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First Foundation Inc (NASDAQ:FFWM)
Q2 2020 Earnings Call
Jul 21, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to First Foundation's Second Quarter 2020 Earnings Conference Call. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions, following the presentation. [Operator Instructions]

Speaking today will be Scott Kavanaugh, First Foundation's Chief Executive Officer; Kevin Thompson, Chief Financial Officer; David DePillo, President of First Foundation; 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 would like to 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 all of you to our second quarter 2020 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 this morning, we experienced another strong quarter across all key financial metrics of the firm. Our earnings for the second quarter were $17.9 million, a 44% increase over the second quarter of 2019, or $0.40 per share. Total revenues were $57.4 million for the quarter, an increase of 13% year-over-year. Our efficiency ratio for the second quarter was 53% at FFI, and 47% at the bank. And our tangible book value per share ended the quarter at $12.16 per share. We can also report that the Company's Board of Directors has declared our quarterly cash dividend of $0.07 per share. And at this time, we anticipate the continuation of the dividend in future quarters.

I am extremely grateful to all of our employees, who have helped us produce such strong results this quarter. It's been remarkable to see our team perform amid all that is currently going on. As I've said in prior calls, we have been focused on the health and safety of our employees and our clients. Providing excellent client service has been a core value of ours, and we remain committed to offering support to those in need. We participated in the Small Business Administration's Paycheck Protection Program, and Dave will touch on that more in detail. We have suspended any further participation in the PPP, and currently do not intend to participate in the mainstream lending program.

I'm also so pleased that all of our branches have been able to safely remain open to support our clients throughout all of this. And as you are aware, we rolled out our digital platforms in October of last year, which proved to be good timing with the pandemic. These digital platforms have performed well both for our clients, who need vital services, as well as our employees, who've relied on virtual technologies to conduct many of their day-to-day functions. This quarter's results are another testament to the strength of our business model. We saw a strong loan and deposit growth. And despite volatile financial markets, our assets under management returned to near peak levels. I'm very grateful for all of our employees and I want to thank all of our clients, who entrust us with their financial needs.

At this time, let me introduce and turn the call over to our newest member of the executive team, our CFO, Kevin Thompson.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Thank you, Scott. It's great to be part of the team. In spite of a challenging economic environment, we experienced strong profitability in the quarter, with a diluted EPS of $0.40 per share. As Scott mentioned, the efficiency ratio decreased to 53% at FFI, and 47% at the bank, with the return on assets of 1.06%, and a return on tangible common equity of 13%.

Our track record during this quarter is a testament to our business model. We benefited from fairly consistent fee income from our Financial Advisory Group, the strong loan portfolio, especially focused on a conservative multifamily book, and the liability sensitive balance sheet that is poised to benefit in this rate environment. And even as we grew deposits by 12%, we witnessed a decrease of interest expense by 30% in the quarter, which helped boost net interest income by 8% and the net interest margin to 2.96%.

The ratio of allowance for credit losses to loans increased to 55 basis points this quarter. Even with strong credit metrics and trends, we used more severe economic scenario assumptions under the CECL framework to help buoy up our reserve levels. With strong expense management and continued operational leverage of the investments we have made in our business, pre-provision net revenue increased an impressive 17% in the quarter. This is despite the lower non-interest income, as a result of lower transaction volumes and advisory fees in the quarter. At this time, we still believe our third quarter multifamily loan securitization should occur, as planned. All in all, it was a strong quarter. And I want to thank everyone on the First Foundation team for the warm welcome.

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

David DePillo -- President

Thank you, Kevin. First, I want to reiterate our gratitude to our team members. Thanks to their efforts, we have been able to maintain a consistent pace with our business plan projections and support our customers.

During the second quarter, we originated $701 million of loans. As expected, loan demand has softened somewhat in many of our markets. But we will remain on track for a strong year, pending any additional unforeseen circumstances. The composition of our loan originations for the quarter is as follows. Multifamily, 55%; commercial, including owner-occupied commercial real estate, 38%; single family, 6%; and other 1%. For the second quarter, the weighted average rate on our loan originations was 2.86%. Excluding PPP loans, originations were at 3.55%.

