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First Foundation Inc  (NASDAQ:FFWM)
Q4 2018 Earnings Conference Call
Jan. 30, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to First Foundation's Fourth Quarter 2018 Earnings Conference Call. Today's call is being recorded. At this time, all participants have been placed in listen-only mode and the floor will be opened for your questions following the presentation. (Operator Instructions) Speaking today will be Scott Kavanaugh, First Foundation's Chief Executive Officer; John Michel, Chief Financial Officer; David DePillo, President of First Foundation Bank; and John Hakopian, President of First Foundation Advisors.

Before I hand the call over to Scott, please note that management will make certain predictive statements during today's call that reflect their current views and expectations about the Company's performance and financial results. These forward-looking statements are made subject to the Safe Harbor Statement included in today's earnings release. In addition, some of the discussion may include non-GAAP financial measures. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures, see the Company's filings with the Securities and Exchange Commission.

And now, I will turn the call over to Scott Kavanaugh.

Scott F. Kavanaugh -- Chief Executive Officer

Hello and thank you for joining us. We would like to welcome you to our fourth quarter and full-year 2018 earnings conference call. We will be providing some prepared comments regarding the -- our activities and then we will respond to questions. As highlighted in the press release this morning, 2018 was another good year for First Foundation. Our earnings for the fourth quarter were $14.1 million or $0.31 per share. For the full year earnings were $43 million, an increase of 56% from 2017 or $1.01 per share. Total revenues were $50 million for the quarter and $191 million for the year, a 26% increase over the prior year. Tangible book value per share ended the year at $10.33, a 9% increase during 2018. As our current business activities have started to generate excess capital, we continue to take steps to increase the return for our shareholders. In addition to the stock repurchase program initiated in the fourth quarter, in January the Board declared a quarterly cash dividend of $0.05 per share, which initiates our cash dividend program.

Then in the fourth quarter, we repurchased 35,300 shares of our stock at a weighted average price of $14.09 per share under our stock repurchase program. Our loan production reached record levels at $1.84 billion, an increase of 7% over 2017 levels. Dave will touch on our loan production in more detail. I'm very proud of our loan production. I am particularly proud that we continue to have minimal credit concerns as evidenced by our low levels of non-performing assets, which stands at 21 basis points as of 12/31/2018. During 2018 we acquired Premier Business Bank and completed the integration of both Premier Business Bank and Community 1st Bank into our operations. We are pleased with the results today of these acquisitions and we are excited about the new communities we are now able to serve and the quality individuals we are able to add to our team. Overall, it was a strong year and I am optimistic about 2019.

Let me turn the call over to our CFO, John Michel, to discuss our financial results.

John M. Michel -- Chief Financial Officer

Thank you, Scott. I will provide a brief summary of our financial results for the quarter. Total revenues for the fourth quarter and full-year 2018 were 18% and 26% higher respectively than for the corresponding periods in 2017. Net income was 56% higher in 2018 when compared to 2017 and fully diluted earnings per share for the fourth quarter and full-year 2018 were $0.31 and $1.01 respectively. The results for the quarter benefited from $2.1 million of credit and yield discounts on the payoff of acquired loans. We also experienced $0.4 million of reduced interest income related to two swaps we entered into in the fourth quarter to hedge our loans held for sale, the net of which added approximately $0.02 per share to our earnings for the quarter. Our net interest margin for the fourth quarter and full-year 2018 was 3.05% and 2.97%, respectively.

During 2018 loans increased by $1 million -- $1 billion and deposits increased by $1.1 billion, which reflects the acquisition of Premier Business Bank and the remix of our balance sheet in the third quarter of 2017. With our continued focus on deposit growth at the bank, we have been able to reduce our reliance on borrowings. The level of borrowings as a percentage of our total assets decreased from 14% at December 31st, 2017 to 12% at December 31st, 2018. At First Foundation Inc. we were able to decrease our line of credit from $50 million at December 31st, 2017 to $5 million outstanding at December 31st, 2018. We experienced an increase in our net yield on interest earning assets to 3.05% and 2.99% for the fourth quarter and full-year of 2018 from 2.97% and 2.93% for the corresponding periods in 2017.

