Form 425 First Foundation Inc. Filed by: First Foundation Inc.

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Filed by First Foundation Inc.

pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-12 under the

Securities Exchange Act of 1934

Subject Company: TGR Financial, Inc.

(Commission File No. 333-258069)

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FIRST FOUNDATION INC. REPORTS SECOND QUARTER 2021 RESULTS

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DALLAS, TX – First Foundation Inc. (NASDAQ: FFWM), a financial services company with two wholly-owned operating subsidiaries, First Foundation Advisors (“FFA”) and First Foundation Bank (“FFB”), reported net income of $26.1 million, including $1.2 million of merger related expenses, or $0.58 per diluted share, for the second quarter of 2021, compared to net income of $22.4 million, or $0.50 per diluted share, for the first quarter of 2021.  Additionally, First Foundation Inc. announced today that its Board of Directors has approved the payment of a quarterly cash dividend of $0.09 per common share, payable on August 20, 2021 to common shareholders of record as of August 9, 2021.

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Loans

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Loans increased $381 million, or 6.8%, compared to the prior quarter, to $6.0 billion as of June 30, 2021, and increased $346 million, or 6.1%, compared to June 30, 2020.  New loan fundings in the second quarter of 2021 were a quarterly record for FFB totaling $1.1 billion, an increase of $367 million, or 48.0%, from the first quarter of 2021 and an increase of $432 million, or 61.6%, from the second quarter of 2020. Contributing to our record quarter of loan originations, our C&I division funded $336 million of new commercial loans during the second quarter of 2021, of which 57% were adjustable commercial revolving lines of credit. The remaining C&I originations were comprised of $73 million of commercial term loans, $34 million of public finance loans, $27 million of equipment finance leases, and $10 million of owner occupied commercial real estate loans.  Included in commercial term loans originations is $10.1 million of second round PPP fundings. Loan growth during the second quarter of 2021 was also impacted by loan payoffs of $752 million, compared to payoffs of $500 million in the first quarter of 2021 and $366 million in the second quarter of 2020. The current pipeline remains strong in 2021.

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Investment Securities

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Investment securities decreased $12.2 million, or 1.6%, from the prior quarter to $745.9 million as of June 30, 2021, and decreased $117.9 million, or 13.7%, compared to June 30, 2020. The decreases in the balance of investment securities compared to the first quarter of 2021 and second quarter of 2020 were primarily driven by elevated prepayments in our agency mortgage backed securities portfolio.

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The allowance for credit losses for investments increased by $0.2 million from the prior quarter, to $9.1 million as of June 30, 2021. The increase was a result of the lower interest rate environment and faster than expected prepayments that negatively impacted the projected cash flows on FFB’s interest-only strip securities.   

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Deposits and Borrowings

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Deposits increased $861 million, or 13.8%, during the second quarter of 2021, to $7.1 billion compared to the prior quarter, and increased $1.5 billion, or 25.8%, compared to the second quarter of 2020. Deposit growth during the second quarter of 2021 was primarily driven by an increase of $1.1 billion, or 50%, in non-interest bearing demand deposits, largely attributable to our commercial deposit services division, and retail branches.  The increases in deposits were offset by a reduction in interest bearing demand deposits of $116 million, also attributable to our commercial deposit services division, a reduction in money market and savings accounts of $28 million, largely from the digital bank channel, in addition to a reduction in CDs of $89 million, primarily due to our intentional run-off of higher cost brokered deposits. Noninterest-bearing demand deposits measured 46.1% of total deposits as of June 30, 2021, compared to 34.9% of total deposits as of March 31, 2021, while core deposits increased by $892 million, and measured 98% of total deposits as of June 30, 2021 and March 31, 2021.

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The $861 million growth in deposits during the second quarter of 2021 included increases in the commercial deposit services division of $859 million and retail branch deposits of $76 million, which were partially offset by a $31 million decrease in wholesale brokered deposits and digital bank channel deposits of $43 million. Of the $892 million increase in core deposits, $884 million, or 99% were attributed to commercial business deposits from both our commercial deposit services channel serving complex treasury management commercial customers, and from our business banking customers served by our retail branches. Commercial business deposits were 74% of total core deposits as of June 30, 2021.  

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Our loan to deposit ratio measured 84.6% as of June 30, 2021, compared to 90.1% as of March 31, 2021 and 100.3% as of June 30, 2020.