I wanted to also reiterate some items about credit quality of our loan portfolio. As Kevin mentioned, our asset quality remains strong with NPAs remaining at 22 basis points. Approximately 85% of our portfolio is secured by real estate. Across all segments, the loan-to-value is low, averaging below 60%. Our debt service coverage ratios on our multifamily, non-owner occupied commercial real estate are strong.

In our commercial business loan portfolio, we have low exposures to industry that have been hit hard by the pandemic. Specifically, hospitality and restaurants, representing $51 million or less than 1% of our loan portfolio. In addition, we have no meaningful exposure to oil and gas, aviation or cruise industries. In our owner-occupied commercial real estate portfolio, we have low exposure to hotels and retail buildings, representing $26 million and $156 million, respectively or a combined total of 3% of our total loan portfolio.

As mentioned, we participated in the PPP program and funded 604 loans, for a total balance of $171 million. The forgiveness portal, the system we used to receive, evaluate, track and process PPP loan forgiveness request has not been turned on at this time, as we are still waiting for the guidance from the FDA. We anticipate the majority of these loans to be forgiven in the fourth quarter of 2020, and the first quarter of 2021. We have also handled request for forbearance, which remain low and we have not seen any significant need for forbearance in our multifamily portfolio at this time.

During the quarter, deposits grew by $617 million, which is an increase of 12%, compared to the second quarter of last year. We saw growth on both retail deposits, and in our specialty deposits. And our online deposit activity had contributed an additional $370 million, since we launched that offering nine months ago.

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

John Hakopian -- President

Thank you, David, and good morning. Our assets under management closed the quarter at $4.3 billion. We added $157 million of assets under management from new clients, which is at a pace that is ahead of last year. Also client terminations are trending much lower than last quarters. This is a testament to our team, who continues to perform even amid this pandemic.

Our investment philosophy, which relies on a value-based investment acumen to preserve capital and manage downside risk has performed well for our clients. Our balanced portfolios have done well this year. Also our trust department continues to be instrumental in our ability to build and maintain relationships with our clients. Our trust department allows us to work with clients that have financial needs beyond our traditional investment and wealth planning offering. We have been able to eliminate some positions, and do not feel the need to replace them at this time.

With AUM at peak levels, and with the recent reduction in staff, we anticipate margin improvement going forward. We are looking at ways to even further strengthen our efficiencies by making and enhancements to our core technologies and improving the client experience. This was a project that was already well under way, but has been validated by the pandemic, given the benefits we could realize in the near term.

Whether we continue to operate virtually with clients for the foreseeable future or we return to the in-person model, soon we are becoming better positioned to serve our clients in either scenario, however, they may prefer. We also have uncovered some new opportunities to efficiently capture assets from clients, who are more inclined to leverage technology when working with a wealth manager. With these elements in place, we are seeing a strong pipeline and expect to continue to be successful in attracting new clients in the future.

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

Questions and Answers:

Operator

Thank you. The floor is now open for questions. [Operator Instructions]

Your first question is from Matthew Clark of Piper Sandler.

Matthew Clark -- Piper Sandler -- Analyst

Hey, good morning.

David DePillo -- President

Good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning, Matthew.

Matthew Clark -- Piper Sandler -- Analyst

Could you give us the contribution to NII this quarter from PPP?

Scott F. Kavanaugh -- Chief Executive Officer

The actual dollars -- you want to go...

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Yeah, I don't have that with me, the actual contribution. But the -- it -- because of the low rate, as you know, Matthew, it did impact our net interest margin by about 4 basis points. It was a hit to our net interest margin. So I don't have the actual amount. But you could take -- the average loans were out there about $171 million. By average, the rates 1%. The fees are amortized over two years. You could kind of back into that.

Matthew Clark -- Piper Sandler -- Analyst

Okay. Yeah. Okay. And then the reserve was up on a dollar basis, about $7.5 million, doesn't look like it came through the provision. Can you just give us some color on that was reallocated?

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Sure. Yeah, there are a couple of things going on there. So as part of CECL, you take your purchase credit impaired loans and what happens is, those become automatically under the -- there is a -- that's the former name for them, they automatically become purchase credit deteriorated loans on the CECL framework. And there is a process you're supposed to go through, I call that the -- a gross-up, where you look at those loans and decide what portion of the discount that you've had out there is related to credit, and what is non-credit. And we went through analysis and it's all credit-related, so we appropriately dispositioned those loans into the CECL reserve. So that doesn't impact the income statement. You saw a number of our peers that have been acquisitive in the past to do that same thing last quarter. So that's one item.