This was due to the addition of higher yielding loans and the sale and payoff of the lower yielding loans, which was offset by the increase in funding costs related to the Federal Reserve rate increases in 2018. Increases in our non-interest expense in 2018 were primarily related to our growth in loans and deposits, the acquisition of Premier Business Bank in June 2018, the implementation of upgrades to IT equipment and processing services, and higher customer service costs.

I will now turn the call over to David DePillo, President of First Foundation Bank.

David DePillo -- President, First Foundation Bank

Thank you, John. In a challenging interest rate environment, we had a great year at the Bank. During 2018 we originated $1.84 billion of loans, a record year for us. In addition, we added $523 million in loans from the acquisition of Premier Business Bank, which closed in June of 2018. The composition of our loan originations in 2018 are as follows; multi-family 60%, C&I loans 27%, single family 11%, land and construction 2%. As of December 31st, 2018 our loan portfolio consisted of 52% multi-family loans, 18% business loans, 9% non-owner occupied commercial real estate loans, 19% consumer and single-family loans, and 2% land and construction. The credit quality of our loan portfolio was strong as evidenced by our low level of delinquencies and our NPA ratio of 21 basis points. Deposit growth remained strong with $1.1 billion increase in balances in 2018 barring $78 million of which came from the acquisition of Premier Business Bank.

The remaining increase of $612 million was due to increases across our entire platform including branches, specialty deposits, and wholesale. As of December 31st, our 20 locations branch network is approximately 49% of our total deposit. Beginning in the third quarter of 2018, we took steps to reduce our reliance on high cost institutional deposit and increased our focus on growth of the branch deposits and lower costs of specialty deposits. In 2019 we expect the results in a net savings to our customer service costs and will be replaced by relatively lower interest costs on deposits. All this success in 2018 could not have been achieved without the great team we have at the Bank and their efforts in handling the integration of our acquisitions and the continued growth of our franchise.

Now I'd like to turn the call over to John Hakopian, President of First Foundation Advisors.

John Hakopian -- President of First Foundation Advisors

Thank you, David, and good morning. The fourth quarter can be characterized by the return of volatility and downward pressure on equity markets. From August to December, the broader markets were down 20%. Our overall AUM was lower due to the volatility experienced particularly in December. Looking into 2019, we have already seen a nice rebound. We remain confident in our investment philosophy and the resulting exposure across our investment strategies. We maintain a strong pipeline and expect to continue to be successful in attracting new clients while maintaining our focus on servicing existing clients. Our trust department has been instrumental in our ability to build and maintain relationships with our clients. Through our trust department, we are able to track and manage more complex and larger relationships including those with non-traditional investment assets. These types of opportunities deepen the relationship with us by making it multi-generational, extending the length of our involvement, as well as producing additional overall revenue.

At this time, we are ready to take questions and I'll hand it back to the operator.

Questions and Answers:

Operator

Thank you. The floor is now open for questions. (Operator Instructions) Our first question comes from the line of Gary Tenner of D.A. Davidson.

Gary Tenner -- D.A. Davidson -- Analyst

Thanks. Good morning guys.

John M. Michel -- Chief Financial Officer

Good morning.

David DePillo -- President, First Foundation Bank

Good morning.

Gary Tenner -- D.A. Davidson -- Analyst

Hey, had a couple of questions. I guess first on the margin. Could you talk about kind of your thoughts given where the balance sheet is right now on holding that margin over 3% through 2019 and as part of that, what kind of assumptions you'd have on fed activity in '19?

John M. Michel -- Chief Financial Officer

Yes. In the -- going into 2019, we're looking at the margin. If you look at the fourth quarter, we benefited from some one-time payoffs and our margin was below 3%. Without the one-time payoffs, we expect the margin to be below 3% for the next year. However, we continue to anticipate maintaining a pretty -- pretty level through 2019 if the interest rate environment stays level.

David DePillo -- President, First Foundation Bank

And I think one of the things, Gary, that impacts our margin in the near term is we typically hold loans held for sale until we complete our securitization, which creates a little more funding pressure on the margin. Once we clear those out, typically our margin won't rise back above the rate which we experience during the whole period. We saw that certainly this year. When our margin did fall during the first part of last year, people expected that trend to continue. However, they didn't take into account the fact that we had excess loans for sale and those once cleared off the balance sheet lowers our loan to deposit ratio. But we aren't really forecasting much in the way of fed increases and we're relatively conservative on our interest rate forecast on the loan side as well. So, I think it's anybody's guess as to where we're going to be as -- in a general interest rate environment.

