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First Foundation Inc (NASDAQ:FFWM)
Q4 2019 Earnings Call
Jan 29, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the First Foundation's Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions]

Speaking today will be Scott Kavanaugh, First Foundation's Chief Executive Officer; John Michel, Chief Financial Officer; David DePillo, President; 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 will 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 would like to turn the call over to Scott Kavanaugh. Please go ahead.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning, everyone. Thank you for joining us.

We would like to welcome all of you to our fourth quarter 2019 earnings conference call. We will be providing some prepared comments regarding our activities and then we will respond to questions.

As highlighted in the press release, 2019 was another great year for First Foundation. Our earnings for the fourth quarter were $15 million or $0.34 a share. For the full year, earnings increased by 31% over 2018 to $56 million or $1.25 per share.

Total revenues were $54 million for the quarter and $212 million for the year, an 11% increase over 2018. Our tangible book value per share ended the year at $11.57, which was a 12% increase during 2019. At the start of the year we initiated a cash dividend, and over the course of the year we are pleased to report that our stockholders enjoyed a payment of $9 million and positive performance on our stock price. As we announced yesterday, we increased that quarterly dividend for the first quarter of 2020 by 40% from $0.05 to $0.07 per share.

Taking a look at our lines of business. Our banking operations experienced strong growth as loan production reached $1.9 billion. Loans increased by $254 million and deposits grew by $358 million. Our trust department posted record revenue numbers and assets grew by 20%. Our wealth management business experienced a great year, with an increase of $504 million in assets under management. And total AUM at the end of the year was $4.4 billion.

Let me also share some other highlights for the year. We enhanced our digital banking offering, including the digital delivery of our products, providing another source of deposit customers; the increased presence of First Foundation brand across digital marketing channels; and the investment in state-of-the-art technology to better serve our clients. In 2019 we also successfully completed the sale and securitization of $551 million of multifamily loans in the third quarter. This is the fourth such securitization. Since 2015 we have sold $2.1 billion in loans.

2019 saw our launch of a municipal lending department, offering a lending solution for small and mid-sized municipalities seeking financing for infrastructure projects or other cash needs.

We received recognition in the media and in the community for our charitable giving efforts. This included the revamp of our supporting our community's nonprofit initiatives to make an even greater impact in the communities we serve.

We appointed two new Board members, which increased the diversity and elevated the overall profile of the Board. And several of our team members received industry accolades for their leadership and contributions to the banking and financial services industry.

I am so proud of the contributions of our entire team and I'm grateful to the employees who work hard every day to deliver the amazing results for our clients. Overall, it's been a strong year. I believe the strength of our offerings and the more favorable economic outlook position us well for the year ahead.

And with that, I'll turn the call over to our CFO, John Michel.

John M. Michel -- Chief Financial Officer

Thank you, Scott.

I will provide a brief summary of our financial results for the quarter and year.

Total revenues for the fourth quarter and full year 2019 were 8% and 11% higher respectively than for the corresponding periods in 2018. Earnings for 2019 were $56 million, a 31% increase from 2018. For the fourth quarter of 2019, earnings were $15 million, an 8% increase from the prior year.

Fully diluted earnings per share were $0.34 and $1.25 respectively for the fourth quarter and full year of 2019.

Our net interest margin for the fourth quarter and full year 2019 was 2.8% and 2.87% respectively.

The results for the fourth quarter and full year benefited from recoveries on acquired loans of $1.1 million and $4.1 million respectively. As a result of the strong earnings, our tangible common equity ratio at the holding company increased from 8% to 8.3% after we paid $9 million of dividends in 2019.

We benefited from the decrease in interest rates during the latter half of 2019, resulting in significant decreases in our funding costs. Our overall deposit costs were 1.24% in the fourth quarter of 2019, down from a high of 1.4% in the second quarter of 2019. And our borrowing cost came down from a high of 2.58% in the first quarter of 2019 to 1.8% in the fourth quarter of 2019.

Our loan yields declined slightly during the year from a high of 4.46% in the second quarter of 2019 to 4.37% in the fourth quarter of 2019. The decrease in the yielding assets from a high of 4.3% in the second quarter of 2019 to 4.07% in the fourth quarter of 2019 was impacted by a higher proportion of lower yielding cash and securities to total assets.