Yeah. And the other item is under CECL, there is this new thought that as you have, what would have traditionally been called the OTTI, the other than temporary impairments on securities when cash flows. When you have some impairment going on, historically that you would have had a valuation allowance against that security. Under CECL guidance, actually that runs through your credit provision now. And so what you do is you take the present value of your cash flows, compare that to your fair value or amortized cost. And you saw that last quarter, we had an IO strip adjustment that appropriately was run through our through CECL this time. And there was a small increase to that -- this quarter as well. Does that make sense, Matthew?

Matthew Clark -- Piper Sandler -- Analyst

Yeah. That's great color. Thank you. And then just shifting gears back to the margin. Do you have to have the spot rate at the end of June on your interest-bearing deposits? And the -- and maybe the interest-bearing liabilities as well, just given the dramatic drop in funding costs, trying to get a sense for where they might be headed in 3Q.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Yeah. The interest-bearing deposits, I have -- yeah deposits -- interest-bearing deposits were dipping into the low 1% by the end of the quarter. So as you see, we're at 1.81% for the quarter. So it was dipping down quite -- we saw quite a bit of movement, and we're seeing more to come. There's a lot of movement we still anticipate.

Scott F. Kavanaugh -- Chief Executive Officer

Yeah, we still think that there is going to be in adjustment in interest expense, lower in the third quarter and slightly into the fourth quarter and should be fully adjusted going into 2021. Remember, we also have described $0.5 billion of home loan bank borrowings that will mature in September -- I think it's mid-September, and that currently is at a rate of 1.77%, and when that wears off, I'm not sure given our loans-to-deposit ratio and the securitization that will need to replace it. But if we did, it would be in the teens, in terms of with the rate adjustment would be. So I think one of the things that we're also trying to do between home bank advances, we want to see a decline in that. We've been very strong in the deposit gathering mode. And then also brokered deposits we're letting a lot of that wear off. And I think we can reduce that quite a bit, maybe as much as $400 million or $500 million. So if you look at it this way, Matthew, typically, this quarter is the one we kind of give you a margin, with and without our wholesale leverage going into the securitization. This year, it's particularly prominent in the fact that, as Scott mentioned, that one-year term borrowing that we're matching against the loans available for sale is that a rate that's significantly higher than borrowing cost today, equivalent borrowing costs today are probably 20 basis points. That effect on the margin will be immediately impacted at the end of the third quarter and then full benefit going forward in the fourth quarter. So the -- if you kind of do a margins build up, it was 2.96%, and it was 3 basis points for PPP, net effect. So call it 3% there. It's kind of our rate today. And then, kind of including the effect of the wholesale leverage, add another 10 basis points...

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Another 8 basis points.

Scott F. Kavanaugh -- Chief Executive Officer

Another 8 basis points, so you can kind of back into where we're at, excluding those items.

David DePillo -- President

And so in the past, we've talked about having a higher than 3% margin. And I think, we'll be able to attain that next quarter.

Matthew Clark -- Piper Sandler -- Analyst

Yeah. Okay, great. And did you buyback any stock in the quarter? And if so, how much and at what price?

Scott F. Kavanaugh -- Chief Executive Officer

No, we did not. I think for the foreseeable future, Matthew, no real intent. When our stock was trading below tangible book value or close to tangible book value, it made more sense. I'm sure you can look at the capital levels and say, it looks like it's close. So, I think for the time being, we're just going to accumulate capital, we'll pay our dividends. But I don't really -- unless the stock dips hard, I probably will not buy any stock back anytime in the next several quarters.

Matthew Clark -- Piper Sandler -- Analyst

Okay. Last one from me. Just on the multifamily portfolio, haven't seen much in the way of deferrals whatsoever. If the unemployment benefits get cut a bit, should we start to -- should that be more of a concern as it relates to the underlying rents and the need for some forbearance?