Gary Tenner -- D.A. Davidson -- Analyst

Okay. And then on the topic of the securitization, the transfer of loans held for sale this quarter, you were talking about doing another securitization after the third quarter. Should we assume that some proportion of your production over the next couple of quarters will also get put into the held for sale category or is this the amount that you'd expect to kind of be sitting with until third quarter?

Scott F. Kavanaugh -- Chief Executive Officer

I think this is the amount that we'll probably be sitting on. The agencies are requiring some seasoning requirements and so the loans that we anticipate putting into the pool have -- already are considered season on our standards.

David DePillo -- President, First Foundation Bank

One of the things, we do have a larger pool than what's hedged available if we need to. So, we could upsize the pool. So at this point, what we have set aside is what we anticipate the lower end of the pool range to be.

John M. Michel -- Chief Financial Officer

And I think he is asking the question. I think we would anticipate with our production capabilities on a go-forward basis like at the end of 2019, we would have a pool of loans anticipated to be sold in the subsequent year also. So, we would expect some level of loans held for sale at the end of the year.

Gary Tenner -- D.A. Davidson -- Analyst

Okay.

Scott F. Kavanaugh -- Chief Executive Officer

Well, I'd want to caveat that, Gary, because really I think you guys know and you've been following us for a while, we adapted to what the markets gave us. And I think that's -- something I think is different about this management team than maybe some of the other banks out there. So, we weren't necessarily in a mode in 2018 of necessarily putting loans up and shrinking the balance sheet. But given the fact that the yield curve became flat, spreads tightened, and there was kind of a consensus out there that there was never going to be end to increase in deposit costs; we adapted and we took those lower yielding loans and put them into a security that arguably saved us about 4 points.

So, if we just had sold them as loans instead of put them into a pool and sold them as securities. So as far as John's comment for 2020, we may, we may not put another pool together. But for 2019 all the wheels have been put in motion and we've got hedges against it. We know what's -- the outcome is pretty well determined because of the hedge we've got in place. And so I'll leave it at that and say -- I've said we have a very fungible balance sheet, 72% or so is single-family and multi-family and I think we've proven year-after-year that we can continue to either sell these to other financial institutions or securitize them through the agencies. And given that, we have a lot of flexibility with the way that we can work the balance sheet.

Gary Tenner -- D.A. Davidson -- Analyst

Okay. I appreciate the color. Just one follow-up there. Should we assume that you'd be likely to retain a portion of the securities the way you did this past year?

Scott F. Kavanaugh -- Chief Executive Officer

Yes. And quite honestly, that really depends on again what the markets give us. But we will replenish our securities portfolio. We're averaging somewhere between $8 million to $10 million a month in payoffs of the traditional mortgage-backed securities that we had in place and so as those continue to paydown...

John M. Michel -- Chief Financial Officer

We maintain them for liquidity purpose.

Scott F. Kavanaugh -- Chief Executive Officer

Yes.

David DePillo -- President, First Foundation Bank

And then we could add the securities portfolio if interest rates evolved to where it's advantageous. So, we could keep more if we choose to if the yields are better execution or where we want to on our balance sheet.

Gary Tenner -- D.A. Davidson -- Analyst

Okay. And remind me last year it's about 100 basis point decline or delta between the loan yields and the securities yield. Was that the right...

Scott F. Kavanaugh -- Chief Executive Officer

No, 80 basis points.

Gary Tenner -- D.A. Davidson -- Analyst

80? Okay. All right. Great. Thanks, guys.

Scott F. Kavanaugh -- Chief Executive Officer

Great. Thanks.

Operator

Our next question comes from the line of Matthew Clark of Piper Jaffray.

Matthew Clark -- Piper Jaffray -- Analyst

Hey, good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning.

John M. Michel -- Chief Financial Officer

Good morning.

Matthew Clark -- Piper Jaffray -- Analyst

The increase in your securities yields, was that's solely due to that securitization or was there also lower premium amortization?

