that apply to us andto FFB and FFA.Trading in our common stock has been limited and there is no assurance that a more active trading market for our shares will develop in thefuture. As a result, stockholders may not be able to sell their shares of our common stock at attractive prices if and when they need or desire to do so.On November 3, 2014, our common stock was listed and commenced trading on the NASDAQ Global Stock Market, under the ticker symbol“FFWM”. However, the trading volume in our common stock has been limited. For example, the average daily trading volume of our shares on NASDAQduring the month of February 2016 was approximately 20,300 shares. There can be no assurance that a more active trading market for our shares will developor can be sustained in the future. If a more active trading market does not develop, or cannot be sustained, our stockholders may have difficulty selling theirshares at attractive prices when they need or desire to do so. Additionally, the lack of an active trading market for our shares may make it more difficult for usto sell shares in the future to raise additional capital and to offer our shares as consideration for acquisitions of other banks or investment management orother financial services businesses, without diluting our existing stockholders.The market prices and trading volume of our common stock may be volatile.Even if an active market develops for our common stock, the market prices of our common stock may be volatile and the trading volume mayfluctuate and cause significant price variations to occur. We cannot assure you that, if a market does develop for our common stock, the market prices of ourcommon stock will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect the prices of our shares or result influctuations in those prices or in trading volume of our common stock could include the following, many of which are outside of our control: ●quarterly variations in our operating results or in the quality of our earnings or assets; ●operating results that differ from the expectations of management, securities analysts and investors; ●changes in expectations as to our future financial performance; ●the operating and securities price performance of other companies that investors believe are comparable to us; ●the implementation of our growth strategy and performance of acquired businesses that vary from the expectations of securities analysts andinvestors; ●the enactment of new more costly government regulations that are applicable to our businesses or the imposition of regulatory restrictions onus; ●our dividend policy and any changes that might occur to that policy in the future; ●future sales of by us of our common stock or any other of our equity securities; ●changes in global financial markets and global economies and general market conditions, such as changes in interest rates or fluctuations instock, commodity or real estate valuations; and ●announcements of strategic developments, material acquisitions and other material events in our business or in the businesses of ourcompetitors.These broad market and industry factors may decrease the market price of our common stock, regardless of our actual operating performance. Thestock market in general has from time to time experienced extreme price and volume fluctuations, including in recent months. In addition, in the past,following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been institutedagainst these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources 31Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Share ownership by our officers and directors and certain agreements may make it more difficult for third parties to acquire us or effectuatea change of control that might be viewed favorably by other stockholders.As of February 27, 2016, our executive officers and directors owned, in the aggregate, approximately 21% of our outstanding shares. As a result, ifthe officers and directors were to oppose a third party’s acquisition proposal for, or a change in control of, FFI, the officers and directors may have sufficientvoting power to be able to block or at least delay such an acquisition or change in control from taking place, even if other stockholders would support such asale or change of control. In addition, a number of FFI’s officers have change of control agreements which could increase the costs and, therefore, lessen theattractiveness of an acquisition of FFI to a potential acquiring party. For additional information regarding these change of control agreements, see Item 11“Executive Compensation” below in this report.Our corporate governance documents, and certain corporate and banking laws applicable to us, could make a takeover attempt, which maybe beneficial to our stockholders, more difficult.Our Board of Directors has the power under our certificate of incorporation to issue additional shares of common stock and create and authorize thesale of one or more series of preferred stock without having to obtain stockholder approval for such action. As a result, our Board could authorize theissuance of shares of a series of preferred stock to implement a shareholders rights plan (often referred to as a “poison pill”) or could sell and issue preferredshares with special voting rights or conversion rights, which could deter or delay attempts by our stockholders to remove or replace management, andattempts of third parties either to engage in proxy contests or to acquire control of FFI. In addition, our charter documents: ●enable our Board to fill any vacancy on the Board, unless the vacancy was created by the removal of a director; ●enable our Board to amend our bylaws without stockholder approval, subject to certain exceptions; and ●require compliance with an advance notice procedure with regard to any business that is to be brought by a shareholder before an annual orspecial meeting of stockholders and with regard to the nomination by stockholders of candidates for election as directors.Furthermore, federal and state banking laws and regulations applicable to us require anyone seeking to acquire more than 10% of our outstandingshares or otherwise effectuate a change of control of the Company or of FFB, to file an application with, and to receive approval from, the Federal Reserveand the FDIC to do so. These laws and regulations may discourage potential acquisition proposals and could delay or prevent a change of control of theCompany, including by means of a transaction in which our stockholders might receive a premium over the market price of our common stock.We may sell additional shares of common stock in the future which could result in dilution to our stockholders.A total of approximately 52 million authorized but unissued shares of our common stock are available for future sale and issuance by action of ourBoard of Directors alone. Accordingly, if we were to sell additional shares in the future, our stockholders could suffer dilution in their investment in theirshares of our common stock and in their percentage ownership of the Company.We may issue additional equity securities, or engage in other transactions which could dilute our book value or affect the priority of ourcommon stock, which may adversely affect the market price of our common stock.Our Board of Directors may determine from time to time that we need to raise additional capital by issuing additional shares of our common stockor other securities. We are not restricted from issuing additional shares of common stock, including securities that are convertible into or exchangeable for, orthat represent the right to receive, common stock. Because our decision to issue securities in any future offering will depend on market conditions and otherfactors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future offerings, or the prices at which such offerings may beaffected. Such offerings could be dilutive to common stockholders. New investors also may have rights, preferences and privileges that are senior to, and thatadversely affect, our then-current common stockholders. Additionally, if we raise additional capital by making additional offerings of debt or preferred equitysecurities, upon liquidation of the Company, holders of our debt securities and shares of preferred stock, and lenders with respect to other borrowings, willreceive distributions of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existingstockholders or reduce the market price of our common stock, or both. Holders of our common stock are not entitled to preemptive rights or other protectionsagainst dilution.We may elect under the JOBS Act to use an extended transition period for complying with new or revised accounting standards.We are an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, (the “JOBS Act”. The JOBS Act allows us, as anemerging growth company, to take advantage of extended transition periods for the implementation of new or 32Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. revised accounting standards. As a result, we will not be required to comply with new or revised accounting standards (i) until those standards apply toprivate companies, even if that is later than the date or dates on which they become effective for public companies or (ii) if sooner, until we cease to be an“emerging growth company” as defined in the JOBS Act. As a result, our financial statements may not be fully comparable to the financial statements ofpublic companies that contain new or revised accounting standards not yet applicable to private companies, which could make our common stock lessattractive to investors.The reduced disclosures and relief from certain other significant disclosure requirements that are available to emerging growth companiesmay make our common stock less attractive to investors.As an “emerging growth company” we are entitled to exemptions from certain reporting requirements that apply to public companies that are notemerging growth companies. These exemptions include the following: ●an exemption from the requirements of the Section 404 of the Sarbanes-Oxley Act of 2002, which requires public companies that areaccelerated filers or large accelerated filers (within the meaning of the Exchange Act) to obtain and include in their annual reports on Form10-K an attestation report from their independent registered public accountants with respect to the effectiveness of their internal control overfinancial reporting; ●less extensive disclosure obligations regarding executive compensation in our proxy statements or other periodic reports that we file with theSEC; and ●exemptions from the requirements to have our stockholders vote, on an advisory and nonbinding basis, on executive compensation and onany golden parachute payments.In addition, even if we choose voluntarily to comply with any of the requirements from which we are exempt, we may later rely on thoseexemptions to avail ourselves of the reduced reporting and disclosure requirements applicable to emerging growth companies.We may remain an emerging growth company for the period ending in December 2018, although we may cease to be an emerging growth companyearlier under certain circumstances, including if, before the end of that period, it is determined that we have become a large accelerated filer under the rules ofthe SEC (which depends on, among other things, having a market value of common stock held by non-affiliates in excess of $700 million). Because we will be relying on one or more of these exemptions, investors and securities analysts may find it more difficult to evaluate our commonstock, and some investors may find our common stock less attractive, and, as a result, there may be a less active trading market for our common stock thanwould be the case if we were not an emerging growth company, which could result in a reductions the trading volume and greater volatility in the prices ofour common stock.A failure to maintain effective internal control over financial reporting could have a material adverse effect on our business and stock prices.Although, as an emerging growth company, we are not required to obtain or include in our annual reports on Form 10-K an attestation report fromtheir independent registered accountants with respect to the effectiveness of our internal control over financial reporting, like all other public companies, ourChief Executive Officer and our Chief Financial Officer are required, annually, to assess, and disclose their findings in our annual reports on Form 10-K withrespect to, the effectiveness of our internal control over financial reporting in a manner that meets the requirements of Section 404(a) of the Sarbanes-OxleyAct. The rules governing the standards that must be met for our Chief Executive and Chief Financial Officers to assess and report on the effectiveness of ourinternal control over financial reporting are complex and require significant documentation, testing and possible remediation, which could significantlyincrease our operating expenses. See Item 9A “Controls and Procedures” below to review the attestation report of our Chief Executive Officer and ChiefFinancial Officer regarding the effectiveness of our internal control over financial reporting as of December 31, 2015.Additionally, If we are unable to maintain the effectiveness of our internal control over financial reporting in the future, we may be unable to reportour financial results accurately and on a timely basis. In such an event, investors and clients may lose confidence in the accuracy and completeness of ourfinancial statements, as a result of which our liquidity, access to capital markets, and perceptions of our creditworthiness could be adversely affected and themarket prices of our common stock could decline. In addition, we could become subject to investigations by NASDAQ, the SEC, or the Federal Reserve, orother regulatory authorities, which could require us to expend additional financial and management resources. As a result, an inability to maintain theeffectiveness of our internal control over financial reporting in the future could have a material adverse effect on our business, financial condition, results ofoperations and prospects. 33Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock priceand trading volume could decline.The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness. Securities and industry analysts first initiated coverage of our stock in July 2015, and may never, publish research on our company. If additionalsecurities or industry analysts do not commence coverage of our company, the trading price of our stock would likely be negatively impacted. If one or moreof the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. Ifone or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which mightcause our stock price and trading volume to decline.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 yourinvestment.An investment in our common stock is not a bank deposit and is not insured against loss or guaranteed by the FDIC, any other deposit insurancefund or by any other public or private entity. An investment in our common stock is inherently risky for the reasons described herein.Other Risks and Uncertainties.Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financialcondition, operating results and future prospects. Item 1B.Unresolved Staff Comments.Not applicable.Item 2.Properties.The corporate headquarters for all of the companies is located in Irvine, California. The Company has offices in California in Newport Beach,Irvine, Indian Wells, Pasadena, El Centro, West Los Angeles, El Segundo, Oakland, Sacramento, Burlingame, and San Diego and in Las Vegas, Nevada, andin Honolulu, Hawaii. All of these offices are leased pursuant to non-cancelable operating leases that will expire between 2017 and 2025.Item 3.Legal Proceedings.In the ordinary course of business, we are subject to claims, counter claims, suits and other litigation of the type that generally arise from theconduct of financial services businesses. We are not aware of any threatened or pending litigation that we expect will have a material adverse effect on ourbusiness operations, financial condition or results of operations.Item 4.Mine Safety Disclosures.Not applicable. 34Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Market InformationPrior to November 3, 2014, there was no public trading market or any publicly available quotations for our common stock. On November 3, 2014, ourcommon stock became listed and commenced trading on the NASDAQ Global Stock Market under the trading symbol “FFWM”. The following table showsthe high and low sales prices of our shares for the respective periods set forth below, as reported on the NASDAQ Global Stock Market: Quarter Ended High Low2015: March 31$19.75$17.60June 30 19.79 18.59September 30 24.33 19.52December 31 24.62 22.202014 December 31 (November 3 to December 31)$23.00$17.50The closing per share sales price of our common stock, as reported by NASDAQ, on March 10, 2016 was $21.01. As of the same date, a total of16,016,326 shares of our common stock were issued and outstanding which were held of record by approximately 1,200 shareholders.Dividend Policy and Restrictions on the Payment of DividendsWe have not previously paid cash dividends on our common stock. It is our current intention to invest our cash flow and earnings in the growth ofour businesses and, therefore, we have no plans to pay cash dividends for the foreseeable future.Our ability to pay dividends to our stockholders is subject to the restrictions set forth in the Delaware General Corporation Law (the “DGCL”) andthe regulatory authority of the Federal Reserve. The DGCL provides that a corporation, unless otherwise restricted by its certificate of incorporation, maydeclare and pay dividends out of its surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for thepreceding fiscal year, as long as the amount of capital of the corporation is not less than the aggregate amount of the capital represented by the issued andoutstanding stock of all classes having a preference upon the distribution of assets. Surplus is defined as the excess of a corporation’s net assets (i.e., its totalassets minus its total liabilities) over the capital associated with issuances of its common stock. Moreover, the DGCL permits a board of directors to reduce itscapital and transfer such amount to its surplus. In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stockof subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, regardless of their historical bookvalue. 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 FRBbefore we can pay cash dividends to our stockholders.Cash dividends from our two wholly-owned subsidiaries, FFB and FFA, represent the principal source of funds available to us, which we might useto pay cash dividends to our shareholders or for other corporate purposes. Since FFA and FFB are California corporations, they are subject to dividendpayment restrictions under the California General Corporation Law (the “CGCL”). The laws of the State of California, as they pertain to the payment of cashdividends by California state chartered banks, limit the amount of funds that FFB would be permitted to dividend to us more strictly than does the CGCL. Inparticular, under California law, cash dividends by a California state chartered bank may not exceed, in any calendar year, the lesser of (i) the sum of its netincome for the year and its retained net income from the preceding two years (after deducting all dividends paid during the period), or (ii) the amount of itsretained earnings.Also, because the payment of cash dividends has the effect of reducing capital, capital requirements imposed on FFB by the DBO and the FDICmay operate, as a practical matter, to preclude the payment, or limit the amount of, cash dividends that might otherwise be permitted to be made underCalifornia law; and the DBO and the FDIC, as part of their supervisory powers, generally require insured banks to adopt dividend policies which limit thepayment of cash dividends much more strictly than do applicable state laws. 35Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Restrictions on Intercompany TransactionsSections 23A and 23B of the Federal Reserve Act, and the implementing regulations thereunder, limit transactions between a bank and its affiliatesand limit a bank’s ability to transfer to its affiliates the benefits arising from the bank’s access to insured deposits, the payment system and the discountwindow and other benefits of the Federal Reserve System. Those Sections of the Act and the implementing regulations impose quantitative and qualitativelimits on the ability of a bank to extend credit to, or engage in certain other transactions with, an affiliate (and a non-affiliate if an affiliate benefits from thetransaction).Equity Compensation PlansCertain information with respect to our equity compensation plans, as of December 31, 2015, is set forth in Item 12, in Part III of this Report and isincorporated herein by this reference.Recent Sales of Unregistered SecuritiesDuring 2015, we sold 272,035 shares of common stock to Mr. DePillo. These shares were exempt from the registration requirements under theSecurities Act of 1933, as amended (or Securities Act). The sales of these shares were made in reliance on the exemptions from registration under Section 4(2)of, and Regulation D and Rule 506 promulgated under, the Securities Act. Mr. DePillo represented his intention to acquire the shares for investment only, andnot with a view to offer or sell any such shares in connection with any distribution of the shares, and appropriate restrictive legends were set forth on the sharecertificates issued.Use of ProceedsOn August 12, 2015, we issued 6,233,766 shares of common stock, at a price of $19.25 per share, in a registered, underwritten public offering. Theoffering resulted in gross proceeds of $120.0 million and net proceeds of approximately $113.7 million, after underwriting discounts and estimated expensesof the offering. The Company used a portion of the net proceeds from the offering to repay all of its $29 million of outstanding term debt and intends to usethe remaining proceeds for general corporate purposes, including to support of organic growth and possible acquisitions. On August 14, 2015, theunderwriters exercised their option to purchase an additional 935,065 shares of the Company’s common stock, at a price of $19.25 per share, to cover anyover-allotments in the public offering. As a result, the Company received additional gross proceeds of $18.0 million and net proceeds of $17.1 million, afterunderwriting discounts. The Company intends to use the proceeds for general corporate purposes, including to support organic growth and possibleacquisitions. 36Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Stock Performance GraphThe following graph shows a comparison from November 3, 2014 (the date our common stock commenced trading on the NASDAQ Global Market)through December 31, 2015 of the cumulative total return for our common stock, compared against (i) the Russell 2000 Index, which measures theperformance of the smallest 2,000 members, by market cap, (i) the Russell 3000 Index, which measures the performance of the smallest 3,000 members, bymarket cap, of the Russell Index, and (ii) an index published by SNL Securities L.C. (“SNL”) and known as the SNL Western Bank Index, which is comprisedof 51 banks and bank holding companies (including the Company), the shares of which are listed on NASDAQ or the New York Stock Exchange and most ofwhich are based in California and the remainder of which are based in nine other western states.The stock performance graph assumes that $100 was invested in Company common stock at the close of market on December 31, 2015, and, at thatsame date, in the Russell 2000 Index, the Russell 3000 Index and the SNL Western Bank Index and that any dividends paid in the indicated periods werereinvested. Shareholder returns shown in the stock performance graph are not necessarily indicative of future stock price performance. Period Ending 11/3/2014 12/31/2014 12/31/2015 First Foundation Inc. (FFWM) 100.00 97.21 126.42 Russell 2000 Index 100.00 102.95 97.07 Russell 3000 Index 100.00 102.06 100.55 SNL Western Bank Index 100.00 103.25 106.98 The above performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilitiesunder 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. 37Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 6.Selected Financial DataWith the exception of the certain items included in the selected performance and capital ratios, the following selected consolidated financialinformation as of and for the years ended December 31, 2015, 2014, and 2013 have been derived from our audited consolidated financial statementsappearing elsewhere in this Annual Report on Form 10-K, and the selected consolidated financial information as of and for the years ended December 31,2012 and 2011 have been derived from our audited consolidated financial statements not appearing in this Annual Report on Form 10-K. 38Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. You should read the following selected financial and operating data in conjunction with other information contained in this Annual Report onForm 10-K, including the information set forth in the sections entitled “Capitalization” and “Management’s Discussion and Analysis of Financial Conditionand Results of Operations”, as well as our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K.The average balances used in computing certain ratios, have been computed using daily averages, except for average equity, which is computed using theaverage of beginning and end of month balances. As of and for the Year Ended December 31, (In thousands, except share and per share data) 2015 2014 2013 2012 2011 Selected Income Statement Data: Net interest income $64,471 $42,814 $35,674 $27,729 $20,141 Provision for loan losses 2,673 235 2,395 2,065 2,297 Noninterest Income: Asset management, consulting and other fees 23,486 21,798 18,240 15,326 13,211 Other(1) 5,287 2,951 1,584 1,294 4,489 Noninterest expense 61,458 52,507 43,622 34,476 26,446 Income before taxes 22,832 14,821 9,481 7,808 9,098 Net income 13,378 8,394 7,851 5,801 9,098 Share and Per Share Data: Net income per share: Basic $1.20 $1.08 $1.06 $0.88 $1.48 Diluted 1.16 1.03 1.01 0.85 1.42 Shares used in computation: Basic 11,155,007 7,737,036 7,424,210 6,603,533 6,164,283 Diluted 11,575,855 8,166,343 7,742,215 6,831,955 6,393,713 Tangible book value per share(2) $16.10 $12.66 $11.18 $9.94 $7.98 Shares outstanding at end of period(3) 15,980,526 7,845,182 7,733,514 7,366,126 6,166,574 Selected Balance Sheet Data: Cash and cash equivalents $215,748 $29,692 $56,954 $63,108 $10,098 Loans, net of deferred fees 1,754,883 1,166,392 903,645 743,627 524,103 Allowance for loan and lease losses (“ALLL”) (10,600) (10,150) (9,915) (8,340) (6,550)Total assets 2,592,579 1,355,424 1,037,360 830,509 551,584 Noninterest-bearing deposits 299,794 246,137 217,782 131,827 66,383 Interest-bearing deposits 1,222,382 716,817 584,255 517,914 340,443 Borrowings(4) 796,000 282,886 141,603 100,000 91,000 Shareholders’ equity(3) 259,736 99,496 86,762 73,580 49,197 Selected Performance and Capital Ratios: Return on average assets 0.76% 0.71% 0.86% 0.80% 1.91%Return on average equity 8.10% 9.10% 10.2% 9.9% 20.7%Net yield on interest-earning assets 3.39% 3.70% 4.06% 4.20% 4.43%Efficiency ratio(5) 70.7% 76.0% 78.6% 77.7% 77.4%Noninterest income as a % of total revenues 33.1% 36.6% 35.7% 37.5% 46.8%Tangible common equity to tangible assets(2) 9.93% 7.33% 8.34% 8.82% 8.92%Tier 1 leverage ratio 11.82% 7.32% 8.67% 9.19% 8.92%Tier 1 risk-based capital ratio 17.99% 11.01% 13.04% 13.60% 13.54%Total risk-based capital ratio 18.77% 12.26% 14.30% 14.85% 14.80%Other Information: Assets under management (end of period) $3,471,237 $3,221,674 $2,594,961 $2,229,116 $1,827,436 NPAs to total assets 0.32% 0.11% 0.32% 0.17% 0.00%Charge-offs to average loans 0.15% 0.00% 0.10% 0.04% 0.05%Ratio of ALLL to loans(6) 0.61% 0.87% 1.16% 1.25% 1.25%Number of wealth management offices 7 7 7 6 4 (1)The 2015 amount includes $2.9 in gains on sales of loans. The 2014 and 2011 amounts include $1.0 million and $3.7 million of gains on sale of REO, respectively.(2)Tangible common equity, (also referred to as tangible book value) and tangible assets, are equal to common equity and assets, respectively, less $2.4 of intangible assets as ofDecember 31, 2015, $0.2 million of intangible assets as of December 31, 2014, and less $0.3 million of intangible assets as of December 31, 2013 and December 31, 2012. 39Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (3)In 2015, we issued 7,168,831 shares at a price of $19.25 per share in a public offering and sold 272,035 shares to the President of FFB at a price of 18.38 per share. As aresult of private offerings, we sold and issued shares of our common stock, (i) in 2013, 318,987 shares at a price of $18.00 per share, and 38,734 shares at a price of $15.00per share; and (ii) in 2012, 374,438 shares at a price of $15.00 per share. As a result of our acquisition of Pacific Rim Bank (“PRB”) in 2015, we issued 621,345 shares ofour common stock to the former PRB shareholders, valued at $19.00 per share. As a result of our acquisition of Desert Commercial Bank (“DCB”), in 2012 we issued to theformer DCB shareholders a total of 815,447 shares of our common stock, valued at $15.00 per share, in exchange for all of the outstanding shares of DCB, in 2014, weissued 23,580 shares, valued at $15.00 per share, to the former DCB shareholders as part of a contingent payout, and in 2015 we issued 31,064 shares, valued at $15.00 pershare. In 2015, we issued 31,307 shares as a result of the exercise of stock options at an average exercise price of $12.94 per share, and in 2014, we issued 84,866 shares as aresult of the exercise of stock options at an average exercise price of $11.19 per share.(4)Borrowings consist primarily of overnight and short-term advances obtained by FFB from the Federal Home Loan Bank.(5)The efficiency ratio is the ratio of noninterest expense to the sum of net interest income and noninterest income. The efficiency ratio excludes (i) gains on sale of REO of $1.0million and $3.7 million in 2014 and 2011, respectively; and (ii) in 2014, $1.0 million of costs related to a cancelled initial public offering and $1.0 million of contingentpayout expense related to the acquisition of DCB.(6)This ratio excludes loans acquired in our acquisitions of PRB and DCB, as generally accepted accounting principles in the United States, or GAAP, requires estimated creditlosses for acquired loans to be recorded as discounts to those loans. 40Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis is intended to facilitate the understanding and assessment of significant changes and trends in ourbusinesses that accounted for the changes in our results of operations in the year ended December 31, 2015, as compared to our results of operation in theyear ended December 31, 2014; in our results of operations in the year ended December 31, 2014, as compared to our results of operations in the year endedDecember 31, 2013, and our financial condition at December 31, 2015 as compared to our financial condition at December 31, 2014. This discussion andanalysis is based on and should be read in conjunction with our consolidated financial statements and the accompanying notes thereto contained elsewherein this Annual Report on Form 10-K. In addition to historical information, this discussion contains forward-looking statements that involve risks,uncertainties and assumptions that could cause results to differ materially from management’s expectations. Some of the factors that could cause results todiffer materially from expectations are discussed in the sections entitled “Risk Factors” and “Forward-Looking Statements” contained elsewhere in thisAnnual Report on Form 10-K.Critical Accounting PoliciesOur consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) andaccounting practices in the banking industry. Certain of those accounting policies are considered critical accounting policies, because they require us tomake estimates and assumptions regarding circumstances or trends that could materially affect the value of those assets, such as economic conditions ortrends that could impact our ability to fully collect our loans or ultimately realize the carrying value of certain of our other assets. Those estimates andassumptions are made based on current information available to us regarding those economic conditions or trends or other circumstances. If changes were tooccur in the events, trends or other circumstances on which our estimates or assumptions were based, or other unanticipated events were to occur that mightaffect our operations, we may be required under GAAP to adjust our earlier estimates and to reduce the carrying values of the affected assets on our balancesheet, generally by means of charges against income, which could also affect our results of operations in the fiscal periods when those charges are recognized.Utilization and Valuation of Deferred Income Tax Benefits. We record as a “deferred tax asset” on our balance sheet an amount equal to the taxcredit and tax loss carryforwards and tax deductions (collectively “tax benefits”) that we believe will be available to us to offset or reduce income taxes infuture periods. Under applicable federal and state income tax laws and regulations, tax benefits related to tax loss carryforwards will expire if they cannot beused within specified periods of time. Accordingly, the ability to fully use our deferred tax asset related to tax loss carryforwards to reduce income taxes inthe future depends on the amount of taxable income that we generate during those time periods. At least once each year, or more frequently, if warranted, wemake estimates of future taxable income that we believe we are likely to generate during those future periods. If we conclude, on the basis of those estimatesand the amount of the tax benefits available to us, that it is more likely, than not, that we will be able to fully utilize those tax benefits prior to theirexpiration, we recognize the deferred tax asset in full on our balance sheet. On the other hand, if we conclude on the basis of those estimates and the amountof the tax benefits available to us that it has become more likely, than not, that we will be unable to utilize those tax benefits in full prior to their expiration,then, we would establish a valuation allowance to reduce the deferred tax asset on our balance sheet to the amount with respect to which we believe it is stillmore likely, than not, that we will be able to use to offset or reduce taxes in the future. The establishment of such a valuation allowance, or any increase in anexisting valuation allowance, would be effectuated through a charge to the provision for income taxes or a reduction in any income tax credit for the periodin which such valuation allowance is established or increased.Allowance for Loan and Lease Losses. Our ALLL is established through a provision for loan losses charged to expense and may be reduced by arecapture of previously established loss reserves, which are also reflected in the statement of income. Loans are charged against the ALLL when managementbelieves that collectability of the principal is unlikely. The ALLL is an amount that management believes will be adequate to absorb estimated losses onexisting loans that may become uncollectible based on an evaluation of the collectability of loans and prior loan loss experience. This evaluation also takesinto consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, currenteconomic conditions and certain other subjective factors that may affect the borrower’s ability to pay. While we use the best information available to makethis evaluation, future adjustments to our ALLL may be necessary if there are significant changes in economic or other conditions that can affect thecollectability in full of loans in our loan portfolio.Adoption of new or revised accounting standards. We have elected to take advantage of the extended transition period afforded by the JOBS Act,for the implementation of new or revised accounting standards. As a result, we will not be required to comply with new or revised accounting standards thathave different effective dates for public and private companies until those standards apply to private companies or we cease to be an “emerging growth”company as defined in the JOBS Act. As a result of this election, our financial statements may not be comparable to the financials statements of companiesthat comply with public company effective dates. 41Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We have two business segments, “Banking” and “Investment Management, Wealth Planning and Consulting” (“Wealth Management”). Bankingincludes the operations of FFB and FFIS and Wealth Management includes the operations of FFA. 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.Recent Developments and OverviewOn July 1, 2015, the Company filed a “shelf” registration statement with the SEC on Form S-3 for the purpose of registering, under the SecuritiesAct of 1933, as amended, an aggregate of $150 million of shares of its common stock that would be available for possible sale, in one or more transactions, inthe future. The registration statement was declared effective on July 20, 2015. Pursuant to this registration statement, the Company commenced a publicoffering in which it sold a total of 6,233,766 shares of its common stock, at a public offering price of $19.25 per share, on August 12, 2015. The offeringresulted in gross proceeds of $120.0 million and net proceeds of approximately $113.7 million, after underwriting discounts and estimated expenses of theoffering. The Company used a portion of the net proceeds from the offering to repay all of its $29 million of outstanding term debt and intends to use theremaining proceeds for general corporate purposes, including supporting organic growth and possible acquisitions. On August 14, 2015, the underwritersexercised their option to purchase an additional 935,065 shares of the Company’s common stock, at a price of $19.25 per share, to cover any over-allotmentsin the public offering. As a result, the Company received additional gross proceeds of $18.0 million and net proceeds of $17.1 million, after underwritingdiscounts.We have continued to grow our operations. Comparing 2015 to 2014, we have increased our revenues (net interest income and noninterest income)by 29%. This growth in revenues is the result of the growth in Banking’s total interest-earning assets. During 2015, total loans in Banking increased by $599million or 51% while securities available for sale increased by $427 million. Wealth Management’s AUM increased by $250 million or 8% during 2015, andtotaled $3.47 billion as of December 31, 2015.The results of operations for Banking and Wealth Management reflect the benefits of this growth. Income before taxes for Banking increased $6.3million from $18.7 million in 2014 to $25.0 million in 2015. Income before taxes for Wealth Management increased from $1.4 million in 2014 to $2.2million in 2015. On a consolidated basis, income before taxes increased $8.0 million from $14.8 million in 2014 to $22.8 million in 2015.Results of OperationsYears Ended December 31, 2015 and 2014.Our net income for 2015 was $13.4 million, as compared to $8.4 million for 2014. The primary sources of revenue for Banking are net interestincome, fees from its deposits, trust and insurance services, gains on sales of loans, certain loan fees, and, beginning in the second half of 2014, fees chargedfor consulting and administrative services. The primary sources of revenue for Wealth Management are asset management fees assessed on the balance ofAUM and, up through the first half of 2014, fees charged for consulting and administrative services. Compensation and benefit costs, which represent thelargest component of noninterest expense, accounted for 63% and 76%, respectively, of the total noninterest expense for Banking and Wealth Managementin 2015. 42Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The following tables show key operating results for each of our business segments for the years ended December 31: (dollars in thousands) Banking WealthManagement Other Total 2015: Interest income $64,471 $— $— $64,471 Interest expense 5,607 — 674 6,281 Net interest income 58,864 — (674) 58,190 Provision for loan losses 2,673 — — 2,673 Noninterest income 8,833 20,530 (590) 28,773 Noninterest expense 39,982 18,352 3,124 61,458 Income (loss) before taxes on income $25,042 $2,178 $(4,388) $22,832 2014: Interest income $47,398 $— $— $47,398 Interest expense 3,844 — 740 4,584 Net interest income 43,554 — (740) 42,814 Provision for loan losses 235 — — 235 Noninterest income 5,866 19,422 (539) 24,749 Noninterest expense 30,509 17,979 4,019 52,507 Income (loss) before taxes on income $18,676 $1,443 $(5,298) $14,821 General. Income before taxes was $22.8 million in 2015 as compared to $14.8 million in 2014. This increase was due to increases in income beforetaxes for Banking and Wealth Management of $6.4 million and $0.7 million, respectively, and a $0.9 million decrease in corporate interest and noninterestexpenses. The $6.4 million increase in income before taxes for Banking in 2015 as compared to 2014 was due to higher net interest income and highernoninterest income, which were partially offset by a higher provision for loan losses and higher noninterest expenses. For Wealth Management, the $0.7million increase was due to higher noninterest income which was partially offset by higher noninterest expenses.The decrease in corporate interest and noninterest expenses in 2015 as compared to 2014 was primarily due to a $0.9 million decrease inprofessional services and marketing expenses. 43Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Net Interest Income. The following tables set forth information regarding (i) the total dollar amount of interest income from interest-earning assetsand the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearingliabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net yield on interest-earning assets for the year ended December 31: 2015 2014 (dollars in thousands) AverageBalances Interest AverageYield /Rate AverageBalances Interest AverageYield /Rate Interest-earning assets: Loans $1,450,081 $57,481 3.96% $1,016,374 $44,140 4.34%Securities 224,906 5,227 2.32% 105,755 2,545 2.41%FHLB stock, fed fundsand deposits 41,356 1,763 4.26% 33,749 713 2.11%Total interest-earning assets 1,716,343 64,471 3.76% 1,155,878 47,398 4.10%Noninterest-earning assets: Nonperforming assets 2,098 3,581 Other 24,741 16,116 Total assets $1,743,182 $1,175,575 Interest-bearing liabilities: Demand deposits $293,502 1,351 0.46% $245,969 1,248 0.51%Money market and savings 281,539 1,641 0.58% 148,541 841 0.57%Certificates of deposit 339,846 1,894 0.56% 262,070 1,497 0.57%Total interest-bearing deposits 914,887 4,886 0.53% 656,580 3,586 0.55%Borrowings 369,225 1,395 0.38% 192,768 998 0.52%Total interest-bearing liabilities 1,284,112 6,281 0.49% 849,348 4,584 0.54%Noninterest-bearing liabilities: Demand deposits 282,822 226,367 Other liabilities 10,865 8,484 Total liabilities 1,577,799 1,084,199 Stockholders’ equity 165,383 91,376 Total liabilities and equity $1,743,182 $1,175,575 Net Interest Income $58,190 $42,814 Net Interest Rate Spread 3.27% 3.56%Net Yield on Interest-earning Assets 3.39% 3.70%Net interest income is impacted by the volume (changes in volume multiplied by prior rate), interest rate (changes in rate multiplied by priorvolume) and mix of interest-earning assets and interest-bearing liabilities. The following table provides a breakdown of the changes in net interest incomedue to volume and rate changes between 2015 as compared to 2014. Increase (Decrease) due to Net Increase(Decrease) (dollars in thousands) Volume Rate Interest earned on: Loans $17,472 $(4,131) $13,341 Securities 2,772 (90) 2,682 FHLB stock, fed funds and deposits 191 859 1,050 Total interest-earning assets 20,435 (3,362) 17,073 Interest paid on: Demand deposits 224 (121) 103 Money market and savings 774 26 800 Certificates of deposit 435 (38) 397 Borrowings 725 (328) 397 Total interest-bearing liabilities 2,158 (461) 1,697 Net interest income $18,277 $(2,901) $15,376 Net interest income increased 36% from $42.8 million in 2014, to $58.2 million in 2015 because of a 48% increase in interest-earning assets,which was partially offset by a decrease in our net interest rate spread. The decrease in the net interest rate spread from 3.56% for 2014 to 3.27% for 2015 wasdue to a decrease in yield on total interest earning assets which was partially offset by a decrease in rates paid on interest bearing liabilities. The yield oninterest earning assets decreased from 4.10% to 3.76% due to an 44Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. increase in the proportion of lower yielding securities to total interest earning assets and a decrease in the yield on loans. The decrease in yield on loans wasdue to prepayments of higher yielding loans and the addition of loans at current market rates which are lower than the current yield on our loan portfolio. Therate on interest bearing liabilities decreased as a result of the payoff of the higher cost term loan in August of 2015 and the impact of lower cost deposits fromthe acquisition of PRB in 2015. We realized $0.3 million and $1.3 million on the net recovery of mark to mark adjustments related to payoffs of acquiredloans in 2015 and 2014, respectively. Provision for loan losses. The provision for loan losses represents our determination of the amount necessary to be charged against the currentperiod’s earnings to maintain the ALLL at a level that is considered adequate in relation to the estimated losses inherent in the loan portfolio. The provisionfor loan losses is impacted by changes in loan balances as well as changes in estimated loss assumptions and charge-offs and recoveries. The amount of ourprovision for loan losses also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, reviewof specific problem loans, current economic conditions and certain other subjective factors that may affect the ability of borrowers to meet their repaymentobligations to us. The provision for loan losses was $2.7 million for 2015 and $0.2 million for 2014. The increase reflects the significant increase in loans andincrease in loan chargeoffs, which were partially offset by a decrease in estimated loss assumptions. We recognized $2.2 million in chargeoffs in 2015, and wedid not recognize any chargeoffs in 2014.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 or REO and insurance commissions. The following table provides a breakdown of noninterest incomefor Banking for the years ended December 31: (dollars in thousands) 2015 2014 Trust fees $2,331 $2,153 Consulting fees 979 576 Deposit charges 427 397 Gain on sale of loans 2,935 — Gain on sale of REO — 1,038 Prepayment fees 1,317 903 Other 844 799 Total noninterest income $8,833 $5,866 The $3.0 million increase in noninterest income for Banking in 2015 as compared to 2014 was due primarily to a $2.7 million gain on sale of $102million of loans in the fourth quarter of 2015, and an increase of $0.4 million loan prepayment fees. In June of 2014, the foundation and family consultingactivities were transferred from Wealth Management to Banking and, as a result, the related revenues are now recognized under Banking.Noninterest income for Wealth Management includes fees charged to high net-worth clients for managing their assets and for providing financialplanning consulting services. The following table provides a breakdown of noninterest income for Wealth Management for the years ended December 31: (dollars in thousands) 2015 2014 Asset management fees $20,470 $18,904 Consulting and administration fees 121 533 Other (61) (15)Total noninterest income $20,530 $19,422 The $1.1 million increase in noninterest income in Wealth Management in 2015 as compared to 2014 was primarily due to increases in assetmanagement fees of 8% which was partially offset by a decrease in consulting and administration fees. The increases in asset management fees were primarilydue to a 8% increase in the AUM balances used for computing the asset management fees in 2015, as compared to AUM balances used for computing theasset management fees in 2014. In June of 2014, the foundation and family consulting activities were transferred from Wealth Management to Banking and,as a result, the related revenues are now recognized under Banking. 45Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Noninterest Expense. The following table provides a breakdown of noninterest expense for Banking and Wealth Management for the years endedDecember 31: Banking Wealth Management (dollars in thousands) 2015 2014 2015 2014 Compensation and benefits $25,273 $18,694 $14,031 $13,760 Occupancy and depreciation 7,117 5,366 1,952 1,818 Professional services and marketing 2,863 2,420 1,549 1,645 Other expenses 4,729 4,029 820 756 Total noninterest expense $39,982 $30,509 $18,352 $17,979 The $9.5 million increase in noninterest expense in Banking in 2015 as compared to 2014 was due primarily to increases in staffing and costsassociated with the Bank’s expansion and growth of its balances of loans and deposits. Compensation and benefits for Banking increased $6.6 millionduring 2015 as compared to 2014 as the number of full time equivalent employees (“FTE”) in Banking increased to 191.3 during 2015 from 144.5 during2014, as a result of the acquisition of PRB and increased staffing to support the growth in loans and deposits. The $2.9 million increase in occupancy anddepreciation, professional services and marketing and other expenses were related to increased costs related to the acquisition of PRB and costs associatedwith its expansion into additional corporate space and opening of new offices. In addition, $0.3 million of costs related to the conversion of PRB coreprocessing systems were included in other expenses in the third quarter of 2015.Noninterest expenses in Wealth Management increased $0.4 million in 2015 as compared to 2014 primarily due to increases in compensation andbenefits. The increase in compensation and benefits reflects increased incentive compensation incurred primarily as a result of the increase in AUM.Years Ended December 31, 2014 and 2013.Our net income for 2014 was $8.4 million, as compared to $7.9 million for 2013. The proportional increase in net income was less than theproportional increase in income before taxes because of an increase in our effective tax rate from 17% in 2013 to 43% in 2014. In 2013, the valuationallowance for deferred taxes was reduced by $2.4 million and certain credits under California tax laws were eliminated at the beginning of 2014 resulting in ahigher effective tax rate in 2014.The primary sources of revenue for Banking are net interest income, fees from its deposits, trust and insurance services, certain loan fees, and,beginning in the second half of 2014, fees charged for consulting and administrative services. The primary sources of revenue for Wealth Management areasset management fees assessed on the balance of AUM and, up through the first half of 2015, fees charged for consulting and administrative services.Compensation and benefit costs, which represent the largest component of noninterest expense accounted for 61% and 77%, respectively, of the totalnoninterest expense for Banking and Wealth Management in 2014.The following tables show key operating results for each of our business segments for the years ended December 31:(dollars in thousands) Banking WealthManagement Other Total 2014: Interest income $47,398 $— $— $47,398 Interest expense 3,844 — 740 4,584 Net interest income 43,554 — (740) 42,814 Provision for loan losses 235 — — 235 Noninterest income 5,866 19,422 (539) 24,749 Noninterest expense 30,509 17,979 4,019 52,507 Income (loss) before taxes on income $18,676 $1,443 $(5,298) $14,821 2013: Interest income $39,181 $— $— $39,181 Interest expense 3,288 — 219 3,507 Net interest income 35,893 — (219) 35,674 Provision for loan losses 2,395 — — 2,395 Noninterest income 3,514 16,715 (405) 19,824 Noninterest expense 24,302 17,400 1,920 43,622 Income (loss) before taxes on income $12,710 $(685) $(2,544) $9,481 46Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. General. Income before taxes was $14.8 million in 2014 as compared to $9.5 million in 2013. This increase was due to increases in income beforetaxes for Banking and Wealth Management of $6.0 million and $2.1 million, respectively, which were partially offset by a $2.8 million increase in corporateinterest and noninterest expenses. The $6.0 million increase in income before taxes for Banking in 2014 as compared to 2013 was due to higher net interestincome, higher noninterest income and a lower provision for loan losses, which were partially offset by higher noninterest expenses. For WealthManagement, a $0.7 million loss before taxes in 2013 improved to income before taxes of $1.4 million in 2014 due to higher noninterest income which waspartially offset by higher noninterest expenses.The increase in corporate interest and noninterest expenses in 2014 as compared to 2013 was primarily due to a $0.5 million increase in interestcosts related to the higher balance of the term loan, the expensing of $1.0 million in IPO costs, $0.3 million of increased allocations of executivecompensation related to the time spent on the IPO by management employees of the Bank and $0.3 million of costs related to the implementation of a newfirm-wide client relationship management system. 47Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Net Interest Income: The following tables set forth information regarding (i) the total dollar amount of interest income from interest-earning assetsand the resultant average yields on those assets; (ii) the total dollar amount of interest expense and the average rate of interest on our interest-bearingliabilities; (iii) net interest income; (iv) net interest rate spread; and (v) net yield on interest-earning assets for the years ended December 31: 2014 2013 (dollars in thousands) AverageBalances Interest AverageYield /Rate AverageBalances Interest AverageYield /Rate Interest-earning assets: Loans $1,016,374 $44,140 4.34% $803,808 $37,918 4.69%Securities 105,755 2,545 2.41% 37,325 864 2.31%FHLB stock, fed funds and deposits 33,749 713 2.11% 37,918 399 1.05%Total interest-earning assets 1,155,878 47,398 4.10% 879,051 39,181 4.43%Noninterest-earning assets: Nonperforming assets 3,581 2,778 Other 16,116 18,875 Total assets $1,175,575 $900,704 Interest-bearing liabilities: Demand deposits $245,969 1,248 0.51% $165,736 857 0.52%Money market and savings 148,541 841 0.57% 99,826 434 0.44%Certificates of deposit 262,070 1,497 0.57% 279,470 1,876 0.67%Total interest-bearingdeposits 656,580 3,586 0.55% 545,032 3,167 0.58%Borrowings 192,768 998 0.52% 84,409 340 0.40%Total interest-bearingliabilities 849,348 4,584 0.54% 629,441 3,507 0.56%Noninterest-bearing liabilities: Demand deposits 226,367 186,760 Other liabilities 8,484 7,813 Total liabilities 1,084,199 824,014 Stockholders’ equity 91,376 76,690 Total liabilities and equity $1,175,575 $900,704 Net Interest Income $42,814 $35,674 Net Interest Rate Spread 3.56% 3.87%Net Yield on Interest-earning Assets 3.70% 4.04%Net interest income is impacted by the volume (changes in volume multiplied by prior rate), interest rate (changes in rate multiplied by priorvolume) and mix of interest-earning assets and interest-bearing liabilities. The following table provides a breakdown of the changes in net interest incomedue to volume and rate changes between 2014 as compared to corresponding period in 2013. Increase (Decrease) due to Net Increase(Decrease) (dollars in thousands) Volume Rate Interest earned on: Loans $9,178 $(2,956) $6,222 Securities 1,646 35 1,681 FHLB stock, fed funds and deposits (48) 362 314 Total interest-earning assets 10,776 (2,559) 8,217 Interest paid on: Demand deposits 408 (17) 391 Money market and savings 252 155) 407 Certificates of deposit (111) (268) (379)Borrowings 538 120 658 Total interest-bearing liabilities 1,087 (10) 1,077 Net interest income $9,689 $(2,549) $7,140 48Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Net interest income increased 21% from $34.8 million in 2013, to $42.3 million in 2014 because of a 31% increase in interest-earning assets,which was partially offset by a decrease in our net interest rate spread. The decrease in the net interest rate spread from 3.87% for 2013 to 3.56% for 2014 wasdue to a decrease in yield on total interest earning assets which was partially offset by a decrease in rates paid on interest bearing liabilities. The yield oninterest earning assets decreased from 4.43% to 4.10% due to an increase in the proportion of lower yielding securities to total interest earning assets and adecrease in the yield on loans. The decrease in yield on loans was due to prepayments of higher yielding loans and the addition of loans at current marketrates which are lower than the current yield on our loan portfolio. The rate on interest bearing liabilities decreased as a decrease in the rate on interest bearingdeposits was partially offset by an increase in the rate on borrowings. The decrease in rates paid on deposits was due to lower market rates while the increasein the rates paid on borrowings was primarily due to the higher proportion of borrowings being from the term loan which bears interest at ninety day Liborplus 4.0% per annum as compared to the FHLB weighted average borrowing rate of 0.15% during 2014. We realized $1.3 million and $1.1 million on the netrecovery of mark to mark adjustments related to payoffs of acquired loans in 2014 and 2013, respectively. Provision for loan losses. The provision for loan losses represents our determination of the amount necessary to be charged against the currentperiod’s earnings to maintain the ALLL at a level that is considered adequate in relation to the estimated losses inherent in the loan portfolio. The provisionfor loan losses is impacted by changes in loan balances as well as changes in estimated loss assumptions and charge-offs and recoveries. The amount of ourprovision also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specificproblem loans, current economic conditions and certain other subjective factors that may affect the ability of borrowers to meet their repayment obligationsto us. The provision for loan losses was $0.2 million for 2014 and $2.4 million for 2013. The lower provision for loan losses in 2014 as compared to 2013reflects reductions in estimated loss assumptions and the lower amount of chargeoffs. We did not recognize any chargeoffs in the 2014, as compared to $0.8million of chargeoffs recognized in 2013.Noninterest income: The following table provides a breakdown of noninterest income for Banking for the years ended December 31: (dollars in thousands) 2014 2013 Trust fees $2,153 $1,785 Consulting fees 576 — Deposit charges 397 366 Gain on sale of REO 1,038 — Prepayment fees 903 846 Other 799 517 Total noninterest income $5,866 $3,514 The $2.4 million increase in noninterest income for Banking in 2014 as compared to 2013 was due primarily to the $1.0 million gain on sale ofREO, $0.6 million of consulting fees, a $0.4 million increase in trust fees and a $0.2 million increase in insurance commissions. In June of 2014, thefoundation and family consulting activities were transferred from Wealth Management to Banking and, as a result, the related revenues are now recognizedunder Banking. The increase in trust fees is due to a 22% increase in trust AUM during 2014 and the increase in insurance commissions reflects a higher levelof large dollar cases closed in 2014 as compared to 2013Noninterest income for Wealth Management includes fees charged to high net-worth clients for managing their assets and for providing financialplanning consulting services. The following table provides a breakdown of noninterest income for Wealth Management for the years ended December 31: (dollars in thousands) 2014 2013 Asset management fees $18,904 $15,560 Consulting and administration fees 533 1,164 Other (15) (9)Total noninterest income $19,422 $16,715 The $2.7 million increase in noninterest income in Wealth Management in 2014 as compared to 2013 was primarily due to increases in assetmanagement fees of 21% which was partially offset by a decrease in consulting and administration fees. The increases in asset management fees wereprimarily due to a 22% increase in the AUM balances used for computing the asset management fees in 2014, as compared to AUM balances used forcomputing the asset management fees in 2013. In June of 2014, the foundation and family consulting activities were transferred from Wealth Management toBanking and, as a result, the related revenues are now recognized under Banking. 49Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Noninterest Expense: The following table provides a breakdown of noninterest expense for Banking and Wealth Management for the years endedDecember 31: Banking Wealth Management (dollars in thousands) 2014 2013 2014 2013 Compensation and benefits $18,694 $14,971 $13,760 $13,176 Occupancy and depreciation 5,366 4,568 1,818 1,922 Professional services and marketing 2,420 1,752 1,645 1,536 Other expenses 4,029 3,011 756 766 Total noninterest expense $30,509 $24,302 $17,979 $17,400 The $6.2 million increase in noninterest expense in Banking in 2014 as compared to 2013 was due primarily to increases in staffing and costsassociated with the Bank’s higher balances of loans and deposits and our continuing expansion and a $1.0 million provision related to contingentconsideration to be paid to the former shareholders of DCB. Compensation and benefits for Banking increased $3.7 million during 2014 as compared to 2013as the number of FTE in Banking increased to 144.5 during 2014 from 123.1 during 2013 and the Bank recorded $0.5 million of severance costs. The $0.8million increase in occupancy and depreciation costs for Banking in 2014 as compared to 2013 was due to an office opening and the expansion intoadditional space at the administrative office in the second quarter of 2013. The $0.7 million increase in professional services and marketing was dueprimarily to higher legal costs related to ongoing litigation matters and increased management fees related to the increased trust AUM. The $1.0 millionincrease in other expenses in 2014 as compared to 2013 was primarily due to the $1.0 million provision related to contingent consideration to be paid to theformer shareholders of DCB.Noninterest expenses in Wealth Management increased $0.6 million in 2014 as compared to 2013 primarily due to increases in compensation andbenefits. The increase in compensation and benefits reflects increased incentive compensation incurred as a result of the increase in AUM. 50Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Financial ConditionThe following table shows the financial position for each of our business segments, and of FFI and elimination entries used to arrive at ourconsolidated totals which are included in the column labeled Other, at December 31: (dollars in thousands) Banking WealthManagement Other andEliminations Total 2015: Cash and cash equivalents $215,671 $5,682 $(5,605) $215,748 Securities AFS 565,135 — — 565,135 Loans, net 1,754,883 — — 1,754,883 Premises and equipment 1,996 545 112 2,653 FHLB Stock 21,492 — — 21,492 Deferred taxes 14,466 630 296 15,392 REO 4,036 — — 4,036 Goodwill and Intangibles 2,416 — — 2,416 Other assets 8,645 314 1,865 10,824 Total assets $2,588,740 $7,171 $(3,332) $2,592,579 Deposits $1,569,932 $— $(47,756) $1,522,176 Borrowings 796,000 — — 796,000 Intercompany balances 2,748 121 (2,869) — Other liabilities 9,309 2,634 2,724 14,667 Shareholders’ equity 210,751 4,416 44,569 259,736 Total liabilities and equity $2,588,740 $7,171 $(3,332) $2,592,579 2014: Cash and cash equivalents $29,585 $3,750 $(3,643) $29,692 Securities AFS 138,270 — — 138,270 Loans, net 1,156,021 221 — 1,156,242 Premises and equipment 1,539 548 100 2,187 FHLB Stock 12,361 — — 12,361 Deferred taxes 9,196 601 (49) 9,748 REO 334 — — 334 Other assets 4,827 500 1,263 6,590 Total assets $1,352,133 $5,620 $(2,329) $1,355,424 Deposits $972,319 $— $(9,365) $962,954 Borrowings 263,000 — 19,886 282,886 Intercompany balances 1,287 73 (1,360) — Other liabilities 6,352 2,486 1,250 10,088 Shareholders’ equity 109,175 3,061 (12,740) 99,496 Total liabilities and equity $1,352,133 $5,620 $(2,329) $1,355,424 2013: Cash and cash equivalents $56,795 $2,134 $(1,975) $56,954 Securities AFS 59,111 — — 59,111 Loans, net 893,364 366 — 893,730 Premises and equipment 2,286 863 100 3,249 FHLB Stock 6,721 — — 6,721 Deferred taxes 11,426 865 (239) 12,052 REO 375 — — 375 Other assets 3,840 717 611 5,168 Total assets $1,033,918 $4,945 $(1,503) $1,037,360 Deposits $809,306 $— $(7,269) $802,037 Borrowings 134,000 — 7,063 141,063 Intercompany balances 857 248 (1,105) — Other liabilities 4,018 2,590 890 7,498 Shareholders’ equity 85,737 2,107 (1,082) 86,762 Total liabilities and equity $1,033,918 $4,945 $(1,503) $1,037,360 51Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our consolidated balance sheet is primarily affected by changes occurring in our Banking operations as our Wealth Management operations do notmaintain significant levels of assets. Banking has experienced and is expected to continue to experience increases in its total assets as a result of our growthstrategy.During 2015, total assets for the Company and the Bank increased by $1.2 billion. For the Bank, during 2015, loans increased by $599 million,deposits increased by $598 million, cash and cash equivalents increased by $186 million, securities AFS increased by $427 million and FHLB advancesincreased by $533 million. Borrowings at FFI decreased by $20 million during 2015. During 2014, total assets for the Company and the Bank increased by$318 million. For the Bank, during 2014, loans increased by $263 million, deposits increased by $163 million, cash and cash equivalents decreased by $27million, securities AFS increased by $79 million and FHLB advances increased by $129 million. Borrowings at FFI increased by $13 million during 2014.Cash and cash equivalents, certificates of deposit and securities: Cash and cash equivalents, which primarily consist of funds held at the FederalReserve Bank or at correspondent banks, including fed funds, increased by $186 million during 2015. Changes in cash and cash equivalents are primarilyaffected by the funding of loans, investments in securities, and changes in our sources of funding: deposits, FHLB advances and FFI borrowings. During 2015the Company obtained net proceeds of $131 million from a public offering of shares of our common stock and used a portion of the net proceeds from theoffering to repay all of its $29 million of outstanding term debt.Securities available for sale: The following table provides a summary of the Company’s AFS securities portfolio at December 31: AmortizedCost Gross Unrealized EstimatedFair Value (dollars in thousands) Gains Losses 2015: US Treasury securities $300 $— $— $300 Agency notes 16,108 — (95) 16,013 Agency mortgage-backed securities 537,819 909 (3,030) 536,148 Beneficial interest – FHLMC securitization 12,674 476 (476) 12,674 Total $567,351 $1,385 $(3,601) $565,135 2014: US Treasury Securities $300 $— $— $300 Agency notes 10,496 — (219) 10,277 Agency mortgage-backed securities 125,944 1,881 (132) 127,693 Total $136,740 $1,881 $(351) $138,270 2013: US Treasury Securities $300 $— $— $300 Agency note 10,496 — (716) 9,780 Agency mortgage-backed securities 50,983 30 (1,982) 49,031 Total $61,779 $30 $(2,698) $59,111 The US Treasury Securities are pledged as collateral to the State of California to meet regulatory requirements related to FFB’s trust operations.The $427 million increase in AFS Securities in 2015 was the result of a capital leverage strategy under which the Company utilized the capitalraised in its public offering to leverage an increase in its AFS securities portfolio through the use of FHLB advances. The purchases of securities under thisstrategy were limited to fifteen year term agency mortgage-backed securities. The $75 million increase in AFS Securities in 2014 reflected our actions toincrease our on-balance sheet sources of liquidity. 52Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The table below indicates, as of December 31, 2015, the gross unrealized losses and fair values of our investments, aggregated by investmentcategory and length of time that the individual securities have been in a continuous unrealized loss position. Securities with Unrealized Loss at December 31, 2015 (dollars in thousands) Less than 12 months 12 months or more Total FairValue UnrealizedLoss FairValue UnrealizedLoss FairValue UnrealizedLoss Agency notes $16,013 $(95) $— $— $16,013 $(95)Agency mortgage backed securities 397,850 (3,030) — — 397,850 (3,030)Beneficial interest – FHLMC securitization 12,674 (476) — — 12,674 (476)Total temporarily impaired securities $426,537 $(3,601) $— $— $426,537 $(3,601)Unrealized losses on agency notes and agency mortgage-backed securities have not been recognized into income because the issuer bonds are ofhigh 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 totheir anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approachmaturity.The scheduled maturities of securities AFS, other than agency mortgage backed securities, and the related weighted average yield is as follows asof December 31, 2015: (dollars in thousands) Less than 1 Year 1 Through 5 years 5 Through 10 Years After10 Years Total Amortized Cost: US Treasury securities $300 $— $— $— $300 Agency notes — 12,760 2,748 600 16,108 Total $300 $12,760 $2,748 $600 $16,408 Weighted average yield 0.45% 1.50% 1.94% 2.86% 1.60%Estimated Fair Value: US Treasury securities $300 $— $— $— $300 Agency notes — 12,692 2,725 596 16,013 Total $300 $12,692 $2,725 $596 $16,313 Agency mortgage backed securities are excluded from the above table because such securities are not due at a single maturity date. The weightedaverage yield of the agency mortgage backed securities as of December 31, 2015 was 2.24%.Loans. The following table sets forth our loans, by loan category, as of December 31: (dollars in thousands) 2015 2014 2013 2012 2011 Recorded investment balance: Loans secured by real estate: Residential properties: Multifamily $627,311 $481,491 $405,984 $367,412 $320,053 Single family 533,257 360,644 227,096 155,864 85,226 Total real estate loans secured by residential properties 1,160,568 842,135 633,080 523,276 405,279 Commercial properties 358,791 205,320 154,982 132,217 75,542 Land 12,320 4,309 3,794 7,575 — Total real estate loans 1,531,679 1,051,764 791,856 663,068 480,821 Commercial and industrial loans 196,584 93,537 93,255 67,920 35,377 Consumer loans 37,206 21,125 18,484 12,585 8,012 Total loans 1,765,469 1,166,426 903,595 743,573 542,210 Premiums, discounts and deferred fees and expenses 14 (34) 50 54 (107)Total $1,765,483 $1,166,392 $903,645 $743,627 $524,103 The $599 million increase in loans during 2015 was the result of loan originations and funding of existing credit commitments of $944 millionand $80 million of loans obtained in the acquisition of PRB, which were partially offset by $426 million of payoffs, scheduled principal payments, and loanssold. The $263 million increase in loans during 2014 was the result of loan originations and funding of existing credit commitments of $504 million, offsetby $241 million of payoffs and scheduled principal 53Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. payments. The scheduled maturities, as of December 31, 2015, of the performing loans categorized as land loans and as commercial and industrial loans, areas follows: Scheduled Maturity Loans With a ScheduledMaturity After One Year (dollars in thousands) Due in One Year orLess Due After One Year ThroughFive Years Due AfterFive Years Loans WithFixed Rates Loan WithAdjustable Rates Land loans $8,709 $2,224 $1,895 $3,395 $724 Commercial and industrial loans $81,085 $69,854 $42,625 $46,081 $66,398 Deposits: The following table sets forth information with respect to our deposits and the average rates paid on deposits, as of December 31: 2015 2014 2013 (dollars in thousands) Amount WeightedAverage Rate Amount WeightedAverage Rate AmountWeightedAverage Rate Demand deposits: Noninterest-bearing $299,794 — $246,137 — $217,782 Interest-bearing 260,167 0.359% 291,509 0.502% 217,129 0.504%Money market and savings 492,015 0.531% 171,958 0.626% 121,260 0.499%Certificates of deposits 470,200 0.554% 253,350 0.619% 245,866 0.606%Total $1,522,176 0.404% $962,954 0.427% $802,037 0.398%The $559 million increase in deposits during 2015 reflect the organic growth of our Banking operations, $120 million of deposits acquired in anacquisition, and a $251 million increase in brokered deposits. The $161 million increase in deposits during 2014 reflects the organic growth of our Bankingoperations.During 2015, deposit market rates, which were declining in prior years, have been stable. However, in 2015, the Company benefited from the lowercost deposits obtained in its acquisition of PRB. The weighted average rate of interest-bearing deposits, which increased slightly from 0.55% at December 31,2013 to 0.57% at December 31, 2014, decreased to 0.50% at December 31, 2015, while the weighted average interest rates of both interest-bearing andnoninterest-bearing deposits, which increased from 0.40% at December 31, 2013, to 0.43% at December 31, 2014, decreased to 0.40% at December 31, 2015.As the Company continues to grow, it has emphasized its money market products and has offered increased rates on promotional products to attract newdeposit clients.The maturities of our certificates of deposit of $100,000 or more were as follows as of December 31, 2015: (dollars in thousands) 3 months or less $124,232 Over 3 months through 6 months 162,301 Over 6 months through 12 months 57,417 Over 12 months 28,008 Total $371,958 FFB utilizes a third party program called CDARs which allows FFB to transfer funds of its clients in excess of the FDIC insurance limit (currently$250,000) to other institutions in exchange for an equal amount of funds from clients of these other institutions. This has allowed FFB to provide FDICinsurance coverage to its clients. Under certain regulatory guidelines, these deposits are considered brokered deposits. From time to time, the Bank willutilize brokered deposits as a source of funding. As of December 31, 2015, the Bank held $328 million of deposits which are classified as brokered deposits,including $49 million of CDARs reciprocal deposits.Borrowings: At December 31, 2015, our borrowings consisted of $796 million of overnight FHLB advances at FFB. At December 31, 2014, ourborrowings consisted of $263 million of overnight FHLB advances at FFB and a $20 million term loan at FFI. These FHLB advances were paid in full in theearly parts of January 2016 and January 2015, respectively. Because FFB utilizes overnight borrowings, the balance of outstanding borrowings fluctuates ona daily basis. The weighted average interest rate on these overnight borrowings was 0.20% for 2015 and 0.15% for 2014. The average balance of overnightborrowings was $352 million during 2015, as compared to $175 million during 2014. The maximum amount of short-term FHLB advances outstanding atany month-end during 2015, and 2014, was $796 million, and $263 million, respectively. 54Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Term Loan. In the second quarter of 2013, we entered into a secured loan agreement with a lender to borrow $7.5 million for a term of five years. Inthe first quarter of 2014, we entered into an amendment to this loan agreement pursuant to which we obtained an additional $15.0 million of borrowings. Thisamendment did not alter any of the terms of the loan agreement or the loan, other than to increase the principal amount and to correspondingly increase theamount of the monthly installments of principal and interest payable on the loan. In the first quarter of 2015, we entered into a second amendment to thisloan agreement pursuant to which, we obtained an additional $10.3 million of borrowings, bringing the outstanding balance of this loan to $30.0 million asof February 28, 2015. This second amendment also reduced the interest rate on this loan to 3.75% over ninety day LIBOR from 4.00% over ninety dayLIBOR, extended the maturity date of this loan to May 1, 2022 and made corresponding changes to the amount of the principal payments required to bemade by us on this loan. This loan was paid off in full on August 13, 2015. Delinquent Loans, Nonperforming Assets and Provision for Credit LossesLoans are considered past due following the date when either interest or principal is contractually due and unpaid. Loans on which the accrual ofinterest has been discontinued are designated as nonaccrual loans. Accrual of interest on loans is discontinued when reasonable doubt exists as to the full,timely collection of interest or principal and, generally, when a loan becomes contractually past due for 90 days or more with respect to principal or interest.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 interest if theloan is in the process of collection or collection of the principal and interest is deemed probable. The following tables provide a summary of past due andnonaccrual loans as of December 31: Past Due and Still Accruing Total PastDue andNonaccrual Current Total (dollars in thousands) 30–59 Days 60-89 Days 90 Daysor More Nonaccrual 2015: Real estate loans: Residential properties $— $— $— $— $— $1,160,568 $1,160,568 Commercial properties 1,232 — 793 1,552 3,577 355,214 358,791 Land — — — — — 12,320 12,320 Commercial and industrial loans 2,425 1,639 5,713 2,509 12,286 184,298 196,584 Consumer loans 1,010 — 1,991 75 3,076 34,130 37,206 Total $4,667 $1,639 $8,497 $4,136 $18,939 $1,746,530 $1,765,469 Percentage of total loans 0.26% 0.09% 0.48% 0.23% 1.07% 2014: Real estate loans: Residential properties $— $— $— $— $— $842,135 $842,135 Commercial properties — 805 200 596 1,601 203,719 205,320 Land — — 651 — 651 3,658 4,309 Commercial and industrial loans 2,092 289 700 342 3,423 90,114 93,537 Consumer loans — — 637 163 800 20,325 21,125 Total $2,092 $1,094 $2,188 $1,101 $6,475 $1,159,951 $1,166,426 Percentage of total loans 0.18% 0.09% 0.19% 0.09% 0.56% 2013: Real estate loans: Residential properties $— $— $— $1,820 $1,820 $631,260 $633,080 Commercial properties — — 417 598 1,015 153,967 154,982 Land — — 1,480 — 1,480 2,314 3,794 Commercial and industrial loans — 2,744 1,315 344 4,403 88,852 93,255 Consumer loans — — — 132 132 18,352 18,484 Total $— $2,744 $3,212 $2,894 $8,850 $894,745 $903,595 Percentage of total loans 0.00% 0.30% 0.36% 0.32% 0.98% As of December 31, 2012, the Company had $3.2 million of loans 30 to 59 days past due which represented 0.43% of total loans outstanding, $1.3million of loans 60 to 89 days past due, which represented 0.17% of loans outstanding, and $3.2 million of loans 90 days or more past due, which represented0.43% of total loans outstanding As of December 31, 2011, the Company had $0.5 million of loans 30 to 59 days past due which represented 0.10% of totalloans outstanding. The Company did not have any loans over 60 days past due as of December 31, 2011. 55Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company had $0.8 million of loans classified as nonaccrual as of December 31, 2012, and did not have any loans classified as nonaccrual asDecember 31, 2011.The level of delinquent loans and nonaccrual loans have been adversely impacted by the loans acquired in an acquisition. As of December 31,2015, of the $12.6 million in loans over 90 days past due, including loans on nonaccrual, $6.8 million, or 54% were loans acquired in an acquisition. As ofDecember 31, 2015, the Company had two loans with a balance of $0.3 million classified as troubled debt restructurings (“TDR”) and as of December 31,2014, the Company had two loans with a balance of $0.5 million classified as a TDR, all of which are included as nonaccrual in the table above.The following is a breakdown of our loan portfolio by the risk category of loans at December 31: (dollars in thousands) Pass SpecialMention Substandard Impaired Total 2015: Real estate loans: Residential properties $1,159,029 $1,539 $— $— $1,160,568 Commercial properties 351,988 174 354 6,275 358,791 Land 11,180 — 1,140 — 12,320 Commercial and industrial loans 180,755 4,977 5,165 5,687 196,584 Consumer loans 37,130 — — 76 37,206 Total $1,740,082 $6,690 $6,659 $12,038 $1,765,469 2014: Real estate loans: Residential properties $841,538 $554 $— $43 $842,135 Commercial properties 198,112 1,266 200 5,742 205,320 Land 4,309 — — — 4,309 Commercial and industrial loans 81,067 5,276 1,559 5,635 93,537 Consumer loans 20,962 — 47 116 21,125 Total $1,145,988 $7,096 $1,806 $11,536 $1,166,426 2013: Real estate loans: Residential properties $630,832 $— $— $2,248 $633,080 Commercial properties 150,053 — 4,108 821 154,982 Land 2,314 — 1,480 — 3,794 Commercial and industrial loans 88,166 43 2,047 2,999 93,255 Consumer loans 18,309 — 175 — 18,484 Total $889,674 $43 $7,810 $6,068 $903,595 2012: Real estate loans: Residential properties $519,288 $— $1,731 $2,257 $523,276 Commercial properties 127,803 — 4,414 — 132,217 Land 3,818 — 3,214 543 7,575 Commercial and industrial loans 62,000 889 2,295 2,736 67,920 Consumer loans 12,387 127 71 — 12,585 Total $725,296 $1,016 $11,725 $5,536 $743,573 2011: Real estate loans: Residential properties $402,630 $291 $— $2,358 $405,279 Commercial properties 75,542 — — — 75,542 Commercial and industrial loans 31,627 3,750 — — 35,377 Consumer loans 7,860 152 — — 8,012 Total $517,659 $4,193 $— $2,358 $524,210 We consider a loan to be impaired when, based upon current information and events, we believe that it is probable that we will be unable to collectall amounts due according to the contractual terms of the loan. We measure impairment using either the present value of the expected future cash flowsdiscounted at the loan’s effective interest rate, or the fair value of the properties collateralizing the loan. Impairment losses are included in the allowance forloan losses through a charge to provision for loan losses. Adjustments to impairment losses due to changes in the fair value of the property collateralizing animpaired loan are considered in computing the provision for loan losses. Loans collectively reviewed for impairment include all loans except for loans whichare 56Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. individually reviewed based on specific criteria, such as delinquency, debt coverage, adequacy of collateral and condition of property collateralizing theloans. Impaired loans include nonaccrual loans (excluding those collectively reviewed for impairment), certain restructured loans and certain performingloans less than ninety days delinquent (“other impaired loans”) which we believe are not likely to be collected in accordance with contractual terms of theloans.In 2012 and 2015, we purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it wasprobable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these purchased credit impaired loans is asfollows at December 31: (dollars in thousands) 2015 2014 Outstanding principal balance: Loans secured by real estate: Commercial properties $533 $206 Land 1,616 — Total real estate loans 2,149 206 Commercial and industrial loans 6,787 2002 Consumer loans 14 249 Total loans 8,950 2,457 Unaccreted discount on purchased credit impaired loans (2,291) (651)Total $6,659 $1,806 57Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Allowance for Loan Losses. The following table summarizes the activity in our ALLL for the year ended December 31: (dollars in thousands) Beginning Balance Provision for Loan Losses Charge-offs Recoveries EndingBalance 2015: Real estate loans: Residential properties $6,586 $243 $— $— $6,829 Commercial properties / land 1,526 670 (310) — 1,886 Commercial and industrial loans 1,897 1,665 (1,913) — 1,649 Consumer loans 141 95 — — 236 Total $10,150 $2,673 $(2,223) $— $10,600 2014: Real estate loans: Residential properties $6,157 $429 $— $— $6,586 Commercial properties / land 1,440 86 — — 1,526 Commercial and industrial loans 2,149 (252) — — 1,897 Consumer loans 169 (28) — — 141 Total $9,915 $235 $— $— $10,150 2013: Real estate loans: Residential properties $4,355 $1,802 $— $— $6,157 Commercial properties / land 936 561 (57) — 1,440 Commercial and industrial loans 2,841 71 (763) — 2,149 Consumer loans 208 (39) — — 169 Total $8,340 $2,395 $(820) $— $9,915 2012: Real estate loans: Residential properties $3,984 $646 $(275) $— $4,355 Commercial properties 1,218 (282) — — 936 Commercial and industrial loans 1,104 1,737 — — 2,841 Consumer loans 244 (36) — — 208 Total $6,550 $2,065 $(275) $— $8,340 2011: Real estate loans: Residential properties $2,185 $1,524 $— $275 $3,984 Commercial properties 900 318 — — 1,218 Commercial and industrial loans 955 381 (232) — 1,104 Consumer loans 170 74 — — 244 Total $4,210 $2,297 $(232) $275 $6,550 Excluding the loans acquired in an Acquisition and any related allocated ALLL, our ALLL as a percentage of total loans was 0.61% and 0.87% asof December 31, 2015, and December 31, 2014, respectively.The amount of the ALLL is adjusted periodically by charges to operations (referred to in our income statement as the “provision for loan losses”)(i) to replenish the ALLL after it has been reduced due to loan write-downs or charge-offs, (ii) to reflect increases in the volume of outstanding loans, and(iii) to take account of changes in the risk of potential loan losses due to a deterioration in the condition of borrowers or in the value of property securingnon–performing loans or adverse changes in economic conditions. The amounts of the provisions we make for loan losses are based on our estimate of lossesin our loan portfolio. In estimating such losses, we use economic and loss migration models that are based on bank regulatory guidelines and industrystandards, and our historical charge-off experience and loan delinquency rates, local and national economic conditions, a borrower’s ability to repay itsborrowings, and the value of any property collateralizing the loan, as well as a number of subjective factors. However, these determinations involvejudgments about changes and trends in current economic conditions and other events that can affect the ability of borrowers to meet their loan obligations tous and a weighting among the quantitative and qualitative factors we consider in determining the sufficiency of the ALLL. Moreover, the duration andanticipated effects of prevailing economic conditions or trends can be uncertain and can be affected by a number of risks and circumstances that are outsideof our control. If changes in economic or market conditions or unexpected subsequent events were to occur, or if changes were made to bank regulatoryguidelines or industry standards that are used to assess the sufficiency of the ALLL, it could become necessary for us to incur additional, and possiblysignificant, charges to increase the ALLL, which would have the effect of reducing our income. 58Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In addition, the FDIC and the DBO, as an integral part of their examination processes, periodically review the adequacy of our ALLL. Theseagencies 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 beto reduce our income.The following table presents the balance in the ALLL and the recorded investment in loans by impairment method at December 31: (dollars in thousands) Allowance for Loan Losses UnaccretedCreditComponentOther Loans Evaluated for Impairment Purchased Impaired Total Individually Collectively 2015: Allowance for loan losses: Real estate loans: Residential properties $— $6,799 $— $6,799 $127 Commercial properties 30 1,783 — 1,813 363 Land — 103 — 103 42 Commercial and industrial loans — 1,649 — 1,649 187 Consumer loans — 236 — 236 13 Total $30 $10,570 $— $10,600 $732 Loans: Real estate loans: Residential properties $— $1,160,568 $— $1,160,568 $7,747 Commercial properties 6,275 352,162 354 358,791 43,287 Land — 11,180 1,140 12,320 4,267 Commercial and industrial loans 5,687 185,732 5,165 196,584 28,231 Consumer loans 76 37,130 — 37,206 1,761 Total $12,038 $1,746,772 $6,659 $1,765,469 $85,293 2014: Allowance for loan losses: Real estate loans: Residential properties $— $6,586 $— $6,586 $26 Commercial properties 26 1,500 — 1,526 193 Land — — — — 4 Commercial and industrial loans 686 1,211 — 1,897 45 Consumer loans — 141 — 141 — Total $712 $9,438 $— $10,150 $268 Loans: Real estate loans: Residential properties $43 $842,092 $— $842,135 $2,861 Commercial properties 5,742 199,378 200 205,320 21,126 Land — 4,309 — 4,309 1,099 Commercial and industrial loans 5,635 86,343 1,559 93,537 5,893 Consumer loans 116 20,962 47 21,125 8 Total $11,536 $1,153,084 $1,806 $1,166,426 $30,987 59Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (dollars in thousands) Allowance for Loan Losses UnaccretedCreditComponentOther Loans Evaluated for Impairment Purchased Impaired Total Individually Collectively 2013: Allowance for loan losses: Real estate loans: Residential properties $— $6,157 $— $6,157 $36 Commercial properties 190 1,250 — 1,440 290 Land — — — — 26 Commercial and industrial loans 925 1,224 — 2,149 126 Consumer loans — 169 — 169 11 Total $1,115 $8,800 $— $9,915 $489 Loans: Real estate loans: Residential properties $2,248 $630,832 $— $633,080 $3,449 Commercial properties 821 150,053 4,108 154,982 23,968 Land — 2,314 1,480 3,794 1,939 Commercial and industrial loans 2,999 88,209 2,047 93,255 10,354 Consumer loans — 18,441 43 18,484 160 Total $6,068 $889,849 $7,678 $903,595 $39,870 2012: Allowance for loan losses: Real estate loans: Residential properties $— $4,355 $— $4,355 $62 Commercial properties — 936 — 936 617 Land — — — — 129 Commercial and industrial loans 1,536 1,305 — 2,841 302 Consumer loans — 208 — 208 19 Total $1,536 $6,804 $— $8,340 $1,129 Loans: Real estate loans: Residential properties $2,257 $519,288 $1,731 $523,276 $5,121 Commercial properties — 128,035 4,182 132,217 39,862 Land 543 3,818 3,214 7,575 4,521 Commercial and industrial loans 2,736 62,989 2,195 67,920 16,512 Consumer loans — 12,514 71 12,585 324 Total $5,536 $726,644 $11,393 $743,573 $66,340 2011: Allowance for loan losses: Real estate loans: Residential properties $— $3,984 $— $3,984 $— Commercial properties — 1,218 — 1,218 — Commercial and industrial loans — 1,104 — 1,104 — Consumer loans — 244 — 244 — Total $— $6,550 $— $6,550 $— Loans: Real estate loans: Residential properties $2,358 $402,921 $— $405,279 $— Commercial properties — 75,542 — 75,542 — Commercial and industrial loans — 35,377 — 35,377 — Consumer loans — 8,012 — 8,012 — Total $2,358 $521,852 $— $524,210 $— The column labeled “Unaccreted Credit Component Other Loans” represents the amount of unaccreted credit component discount for the otherloans acquired in the DCB and PRB acquisitions, and the stated principal balance of the related loans. The discount is equal to 0.86% and 0.86% of thestated principal balance of these loans as of December 31, 2015 and 2014, respectively. In addition to this unaccreted credit component discount, anadditional $0.3 million and $0.3 million of the ALLL were provided for these loans as of December 31, 2015 and 2014, respectively. 60Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. LiquidityLiquidity management focuses on our ability to generate, on a timely and cost-effective basis, cash sufficient to meet the funding needs of currentloan demand, deposit withdrawals, principal and interest payments with respect to outstanding borrowings and to pay operating expenses. Our liquiditymanagement is both a daily and long-term function of funds management. Liquid assets are generally invested in marketable securities or held as cash at theFRB or other financial institutions.We monitor our liquidity in accordance with guidelines established by our Board of Directors and applicable regulatory requirements. Our need forliquidity is affected by our loan activity, net changes in deposit levels and the maturities of our borrowings. The principal sources of our liquidity consist ofdeposits, loan interest and principal payments and prepayments, investment management and consulting fees, FHLB advances and proceeds from borrowingsand sales of shares by FFI. The remaining balances of the Company’s lines of credit available to draw down totaled $98 million at December 31, 2015.Cash Flows Provided by Operating Activities. During the year ended December 31, 2015 operating activities provided net cash of $13.9 million,comprised primarily of our net income of $13.4 million. In 2014, operating activities provided net cash of $9.4 million, comprised primarily of our netincome of $8.4 million.Cash Flows Used in Investing Activities. During the year ended December 31, 2015, investing activities used net cash of $916.5 million, primarilyto fund a $626.2 million net increase in loans and a $426.9 million net increase in securities AFS, offset partially by $106.2 million in proceeds from loansales and $38.1 million of cash in from the acquisition of PRB. In 2014, investing activities used net cash of $340.3 million, primarily to fund a $262.3million net increase in loans and a $83.5 million net increase in securities AFS.Cash Flow Provided by Financing Activities. During the year ended December 31, 2015, financing activities provided net cash of $1.1 billion,consisting primarily of a net increase of $439.4 million in deposits and a net increase of $533.0 million in borrowings, and $136.2 million proceeds from thesale of stock. In 2014, financing activities provided net cash of $303.7 million, consisting primarily of a net increase of $160.9 million in deposits and a netincrease of $141.8 million in borrowings.Ratio of Loans to Deposits. The relationship between gross loans and total deposits can provide a useful measure of a bank’s liquidity. Sincerepayment of loans tends to be less predictable than the maturity of investments and other liquid resources, the higher the loan-to-deposit ratio the less liquidare our assets. On the other hand, since we realize greater yields on loans than we do on other interest-earning assets, a lower loan-to-deposit ratio canadversely affect interest income and earnings. As a result, our goal is to achieve a loan-to-deposit ratio that appropriately balances the requirements ofliquidity and the need to generate a fair return on our assets. At December 31, 2015 and December 31, 2014, the loan-to-deposit ratios at FFB were 116.0%,and 118.9%, respectively.Contractual ObligationsThe following table summarizes the indicated contractual obligations of the Company as of the December 31, 2015: Payments Due by Period (dollars in thousands) Total Less Than1 Year 1 – 3 Years 3 – 5 Years More Than5 Years FHLB Advances $796,000 $796,000 $— $— $— Operating lease obligations 29,363 3,951 9,057 8,376 7,979 Total $825,363 $799,951 $9,057 $8,376 $7,979 Off-Balance Sheet ArrangementsThe following table provides the off-balance sheet arrangements of the Company as of December 31, 2015: (dollars in thousands) Commitments to fund new loans $51,887 Commitments to fund under existing loans, lines of credit 153,606 Commitments under standby letters of credit 8,617 Some of the commitments to fund existing loans, lines of credit and letters of credit are expected to expire without being drawn upon. Therefore,the total commitments do not necessarily represent future cash requirements. As of December 31, 2015, FFB was obligated on $101.5 million of letters ofcredit to the FHLB which were being used as collateral for public fund deposits, including $86.0 million of deposits from the State of California. 61Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Asset and Liability Management: Interest Rate RiskInterest rate risk is inherent in financial services businesses. Management of interest-earning assets and interest-bearing liabilities in terms of rateand maturity has an important effect on our liquidity and net interest margin. Interest rate risk results from interest-earning assets and interest-bearingliabilities maturing or repricing at different times, on a different basis or in unequal amounts. The Board of Directors of FFB approves policies and limitsgoverning the management of interest rate risk. The asset / liability committee formed by these policies is responsible for monitoring our interest rate risk andproviding periodic reports to the Board of Directors regarding our compliance with these policies and limits. We have established three primary measurementprocesses to quantify and manage our interest rate risk. These include: (i) gap analysis which measures the repricing mismatches of asset and liability cashflows; (ii) net interest income simulations which are used to measure the impact of instantaneous changes in interest rates on net interest income over a 12month forecast period; and (iii) economic value of equity calculations which measure the sensitivity of our economic value of equity to simultaneouschanges in interest rates.Gap Analysis. Under this analysis, rate sensitivity is measured by the extent to which our interest-earning assets and interest-bearing liabilitiesreprice or mature at different times. Rate sensitivity gaps in which the repricing of interest-earning assets exceed the repricing of interest-bearing liabilitiestend to produce an expanded net yield on interest-earning assets in rising interest rate environments and a reduced net yield on interest-earning assets indeclining interest rate environments. Conversely, when the repricing of interest-bearing liabilities exceed the repricing of interest-earning assets, the net yieldon interest-earning assets generally declines in rising interest rate environments and increases in declining interest rate environments. The following tablesets forth the interest-earning assets and interest-bearing liabilities on the basis of when they reprice or mature as of December 31, 2015: (dollars in thousands) Less than1 year From 1 to3 Years From 3 to5 Years Over 5Years Total Interest-earnings assets: Cash equivalents $207,666 $— $— $— $207,666 Securities, FHLB stock 116,750 152,079 112,582 208,122 589,533 Loans 341,078 271,091 635,339 517,962 1,765,470 Interest-bearing liabilities: Deposits: Interest-bearing checking (260,167) — — — (260,167) Money market and savings (492,015) — — — (492,015) Certificates of deposit (430,179) (39,322) (630) — (470,131) Borrowings (796,000) — — — (796,000) Net: Current Period $(1,312,867) $383,848 $747,291 $726,084 $544,356 Net: Cumulative $(1,312,867) $(929,019) $(181,728) $544,356 The cumulative positive total of $544 million reflects the funding provided by noninterest-bearing deposits and equity. Because we had a $1.3billion net negative position at December 31, 2015 for the repricing period of less than one year, the result of this analysis indicate that we would beadversely impacted by a short term increase in interest rates and would benefit from a short term decrease in interest rates.However, the extent to which our net interest margin will be impacted by changes in prevailing interest rates will depend on a number of factors,including how quickly interest-earning assets and interest-bearing liabilities react to interest rate changes. It is not uncommon for rates on certain assets orliabilities to lag behind changes in the market rates of interest. Additionally, prepayments of loans and early withdrawals of certificates of deposit couldcause interest sensitivities to vary. As a result, the relationship or “gap” between interest-earning assets and interest-bearing liabilities, as shown in the abovetable, is only a general indicator of interest rate sensitivity and the effect of changing rates of interest on our net interest income is likely to be different fromthat predicted solely on the basis of the interest rate sensitivity analysis set forth in the above table. 62Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Net Interest Income Simulations (“NII”). Under this analysis, we use a simulation model to measure and evaluate potential changes in our netinterest income resulting from changes in interest rates. This model measures the impact of instantaneous shocks of 100, 200, 300 and 400 basis points on ournet interest income over a 12 month forecast period. The computed changes to our net interest income between hypothetical rising and declining ratescenarios for the twelve month period beginning December 31, 2015 are as follows: Assumed Instantaneous Change in Interest Rates Estimated Increase(Decrease) in NetInterest Income + 100 basis points (10.8)%+ 200 basis points (21.1)%+ 300 basis points (31.8)%+ 400 basis points (42.1)% - 100 basis points 1.9% - 200 basis points 1.5% We did not include scenarios below the minus 200 basis point scenario because we believe those scenarios are not meaningful based on currentinterest rate levels. The NII results indicate that we would be adversely impacted by a short term increase in interest rates and would benefit from a short termdecrease in interest rates. The results of the NII are hypothetical, and a variety of factors might cause actual results to differ substantially from what isdepicted. These could include non-parallel yield curve shifts, changes in market interest rate spreads and the actual reaction to changes in interest rate levelsof 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 ratesof interest. Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest sensitivities to vary.Economic Value of Equity Calculations (“EVE”). The EVE measures the sensitivity of our market value equity to simultaneous changes in interestrates. EVE is derived by subtracting the economic value of FFB’s liabilities from the economic value of its assets, assuming current and hypothetical interestrate environments. EVE is based on all of the future cash flows expected to be generated by the FFB’s current balance sheet, discounted to derive theeconomic value of FFB’s assets & liabilities. These cash flows may change depending on the assumed interest rate environment and the resulting changes inother assumptions, such as prepayment speeds. The computed changes to our economic value of equity between hypothetical rising and declining ratescenarios as of December 31, 2015 are as follows: Assumed Simultaneous Change in Interest Rates EstimatedIncrease (Decrease)in EconomicValue of Equity + 100 basis points (2.62)% + 200 basis points (17.82)% + 300 basis points (24.62)% + 400 basis points (31.24)% - 100 basis points (4.01)% - 200 basis points (11.67)% We did not include scenarios below the minus 200 basis point scenario because we believe those scenarios are not meaningful based on currentinterest rate levels. The EVE results indicate that we would be adversely impacted by a short term increase in interest rates and a short term decrease ininterest rates. This differs from the NII results because, in the current interest rate environment, assumed interest rate floors for loans eliminates the benefitnormally derived for loans in a declining interest rate environment. The results of the EVE are hypothetical, and a variety of factors might cause actual resultsto differ substantially from what is depicted. These could include non-parallel yield curve shifts, changes in market interest rate spreads and the actualreaction to changes in interest rate levels of interest-earning assets and interest-bearing liabilities. It is not uncommon for rates on certain assets or liabilitiesto lag behind changes in the market rates of interest. Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interestsensitivities to vary.The results of these analyses and simulations do not contemplate all of the actions that we may undertake in response 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, suchas entering into hedges and obtaining long-term fixed rate FHLB advances. To date, we have not entered into any hedges or other derivative instruments forthis or any other purpose and it is our policy not to use derivatives or other financial instruments for trading or other speculative purposes. 63Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Capital Resources and DividendsUnder federal banking regulations that apply to all United States based bank holding companies and federally insured banks, the Company (on aconsolidated basis) and FFB (on a stand-alone basis) must meet specific capital adequacy requirements that, for the most part, involve quantitative measures,primarily in terms of the ratios of their capital to their assets, liabilities, and certain off-balance sheet items, calculated under regulatory accounting practices.Under those regulations, which are based primarily on those quantitative measures, each bank holding company must meet a minimum capital ratio and eachfederally insured bank is determined by its primary federal bank regulatory agency to come within one of the following capital adequacy categories on thebasis of its capital ratios: (i) well capitalized; (ii) adequately capitalized; (iii) undercapitalized; (iv) significantly undercapitalized; or (v) criticallyundercapitalized.Certain qualitative assessments also are made by a banking institution’s primary federal regulatory agency that could lead the agency to determinethat the banking institution should be assigned to a lower capital category than the one indicated by the quantitative measures used to assess the institution’scapital adequacy. At each successive lower capital category, a banking institution is subject to greater operating restrictions and increased regulatorysupervision by its federal bank regulatory agency.The following table sets forth the capital and capital ratios of FFI (on a consolidated basis) and FFB as of the respective dates indicated below, ascompared to the respective regulatory requirements applicable to them: Actual For CapitalAdequacy Purposes To Be Well CapitalizedUnder Prompt Corrective Action Provisions (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio FFI December 31, 2015 CET1 capital ratio $256,305 17.99% $64,099 4.50% Tier 1 leverage ratio 256,305 11.82% 86,747 4.00% Tier 1 risk-based capital ratio 256,305 17.99% 85,466 6.00% Total risk-based capital ratio 267,325 18.77% 113,954 8.00% December 31, 2014 Tier 1 leverage ratio $95,582 7.32% $52,200 4.00% Tier 1 risk-based capital ratio 95,582 11.02% 34,700 4.00% Total risk-based capital ratio 106,132 12.23% 69,399 8.00% December 31, 2013 Tier 1 leverage ratio $85,268 8.67% $39,321 4.00% Tier 1 risk-based capital ratio 85,268 13.04% 26,150 4.00% Total risk-based capital ratio 93,465 14.30% 52,300 8.00% FFB December 31, 2015 CET1 capital ratio $206,807 14.56% $63,907 4.50% $92,310 6.50%Tier 1 leverage ratio 206,807 9.56% 86,562 4.00% 108,202 5.00%Tier 1 risk-based capital ratio 206,807 14.56% 85,209 6.00% 113,612 8.00%Total risk-based capital ratio 217,827 15.34% 113,612 8.00% 142,015 10.00% December 31, 2014 Tier 1 leverage ratio $105,261 8.09% $52,036 4.00% $65,045 5.00%Tier 1 risk-based capital ratio 105,261 12.18% 34,572 4.00% 51,858 6.00%Total risk-based capital ratio 115,811 13,40% 69,144 8.00% 86,430 10.00%December 31, 2013 Tier 1 leverage ratio $84,243 8.61% $39,115 4.00% $48,894 5.00%Tier 1 risk-based capital ratio 84,243 12.95% 26,017 4.00% 39,025 6.00%Total risk-based capital ratio 92,399 14.21% 52,034 8.00% 65,042 10.00%As of each of the dates set forth in the above table, the Company (on a consolidated basis) exceeded the minimum required capital ratios applicableto it and FFB (on a stand-alone basis) qualified as a well-capitalized depository institution under the capital adequacy guidelines described above.As of December 31, 2015, the amount of capital at FFB in excess of amounts required to be Well Capitalized was 114.5 million for the CET1capital ratio, $98.6 million for the Tier 1 Leverage Ratio, $93.2 million for the Tier 1 risk-based capital ratio and $75.8 million for the Total risk-basedcapital ratio. 64Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. During the years ended December 31, 2015 and 2014, FFI made capital contributions to FFB of $76.5 million and $10.5 million, respectively. Asof December 31, 2015, FFI had $49.3 million of available capital and, therefore, has the ability and financial resources to contribute additional capital toFFB, if needed.In July, 2013, the federal bank regulatory agencies approved the final rules implementing the Basel Committee on Banking Supervision's capitalguidelines for U.S. banks. The new rules became effective on January 1, 2015, with certain of the requirements phased-in over a multi-year schedule, andfully phased in by January 1, 2019. The rules include a new common equity Tier 1 ("CET1") capital to risk-weighted assets ratio with minimums for capitaladequacy and prompt corrective action purposes of 4.5% and 6.5%, respectively. The net unrealized gain or loss on available for sale securities is notincluded in computing regulatory capital. Capital amounts and ratios for December 31, 2014 are calculated using Basel I rules. For additional informationregarding these New Capital Rules, see Item 1 “Business —Supervision and Regulation—First Foundation Bank —New Basel III Capital Rules” above inItem I of this report.We did not pay dividends in 2015 or 2014 and we have no plans to pay dividends at least for the foreseeable future. Instead, it is our intention toretain internally generated cash flow to support our growth. Moreover, the payment of dividends is subject to certain regulatory restrictions, which arediscussed in Item 1 “Business—Supervision and Regulation—Dividends.” included elsewhere in this Annual Report on Form 10-K.We had no material commitments for capital expenditures as of December 31, 2015. However, we intend to take advantage of opportunities thatmay arise in the future to grow our businesses, including by opening additional wealth management offices or acquiring complementary businesses that webelieve will provide us with attractive risk-adjusted returns, although we do not have any immediate plans, arrangements or understandings relating to anymaterial acquisition. As a result, we may seek to obtain additional borrowings and to sell additional shares of our common stock to raise funds which wemight need for these purposes. There is no assurance, however, that, if required, we will succeed in obtaining additional borrowings or selling additionalshares of our common stock on terms that are acceptable to us, if at all, as this will depend on market conditions and other factors outside of our control, aswell as our future results of operations. See Item 1A – “Risk Factors for information regarding the impact that future sales of our common stock may have onthe share ownership of our existing stockholders. Item 7A. Quantitative and Qualitative Disclosures About Market RiskFor quantitative and qualitative disclosures regarding market risk in the Company’s portfolio, please see Item 7 “Management’s Discussion andAnalysis—Asset and Liability Management: Interest Rate Risk” in Part II above. 65Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 8.Financial Statements and Supplementary DataFIRST FOUNDATION INCINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements 67Consolidated Balance Sheets: December 31, 2015 and December 31, 2014 68Consolidated Income Statements: Years Ended December 31, 2015, December 31, 2014, and December 31, 2013 69Consolidated Statements of Comprehensive Income: Years Ended December 31, 2015, December 31, 2014, and December 31, 2013 70Consolidated Statements of Changes in Shareholders’ Equity: Years Ended December 31, 2015, December 31, 2014, and December 31, 2013 71Consolidated Statements of Cash Flows: Years Ended December 31, 2015, December 31, 2014, and December 31, 2013 72Notes to the Consolidated Financial Statements 73 66Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and ShareholdersFirst Foundation Inc. and SubsidiariesIrvine, California We have audited the accompanying consolidated balance sheets of First Foundation Inc. and Subsidiaries as of December 31, 2015 and 2014, and the relatedconsolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three year period endedDecember 31, 2015. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Foundation Inc.and Subsidiaries as of December 31, 2015 and 2014 and the results of their operations and their cash flows for each of the years in the three year period endedDecember 31, 2015, in conformity with U.S. generally accepted accounting principles. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), First Foundation Inc. andSubsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2016, expressed anunqualified opinion on the effectiveness of the Company’s internal control over financial reporting.Laguna Hills, CaliforniaMarch 15, 2016 67Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts) December 31, 2015 2014 ASSETS Cash and cash equivalents $215,748 $29,692 Securities available-for-sale (“AFS”) 565,135 138,270 Loans, net of deferred fees 1,765,483 1,166,392 Allowance for loan and lease losses (“ALLL”) (10,600) (10,150)Net loans 1,754,883 1,156,242 Premises and equipment, net 2,653 2,187 Investment in FHLB stock 21,492 12,361 Deferred taxes 15,392 9,748 Real estate owned (“REO”) 4,036 334 Goodwill and intangibles 2,416 197 Other assets 10,824 6,393 Total Assets $2,592,579 $1,355,424 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities: Deposits $1,522,176 $962,954 Borrowings 796,000 282,886 Accounts payable and other liabilities 14,667 10,088 Total Liabilities 2,332,843 1,255,928 Commitments and contingencies — — Shareholders’ Equity Common Stock, par value $.001: 70,000,000 shares authorized; 15,980,526 and 7,845,182 shares issuedand outstanding at December 31, 2015 and December 31, 2014, respectively 16 8 Additional paid-in-capital 227,262 78,204 Retained earnings 33,762 20,384 Accumulated other comprehensive income (loss), net of tax (1,304) 900 Total Shareholders’ Equity 259,736 99,496 Total Liabilities and Shareholders’ Equity $2,592,579 $1,355,424 (See accompanying notes to the consolidated financial statements) 68Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.CONSOLIDATED INCOME STATEMENTS(In thousands, except share and per share amounts) For the Year Ended December 31, 2015 2014 2013 Interest income: Loans $57,481 $44,140 $37,918 Securities 5,227 2,545 864 FHLB stock, fed funds sold and interest-bearing deposits 1,763 713 399 Total interest income 64,471 47,398 39,181 Interest expense: Deposits 4,886 3,586 3,167 Borrowings 1,395 998 340 Total interest expense 6,281 4,584 3,507 Net interest income 58,190 42,814 35,674 Provision for loan losses 2,673 235 2,395 Net interest income after provision for loan losses 55,517 42,579 33,279 Noninterest income: Asset management, consulting and other fees 23,486 21,798 18,240 Gain on sale of loans 2,935 — — Other income 2,352 2,951 1,584 Total noninterest income 28,773 24,749 19,824 Noninterest expense: Compensation and benefits 40,456 33,550 28,760 Occupancy and depreciation 9,260 7,325 6,556 Professional services and marketing costs 5,490 5,995 4,003 Other expenses 6,252 5,637 4,303 Total noninterest expense 61,458 52,507 43,622 Income before taxes on income 22,832 14,821 9,481 Taxes on income 9,454 6,427 1,630 Net income $13,378 $8,394 $7,851 Net income per share: Basic $1.20 $1.08 $1.06 Diluted $1.16 $1.03 $1.01 Shares used in computation: Basic 11,155,007 7,737,036 7,424,210 Diluted 11,575,855 8,166,343 7,742,215 (See accompanying notes to the consolidated financial statements) 69Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In thousands) For the Year Ended December 31, 2015 2014 2013 Net income $13,378 $8,394 $7,851 Other comprehensive income (loss): Unrealized holding gains (losses) on securities arising during the period (3,746) 4,198 (2,668) Other comprehensive income (loss) before tax (3,746) 4,198 (2,668) Income tax (expense) benefit related to items of other comprehensive income 1,542 (1,728) 1,098 Other comprehensive income (loss) (2,204) 2,470 (1,570) Total comprehensive income $11,174 $10,864 $6,281 (See accompanying notes to the consolidated financial statements) 70Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.CONSOLIDATED STATEMENTS OF CHANGESIN SHAREHOLDERS’ EQUITY(In thousands, except share amounts) Common Stock AdditionalPaid-in-Capital RetainedEarnings AccumulatedOtherComprehensiveIncome (Loss) Total Numberof Shares Amount Balance: December 31, 2012 7,366,126 $7 $69,434 $4,139 $— $73,580 Net income — — — 7,851 — 7,851 Other comprehensive loss — — — — (1,570) (1,570) Issuance of restricted stock 9,667 — — — — — Issuance of common stock 357,721 1 6,321 — — 6,322 Stock-based compensation — — 579 — — 579 Balance: December 31, 2013 7,733,514 8 76,334 11,990 (1,570) 86,762 Net income — — — 8,394 — 8,394 Other comprehensive income — — — — 2,470 2,470 Issuance of restricted stock 3,222 — — — — — Issuance of common stock: Exercise of options 84,866 — 949 — — 949 Payout of contingent consideration 23,580 — 354 — — 354 Stock-based compensation — — 451 — — 451 Tax windfall from exercise of stock options — — 116 — — 116 Balance: December 31, 2014 7,845,182 8 78,204 20,384 900 99,496 Net income — — — 13,378 — 13,378 Other comprehensive loss — — — — (2,204) (2,204)Stock based compensation — — 613 — — 613 Issuance of common stock: Exercise of options 31,307 — 405 — — 405 Stock grants – vesting of RSUs 10,762 — — — — — Payout of contingent consideration 31,064 — 452 — — 452 Sale of stock 272,035 — 5,000 — — 5,000 Stock issued in acquisition 621,345 1 11,805 — — 11,806 Public offering 7,168,831 7 130,751 — — 130,758 Tax windfall from exercise of stock options — — 32 — — 32 Balance: December 31, 2015 15,980,526 $16 $227,262 $33,762 $(1,304) $259,736 (See accompanying notes to the consolidated financial statements) 71Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) For the Year Ended December 31, 2015 2014 2013 Cash Flows from Operating Activities: Net income $13,378 $8,394 $7,851 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 2,673 235 2,395 Depreciation and amortization 1,350 1,231 1,040 Stock–based compensation expense 613 451 579 Deferred tax expense (benefit) (1,866) 576 (1,267)Amortization of discounts (premiums) on purchased loans - net (612) (2,310) (3,219)Gain on sale of REO — (1,038) — Gain on sale of loans (2,935) — — Provision for REO losses — — 250 Increase in other assets (3,473) (1,244) (366)Increase in accounts payable and other liabilities 4,741 3,060 703 Net cash provided by operating activities 13,869 9,355 7,966 Cash Flows from Investing Activities: Net increase in loans (626,245) (262,271) (157,619)Proceeds from sale of loans 106,251 — — Purchases of AFS securities (446,652) (83,527) (62,664)Maturities of AFS securities 22,826 8,388 6,608 Proceeds from sale of REO — 4,198 — Purchase of note on REO property — (1,285) — Cash in from merger 38,081 — — Sale (purchase) of FHLB stock, net (8,979) (5,640) 1,779 Purchase of premises and equipment (1,753) (169) (1,905)Net cash used in investing activities (916,471) (340,306) (213,801)Cash Flows from Financing Activities: Increase in deposits 439,381 160,917 152,296 Net increase in FHLB advances 533,000 129,000 34,000 Term note - borrowings 10,114 15,000 7,500 Term note - payments (30,000) (2,177) (437)Proceeds from the sale of stock, net 136,163 949 6,322 Net cash provided by financing activities 1,088,658 303,689 199,681 Increase (decrease) in cash and cash equivalents 186,056 (27,262) (6,154)Cash and cash equivalents at beginning of year 29,692 56,954 63,108 Cash and cash equivalents at end of year $215,748 $29,692 $56,954 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $6,082 $4,585 $3,506 Income taxes $10,050 $5,394 $3,490 Noncash transactions: Transfer of loans to loans held for sale $102,026 $— $— Chargeoffs against allowance for loans losses $2,223 $— $820 Transfer from loans to REO $— $1,834 $— (See accompanying notes to the consolidated financial statements) 72Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2015, 2014, and 2013 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBusinessFirst Foundation Inc. (“FFI”) is a financial services holding company whose operations are conducted through its wholly owned subsidiaries: FirstFoundation Advisors (“FFA”) and First Foundation Bank (“FFB” or the “Bank”), and First Foundation Insurance Services (“FFIS”), a wholly ownedsubsidiary of FFB (collectively the “Company”). FFI also has two inactive wholly owned subsidiaries, First Foundation Consulting (“FFC”) and FirstFoundation Advisors, LLC (“FFA LLC”). In addition, FFA has set up a limited liability company, which is not included in these consolidated financialstatements, as a private investment fund to provide an investment vehicle for its clients. The corporate headquarters for all of the companies is located inIrvine, California. The Company has offices in California in Newport Beach, Irvine, Indian Wells, Pasadena, El Centro, West Los Angeles, El Segundo,Oakland, Sacramento, Burlingame, and San Diego and in Las Vegas, Nevada, and in Honolulu, Hawaii.On October 28, 2015, FFI changed its state of incorporation from California to Delaware. Other than the change in corporate domicile, thereincorporation did not result in any change in the business, physical location, management, assets, liabilities or total shareholders’ equity of the Company,nor did it result in any change in location of the Company’s employees, including the Company’s management. Additionally, the reincorporation did notalter any shareholder’s percentage ownership interest or number of shares owned in the Company.FFA, established in 1985 and incorporated in the State of California, began operating in 1990 as a fee based registered investment advisor. FFAprovides (i) investment management and financial planning services for high net-worth individuals, retirement plans, charitable institutions and privatefoundations; (ii) provides financial, investment and economic advisory and related services to high net-worth individuals and their families, family-ownedbusinesses, and other related organizations; and (iii) provides support services involving the processing and transmission of financial and economic data forcharitable organizations. At the end of 2015, these services were provided to approximately 1,400 clients, primarily located in Southern California, with anaggregate of $3.5 billion of assets under management.The Bank commenced operations in 2007 and currently operates in California, Nevada, and in Hawaii. The Bank offers a wide range of depositinstruments including personal and business checking and savings accounts, including interest-bearing negotiable order of withdrawal (“NOW”) accounts,money market accounts, and time certificates of deposit (“CD”) accounts. As a lender, the Bank originates, and retains for its portfolio, loans secured by realestate and commercial loans. Over 90% of the Bank’s loans are to clients located in California. The Bank also offers a wide range of specialized servicesincluding trust services, on-line banking, remote deposit capture, merchant credit card services, ATM cards, Visa debit cards, business sweep accounts, andthrough FFIS, insurance brokerage services. The Bank has a state non-member bank charter and it is subject to continued examination by the CaliforniaDepartment of Business Oversight and Federal Deposit Insurance Corporation.At December 31, 2015, the Company employed 295 employees.Basis of PresentationThe consolidated financial statements have been prepared in conformity with U. S. generally accepted accounting standards and prevailingpractices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions thataffect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses during the reporting periods and relateddisclosures. Actual results could differ significantly from those estimates.The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All inter-company balances andtransactions have been eliminated in consolidation.Variable Interest EntitiesThe Company may have variable interests in Variable Interest Entities (“VIEs”) arising from debt, equity or other monetary interests in an entity,which change with fluctuations in the fair value of the entity's assets. VIEs are entities that, by design, either (1) lack sufficient equity to permit the entity tofinance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to makesignificant decisions relating to the entity's operations through voting 73Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The primarybeneficiary of a VIE (i.e., the party that has a controlling financial interest) is required to consolidate the assets and liabilities of the VIE. The primarybeneficiary is the party that has both (1) the power to direct the activities of an entity that most significantly impact the VIE's economic performance; and (2)through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to theVIE. The Company's has sold loans through a securitization sponsored by a government sponsored entity, Freddie Mac, who also provided creditenhancement of the loans through certain guarantee provisions. The Company retained the right to provide servicing for the loans except for specialservicing for which a unrelated third party was engaged by the VIE. In addition the Company acquired the “B” piece of the securitization, which is structuredto absorb any losses from the securitization, and two interest only strips from the securitization. Because the Company does not act as the special servicer forthe VIE and because of the power of Freddie Mac over the VIE that holds the assets from the mortgage loan securitizations, the Company is not the primarybeneficiary of the VIE and therefore the VIE is not consolidated.ReclassificationsCertain amounts in the 2014 consolidated financial statements have been reclassified to conform to the 2015 presentation.Cash and Cash EquivalentsFor purposes of reporting cash flows, cash and cash equivalents include cash, due from banks, certificates of deposits with maturities of less thanninety days, investment securities with original maturities of less than ninety days, money market mutual funds and Federal funds sold. At times, the Bankmaintains cash at major financial institutions in excess of Federal Deposit Insurance Corporation (“FDIC”) insured limits. However, as the Bank places thesedeposits with major well-capitalized financial institutions and monitors the financial condition of these institutions, management believes the risk of loss tobe minimal. The Bank maintains most of its excess cash at the Federal Reserve Bank, with well-capitalized correspondent banks or with other depositoryinstitutions at amounts less than the FDIC insured limits. At December 31, 2015, included in cash and cash equivalents were $200.9 million in funds held atthe Federal Reserve Bank.Banking regulations require that banks maintain a percentage of their deposits as reserves in cash or on deposit with the Federal Reserve Bank. TheBank was in compliance with its reserve requirements as of December 31, 2015.Certificates of DepositFrom time to time, the Company may invest funds with other financial institutions through certificates of deposit. Certificates of deposit withmaturities of less than ninety days are included as cash and cash equivalents. Certificates of deposit are carried at cost.Investment SecuritiesInvestment securities for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums anddiscounts that are recognized in interest income using the interest method over the period to maturity. Investments not classified as trading securities nor asheld-to-maturity securities are classified as available-for-sale securities and recorded at fair value. Unrealized gains or losses on available-for-sale securitiesare excluded from net income and reported as an amount net of taxes as a separate component of other comprehensive income included in shareholders’equity. Premiums or discounts on held-to-maturity and available-for-sale securities are amortized or accreted into income using the interest method.Realized gains or losses on sales of held-to-maturity or available-for-sale securities are recorded using the specific identification method. Declinesin the fair value of individual held-to-maturity and available-for-sale securities below their cost that are considered other-than-temporary impairment(“OTTI”) result in write-downs of the individual securities to their fair value. The credit component of any OTTI related write-downs is charged againstearnings.Management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such anevaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition andnear-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security inan unrealized loss position before recovery of its amortized 74Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized asimpairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components asfollows; OTTI related to credit loss, which must be recognized in the income statement and; OTTI related to other factors, which is recognized in othercomprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortizedcost basis. For equity securities, the entire amount of impairment is recognized through earnings.In order to determine OTTI for purchased beneficial interests that, on the purchase date, were not highly rated, the Company compares the presentvalue of the remaining cash flows as estimated at the preceding evaluation date to the current expected remaining cash flows. OTTI is deemed to haveoccurred if there has been an adverse change in the remaining expected future cash flows.Loan Origination Fees and CostsNet loan origination fees and direct costs associated with lending are deferred and amortized to interest income as an adjustment to yield over therespective lives of the loans using the interest method. The amortization of deferred fees and costs is discontinued on loans that are placed on nonaccrualstatus. When a loan is paid off, any unamortized net loan origination fees are recognized in interest income.Loans Held for InvestmentLoans held for investment are reported at the principal amount outstanding, net of cumulative chargeoffs, interest applied to principal (for loansaccounted for using the cost recovery method), unamortized net deferred loan origination fees and costs and unamortized premiums or discounts onpurchased loans. Interest on loans is accrued and recognized as interest income at the contractual rate of interest. When a loan is designated as held forinvestment, the intent is to hold these loans for the foreseeable future or until maturity or payoff. If subsequent changes occur, the Company may change itsintent to hold these loans. Once a determination has been made to sell such loans, they are immediately transferred to loans held for sale and carried at thelower of cost or fair value.Loans Held for SaleLoans designated for sale through securitization or in the secondary market are classified as loans held for sale. Loans held for sale are accountedfor at the lower of amortized cost or fair value. The fair value of loans held for sale is generally based on observable market prices from other loans in thesecondary market that have similar collateral, credit, and interest rate characteristics. If quoted market prices are not readily available, the Company mayconsider other observable market data such as dealer quotes for similar loans or forward sale commitments. In certain cases, the fair value may be based on adiscounted cash flow model. Related gains and losses are recognized in net gain on mortgage loan origination and sale activities. Direct loan originationcosts and fees for loans classified as held for sale are deferred at origination and recognized in earnings at the time of sale.Nonaccrual LoansLoans are placed on nonaccrual status when the full and timely collection of principal and interest is doubtful, generally when the loan becomes90 days or more past due for principal or interest payment All payments received on nonaccrual loans are accounted for using the cost recovery method.Under the cost recovery method, all cash collected is applied to first reduce the principal balance. A loan may be returned to accrual status if all delinquentprincipal and interest payments are brought current and the collectability of the remaining principal and interest payments in accordance with the loanagreement is reasonably assured. Loans that are well secured and in the collection process may be maintained on accrual status, even if they are 90 days ormore past due.Purchased Credit Impaired LoansThe Company may purchase individual loans and groups of loans which have shown evidence of credit deterioration and are considered creditimpaired. Purchased credit impaired loans are recorded at the amount paid and there is no carryover of the seller’s allowance for loan losses. 75Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 Purchased credit impaired loans are accounted for individually or aggregated into pools of loans based on common risk characteristics such as,credit score, loan type, and date of origination. The Company estimates the amount and timing of expected cash flows for each loan or pool, and the expectedcash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s orpool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference). Over the life of the loan or pool, expected cashflows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded by an increase in the allowancefor loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.Allowance for Loan LossesThe allowance for loan losses is a valuation allowance for probable incurred credit losses. Provisions for loan losses are charged to operationsbased on management’s evaluation of the estimated losses in its loan portfolio. The major factors considered in evaluating losses are historical charge-offexperience, delinquency rates, local and national economic conditions, the borrower’s ability to repay the loan and timing of repayments, and the value ofany related collateral. Management’s estimate of fair value of the collateral considers current and anticipated future real estate market conditions, therebycausing these estimates to be particularly susceptible to changes that could result in a material adjustment to results of operations in the future. Recovery ofthe carrying value of such loans and related real estate is dependent, to a great extent, on economic, operating and other conditions that may be beyond theBank’s control.The Bank’s primary regulatory agencies periodically review the allowance for loan losses and such agencies may require the Bank to recognizeadditions to the allowance based on information and factors available to them at the time of their examinations. Accordingly, no assurance can be given thatthe Bank will not recognize additional provisions for loan losses with respect to its loan portfolio.The allowance consists of specific and general reserves. Specific reserves relate to loans that are individually classified as impaired. Loan losses arecharged against the allowance when management believes a loan balance is uncollectible. Subsequent recoveries, if any, are credited to the allowance.Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should becharged off.The Bank considers a loan to be impaired when, based upon current information and events, it believes it is probable that the Bank will be unableto collect all amounts due according to the contractual terms of the loan agreement. The Bank bases the measurement of loan impairment using either thepresent value of the expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the loan’s collateral properties. Impairmentlosses are included in the allowance for loan losses through a charge to provision for loan losses. Adjustments to impairment losses due to changes in the fairvalue of impaired loans’ collateral properties are included in the provision for loan losses. The Bank’s impaired loans include nonaccrual loans (excludingthose collectively reviewed for impairment), certain restructured loans and certain performing loans less than ninety days delinquent (“other impaired loans”)that the Bank believes will likely not be collected in accordance with contractual terms of the loans. Loans, for which the terms have been modified resultingin a concession, and for which the borrower is experiencing financial difficulties, are generally considered troubled debt restructurings and classified asimpaired.Commercial loans and loans secured by multifamily and commercial real estate are individually evaluated for impairment. If a loan is impaired, aportion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at thefair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer andresidential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cashflows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, atthe fair value of the collateral. For troubled debt restructurings that subsequently default, the Bank determines the amount of reserve in accordance with theaccounting policy for the allowance for loan losses.General reserves cover non-impaired loans and are based on historical loss rates for each portfolio segment, adjusted for the effects of qualitative orenvironmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment’s historical loss experience.Because the Bank is relatively new and has not experienced any meaningful amount of losses in any of its current portfolio segments, the Bank calculates thehistorical loss rates on industry data, specifically loss rates published by the FDIC. Qualitative factors include consideration of the following: changes inlending policies and procedures; 76Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management andother relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; changesin the value of the underlying collateral for collateral-dependent loans; concentrations of credit and the effect of other external factors such as competitionand legal and regulatory requirements.Portfolio segments identified by the Bank include loans secured by residential real estate, including multifamily and single family properties,loans secured by commercial real estate, commercial and industrial loans and consumer loans. Relevant risk characteristics for these portfolio segmentsgenerally include debt service coverage, loan-to-value ratios and financial performance on non-consumer loans and debt-to income, collateral type and loan-to-value ratios for consumer loans.Financial InstrumentsIn the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit,commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or relatedfees are incurred or received. Transfers of Financial Assets Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets isdeemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it fromtaking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assetsthrough an agreement to repurchase them before their maturity.Real Estate OwnedREO represents the collateral acquired through foreclosure in full or partial satisfaction of the related loan. REO is recorded at the fair value lessestimated selling costs at the date of foreclosure. Any write-down at the date of transfer is charged to the allowance for loan losses. The recognition of gains orlosses on sales of REO is dependent upon various factors relating to the nature of the property being sold and the terms of sale. REO values are reviewed onan ongoing basis and any decline in value is recognized as foreclosed asset expense in the current period. The net operating results from these assets areincluded in the current period in noninterest expense as foreclosed asset expense (income).Premises and EquipmentPremises and equipment are stated at cost, less accumulated depreciation and amortization, which is charged to expense on a straight-line basisover the estimated useful lives of 3 to 10 years. Premises under leasehold improvements are amortized on a straight-line basis over the term of the lease or theestimated useful life of the improvements, whichever is shorter. Expenditures for major renewals and betterments of premises and equipment are capitalizedand those for maintenance and repairs are charged to expense as incurred. A valuation allowance is established for any impaired long-lived assets. TheCompany did not have impaired long-lived assets as of December 31, 2015 or 2014.Federal Home Loan Bank StockAs a member of the Federal Home Loan Bank (“FHLB”), the Bank is required to purchase FHLB stock in accordance with its advances, securitiesand deposit agreement. This stock, which is carried at cost, may be redeemed at par value. However, there are substantial restrictions regarding redemptionand the Bank can only receive a full redemption in connection with the Bank surrendering its FHLB membership. At December 31, 2015, the Bank held$21.5 million of FHLB stock. The Company does not believe that this stock is currently impaired and no adjustments to its carrying value have beenrecorded.Mortgage Servicing Rights When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recordedin gains on sales of loans. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. All classes ofservicing assets are subsequently measured using the amortization method which 77Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of theunderlying loans. Servicing rights are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is recognizedthrough a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If the Company later determines thatall or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Servicing fee income, which is reported on the income statement as other income, is recorded for fees earned for servicing loans. The fees are basedon a contractual percentage of the outstanding principal. The amortization of mortgage servicing rights is netted against loan servicing fee income. GoodwillGoodwill is recorded upon completion of a business combination as the difference between the purchase price and the fair value of net identifiableassets acquired. Subsequent to initial recognition, the Company will test goodwill for impairment on an annual basis. The goodwill recorded by theCompany was recognized from the acquisition of Pacific Rim Bank in June of 2015, and was not considered impaired at December 31, 2015.Other Intangible AssetsIntangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. Other intangible assetsconsist of core deposit intangible assets arising from whole bank acquisitions and are amortized on an accelerated method over their estimated useful lives,which range from 7 to 10 years. At December 31, 2015 and 2014, core deposit intangible assets totaled $1.1 million and $0.2 million, respectively, and werecognized $0.2 million, $0.1 million and $0.1 million in core deposit intangible amortization expense in 2015, 2014 and 2013, respectively.Revenue RecognitionInterest on Loans: Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest on loans isdiscontinued when reasonable doubt exists as to the full, timely collection of interest or principal and, generally, when a loan becomes contractually past duefor ninety days or more with respect to principal or interest. The accrual of interest may be continued on a well-secured loan contractually past due ninetydays or more with respect to principal or interest if the loan is in the process of collection or collection of the principal and interest is deemed probable.When a loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period income. Interest onsuch loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Accrual of interest is resumedon loans only when, in the judgment of management, the loan is estimated to be fully collectible. The Bank continues to accrue interest on restructured loanssince full payment of principal and interest is expected and such loans are performing or less than ninety days delinquent and, therefore, do not meet thecriteria for nonaccrual status. Restructured loans that have been placed on nonaccrual status are returned to accrual status when the remaining loan balance,net of any charge-offs related to the restructure, is estimated to be fully collectible by management and performing in accordance with the applicable loanterms.Other Fees: Asset management fees are billed on a monthly or quarterly basis based on the amount of assets under management and the applicablecontractual fee percentage. Asset management fees are recognized as revenue in the period in which they are billed and earned. Financial planning fees aredue and billed at the completion of the planning project and are recognized as revenue at that time.Stock-Based CompensationThe Company recognizes the cost of employee services received in exchange for awards of stock options, or other equity instruments, based on thegrant-date fair value of those awards. This cost is recognized over the period, which an employee is required to provide services in exchange for the award,generally the vesting period. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s commonstock at the date of grant is used for stock awards. 78Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 Marketing CostsThe Company expenses marketing costs, including advertising, in the period incurred.Income TaxesThe Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets andliabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets andliabilities and their respective tax bases. A valuation allowance is established if it is “more likely than not” that all or a portion of the deferred tax asset willnot be realized.The tax effects from an uncertain tax position can be recognized in the financial statements only if, based on its merits, the position is more likelythan not to be sustained on audit by the taxing authorities. Interest and penalties related to uncertain tax positions are recorded as part of income tax expense.Comprehensive IncomeComprehensive income consists of net income and other comprehensive income. Changes in unrealized gains and losses on available-for-salesecurities and the related tax costs or benefits are the only components of other comprehensive income for the Company.Earnings Per Share (“EPS”)Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common sharesoutstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential commonshares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by theCompany relate to outstanding stock options and restricted stock, which are determined using the treasury stock method, and stock to be issued as contingentconsideration related to an acquisition that occurred in 2012.Fair Value MeasurementFair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separatenote. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors,especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.New Accounting PronouncementsOn February 25, 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic842). The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases notconsidered short-term leases, which is generally defined as a lease term of less than 12 months. This change will result in lessees recognizing right-of-useassets and lease liabilities for most leases currently accounted for as operating leases under current lease accounting guidance. The amendments in thisUpdate are effective for interim and annual periods beginning after December 15, 2018. The Company is currently evaluating the effects of ASU 2016-02 onits financial statements and disclosures. On January 5, 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets andFinancial Liabilities (Subtopic 825-10). Changes made to the current measurement model primarily affect the accounting for equity securities with readilydeterminable fair values, where changes in fair value will impact earnings instead of other comprehensive income. The accounting for other financialinstruments, such as loans, investments in debt securities, and financial liabilities is largely unchanged. The Update also changes the presentation anddisclosure requirements for financial instruments including a requirement that public business entities use exit price when measuring the fair value offinancial instruments measured at amortized cost for disclosure purposes. This Update is generally effective for public business entities in fiscal yearsbeginning after 79Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the effects of ASU 2016-01 on its financialstatements and disclosures.In September, 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-PeriodAdjustments. The amendments in this update require that an acquirer recognize adjustments to provisional amounts that are identified during themeasurement period in the reporting period in which the adjustment amounts are determined. For public companies, this update will be effective for interimand annual periods beginning after December 15, 2015, including interim periods within those fiscal periods. The adoption of ASU No. 2015-16 is notexpected to have a material impact on the Company’s Consolidated Financial Statements.In May 2014, the FASB issued ASU 2015-09, Revenue from Contracts with Customers (Topic 660): Summary and Amendments that CreateRevenue from Contracts with Customers (Topic 606) and Other Assets and Deferred Costs-Contracts with Customers (Subtopic 340-40). The guidance in thisupdate supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout theindustry topics of the codification. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2016. TheCompany is currently assessing the impact that this guidance will have on its consolidated financial statements, but does not expect the guidance to have amaterial impact on the Company’s consolidated financial statements. NOTE 2: ACQUISITIONS On June 16, 2015, the Company completed the acquisition of Pacific Rim Bank (‘PRB”), through a merger of PRB with and into the Bank, inexchange for 621,345 shares of its common stock with a fair value of $19.00 per share and $543,000 in cash, which was paid to dissenting shareholders. Theprimary reason for acquiring PRB was to expand our operations into Hawaii.The acquisition of PRB was accounted for under the purchase method of accounting. The acquired assets, assumed liabilities and identifiableintangible assets are recorded at their respective acquisition date fair values. Goodwill of $1.3 million, which is not tax deductible, is included in intangibleassets in the table below. 80Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 The following table represents the assets acquired and liabilities assumed of PRB as of June 15, 2015 and the fair value adjustments and amountsrecorded by the Bank in 2015 under the acquisition method of accounting: PRB BookValue Fair ValueAdjustments Fair Value(dollars in thousands) Assets Acquired: Cash and cash equivalents$38,624 $— $38,624 Securities AFS 7,179 115 7,294 Loans, net of deferred fees 80,192 (2,419) 77,773 Allowance for loan losses (2,034) 2,034 — Premises and equipment, net 251 (188) 63 Investment in FHLB stock 152 — 152 Deferred taxes — 2,258 2,258 REO 4,374 (672) 3,702 Goodwill — 1,300 1,300 Core deposit intangible — 1,099 1,099 Other assets 269 — 269 Total assets acquired$129,007 $3,527 $132,534 Liabilities Assumed: Deposits$119,663 $178 $119,841 Accounts payable and other liabilities 442 (98) 344 Total liabilities assumed 120,105 80 120,185 Excess of assets acquired over liabilities assumed 8,902 3,447 12,349 Total$129,007 $3,527 $132,534 Consideration: Stock issued $11,806 Cash paid 543 Total $12,349 In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from thoseassets and liabilities and discounting them at appropriate market rates. The most significant category of assets for which this procedure was used was that ofacquired loans. The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives ofthe loans in accordance with FASB Accounting Standards Codification (“ASC”) 310-20.Certain loans, for which specific credit-related deterioration since origination was identified, are recorded at fair value reflecting the present valueof the amounts expected to be collected. Income recognition on these “purchased credit impaired” loans is based on a reasonable expectation about thetiming and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loancollateral indeterminate, remain on nonaccrual status and have no accretable yield. All purchased credit impaired loans were classified as accruing loans as ofand subsequent to the acquisition date. 81Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 For loans acquired from PRB, the contractual amounts due, expected cash flows to be collected and fair value as of the acquisition date were asfollows: (dollars in thousands) PurchasedCredit Impaired All OtherAcquired Loans Contractual amounts due $9,418 $86,466 Cash flows not expected to be collected 2,201 1,155 Expected cash flows 7,217 85,311 Interest component of expected cash flows 805 13,950 Fair value of acquired loans $6,412 $71,361 In accordance with generally accepted accounting principles there was no carryover of the allowance for loan losses that had been previouslyrecorded by PRB.The Company recorded a deferred income tax asset of $2.3 million related to PRB’s operating loss carry-forward and other tax attributes of PRB,along with the effects of fair value adjustments resulting from applying the purchase method of accounting.The fair value of savings and transaction deposit accounts acquired from PRB were assumed to approximate their carrying value as these accountshave no stated maturity and are payable on demand. Certificates of deposit accounts were valued by comparing the contractual cost of the portfolio to anidentical portfolio bearing current market rates. The portfolio was segregated into pools based on remaining maturity. For each pool, the projected cash flowsfrom maturing certificates were then calculated based on contractual rates and prevailing market rates. The valuation adjustment for each pool is equal to thepresent value of the difference of these two cash flows, discounted at the assumed market rate for a certificate with a corresponding maturity. This valuationadjustment will be accreted to reduce interest expense over the remaining maturities of the respective pools. The Company also recorded a core depositintangible, which represents the value of the deposit relationships acquired from PRB, of $1.1 million. The core deposit intangible will be amortized over aperiod of 7 years.Pro Forma Information (unaudited)The following table presents unaudited pro forma information as if the acquisition of PRB had occurred on January 1, 2015, and January 1, 2014,for 2015 and 2014, respectively, after giving effect to certain adjustments. The unaudited pro forma information for these periods includes adjustments forinterest income on loans acquired, amortization of intangibles arising from the transaction, adjustments for interest expense on deposits acquired, and therelated income tax effects of all these items and the income tax benefits derived from PRB’s loss before taxes. The net effect of these pro forma adjustmentswere increases of $0.3 million and $0.5 million in net income for 2015 and 2014, respectively. The unaudited pro forma financial information is notnecessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates. 2015 2014(dollars in thousands) Net interest income $59,918 $46,935 Provision for loan losses 2,673 235 Noninterest income 28,891 25,156 Noninterest expenses 64,167 57,577 Income before taxes 21,969 14,279 Taxes on income 9,097 6,192 Net income $12,872 $8,087 Net income per share: Basic $1.09 $0.97 Diluted $1.06 $0.92 82Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 The revenues (net interest income and noninterest income) and income before taxes for the period from June 16, 2015 to December 31, 2015related to the operations acquired from PRB and included in the results of operations for 2015 was approximately $2.5 million and $0.8 million,respectively. NOTE 3: FAIR VALUEAssets Measured at Fair Value on a Recurring BasisFair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market forthe asset or liability in an orderly transaction between market participants on the measurement date. Current accounting guidance establishes a fair valuehierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Thereare three levels of inputs that may be used to measure fair values: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurementdate. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in marketsthat are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect the Company's own assumptions about the assumptions that market participants would use inpricing an asset or liability.The following tables show the recorded amounts of assets and liabilities measured at fair value on a recurring basis as of: Fair Value Measurement Level Total Level 1 Level 2 Level 3 (dollars in thousands) December 31, 2015: Investment securities available for sale US Treasury securities $300 $300 $— $— FNMA and FHLB Agency notes 16,013 — 16,013 — Agency mortgage-backed securities 536,148 — 536,148 — Beneficial interest – FHLMC securitization 12,674 — — 12,674 Total assets at fair value on a recurring basis $565,135 $300 $552,161 $12,674 December 31, 2014: Investment securities available for sale US Treasury securities $300 $300 $— $— FNMA and FHLB Agency notes 10,277 — 10,277 — Agency mortgage-backed securities 127,693 — 127,693 — Total assets at fair value on a recurring basis $138,270 $300 $137,970 $— The Company did not have any material assets measured at fair value on a non recurring basis as of December 31, 2015 and 2014.Fair Value of Financial InstrumentsWe have elected to use fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair valuedisclosures. Securities available for sale are measured at fair value on a recurring basis. Additionally, from time to time, we may be required to measure at fairvalue other assets on a nonrecurring basis, such as loans held for investment and certain other assets. These nonrecurring fair value adjustments typicallyinvolve application of lower of cost or market accounting or write-downs of individual assets. 83Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 Fair value estimates are made at a discrete point in time based on relevant market information and other information about the financialinstruments. Because no active market exists for a significant portion of our financial instruments, fair value estimates are based in large part on judgments wemake primarily regarding current economic conditions, risk characteristics of various financial instruments, prepayment rates, and future expected lossexperience. These estimates are subjective in nature and invariably involve some inherent uncertainties. Additionally, unexpected changes in events orcircumstances can occur that could require us to make changes to our assumptions and which, in turn, could significantly affect and require us to makechanges to our previous estimates of fair value.In addition, the fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the valueof existing and anticipated future customer relationships and the value of assets and liabilities that are not considered financial instruments, such as premisesand equipment and other real estate owned.The following methods and assumptions were used to estimate the fair value of financial instruments.Cash and Cash Equivalents. The fair value of cash and cash equivalents approximates its carrying value.Interest-Bearing Deposits with Financial Institutions. The fair values of interest-bearing deposits maturing within ninety days approximate theircarrying values.Investment Securities Available for Sale. Investment securities available-for-sale are measured at fair value on a recurring basis. Fair valuemeasurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or othermodel-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and otherfactors such as credit loss assumptions. When a market is illiquid or there is a lack of transparency around the inputs to valuation, the securities are classifiedas Level 3 and reliance is placed upon internally developed models, and management judgment and evaluation for valuation. Level 1 securities includethose traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bondsand corporate debt securities. Securities classified as level 3 include beneficial interests – FHLMC securitization. Significant assumptions in the valuation ofthese Level 3 securities as of December 31, 2015 included a prepayment rate of 15% and discount rates ranging from 4.0% to 10%.Federal Home Loan Bank and Federal Reserve Bank Stock. The Bank is a member of the Federal Home Loan Bank (the “FHLB”) and the FederalReserve Bank of San Francisco (the “FRB”). As members, we are required to own stock of the FHLB and the FRB, the amount of which is based primarily onthe level of our borrowings from those institutions. We also have the right to acquire additional shares of stock in either or both of the FHLB and the FRB;however, to date, we have not done so. The fair values of that stock are equal to their respective carrying amounts, are classified as restricted securities and areperiodically evaluated for impairment based on our assessment of the ultimate recoverability of our investments in that stock. Any cash or stock dividendspaid to us on such stock are reported as income.Loans. The fair value for loans with variable interest rates is the carrying amount. The fair value of fixed rate loans is derived by calculating thediscounted value of future cash flows expected to be received by the various homogeneous categories of loans. All loans have been adjusted to reflectchanges in credit risk.Impaired Loans. ASC 820-10 applies to loans measured for impairment in accordance with ASC 310-10, “Accounting by Creditors for Impairmentof a Loan”, including impaired loans measured at an observable market price (if available), and at the fair value of the loan’s collateral (if the loan iscollateral dependent) less selling cost. The fair value of an impaired loan is estimated using one of several methods, including collateral value, market valueof similar debt, enterprise value, liquidation value and discounted cash flows. When the fair value of the collateral is based on an observable market price or acurrent appraised value, we measure the impaired loan at nonrecurring Level 2. When an appraised value is not available, or management determines the fairvalue of the collateral is further impaired below the appraised value and there is no observable market price or a discounted cash flow has been used todetermine the fair value, we measure the impaired loan at nonrecurring Level 3.Deposits. The fair value of demand deposits, savings deposits, and money market deposits is defined as the amounts payable on demand at quarter-end. The fair value of fixed maturity certificates of deposit is estimated based on the discounted value of the future cash flows expected to be paid on thedeposits. 84Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 Borrowings. The fair value of $796 million in borrowings is the carrying value of overnight FHLB advances that approximate fair value because ofthe short-term maturity of this instrument, resulting in a Level 2 classification. The fair value of term borrowings is derived by calculating the discountedvalue of future cash flows expected to be paid out by the Company. The following table sets forth the estimated fair values and related carrying amounts of our financial instruments as of: Carrying Fair Value Measurement Level (dollars in thousands) Value 1 2 3 Total December 31, 2015: Assets: Cash and cash equivalents $215,748 $215,748 $— $— $215,748 Securities AFS 565,135 300 552,161 12,674 565,135 Loans 1,754,883 — — 1,779,941 1,779,941 Investment in FHLB stock 21,492 — 21,492 — 21,492 Liabilities: Deposits 1,522,176 1,051,976 470,128 — 1,522,104 Borrowings 796,000 — 796,000 — 796,000 December 31, 2014: Assets: Cash and cash equivalents $29,692 $29,692 $— $— $29,692 Securities AFS 138,270 300 137,970 — 138,270 Loans 1,156,242 — — 1,186,408 1,186,408 Investment in FHLB stock 12,361 — 12,361 — 12,361 Liabilities: Deposits 962,954 709,604 253,244 — 962,848 Borrowings 282,886 — 263,000 19,886 282,886 NOTE 4: SECURITIESThe following table provides a summary of the Company’s AFS securities portfolio at December 31: AmortizedCost Gross Unrealized EstimatedFair Value (dollars in thousands) Gains Losses 2015: US Treasury securities $300 $— $— $300 Agency notes 16,108 — (95) 16,013 Agency mortgage-backed securities 538,269 909 (3,030) 536,148 Beneficial interest – FHLMC securitization 12,674 476 (476) 12,674 Total $567,351 $1,385 $(3,601) $565,135 2014: US Treasury securities $300 $— $— $300 Agency notes 10,496 — (219) 10,277 Agency mortgage-backed securities 125,944 1,881 (132) 127,693 Total $136,740 $1,881 $(351) $138,270 The US Treasury Securities are pledged as collateral to the State of California to meet regulatory requirements related to the Bank’s trustoperations. 85Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 The table below indicates, as of December 31, 2015, the gross unrealized losses and fair values of our investments, aggregated by investmentcategory and length of time that the individual securities have been in a continuous unrealized loss position. Securities with Unrealized Loss at December 31, 2015 (dollars in thousands) Less than 12 months 12 months or more Total FairValue UnrealizedLoss FairValue UnrealizedLoss FairValue UnrealizedLoss Agency notes $16,013 $(95) $— $— $16,013 $(95)Agency mortgage backed securities 397,850 (3,030) — — 397,850 (3,030)Beneficial interest – FHLMC securitization 12,674 (476) — — 12,674 (476)Total temporarily impaired securities $426,537 $(3,601) $— $— $426,537 $(3,601)Unrealized losses on agency notes and agency mortgage-backed securities have not been recognized into income because the issuer bonds are ofhigh 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 totheir anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approachmaturity.The scheduled maturities of securities AFS, other than agency mortgage backed securities, and the related weighted average yield is as follows asof December 31, 2015: (dollars in thousands) Less than 1 Year 1 Through 5 years 5 Through 10 Years After10 Years Total Amortized Cost: US Treasury securities $300 $— $— $— $300 Agency notes — 12,760 2,748 600 16,108 Total $300 $12,760 $2,748 $600 $16,408 Weighted average yield 0.45% 1,50% 1.94% 2.86% 1.60%Estimated Fair Value: US Treasury securities $300 $— $— $— $300 Agency notes — 12,692 2,725 596 16,013 Total $300 $12,692 $2,725 $596 $16,313 Agency mortgage backed securities are excluded from the above table because such securities are not due at a single maturity date. The weightedaverage yield of the agency mortgage backed securities as of December 31, 2015 was 2.24%. 86Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 NOTE 5: LOANSThe following is a summary of our loans as of December 31: (dollars in thousands) 2015 2014 Recorded investment balance: Loans secured by real estate: Residential properties: Multifamily $627,311 $481,491 Single family 533,257 360,644 Total real estate loans secured by residential properties 1,160,568 842,135 Commercial properties 358,791 205,320 Land 12,320 4,309 Total real estate loans 1,531,679 1,051,764 Commercial and industrial loans 196,584 93,537 Consumer loans 37,206 21,125 Total loans 1,765,469 1,166,426 Deferred (fees) and expenses 14 (34)Total $1,765,483 $1,166,392 As of December 31, 2015 and 2014, the principal balances shown above are net of unaccreted discount related to loans acquired in an acquisitionof $2.8 million and $0.8 million, respectively.In 2012 and 2015, the Company purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since originationand it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these purchased credit impairedloans is as follows at December 31: (dollars in thousands) 2015 2014 Outstanding principal balance: Loans secured by real estate: Commercial properties $533 $206 Land 1,616 — Total real estate loans 2,149 206 Commercial and industrial loans 6,787 2,002 Consumer loans 14 249 Total loans 8,950 2,457 Unaccreted discount on purchased credit impaired loans (2,291) (651)Total $6,659 $1,806 Accretable yield, or income expected to be collected on purchased credit impaired loans, is as follows at December 31: (dollars in thousands) 2015 2014 Beginning balance $130 $2,349 Accretion of income (529) (1,076)Reclassifications from nonaccretable difference 175 (391)Acquisitions 805 — Disposals — (752)Ending balance $581 $130 87Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 The following table summarizes our delinquent and nonaccrual loans as of December 31: Past Due and Still Accruing Total PastDue andNonaccrual (dollars in thousands) 30–59 Days 60-89 Days 90 Daysor More Nonaccrual Current Total 2015: Real estate loans: Residential properties $— $— $— $— $— $1,160,568 $1,160,568 Commercial properties 1,232 — 793 1,552 3,577 355,214 358,791 Land — — — — — 12,320 12,320 Commercial and industrial loans 2,425 1,639 5,713 2,509 12,286 184,298 196,584 Consumer loans 1,010 — 1,991 75 3,076 34,130 37,206 Total $4,667 $1,639 $8,497 $4,136 $18,939 $1,746,530 $1,765,469 Percentage of total loans 0.26% 0.09% 0.48% 0.23% 1.07% 2014: Real estate loans: Residential properties $— $— $— $— $— $842,135 $842,135 Commercial properties — 805 200 596 1,601 203,719 205,320 Land — — 651 — 651 3,658 4,309 Commercial and industrial loans 2,092 289 700 342 3,423 90,114 93,537 Consumer loans — — 637 163 800 20,325 21,125 Total $2,092 $1,094 $2,188 $1,101 $6,475 $1,159,951 $1,166,426 Percentage of total loans 0.18% 0.09% 0.19% 0.09% 0.56% The level of delinquent loans and nonaccrual loans have been adversely impacted by the loans acquired in an acquisition. As of December 31,2015, of the $12.6 million in loans over 90 days past due, including loans on nonaccrual, $6.8 million, or 54% were loans acquired in an acquisition.Accrual of interest on loans is discontinued when reasonable doubt exists as to the full, timely collection of interest or principal and, generally,when a loan becomes contractually past due for ninety days or more with respect to principal or interest. The accrual of interest may be continued on a well-secured loan contractually past due ninety days or more with respect to principal or interest if the loan is in the process of collection or collection of theprincipal and interest is deemed probable. The Bank considers a loan to be impaired when, based upon current information and events, it believes it isprobable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The determination of past due,nonaccrual or impairment status of loans acquired in an acquisition, other than loans deemed purchased impaired, is the same as loans we originate.As of December 31, 2015, the Company had two loans with a balance of $0.3 million classified as troubled debt restructurings (“TDR”) which areincluded as nonaccrual in the table above. Both loans were classified as a TDR as a result of a reduction in required principal payments and an extension ofthe maturity date of the loans. As of December 31, 2014, the Company had two loans with a balance of $0.5 million classified as troubled debt restructurings(“TDR”) which are included as nonaccrual in the table above. Both loans were classified as a TDR as a result of a reduction in required principal paymentsand an extension of the maturity date of the loans. In 2015, FFB sold through a securitization sponsored by Freddie Mac $102 million of multifamily loans and recognized a gain of $2.7 million. Inthe securitization, the Company obtained a beneficial interest in an interest-only strip. The $0.9 million fair value of this beneficial interest, which wasdetermined based on variety of factors including market prepayment speeds, discount rates and yield curve assumptions, was included in the determination ofthe gain on sale of loans. In addition the Company purchased the “B” piece of the securitization, which is structured to absorb any losses incurred on theloans in the securitization, and an interest only strip. As of December 31, 2015, FFB is servicing $102 million of loans, and, in 2015, earned $0.1 million ofservicing fees related to this transaction. 88Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 NOTE 6: ALLOWANCE FOR LOAN LOSSESThe following is a rollforward of the Bank’s allowance for loan losses for the years ended December 31: (dollars in thousands) BeginningBalance Provision forLoan Losses Charge-offs Recoveries EndingBalance 2015: Real estate loans: Residential properties $6,586 $243 $— $— $6,829 Commercial properties 1,526 670 (310) — 1,886 Commercial and industrial loans 1,897 1,665 (1,913) — 1,649 Consumer loans 141 95 — — 236 Total $10,150 $2,673 $(2,223) $— $10,600 2014: Real estate loans: Residential properties $6,157 $429 $— $— $6,586 Commercial properties 1,440 86 — — 1,526 Commercial and industrial loans 2,149 (252) — — 1,897 Consumer loans 169 (28) — — 141 Total $9,915 $235 $— $— $10,150 2013: Real estate loans: Residential properties $4,355 $1,802 $— $— $6,157 Commercial properties 936 561 (57) — 1,440 Commercial and industrial loans 2,841 71 (763) — 2,149 Consumer loans 208 (39) — — 169 Total $8,340 $2,395 $(820) $— $9,915 89Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by impairment method as ofDecember 31: (dollars in thousands) Allowance for Loan Losses UnaccretedCreditComponentOther Loans Evaluated for Impairment PurchasedImpaired Total Individually Collectively 2015: Allowance for loan losses: Real estate loans: Residential properties $— $6,799 $— $6,799 $127 Commercial properties 30 1,783 — 1,813 363 Land — 103 — 103 42 Commercial and industrial loans — 1,649 — 1,649 187 Consumer loans — 236 — 236 13 Total $30 $10,570 $— $10,600 $732 Loans: Real estate loans: Residential properties $— $1,160,568 $— $1,160,568 $7,747 Commercial properties 6,275 352,162 354 358,791 43,287 Land — 11,180 1,140 12,320 4,267 Commercial and industrial loans 5,687 185,732 5,165 196,584 28,231 Consumer loans 76 37,130 — 37,206 1,761 Total $12,038 $1,746,772 $6,659 $1,765,469 $85,293 2014: Allowance for loan losses: Real estate loans: Residential properties $— $6,586 $— $6,586 $26 Commercial properties 26 1,500 — 1,526 193 Land — — — — 4 Commercial and industrial loans 686 1,211 — 1,897 45 Consumer loans — 141 — 141 — Total $712 $9,438 $— $10,150 $268 Loans: Real estate loans: Residential properties $43 $842,092 $— $842,135 $2,861 Commercial properties 5,742 199,378 200 205,320 21,126 Land — 4,309 — 4,309 1,099 Commercial and industrial loans 5,635 86,343 1,559 93,537 5,893 Consumer loans 116 20,962 47 21,125 8 Total $11,536 $1,153,084 $1,806 $1,166,426 $30,987 The column labeled “Unaccreted Credit Component Other Loans” represents the amount of unaccreted credit component discount for the otherloans acquired in a business combination, and the stated principal balance of the related loans. The discount is equal to 0.86% and 0.86% of the statedprincipal balance of these loans as of December 31, 2015 and 2014, respectively. In addition to this unaccreted credit component discount, an additional$0.3 million and $0.3 million of the ALLL was provided for these loans as of December 31, 2015 and 2014, respectively. 90Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as currentfinancial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Bankanalyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as loans securedby multifamily or commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained.The Bank uses the following definitions for risk ratings:Pass: Loans classified as pass are strong credits with no existing or known potential weaknesses deserving of management’s close attention.Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected,these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of thecollateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterizedby the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.Impaired: A loan is considered impaired, when, based on current information and events, it is probable that the Bank will be unable to collect allamounts due according to the contractual terms of the loan agreement.Additionally, all loans classified as troubled debt restructurings (“TDRs”) are considered impaired. Purchased credit impaired loans are notconsidered impaired loans for these purposes.Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions above and smaller, homogeneous loans notassessed on an individual basis.Based on the most recent analysis performed, the risk category of loans by class of loans is as follows as of December 31: (dollars in thousands) Pass SpecialMention Substandard Impaired Total 2015: Real estate loans: Residential properties $1,159,029 $1,539 $— $— $1,160,568 Commercial properties 351,988 174 354 6,275 358,791 Land 11,180 — 1,140 — 12,320 Commercial and industrial loans 180,755 4,977 5,165 5,687 196,584 Consumer loans 37,130 — — 76 37,206 Total $1,740,082 $6,690 $6,659 $12,038 $1,765,469 2014: Real estate loans: Residential properties $841,538 $554 $— $43 $842,135 Commercial properties 198,112 1,266 200 5,742 205,320 Land 4,309 — — — 4,309 Commercial and industrial loans 81,067 5,276 1,559 5,635 93,537 Consumer loans 20,962 — 47 116 21,125 Total $1,145,988 $7,096 $1,806 $11,536 $1,166,426 91Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 Impaired loans evaluated individually and any related allowance is as follows as of December 31: With No Allowance Recorded With an Allowance Recorded (dollars in thousands) UnpaidPrincipalBalance RecordedInvestment UnpaidPrincipalBalance RecordedInvestment RelatedAllowance 2015: Real estate loans: Residential properties $— $— $— $— $— Commercial properties 5,925 5,925 590 350 30 Commercial and industrial loans 7,770 5,687 — — — Consumer loans 114 76 — — — Total $13,809 $11,688 $590 $350 $30 2014: Real estate loans: Residential properties $43 $43 $— $— $— Commercial properties 5,568 5,568 174 174 26 Commercial and industrial loans 2,094 2,094 3,541 3,541 686 Consumer loans 116 116 — — — Total $7,821 $7,821 $3,715 $3,715 $712 The weighted average annualized average balance of the recorded investment for impaired loans, beginning from when the loan became impaired,and any interest income recorded on impaired loans after they became impaired is as follows for the years ending December 31: 2015 2014 2013 (dollars in thousands) AverageRecordedInvestment InterestIncome after Impairment AverageRecordedInvestment InterestIncome after Impairment AverageRecordedInvestment InterestIncome after Impairment Real estate loans: Residential properties $27 $2 $3,000 $25 $2,250 $32 Commercial properties 6,487 281 3,217 140 323 22 Commercial and industrial loans 7,850 394 1,196 241 2,690 168 Consumer loans 105 — 126 — — — Total $14,469 $677 $7,539 $406 $5,263 $222 There was no interest income recognized on a cash basis in either 2015 or 2014 on impaired loans. NOTE 7: PREMISES AND EQUIPMENTA summary of premises and equipment is as follows at December 31: (dollars in thousands) 2015 2014 Leasehold improvements and artwork $1,473 $1,202 Information technology equipment 4,358 3,073 Furniture and fixtures 2,230 1,969 Total 8,061 6,244 Accumulated depreciation and amortization (5,408) (4,057)Net $2,653 $2,187 92Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 NOTE 8: REAL ESTATE OWNEDThe activity in our portfolio of REO is as follows during the periods ending December 31: (dollars in thousands) 2015 2014 Beginning balance $334 $375 Loans transferred to REO — 1,834 Purchase of note on REO property — 1,285 REO chargeoffs — — REO acquired in merger 3,702 — Dispositions of REO — (3,160)Ending balance $4,036 $334 NOTE 9: DEPOSITSThe following table summarizes the outstanding balance of deposits and average rates paid thereon at December 31: 2015 2014 (dollars in thousands) Amount WeightedAverage Rate Amount WeightedAverage Rate Demand deposits: Noninterest-bearing $299,794 — $246,137 — Interest-bearing 260,167 0.359% 291,509 0.502%Money market and savings 492,015 0.531% 171,958 0.626%Certificates of deposits 470,200 0.554% 253,350 0.619%Total $1,522,176 0.404% $962,954 0.427%At December 31, 2015, of the $149.2 million of certificates of deposits of $250,000 or more, $137.8 million mature within one year and $11.4million mature after one year. Of the $321 million of certificates of deposit of less than $250,000, $292.5 million mature within one year and $28.5 millionmature after one year. At December 31, 2014, of the $117.0 million of certificates of deposits of $250,000 or more, $96.9 million mature within one year and$20.1 million mature after one year. Of the $136.4 million of certificates of deposit of less than $250,000, $127.1 million mature within one year and $9.3million mature after one year. NOTE 10: BORROWINGSBorrowings: At December 31, 2015, our borrowings consisted of $796.0 million of overnight FHLB advances. At December 31, 2014, ourborrowings consisted of $263.0 million of overnight FHLB advances and a $19.9 million term loan payable by FFI. These FHLB advances were paid in fullin the early part of January 2016 and 2015, respectively, and bore interest rates of 0.27% and 0.27%, respectively. Because the Bank utilizes overnightborrowings, the balance of outstanding borrowings fluctuates on a daily basis.FHLB advances are collateralized by loans secured by multifamily and commercial real estate properties with a carrying value of $1.3 billion as ofDecember 31, 2015. As a matter of practice, the Bank provides substantially all of its qualifying loans as collateral to the FHLB. The Bank’s total borrowingcapacity from the FHLB at December 31, 2015 was $898.1 million. In addition to the $796.0 million borrowing, the Bank had in place $101.5 million ofletters of credit from the FHLB which are used to meet collateral requirements for borrowings from the State of California and local agencies.The Bank also has a $20.0 million available unsecured fed funds line with Pacific Coast Banker’s Bank, a $2.0 million available unsecured fedfunds line with Wells Fargo Bank, a $25.0 million available unsecured fed funds line with US Bank, a $25.0 million available unsecured fed funds line withPNC Bank, and a $25.0 million available unsecured fed funds line at Zions Bank. None of these lines had outstanding borrowings as of December 31, 2015.Combined, the Bank’s unused lines of credit as of December 31, 2015 were $97.6 million. The average daily balance of borrowings outstanding during 2015and 2014 was $352.7 million and $192.8 million, respectively. 93Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 NOTE 11: SHAREHOLDERS’ EQUITYIn August 2012, the Company acquired all of the assets and assumed all of the liabilities of Desert Commercial Bank. The merger agreement forthis acquisition included a contingent payout based on the performance of certain assets over a two year period. The Company has determined that theamount of the contingent payout to be $1.0 million, of which $0.90 million is to be paid out in common stock of FFI using an assumed value of $15.00 pershare and $0.1 million is to be paid out in cash. As of December 31, 2015, the Company had issued 54,644 shares of FFI common stock as part of this payout. FFI is a holding company and does not have any direct operating activities. Any future cash flow needs of FFI are expected to be met by itsexisting cash and cash equivalents and dividends from its subsidiaries. The Bank is subject to various laws and regulations that limit the amount of dividendsthat a bank can pay without obtaining prior approval from bank regulators. As of December 31, 2015, FFI’s cash and cash equivalents totaled $42.2 million. NOTE 12: EARNINGS PER SHAREThe following table sets forth the Company’s earnings per share calculations for the years ended December 31: 2015 2014 2013 (dollars in thousands, except share andper share amounts) Basic Diluted Basic Diluted Basic Diluted Net income $13,378 $13,378 $8,394 $8,394 $7,851 $7,851 Basic common shares outstanding 11,155,007 11,155,007 7,737,036 7,737,036 7,424,210 7,424,210 Effect of options, restricted stockand contingent shares issuable 420,848 429,307 318,005 Diluted common sharesoutstanding 11,575,855 8,166,343 7,742,215 Earnings per share $1.20 $1.16 $1.08 $1.03 $1.06 $1.01 Based on a weighted average basis, options to purchase 42,518, 66,324, and 154,814 shares of common stock were excluded for 2015, 2014, and2013 respectively, because their effect would have been anti-dilutive. NOTE 13: STOCK BASED COMPENSATIONIn 2007, the Board of Directors of FFI approved two equity incentive plans that provided for the grant of stock options, shares of restricted stock,restricted stock units (“RSUs”), stock bonus awards and performance awards (collectively, “Equity Incentive Awards”) to the Company’s executive officers,other key employees and directors up to 1,300,282 shares of the FFI’s common stock. In 2010, shareholders approved an increase of 580,000 in the number ofshares available for issuance under one of these plans. In 2015, shareholders approved a new equity incentive plan whereby: the Company can no longerissue Equity Incentive Awards under the previously approved plans; 750,000 shares of common stock will be available for the grant of Equity IncentiveAwards to the Company’s executive officers, other key employees and directors; Equity Incentive Awards that are outstanding under the prior plans willremain outstanding and unchanged and subject to the terms of those Plans; and upon termination, cancellation or forfeiture of any of the Equity IncentiveAwards that are outstanding under the prior plans, those shares will be added to the pool of shares available for future grants of Equity Incentive Awardsunder the plan approved in 2015. The Company recognized stock-based compensation expense of $0.6 million, $0.5 million, and $0.6 million in 2015,2014, and 2013, respectively. Included in the 2015 amount is $0.4 million of expense related to RSUs. Stock options, when granted, have an exercise price not less than the current market value of the common stock and expire after ten years if notexercised. If applicable, vesting periods are set at the date of grant and the Plans provide for accelerated vesting 94Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 should a change in control occur. The fair value of the each option granted in 2015, 2014 and 2013 was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions: Expected Volatility 20%Expected Term 6.5 years Expected Dividends None Weighted Average Risk Free Rate: 2015 grants 1.714%2014 grants 2.269%2013 grants 1.181%Weighted-Average Grant Fair Value: 2015 grants $4.89 2014 grants 4.77 2013 grants 3.79 Since the Company has limited historical stock activity, the expected volatility is based on the historical volatility of similar companies that havea longer trading history. The expected term represents the estimated average period of time that the options remain outstanding. Since the Company does nothave sufficient historical data on the exercise of stock options, the expected term is based on the “simplified” method that measures the expected term as theaverage of the vesting period and the contractual term. The risk free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasurybonds over the expected term of the options.The following table summarizes the activities in the Plans during 2015: (dollars in thousands exceptper share amounts) Options Granted Weighted AverageExercise Price perShare Weighted AverageRemainingContractual Term AggregateIntrinsic Value Balance: December 31, 2014 1,384,808 $12.67 Options granted 11,500 19.75 Options exercised (31,307) 12.94 Options forfeited (6,584) 16.48 Balance: December 31, 2015 1,358,417 12.71 3.52 Years $14,782 Options exercisable 1,299,504 $12.46 3.30 Years $14,463 As of December 31, 2015, the Company had $0.2 million of unrecognized compensation costs related to outstanding stock options which will berecognized through February 2018, subject to the vesting requirements for these stock options. The intrinsic value of stock options exercised in 2015 was$0.3 million.The following table summarizes the activities in the Plans during 2014: (dollars in thousands exceptper share amounts) Options Granted Weighted AverageExercise Price perShare Weighted AverageRemainingContractual Term AggregateIntrinsic Value Balance: December 31, 2013 1,430,967 $12.37 Options granted 71,735 18.08 Options exercised (84,866) 11.19 Options forfeited (32,668) 15.28 Balance: December 31, 2014 1,384,808 12.67 4.50 Years $7,378 Options exercisable 1,279,091 $12.32 4.15 Years $7,272 95Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 The following table summarizes the activities in the Plans during 2013: (dollars in thousands exceptper share amounts) Options Granted Weighted AverageExercise Price perShare Weighted AverageRemainingContractual Term AggregateIntrinsic Value Balance: December 31, 2012 1,423,965 $12.36 Options granted 26,000 15.58 Options exercised — — Options forfeited (18,998) 15.53 Balance: December 31, 2013 1,430,967 12.37 5.25 Years $8,051 Options exercisable 1,249,960 $11.98 4.83 Years $7,527 The following table provides a summary of the RSUs issued by the Company under its equity incentive plans for the periods ended December 31: 2015 2014 2013 Shares WeightedAverage GrantDate Fair Value Shares WeightedAverage GrantDate Fair Value Shares WeightedAverage GrantDate Fair Value Balance: January 1 4,444 $18.00 7,666 $17.61 10,667 $15.00 New RSUs 73,682 20.00 — — 6,666 18.00 Shares vested and issued (10,762) 19.99 (3,222) 17.07 (9,667) 15.00 RSUs forfeited — — — — — — Balance December 31 67,364 $19.87 4,444 $18.00 7,666 $17.61 The fair value of the shares vested and issued was $0.2 million, $0.1 million and $0.2 million in 2015, 2014 and 2013, respectively. As ofDecember 31, 2015, the Company had $1.1 million of unrecognized compensation costs related to outstanding RSUs which will be recognized throughNovember 2018, subject to the related vesting requirements. NOTE 14: 401(k) PROFIT SHARING PLANThe Company’s employees participate in the Company’s 401(k) profit sharing plan (the “401k Plan”) that covers all employees eighteen years ofage or older who have completed three months of employment. Each employee eligible to participate in the 401k Plan may contribute up to 100% of his orher compensation, subject to certain statutory limitations. In 2015, 2014 and 2013, the Company matched 50% of the participant’s contribution up to 5% ofemployee compensation, which is subject to the plan’s vesting schedule. The Company contributions of $0.5 million, $0.5 million and $0.4 million wereincluded in Compensation and Benefits for 2015, 2014 and 2013, respectively. The Company may also make an additional profit sharing contribution onbehalf of eligible employees. No profit sharing contributions were made in 2015, 2014 or 2013. 96Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 NOTE 15: INCOME TAXESThe Company is subject to federal income tax and California franchise tax. Income tax expense (benefit) was as follows for the years endedDecember 31: (dollars in thousands) 2015 2014 2013 Current expense: Federal $8,620 $4,485 $2,505 State 2,700 1,366 392 Deferred expense (benefit): Federal (1,525) 263 992 State (341) 313 354 Benefit of net operating loss carryforwards — — (172)Change in valuation allowance — — (2,441)Total $9,454 $6,427 $1,630 The following is a comparison of the federal statutory income tax rates to the Company’s effective income tax rate for the years endedDecember 31: 2015 2014 2013 (dollars in thousands) Amount Rate Amount Rate Amount Rate Income before taxes $22,832 $14,821 $9,481 Federal tax statutory rate $7,991 35.00% $5,070 34.20% 3,224 34.00%State tax, net of Federal benefit 1,536 6.73% 1,009 6.81% 664 7.00%Change in valuation allowance — —% — —% (2,441) (25.74)%DCB Asset Pool payout — —% 154 1.04% — —%Other items, net (73) (0.32)% 194 1.31% 183 1.93%Effective tax rate $9,454 41.41% $6,427 43.36% $1,630 17.19%Deferred taxes are a result of differences between income tax accounting and generally accepted accounting principles with respect to income taxrecognition. The following is a summary of the components of the net deferred tax assets recognized in the accompanying consolidated balance sheets atDecember 31: (dollars in thousands) 2015 2014 Deferred tax assets (liabilities) Allowance for loan and REO losses $5,092 $4,024 Operating loss carryforwards 4,249 2,972 Market valuation: Acquired loans and REO 2,056 880 Stock-based compensation 1,524 1,396 State taxes 937 461 Accumulated other comprehensive income 912 (630)Organizational expenses 288 321 Depreciation (179) (435)Prepaid expenses (562) (489)Accrued vacation 542 531 Other 533 717 Net deferred tax assets 15,392 $9,748 97Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 As part of the merger with DCB, the Company acquired operating loss carryforwards of approximately $13.4 million. These operating losscarryforwards are subject to limitation under Section 382 of the Internal Revenue Service Code and expire in 2032. As a result, the Company will only beable to utilize operating loss carryforwards of $8.2 million, ratably over a period of 20 years. As part of the merger with PRB, the Company acquiredoperating loss carryforwards of approximately $3.9 million. These operating loss carryforwards are subject to limitation under Section 382 of the InternalRevenue Service Code and expire in 2035. As a result, the Company will only be able to utilize these operating loss carryforwards, ratably over a period of 20years. As of December 31, 2015, the remaining operating loss carryforwards from DCB and PRB available to be utilized by the Company were $10.4 million. The Company has no other operating loss carryforwards. The Company is subject to federal income tax and franchise tax of the state of California.Income tax returns for the periods 2012 through 2015 are open to audit by federal authorities and for the periods 2012 through 2015 by California stateauthorities, and for 2015 by Hawaii state authorities. NOTE 16: COMMITMENTS AND CONTINGENCIESLeasesThe Company leases certain facilities for its corporate offices and branch operations under non-cancelable operating leases that expire through2027. Lease expense for 2015, 2014, and 2013 was $3.7 million, $3.1 million, and $2.7 million, respectively. Future minimum lease commitments under allnon-cancelable operating leases at December 31, 2015 are as follows: (dollars in thousands) Year Ending December 31, 2016 $3,951 2017 4,637 2018 4,419 2019 4,330 2020 and after 12,026 Total $29,363 Financial Instruments with Off-Balance Sheet RiskIn the normal course of business, the Bank is a party to financial instruments with off-balance sheet risk to meet the financing needs of customersand to reduce exposure to fluctuations in interest rates. These financial instruments may include commitments to extend credit and standby and commercialletters of credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in thecontract. Standby and commercial letters of credit and financial guarantees are conditional commitments issued by the Bank to guaranty the performance of acustomer to a third party. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The followingtable provides the off-balance sheet arrangements of the Bank as of December 31: (dollars in thousands) 2015 2014 Commitments to fund new loans $51,887 $18,217 Commitments to fund under existing loans, lines of credit 153,606 104,881 Commitments under standby letters of credit 8,617 5,402 Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily representfuture cash requirements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank uponextension of credit, is based on management’s credit evaluation of the counter-party. Collateral held varies but may include deposits, marketable securities,accounts receivable, inventory, property, plant and equipment, motor vehicles and real estate. 98Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 LitigationFrom time to time, the Company may become party to various lawsuits, which have arisen in the course of business. While it is not possible topredict with certainty the outcome of such litigation, it is the opinion of management, based in part upon opinions of counsel, that the liability, if any, arisingfrom such lawsuits would not have a material adverse effect on the Company’s financial position or results of operations. NOTE 17: RELATED-PARTY TRANSACTIONSLoans to related parties, including directors and executive officers of the Company and their affiliates, were as follows for the periods presented: (dollars in thousands) 2015 Balance, January 1 $454 New loans and advances 5,910 Principal payments received (454)Balance, December 31 $5,910 Interest earned from loans to related parties was $0.2 million in 2015, and $0.1 million in each of 2014 and 2013. In addition, the Bank has a $0.5million commitment to an affiliate of a director under a commercial line of credit under which no balances were outstanding as of December 31, 2015.The Bank held $1.9 million and $6.1 million of deposits from related parties, including directors and executive officers of the Company and theiraffiliates, as of December 31, 2015 and December 31, 2014, respectively. Interest paid on deposit accounts held by related parties was $7,000 in 2015, $9,000in 2014 and $5,000 in 2013. As of December 31,As of December 31, 2015, related parties, including directors and executive officers of the Company and their affiliates, held $11.7 million inassets under management with FFA and FFB. In 2015, the Company received $0.1 million in fees related to these assets under management.The CEO of the Company was, from 2013 to 2015, a member of the board of directors of a bank that provided a term loan to the Company. Underthis loan, which was originated in the first quarter of 2013, subsequently amended in 2014 and 2015, and paid off in August 2015, the Company had averageborrowings of $16.6 million, $17.5 million and $5.1 million in 2015, 2014 and 2013 respectively, and the Company incurred interest of $0.7 million, $0.7million and $0.2 million in 2015, 2014 and 2013, respectively. As of December 31, 2015, this Bank held $40.1 million of deposits at FFB and the Bankpaid interest of $0.1 million on this account in 2015. The President of FFB has a minority interest in an entity which FFB uses for software services, for whichFFB paid $0.1 million in 2015. During 2014 and 2013, an entity in which one of the directors of the Company had an ownership interest, provided insurancebrokerage services to the Company. Broker fees earned by this entity for the services it provided to the Company were $0.2 million in 2014 and $0.1 millionin 2013. NOTE 18: REGULATORY MATTERSFFI and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimumcapital requirements can initiate certain mandatory, and possible additional discretionary, actions by regulators that, if undertaken, could have a directmaterial effect on FFI and the Bank’s financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, theCompany and the Bank must meet specific capital guidelines that involve quantitative measures of FFI and the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. In July, 2013, the federal bank regulatory agencies approved the final rulesimplementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks. The new rules became effective on January 1, 2015, withcertain of the requirements phased-in over a multi-year schedule, and fully phased in by January 1, 2019. The rules include a new common equity Tier 1("CET1") capital to risk-weighted assets ratio with minimums for capital adequacy and prompt corrective action purposes of 4.5% and 6.5%, respectively. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital. Capital 99Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 amounts and ratios for December 31, 2014 are calculated using Basel I rules. FFI’s and the Bank’s capital amounts and classification are also subject toqualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by the regulators to ensure capital adequacy require FFI and the Bank to maintain minimum amounts and ratios(set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) toassets (as defined). Management believes, as of December 31, 2015 that FFI and the Bank met all capital adequacy requirements.The following table presents the regulatory standards for well-capitalized institutions and the capital ratios for FFI and the Bank as of: Actual For CapitalAdequacy Purposes To Be Well-CapitalizedUnder Prompt CorrectiveAction Provisions (dollars in thousands) Amount Ratio Amount Ratio Amount Ratio FFI December 31, 2015 CET1 capital ratio $256,305 17.99% $64,099 4.50% Tier 1 leverage ratio 256,305 11.82% 86,747 4.00% Tier 1 risk-based capital ratio 256,305 17.99% 85,466 6.00% Total risk-based capital ratio 267,325 18.77% 113,954 8.00% December 31, 2014 Tier 1 leverage ratio $95,582 7.32% $52,200 4.00% Tier 1 risk-based capital ratio 95,582 11.01% 34,711 4.00% Total risk-based capital ratio 106,426 12.26% 69,423 8.00% BANK December 31, 2015 CET1 capital ratio $206,807 14.56% $63,907 4.50% $92,310 6.50%Tier 1 leverage ratio 206,807 9.56% 86,562 4.00% 108,202 5.00%Tier 1 risk-based capital ratio 206,807 14.56% 85,209 6.00% 113,612 8.00%Total risk-based capital ratio 217,827 15.34% 113,612 8.00% 142,015 10.00%December 31, 2014 Tier 1 leverage ratio $105,261 8.09% $52,036 4.00% $65,045 5.00%Tier 1 risk-based capital ratio 105,261 12.18% 34,572 4.00% 51,858 6.00%Total risk-based capital ratio 115,811 13.40% 69,144 8.00% 86,430 10.00%As of each of the dates set forth in the above table, the Company (on a consolidated basis) exceeded the minimum required capital ratios applicableto it and FFB (on a stand-alone basis) qualified as a well-capitalized depository institution under the capital adequacy guidelines. NOTE 19: OTHER EXPENSESThe following items are included in the consolidated income statements as professional services and marketing costs and other expenses for theyears ended December 31: (dollars in thousands) 2015 2014 2013 Regulatory assessments $1,105 $788 $650 Directors’ compensation expenses 558 522 604 Contingent payout related to DCB acquisition — 960 — Costs related to cancelled initial public offering — 1,000 — 100Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 NOTE 20: SEGMENT REPORTINGIn 2015, 2014, and 2013 the Company had two reportable business segments: Banking (FFB) and Wealth Management (FFA). The results of FFIand any elimination entries are included in the column labeled Other. The reportable segments are determined by products and services offered and thecorporate structure. Business segment earnings before taxes are the primary measure of the segment's performance as evaluated by management. Businesssegment earnings before taxes include direct revenue and expenses of the segment as well as corporate and inter-company cost allocations. Allocations ofcorporate expenses, such as finance and accounting, data processing and human resources, are calculated based on estimated activity or usage levels. Themanagement accounting process measures the performance of the operating segments based on the Company's management structure and is not necessarilycomparable with similar information for other financial services companies. If the management structures and/or the allocation process changes, allocations,transfers and assignments may change. The following tables show key operating results for each of our business segments used to arrive at our consolidatedtotals for the years ended December 31: (dollars in thousands) Banking WealthManagement Other Total 2015: Interest income $64,471 $— $— $64,471 Interest expense 5,607 — 674 6,281 Net interest income 58,864 — (674) 58,190 Provision for loan losses 2,673 — — 2,673 Noninterest income 8,833 20,530 (590) 28,773 Noninterest expense 39,982 18,352 3,124 61,458 Income (loss) before taxes on income $25,042 $2,178 $(4,388) $22,832 2014: Interest income $47,398 $— $— $47,398 Interest expense 3,844 — 740 4,584 Net interest income 43,554 — (740) 42,814 Provision for loan losses 235 — — 235 Noninterest income 5,866 19,422 (539) 24,749 Noninterest expense 30,509 17,979 4,019 52,507 Income (loss) before taxes on income $18,676 $1,443 $(5,298) $14,821 2013: Interest income $39,181 $— $— $39,181 Interest expense 3,288 — 219 3,507 Net interest income 35,893 — (219) 35,674 Provision for loan losses 2,395 — — 2,395 Noninterest income 3,514 16,715 (405) 19,824 Noninterest expense 24,302 17,400 1,920 43,622 Income (loss) before taxes on income $12,710 $(685) $(2,544) $9,481 101Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 The following tables show the financial position for each of our business segments, and of FFI which is included in the column labeled Other, andthe eliminating entries used to arrive at our consolidated totals at December 31: (dollars in thousands) Banking WealthManagement Other Eliminations Total 2015: Cash and cash equivalents $215,671 $5,682 $42,151 $(47,756) $215,748 Securities AFS 565,135 — — — 565,135 Loans, net 1,754,883 — — — 1,754,883 Premises and equipment 1,996 545 112 — 2,653 FHLB Stock 21,492 — — — 21,492 Deferred taxes 14,466 630 296 — 15,392 REO 4,036 — — — 4,036 Goodwill and intangibles 2,416 — — — 2,416 Other assets 8,645 314 217,032 (215,167) 10,824 Total assets $2,588,740 $7,171 $259,591 $(262,923) $2,592,579 Deposits $1,569,932 $— $— $(47,756) $1,522,176 Borrowings 796,000 — — — 796,000 Intercompany balances 2,748 121 (2,869) — — Other liabilities 9,309 2,634 2,724 — 14,667 Shareholders’ equity 210,751 4,416 259,736 (215,167) 259,736 Total liabilities and equity $2,588,740 $7,171 $259,591 $(262,923) $2,592,579 2014: Cash and cash equivalents $29,585 $3,750 $5,722 $(9,365) $29,692 Securities AFS 138,270 — — — 138,270 Loans, net 1,156,021 221 — — 1,156,242 Premises and equipment 1,539 548 100 — 2,187 FHLB Stock 12,361 — — — 12,361 Deferred taxes 9,196 601 (49) — 9,748 REO 334 — — — 334 Goodwill and Intangibles 197 — — — 197 Other assets 4,630 500 113,499 (112,236) 6,393 Total assets $1,352,133 $5,620 $119,272 $(121,601) $1,355,424 Deposits $972,319 $— $— $(9,365) $962,954 Borrowings 263,000 — 19,886 — 282,886 Intercompany balances 1,287 73 (1,360) — — Other liabilities 6,352 2,486 1,250 — 10,088 Shareholders’ equity 109,175 3,061 99,496 (112,236) 99,496 Total liabilities and equity $1,352,133 $5,620 $119,272 $(121,601) $1,355,424 102Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 NOTE 21: QUARTERLY FINANCIAL INFORMATION (Unaudited) (dollars in thousands,except per share amounts) FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Full Year Year Ended December 31, 2015: Interest income $13,158 $14,993 $17,108 $19,212 $64,471 Interest expense 1,287 1,569 1,647 1,778 6,281 Net interest income 11,871 13,424 15,461 17,434 58,190 Provision for loan losses 150 753 570 1,200 2,673 Noninterest income 6,204 6,420 6,868 9,281 28,773 Noninterest expense 13,358 13,974 16,956 17,170 61,458 Income before taxes on income 4,567 5,117 4,803 8,345 22,832 Taxes on income 1,941 2,175 2,041 3,297 9,454 Net income $2,626 $2,942 $2,762 $5,048 $13,378 Income per share Basic $0.33 $0.36 $0.22 $0.32 $1.20 Diluted $0.32 $0.35 $0.21 $0.31 $1.16 Year Ended December 31, 2014: Interest income $10,675 $10,931 $12,384 $13,408 $47,398 Interest expense 925 1,115 1,237 1,307 4,584 Net interest income 9,750 9,816 11,147 12,101 42,814 Provision for loan losses 235 — — — 235 Noninterest income 5,551 6,416 6,737 6,045 24,749 Noninterest expense 12,546 13,871 13,095 12,995 52,507 Income before taxes on income 2,520 2,361 4,789 5,151 14,821 Taxes on income 1,058 1,094 2,130 2,145 6,427 Net income $1,462 $1,267 $2,659 $3,006 $8,394 Income per share Basic $0.19 $0.16 $0.34 $0.39 $1.08 Diluted $0.18 $0.16 $0.32 $0.37 $1.03 Year Ended December 31, 2013: Interest income $9,004 $10,350 $9,524 $10,303 $39,181 Interest expense 812 862 886 947 3,507 Net interest income 8,192 9,488 8,638 9,356 35,674 Provision for loan losses 622 686 445 642 2,395 Noninterest income 4,533 5,210 5,088 4,993 19,824 Noninterest expense 10,396 11,025 10,938 11,263 43,622 Income before taxes on income 1,707 2,987 2,343 2,444 9,481 Taxes on income 649 1,135 890 (1,044) 1,630 Net income $1,058 $1,852 $1,453 $3,488 $7,851 Income per share Basic $0.14 $0.25 $0.20 $0.47 $1.06 Diluted $0.14 $0.24 $0.19 $0.44 $1.01 103Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 NOTE 22: PARENT ONLY FINANCIAL STATEMENTSBALANCE SHEETS (dollars in thousands) December 31, 2015 2014 ASSETS Cash and cash equivalents $42,151 $5,722 Premises and equipment, net 112 100 Deferred taxes 296 (49)Investment in subsidiaries 215,167 112,236 Intercompany receivable 2,869 1,360 Other assets 1,865 1,263 Total Assets $262,460 $120,632 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities: Borrowings $— $19,886 Accounts payable and other liabilities 2,724 1,250 Total Liabilities 2,724 21,136 Shareholders’ Equity Common Stock 16 8 Additional paid-in-capital 227,262 78,204 Retained earnings 33,762 20,384 Accumulated other comprehensive income (loss), net of tax (1,304) 900 Total Shareholders’ Equity 259,736 99,496 Total Liabilities and Shareholders’ Equity $262,460 $120,632 INCOME STATEMENTS (dollars in thousands) For the Year EndedDecember 31, 2015 2014 2013 Interest expense—borrowings $674 $740 $219 Noninterest income—earnings from investment in subsidiaries 15,801 11,050 9,883 Noninterest expense: Compensation and benefits 1,152 1,096 613 Occupancy and depreciation 191 141 66 Professional services and marketing costs 1,669 2,469 1,120 Other expenses 702 852 526 Total noninterest expense 3,714 4,558 2,325 Income before taxes on income 11,413 5,752 7,339 Taxes on income (1,965) (2,642) (512)Net income $13,378 $8,394 7,851 104Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. FIRST FOUNDATION INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)Years Ended December 31, 2015, 2014, and 2013 STATEMENTS OF COMPREHENSIVE INCOME (dollars in thousands) For the Year EndedDecember 31, 2015 2014 2013 Net income $13,378 $8,394 $7,851 Other comprehensive income (loss): Unrealized holding gains (losses) on securities arising during the period (3,746) 4,198 (2,668)Other comprehensive income (loss) before tax (3,746) 4,198 (2,668)Income tax (expense) benefit related to items of other comprehensive income 1,542 (1,728) 1,098 Other comprehensive income (loss) (2,204) 2,470 (1,570)Total comprehensive income $11,174 $10,864 $6,281 STATEMENTS OF CASH FLOWS (dollars in thousands) For the Year EndedDecember 31, 2015 2014 2013 Cash Flows from Operating Activities: Net income $13,378 $8,394 $7,851 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Earnings from investment in subsidiaries (15,801) (11,050) (9,883)Stock–based compensation expense 113 50 41 Deferred tax liability (benefit) (345) (190) 579 Increase in other assets (602) (652) (46)Increase (decrease) in accounts payable and other liabilities 1,926 829 (828)Net cash provided by (used in) operating activities (1,331) (2,619) (2,286)Cash Flows from Investing Activities: Investment in subsidiaries (76,453) (10,470) (8,500)Payment to shareholders of acquired companies (543) — — Purchase of premises and equipment (12) — (34)Net cash used in investing activities (77,008) (10,470) (8,534)Cash Flows from Financing Activities: Proceeds from borrowings 10,114 15,000 7,500 Paydowns of borrowings (30,000) (2,177) (437)Proceeds from the sale of stock, net 136,163 949 6,322 Intercompany accounts, net decrease (increase) (1,509) (255) 551 Net cash provided by financing activities 114,768 13,517 13,936 Increase (decrease) in cash and cash equivalents 36,429 428 3,116 Cash and cash equivalents at beginning of year 5,722 5,294 2,178 Cash and cash equivalents at end of year $42,151 $5,722 $5,294 105Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.Item 9A.Controls and ProceduresDisclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under theExchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such informationis accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisionsregarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controlsand procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours aredesigned to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls andprocedures.As required by SEC rules, an evaluation was performed under the supervision and with the participation of the Chief Executive Officer and ChiefFinancial Officer of the effectiveness as of December 31, 2015, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under theExchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2015, the Company’sdisclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file underthe Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information isaccumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regardingrequired disclosure.Changes in Internal ControlsThere was no change in the Company’s internal control over financial reporting in 2015 that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting.Internal Control Over Financial ReportingManagement’s Annual Report on Internal Control Over Financial ReportingManagement of First Foundation Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as definedin Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withaccounting principles generally accepted in the United States of America. Internal control over financial reporting includes those written policies andprocedures that: ·pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; ·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withaccounting principles generally accepted in the United States of America; ·provide reasonable assurance that our receipts and expenditures are being made only in accordance with authorization of our managementand board of directors; and ·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that couldhave a material effect on our consolidated financial statements.Internal control over financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correctdeficiencies as identified. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of the effectiveness of such controls to future periods are subject to the risks that the controls may become inadequate becauseof changes in conditions or because the degree of compliance with the policies or procedures may deteriorate. 106Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Management’s Assessment of Internal Control over Financial ReportingOur management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015, based on criteriafor effective internal control over financial reporting described in “Internal Control – Integrated Framework” issued by the Committee of SponsoringOrganizations of the Treadway Commission. Management’s assessment included an evaluation of the design and the testing of the operational effectivenessof the Company’s internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee of our Board ofDirectors.Based on that assessment, management determined that, as of December 31, 2015, the Company maintained effective internal control overfinancial reporting.The foregoing report on internal control over financial reporting shall not be deemed “filed” for purposes of Section 18 of the Exchange Act orotherwise subject to the liabilities of that section.Vavrinek, Trine, Day & Co. LLP, independent registered public accounting firm, which audited our consolidated financial statements for the fiscalyear ended December 31, 2015 included in this Annual Report on Form 10-K, has audited the effectiveness of our internal control over financial reporting asof December 31, 2015, as stated in their report below. 107Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and ShareholdersFirst Foundation Inc. and SubsidiariesIrvine, California We have audited First Foundation, Inc. and Subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2015, based on criteriaestablished in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.Our responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing therisk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Ouraudit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basisfor our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in conformity with U.S. generally accepted accounting principles. Because management'sassessment and our audit were conducted to also meet the reporting requirement of Section 112 of the Federal Deposit Insurance Corporation ImprovementAct (FDICIA), management's assessment and our audit of the company's internal control over financial reporting included controls over the preparation offinancial statements in accordance with instructions to the consolidated Financial Statements for Bank Holding companies (Form FR Y-9C). A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that (1) in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and the receipts and expendituresof the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteriaestablished in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof the Company as of December 31, 2015 and 2014 and the related consolidated statements of income, comprehensive income, changes in shareholders’equity and cash flows for each of the three years in the period ended December 31, 2015, and our report dated March 15, 2016 expressed an unqualifiedopinion on those consolidated financial statements.Laguna Hills, CaliforniaMarch 15, 2016 108Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 9B.Other Information. None. 109Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IIIItem 10.Directors, Executive Officers and Corporate Governance.Executive Officers and DirectorsThe following table sets forth the name, age and position with the Company of each of the persons who serve as directors and executive officers ofthe Company. The business address for all of these individuals is 18101 Von Karman Avenue, Suite 700, Irvine, California 92612. Name Age PositionUlrich Keller, Jr., CFP 59 Executive Chairman and DirectorScott Kavanaugh 55 Director, Vice Chairman of the Board and Chief Executive OfficerJohn Hakopian 47 President of FFA and DirectorJames Brakke(1) 73 DirectorMax Briggs, CFP(2)(3) 50 DirectorVictoria Collins, Ph.D., CFP 73 DirectorWarren Fix(2) 77 DirectorGerald Larsen, J.D., LL.M., CFP, CPA(1)(2) 66 DirectorMitchell Rosenberg, Ph.D.(1)(3) 62 DirectorJacob Sonenshine, J.D., CFA(3) 45 DirectorDavid DePillo 54 President of FFBJohn Michel 56 Executive Vice President and Chief Financial Officer (1)Member of the compensation committee.(2)Member of the audit committee.