Due to a focus on reducing costs, non-interest expenses for 2019 were only 2% higher than 2018. In fact, this increase was due to higher customer service costs and a full year of costs related to the acquisition of Premier Business Bank in the second quarter of 2018. As a result of our efforts, our efficiency ratio improved from 64.4% in 2018 to 61.9% in 2019.

I will now turn the call over to Dave DePillo, President.

David DePillo -- President

Thank you, John.

We had a great year at the Bank. The emphasis heading into the year was on maximizing scale and efficiency, and I believe we accomplished that, as evidenced by the financial results that we've reported.

During 2019 we originated $1.9 billion of loans, a record year for us. Included in that total was a record $712 million of C&I loans. The composition of our loan portfolio in 2019 is as follows: multifamily, 53%; C&I, 37%; single family, 7%; and other, 3%. As of December 31, 2019, our loan portfolio consists of 53% multifamily loans, 21% business loans; 7% non-owner occupied CRE, 18% consumer and single family and 1% land and construction. The credit quality of our loan portfolio is strong as evidenced by our low level of delinquencies and our NPA ratio declining to 20 basis points as of December 31.

Deposit growth remains strong with $358 million increase in balances in 2019. We experienced a $138 million increase at the branch level and $220 million increase in specialty deposits. The growth in our deposit business during the year is also partially attributed to the success experienced in attracting new mass affluent clients through digital channels. Branch deposits, including in our digital activities, which was launched in the fourth quarter, totaled $149 million at the end of December.

Being able to attract clients via our existing branch network, coupled with our digital delivery capabilities, will continue to set us apart in the industry. All this success in 2019 could not have been achieved without the great team we have at the Bank and all their efforts to support 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, First Foundation Advisors

Thank you, David, and good morning.

2019 can be characterized by a strong year for the financial markets, especially in US equities. From January to December, the broader markets were up over 30%. Our investment strategy is broadly diversified across asset classes and sectors, and we made many investments that proved to be beneficial for our clients in 2019. Our overall assets under management increased by $504 million during the year, benefiting from market appreciation as well as the addition of new clients.

Looking into 2020, we believe economic expansion will continue, albeit more modestly than 2019. And now that growth has stabilized and fears of a recession that we saw early last year have subsided, we feel we are well positioned for the year ahead. That said, there will be the unpredictability that comes as we enter the heart of an election cycle. We remain confident in our investment philosophy and the resulting exposure across our investment strategies.

Our process for delivering sophisticated wealth planning strategies continues to help us uncover additional opportunities to serve our clients, including making introductions to our banking and trust teams. Our trust department has been instrumental in our ability to build and maintain relationships with our clients, especially for those with non-traditional investment assets.

We maintain a strong pipeline and expect to continue to be successful in attracting new clients, while maintaining our focus on serving our existing clients. And, like the broader theme you heard from Scott and David, we are leveraging technology to enhance the delivery of our services.

Overall, I'm very pleased with our accomplishments in 2019.

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

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Steve Moss with B. Riley FBR.

Steve Moss -- B. Riley FBR -- Analyst

Good morning.

David DePillo -- President

Hey.

Steve Moss -- B. Riley FBR -- Analyst

I want to start off with the mix of commercial originations versus multifamily originations this quarter. And also, what your expectations are for 2020 in total originations?

David DePillo -- President

Let's start with the mix. During the quarter, it was 37% C&I. And our expectation going into next year is our C&I will continue to maintain about the same level as a percentage because we do expect some increase in our multifamily. I think the good news for portfolio diversification is since we only sit around 20% in the C&I book, eventually, if we continue to do 37% to 40% of our book, our origination in that book will increase over time. And our expectation is, we want to have about a third of our book always in C&I. So we feel really good about that.

So, our expectations for next year is to do about the same, maybe slightly more in C&I. And then overall, I would say we expect a slight increase from the 2019 level. The one positive thing going into the year is our pipelines are very robust.

Scott F. Kavanaugh -- Chief Executive Officer

And a lot of positive things going into 2020. But yeah, we do have a robust pipeline.

David DePillo -- President

On all levels. Included in that is, one, so about $500 million of those originations were line of credit and term loans and not focused in owner-occupied CRE, so they weren't necessarily real estate related, as well as our equipment finance group is approaching a $100 million run rate. So that's very strong for us.