John M. Michel -- Chief Financial Officer

No, it was solely due to the increase in securities.

Matthew Clark -- Piper Jaffray -- Analyst

Okay. And then on the net loan growth outlook assuming we don't do anything else..

Scott F. Kavanaugh -- Chief Executive Officer

Let me caveat that, Matthew. Towards last year we were selling cash too in order to maintain on balance sheet liquidity and we were selling those -- I think that started in the third quarter that we were selling those at losses in order to maintain liquidity that the regulators felt comfortable with. I didn't feel comfortable selling daily cash at a loss. And so as a result, we changed our policy, we are keeping less on balance sheet liquidity until those securities were securitized and then we replenish the securities portfolio. So, it's kind of a combination between we stop selling about $350 million of cash and then the securities themselves replenishing.

Matthew Clark -- Piper Jaffray -- Analyst

Yes, great. Okay. And then on the net loan growth outlook, assuming no more sales for the balance of the year, is 10% to 15% kind of the pace you want to grow at because if you add back the transfer to held for sale looks like your growth -- like your growth was twice that?

David DePillo -- President, First Foundation Bank

Yes. So, our expectations are we'll probably originate about the same as what we did this year plus or minus. We have -- the good news is we have continued CPR against portfolio of lower yielding loans paying off and that accounts for close to $0.5 billion. And then if we securitize another $0.5 billion, our net replacement yield will grow about 10%, maybe 12% depending on where payoffs are and we may securitize a little bit more. So I guess I would say 10% to 15% is a good range to look at.

Matthew Clark -- Piper Jaffray -- Analyst

Okay. And then pricing on new multi-family loans this quarter versus last?

David DePillo -- President, First Foundation Bank

Pricing actually was pretty good in the quarter, we ended up about 460 (ph) on new loan originations and for the year it was 445 (ph). So, we've been steadily increasing it during the year. We had a little bit a dip in the fourth quarter, some competition had dropped pricing by just following the yield curve down. We kind of held relatively tight so new loans coming in are slightly below what our current pipeline is. But in general compared to some of our competition, loan yields are holding up very well. And I would say that the fact that the largest originator Chase is still holding their pricing well and the agencies are certainly holding up, it affords us to be more rational pricing. If the yield curve starts to steepen, we'll obviously get benefit of that, but even in the environment now yields are holding up.

Matthew Clark -- Piper Jaffray -- Analyst

Okay. And then can you speak to what drove the decline in non-interest bearing deposits on an average end of period basis? Whether or not you expect that to come back this year?

David DePillo -- President, First Foundation Bank

Well, what we did is we made a conscious effort on a large chunk of those that are subject to earnings credits. And as the fed started to raise rates, earnings credits started to go up and I think a lot of commercial banks have experienced it. So it doesn't necessarily show up in the interest margin, but does show up in our customer expense. So, we've got a corresponding reduction in our non-interest expense. We replaced some of that with interest-bearing deposits that created a little more stability to us so we could go out a little longer in duration on those deposits. So, net-net it was a net savings to us in overall cost.

Scott F. Kavanaugh -- Chief Executive Officer

Given the fact that the yield curve's flat and everything that we talked about already as far as challenges, I said in the opening comments, I think we said it in the press release that it's going to be a real focus in 2019 to continue to reduce our reliance on high-cost institutional deposits and focus more on the branch network and lower cost specialty deposit. So...

David DePillo -- President, First Foundation Bank

That being said, those deposits are seasonal or cyclical. So typically in the fourth quarter, we have about a 30% run-off and then that is replaced. So outside of the conscious effort to reduce approximately $300 million of that in the third quarter, whatever decline we had in the fourth quarter typically replenishes itself in the first quarter. So -- and I think you could see that year-over-year in our decline in non-interest bearing deposits for the quarter.

John M. Michel -- Chief Financial Officer

And keep in mind, we still are adding besides those type of deposits, non-interest bearing accounts through our branches and through our other activities. So it's -- there is some seasonality to the -- the high costing deposits, but it's going to be less than it was in prior years.

Matthew Clark -- Piper Jaffray -- Analyst

Okay. And then just last one. On your decline in AUM, can you just differentiate between outflows and the impact from the market in the fourth quarter?

John M. Michel -- Chief Financial Officer

About 80% of it was market performance.