(3)Member of the nominating and corporate governance committee.Seven of the Company’s ten directors have been determined to be independent directors, because they have not been employed nor have theyreceived any compensation from the Company or any of its subsidiaries during the past three years, other than compensation for their service on the Boardand on Board Committees. Those directors are Dr. Collins and Messrs. Brakke, Briggs, Fix, Larsen, Rosenberg and Sonenshine. Set forth below is abiographical summary of the experience of the members of our Board of Directors and our executive officers.DirectorsUlrich Keller, Jr., CFP. Mr. Keller is one of the founders of the Company and currently is the Executive Chairman of FFI and its wholly-ownedsubsidiary, First Foundation Advisors (“FFA”). Mr. Keller served as Chief Executive Officer (“CEO”) of FFA from 1990, when it began operations as a fee-only investment advisor, until December 2009, at which time he became its Executive Chairman. In 2007, Mr. Keller became the Executive Chairman of FFIand from June 2007 until December 2009 he also served as the CEO of FFI. Mr. Keller earned a Bachelor of Science degree in Finance from San Diego StateUniversity and completed the financial planning program at the University of Southern California. Mr. Keller serves as a member of the University ofCalifornia, Irvine (“UCI”) Foundation’s Finance & Investment Committee and serves as Co-Chair for the Center for Investment and Wealth Management atthe Paul Merage School of Business at UCI. As one of the founders of the Company, who played a key role in the development and successfulimplementation of our business strategy of providing high quality and personalized wealth management and investment advisory services to our clients andthe expansion of the financial services we offer our clients, Mr. Keller brings to the Board considerable knowledge and valuable insights about the wealthmanagement and investment advisory business and the Southern California financial services market.Scott Kavanaugh. Mr. Kavanaugh is, and since December 2009 has been the CEO of FFI, and from June 2007 until December 2009, he served asPresident and Chief Operating Officer of FFI. Mr. Kavanaugh has been the Vice- Chairman of FFI since June 2007. He also is, and since September 2007 hasbeen, the Chairman and CEO of FFI’s wholly-owned banking subsidiary, First Foundation Bank (“FFB”). Mr. Kavanaugh was a founding shareholder andserved as an Executive Vice President and Chief Administrative Officer and a member of the board of directors of Commercial Capital Bancorp, Inc., theparent holding company of Commercial Capital Bank. During his tenure as an executive officer and director of Commercial Capital Bancorp, Inc. thatcompany became a publicly traded company, listed on NASDAQ, and its total assets grew to more than $1.7 billion. From 1998 until 2003, Mr. Kavanaughserved as the Executive Vice President and Chief Operating Officer and a director of Commercial Capital Mortgage. From 110Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 1993 to 1998, Mr. Kavanaugh was a partner and head of trading for fixed income and equity securities at Great Pacific Securities, Inc., a west coast-basedregional securities firm. Mr. Kavanaugh earned a Bachelor of Science degree in Business Administration and Accounting at the University of Tennessee and aMasters of Business Administration (“MBA”) degree in Information Systems at North Texas State University. Mr. Kavanaugh is, and since 2008 has been, amember of the board of directors of Colorado Federal Savings Bank and its parent holding company, Silver Queen Financial Services, Inc. Since March 2015,Mr. Kavanaugh has served as director for Nexpoint Residential Trust Inc., a publicly traded real estate investment trust that is advised by NexPoint RealEstate Advisors, L.P. an affiliate of Highland Capital Management, L.P.. Mr. Kavanaugh also served as a member of the boards of directors of NexBank SSBand its parent holding company, NexBank Capital, Inc. from December 2013 until December 2015. From January 2000 until June 2012, Mr. Kavanaughserved as Independent Trustee and Chairman of the Audit Committee, and from June 2012 until December 2013 served as Chairman, of the Highland MutualFunds, a mutual fund group managed by Highland Capital Management, L.P.. The Board believes that Mr. Kavanaugh’s extensive experience as an executiveofficer of banks and other financial services organizations, combined with his experience as a director of both public and private companies, qualifies him toserve as a member of our Board of Directors. In addition, because Mr. Kavanaugh is the Company’s Chief Executive Officer, the Board of Directors believesthat his participation as a member of the Board facilitates communication between the outside Board members and management.James Brakke. Mr. Brakke has served as a director of FFI since 2007. From 2001 until 2006 Mr. Brakke served as a director of Commercial CapitalBancorp, Inc. and from 2000 until 2006, Mr. Brakke served as a director of Commercial Capital Bank. Mr. Brakke is, and since 2001 has been, ExecutiveVice President and director of the Dealer Protection Group, an insurance brokerage firm that Mr. Brakke co-founded, which specializes in providing insuranceproducts to the automobile industry. Mr. Brakke also serves as a salesperson for Brakke-Schafnitz Insurance Brokers, a commercial insurance brokerage andconsulting firm that he co-founded and where he was President and Chairman from 1971 until 2009. Mr. Brakke currently serves as a director of MauryMicrowave Corporation and as Chairman of Advanced Wellness and Lasers. Mr. Brakke earned a Bachelor of Science degree in Business and Finance fromColorado State University. Mr. Brakke’s experience as a director of Commercial Capital Bancorp, Inc. and its wholly owned banking subsidiary, CommercialCapital Bank is valuable to other independent member of the Company’s Board of Directors. Moreover, we believe Mr. Brakke’s extensive knowledge of theinsurance industry provides valuable insight and support for our insurance operations.Max Briggs, CFP. From 2005 to 2012, Mr. Briggs served as Chairman of the Board of DCB. He was elected as a director of the Company followingour acquisition of DCB in August 2012. Mr. Briggs is, and since 1996 has been the President and CEO of FLC Capital Advisors, a wealth management firmwith over $340 million of assets under administration. Mr. Briggs earned a Business Administration and Finance degree from Stetson University. We believeMr. Briggs is a valuable member of our Board of Directors due to his knowledge of the banking business, gained from his service as Chairman of DCB,particularly as conducted in Palm Desert, California and its surrounding communities, where we have two of our wealth management offices, and hisexperience as President and CEO of a wealth management firm.Victoria Collins, Ph.D. Dr. Collins is and has been a director of FFI since 2007. Beginning in 1990, Dr. Collins served as an executive officer ofFFA, including as an Executive Vice President from 1990 until 2009 and as a Senior Managing Director from 2009, until her retirement in December 2011.Dr. Collins currently serves on the Dean’s Advisory Board as well as on the Executive Committee for the Center for Investment and Wealth Management atthe Paul Merage School of Business at the University of California, Irvine. Dr. Collins earned a Bachelor’s of Administration degree in Psychology from SanDiego State University, a Master of Arts degree in Educational Psychology from St. Mary’s College and a Doctor of Philosophy (or Ph.D.) degree inCognitive Psychology from the University of California, Berkeley. Dr. Collins’ found that her knowledge of psychology was invaluable in her role as anexecutive officer and a senior wealth manager at FFA. We believe that the Board has found that Dr. Collins brings to the Board valuable insights about FFA’sbusiness from her knowledge of and her experience in wealth management, and her management experience at FFA.Warren Fix. Mr. Fix has served as a director of FFI since 2007. Mr. Fix is, and since 1992 has been, a partner in The Contrarian Group, a businessinvestment and management company. From 1995 to 2008, Mr. Fix served in various management capacities and on the Board of Directors of WCH, Inc.,formerly Candlewood Hotel Company. From 1989 to 1992, Mr. Fix served as President of the Pacific Company, a real estate investment and developmentcompany. From 1964 to 1989, Mr. Fix held numerous positions at the Irvine Company, including serving as its Chief Financial Officer (“CFO”) and amember of the executive committee of the board of directors. Mr. Fix currently serves as a director of Healthcare Trust of America, a publicly traded real estateinvestment trust, Clark Investment Group, Accel Networks and CT Realty. Mr. Fix earned a Bachelor of Administration degree from Claremont McKennaCollege. We believe Mr. Fix brings to the Board his knowledge of accounting, real estate and financial matters as a result of his long tenure as CFO of theIrvine Company and his experience as an independent director of both public and private companies.John Hakopian. Mr. Hakopian is, and since April 2009 has been, the President of FFA and is and since 2007 has been a member of the Company’sBoard of Directors. Mr. Hakopian was one of the founders of FFA in 1990, when it began its operations as 111Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. a fee-based investment advisor and served as its Executive Vice President and Co-Portfolio Manager from 1994 through April 2009. Mr. Hakopian earned aBachelor of Arts degree in Economics from UCI and a MBA degree in Finance from the University of Southern California. Mr. Hakopian’s extensiveknowledge of the Company’s wealth management and investment advisory business makes him a valuable member of the Board who is able to provide theoutside Board members with insight in to the operations and risks of that business.Gerald Larsen, J.D, LL.M, CFP, CPA. Mr. Larsen has served as a director of FFI since 2013 and as a director of FFB since 2008. Mr. Larsen is, andsince 1992 has served as the President, Principal and owner of the law firm of Larsen & Risley, located in Costa Mesa, California. Mr. Larsen’s law practicefocuses on federal and state taxation, probate, estate planning, partnerships and corporate law. Mr. Larsen earned a Bachelor of Science degree in Accountingfrom California State University, Northridge, a Juris Doctorate degree from the law school at Stetson University, in Florida, and an LL.M. degree from theUniversity of Florida. We believe that Mr. Larsen’s extensive experience as a tax and estate planning lawyer provides the Board with valuable insightsregarding the tax and estate planning aspects of wealth management.Mitchell Rosenberg, Ph.D. Dr. Rosenberg has served as a director of FFI since 2007. Dr. Rosenberg is, and since 2005 has served as, President andfounder of the consulting firm of M. M. Rosenberg & Associates, which provides executive and organizational development services to technologycompanies, health care businesses and public entities. From 2002 to 2005, Dr. Rosenberg was Chief Executive Officer for The Picerne Group, an internationalinvestment firm investing primarily in real estate, and portfolios of loans. Prior to 2002, Dr. Rosenberg served as Executive Vice President and Director ofBusiness Services for Ameriquest Capital Corporation and directed the Human Resource and Organizational Development functions for Washington MutualBank, American Savings Bank and Great Western Bank. Dr. Rosenberg earned a Bachelor of Science degree in Psychology from Ohio University, a Masters ofScience degree in Industrial Psychology from California State University, Long Beach, and a Ph.D. degree in Psychology with an emphasis on OrganizationalBehavior from Claremont Graduate University, which is the graduate university of the Claremont Colleges. We believe that Dr. Rosenberg’s educational andoperational experience in managing the human resource and organizational development functions of a number of banking organizations and a real estateinvestment firm provides insight regarding the Company’s human resource functions, including compensation considerations that will impact theCompany’s growth and expansion.Jacob Sonenshine, J.D., CFA. Mr. Sonenshine has served as a director of FFI since 2007. Mr. Sonenshine is, and since 2012, has served as co-chiefexecutive officer of Prell Restaurant Group, an operator of fast casual restaurants. From 2006 until 2012, Mr. Sonenshine served as the President and ChiefOperating Officer of Professionals Retirement Strategy, a retirement planning and entity risk management firm. From 1999 to 2005, Mr. Sonenshine wasPresident and co-founder of RSM EquiCo, an investment bank specializing in mergers and acquisitions of privately-held middle market companies.Mr. Sonenshine earned a Bachelor of Science degree in economics and a Bachelor of Administration degree in International Relations from the University ofPennsylvania, and a J.D. degree and a MBA degree from the University of Southern California. We believe Mr. Sonenshine’s experience as CEO of aretirement planning firm is valuable to the Board in overseeing FFA’s wealth management and investment advisory business.The business address for each director and named executive officer listed is 18101 Von Karman Avenue, Suite 700, Irvine, California 92612.Executive OfficersDavid DePillo. Mr. DePillo, is, and since May 2015 has been, the President of FFB. Mr. DePillo has more than 25 years of banking and investmentmanagement experience. He was most recently at Umpqua Bank, where he served as Executive Vice President from April 2014, following Umpqua’sacquisition of Sterling Savings Bank, until he left to join FFB. He joined Sterling Savings Bank in October 2010 as its chief credit officer and transitioned tochief lending officer in March 2012, until his appointment as Executive Vice President of Umpqua Bank. Previously, Mr. DePillo served as the vice chairmanof the board of Fremont General Corporation, a financial services holding company, and of Fremont Investment & Loan, its wholly-owned bank subsidiary.From November 2007 to September 2009, he was the president of both companies. From 1999 through 2006, Mr. DePillo served as the vice chairman,president and chief operating officer of Commercial Capital Bancorp Inc. and its subsidiary companies.John Michel. Mr. Michel, is, and since September 2007 has been, the Executive Vice President and CFO of the Company and FFB. Since January2009, he has also served as the CFO of FFA. Mr. Michel served as the Chief Financial Officer of Sunwest Bank from February 2005 to October 2006 and ofFidelity Federal Bank from September 1998 to December 2001. Mr. Michel earned a Bachelor of Business Administration Accounting degree from theUniversity of Notre Dame. 112Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Corporate Governance and Board MattersWe are committed to having sound corporate governance principles, which are essential to running our business efficiently and maintaining ourintegrity in the marketplace.Director QualificationsWe believe that our directors should have the highest professional and personal ethics and values, consistent with our longstanding values andstandards. They should have broad experience at the policy-making level in business, government or banking. They should be committed to enhancingshareholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service onboards of other companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties.Each director must represent the interests of all shareholders. When considering potential director candidates, our Board of Directors also considers thecandidate’s character, judgment, diversity, age, skills, including financial literacy, and experience in the context of our needs and those of the Board ofDirectors.Director IndependenceUnder the rules of the NASDAQ Stock Market, independent directors must comprise a majority of our Board of Directors. The rules of the NASDAQStock Market, as well as those of the SEC, also impose several other requirements with respect to the independence of our directors. Our Board of Directorshas evaluated the independence of its members based upon the rules of the NASDAQ Stock Market and the SEC. Applying these standards, our Board ofDirectors has affirmatively determined that, with the exception of Mr. Kavanaugh, Mr. Keller, and Mr. Hakopian, each of our current directors is anindependent director, as defined under the applicable rules.Family RelationshipsThere is no family relationship between any director, executive officer or person nominated to become a director or executive director.Board of DirectorsElection of DirectorsOur bylaws provide that our directors shall be elected at each annual meeting of shareholders but, if any such annual meeting is not held or thedirectors are not elected thereat, the directors may be elected at any special meeting of shareholders held for such purpose. All directors shall hold office untiltheir respective successors are elected, subject to the DGCL and our bylaws with respect to vacancies on the Board of Directors. A vacancy on the Board ofDirectors shall be deemed to exist in case of the death, resignation, retirement, disqualification, or removal from office. Vacancies on the Board of Directors,unless otherwise required by law or by resolution of the Board of Directors, may be filled only by a majority vote of the directors then in office, though lessthan a quorum or, if there is only one director then in office, by such director (and in neither case by the stockholders). No decrease in the number ofauthorized directors shall shorten the term of any incumbent director.Subject to the DGCL and our bylaws, each director shall be elected by the vote of the majority of the votes cast with respect to the director at anymeeting for the election of directors at which a quorum is present, provided, however, that at any meeting of stockholders for which the secretary of theCompany determines that the number of nominees exceeds the number to be elected as of the record date for such meeting, the directors shall be elected byvote of the plurality of the shares, present in person or represented by proxy and entitled to vote on the election of directors.Appointment of Executive OfficersOur current and future executive officers and significant employees serve at the discretion of our Board of Directors, subject to any employmentagreements under which any such officers may be employed.Board Leadership StructureThe Chairman of our Board of Directors is Rick Keller who is a member of senior management. However, the Board of Directors has decided toseparate the positions of Chairman and Chief Executive Officer because the Board of Directors believes that 113Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. doing so provides the appropriate leadership structure for us at this time, particularly since the separation of those two positions enables our Chief ExecutiveOfficer to focus on our day-to-day management of our business, while the Chairman leads the Board of Directors in the performance of its responsibilities.The Board’s Role in Risk OversightThe Board’s responsibilities in overseeing the Company’s management and business include oversight of the Company’s key risks andmanagement processes and controls to manage them appropriately. Management, in turn, is responsible for the day-to-day management of risk andimplementation of appropriate risk management controls and procedures.The risk of incurring losses on the loans we make is an inherent feature of the banking business and, if not effectively managed, such risks canmaterially affect our results of operations. Accordingly, the Board, as a whole, exercises oversight responsibility over the processes that our managementemploys to manage those risks. The Board fulfills that oversight responsibility by: ·monitoring trends in the Company’s loan portfolio and the Company’s allowance for loan losses; ·establishing internal limits related to the Company’s lending exposure and reviewing and determining whether or not to approve loans in amountsexceeding certain specified limits; ·reviewing and discussing, at least quarterly and more frequently, if the Board deems necessary, reports from the FFB’s chief credit officer relating tosuch matters as (i) risks in the Company’s loan portfolio, (ii) economic conditions or trends that could reasonably be expected to affect (positivelyor negatively) the performance of the loan portfolio or require increases in the ALLL and (iii) specific loans that have been classified as “specialmention,” “substandard” or “doubtful” and, therefore, require increased attention from management; ·reviewing, at least quarterly, management’s determinations with respect to the adequacy of, and any provisions required to be made to replenish orincrease, the ALLL; ·reviewing management reports regarding collection efforts with respect to nonperforming loans; and ·authorizing the retention of, and reviewing the reports of, external loan review consultants with respect to the risks in and the quality of the loanportfolio.Although risk oversight permeates many elements of the work of the full Board and its committees, the audit committee has direct and systematicresponsibility for overseeing other significant risk management processes.Committees of our Board of DirectorsOur Board of Directors has three standing committees: an audit committee, a compensation committee, and a nominating and governancecommittee. The Board of Directors has adopted a written charter for each of those committees, and copies of those charters are available at the InvestorRelations section of our website at www.ff-inc.com. In addition, from time to time, special committees may be established under the direction of our Board ofDirectors when necessary to address specific issues.Audit Committee. We have an audit committee the members of which are Mr. Briggs, Mr. Fix and Mr. Larsen. Mr. Fix serves as chairman. The Boardof Directors has determined that all of the members of the audit committee are independent within the meaning of the Listing Rules of the NASDAQ StockMarket and the enhanced independence requirements for audit committee members contained in Rule 10A-3 under the Exchange Act. Our Board of Directorsalso has determined that Mr. Fix and Mr. Briggs meet the definition of “audit committee financial expert” adopted by the SEC. The audit committee’sresponsibilities include: ·Selecting and appointing the independent auditors, following the committee’s evaluation of their qualifications, and determining thecompensation of the independent auditors; ·overseeing the work of and monitoring and evaluating the independent auditors’ performance and independence and making all decisionswith respect to the termination of the independent auditors; ·reviewing all audit and non-audit services to be performed by the independent auditors, taking into consideration whether the provision ofany non-audit services to us by the independent auditors is compatible with maintaining their independence; ·reviewing and discussing with management and the independent auditors the annual and quarterly financial statements prior to their release; 114Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ·reviewing and discussing with management and our independent auditors the adequacy and effectiveness of our accounting and financialreporting processes and internal controls and the audits of our financial statements; ·establishing and overseeing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internalaccounting controls or auditing matters, including procedures for the confidential, anonymous submission by our employees of questions orconcerns regarding accounting or auditing matters; ·investigating any matter brought to the audit committee’s attention within the scope of its duties and engaging independent counsel andother advisors as the audit committee deems necessary; ·reviewing reports to management prepared by the internal audit function, as well as management’s responses; ·reviewing and assessing the adequacy of the committee’s formal written charter on an annual basis; ·reviewing and approving related party transactions for potential conflict of interest situations; and ·overseeing such other matters that may be specifically delegated to the audit committee by our Board of Directors.The Audit Committee met nine times during 2015. The Audit Committee has a written charter that specifies its responsibilities, which includeoversight of the Company’s financial reporting process and system of internal accounting controls, and appointment and oversight of the independentregistered public accounting firm engaged to audit the Company’s financial statements. A copy of the Audit Committee charter will be provided, withoutcharge, to any shareholder who sends a written request to the Chief Financial Officer of First Foundation Inc. at 18101 Von Karman Avenue, Suite 700 Irvine,CA. 92612.Compensation Committee. We have a compensation committee the members of which are Mr. Brakke, Mr. Larsen and Mr. Rosenberg.Mr. Rosenberg serves as chairman. The Board of Directors has determined that all of the members of the compensation committee are independent under theapplicable Listing Rules of the NASDAQ Stock Market. The compensation committee’s responsibilities include: ·developing, reviewing, and approving our management compensation programs, and regularly reporting to the full Board of Directorsregarding the adoption and effectiveness of such programs; ·developing, reviewing and approving our cash and equity incentive plans, including approving individual grants or awards thereunder, andregularly reporting to the full Board of Directors regarding the terms of such plans and individual grants or awards; ·reviewing and approving individual and Company performance goals and objectives that may be relevant to the compensation of executiveofficers and other key management employees; ·reviewing and approving the terms of any employment agreement, severance or change in control arrangements, or other compensatoryarrangement with any executive officers or other key management employees; ·reviewing and discussing with management the narrative discussion to be included in the annual proxy statements with respect to executiveofficer and director compensation; ·reviewing and assessing, on an annual basis, the adequacy of its formal written charter; and ·overseeing any other matters that may be specifically delegated to the compensation committee by our Board of Directors.The Compensation Committee met three times during 2015.Nominating and Governance Committee. We have a nominating and governance committee, the members of which are Mr. Briggs, Mr. Rosenbergand Mr. Sonenshine. Mr. Rosenberg serves as chairman. The Board of Directors has determined that all of the members of the nominating and governancecommittee are independent under the Listing Rules of the NASDAQ Stock Market applicable to such committees. The nominating and governancecommittee’s responsibilities include: ·identifying and recommending nominees for election to the Board of Directors; ·making recommendations to the Board of Directors regarding the directors to be appointed to each of its standing committees; ·developing and recommending corporate governance guidelines for adoption by the Board of Directors; and ·overseeing annual self-assessments by the directors of the performance of the Board and its committees. 115Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Nominating and Governance Committee met once during 2015.Compensation Committee Interlocks and Insider ParticipationNone of the members of our compensation committee have been an officer or employee of the Company or any of our subsidiaries. In addition,none of our executive officers serves or has served as a member of the board of directors or compensation committee (or other board committee performingequivalent functions) of any entity that has one or more executive officers serving as one of our directors or as one of the members of our compensationcommittee. Codes of Business and Ethical ConductWe have adopted a Code of Business and Ethical Conduct for our officers and employees and a Code of Conduct which contains specific ethicalpolicies and principles that apply to our Chief Executive Officer, Chief Financial Officer, FFB Chief Operating Officer and other key accounting andfinancial personnel. A copy of our Code of Business and Ethical Conduct is accessible at the Investor Relations section of our website at www.ff-inc.com. Weintend to disclose, at that same location on our website, any amendments to that Code and any waivers of the requirements of the Code of Conduct that maybe granted to our Chief Executive Officer or Chief Financial Officer.Section 16(a) Beneficial Ownership Reporting CompliancePursuant to Section 16(a) of the Exchange Act and the related rules and regulations, our directors and executive officers and any beneficial ownersof more than 10% of any registered class of our equity securities, are required to file reports of their ownership, and any changes in the ownership, of ourcommon stock with the SEC pursuant to Section 16(a) of the Exchange Act. To our knowledge, based solely on a review of copies of Section 16(a) reportsfurnished to us and on written representations from such reporting persons, during 2015, all of those persons complied with the Section 16(a) filingrequirements, with the exception of the following reports: ·Ms. Victoria Collins, a director, gifted 5,600 shares of common stock on March 27, 2015, and a Form 4 was filed on April 28, 2015. Ms.Collins was granted 519 restricted stock units on December 30, 2015, and a Form 4 was filed on January 6, 2016. ·Mr. Mitchel Rosenberg, a director, disposed of 9,000 shares of common stock on June 5, 2015, and a Form 4 was filed on June 10, 2015. Mr.Rosenberg was granted 519 restricted stock units on December 30, 2015, and a Form 4 was filed on January 6, 2016. ·Mr. James Brakke, a director, purchased 1,668 shares of common stock on September 9, 2015, and a Form 4 was filed on September 14,2015. Mr. Brakke was granted 519 restricted stock units on December 30, 2015, and a Form 4 was filed on January 6, 2016. ·Mr. Gerald Larson, a director, was granted 519 restricted stock units on December 30, 2015, and a Form 4 was filed on January 6, 2016. ·Mr. Max Briggs, a director, was granted 519 restricted stock units on December 30, 2015, and a Form 4 was filed on January 6, 2016. ·Mr. Warren Fix, a director, was granted 519 restricted stock units on December 30, 2015, and a Form 4 was filed on January 6, 2016. ·Mr. Jacob Sonenshine, a director, was granted 519 restricted stock units on December 30, 2015, and a Form 4 was filed on January 6, 2016.Item 11.Executive CompensationNamed Executive OfficersOur “named executive officers” include our principal executive officer and our four other most highly compensated executive officers. For 2015,our named executive officers were: ●Ulrich E. Keller, Jr., who currently serves as our Executive Chairman, as well as a member of the Board of Directors. ●Scott F. Kavanaugh, who currently serves as our Chief Executive Officer, as well as Vice Chairman and a member of the Board of Directors.Mr. Kavanaugh is our Principal Executive Officer. 116Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ●John Hakopian, who currently serves as President of FFA, as well as a member of the Board of Directors. ●David DePillo, who currently serves as President of FFB ●John Michel, who currently serves as our Executive Vice President and Chief Financial Officer and the Executive Vice President and ChiefFinancial Officer of FFB and FFA.Summary Compensation TableThe following table sets forth, for our named executive officers, the compensation earned in the years ended December 31:Name and Position Year Salary(2)(3) Non-EquityIncentiveCompensation($)(4)(5) StockAwards (4)(5)(6)(7) Total Ulrich E. Keller, Jr., Executive 2015 $500,000 $200,000 $— $700,000 Chairman of FFI and FFA 2014 500,000 200,000 — 700,000 Scott F. Kavanaugh, Chief Executive Officer of FFI and FFB, Vice 2015 556,000 309,400 103,100 968,500 Chairman of FFI, Chairman of FFB 2014 556,000 412,500 — 968,500 John Hakopian, 2015 425,000 170,000 — 595,000 President of FFA 2014 425,000 170,000 — 595,000 David DePillo, President of FFB(1) 2015 257,700 193,300 301,300 752,300 John Michel, Chief Financial Officer 2015 316,000 15,100 50,400 381,500 Of FFI, FFB and FFA 2014 316,000 201,500 — 517,500 (1)Mr. DePillo commenced his employment with us on May 11, 2015.(2)Although Messrs. Keller, Kavanaugh and Hakopian are also directors of the Company, they do not receive any fees or other compensation for their service as directors.(3)Mr. Kavanaugh’s and Mr. Michel’s salaries include a $6,000 per year automobile allowance for use of his personal automobile.(4)For 2015 and 2014, the Board of Directors established annual target bonus awards for each of the named executive officers, the payment of which was made contingent onFFI generating earnings before taxes, of $22.8 million in 2015 and $17.5 million in 2014. In 2015, and in 2014, Messrs. Keller, Kavanaugh, Michel and Hakopian eachreceived 100% of their target bonus awards, the respective amounts of which are set forth in this table. Because Mr. DePillo started after the year started, he was awarded hisfull bonus potential based upon a subjective evaluation by the Compensation Committee. (5) For Mr. Kavanaugh and Mr. Michel, 25% of their annual bonus for 2015 was paid to them in the form of restricted stock units (“RSU”). Therefore, on January 27, 2016, Mr.Kavanaugh received a grant of 4,635 RSUs and Mr. Michel received a grant of 2,265 RSUs under our 2015 Equity Incentive Plan. Each RSU, upon vesting, enables itsholder to receive one of our common shares. One-third of these awards of RSUs vested immediately at grant date and one-third vests incrementally on each of the first andsecond anniversaries of the grant date subject to continued employment. Our closing share price on the date of this grant was $22.25.(6)On May 11, 2015, Mr. DePillo was granted 15,900 RSUs under our 2007 Equity Incentive Plan as part of his initial compensation in connection with his hire. These RSUsvest in three equal installments on each of the first three anniversaries of the grant date subject to continued employment. Our closing share price on the date of this grant was$18.95. (7)This column reflects the dollar amount of the grant date fair value of an RSU award, computed in accordance with Financial Accounting Standards Board ("FASB")Accounting Standards Codification ("ASC") Topic 718, Stock Compensation. Generally, the grant date fair value is the amount that we would expense in our financialstatements over the award’s vesting schedule.In addition to the compensation set forth in the table above, each named executive officer receives group health and life insurance benefits. Incidental job related benefits,including employer contributions under the Company’s 401k plan, totaled less than $10,000 for each of the named executive officers in 2015 and 2014.Employment AgreementsEach of our named executive officers is employed under an employment agreement for a term ending on December 31, 2018. The employmentagreements with each named executive officer are substantially the same. Mr. Kavanaugh originally entered into an employment agreement with FFI and FFB on September 17, 2007 and this agreement was subsequentlyamended on December 31, 2009, December 28, 2012, August 31, 2013, and January 26, 2016. Mr. Keller and Mr. Hakopian originally entered into anemployment agreements with FFA on September 17, 2007 and these agreements were subsequently amended on December 31, 2009, December 31, 2012,August 31, 2013, and January 26, 2016. Mr. Michel originally entered into an employment agreement with FFI, FFB and FFA on September 17, 2007 and thisagreement was subsequently amended 117Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. on December 31, 2009, December 28, 2012, August 31, 2013, and January 26, 2016.Mr. DePillo entered into an employment agreement with FFB on May 11,2015.Set forth below are summaries of the material terms of those employment agreements. These summaries are not intended to be complete and arequalified in their entirety by reference to the employment agreements themselves.Material Terms of the Employment AgreementsSalaries. The employment agreements currently provide for the payment of base annual salaries as follows: Mr. Keller: $500,000; Mr. Kavanaugh:$550,000; Mr. Hakopian: $425,000, Mr. DePillo: $257,700 and Mr. Michel: $310,000. Those salaries are subject to review and may be increased, but notreduced, by the Board of Directors in its discretion.Participation in Incentive Compensation and Employee Benefit Plans. Each of the employment agreements provides that the named executiveofficer will be entitled to participate in any management bonus or incentive compensation plans adopted by the Board or its Compensation Committee andin any qualified or any other retirement plans, stock option or equity incentive plans, life, medical and disability insurance plans and other benefit planswhich FFI and its subsidiaries may have in effect, from time to time, for all or most of its senior executives. Mr. DePillo’s agreement provides that he will havean annual target bonus of 75% of his then current base annual salary.Termination and Severance Provisions. Each employment agreement provides that the named executive officer’s employment may be terminatedby the Company with or without cause or due to his death or disability or by the named executive officer with or without good reason. In the event of atermination of the named executive officer’s employment by the Company without cause or by the named executive officer for good reason, the Companywill become obligated to pay severance compensation to the named executive officer in an amount equal to 12 months of his annual base salary or theaggregate annual base salary that would have been paid to the named executive officer for the remainder of the term of his employment agreement if suchremaining term is shorter than 12 months (the “Termination Benefits Period”). In addition, during the Termination Benefits Period or until the namedexecutive officer obtains employment with another employer that offers comparable health insurance benefits, whichever period is shorter, the Company willbe obligated to continue to provide any group health plan benefits to the extent authorized by and consistent with 29 U.S.C. § 1161 et seq. (commonlyknown as “COBRA”), subject to payment of premiums by the named executive officer at the active employee’s rate then in effect. The severance benefits willbe reduced by severance benefits received under other severance or similar plans. Payments of the foregoing severance benefits amounts will be paid over theTermination Benefits Period in pro rata installments in accordance with our payroll practices.The foregoing severance benefits are subject to the named executive officer executing an agreement that releases us and our affiliates from all legalclaims. The named executive officer is also required to abide by customary confidentiality provisions and for eighteen months after his termination, thenamed executive officer may not solicit our employees or use trade secrets or confidential information to solicit current or prospective customers or toencourage customers, suppliers, vendors or service providers to terminate or modify their business relationship with us.If the named executive officer’s employment is terminated due to his death then his estate shall receive a lump sum payment equal to his thenannual base salary with payment occurring as soon as practicable after his death. If, during his employment, a named executive officer experiences adisability such that he cannot perform his essential job functions then we can only terminate his employment after the expiration of the lesser of six monthsor the remaining term in the employment agreement. During such period of time, the named executive officer shall continue to receive his annual base salaryless any disability or sick pay that he is receiving along with continued participation in our employee benefits plans.Cause/Good Reason Definitions. The employment agreements contain the following definitions with respect to determining whether/when anamed executive officer is eligible for severance benefits.“Cause” generally means the occurrence of any of the following by the named executive officer: (i)acts of gross negligence, willful misconduct or insubordination and which involve us or our affiliates, or acts of fraud;(ii) violation of laws or government regulations which could subject us or our affiliates to disciplinary or enforcement action by agovernmental agency, or which could adversely affect our or our affiliates’ reputation or goodwill;(iii) acts which would constitute a felony or any misdemeanor involving moral turpitude, deceit, dishonesty or fraud;(iv) failure to perform a substantial portion of the duties and responsibilities assigned or delegated to the named executive officer under thisAgreement, 118Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (v) breach of the material obligations under the employment agreement;(vi) violation by Executive of any conflict of interest policy, ethical conduct policy or employment policy or a breach of his fiduciary duties;(vii) the issuance of an order or directive by any government agency which requires the named executive officer to disassociate himself from usor an affiliates or which suspends his employment or requires him to terminate his employment; or(viii) for Mr. Keller and Mr. Hakopian, the suspension or loss of, or a failure to maintain in full force and effect, any professional license orcertification needed by the named executive officer which is needed to enable him to perform his responsibilities or duties; or (ix)for Messrs. Kavanaugh, Michel and DePillo, the issuance of an order under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Actrequiring the named executive officer to be removed or permanently prohibited from participating in the conduct of our business.“Good Reason” generally means the occurrence of any of the following actions taken by us with respect to the named executive officer andwithout his consent: (i)a material reduction in authority, duties or responsibilities; (ii)a material reduction in base salary or base compensation, unless such reduction is made as part of an across-the-board cost-cuttingmeasure that is applied equally or proportionately to all senior executives; (iii)a relocation of the named executive officer’s principal place of employment to an office (other than our headquarters offices) locatedmore than thirty (30) miles from his then principal place of employment; or (iv)a breach of our material obligations to the named executive officer under the employment agreement which breach continues uncuredfor a period of thirty (30) days following written notice from the named executive officer.The following conditions must be satisfied in order for the named executive officer to terminate his employment for Good Reason: (1) the namedexecutive officer shall have given us a written notice of termination for Good Reason (a “Good Reason Termination Notice”) prior to the expiration of aperiod of fifteen (15) consecutive calendar days commencing on the date that the named executive officer is first notified in writing that we have taken aGood Reason action, (2) we have failed to rescind or cure the Good Reason action within thirty (30) consecutive calendar days following our receipt of theGood Reason Termination Notice, and (3) the Good Reason Termination Notice must expressly state that the named executive officer is terminating hisemployment for Good Reason and must describe in reasonable detail the Good Reason action that entitles him to terminate his employment for Good Reason.Change of Control AgreementsThe Company has entered into Change of Control Severance Agreements with each of its named executive officers (the “CCAgreements”). Messrs. Kavanaugh, Keller, Hakopian and Michel each entered into their respective CC Agreements on September 17, 2007 and Mr. DePilloentered into his CC Agreement on May 11, 2015. The CC Agreements with each named executive officer are substantially the same and can be terminated by the Company upon three years advancewritten notice to the named executive officer. A CC Agreement will also terminate (without payment of severance benefits) in the event the named executiveofficer’s employment is terminated by the Company for Cause (as defined in the named executive officer’s employment agreement) or due to his death ordisability or retirement, or by the named executive officer without Good Reason.Each of the CC Agreements provides that if the Company undergoes a Change of Control while the named executive officer is still in the employof the Company or one of its subsidiaries and, within the succeeding 12 months, the named executive officer terminates his employment due to theoccurrence of a “Good Reason Event” then the named executive officer will become eligible to receive the following severance compensation (in lieu ofseverance benefits that could be provided under the named executive officer’s employment agreement): (i)two times the sum of (1) his annual base salary as then in effect and (2) the maximum bonus compensation that the named executiveofficer could have earned under any bonus or incentive compensation plan in which he was then participating, if any; (ii)acceleration of the vesting of any then unvested stock options or restricted stock held by the named executive officer, and 119Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (iii)continued participation for the named executive officer and his family members in medical, dental, vision, disability, and lifeinsurance plans and programs through the end of the second calendar year following the calendar year of the termination. The foregoing severance benefits are conditioned upon the named executive officer executing documentation that releases us and our affiliatesfrom all legal claims. Payment of the cash amount under clause (i) above shall be paid on the first business day after the end of the sixth calendar month afterthe named executive officer’s termination of employment if the Company is subject to the reporting requirements of the Securities Exchange Act of 1934 onthe date of the named executive officer’s termination of employment. In all other cases, the payment will be due on the fifth business day after the namedexecutive officer’s termination of employment. The severance benefits will be reduced to avoid the imposition of excise taxes under Internal Revenue CodeSections 280G and 4999 if the named executive officer would be better off an after-tax basis.Change of Control/Good Reason Definitions. The CC Agreements contain the following definitions with respect to determining whether/when anamed executive officer is eligible for severance benefits under the CC Agreements.