Kevin Thompson -- Executive Vice President, Chief Financial Officer

It's kind of interesting. There is a lot of elasticity in the cash flows of our multifamily borrowers. So even if they saw, say, a 10% collection variance, maybe as high as even 20%, most of them with cash flow positive toward debt because of the nature of our underwriting. So could there be some impact potentially, if this becomes severely protracted for a long period of time and there is no safety net. But at this point, we've done some pretty severe stress analysis through our CECL modeling. And because of the richness, again, of the cash flows, it would take something beyond just non-continuance of unemployment benefits to dramatically impact to the point of any need for forbearance or any form of default.

Matthew Clark -- Piper Sandler -- Analyst

Great. Thank you.

Scott F. Kavanaugh -- Chief Executive Officer

Thanks, Matthew.

Operator

Thank you. Your next question is from Steve Moss of B. Riley, FBR.

Steve Moss -- B. Riley, FBR -- Analyst

Good morning.

Scott F. Kavanaugh -- Chief Executive Officer

Good morning, Steve.

Steve Moss -- B. Riley, FBR -- Analyst

Starting with perhaps loan yields here, just kind of wondering where they ended up at the quarter? I think, I heard 3.55% for the quarter average. Just wondering if spreads are tighter today than they were during the quarter here.

David DePillo -- President

So interesting, the loans that were funded out and obviously the ones that are impacted the most outside of PPP, which had kind of an aberration to the net is typically multifamily. Those came down from 3.71% in the first quarter to 3.55%. And that -- the majority of that pipeline was built up when the Fed dropped rates and there was kind of what we call pre-locked down. So there is high demand and no risk-adjusted return. Our expectation is that's probably where we're going to probably normalize. Most people have figured out that multifamily is somewhat a safe harbor in the market. Most lenders have returned. And so we, from an internal modeling standpoint, Steve, look at that run rate as kind of consistent going forward. We had a, I would say, a brief period of time of wider spreads in the market, but certainly from what we see all the way from the agencies through portfolio lenders, those spreads have more or less risk-adjusted themselves back to where they were in the first quarter. Does that kind of answer your question on that?

Steve Moss -- B. Riley, FBR -- Analyst

Yes. And so in terms of the pipeline, just kind of curious here. I mean, you mentioned some moderation in the pipeline and slower loan growth. Any extra color or kind of what you're thinking about for the back half of this year, would be helpful.

David DePillo -- President

So we modeled kind of a slow July, then starting to pick up a little bit in August, and then September and then fully ramped back up to our normal production levels in the fourth quarter. The summer is typically a slower season. It's kind of that plus COVID, and multifamily borrowers can be a little more conservative. Some of them were sitting on the sidelines less sensitive to rate and more of just wanting to see what's going on. That's kind of subsided and we're starting to see momentum and pick up back in the pipeline. So I would say, we're ahead of expectations for July and August from where we had modeled internally. So that's good news. And we expect to probably be back to fully ramped, probably by the end of September going into the fourth quarter. So the market seems -- purchase activity is picking up. Our refinance activity is picking up. And then obviously, on the consumer side and, mostly in the residential mortgage market, that seems to be fairly robust. So multifamily is kind of catching back up to that kind of general pace, I would say.

Steve Moss -- B. Riley, FBR -- Analyst

Okay. That's helpful. And then in terms of funding cost, perhaps going to customer service costs, you had pretty good growth here, I think, on an EOP basis. Just kind of curious as to how to think about that line item for the back half of this year as well.

David DePillo -- President

Well, it's a confluence of two things. One, lowering costs, but higher balances. So I would say that, I would probably run it flat because we are seeing huge demand by a lot of our customers to park money, so to speak. And I think, you've probably heard this from just about every bank. There is a demand for a home for deposits now that we haven't seen for quite some time. So I don't think the relative absolute dollars will decline. The rates have kind of [Speech Overlap]. But balances are going to be up pretty significant...

Scott F. Kavanaugh -- Chief Executive Officer

Balances are high, but the costs themselves have come down substantially.

David DePillo -- President

The way I would look at it, Steve, is even with those higher costs, the bank is already in the 40s in efficiency. That should continue to improve as our revenues continue to improve as well. So we're -- I would say, we wanted to be at about 50% efficiency by the end of this year. We're already kind of ahead of schedule, even including higher balances in customer service area.

Steve Moss -- B. Riley, FBR -- Analyst

Okay, that's helpful. And last one for me. In terms of the wealth management business, good rebound. Just with regard to the new clients coming on board, is there a further pipeline of new clients to add? And just kind of incremental color that would be great.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Yeah. Great question. So what we're seeing is the quality of the new clients coming on board, seems to be larger relationships, relationships that also include our trust company. And so the volume is probably a little less, but in terms of quality and size of relationships, it's probably a better than larger client relationships.