John Hakopian -- President of First Foundation Advisors

Yes. Our typical accounts to balance portfolio, but obviously equities were down 20% in the quarter. So -- and year-to-date in January, we made up a nice chunk of the decline we saw in the fourth quarter.

Matthew Clark -- Piper Jaffray -- Analyst

Great. Thanks.

Operator

Our next question comes from the line of Andrew Liesch of Sandler O'Neill.

Andrew Liesch -- Sandler O'Neill -- Analyst

Hey, guys. Good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning.

David DePillo -- President, First Foundation Bank

Good morning.

Andrew Liesch -- Sandler O'Neill -- Analyst

John, just on the margin you mentioned about $2.1 million of purchase accounting adjustments. Is that just normal purchase accounting that comes in from the deals or was this more one-time in nature?

John M. Michel -- Chief Financial Officer

So, this is what we have and the reason we mentioned it is is we had a couple rather large loans payoff that had reserves against it. It's not the normal recurring stuff that we do benefit from. But when we have a pretty significant loan that has a reserve against it because it was rated as a substandard loan by our predecessors and we're able to rework it and have it payoff, we recover the provision we had against the credit loss. And that's what happened in the fourth quarter so a couple of those loans paid off and they were -- it was more of a one-time because it's the PCI loans. We still do recover because of the marks that we have on the regular loans and that does provide benefit, but that's not what that was.

Andrew Liesch -- Sandler O'Neill -- Analyst

Okay.

David DePillo -- President, First Foundation Bank

Yes. We have a -- I wouldn't say a large bucket, but we do have a bucket of PCI loans and they tend to be lumpy. It's probably the best term. So even though it's considered maybe a one-time thing, they will be reoccurring over time (multiple speakers)

John M. Michel -- Chief Financial Officer

Yes, it's a one-time thing that reoccurs.

Matthew Clark -- Piper Jaffray -- Analyst

Yes. Right, right. Now I assume there's going to be some level of that every quarter, but there was a similar and there was some in the third quarter as well. wasn't there?

John M. Michel -- Chief Financial Officer

What was interesting is the ones that happened in the third quarter actually related to a different transactions.

David DePillo -- President, First Foundation Bank

And I think one of the things we do on emphasizing is that in a period where some folks are getting concerned about potential for asset quality issues, we continue to see improvements and we keep improving on cleaning up items. Certainly I said a watchlist or acquired assets typically are the primary driver of our non-performing asset ratio, which is very low. But we wanted to at least communicate that the trend is -- continues to be positive on -- we got rid of most of the acquired REO that we've had from acquisitions, very de minimis levels locked in. A lot of that will be gone in the first quarter as well. So, we're pretty much down to practically nothing in our problem asset area. Again, most of those did come from acquired assets so.

Andrew Liesch -- Sandler O'Neill -- Analyst

Okay. And just on that sale or securitization coming in the third quarter, should we expect or build in gain on that like there was in the third quarter of this year?

Scott F. Kavanaugh -- Chief Executive Officer

Yes, I think it would be around a point.

Andrew Liesch -- Sandler O'Neill -- Analyst

Okay.

David DePillo -- President, First Foundation Bank

Yes. One of the advantages last year was more about securitizing lower yielding -- lower yielding loans in the current pool of loans and those on a net-net basis were more or less par I think. Once the final accounting, these are little bit better yielding. Our market conditions at the time in which we entered in were good so that one point -- right now the only -- we've taken care of the interest rate risk. The only caveat we would say is if credit spreads change dramatically between now and then, that could have a positive or negative effect on the execution.

John M. Michel -- Chief Financial Officer

Which on an agency security is not that great.

Andrew Liesch -- Sandler O'Neill -- Analyst

Got you. And then just on the expense front here, some good cost control. The customer service fees came down, looks like maybe some (inaudible) maybe a reduction in compensation. You referenced that deferred costs as well. Were there -- was there was there any bonus accruals? Was that what that maybe accrued for another quarter so you didn't have that in the fourth quarter? And then what do you think is a good run rate to use starting in the first quarter of '19?

