First Western Financial, Inc. (“First Western” or the “Company”)
(NASDAQ: MYFW), today reported financial results for the second
quarter ended June 30, 2023.
Net income available to common shareholders was
$1.5 million, or $0.16 per diluted share, for the second quarter of
2023. This compares to $3.8 million, or $0.39 per diluted
share, for the first quarter of 2023, and $4.5 million, or
$0.46 per diluted share, for the second quarter of 2022. Net income
for the second quarter of 2023 was negatively impacted by net of
tax impacts of $1.5 million related to an allowance recorded on
individually analyzed loans, $0.9 million of impairment to the
carrying value of contingent consideration assets, and $0.8 million
of losses on loans accounted for under the fair value option.
Scott C. Wylie, CEO of First Western, commented,
“Our second quarter performance reflects the strength of the
franchise we have built as we continued to see good stability in
our deposit base and healthy asset quality despite the challenging
operating environment. While remaining conservative and disciplined
in our underwriting and pricing criteria, our total loans increased
at an annualized rate of 4% despite a lower level of loan demand
that we are seeing due to higher interest rates and concerns about
a slowing economy. While we experienced some non-recurring expenses
in the second quarter, our solid financial performance and prudent
balance sheet management resulted in an increase in our capital
ratios and further growth in tangible book value per share during
the second quarter.
“While economic conditions remain uncertain, we
will continue to prioritize prudent risk management and maintain
high levels of liquidity, capital, and reserves. However, we remain
committed to acting in the best long-term interests of our
shareholders, and we will continue to evaluate opportunities for
capital utilization that can create additional value for
shareholders,” said Mr. Wylie.
| |
For the Three Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
(Dollars in thousands, except per share data) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Earnings
Summary |
|
|
|
|
|
| Net interest income |
$ |
18,435 |
|
|
$ |
19,560 |
|
|
$ |
20,380 |
|
| Provision (release) for credit
losses(1) |
|
1,843 |
|
|
|
(310) |
|
|
|
519 |
|
| Total non-interest income |
|
3,962 |
|
|
|
5,819 |
|
|
|
6,698 |
|
| Total non-interest
expense |
|
18,519 |
|
|
|
20,528 |
|
|
|
20,583 |
|
| Income before income
taxes |
|
2,035 |
|
|
|
5,161 |
|
|
|
5,976 |
|
| Income tax expense |
|
529 |
|
|
|
1,341 |
|
|
|
1,494 |
|
| Net income available to common
shareholders |
|
1,506 |
|
|
|
3,820 |
|
|
|
4,482 |
|
| Adjusted net income available
to common shareholders(2) |
|
2,440 |
|
|
|
3,847 |
|
|
|
4,742 |
|
| Basic earnings per common
share |
|
0.16 |
|
|
|
0.40 |
|
|
|
0.47 |
|
| Adjusted basic earnings per
common share(2) |
|
0.25 |
|
|
|
0.40 |
|
|
|
0.50 |
|
| Diluted earnings per common
share |
|
0.16 |
|
|
|
0.39 |
|
|
|
0.46 |
|
| Adjusted diluted earnings per
common share(2) |
|
0.25 |
|
|
|
0.39 |
|
|
|
0.49 |
|
| |
|
|
|
|
|
| Return on average assets
(annualized) |
|
0.21% |
|
|
|
0.54% |
|
|
|
0.71% |
|
| Adjusted return on average
assets (annualized)(2) |
|
0.35 |
|
|
|
0.55 |
|
|
|
0.75 |
|
| Return on average
shareholders' equity (annualized) |
|
2.49 |
|
|
|
6.40 |
|
|
|
7.89 |
|
| Adjusted return on average
shareholders' equity (annualized)(2) |
|
4.04 |
|
|
|
6.45 |
|
|
|
8.35 |
|
| Return on tangible common
equity (annualized)(2) |
|
2.86 |
|
|
|
7.35 |
|
|
|
9.16 |
|
| Adjusted return on tangible
common equity (annualized)(2) |
|
4.64 |
|
|
|
7.41 |
|
|
|
9.69 |
|
| Net interest margin |
|
2.73 |
|
|
|
2.93 |
|
|
|
3.38 |
|
| Efficiency ratio(2) |
|
74.42% |
|
|
|
78.29% |
|
|
|
74.85% |
|
(1) Provision for credit loss amounts for
periods prior to the ASC 326 adoption date of January 1, 2023 are
reported in accordance with previously applicable GAAP. (2)
Represents a Non-GAAP financial measure. See “Reconciliations of
Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to
the most directly comparable GAAP financial measure.
Operating Results for the Second Quarter
2023
Revenue
Gross revenue (1) was $24.8 million for the
second quarter of 2023, a decrease of 5.0% from $26.1 million for
the first quarter of 2023. The decrease was primarily driven by a
decrease in net interest income as a result of higher interest
expense driven by higher deposit costs, offset partially by higher
interest income. Relative to the second quarter of 2022, gross
revenue decreased 8.0% from $26.9 million. The decrease was driven
by a decrease in net interest income as a result of higher interest
expense driven by higher deposit costs, offset partially by higher
interest income.