Steve Moss -- B. Riley, FBR -- Analyst

Is that a shift in the -- I'm sorry, go ahead.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

No, go ahead, Steve.

Steve Moss -- B. Riley, FBR -- Analyst

Okay. In terms of just -- is that in terms -- is that a result of hiring of new relationship managers? Or just kind of what's driving that shift in larger clients?

Kevin Thompson -- Executive Vice President, Chief Financial Officer

No. I think if you look back over the last several years, we've definitely been moving upstream trying to go after larger relationships. And so as a result, we just got to, I think, $25 million relationship that came through here in the last few days. And so both through the swap channel, the TV channel, as well as our own channel, we've been -- we've definitely been bringing on larger relationships and it's just something we focused on in the last couple of years. And the platform is really built for larger relationships. And so we've worked closely with our trust company. Our Nevada Trust offering has helped a lot in -- as well as just the California Trust powers also.

Scott F. Kavanaugh -- Chief Executive Officer

I think it's important to point out, we did have a reduction in staff. We really have not added relationship managers. We've actually pared back a few. And I would tell you that in quarters past margin has not been where we would like to see it. And I think on a go-forward basis, you're going to see margins start to improve and will continue to improve. We're kind of hunkered down. And most of our RMs are working off-site or remote. So to have that type of pickup in new assets is actually pretty good. But I think it's just equally is important and talk about the expense savings, which are at least a couple of million dollars so far. And as soon as we can bring our new operating system online, I think we can create more efficiencies on a go-forward basis and not feel the need to increase our staffing.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Yeah. And lastly, just I think when you get more volatility in the markets, people tend not to want to manage their assets on their own. And so they're out engaging a wealth manager like ourselves. And so, we usually see a pickup in business when we see the volatility we've seen in the last couple of months.

Steve Moss -- B. Riley, FBR -- Analyst

Great. Thank you very much, and nice quarter.

Scott F. Kavanaugh -- Chief Executive Officer

Thank you, Steve.

Operator

Thank you. [Operator Instructions] Your next question is from David Feaster of Raymond James.

David Feaster -- Raymond James -- Analyst

Good morning, everybody.

Kevin Thompson -- Executive Vice President, Chief Financial Officer

Good morning, David.

Scott F. Kavanaugh -- Chief Executive Officer

Hey, David, how are you doing?

David Feaster -- Raymond James -- Analyst

I'm well. I'm well, thank you. I just wanted to start on deposit growth. Deposit growth was tremendous. But when I look at it -- look at end-of-period versus the average, it seems like a lot of it happened late quarter. Just curious how much of this deposit growth you think was from PPP or stimulants versus true organic growth from the digital brand or specialty deposits or anything? And then how deposits have trended early in the third quarter and maybe just how expectations might be for how sticky some of the deposit growth will be?

David DePillo -- President

So it's interesting. The -- we did an analysis on PPP. About half the dollars have already left, which is, I guess, good news. And it's probably 60% -- a little over 60%. So of the $170 million, there's maybe half of that left.

Scott F. Kavanaugh -- Chief Executive Officer

So it was -- so we funded into -- there was a $171 million funded PPP. About $160 million actually went into a First Foundation account as opposed to maybe a different bank. And then like Dave saying, over half of that has already left the bank. So really when you look at it, it's not a significant impact versus the $600 million that we took on board. And it really came across a broad stroke, I mean we -- the branch network was very successful. The digital network was also very successful with huge, and then our specialty deposits also picked up. And like Dave was alluding to earlier, we've had a lot of clients call up and say, hey, we want to give you more dollars, and we've definitely been the beneficiary of that as well as new relationship.