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No Federal Home Loan Bank (FHLB) advances were outstanding as of June 30, 2021, compared to $5 million as of March 31, 2021, and $760 million as of June 30, 2020. Borrowings decreased during the quarter as cash provided by the increase in deposits, which exceeded the growth in our assets, was used to pay down our borrowings at FFB.

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Private Wealth Management and Trust Assets

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AUM at FFA increased by $292 million in the second quarter, to $5.3 billion, and was the net result of $161 million of new accounts, $275 million of portfolio gains, and terminations and net withdrawals of $144 million. AUA at FFB’s Trust Department increased $44.4 million to $1.2 billion during the second quarter of 2021.  The Advisory and Trust divisions achieved a record combined pre-tax profit margin of 23% in the quarter.

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Net Interest Income

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Net interest income was $57.9 million for the second quarter of 2021, compared to $54.2 million and $48.4 million in the first quarter of 2021 and second quarter of 2020, respectively.  Interest income from loans increased 4.6% to $56.0 million for the second quarter of 2021 compared to $53.5 million in the first quarter in 2021, and increased 1.5% compared to $55.1 million for the second quarter of 2020, driven primarily by higher average loan balances. Interest income from investment securities and interest-earning cash decreased by 3.4%, to $5.4 million for the second quarter of 2021, compared to $5.6 million for the first quarter of 2021, and decreased 20.2%, compared to $6.8 million in the second quarter of 2020, driven primarily by a decrease in average investment securities balances.

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Interest expense decreased 28.8% to $3.5 million for the second quarter of 2021, compared to $4.9 million for the first quarter of 2021, and decreased 74.1% compared to $13.5 million for the second quarter of 2020. The decreases in interest expense were driven primarily by 26.7% and 69.0% decreases in interest expense on deposits compared to the first quarter of 2021 and second quarter of 2020, respectively, to $3.4 million for the second quarter of 2021. The decreases in interest expense on deposits was also due to 10 and 81 basis point decreases in average rates on interest-bearing deposits, that were partially offset by higher average balances of deposits, compared to the first quarter of 2021 and second quarter of 2020, respectively. Interest expense on FHLB advances decreased $0.2 million compared to the prior quarter due to payoffs on FHLB advances.

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Net Interest Margin

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Net interest margin increased four basis points to 3.20% in the second quarter of 2021 from 3.16% in the first quarter of 2021, and increased 24 basis points from 2.96% in the second quarter of 2020. The linked quarter and year to year quarterly changes in NIM reflects the current low interest rate environment, which positively impacted our NIM, as our cost of funds have fallen faster than the yield on our earnings assets between these two periods.

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Noninterest Income

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Noninterest income increased 17.9% to $14.0 million in the second quarter of 2021, compared to $11.9 million in the first quarter of 2021. In addition, noninterest income increased 56.5% compared to $9.0 million in the second quarter of 2020.

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Noninterest income during the second quarter of 2021 was comprised primarily of $6.9 million of investment advisory fees from Wealth Management, $1.9 million of trust administrative and consulting fees, $3.3 million in gains of sales of loans, $1.3 million of loan and servicing fees, and $0.4 million of deposit account fees. Other

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income decreased in the linked quarter, as we recognized a $1.3 million valuation allowance on mortgage servicing rights as a result of changes in the interest rate environment and prepayment speeds. Income related to Wealth Management increased in the second quarter of 2021, when compared to the first quarter of 2021 and the second quarter of 2020, due primarily to higher levels of fees earned on AUM.  Loan and servicing fees in the second quarter of 2021 increased compared to the second quarter of 2020 due to higher loan volume.  

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Noninterest Expense

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Noninterest expense increased 3.2% to $35.6 million for the second quarter of 2021, compared to $34.5 million for the first quarter of 2021, and increased 15.1%, compared to $30.9 million for the second quarter of 2020. Compensation and benefits were $20.2 million in the second quarter of 2021, a $1.3 million decrease compared to $21.5 million in the first quarter of 2021, due to merit increases, annual bonus, and commission payouts in the first quarter. Noninterest expenses for Wealth Management decreased by $0.3 million in the linked quarter also due to lower compensation and benefits costs. In addition, noninterest expense included $1.2 million of one-time merger expenses during the quarter related to the TGR Financial acquisition.