Scott F. Kavanaugh -- Chief Executive Officer

And Steve, I do want to point out that we have already negotiated to have a securitization...

John M. Michel -- Chief Financial Officer

Planning on having.

Scott F. Kavanaugh -- Chief Executive Officer

Yeah, planning on having in the third quarter.

David DePillo -- President

Yeah. I would expect a similar timing for this year in September for approximately the same level. We typically budget around $500 million to $600 million range with similar execution.

Steve Moss -- B. Riley FBR -- Analyst

And have you hedged the $500 million of loans classified as held for sale or how are you thinking about that?

Scott F. Kavanaugh -- Chief Executive Officer

At this time, no.

David DePillo -- President

We would have made a joke, but it probably wouldn't be that funny.

Scott F. Kavanaugh -- Chief Executive Officer

No. At this time we have not hedged anything.

Steve Moss -- B. Riley FBR -- Analyst

Okay.

David DePillo -- President

I would say, Steve, the good news around that is, we have what we have available for sale. But we have what is the -- that's our inside book and now we have our outside book, which is a larger group of loans that we would use for hedging activities. And the range of yield on those is pretty broad. So going into a securitization -- unlike last year where we had locked in higher yielding loans, this year, it's basically a non-balance sheet hedge at this point.

John M. Michel -- Chief Financial Officer

Yeah. And the other aspect on the hedging, Steve, is that we took on a $500 million one year FHLB advance to lock in the rates. So in essence, we're trying to have some hedging on balance sheet already.

Steve Moss -- B. Riley FBR -- Analyst

Okay.

John Hakopian -- President, First Foundation Advisors

Honestly, more toward the securities portfolio.

Steve Moss -- B. Riley FBR -- Analyst

Okay. And then I guess in terms of just sticking with the production side of things here, where are you seeing new money yields on both commercial and multifamily loans?

David DePillo -- President

Well, on the multifamily side we've been floored out for, I would say ever, because of where the yield curve has been. So our yields have been in the kind of 3.80 [Phonetic] range...

John M. Michel -- Chief Financial Officer

For the fourth quarter, it was 3.80 [Phonetic].

David DePillo -- President

For a while. So it's come down from earlier locked product. But we're still seeing, even with kind of the volatility -- current volatility in the yield curve, we're still -- our pipeline is at about that rate or maybe slightly above.

On the C&I side, they've come down I would say consistent with LIBOR. So we're probably down about 75 basis points, but from the beginning of the year to the end of the year actually by about 40 basis points.

The interesting part for us is, if we look at our business plan, we've kind of modeled current rates across the board, and it's provided us the consistent projection of NIM going into next year -- or this year.

Steve Moss -- B. Riley FBR -- Analyst

So basically relatively stable margin for 2020?

John M. Michel -- Chief Financial Officer

Yes.

David DePillo -- President

We feel so. I think part of the flatness of what we're experiencing now was the front-loading of securities and some excess cash that we had on the balance sheet from a couple of clients that we've redeployed into loans. But...

Scott F. Kavanaugh -- Chief Executive Officer

And our modeling does not anticipate any increases or decreases in interest rates by the Fed.

Steve Moss -- B. Riley FBR -- Analyst

Okay. That's helpful. All right. I'll step back. Thank you very much, and good quarter.

John M. Michel -- Chief Financial Officer

Thank you.

Scott F. Kavanaugh -- Chief Executive Officer

Thank you.

Operator

Thank you. Your next question comes from the line of Matthew Clark with Piper Sandler.

Matthew Clark -- Piper Sandler -- Analyst

Hi, good morning.

David DePillo -- President

Good morning, Matthew.

Matthew Clark -- Piper Sandler -- Analyst

Good morning. Do you happen to have the spot rate on interest bearing deposit costs at the end of December, just to give us a sense for, going into 1Q?

John M. Michel -- Chief Financial Officer

I don't have that right in front of me, Matthew. It is -- for the quarter, the rates that we have were still declining slightly. It's going to be a little bit below what we had in the quarter for the -- for the quarter percentage, but I don't have the number right in front of me.

Matthew Clark -- Piper Sandler -- Analyst

Okay. And then just the drop in non-interest bearing deposits. I think you had a similar drop a year ago, in the fourth quarter. I guess what's your expectation for non-interest bearing deposit growth? Is that fully expected to come back in the first half of the year?