(1) Represents a Non-GAAP financial measure. See
“Reconciliations of Non-GAAP Measures” for a reconciliation of our
Non-GAAP measures to the most directly comparable GAAP financial
measure.
Net Interest Income
Net interest income for the second quarter of
2023 was $18.4 million, a decrease of 5.8% from $19.6 million in
the first quarter of 2023. Relative to the second quarter of 2022,
net interest income decreased 9.5% from $20.4 million. The
decreases were due to higher interest expense driven primarily by
higher deposit costs, offset partially by higher interest
income.
Net Interest Margin
Net interest margin for the second quarter of
2023 decreased 20 basis points to 2.73% from 2.93% reported in the
first quarter of 2023, primarily due to a 42 basis point increase
in average cost of deposits, driven by a rising rate environment
and a highly competitive deposit market.
The yield on interest-earning assets increased
18 basis points to 5.38% in the second quarter of 2023 from 5.20%
in the first quarter of 2023 and the cost of interest-bearing
deposits increased 50 basis points to 3.44% in the second quarter
of 2023 from 2.94% in the first quarter of 2023.
Relative to the second quarter of 2022, net
interest margin decreased from 3.38%, primarily due to a 248 basis
point increase in average cost of deposits, offset partially by a
135 basis point increase in loan yields.
Non-interest Income
Non-interest income for the second quarter of
2023 was $4.0 million, a decrease of 31.9%, from $5.8 million in
the first quarter of 2023. This was primarily due to a $1.2 million
impairment to the carrying value of contingent consideration assets
related to the sale of First Western Capital Management in 2020.
The value was established using asset growth assumptions provided
by the buyer, which had not materialized. The decrease in
Non-interest income was further driven by losses of $1.1 million
recorded on loans accounted for under the fair value option during
the second quarter of 2023.
Relative to the second quarter of 2022,
non-interest income decreased 40.8% from $6.7 million. The decrease
was primarily due to a $1.2 million impairment to the fair value of
contingent consideration assets, and losses of $1.1 million
recorded on loans accounted for under the fair value option.
Non-interest Expense
Non-interest expense for the second quarter of
2023 was $18.5 million, a decrease of 9.8%, from
$20.5 million in the first quarter of 2023. Relative to the
second quarter of 2022, non-interest expense decreased 10.0% from
$20.6 million. The decreases were primarily driven by lower
salaries and employee benefits related to staffing reductions to
better align with lower revenue. Headcount decreased 10.5% as of
June 30, 2023 compared to March 31, 2023 as a result of the
staffing reductions.
The Company’s efficiency ratio(1) was 74.4% in
the second quarter of 2023, compared with 78.3% in the first
quarter of 2023 and 74.9% in the second quarter of 2022.
(1) Represents a Non-GAAP financial measure. See
“Reconciliations of Non-GAAP Measures” for a reconciliation of our
Non-GAAP measures to the most directly comparable GAAP financial
measure.
Income Taxes
The Company recorded income tax expense of $0.5
million for the second quarter of 2023, representing an effective
tax rate of 26.0%, compared to 26.0% for the first quarter of 2023
and 25.0% for the second quarter of 2022.
Loans
Total loans held for investment were
$2.50 billion as of June 30, 2023, an increase of 1.1%
from $2.48 billion as of March 31, 2023. Relative to the
second quarter of 2022, total loans held for investment increased
16.4% from $2.15 billion as of June 30, 2022. The
increase in total loans held for investment from June 30, 2022
was attributable to loan growth primarily in our commercial real
estate and residential mortgage portfolios.
Deposits
Total deposits were $2.38 billion as of
June 30, 2023, a decrease of 0.7% from $2.39 billion as of
March 31, 2023, as a result of seasonal factors and a highly
competitive deposit market. Relative to the second quarter of 2022,
total deposits increased 9.5% from $2.17 billion as of
June 30, 2022, driven primarily by organic growth through new
and expanded client relationships.
Borrowings
Federal Home Loan Bank (“FHLB”) and Federal
Reserve borrowings were $312.6 million as of June 30, 2023, an
increase of $51.2 million from $261.4 million as of March 31, 2023,
and an increase of $225.4 million from $87.2 million as of
June 30, 2022. Relative to the first quarter of 2023 and
second quarter of 2022, total borrowings increased to support
balance sheet growth and liquidity.
Subordinated notes remained consistent at
$52.2 million as of June 30, 2023, compared to March 31,
2023. Subordinated notes increased $19.7 million from
$32.6 million as of June 30, 2022.
Assets Under Management
AUM increased by $121.9 million during the
second quarter to $6.50 billion as of June 30, 2023, compared
to $6.38 billion as of March 31, 2023. This increase was
attributable to an increase in market values at the end of the
second quarter 2023. Total AUM increased by $226.4 million
compared to June 30, 2022 from $6.28 billion, which was
primarily attributable to improving market conditions
year-over-year resulting in an increase in the value of assets
under management balances.