“Change of Control” generally means the occurrence of any of the following subject to certain exceptions: (iv)a person who becomes the beneficial owner, directly or indirectly, of more than twenty-five percent (25%) of the Company’s votingsecurities subject to certain conditions; (v)a consolidation, merger, or reorganization of the Company with or into another person, or of another person with or into the Company, inwhich the holders of the Company’s outstanding voting securities immediately prior to the consummation of such consolidation, mergeror reorganization would not, immediately after such consummation, own beneficially, directly or indirectly, (in the aggregate) at leastsixty percent (60%) of the voting securities of (1) the continuing or surviving person in such merger, consolidation or reorganization(whether or not that is the Company) or (2) the ultimate parent, if any, of that continuing or surviving person; (vi)a consolidation, merger or reorganization of the Company’s subsidiary with or into another person, or of another person with or into thesubsidiary, unless the persons that were the holders of the Company’s voting securities immediately prior to such consummation wouldhave, immediately after such consolidation, merger or reorganization, substantially the same proportionate direct or indirect beneficialownership of at least sixty (60%) of the voting securities of (1) the continuing or surviving person in such consolidation, merger orreorganization (whether or not that is the Subsidiary) or, (2) the ultimate parent, if any, of that continuing or surviving person; (vii)a sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a singleplan) of all or substantially all of the assets of the Company or of its subsidiary; (viii)the holders of the voting securities of the Company approve any plan or proposal for the liquidation or dissolution of the Company,unless the plan of liquidation provides for all or substantially all of the assets of the Company to be transferred to a person in which theholders of the Company’s voting securities immediately prior to such liquidation have or will have, immediately after such liquidation,substantially the same proportionate direct or indirect beneficial ownership of at least sixty percent (60%) of the voting securities ofsuch person; or (ix)during any period of two (2) consecutive years during the term of the CC Agreement, individuals who at the beginning of that two yearperiod constituted the entire Board of Directors do not, for any reason, constitute a majority thereof, unless the election (or thenomination for election) by the holders of the Company’s voting securities, of each director who was not a member of the Board ofDirectors at the beginning of that two year period was approved by a vote of at least two-thirds of the directors then still in office whowere directors at the beginning of the two year period.“Good Reason” generally means the occurrence of any of the following actions taken by us with respect to the named executive officer andwithout his consent: (i)The scope of named executive officer’s authority or responsibilities is significantly reduced or diminished or there is an change in hisposition or title as an officer of the Company or subsidiary, or both, that constitutes or would generally be considered to constitute ademotion; (ii)a reduction in base salary, unless such reduction is made as part of an across-the-board cost-cutting measure that is applied equally orproportionately to all senior executives; (iii)a significant reduction or discontinuation in the named executive officer's bonus and/or incentive compensation award opportunityunless it is applied equally or proportionately to all senior executives participating in the incentive plan or program; 120Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (iv)a significant reduction or discontinuation in the named executive officer's participation in any other benefit plan subject to certainexceptions; (v)a relocation of the named executive officer’s principal place of employment to an office (other than our headquarters offices) locatedmore than thirty (30) miles from his then principal place of employment; or (vi)a breach of our material obligations to the named executive officer under either the employment agreement or CC Agreement whichbreach continues uncured for a period of thirty (30) days following written notice from the named executive officer. In order to resign his employment for Good Reason under the CC Agreement, the named executive officer must provide the Company with writtennotice of termination for Good Reason within 45 days of the occurrence of the applicable Good Reason event. 121Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Outstanding Equity Awards at Fiscal Year EndThe following table sets forth information regarding outstanding stock options and unvested RSUs held by each of our named executive officers asof December 31, 2015.Outstanding Equity Awards at 2015 Fiscal Year End Option Awards(1) Name / Grant Date Number ofsecuritiesunderlyingunexercisedoptions(#)(1) Number ofsecuritiesunderlyingunexercisedoptions (#) Option Exercise Price($)(2) OptionExpiration Date(3) Ulrich E. Keller, Jr. 9/17/2007 40,500 — 11.00 9/16/2017 1/27/2009 15,000 — 16.50 1/26/2019 10/25/2011 40,000 — 16.50 10/24/2021 Scott F. Kavanaugh 9/17/2007 160,000 — 10.00 9/16/2017 1/27/2009 20,000 — 15.00 1/26/2019 10/25/2011 80,000 — 15.00 10/24/2021 John Hakopian 9/17/2007 40,500 — 10.00 9/16/2017 1/27/2009 10,000 — 15.00 1/26/2019 10/25/2011 40,000 — 15.00 10/24/2021 John Michel 9/17/2007 80,000 — 10.00 9/16/2017 1/27/2009 7,000 — 15.00 1/26/2019 10/25/2011 40,000 — 15.00 10/24/2021 Stock Awards Name / Grant Date Number of shares orunits of stock that havenot vested(#) Market value of sharesor units of stock thathave not vested($)(4) Scott F. Kavanaugh 1/27/2016 3,090 72,900 David DePillo 5/11/2015 15,900 375,100 John Michel 1/27/2016 1,510 35,600 (1)Stock options granted to the named executive officers generally incrementally vested over three years at the rate of one-third of the total number of shares subject to the optionas of each of the first three anniversaries of the date of grant, provided that the executive was still employed by the Company on that anniversary date.(2)In accordance with the Company’s equity compensation plans, the per share exercise prices was equal to or greater than 100% of the fair market value of a Company share asof the respective grant dates. In accordance with Internal Revenue Code Section 422, the per share exercise price of incentive stock options granted to Mr. Keller was equal to110% of the fair market value of a share of our common stock on the date of grant because Mr. Keller owned more than 10% of the outstanding common stock of theCompany at the date of the grant.(3)The expiration date of each option award is ten years from the date of its grant, subject to earlier termination on a cessation of service with the Company.(4)The remaining RSUs for Messrs. Kavanaugh and Michel vest in equal installments on each of the first and second anniversaries of the grant date subject to continuedemployment. The RSUs for Mr. DePillo vest in three equal installments on each of the first three anniversaries of the grant date subject to continued employment. Marketvalue is based on the closing share price of $23.59 for our common stock as of December 31, 2015 which was the last day of our fiscal year 2015. 122Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Compensation Risk AssessmentWe believe that, although a portion of the compensation provided to our executives and other employees is subject to the achievement of specifiedfinancial performance criteria, our executive compensation program does not encourage excessive or unnecessary risk-taking. We do not believe that ourcompensation programs are reasonably likely to have a material adverse effect on us. 123Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Director CompensationOnly non-employee directors are entitled to receive compensation for service on the Board and committees of the Board. Each director receives anannual retainer of $45,000 plus annual equity grants with a grant date value of $25,000. The compensation each non-employee director received for theirservice on the Board and Board committees is set forth in the following table for the year ended December 31 2015: Director Compensation Fees Earned or Paidin Cash ($) Stock Awards ($) Total ($) James Brakke 45,000 25,000 70,000 Max Briggs 45,000 25,000 70,000 Victoria Collins 45,000 25,000 70,000 Warren D. Fix 45,000 25,000 70,000 Gerald Larsen 45,000 25,000 70,000 Mitchell M. Rosenberg 45,000 25,000 70,000 Jacob Sonenshine 45,000 25,000 70,000 (1)On January 27, 2015, when our closing share price was $17.82 per share, each non-employee director received a grant of 701 RSUs. These vested on April 28, 2015. On,October 27, 2015, when our closing share price was $24.14, each non-employee director received a grant of 519 RSUs. These shares vested on December 30, 2015. Thiscolumn reflects the aggregate dollar amount of the grant date fair value of these RSU awards, computed in accordance with FASB ASC Topic 718, Stock Compensation.Generally, the grant date fair value is the amount that we would expense in our financial statements over the award’s vesting schedule.Outstanding Equity Awards.The following table sets forth information regarding outstanding stock options held by each non-employee director as of December 31, 2015.Outstanding Equity Awards at 2015 Fiscal Year End Option Awards(1) Name / Grant Date Number ofsecuritiesunderlyingunexercisedoptions(#) Number ofsecuritiesunderlyingunexercisedoptions (#) Exercise Price($)(2) Expiration Date(3) James Brakke 9/17/2007 15,000 — 10.00 9/16/2017 1/27/2009 1,500 — 15.00 1/26/2019 Max Briggs 8/28/2012 15,000 — 15.00 8/27/2022 Victoria Collins 9/17/2007 40,500 — 10.00 9/16/2017 1/27/2009 5,000 — 15.00 1/26/2019 Warren D. Fix 9/17/2007 15,000 — 10.00 9/16/2017 1/27/2009 1,500 — 15.00 1/26/2019 Gerald L. Larsen 7/22/2008 10,000 — 15.00 7/21/2018 1/27/2009 1,000 — 15.00 1/26/2019 1/27/2011 — — — — Mitchell M. Rosenberg 9/17/2007 15,000 — 10.00 9/16/2017 1/27/2009 1,500 — 15.00 1/26/2019 Jacob Sonenshine 9/17/2007 15,000 — 10.00 9/16/2017 1/27/2009 1,500 — 15.00 1/26/2019 124Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (1)Stock options granted to the non-employee directors generally incrementally vested over three years at the rate of one-third of the total number of shares subject to the optionas of each of the first three anniversaries of the date of grant, provided that the director is still serving the Company on that anniversary date. (2)In accordance with the Company’s equity compensation plans, the per share exercise price of these options were equal to or greater than 100% of the fair market value of aCompany share as of the respective grant dates.(3)The expiration date of each option award is ten years from the date of its grant, subject to earlier termination on a cessation of service with the Company. 125Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Security Ownership of Certain Beneficial Owners and ManagementThe following table sets forth certain information with respect to the beneficial ownership of our common stock, as of March 11, 2016 for: ●each of our named executive officers; ●each of our directors; ●all our executive officers and directors as a group; and ●each person, or group of affiliated persons, known by us to be the beneficial owner of more than 5% of our outstanding shares of our commonstock.For purposes of the table below, the percentage ownership calculations for purposes of determining the beneficial ownership of our directors andexecutive officers are based on 16,016,326 shares of our common stock outstanding as of March 11, 2016.Under the rules and regulations of the SEC, a person is deemed to be the beneficial owner of (i) shares with respect to which that person has, eitheralone or with others, the power to vote or dispose of those shares; and (ii) shares which that person may acquire on exercise of options or other rights topurchase shares of our common stock at any time during a 60 day period which, for purposes of this table, will end on May 10, 2016. The number of sharessubject to options that are exercisable or may become exercisable during that 60 day period are deemed outstanding for purposes of computing the number ofshares beneficially owned by, and the percentage ownership of, the person holding such options, but not for computing the percentage ownership of anyother shareholder named in this table. Except as otherwise noted below, we believe that the persons named in the table have sole voting and dispositivepower with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. As of March 11, 2016(1) Name and Title Number of Shares BeneficiallyOwned(2) Percent of Class Wellington Management Company, LLP280 Congress Street, Boston, MA 02210 1,487,758 9.3%Ulrich Keller, Jr., Executive Chairman 1,396,085(3) 8.7%Scott Kavanaugh, Vice Chairman and CEO 691,012 4.2%James Brakke, Director 63,280 * Max Briggs, Director 31,477(4) * Victoria Collins, Director 408,329(5) 2.5%Warren Fix, Director 82,737(6) * John Hakopian, Director and President of FFA 485,180 3.0%Gerald Larsen, Director 21,920 * Mitchell M. Rosenberg, Director 34,220 * Jacob Sonenshine, Director 40,720 * David DePillo, President of FFB 344,785 2.2%John M. Michel, EVP and Chief Financial Officer 144,755 * All Directors and Executive Officers as a Group(12 persons) 3,744,500 22.4% *Represents less than one (1%) percent of the shares outstanding as of March 11, 2016.(1)This table is based upon information supplied to us by our officers, directors and principal shareholders. Except as otherwise noted, we believe that each of the shareholdersnamed in the table has sole voting and investment power with respect to all shares of common stock shown as to which he or she is shown to be the beneficial owner, subjectto applicable community property laws. The percentage ownership interest of each individual or group is based upon the total number of shares of the Company’s commonstock outstanding plus the shares which the respective individual or group has the right to acquire within 60 days after March 11, 2016 through the exercise of stock options.(2)Includes shares that may be acquired within 60 days of March 11, 2016 pursuant to the exercise of stock options. Shares subject to options are as follows: Mr. Keller—95,500 shares; Mr. Kavanaugh—260,000 shares; Messrs. Brakke, Fix, Sonenshine and Dr. Rosenberg,—16,500 shares each; Mr. Briggs—15,000 shares; Dr. Collins—45,500 shares; Mr. Hakopian—90,500 shares; Mr. Larsen—11,000 shares; Mr. Michel—127,000 shares; and Directors and Executive Officers as a Group—710,500 shares. 126Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (3)Includes 100,000 shares beneficially owned by Mr. Keller’s wife, as to which he disclaims beneficial ownership. (4)Includes 3,000 shares beneficially owned by Mr. Briggs wife, as to which he disclaims beneficial ownership.(5)Includes 8,121 shares beneficially owned by Dr. Collins husband, as to which she disclaims beneficial ownership.(6)Includes 5,000 shares beneficially owned by Mr. Fix’s wife, as to which he disclaims beneficial ownership.The following table provides information as of December 31, 2015 regarding the Company’s Equity Plans: Column (a) Column (b) Column (c) Plan Category Number ofSecurities to beIssued uponExercise ofOutstandingOptions,Warrants andRights Weighted-AverageExercise Price ofOutstandingOptions,Warrants andRights(1) Number ofSecuritiesRemainingAvailable forFuture Issuanceunder EquityCompensationPlans(ExcludingSecuritiesReflected inColumn(a)) Equity compensation plans approved by shareholders 1,357,417 $12.71 737,271 Equity compensation plans not approved by shareholders — — — Total 1,358,417 $12.71 737,271 (1)Options are granted at an exercise price equal to or greater than the fair market value per share of our common stock on their respective dates of grant.Item 13.Certain Relationships and Related Transactions, and Director Independence.In addition to the compensation arrangements with directors and executive officers described in “Executive Compensation” above, the followingis a description of each transaction since January 1, 2014, and each proposed transaction in which: ●we have been or are to be a participant; ●the amount involved exceeded or exceeds $120,000; and ●any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family member of orperson sharing the household with any of these individuals (other than tenants or employees), had or will have a direct or indirect materialinterest.Ordinary Banking RelationshipsFFB has had, and in the future may have, banking transactions in the ordinary course of its business with directors, principal shareholders and theirassociates, including the making of loans to directors and their associates. Such loans and other banking transactions were, and in the future will be, made onthe same terms, including interest rates and collateral securing the loans, as those prevailing at the time for comparable transactions with persons ofcomparable creditworthiness who have no affiliation with the Company, FFB or any other subsidiaries of the Company and will be made only if they do notinvolve more than the normal risk of collectability and do not present any other unfavorable features at the times the loans are made.Indemnification Agreements with our Directors and OfficersIn connection with the reincorporation, and as permitted by the Delaware corporate law and as provided for by the Company’s bylaws, effectiveOctober 30, 2015, the Company entered into indemnification agreements with its directors and executive officers. Those indemnification agreements requirethe Company, among other things, (i) to indemnify its directors and officers against certain liabilities that may arise by reason of their status or service asdirectors or officers (other than liabilities arising from actions not taken in good faith or in a manner the indemnitee believed to be opposed to the bestinterests of the Company), (ii) to advance the expenses such directors or executive officers may incur as a result of or in connection with the defense of anyproceeding brought against them as to which they could be indemnified, subject to an undertaking by the indemnified party to repay such 127Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. advances if it is ultimately determined that he or she is not entitled to indemnification, and (iii) to obtain officers’ & directors’ liability insurance if availableon reasonable terms.Procedures for Approval of Related Party TransactionsTransactions by FFI or FFB with related parties are subject to regulatory requirements and restrictions. These requirements and restrictions includeSections 23A and 23B of the Federal Reserve Act (which govern certain transactions by a bank with its affiliates) and the Federal Reserve’s Regulation O(which governs certain loans by FFB to its executive officers, directors, and principal shareholders). We have adopted policies to comply with theseregulatory requirements and restrictions.In addition our Board has adopted a written policy governing the approval of related party transactions that complies with all applicable SECrequirements. FFI’s related parties include directors (including any nominee for election as a director), executive officers, 5% shareholders and the immediatefamily members of these persons. Our Chief Financial Officer, in consultation with other members of management and outside counsel, as appropriate, willreview potential related party transactions to determine if they are subject to the policy. If so, the transaction will be referred to the Board of Directors forapproval. In determining whether to approve a related party transaction, the Board of Directors will consider, among other factors, the fairness of the proposedtransaction to the Company, the direct or indirect nature of the related party’s interest in the transaction, the appearance of any improper conflict of interestsfor any director or executive officer, taking into account the size of the transaction and the financial position of the related party, whether the transactionwould impair an outside director’s independence, the acceptability of the transaction to our regulators and any possible violations of other of our corporatepolicies.Director IndependenceOur Board of Directors has evaluated the independence of its members based on the definition of independence for purpose of Board membershipand membership on the Board’s standing committees that are applicable to the Company because its shares are listed on the NASDAQ Stock Market. Basedon that evaluation, our Board has concluded that (i) six of the ten members of the Board are independent: Messrs. Brakke, Briggs, Fix, Larsen, Rosenberg andSonenshine, and (ii) all of the members of the Audit Committee, Compensation Committee and Nominating Committee are independent.Item 14.Principal Accounting Fees and ServicesAudit and Non-Audit Services Pre-Approval PolicyThe Audit Committee’s Charter provides that the Audit Committee must pre-approve services to be performed by the Company’s independentregistered public accounting firm. In accordance with that requirement, the Audit Committee pre-approved the engagement of Vavrinek, Trine Day and Co.LLP, (“VTD”) pursuant to which it provided the services described below for the fiscal years ended December 31, 2015 and 2014.Audit and Other Fees Paid in Fiscal Year 2015 and 2014Aggregate fees for professional services rendered to the Company by VTD were as follows for the years ended December 31: 2015 2014 Audit services $160,000 $125,000 Audit related services — — Tax compliance services — — All other services 30,000 18,200 Total $190,000 $143,200 Audit ServicesIn each of the years ended December 31, 2015 and 2014, VTD rendered audit services which consisted of the audit of the Company’s consolidatedfinancial statements for the years then ended.Audit Related ServicesVTD did not render any other audit related services to us during 2015 or2014. 128Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Tax Compliance ServicesVTD did not render any tax compliance services to us during 2015 or 2014.Other ServicesIn 2015, VTD provided comfort letters, consents, and assistance with and review of documents filed with the SEC in conjunction our successful (in2015) and cancelled (in 2014) public offerings. No other services were provided in 2015 and 2014. 129Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART IVItem 15.Exhibits and Financial Statement Schedules. (a)Financial Statements, Financial Statement SchedulesSee page 66 for an index of the financial statements filed as part of this Annual Report on Form 10-K. No financial statement schedules are providedbecause the information called for is not required or is shown either in the financial statements or the notes thereto. (b)ExhibitsSee the Index of Exhibits on page E-1 for a list of exhibits filed as part of this Annual Report on Form 10-K, which Index of Exhibits is incorporatedherein by reference. 130Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized in Irvine California on March 15, 2016. FIRST FOUNDATION INC.By: /S/ SCOTT F. KAVANAUGH Scott F. Kavanaugh, President andChief Executive OfficerPOWER OF ATTORNEYEach individual whose signature appears below constitutes and appoints Scott F. Kavanaugh, Ulrich E. Keller, Jr. and John M. Michel, and each ofthem, acting severally, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place andstead, in any and all capacities, to sign and file on his or her behalf and in each capacity stated below, all amendments and/or supplements to this AnnualReport on Form 10-K, which amendments or supplements may make changes and additions to this Report as such attorneys-in-fact, or any of them, actingseverally, may deem necessary or appropriate.Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-K has been signed below by the following persons inthe capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ SCOTT F. KAVANAUGH Scott F. Kavanaugh Chief Executive Officer and Director(Principal Executive Officer) March 15, 2016 /s/ JOHN M. MICHEL John M. Michel Chief Financial Officer(Principal Financial and Accounting Officer) March 15, 2016 /s/ ULRICH E. KELLER, JR. Ulrich E. Keller, Jr. Chairman and Director March 15, 2016 /s/ JAMES BRAKKE James Brakke Director March 15, 2016 /s/ MAX BRIGGS Max Briggs Director March 15, 2016 /s/ VICTORIA COLLINS Victoria Collins Director March 15, 2016 /s/ WARREN D. FIX Warren D. Fix Director March 15, 2016 /s/ JOHN HAKOPIAN John Hakopian Director March 15, 2016 /s/ GERALD L. LARSEN Gerald L. Larsen Director March 15, 2016 /s/ MITCHELL M. ROSENBERG Mitchell M. Rosenberg Director March 15, 2016 /s/ JACOB SONENSHINE Jacob Sonenshine Director March 15, 2016 S-1Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. INDEX OF EXHIBITS Exhibit No. Description2.1 Agreement and Plan of Merger, dated October 29, 2015, entered into by First Foundation Inc., a California corporation, and FirstFoundation Inc., a Delaware corporation, to effectuate the Delaware reincorporation (incorporated by reference to Exhibit 2.99 to theCompany’s Current Report on Form 8-K, filed on October 29, 2015). 2.2 Agreement and Plan of Merger, dated November 25, 2014, by and among the Company, First Foundation Bank and Pacific Rim Bank(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed on December 1, 2014). 2.3 Agreement and Plan of Merger, as amended, by and among the Company, First Foundation Bank and Desert Commercial Bank, datedJune 29, 2011, together with First, Second and Third Amendments thereto (incorporated by reference to Exhibit 10.10 to the Company’sRegistration Statement on Form 10, filed on October 17, 2013). 3.1 Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filedon October 29, 2015). 3.2 Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed on October 29, 2015). 4.1 Specimen Certificate for Common Stock (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K/A, filedon August 3, 2015). 10.1(1) First Foundation Inc. 2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement onForm 10, filed on October 17, 2013). 10.2(1) First Foundation Inc. 2007 Management Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s RegistrationStatement on Form 10, filed on October 17, 2013). 10.3(1) First Foundation Inc. 2015 Equity Incentive Plan (incorporated by reference to Exhibit 10.99 to the Company’s Registration Statement onForm S-8, filed on October 28, 2015). 10.4(1) (2) First Foundation Inc. Form of Restricted Stock Unit Agreement for 2015 Equity Incentive Plan. 10.5(1) (2) First Foundation Inc. Form of Stock Option Agreement for 2015 Equity Incentive Plan. 10.6(1) Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.99 to the Company’s Current Report onForm 8-K, filed on October 30, 2015). 10.7(1) Amended and Restated Employment Agreement, dated December 31, 2009, by and between the Company, First Foundation Advisors andUlrich E. Keller, Jr., together with First and Second Amendments thereto (incorporated by reference to Exhibit 10.4 to the Company’sRegistration Statement on Form 10, filed on October 17, 2013). 10.8(1) Amended and Restated Employment Agreement, dated December 31, 2009, by and between the Company, First Foundation Bank and ScottF. Kavanaugh, together with First and Second Amendments thereto (incorporated by reference to Exhibit 10.5 to the Company’s RegistrationStatement on Form 10, filed on October 17, 2013). 10.9(1) Amended and Restated Employment Agreement, dated December 31, 2009, by and between First Foundation Advisors and John Hakopian,together with First and Second Amendments thereto (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement onForm 10, filed on October 17, 2013). 10.10(1) Amended and Restated Employment Agreement, dated December 31, 2009, by and between First Foundation Bank and Dave Rahn, togetherwith First and Second Amendments thereto (incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K, filedon March 25, 2014). E-1Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit No. Description10.11(1) Amended and Restated Employment Agreement, dated December 31, 2009, by and between the Company, First Foundation Bank, FirstFoundation Advisors and John Michel, together with First and Second Amendments thereto (incorporated by reference to Exhibit 10.14 tothe Company’s Annual Report on Form 10-K filed on March 25, 2014). 10.12(1) Employment Agreement, dated May 11, 2015, by and between First Foundation Bank and David DePillo (incorporated by reference toExhibit 10.21 to the Company’s Quarterly Report on Form 10-Q, filed on May 11, 2015). 10.13(1) Change of Control Agreement, dated September 17, 2007, by and between the Company and Ulrich E. Keller, Jr. (incorporated by referenceto Exhibit 10.7 to the Company’s Registration Statement on Form 10, filed on October 17, 2013). 10.14(1) Change of Control Agreement, dated September 17, 2007, by and between the Company and Scott F. Kavanaugh (incorporated by referenceto Exhibit 10.8 to the Company’s Registration Statement on Form 10, filed on October 17, 2013). 10.15(1) Change of Control Agreement, dated September 17, 2007, by and between the Company and John Hakopian (incorporated by reference toExhibit 10.9 to the Company’s Registration Statement on Form 10, filed on October 17, 2013). 10.16(1) Change of Control Agreement, dated September 17, 2007, by and between the Company and Dave Rahn (incorporated by reference toExhibit 10.15 to the Company’s Annual Report on Form 10-K, filed with the Commission on March 25, 2014). 10.17(1) Change of Control Agreement, dated September 17, 2007, by and between Keller Financial Group (predecessor of the Company) and JohnMichel (incorporated by reference to the Exhibit 10.16 to the Company’s Annual Report on Form 10-K, filed on March 25, 2014). 10.18(1) Change of Control Agreement, dated May 11, 2015, by and between the Company and David DePillo (incorporated by reference to Exhibit10.22 to the Company’s Quarterly Report on Form 10-Q, filed on May 11, 2015). 10.19 Earn-Out Agreement, dated August 15, 2012, entered into pursuant to the Agreement and Plan of Merger with Desert Commercial Bank, byand between the Company and Desert Commercial Bank (incorporated by reference to Exhibit 10.11 to the Company’s RegistrationStatement on Form 10, filed on October 17, 2013). 10.20 Loan Agreement, dated April 19, 2013, by and between First Foundation Bank, as borrower, and NexBank SSB, as lender, together with theCompany’s Promissory Note and a Security Agreement entered into by the Company pursuant to the Loan Agreement (incorporated byreference to Exhibit 10.12 to the Company’s Registration Statement on Form 10, filed on October 17, 2013). 10.21 First Amendment to Loan Agreement with NexBank SSB (incorporated by reference to Exhibit 10.98 to the Company’s Current Report onForm 8-K, filed on March 27, 2014). 10.22 Amended & Restated Promissory Note issued by the Company to NexBank SSB pursuant to the First Amendment to Loan Agreement(incorporated by reference to Exhibit 10.99 to the Company’s Current Report on Form 8-K, filed on March 27, 2014). 10.23 Second Amendment to Loan Agreement with NexBank (incorporated by reference to Exhibit 10.98 to the Company’s Current Report onForm 8-K, filed on March 3, 2015.) 10.24 Second Amended & Restated Promissory Note issued to NexBank pursuant to the Second Amendment to Loan Agreement (incorporated byreference to Exhibit 10.99 to the Company’s Current Report on Form 8-K, filed on March 3, 2015). 14.1 Code of Conduct for the Chief Executive Officer and Other Senior Financial Officers (incorporated by reference to Exhibit 14.1 to theCompany’s Annual Report on Form 10-K, filed on March 25, 2014). 21.1(2) Subsidiaries of the Registrant.23.1(2) Consent of Vavrinek, Trine, Day & Co., LLP, independent registered public accounting firm. 24.1 Power of Attorney (included on signature page of this Annual Report on Form 10-K). E-2Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit No. Description31.1(2) Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2(2) Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1(2) Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2(2) Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101(2) XBRL (eXtensive Business Reporting Language). The following financial materials from the Company’s Quarterly Report on Form 10-K forthe period ended December 31, 2014, formatted in XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed ConsolidatedStatements of Operations, (iii) Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Cash Flows,and (v) Notes to Condensed Consolidated Financial Statements. (1)Management contract or compensatory plan.(2)Filed herewith. E-3Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.4FIRST FOUNDATION INC.2015 EQUITY INCENTIVE PLANRESTRICTED STOCK UNIT AGREEMENTOn ______ __, 20__, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of First Foundation Inc., aDelaware corporation (the “Company”), granted to ________________ (“Participant” or “you”), the number of Restricted Stock Units (the “RSUs”) set forthbelow pursuant to and on the terms and subject to the restrictions and conditions contained in the Company’s 2015 Equity Incentive Plan (the “Plan”) and inthis Restricted Stock Unit Agreement (this “RSU Agreement” or this “Agreement”). Any term with an initial capital letter that is included, but is not defined,in this RSU Agreement shall have the meaning given to such term in the Plan, unless the context in which such term is used clearly indicates that anothermeaning is intended.Name of Participant: Number of RSUs:_______________. Subject to the adjustment provisions in Section 3.5 of the Plan, upon vestingeach of the RSUs will represent a right to receive, upon settlement thereof, one (1) share of CompanyCommon Stock, par value $0.001 per share.Date of Grant:__________ __, 20__Vesting Schedule: RSU Expiration Date:The earlier of (i) the settlement of all RSUs granted hereunder, or (ii) the date as of which anyremaining unvested RSUs have terminated or been forfeited, as described in the RSU Agreement orthe Plan.Additional Terms and Conditions:¨If this box is checked, the additional terms and conditions set forth on Attachment A hereto (asexecuted by the Company) are applicable to the RSUs and, by this reference are incorporatedinto and made an integral part of this Agreement. No document need be attached asAttachment A if the box is not checked.BY SIGNING BELOW, YOU ARE ACCEPTING THE GRANT OF THE RSUs AND YOU ARE ENTERING INTO THIS AGREEMENT AND AREAGREEING TO ALL OF THE TERMS, RESTRICTIONS AND CONDITIONS CONTAINED IN THIS AGREEMENT AND IN THE PLAN. You alsoacknowledge that you have previously received copies of the following: (i) this Agreement; (ii) the Plan, and (iii) the Plan Prospectus.PARTICIPANT:Signature: Print Name: FIRST FOUNDATION INC.By: Name: Its: (Remainder of page intentionally left blank.Agreement continues on next page.) Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 1.RSUs. Subject to the adjustment provisions of the Plan, upon vesting each of the RSUs will represent a right to receive, uponsettlement thereof, one (1) share of common stock, par value $0.001 per share, of the Company (a “Share” or, collectively, the “Shares”). 2.Settlement of RSUs. Settlement of the RSUs that vest on any vesting date set forth on the first page of this Agreement and/or uponsatisfaction of any vesting conditions set forth in this Agreement or in Attachment A hereto, shall be made within thirty (30) days of vesting. Settlement ofRSUs shall be in Shares. Settlement means the delivery of the Shares vested under an RSU. No fractional RSUs or rights for fractional Shares shall be createdpursuant to this RSU Agreement.3.No Stockholder Rights. You shall have no ownership interest in or to any of the Shares underlying the RSUs, and shall have no rightof a stockholder with respect to any such Shares, unless and until such time as Shares are issued in settlement of vested RSUs. 4.Dividend Equivalents. Dividends, if any (whether payable in cash, Shares or other securities or other property) declared prior tosettlement of RSUs, shall not be credited to you.5.No Transfers of RSUs. RSUs may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any mannerother than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the express terms of the Plan or as may be approvedin advance by the Committee on a case-by-case basis. 6.Termination of RSUs. (a)If there is a cessation of your continuous Service for any reason, including a termination of your employment or Service bythe Company or any Affiliate (as the case may be), with or without “Cause” (as defined in Section 2.5 of the Plan), all then unvested RSUs shall be forfeitedto the Company forthwith, and all rights you have in or to such RSUs shall immediately terminate.(b)If the vesting of the RSUs, or any of them, is subject to satisfaction of any conditions (“Vesting Conditions”), in additionto or in lieu of remaining in the continuous Service for a period or periods of time set forth in the Vesting Schedule, the RSUs will terminate and be forfeitedback to the Company upon the failure of such Vesting Condition or Conditions to be satisfied, as more fully set forth in Attachment A hereto.(c)In case of any dispute as to whether a cessation of your continuous Service has occurred or whether or not there has been afailure of any other Vesting Condition to be satisfied, the Committee shall have sole discretion to determine, with finality, whether such cessation ofContinuous Service has occurred or if there has been a failure of any other Vesting Condition to be satisfied and the effective date of the termination andforfeiture of the unvested RSUs resulting therefrom.7.Income Tax Consequences; Withholding Taxes. (a)Regardless of any action taken by the Company and/or Company Affiliate with respect to any or all income tax, socialinsurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge and agree that you will are liable forthe payment of all Tax-Related Items legally due by you and that that neither the Company nor any Company Affiliate shall have any liability of any kind ornature for or in respect of any of such Tax-Related Items. You further acknowledge and agree that neither the Company nor any Company Affiliate (i) hasprovided or is providing any tax advice to you with respect to your acceptance of the RSU Award to you hereunder or the acquisition of Shares uponsettlement thereof or with respect to the disposition by you of any of those Shares, and you are relying solely on your own personal tax advisor(s) for suchadvice; (ii) is making any representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the awardhereunder of the RSUs, including the grant, vesting or settlement of the RSUs, the subsequent sale of Shares acquired upon such settlement and the receipt ofdividends thereon (if any); and (iii) is committing to structure the terms of your RSU Award or any aspect of the RSUs to reduce or eliminate your liability forTax-Related Items. You2Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. acknowledge that if you are subject to Tax-Related Items in more than one jurisdiction, the Company and/or Company Affiliate may be required to withholdor account for Tax-Related Items in more than one jurisdiction. (b)Prior to the issuance to you of any Shares as a result of the vesting of any of the RSUs, you shall pay or make adequatearrangements satisfactory to the Company and/or any Company Affiliate to satisfy and discharge, without liability to the Company or any CompanyAffiliate, all withholding and payment on account obligations of the Company and/or such Company Affiliate. In this regard, you authorize the Companyand/or such Company Affiliate to withhold all applicable Tax-Related Items legally payable by you from your wages or other cash compensation that is orhas become payable to you by the Company and/or such Company Affiliate. With the prior approval of the Compensation Committee (as may be evidencedby provisions contained in Attachment A hereto), these arrangements may also include, if permissible under applicable law and government regulations:(i) withholding and cancelling Shares that otherwise would be issued to you upon vesting and settlement of any of the RSUs, provided that the Companyonly withholds a number of such Shares required to satisfy the minimum statutory withholding amount, (ii) delivering to the Company for cancellation sharesof Company Common Stock already owned by you, (iii) having the Company withhold taxes from the proceeds of the sale of any of the Shares, eitherthrough a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sales by this authorization),(iv) your payment of a cash amount, or (v) any other arrangement approved in advance by the Compensation Committee, all under such rules as may beestablished by the Committee and in compliance with the Company’s Insider Trading Policy, if applicable, and applicable law. The Fair Market Value (asdefined in the Plan) of any Shares withheld or other shares of Company Common Stock cancelled to pay any or all Tax-Related Items will be determined as ofthe date on which the RSUs in question first became vested and will be applied as a credit against the withholding taxes and any other Tax Related Itemspayable by you. You shall pay to the Company or such Company Affiliate (as the case may be) any amount of Tax-Related Items that the Company or suchCompany Affiliate may be required to withhold from your compensation as a result of your participation in the Plan, the grant or vesting of the RSUs or thesale or other disposition of the Shares acquired on vesting that cannot be satisfied by the means previously described. Finally, you acknowledge that theCompany has no obligation to deliver any Shares to you unless and until you have satisfied your obligations to pay the Tax-Related Items as described inthis Section.8.Entire Agreement; Amendments and Waivers. This RSU Agreement (including any terms or conditions that may be set forth inAttachment A hereto) and the Plan contain all of the agreements and understandings of the Company and you relating to, and supersede all prior agreementsand understandings (written or oral) and all prior discussions between you and the Company with respect to, the subject matter of this Agreement. Nomodification of or amendment to this RSU Agreement, nor any waiver of any rights under this RSU Agreement, shall be effective unless such amendment orwaiver is set forth in a writing that is signed by the parties to this RSU Agreement. The failure by either party to enforce any rights under this RSU Agreementshall not be construed as a waiver of any such rights.9.Compliance with Laws; Limitation of Company Liability for Nonissuance. (a)The issuance of Shares upon the vesting of any of the RSUs will be subject to and conditioned upon compliance by theCompany and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange orautomated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance. The Shares issued pursuant tothis RSU Agreement shall be endorsed with appropriate legends, if any, as determined by the Company in its sole discretion.