David DePillo -- President

Yeah. It was actually slightly higher than prior years. Typically it was in the mid 30s and will come...

Scott F. Kavanaugh -- Chief Executive Officer

It's already building back.

David DePillo -- President

Yeah.

Scott F. Kavanaugh -- Chief Executive Officer

There is always the seasonality effect, but those deposits have already started to increase here early in the first quarter.

John M. Michel -- Chief Financial Officer

Yeah. And then we'll have a little bit of dip in April and then it will pick back up through the summer.

Matthew Clark -- Piper Sandler -- Analyst

Okay. And then just -- and I think speaking to a slightly higher origination activity this year, I think you had talked about in the past, wanting to maintain organic growth in the 10% to 15% range. You obviously did better than that this quarter. But is 10% to 15% kind of the right range to think about for your HFI portfolio?

David DePillo -- President

Yeah. We could obviously do more than that if we wanted to, but that's kind of our internal target. Some of it's dependent on payoff rates and other factors, but...

Scott F. Kavanaugh -- Chief Executive Officer

Yeah. I'm going to say, I think if you look at the fourth quarter, I think most banks had slightly higher prepayments than anticipated. The good thing is that we have that ability to step up and replenish that.

David DePillo -- President

And one way we can control our portfolio growth is through the amount of securitization we do as well. We can upsize that if we have excess production to keep our growth rate within the lines of what we expect or downsize it slightly as well.

Matthew Clark -- Piper Sandler -- Analyst

Okay. And then you happen to have the balance of your substandard and special mentioned loans at the end of the quarter. I know credit is good. I just wanted to get that updated number.

John M. Michel -- Chief Financial Officer

I don't have it right -- we will be publishing that. I don't have that again right in front of me.

Scott F. Kavanaugh -- Chief Executive Officer

It did decline quarter-over-quarter from 32 basis points to 20 basis points.

David DePillo -- President

That was on the NPA.

John M. Michel -- Chief Financial Officer

That's the NPA. Substandard is a little different number. So I don't have that right in front of me. So that stuff, we'll make sure we get out for you, Matthew.

David DePillo -- President

Yeah, and I would say outside of a few anomalies we had that we've been cleaning up in the last quarter and probably will continue to clean up in the first quarter. The migration into substandard and ultimately into non-accrual has been very de minimis. But a lot of it's related to smaller acquired assets from the last couple of acquisitions, which we expect, as we continue to kind of call and work through those books that should start to subside as well. So our expectation for credit at this point is to have continued improvement.

Matthew Clark -- Piper Sandler -- Analyst

Okay. And then just last one from me. I know it's a really small number, but just a housekeeping item: the accretion in the quarter, maybe prepay income?

John M. Michel -- Chief Financial Officer

In terms of what we had in the quarter, which we mentioned and the number here was about $1 million in recoveries, and that was -- what was kind of interesting about that is over half of that was actually related to a loan that was charged off by a prior company that we -- bank that we acquired. So [Indecipherable] wasn't anticipated in terms of March. So it was a recovery we realized in the quarter. So it's about $1.1 million for the quarter. And that's mentioned in the press release, so you guys can understand the numbers too.

David DePillo -- President

And then we've had that relatively consistent recovery -- we're fairly aggressive on our charge-offs, and have had positive recoveries over time on most of them, so I would expect that we'll continue to have some recoveries going into this year.

Matthew Clark -- Piper Sandler -- Analyst

Okay. Thank you.

Operator

Your next question is from the line of Gary Tenner with D.A. Davidson.

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

Thanks. Good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning.

David DePillo -- President

Good morning, Gary.

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

Hey, I just wanted to get some color on some operating expense line items. It looks like you've got some of the benefit this quarter of lower rates on the customer service costs. Is that pretty fully baked into the fourth quarter number with forward fluctuation or line driven?

John M. Michel -- Chief Financial Officer

Yeah. So the -- we are looking forward in terms of this. The fourth quarter number, assuming rates don't change, will be consistent with what we expect in the future for the fourth quarter. It is cyclical. We expect to see benefits in the first three quarters. We'll have a little bit higher volume, but a lower cost compared to the first three quarters of 2019. So we're expecting decreases in total overall customer service costs between 5% and 10%, probably mostly in the first three quarters.