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Our efficiency ratio for the second quarter of 2021 was 47.3%, compared to 51.5% for the first quarter of 2021 and 53.0% in the second quarter of 2020.

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Income Tax Expense

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We recorded an income tax expense of $10.2 million in the second quarter of 2021, compared to an income tax expense of $8.9 million in the first quarter of 2021, and an income tax expense of $7.3 million in the second quarter of 2020. Our effective tax rate for the second quarter of 2021 was 28.2%, compared to 28.5% for the first quarter of 2021, and 28.9% for the second quarter of 2020.

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Asset Quality

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Total nonperforming assets were $16.2 million as of June 30, 2021, compared to $16.6 million as of March 31, 2021, and $15.5 million as of June 30, 2020. Our ratio of nonperforming assets to total assets was 0.20% as of June 30, 2021, compared to 0.24% as of March 31, 2021, and 0.22% as of June 30, 2020. Total delinquent loans decreased $7.8 million, to $2.6 million as of June 30, 2021, compared to $10.4 million as of March 31, 2021.

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Our allowance for credit losses for loans was $22.3 million, or 0.40% of total loans, as of June 30, 2021, compared to $23.2 million, or 0.45%, as of March 31, 2021 and $28.1 million, or 0.55%, as of June 30, 2020. The linked quarter decrease in the allowance for credit losses for loans was a result of improvement in the economic scenario outlook. Net charge-offs during the second quarter of 2021 were $0.1 million, or 0.01% of average loans annualized, compared to net recoveries of $0.2 million, or (0.01)% of average loans annualized, for the first quarter of 2021, and $0.4 million, or 0.03% of average loans annualized, for the second quarter of 2020.  

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The ratio of the allowance for credit losses for loans to total nonperforming assets was 137.6% as of June 30, 2021, compared to 139.3% as of March 31, 2021 and 181.3% as of June 30, 2020.

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Capital

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As of June 30, 2021, FFB exceeded all Basel III minimum regulatory capital requirements necessary to be considered a "well-capitalized" depository institution, as summarized in the table below:

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Shareholders' equity totaled $734.0 million as of June 30, 2021, an increase from $714.4 million and $638.7 million as of March 31, 2021 and June 30, 2020, respectively. Our tangible book value per common share increased $0.43 to $14.27 as of June 30, 2021, compared to $13.84 as of March 31, 2021, and increased $2.11 compared to $12.16 as of June 30, 2020.

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About First Foundation

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First Foundation Inc. (NASDAQ: FFWM) and its subsidiaries offer personal banking, business banking, and private wealth management services, including investment, trust, insurance, and philanthropy services. This comprehensive platform of financial services is designed to help clients at any stage in their financial journey. First Foundation is comprised of an extraordinary team of financial professionals united around a single cause: to enable growth-minded individuals and businesses to boldly live the life they imagined and preserve the legacy they have worked so hard to build. The financial products and services offered by First Foundation are more consistent with those offered by larger financial institutions, while its high level of personalized service, accessibility, and responsiveness to clients are more aligned with community banks and boutique wealth management firms. This combination of an integrated platform of comprehensive financial services and the products along with personalized service differentiates First Foundation from many of its competitors and has contributed to the growth of its client base and business. Services are offered through bank and/or wealth management branch offices in California, Texas, Nevada, and Hawaii. Learn more at firstfoundationinc.com, or connect with us on LinkedIn and Twitter.  

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Forward-Looking Statements

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This report includes forward-looking statements within the meaning of the “Safe-Harbor” provisions of the Private Securities Litigation Reform Act of 1995, including forward-looking statements regarding our expectations and beliefs about our future financial performance and financial condition, our dividend policy, as well as trends in our business and markets. Forward-looking statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "outlook," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." The forward-looking statements in this report are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this report and could cause us to make changes to our future plans. Those risks and uncertainties include, but are not limited to, the risk of incurring credit losses, which is an inherent risk of the banking business; the negative impacts and disruptions resulting from the COVID-19 pandemic on our colleagues, clients, the communities we serve and the domestic and global economy, which may have an adverse effect on our business, financial position and results of operations; the risk that we will not be able to continue our internal growth rate; the performance of loans currently on deferral following the expiration of the respective deferral periods; the risk that we will not be able to access the securitization market on favorable terms or at all; changes in general economic conditions, either nationally or locally in the areas in which we conduct or will conduct our business; risks associated with the Federal Reserve Board taking actions with respect to interest rates, which could adversely affect our interest income and interest rate margins and, therefore, our future operating results; the risk that the performance of our investment management business or of the equity and bond markets could lead clients to move their funds from or close their investment accounts with us, which would reduce our assets under management and adversely affect our operating results; the risk that we may be unable or that our board of directors may determine that it is inadvisable to pay future dividends; risks associated with changes in income tax laws and regulations; and risks associated with seeking new client relationships and maintaining existing client relationships.  