David DePillo -- President

I mean -- I think if you look at our balance sheet at the end of the quarter, traditionally, this would be our highest loan-to-deposit ratio because of the wholesale leverage we typically carry by having those excess loans in our books. And it's at a level we haven't seen basically one to one for that period of time. Plus, a lot of the balance sheet growth is sitting in cash right now as well. And traditionally we haven't been sitting on a lot of cash. So deposit demand is significant as Scott said, across all the lines. Our expectations are, the digital channel will continue to grow. The question is -- for everyone, is how sticky is that business? Well, when we started that program, our rates were significantly higher than they are today, and we keep ratcheting down, ratcheting down, ratcheting down, and it keeps growing and growing and growing. Our decay rate is very minimal. As long as you're close in the market, in which we can afford to be, because we don't have a 1,000 legacy branches sitting around that we have to support. So we're almost to the point of collapsing those on top of our branch rates, which would be the first time we've seen that in a long time. And again, as Scott stated, rent growth has been pretty significant too. In the specialty side for us is really where a lot of our expectation for growth will continue. So -- and just to let you know, the pipeline still is very robust on the deposit front.

David Feaster -- Raymond James -- Analyst

That's terrific. That's terrific. And then just on the multifamily portfolio, I'm just curious what you're hearing from clients. There's obviously, investors are a bit concerned about the market. We're seeing different data about rent collections. You're obviously well-positioned in rent controlled markets. But just curious how rent collections are trending in June and early July? And how vacancy rates are trending?

David DePillo -- President

So we haven't seen any significant deterioration in collections period-over-period, month-over-month. And July was, typically it seems to be the same as what we've seen in June and in May. Talking to our clients, typically, they'll get the majority of the rents in the normal collection period, and then we'll have a few tenants that they'll work with, through the end of the month. But outside of that, we haven't seen any major tenant defaults. I think a lot of the municipalities have changed their tune in regards to, hey, don't pay your rents. Don't worry about it, because they've been sued over that, and there has been cases in California also. So they're being a lot more mindful on telling people, go pay your rent, that's an important thing. There is probably a couple of other factors. One, as they come out with some rental assistance programs in some of our major cities in California, specifically LA, that will help renters. And this whole anomaly of people working from home, as you know, we have a high percentage of renters. It's not like you want to sacrifice your ability to maintain your job from your dwelling, and a lot of those are apartments. So we see this kind of hyper importance of housing beyond what we've traditionally seen in the past where the mobility is certainly there, but the demand is certainly still high. So talking to our apartment owners, which we talk to every day and through the process of securitization, we're getting updated rent rolls. I would say that, we don't really see any stress, any different from July to June from May. If a walkdown continues in perpetuity and another shoe drops, yes, that could change. But if it kind of stays where we're at, it feels kind of every day is Groundhog Day.

Scott F. Kavanaugh -- Chief Executive Officer

I told you anecdotally, I own units myself. And in the month of April, May, June and July, it's been a 100% collections.

David DePillo -- President

And you would say, those are more traditional workforce...

Scott F. Kavanaugh -- Chief Executive Officer

Yeah, workforce housing, which is what exactly the type of stuff that we do.

David Feaster -- Raymond James -- Analyst

That's helpful. And then just kind of following up on your point, Dave, on the working from home, maybe more of a strategic question. And I suspect I know the answer to this is, this market really basically just affirms your business model. But I guess, as you guys step back and think about your positioning in the market and the business model, do you see any changes to the strategy in the midst of this environment, given increased remote workers and more digital adoption and changing consumer behaviors? Just -- not only just on the expense savings side, maybe office space saving, but even opportunities for growth or places that you might want to invest to drive additional organic growth going forward?

David DePillo -- President

So we embarked on those, I would say, four years ago and said, we are not going to be solely dependent on bricks and mortar. We want to invest in technology. We want to upgrade our systems. We want to have scale and efficiency that most institutions at the size we were four years or five years ago, wouldn't have made those investments. And quite frankly, we got beat up for it for a while, because our efficiency ratio was running a little bit higher. Those investments, we feel, are paying off in a few areas. One is, the -- from the inception of the business, when Scott put the bank together, it was built in a time where distributed technology was a lot more efficient than most banks were built 20 years, 30 years ago. So this bank has always been -- has the ability to have a distributed workforce from day one. We haven't had the need to disseminate everyone out. But we've always had that ability. So that was a strategic advantage. On the core systems and our digital delivery, the commercial side from the -- from five years ago, we built out a robust commercial site, because we knew the client base that we're going after requires significant technology to perform those tasks. And then we made the strategic decision to really kind of push the consumer side on our digital delivery platforms. So we kind of feel we are what we call the cutting edge of digital delivery on the consumer side, and not the bleeding edge. So we let the big bank spend the hundreds of millions of dollars, and figuring out how to deliver this, and then we take more off-the-shelf products that are cheap and efficient for us. And if you just look at our digital branch growth -- from zero to $380 million in less than, what, nine months?