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

Okay. Great. And to clarify the FDIC rebate, that was a third quarter event and fourth quarter was a normalized run rate...

John M. Michel -- Chief Financial Officer

Yeah. We didn't have -- we had none in the fourth quarter.

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

Okay. Is there any projected for first quarter? Or are you -- have you utilized the entire...

John M. Michel -- Chief Financial Officer

We're done. We got everything and it was done in the third quarter.

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

Okay. And then just one last expense item here on the personnel line. Lower despite really strong production on the lending side in the quarter. So just any thoughts on kind of how that was down?

John M. Michel -- Chief Financial Officer

Yeah. A couple of factors, just going through and doing here and reconciliations of our accruals and making sure that we're in line with what we kind of resulted. We had -- interesting being, as larger companies, we have low [Phonetic] higher levels of turnover, so anticipated processes in terms of bonuses and everything that we kind of forecast in the year. When people leave and we replace them, the levels of those dollars kind of benefited us in the fourth quarter.

I also want to remind you that the impact we have in the first quarter of our seasonality. For example, last year, between the payroll taxes, 401(k) match and raises, the difference between the fourth quarter of 2018 and the first quarter of 2019 was $2 million. So we're going to have a similar type of increase for payroll taxes timing and 401(k) match and raises, increase in customer service costs, besides other items.

Scott F. Kavanaugh -- Chief Executive Officer

Gary, this goes all the way back to 2015 when we raised capital, and that was we were going to have a heavy buildup of the employee base based on compliance and everything -- systems that we needed in place. And we did all that. And I know a lot of people were concerned that when does that stop. I think last year was a pretty good example that, to a point, where we really don't need a lot more infrastructure. Even as we continue to grow, we think that it will be minimal in terms of employee growth.

David DePillo -- President

Yeah, and I think to Scott's point, when we talk about scale and efficiency, we put the infrastructure in place, including our IT infrastructure to grow well past $10 billion and could support on our platform. Similar institutions are running over $50 billion. So, all of the -- certainly those expenses over the last four or five years, we're starting to see those benefits. But on the employee side, we don't necessarily need to add employees to grow over the next...

Scott F. Kavanaugh -- Chief Executive Officer

Which hopefully will drive better efficiency.

John M. Michel -- Chief Financial Officer

Yeah. We expect the trends -- the positive trends in efficiency ratios to continue.

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

Great. I appreciate the color there. And then just in terms of time deposit repricing, say over the first half of the year, can you give us a sense of your dollars that are repricing and the rates on [Indecipherable] time deposits?

John M. Michel -- Chief Financial Officer

On the time deposits, in terms of the impact of that, we probably are expecting maybe a 10 to 20 basis point decrease in our average cost because we've repriced a lot. We don't have a heavy load of CDs that are longer term. So we will see some decrease in those costs, primarily on the CDs, the money market and the savings accounts. Those type of rates are probably at market now because we adjust them.

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

Thank you.

Operator

[Operator Instructions] Your next question comes from the line of Conor McDonnell with Azora.

Conor McDonnell -- Azora -- Analyst

Good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning.

Conor McDonnell -- Azora -- Analyst

How are you?

Scott F. Kavanaugh -- Chief Executive Officer

Good. Great.

Conor McDonnell -- Azora -- Analyst

Great. I just want to quickly follow up on the net interest margin outlook. I guess I'm trying to figure out kind of the puts and takes around the stable margin, given the liquidity deployment and some of the decline in the CD costs and why maybe there is not a slight upward bias to the margin. Thanks.

Scott F. Kavanaugh -- Chief Executive Officer

I think you'll probably see some slight upper movement in the net interest margin. I mean, we had an opportunity when we did the securitization last year -- we had the opportunity to sell about $300 million of 15-year mortgage-backed securities that was yielding 2.08% and we moved those into our own product that was yielding closer to 2.50%. And as I have mentioned earlier, we kind of stabilized the home loan bank advance against that to kind of lock in that type of return.

The reason why we did that -- and you won't see us increase the security balances anymore. The anticipation is that through prepayments you'll see those balances go down. The fact is, we would normally probably keep our on balance sheet liquidity. It may be definitely lower levels, maybe 15-percentish, but the reality is, these are great yielding assets with a lower duration than the 15-year mortgage-backeds. And we took advantage of that.