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Further, statements about the potential effects of the proposed acquisition of TGR Financial on our business, financial results, and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in the forward-looking statements due to factors and future developments which are uncertain, unpredictable and in many cases beyond our control, including the possibility that the proposed merger does not close when expected or at all because required regulatory, shareholder or other approvals, financial tests or other conditions to closing are not received or satisfied on a timely basis or at all; changes in our or TGR Financial's stock price before closing, including as a result of each company’s financial performance prior to closing or transaction-related uncertainty, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies; the occurrence of any event, change or other circumstance that could give risk to the right of one or both of the parties to terminate the merger agreement; the risk that the benefits from the proposed merger may not be fully realized or may take longer to realize than expected or be more costly to achieve, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which we and TGR Financial operate; our ability to promptly and effectively integrate the companies’ businesses; reputational risks and the reaction of the companies' customers, employees and counterparties to the proposed merger; diversion of management time on merger-related issues; lower than expected revenues, credit quality deterioration or a reduction in real estate values or a reduction in net earnings; and that the COVID-19 pandemic, including uncertainty and volatility in financial, commodities and other markets, and disruptions to banking and other financial activity, could harm our or TGR Financial's

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business, financial position and results of operations, and could adversely affect the timing and anticipated benefits of the proposed merger.  

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Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our 2020 Annual Report on Form 10-K for the fiscal year ended December 31, 2020 that we filed with the SEC on February 26, 2021, and other documents we file with the SEC from time to time. We urge readers of this report to review those reports and other documents we file with the SEC from time to time. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this report, which speak only as of today's date, or to make predictions based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this report or in the above-referenced reports, whether as a result of new information, future events or otherwise, except as may be required by law or NASDAQ rules.

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Additional Information About the Merger and Where to Find It

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This report does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Investors and security holders are urged to carefully review First Foundation's public filings with the SEC, including but not limited to its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, proxy statements and Current Reports on Form 8-K. The documents are filed with the SEC and may be obtained free of charge at www.sec.gov, at First Foundation's website at firstfoundationinc.com under the "Investor Relations" link, or writing First Foundation at 18101 Von Karman Ave., Suite 700, Irvine, CA 92612; Attention: Kevin Thompson.

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ln connection with the proposed merger transaction, First Foundation filed with the SEC a registration statement on Form S-4 that includes a joint proxy statement of First Foundation and TGR Financial, and a prospectus of First Foundation, which are referred to as the joint proxy statement/prospectus, as well as other relevant documents concerning the proposed transaction. Before making any voting or investment decision, investors and security holders are urged to carefully read the entire registration statement and joint proxy statement/prospectus, as well as any amendments or supplements to these documents, because they contain important information about the proposed transaction. A definitive joint proxy statement/prospectus will be sent to the shareholders of First Foundation and TGR Financial seeking required shareholder approvals. Investors and security holders will be able to obtain the registration statement and the joint proxy statement prospectus, and any other documents First Foundation files with the SEC free of charge as described in the preceding paragraph.

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First Foundation, TGR Financial, their directors, executive officers and certain other persons may be deemed to be participants in the solicitation of proxies from First Foundation and TGR Financial shareholders in favor of the approval of the transaction. Information about the directors and executive officers of First Foundation and their ownership of First Foundation common stock is set forth in the proxy statement for First Foundation's 2021 annual meeting of stockholders, as previously filed with the SEC. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the joint proxy statement/prospectus regarding the proposed merger.

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CONSOLIDATED BALANCE SHEETS

(unaudited)

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CONSOLIDATED INCOME STATEMENTS

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SELECTED CONSOLIDATED FINANCIAL DATA AND ASSET QUALITY

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SEGMENT REPORTING

(unaudited)