John M. Michel -- Chief Financial Officer

And a couple of the benefits. One is Dave already mentioned the fact that we have a little bit of seasonality in the customer service cost that always occurs in the fourth quarter. So, that's one of the reasons for the decrease. Again we'll see some increases in that, but it won't be as substantial as in prior years because we're not increasing the level of deposits in terms of the impact from the deposits themselves. Again, the fourth quarter compensation benefits is always our lowest quarter, as we mentioned before, because of the accruals for -- I mean the incurrence of cost related to taxes and 401-K matches et cetera that occurs in the first quarter. By the time we get to the fourth quarter, we hardly have any of those and so we'll...

Scott F. Kavanaugh -- Chief Executive Officer

So, you're saying the first quarter is always the highest and the fourth quarter is the lowest.

John M. Michel -- Chief Financial Officer

Is the lowest. And the other thing that we benefited from is -- on the compensation front is we initially anticipated that our conversions would take longer to do. We were able with the help of all our staff to get the conversions completed, which allowed us to basically wrap up the integration of the personnel from the acquisition of PBB at the end of the fourth quarter where we expected it originally to go into the first quarter and we had some benefits from that, some cost savings that we realized in the fourth quarter that's -- because of that. So, that was kind of some positive execution benefits from the acquisition of PBB as we got the conversions done earlier than we anticipated so.

Scott F. Kavanaugh -- Chief Executive Officer

So, but let's be clear about that. We had three conversions last year.

John M. Michel -- Chief Financial Officer

Yes.

Scott F. Kavanaugh -- Chief Executive Officer

Three, so C1B and then we have two conversions related to PBB. So, our team worked extremely hard and of course you got costs associated with the conversion as well. But three is pretty -- pretty extreme for any given year.

David DePillo -- President, First Foundation Bank

And I think that bodes well for 2019 given the fact that we don't have those overhang of incremental staff, we can lever our staff more appropriately for our organic growth on the platform that...

John M. Michel -- Chief Financial Officer

And one other aspect that affects the first quarter I always forget to mention is basically the salary increases, we always effectuate them at the beginning of every year. So, that will be reflected in the first quarter. And again as you go through the year, that's already reflected in the first quarter so it doesn't affect the subsequent quarters.

Andrew Liesch -- Sandler O'Neill -- Analyst

Right. That's all my questions. Thanks, guys.

Operator

(Operator Instructions) Our next question comes from the line of Steve Moss of B. Riley FBR.

Steve Moss -- B. Riley FBR -- Analyst

Hey, good morning guys.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning, Steve.

Steve Moss -- B. Riley FBR -- Analyst

I jumped on late so I apologize, perhaps you addressed this. But it sounds like on the specialty deposits, obviously a seasonal decline this quarter and a bit of de-emphasis. Just want to think -- just wondering how do we think about that over the course of the full-year 2019. Do those costs generally trend lower from what we saw in say the third quarter levels?

John M. Michel -- Chief Financial Officer

There's two competing factors. Where -- one is if you're looking at 2018, you're not going to see that benefit because rates -- we had the four rate increases during the year. But from the perspective of looking at the fourth quarter then looking out future periods, we would not expect the same cyclicality to be as extreme in the first quarter and subsequent quarters because we have less reliance on them. But they're still going to be 100 basis points higher in costs than they were a year before because of the four rate increases. So the allowance will be less, but the costs will be higher.

Steve Moss -- B. Riley FBR -- Analyst

Right. Just kind of said differently perhaps like $4 million or so per quarter on average over 12 months?

John M. Michel -- Chief Financial Officer

I'm probably not going to give you the actual amount of what it is. So in terms of going through it, but...

Scott F. Kavanaugh -- Chief Executive Officer

What were you going to say, Dave?

David DePillo -- President, First Foundation Bank

Well, our expectations are since we ran off first at $250 million to $300 million consciously that we planned not to replace, we're obviously not going to incur that portion going forward. One of the things we were emphasizing, Steve, right now is the more that -- in the other segments of the buckets of our specialty deposit franchise, we have opportunities to bring in deposits at dramatically lower rates than what we see in some of the other spaces that we're de-emphasizing. So, it's a balancing act so it's somewhat those -- somewhat hard to predict when all of those efforts will actually fund in. We have a large pipeline that's already established in all of those segments. It's just predicting which quarter will they be there for the whole year on average and what impact that will have on the overall cost.