Scott F. Kavanaugh -- Chief Executive Officer

Yeah.

David DePillo -- President

We grew the size of the community bank in that period literally with a few people at no cost, effectively, on the margin to us. Our strategic partnerships with our technology providers are some of the best in the industry right now. They're using us as kind of the poster child for our other banks. We've won several awards around our distributed delivery, as well as our internal efficiency use of business intelligence. So we've -- we feel going into the next leg, we were just lucky to make those investments, when this pandemic hit because we sit around going with 15% of our staff on cycling, we're as efficient or more efficient than we've ever been.

Scott F. Kavanaugh -- Chief Executive Officer

I keep using the word serendipitous. I mean, it really was serendipitous. Look, looking forward, on a longer-term basis, and I think it's important to really talk about it, we have very little office exposure, if any. When you look at our CRE concentrations, it's multifamily. We're not the only bank. I mean, I've been reading all the big banks are in no hurry to bring their employees back. We were initially facing some of our employees back, and we've halted that. And I think for the foreseeable future, we're evaluating what our needs are in terms of office space. And come time for the renewal, I have a feeling we won't need near the office space that we currently have, which will be further cost savings for First Foundation. And I would bet that not just banks, but a lot of different companies out there are facing the same thing that we are in, realizing that you can still get good productivity from people working remotely as well.

David DePillo -- President

Yeah. Just the ability to reach different demographics than we have historically been able to do over half of our customer base through our digital delivery. New customer acquisition is 40 and below, which is very unique. This institution typically, from an age and demographic perspective was kind of 65 and above. So we've kind of transform the customer base of the bank to be a lot more broad and want to continue to do that. That's where all our energy is really through expansion of our product offerings, digital delivery and that goes all the way through our high-touch customer service side. So at the end of the day, if you need a high-touch customer service and you want to do it digitally, we want to be the default option.

David Feaster -- Raymond James -- Analyst

Got it. That's great. That's extremely helpful. Thanks, guys.

Operator

Thank you. You have a follow-up from Matthew Clark of Piper Sandler.

Matthew Clark -- Piper Sandler -- Analyst

Hey, on the comp line, the drop there, I guess how much of that was driven by the deferral of origination cost tied to PPP, if any?

Kevin Thompson -- Executive Vice President, Chief Financial Officer

It's not terribly impactful. You have a little bit of decrease during this time with lower commissions and lower transactions happening in branches and things like that. And of course, the first quarter is when you generally have the highest benefits and salary costs. So we anticipate going forward as things kind of normalize that line coming up slightly.

Scott F. Kavanaugh -- Chief Executive Officer

Matthew, we've been very firm about hiring practices throughout kind of this area. Plus or minus one or two bodies, we are at 500 employees. And we feel that that's sufficient for the workload that currently we can handle. So I think for the foreseeable future, you should expect to see the headcount remain very close to 500.

David DePillo -- President

On the deferral side, as you probably heard us say, we've been historically, I would say, fairly conservative on the low end on deferrals. Yes, a lot of folks play that game of deferring a lot of expenses, but we don't want to have our basis of our loans to be 100 to one [Phonetic]. So one all -- I would say, on all business lines, including PPP, we've kept that number relatively low.

Matthew Clark -- Piper Sandler -- Analyst

Okay. Thank you.

David DePillo -- President

Sure.

Operator

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

Scott F. Kavanaugh -- Chief Executive Officer

Thank you, everyone, for taking the time today. We certainly appreciate it. Overall, we are pleased with our results, and we look forward to speaking with you next quarter. This has been an extraordinary time and our team has been up to the challenge. I am so proud of how everyone has responded. Thank you, again and have a great remainder of your day.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Scott F. Kavanaugh -- Chief Executive Officer

Kevin Thompson -- Executive Vice President, Chief Financial Officer

David DePillo -- President

John Hakopian -- President

Matthew Clark -- Piper Sandler -- Analyst

Steve Moss -- B. Riley, FBR -- Analyst

David Feaster -- Raymond James -- Analyst

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