So, I think as those continue to prepay, obviously you will see the margin. And then, like John said, some of the deposits that we had were mid-quarter last year. And so you'll start to see -- and we are looking at average balances. So I think as you look to the first quarter and full second quarter, you will see some slight reduction in the cost of funds.

John M. Michel -- Chief Financial Officer

Yeah. The cost of funds is a positive impact. One of the things is that the originations of our loan, the weighted average interest rate is below what our portfolio is. So there will be a little pressure on the loan side also. That's kind of why we're expecting to be stable or slightly up.

David DePillo -- President

But our kind of expectations for next year is to have an increase in our net interest margin from where we ended. Our aspirational kind of guidance would be close to 3%. Some of that is dependent on where the yield curve is. If it is flat to negative, it could have some impact on that. But we've always kind of guided that kind of 2.85 [Phonetic] to 2.95 [Phonetic] is the range, and within this kind of interest rate environment, we think we're going to be at the higher end of that range and maybe get close to 3%.

Conor McDonnell -- Azora -- Analyst

Okay. Perfect. I guess what -- and thinking about the 3%, I mean, what would be the drivers to push toward the upper end that maybe I need to think about?

David DePillo -- President

Well, I think if interest rates stay relatively stable, deposit costs...

John M. Michel -- Chief Financial Officer

Are continuing to decline. You're going to see runoff in the securities portfolio [Indecipherable] obviously the lesser yielding of all of our earning assets. So I think just those things alone, if everything else stays status quo, that's where you're going to see some of the movement upwards toward the 3%.

David DePillo -- President

And also depending on where -- loan yields are slightly lower. We could securitize some of our lower yielding loans at similar gains and be able to affect it that way as well. So we've got a very flexible balance sheet, and that's the one thing that we've always kind of prided ourselves. We can maneuver relatively quickly in order to reposition ourselves year-over-year and I think we've done that over the last few years, setting ourselves up for the interest rate environment that we're in.

But if we get a 50 basis points steepening of the yield curve, then we're going to [Indecipherable] but we're not planning on that at this point.

Conor McDonnell -- Azora -- Analyst

Got it. That's very helpful. I appreciate it. And one more if you don't mind. Just on the expenses, I think you gave a pretty good color on where the first quarter looks like it's going to shake out. If I look at first quarter kind of on a year-over-year basis, it's kind of implying about low single digit growth year-over-year. Is that sort of a reasonable level to think about expenses going into 2020? And maybe if you could talk about the efficiency ratio and where you think that might shake out.

John M. Michel -- Chief Financial Officer

I think from the perspective that you're -- so we expect the growth in the balance sheet as we mentioned earlier, to be in the 10% [Phonetic] plus range, and we expect our costs to not increase as much as that to help us and improve our efficiency ratios, being at 61% for the year. As we get through this for the full year, we expect to be closer to -- we have a [Indecipherable] digit for that, be in the 50s, the high 50s in 2020 because of that leverage that we get from the size that we are.

Scott F. Kavanaugh -- Chief Executive Officer

And remember, the asset manager does not have a great efficiency ratio per se. So at the Bank, it will be much more efficient.

John Hakopian -- President, First Foundation Advisors

At the Bank, it's already in the 50s.

Scott F. Kavanaugh -- Chief Executive Officer

Yeah.

Conor McDonnell -- Azora -- Analyst

Okay. Perfect. I appreciate the time.

Scott F. Kavanaugh -- Chief Executive Officer

Great. Thank you.

Operator

Your next question is a follow-up from Steve Moss with B. Riley FBR.

Steve Moss -- B. Riley FBR -- Analyst

Just two more follow-ups for me. I don't think CECL was brought up. I was just kind of wondering what the expected impact would be.

John M. Michel -- Chief Financial Officer

[Speech Overlap] So our expectations are that in the first quarter, we will have additional charge, somewhere between $1 million and $3 million. We're continuing to refine that as we go through the analysis from the 12/31 balances. So the range is $1 million to $3 million right now. It will probably be tighter by the time we file the K.

Steve Moss -- B. Riley FBR -- Analyst

Okay. And then I guess there is going to be a Day 2 impact given the formulaic nature. Probably would have to have some higher level of provisioning.