John M. Michel -- Chief Financial Officer

So I think as we caught up to the fed rate increases and we slowed down the growth, I mean if you look historically, we've grown at 40% to 45%. Well, we put the brakes on hard in 2018, did the loan sale, shrank the balance sheet little bit. This really gives our team the chance to take a breath and work on those deposits that Dave was talking about while not having to have the concern about how are we going to keep deposit growth with loan growth because we're just -- the balance sheet is going to be not near the growth that we've experienced in previous years.

David DePillo -- President, First Foundation Bank

Yes, there's probably -- well, go ahead, Steve.

Steve Moss -- B. Riley FBR -- Analyst

Oh, no go ahead, I'm sorry.

David DePillo -- President, First Foundation Bank

Yes. There's probably two things of consideration. One is one topic we already addressed is the fact that we have loans held for sale that we're going to have to fund through the securitization. It does have some interim margin impact, but it does incrementally on our net interest income obviously add a lot of dollars and then we get the gain on sale. So, it's more of a wholesale mortgage banking type of effort that we traditionally do. The good news on that is we are able to lock-in the interest rate risk on that at no carry cost to us given the current environment and our ability to kind of walk into those swaps opportunistically. The other piece is given the expected lower growth rate, which is best talking about somewhere say 10% to 15%, our requirement to fund incremental deposits on the margin certainly goes down and we can work on replacing some of those higher costing relationships with lower costing relationships. And that's in a nutshell kind of our business plan going into this year to kind of do more margin maintenance and growth and profitability.

Steve Moss -- B. Riley FBR -- Analyst

That's very helpful. And then I was just wondering, we have -- what's the yield on the loans held for sale in the portfolio?

David DePillo -- President, First Foundation Bank

I think it's...

John M. Michel -- Chief Financial Officer

I don't have that actually. I just was actually going through that. I'll get back to you, Steve, with that. I don't have it right in front me and I don't want to give you a number that's incorrect.

Steve Moss -- B. Riley FBR -- Analyst

All right. Well, thank you very much, guys.

David DePillo -- President, First Foundation Bank

Right. Thanks, Steve.

Operator

Our next question comes from the line of Don Worthington of Raymond James.

Don Worthington -- Raymond James -- Analyst

Thank you. Good morning, everyone.

David DePillo -- President, First Foundation Bank

Hey, Don.

John M. Michel -- Chief Financial Officer

Hey, Don.

Don Worthington -- Raymond James -- Analyst

John, was there a special FHLB dividend this quarter? And if so...

John M. Michel -- Chief Financial Officer

There was -- it was about $0.25 million. It wasn't very material on our balance sheet. It used to be a lot more material to us when we were smaller.

Don Worthington -- Raymond James -- Analyst

Yes. Okay, great. And then any thoughts on M&A in the current environment?

Scott F. Kavanaugh -- Chief Executive Officer

Yes. I mean would I love to do it? Yes. But I -- you know like I do, Don, banks our size that are trading publicly have gotten crushed in the last quarter or two and as a result, it's hard to really pay up. I'm not sure that some of the guys out there that don't trade publicly have reset what their expectations are in the marketplace. So as a result, I think there has to be some type of reset among those other institutions. I'm hopeful, but they really need to look at what we've gone through and realize that a 2 times book is just not in the cards.

Don Worthington -- Raymond James -- Analyst

Yes, OK. Thanks, Scott.

Operator

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

Scott F. Kavanaugh -- Chief Executive Officer

Thank you, everyone, for taking the time today. We appreciate it. Overall, we are pleased with our results and we look forward to speaking to you next quarter. Have a great remainder of your day and thank you and don't (multiple speakers).

Operator

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.

Duration: 39 minutes

Call participants:

Scott F. Kavanaugh -- Chief Executive Officer

John M. Michel -- Chief Financial Officer

David DePillo -- President, First Foundation Bank

John Hakopian -- President of First Foundation Advisors

Gary Tenner -- D.A. Davidson -- Analyst

Matthew Clark -- Piper Jaffray -- Analyst

Andrew Liesch -- Sandler O'Neill -- Analyst

Steve Moss -- B. Riley FBR -- Analyst

Don Worthington -- Raymond James -- Analyst

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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.