(b)The Company will use its diligent efforts to obtain from any applicable regulatory agency such authority or approvals asmay be required in order to issue Shares to you upon the vesting of the RSUs, in whole or in part. The inability of the Company to obtain any such authorityor any approvals which are deemed by the Company’s counsel to be necessary for the lawful issuance of the Shares hereunder and under the Plan shall relievethe Company of any liability in respect of the nonissuance of such Shares as to which such requisite authority or any such approvals have not been obtained.10.Governing Law; Severability; Jurisdiction over Disputes. This RSU Agreement and all acts and transactions pursuant hereto andthe rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with and enforced under the laws of the State ofDelaware, without giving effect to Delaware’s conflicts of law principles or rules. If one or more provisions of this RSU Agreement are held to be3Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutuallyagreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this RSU Agreement, (b) the balance of this RSUAgreement shall be interpreted as if such provision were so excluded and (c) the balance of this RSU Agreement shall be enforceable in accordance with itsterms. Unless otherwise agreed in writing by the Company, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of theState of Delaware lacks subject matter jurisdiction, any state or federal court located within the State of Delaware) shall be the sole and exclusive forum forpurposes of litigating any dispute that may arise directly or indirectly with respect to or in connection with the RSUs, or their grant, vesting or settlement, orthis Agreement or the Plan, and each of the Company and you irrevocably consents to the exclusive jurisdiction of such courts with respect to the litigationof any such disputes. 11.No Rights as Employee, Director or Consultant. Nothing in this RSU Agreement shall affect in any manner whatsoever the right orpower of the Company or any Company Affiliate to terminate your employment or Service for any reason, with or without Cause, and nothing in this RSUAgreement or the Plan, or the grant of the RSUs to you, entitles you to continued employment or Service with the Company or any Company Affiliate.12.Consent to Electronic Delivery of All Plan Documents and Disclosures. By your acceptance of the RSUs, you consent to theelectronic delivery of this RSU Agreement, the Plan, account statements, Plan Prospectuses, and of reports and proxy statements filed by the Company withthe Securities and Exchange Commission, and all other documents that the Company is required to deliver to its security holders (including annual reports)or other communications or information relating to the RSUs, this Agreement or the Plan. Electronic delivery may include the delivery of a link to aCompany intranet or to the internet site of a third party involved in administering the Plan, the delivery of the documents via e-mail or such other deliverymethods as the Company may determine in its discretion. The Company retains the right, however, to deliver paper copies of such documents in lieu of or inaddition to the electronic delivery thereof to you. You acknowledge your understanding that you may receive from the Company a paper copy of anydocuments that may have been or may otherwise be delivered to you electronically, at no cost, by making such request on the Company by telephone,through a postal service or by electronic mail at________@ff.-inc.com. Also, you acknowledge your understanding that you are not required to consent to electronic delivery of documents or otherinformation, as outlined above, and that you may withhold, or at any time hereafter revoke or change your consent to electronic delivery, including anychange in the electronic mail address to which documents are delivered to you (if you have provided an electronic mail address), by notifying the Companythereof by telephone, postal service or by electronic mail at ________@ff.-inc.com. 13.Code Section 409A. For purposes of this RSU Agreement, a termination of employment will be determined consistent with the rulesrelating to a “separation from service” as defined in Section 409A of the Code and the regulations thereunder (“Section 409A”). Notwithstanding anythingelse provided herein, to the extent any payments provided under this RSU Agreement in connection with your termination of employment constitute deferredcompensation subject to Section 409A, and you are deemed at the time of such termination of employment to be a “specified employee” under Section 409A,then such payment shall not be made or commence until the earlier of (a) the expiration of the six-month period measured from your separation from serviceor (b) the date of your death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required toavoid adverse tax treatment to you including, without limitation, the additional tax for which you would otherwise be liable under Section 409A(a)(1)(B) inthe absence of such a deferral. To the extent any payment under this RSU Agreement may be classified as a “short-term deferral” within the meaning ofSection 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision ofSection 409A. Payments pursuant to this Section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the TreasuryRegulations promulgated under the Code.14.Adjustments Upon Changes in Capital Structure. In the event that the outstanding shares of Common Stock of the Company arehereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of arecapitalization, stock split, reverse stock split, reclassification, stock dividend or other similar change in the capital structure of the Company, then, inaccordance with the provisions of Section 3.5 of the Plan, appropriate adjustment shall be made by the Compensation Committee to the number of Sharessubject to the unvested RSUs, in order to preserve, as nearly as practical, but not to increase, the benefits of the Participant under this RSU Agreement. 4Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 15.Lock-Up Agreement. Upon request of the Company or the underwriter or underwriters managing any underwritten offering of theCompany’s securities (the “Managing Underwriter(s)”), you hereby agree as follows: (a) you will not sell, make any short sale of, loan, grant any option forthe purchase of, or otherwise dispose of any securities of the Company, however and whenever acquired (other than any securities owned by you that are tobe offered for sale in the offering), without the prior written consent of the Company or such managing underwriter(s), as the case may be, for such period oftime (not to exceed one hundred eighty (180) days) from the effective date of the registration statement filed with the Securities Exchange Commission forsuch offering (the “Lockup Period”) as may be requested by the Company or such managing underwriter(s) and (b) you will execute an agreement reflectingthe foregoing as may be requested by the Company or the managing underwriter(s) at the time of, or within thirty (30) days prior to, the filing of suchregistration statement; provided, however, that, if during the last seventeen (17) days of the Lockup Period the Company issues an earnings release ormaterial news or a material event relating to the Company occurs, or prior to the expiration of the Lockup Period the Company announces that it will releaseearnings results during the sixteen (16)-day period beginning on the last day of the Lockup Period, then, upon the request of the managing underwriter(s), tothe extent required by any FINRA rules, the restrictions imposed by this Section shall continue to apply until the end of the third trading day following theexpiration of the fifteen (15)-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. In noevent will the Lockup Period extend beyond two hundred sixteen (216) days after the effective date of the registration statement. The rights of the Companyand any managing underwriter(s), and your obligations, under this Section 18 shall survive the vesting of the RSUs and the issuance of Shares on settlementthereof until such time as such Shares have been sold or otherwise transferred in compliance with the Securities Act (as defined in the Plan), or in reliance onany exemptions from the registration requirements thereof. 16.Award Subject to Clawback or Recoupment. You agree that to the extent permitted or required by applicable law or governmentregulations applicable to the Company, the RSUs, the Shares issuable on vesting and settlement thereof, and any gains or profits you may realize on anydisposition of such Shares shall be subject to clawback or recoupment pursuant to any incentive compensation clawback or recoupment policy adopted bythe Board or any requirements of law that are applicable to the Company or you during or after the term of your employment or other Service with theCompany or any Company Affiliate. In addition to any other remedies available under such policy, you acknowledge and agree that applicable law mayrequire the cancellation of your RSUs (whether vested or unvested), the cancellation or forfeiture of Shares issued upon vesting and settlement of your RSUsand the recoupment of any gains or profits realized with respect to your RSUs or as a result of the sale or other disposition by or for your account of Sharesissued to you or for your account upon or following settlement of the RSUs granted hereunder. 17.Binding Agreement. All covenants and agreements herein contained by or on behalf of any of the parties shall bind and inure to thebenefit of the parties and their respective successors by operation of law and any persons to which the Company may assign its rights hereunder and anypersons to whom you are permitted to assign your RSUs in accordance with the Plan.18.Interpretation. This RSU Agreement is the result of arms’-length negotiations between the parties hereto and no provision hereofshall, for any reason, be construed against a party. Unless the context in which such terms are used clearly and unambiguously indicates otherwise, (i) theterm “or” shall not be exclusive, (ii) the terms “including” and “include” shall not be limiting and shall mean “including, but not limited to,” or “includewithout limitation”, and (iii) the terms “herein,” “hereof,” “hereto,” “hereunder”, “hereinafter” and other similar terms shall refer to this RSU Agreement as awhole and not merely to the specific section, subsection, paragraph or clause where such terms may appear. The section, subsection and any paragraphheadings contained herein are for convenience of reference only and are not intended to and shall not define, limit or affect, and shall not be considered inconnection with, the interpretation or application of any of the terms or provisions of this RSU Agreement. 19.Conflicts. If any of the terms or provisions contained in this RSU Agreement conflict with any of the terms or provisions of the Plan,and such conflict cannot be resolved by the Committee in a manner that is consistent with the terms and purposes of the Plan, then the terms or provisions ofthe Plan in question shall control in that instance. 20.Notices. Any notice, demand or request required or permitted to be given under or with respect to this Agreement shall be in writingand shall be deemed given when delivered personally or three (3) days after being deposited in the United States mail, as certified or registered mail, withpostage prepaid (or by such other method as the Committee may from time to time deem appropriate), and addressed, if to the Company, at its principal placeof5Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. business, Attention: Chief Financial Officer; and, if addressed to the Participant, at his or her most recent address as shown in the employment or otherrecords of the Company. 21.Survival. If any RSUs granted hereunder vest, then this Agreement, and the respective rights and obligations of the parties shallsurvive the expiration or any earlier termination of this Agreement.22.Counterparts. This Agreement may be executed in two or more counterparts, and each such executed counterpart, and anyphotocopy, facsimile copy, digital and pdf. copy thereof, shall be deemed an original, but all of which together shall be deemed to constitute one and thesame instrument.### 6Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ATTACHMENT AADDITIONAL TERMS AND CONDITIONSSet forth below are additional terms or conditions that are applicable to the RSU Award, which terms or conditions are hereby incorporated intoand made an integral part of the RSU Agreement. Any term with an initial capital letter contained, but not defined, in this Attachment A, shall have the meaning given to it in this RSU Agreementor in the Plan, unless the context in which such term is used in this Attachment A clearly indicates that a different meaning is intended.1.Payment of Withholding Taxes (check appropriate box):1 Subject to applicable law: oo Participant shall, oo Participant shall not, be permitted to pay the withholding taxes and any otherTax-Related Items (as defined in the RSU Agreement) by (i) the Company’s cancellation of a number of the Shares otherwise issuable on vesting andsettlement of any of the RSUs, or delivery to the Company and cancellation of a number of shares of Company Common Stock already owned by Participant,in either case, with a Fair Market Value, as of the date of the vesting of the RSUs, equal to the aggregate amount of the withholding taxes and any other Tax-Related Items required to be withheld in connection with or as a result of the vesting of the RSUs or any of them, or by a combination of the foregoingmethods of payment.[NOTE: If there are no other additional terms or conditions, please insert the word “NONE” below. If, on the other hand, there are other additional terms orconditions (for example, such as, but not limited to, Vesting Conditions), insert those other terms and/or conditions below and on additionalpages if necessary.] PARTICIPANT:Signature: Print Name: FIRST FOUNDATION INC.By: Name: Its: 1Applicable only to Participants who are employees of the Company or of any Company Affiliate.A-1Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.5FIRST FOUNDATION INC.2015 EQUITY INCENTIVE PLANSTOCK OPTION AGREEMENTOn ______ __, 20__, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of First Foundation Inc., aDelaware corporation (the “Company”), granted to ________________ (“Participant” or “you”), pursuant to the Company’s 2015 Equity Incentive Plan (the“Plan”), an option (the “Option”) entitling you to purchase the number of shares of Common Stock of the Company set forth below (the “Option Shares”) onthe terms and subject to the conditions set forth in this Stock Option Agreement (this “Agreement”) and in the Plan. Any capitalized term not defined in thisAgreement shall have the same meaning ascribed to it in the Plan, unless the context in which such term is used in this Agreement indicates otherwise.Grant Date:__________ __, 20__Total Number of Option Shares: SharesExercise Price Per Share:$ Type of Option (check one):oo Incentive Stock Option (“ISO”)oo Nonqualified Stock Option (“NSO”)Vesting Commencement Date:___________ __, 20__Vesting Schedule: Term of Option:The Option will expire on the _____ (__th) anniversary of the Grant Date, unless soonerterminated as provided in this Option Agreement.Additional Terms and Conditions:¨If this box is checked, the additional terms and conditions set forth on Attachment A hereto (asexecuted by the Company) are applicable and are incorporated herein by reference. [Nodocument need be attached as Attachment A if the box is not checked.]BY SIGNING BELOW, YOU ARE ACCEPTING THE OPTION AND ENTERING INTO THIS STOCK OPTION AGREEMENT AND YOU AREAGREEING TO ALL OF THE TERMS, RESTRICTIONS AND CONDITIONS CONTAINED IN THIS AGREEMENT AND IN THE PLAN. You alsoacknowledge that you have previously received copies of the following: (i) this Agreement; (ii) the Plan, and (iii) the Plan Prospectus.PARTICIPANT:Signature: Print Name: FIRST FOUNDATION INC.By: Name: Its: (Remainder of page intentionally left blank.Agreement continues on next page.) Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 1.Grant of Option. The Company has granted the Option to Participant, which entitles Participant to purchase all or any portion of thenumber of Option Shares at the exercise price per share (the “Exercise Price”) stated on the first page of this Option Agreement and on the other terms andsubject to the conditions set forth in this Agreement and in the Plan. 2.Vesting of Option. The right to exercise this Option shall vest and become exercisable as set forth on the first page of this OptionAgreement. No Option Shares shall vest after the date of termination of Participant’s continuous Service, but this Option shall continue to be exercisable inaccordance with Section 3 hereof with respect to that number of Option Shares that had vested at on or prior to the date of the termination of Participant’scontinuous Service.3.Term of Option. The right of the Participant to exercise this Option shall terminate upon the first to occur of the following:(a)the expiration of _____ (__) years from the date of this Agreement;(b)the expiration of three (3) months from the date of termination of Participant’s continuous Service, if such terminationoccurs for any reason other than permanent disability, death, voluntary resignation or “Cause” (as defined in Section 2.5 of the Plan); provided, however, thatif Participant dies during such three-month period, then, the provisions of Section 3(e) below shall apply;(c)the date of termination of Participant’s continuous Service if such termination is the result of a voluntary resignation byParticipant or a termination of Participant’s continuous Service for “Cause” (as defined in Section 2.5 of the Plan);(d)the expiration of one (1) year from the date of termination of Participant’s continuous Service if such termination is due topermanent disability of the Participant (as defined in Section 22(e)(3) of the Code);(e)the expiration of one (1) year from the date of termination of Participant’s continuous Service if such termination is due toParticipant’s death or if death occurs during the three-month following termination of Participant’s continuous Service pursuant to Section 3(b) above; or(f)upon the consummation of a “Corporate Transaction” (as defined in Section 2.11 of the Plan), unless the Option isassumed, as provided in Section 12.1 of the Plan, by the successor entity or acquiring person in such Corporate Transaction.4.Exercise of Option. On or after the vesting of any the Option Shares, in accordance with Section 2 hereof, and continuing untiltermination of the right to exercise this Option in accordance with Section 3 above, the Option Shares which have vested may be exercised in whole or in partby the Participant (or, after his or her death, by the person designated in Section 5 below) upon delivery of the following to the Company at its principalexecutive offices:(a)a written notice of exercise which identifies this Agreement and states the number of Option Shares then being purchased(but no fractional Shares may be purchased);(b)a check or cash in the amount of the Exercise Price (or payment of the Exercise Price in such other form of lawfulconsideration as the Compensation Committee has theretofore approved under the provisions of Section 13.1 of the Plan);(c)a check or cash, or other form of payment approved by the Committee as described in Section 9(b) below, in the amountrequested by the Company to satisfy the Company’s withholding obligations under federal, state or other applicable tax laws with respect to the taxableincome, if any, recognized by the Participant in connection with the exercise of this Option; and(d)a letter or agreement, if requested by the Company, in such form and substance as the Company may require, containingrepresentations and warranties and covenants of the Participant, or Participant’s permitted transferee or Successor as the Administrator may require to enablethe Company to issue the Shares in compliance with the Securities Act and applicable state securities laws.2Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5.Death of Participant; Transferability. If the Option is designated, on the first page hereof, as an “Incentive Stock Option” (which isdefined in Section 422 of the Code), then, the Option may be transferred or assigned only to the extent consistent with Section 422 of the Code and in noevent shall any transferee, to whom this Option may be assigned or transferred in conformity with Section 422 of the Code, be entitled to transfer the Optionin whole or in part to any other person or entity. If the Option is designated as a “Nonqualified Stock Option” or “’NSO” on the first page of this Agreement,then, unless otherwise determined by the Committee, the Option may not be sold, pledged, assigned, hypothecated, transferred or otherwise disposed of inany manner other than by will or by the laws of descent or distribution. If the Committee has made the Option transferable, including by instrument to aninter-vivos or testamentary trust in which the Option is to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relationsorder to a “Permitted Transferee” (as defined in Section 2.30 of the Plan), this Agreement shall be amended to contain such additional terms and conditionsas the Committee deems appropriate. This Option will be exercisable: (a) during the Participant’s lifetime only by (i) Participant, or (ii) Participant’s guardianor legal representative; (b) after Participant’s death, by Participant’s legal representative or heirs or legatees, and (c) by a Permitted Transferee (if any).6.Rights as Stockholder. The Participant (or any Permitted Transferee of this Option, whether by will or by the laws of descent anddistribution or otherwise) shall have no rights as a stockholder of the Company with respect to any of the Option Shares until the Participant (or if applicable,such Permitted Transferee) has duly exercised this Option, paid the Exercise Price therefor and become a holder of record of any or all of the Option Shares.7.Adjustments Upon Changes in Capital Structure. In the event that the outstanding shares of Common Stock of the Company arehereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of arecapitalization, stock split, reverse stock split, reclassification, stock dividend or other similar change in the capital structure of the Company, then, inaccordance with the provisions of Section 3.5 of the Plan, appropriate adjustment shall be made by the Compensation Committee to the number of OptionShares subject to the unexercised portion of this Option and to the Per Share Exercise Price, in order to preserve, as nearly as practical, but not to increase, thebenefits of the Participant under this Option.8.Tax Consequences. YOU SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR SELLING OROTHERWISE DISPOSING OF ANY OF THE OPTION SHARES.(a)Exercising the Option. You will not be allowed to exercise this Option unless you make arrangements acceptable to theCompany to pay any withholding taxes that may be due as a result of the Option exercise.(b)Notice of Disqualifying Disposition of ISO Shares. If you sell or otherwise dispose of any of the Option Shares acquiredpursuant to an ISO on or before the later of: (i) two (2) years after the Grant Date, or (ii) one (1) year after the date of exercise, you shall immediately notify theCompany in writing of such disposition. You agree that you may be subject to income tax withholding by the Company on the compensation incomerecognized from such early disposition of ISO Shares by payment in cash or out of the current compensation paid to you.9.Withholding Taxes and Stock Withholding Applicable to Employee Participants. If you are an employee of the Company or anyCompany Affiliate, you agree as follows:(a)Regardless of any action that may be taken by the Company or any Company Affiliate with respect to any or all incometax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), you acknowledge and agree that (i) you areand will ultimately be liable to pay all Tax-Related Items legally due by you and (ii) neither the Company nor any Company Affiliate (A) is making anyrepresentations or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting or exercise of the Option, thesubsequent sale of Option Shares acquired pursuant to such exercise, or the receipt of any dividends; and (ii) is committing to structure the grant or the termsor any other aspect of the Option to reduce or eliminate your liability for Tax-Related Items. You acknowledge that if you are subject to Tax-Related Items inmore than one jurisdiction, the Company and/or the Company Affiliate (as applicable) may be required to withhold or account for Tax-Related Items in morethan one jurisdiction.(b)Prior to the issuance to you of any Option Shares upon exercise of the Option, you shall pay or make adequatearrangements satisfactory to the Company and/or any Company Affiliate by which you are employed,3Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. if other than the Company, to satisfy all withholding and payment on account obligations of the Company and/or such Company Affiliate. In this regard,you authorize the Company and/or such Company Affiliate to withhold all applicable Tax-Related Items legally payable by you from your wages or othercash compensation paid to you by the Company and/or such Company Affiliate. With the prior approval of the Compensation Committee (as may beevidenced by provisions contained in Attachment A hereto), these arrangements may also include, if permissible under applicable law and governmentregulations: (i) withholding and cancelling Option Shares that otherwise would be issued to you when you exercise the Option, provided that the Companyonly withholds a number of Option Shares required to satisfy the minimum statutory withholding amount, (ii) delivering to the Company for cancellationshares of Company Common Stock already owned by you, (iii) having the Company withhold taxes from the proceeds of the sale of the Option Shares, eitherthrough a voluntary sale or through a mandatory sale arranged by the Company (on your behalf and you hereby authorize such sales by this authorization),(iv) your payment of a cash amount, or (v) any other arrangement approved in advance by the Compensation Committee, all under such rules as may beestablished by the Committee and in compliance with the Company’s Insider Trading Policy, if applicable, and applicable law. The Fair Market Value (asdefined in the Plan) of any Option Shares withheld or other shares of Company Common Stock cancelled to pay any or all Tax-Related Items will bedetermined as of the effective date of the Option exercise and will be applied as a credit against the withholding taxes and any other Tax Related Itemspayable by you. You shall pay to the Company or such Company Affiliate (as the case may be) any amount of Tax-Related Items that the Company or theEmployer Entity may be required to withhold from your compensation as a result of your participation in the Plan or your exercise or purchase of the OptionShares that cannot be satisfied by the means previously described. Finally, you acknowledge that the Company has no obligation to deliver any OptionShares to you until you have satisfied your obligations to pay the Tax-Related Items as described in this Section.10.Consent to Electronic Delivery of All Plan Documents and Disclosures. By your acceptance of the Option and entry into thisAgreement, you consent to the electronic delivery of this Agreement, the Plan, account statements, Plan Prospectuses required by the Securities andExchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders(including, without limitation, annual reports and proxy statements) or other communications or information related to the Option or this Agreement.Electronic delivery may include the delivery of a link to a Company intranet or to the internet site of a third party involved in administering the Plan, thedelivery of the documents via e-mail or such other delivery method as may be determined by the Company in its discretion. You acknowledge that (i) theCompany may, in its discretion, provide or send paper copies to you of any of the foregoing documents either in lieu of or in addition to electronic copiesthereof and (ii) you may elect to receive from the Company a paper copy of any such documents that have been or may be delivered electronically at no costto you, if you contact the Company by telephone, through a postal service or electronic mail at _______@ff-inc.com. You understand that you are notrequired to consent to electronic delivery and that, if you do consent to electronic delivery, your consent may be revoked or changed, including any changein the electronic mail address to which documents are delivered (if you have provided an electronic mail address), at any time by you by notifying theCompany of such revocation or any revised consent, by telephone, postal service or electronic mail at _______@ff-inc.com. 11.Compliance with Laws and Regulations. (a)The exercise of the Option and issuance of Option Shares upon such exercise will be subject to and conditioned uponcompliance by the Company and you with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stockexchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such exercise. The Option Sharesissued pursuant to this Agreement shall be endorsed with appropriate legends, if any, as determined by the Company in its sole discretion.(b)The Company will use its diligent efforts to obtain from any applicable regulatory agency such authority or approvals asmay be required in order to issue Option Shares to you upon exercise of the Option, in whole or in part. The inability of the Company to obtain any suchauthority or any approvals which are deemed by the Company’s counsel to be necessary for the lawful issuance of the Shares hereunder and under the Planshall relieve the Company of any liability in respect of the nonissuance of such Shares as to which such requisite authority or any such approvals have notbeen obtained.12.Governing Law; Severability; Jurisdiction over Disputes. This Agreement and all acts and transactions pursuant hereto and the rightsand obligations of the parties hereunder and under the Plan shall be4Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. governed, construed and interpreted in accordance with, and enforced under, the laws of the State of Delaware, without giving effect to its conflicts of lawrules or principles. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate suchprovision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) suchprovision shall be excluded from this Agreement, (b) the balance of this Agreement shall be interpreted as if such provision were so excluded and (c) thebalance of this Agreement shall be enforceable in accordance with its terms. Unless otherwise agreed in writing by the Company, the Court of Chancery of theState of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state or federal court located withinthe State of Delaware) shall be the sole and exclusive forum for purposes of litigating any dispute that may arise directly or indirectly out of or in connectionwith the Option, or its grant or exercise, the issuance of the Option Shares or this Agreement or the Plan and each of you and the Company irrevocablyconsents to the exclusive jurisdiction of such courts with respect to the litigation of any such disputes.13.No Effect on Employment or Service. Nothing in this Agreement shall affect in any manner whatsoever the right or power of theCompany, or a Parent, Subsidiary or Affiliate of the Company, to terminate your Service, for any reason, with or without Cause.14.Lock-Up Agreement. Upon request of the Company or the underwriter or underwriters managing any underwritten offering of theCompany’s securities (the “Managing Underwriter(s)”), you hereby agree not to sell, make any short sale of, loan, grant any option for the purchase of, orotherwise dispose of any securities of the Company however and whenever acquired (other than those included in the registration) without the prior writtenconsent of the Company or such managing underwriter(s), as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from theeffective date of such registration (the “Lockup Period”) as may be requested by the Company or such managing underwriter(s) and to execute an agreementreflecting the foregoing as may be requested by the Company or the managing underwriter(s) at the time of, or within thirty (30) days prior to, the filing of theregistration statement for such underwritten offering; provided, however, that, if during the last seventeen (17) days of the Lockup Period the Company issuesan earnings release or material news or a material event relating to the Company occurs, or prior to the expiration of the Lockup Period the Companyannounces that it will release earnings results during the sixteen (16)-day period beginning on the last day of the Lockup Period, then, upon the request of themanaging underwriter(s), to the extent required by any FINRA rules, the restrictions imposed by this Section shall continue to apply until the end of the thirdtrading day following the expiration of the fifteen (15)-day period beginning on the issuance of the earnings release or the occurrence of the material news ormaterial event. In no event will the restricted period extend beyond two hundred sixteen (216) days after the effective date of the registration statement. Therights of the Company and any managing underwriter(s), and your obligations, under this Section 14 shall survive the grant and exercise of the Option untilsuch time as the Option Shares acquired on exercise of the Option have been sold or otherwise transferred in compliance with the Securities Act (as defined inthe Plan) or in reliance on any exemptions from the registration requirements thereof.15.Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the Option, the Option Shares andthe proceeds from any sale or other transfer or disposition of the Option Shares shall be subject to clawback or recoupment pursuant to any compensationclawback or recoupment policy adopted by the Board or required by law during the term of your employment or other Service with the Company or anyCompany Affiliate that is applicable to you. In addition to any other remedies available under such policy, applicable law may require the cancellation ofyour Option (whether vested or unvested) and/or the recoupment of any gains realized upon or in connection with the sale or other disposition of any of theOption Shares.16.Entire Agreement; Amendments and Waivers. This Agreement (inclusive of Attachment A) and the Plan constitute the entireagreement and contain all of the understandings of the parties relating to the subject matter herein and supersede all prior discussions between them withrespect thereto. Any prior agreements, commitments or negotiations concerning this Option are superseded. No modification of or amendment to thisAgreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing and signed by the parties to this Agreement. The failure byeither party to enforce any rights under this Agreement, prior to the expiration or earlier termination of such rights under this Agreement or the Plan, shall notbe construed as a waiver of any rights of such party.17.Binding Agreement. All covenants and agreements herein contained by or on behalf of any of the parties shall bind and inure to thebenefit of the parties and their respective successors by operation of law and any5Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. persons to which the Company may assign its rights hereunder and any Permitted Transferee of Participant to whom the Option or Participant’s rightshereunder may be assigned or transferred in accordance with this Agreement and the Plan.18.Interpretation. This Agreement is the result of arms’-length negotiations between the parties hereto and no provision hereof shall, forany reason, be construed against a party. Unless the context in which such terms are used clearly and unambiguously indicates otherwise, (i) the term “or”shall not be exclusive, (ii) the terms “including” and “include” shall not be limiting and shall mean “including, but not limited to,” or “include withoutlimitation”, and (iii) the terms “herein,” “hereof,” “hereto,” “hereunder”, “hereinafter” and other similar terms shall refer to this Agreement as a whole and notmerely to the specific section, subsection, paragraph or clause where such terms may appear. The section, subsection and any paragraph headings containedherein are for convenience of reference only and are not intended to and shall not define, limit or affect, and shall not be considered in connection with, theinterpretation or application of any of the terms or provisions of this Agreement.19.Conflicts. If any of the terms or provisions contained in this Agreement conflict with any of the terms or provisions of the Plan,and such conflict cannot be resolved by the Committee in a manner that is consistent with the terms and purposes of the Plan, then the terms orprovisions of the Plan shall control in that instance.20.Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall bedeemed given when delivered personally or three (3) days after being deposited in the United States mail, as certified or registered mail, with postage prepaid(or by such other method as the Administrator may from time to time deem appropriate), and addressed, if to the Company, at its principal place of business,Attention: the Chief Financial Officer, and if to the Participant , at his or her most recent address as shown in the employment or stock records of theCompany.21.Counterparts. This Agreement may be executed in two or more counterparts, and each such executed counterpart, and anyphotocopy, facsimile copy, digital and pdf. copy thereof, shall be deemed an original, but all of which together shall be deemed one and the same instrument.### 6Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ATTACHMENT AADDITIONAL TERMS AND CONDITIONSSet forth below are additional terms or conditions that are applicable to the Option, which terms or conditions are hereby incorporated into andmade an integral part of the Option Agreement. Any term with an initial capital letter contained, but not defined, in this Attachment A, shall have the meaning given to it in this OptionAgreement or in the Plan, unless the context in which such term is used in this Attachment A clearly indicates that a different meaning is intended.1.Payment of Exercise Price (check appropriate box):Subject to applicable law, Participant shall: ooParticipant shall not: oo bepermitted to pay the Exercise Price of his/her Option by (i) the Company’s cancellation of a number of the Option Shares otherwise issuable on exercise of theOption, or delivery to the Company and cancellation of a number of shares of Company Common Stock already owned by Participant, in either case, with aFair Market Value, as of the date of exercise of the Option, equal to the aggregate exercise price of the Option Shares being exercised, or (ii) from the proceedsof a voluntary sale or a mandatory sale arranged by the Company of Option Shares which are at least sufficient to pay the aggregate Exercise Price of theOption Shares being exercised, or any combination of the foregoing.2.Payment of Withholding Taxes (check appropriate box):1 Subject to applicable law, Participant shall: o o Participant shall not: oo: be permitted to pay the withholding taxes and any otherTax-Related Items (as defined in the Option Agreement) by (i) the Company’s cancellation of a number of the Option Shares otherwise issuable on exercise ofthe Option, or delivery to the Company and cancellation of a number of shares of Company Common Stock already owned by Participant, in either case, witha Fair Market Value, as of the date of exercise of the Option, equal to the aggregate amount of the withholding taxes and any other Tax-Related Itemsrequired to be withheld in connection with or as a result of the exercise of the Option, or any combination of the foregoing.[NOTE: If there are no other additional terms or conditions, please insert the word “NONE” below. If, on the other hand, there are other additional terms orconditions (for example, such as, but not limited to, performance conditions), insert those other terms and/or conditions below and on additionalpages if necessary.] PARTICIPANT:Signature: Print Name: FIRST FOUNDATION INC.By: Name: Its: 1Applicable only to Participants who are employees of the Company or of any Affiliate of the Company.A-1Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 21.1SUBSIDIARIES OF REGISTRANT Name and State or other Jurisdiction of Incorporation Registrant’sPercentageOwnership First Foundation Advisors, a California corporation 100%First Foundation Bank, a California corporation 100%In accordance with the instructions set forth in Paragraph (b) of Item 601 of Regulation S-K, we have omitted subsidiaries that, if considered in theaggregate as a single subsidiary, would not have constituted a significant subsidiary as of December 31, 2015. Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe have issued our report dated March 15, 2016 with respect to the accompanying the consolidated financial statements of First Foundation Inc. andSubsidiaries (the Company) for the years ended December 31, 2015, 2014 and 2013 included in the Company’s Annual Report on Form 10-K for the yearsended December 31, 2015, 2014 and 2013. We hereby consent to the incorporation by reference of that report in the Company’s Registration Statement onForm S-8 (File No. 333-193658). /s/ Vavrinek, Trine, Day & Co. LLP Laguna Hills, CaliforniaMarch 15, 2016 Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 31.1CERTIFICATIONS OF CHIEF EXECUTIVE OFFICERUNDERSECTION 302 OF THE SARBANES-OXLEY ACTI, Scott F. Kavanaugh, certify that:1.I have reviewed this Annual Report on Form 10-K of First Foundation Inc. for the fiscal year ended December 31, 2015;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Dated: March 15, 2016 /s/ SCOTT F. KAVANAUGHScott F. KavanaughChief Executive Officer Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 31.2CERTIFICATIONS OF CHIEF FINANCIAL OFFICERUNDERSECTION 302 OF THE SARBANES-OXLEY ACTI, John M. Michel, certify that:1.I have reviewed this Annual Report on Form 10-K of First Foundation Inc. for the fiscal year ended December 31, 2015;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Dated: March 15, 2016 /s/ John M. MichelJohn M. MichelExecutive Vice Presidentand Chief Financial Officer Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 32.1CERTIFICATION OF CHIEF EXECUTIVE OFFICERPursuant to Section 906 of the Sarbanes-Oxley Act of 2002FIRST FOUNDATION INC.Annual Report on Form 10-Kfor the Year ended December 31, 2015In connection with the accompanying Annual Report on Form 10-K of First Foundation Inc. (the “Company”), for the year ended December 31, 2015,as filed with the Securities and Exchange Commission as of the date hereof (the “Annual Report”), I, Scott F. Kavanaugh, Chief Executive Officer of theCompany, hereby certify pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Annual Report fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: March 15, 2016 /s/ Scott F. Kavanaugh Scott F. Kavanaugh Chief Executive Officer A signed original of this written statement required by Section 906 has beenprovided to First Foundation Inc. and will be retained by First FoundationInc. and furnished to the Securities and Exchange Commission or its staffupon request. Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 32.2CERTIFICATION OF CHIEF FINANCIAL OFFICERPursuant to Section 906 of the Sarbanes-Oxley Act of 2002FIRST FOUNDATION INC.Annual Report on Form 10-Kfor the Year ended December 31, 2015In connection with the accompanying Annual Report on Form 10-K of First Foundation Inc. (the “Company”), for the year ended December 31, 2015,as filed with the Securities and Exchange Commission as of the date hereof (the “Annual Report”), I, John M. Michel, Chief Financial Officer of theCompany, hereby certify pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1) The Annual Report fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: March 15, 2016 /s/ John M. Michel John M. Michel Chief Financial Officer A signed original of this written statement required by Section 906 has beenprovided to First Foundation Inc. and will be retained by First FoundationInc. and furnished to the Securities and Exchange Commission or its staffupon request. Source: First Foundation Inc., 10-K, March 15, 2016Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
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