John M. Michel -- Chief Financial Officer

It's probably not going to be that much significantly because we're pretty close. I mean, if you look at $1 million in '20, it's a 5% difference. It's really not going to impact our average. We had a pretty high level in relation to our actual losses under the old modeling. So the impact of CECL is not -- we don't expect to be significant.

Obviously, the expectation would be whatever we end up with CECL as a percentage of the portfolio is probably be going to be pretty consistent going forward barring any unforeseen changes in economic scenarios. But that's kind of -- as we go forward, we see that, and that's not much different from what we've done in the past.

Steve Moss -- B. Riley FBR -- Analyst

Okay. That's helpful. And then just on the expected tax rate for 2020 was a little higher this quarter than I think probably [Indecipherable]

John M. Michel -- Chief Financial Officer

Yeah. We are reconciling it for year-to-date and quarters and going through that. So the overall rate for all of 2019 was 29.3%. We expect because of some of the tax advantage activities we're doing that it will come down closer to 29% from [Phonetic] 29.3% in 2020 and then hopefully continue to go down as we look for other tax-advantaged investments in the future. But the projection right now for 2020 is 29%.

Steve Moss -- B. Riley FBR -- Analyst

Okay. And then I guess just one last one here. Just wondering, is there any change in the M&A environment or what you guys are seeing for M&A activity these days?

Scott F. Kavanaugh -- Chief Executive Officer

It's all pretty quiet. Very optimistic in terms of that expectations will get closer together between buyer and seller. But I think right now -- and it's funny because I just had this conversation yesterday with someone and I think expectations are still pretty wide between where we are trading versus where a non-public company thinks they should settle. And so, I'm -- we'll see. I think some people are starting to show signs of fatigue and may be realigning their thoughts. But it's still early. So we'll see. But at some point people have to I think readjust their thinking if they're willing to be acquired.

David DePillo -- President

Yeah. It's kind of interesting, Steve. We're approaching 1% ROA and we have a high growth rate in earnings, and if we take a modest sized institution, that's probably at 0.5%, 0.6% ROA, modest to flat growth, and they still want 2 times the book. It's pretty hard to make that accretive over time for us. So, we're kind of a victim of our own circumstance of -- yes, victim of success of having higher growth in earnings and now hitting hurdle rates of returns that most of the people that are for sale aren't achieving. And it just makes it really tough.

Scott F. Kavanaugh -- Chief Executive Officer

Yeah. And I think, given this environment -- I mean, the proposition for us is, as Dave started to allude to, I mean, we made $1.25 this year and your consensus is $1.44 for next year. I don't know that many banks out there are experiencing the same type of growth rates the First Foundation is.

But if there is a proposition to be made for another bank is that they can hook their pony to a wagon that's maybe got a little more steam behind it. We've been fortunate enough to have very strong tangible book value growth the last several years. And I tell people, even though the actual sale may not be 2 times book, if we are successful in doing the same growth as we've been able to experience the last several years, they'll get their 2 times number.

Steve Moss -- B. Riley FBR -- Analyst

Great. Well, thank you very much, guys.

Scott F. Kavanaugh -- Chief Executive Officer

Thank you.

Operator

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

Scott F. Kavanaugh -- Chief Executive Officer

So, I wanted to point out, we recently changed our slide deck, and that can be reviewed on our Investor Relations portion or segment of our website. So I would strongly encourage any investor that has seen kind of our old standard -- to me, it seems like it's a lot different, and I think it would be valuable to take a look at that.

But in my closing remarks, I'll just say, as of today, and given the current environment, I am very optimistic in our business plan looking forward. While things are obviously subject to change based on market conditions, I believe we have a strong management team and I am forever thankful for all of our employees. Everyone on the team is working hard to create an excellent client experience, and we are committed to delivering strong results for shareholders. Thank you again for participating in today's call, and have a great remainder of your day.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Scott F. Kavanaugh -- Chief Executive Officer

John M. Michel -- Chief Financial Officer

David DePillo -- President

John Hakopian -- President, First Foundation Advisors

Steve Moss -- B. Riley FBR -- Analyst

Matthew Clark -- Piper Sandler -- Analyst

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

Conor McDonnell -- Azora -- Analyst

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