Credit Quality
Non-performing assets totaled $10.3 million, or
0.36% of total assets, as of June 30, 2023, compared to
$12.5 million, or 0.42% of total assets, as of March 31, 2023.
The decrease was attributable to the two non-accrual loans being
paid off during the quarter. Total classified loans decreased
46.8%, to $10.1 million as of June 30, 2023, compared to $19.0
million as of March 31, 2023, driven primarily by four classified
loans being paid off during the second quarter of 2023. As of
June 30, 2022, non-performing assets totaled
$4.3 million, or 0.17% of total assets. Relative to the second
quarter of 2022, the increase in non-performing assets was driven
by the addition of $8.9 million in loans at the end of the fourth
quarter of 2022, partially offset by two non-accrual loans being
paid off during the quarter.
During the second quarter of 2023, the Company
recorded a provision expense of $1.8 million, compared to a
provision release of $0.3 million in the first quarter of 2023
and a $0.5 million provision expense in the second quarter of
2022. The provision recorded in the second quarter of 2023 reflects
a $2.0 million allowance on individually analyzed loans, partially
offset by the impact of improved economic forecasts which decreased
probability of default rates and loss given default rates, which in
turn reduced our quantitative model loss rates.
Capital
As of June 30, 2023, First Western
(“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the
minimum capital levels required by their respective regulators. As
of June 30, 2023, the Bank was classified as “well
capitalized,” as summarized in the following table:
| |
June 30, |
| |
2023 |
| Consolidated
Capital |
|
| Tier 1 capital to
risk-weighted assets |
9.26% |
|
| Common Equity Tier 1 ("CET1")
to risk-weighted assets |
9.26 |
|
| Total capital to risk-weighted
assets |
12.41 |
|
| Tier 1 capital to average
assets |
7.80 |
|
| |
|
| Bank
Capital |
|
| Tier 1 capital to
risk-weighted assets |
10.34 |
|
| CET1 to risk-weighted
assets |
10.34 |
|
| Total capital to risk-weighted
assets |
11.23 |
|
| Tier 1 capital to average
assets |
8.70 |
|
Book value per common share increased 0.6% from
$25.22 as of March 31, 2023 to $25.38 as of June 30, 2023.
Book value per common share was up 5.5% from $24.06 as of
June 30, 2022. The adoption of CECL on January 1, 2023
resulted in a $0.56 reduction of book value per common share.
Tangible book value per common share (1)
increased 0.8% from $21.85 as of March 31, 2023, to $22.03 as of
June 30, 2023. Tangible book value per common share was up
6.7% from $20.65 as of June 30, 2022. The adoption of CECL on
January 1, 2023 resulted in a $0.56 reduction of tangible book
value per common share.
(1) Represents a Non-GAAP financial measure. See
“Reconciliations of Non-GAAP Measures” for a reconciliation of our
Non-GAAP measures to the most directly comparable GAAP financial
measure.
Conference Call, Webcast and Slide
Presentation
The Company will host a conference call and webcast at 10:00
a.m. MT/ 12:00 p.m. ET on Friday, July 28, 2023. Telephone access:
https://register.vevent.com/register/BI8ae2876802dc4a1d986948ac4226140e
A slide presentation relating to the second
quarter 2023 results will be accessible prior to the scheduled
conference call. The slide presentation and webcast of the
conference call can be accessed on the Events and Presentations
page of the Company’s investor relations website at
https://myfw.gcs-web.com.
About First Western
First Western is a financial services holding
company headquartered in Denver, Colorado, with operations in
Colorado, Arizona, Wyoming, California, and Montana. First Western
and its subsidiaries provide a fully integrated suite of wealth
management services on a private trust bank platform, which
includes a comprehensive selection of deposit, loan, trust, wealth
planning and investment management products and services. First
Western’s common stock is traded on the Nasdaq Global Select Market
under the symbol “MYFW.” For more information, please visit
www.myfw.com.
Non-GAAP Financial Measures
Some of the financial measures included in this
press release are not measures of financial performance recognized
in accordance with generally accepted accounting principles in the
United States (“GAAP”). These non-GAAP financial measures include
“Tangible Common Equity,” “Tangible Common Book Value per Share,”
“Return on Tangible Common Equity,” “Efficiency Ratio,” “Gross
Revenue,” “Allowance for Credit Losses to Adjusted Loans,”
“Adjusted Net Income Available to Common Shareholders,” “Adjusted
Basic Earnings Per Share,” “Adjusted Diluted Earnings Per Share,”
“Adjusted Return on Average Assets,” “Adjusted Return on Average
Shareholders’ Equity,” and “Adjusted Return on Tangible Common
Equity”. The Company believes these non-GAAP financial measures
provide both management and investors a more complete understanding
of the Company’s financial position and performance. These non-GAAP
financial measures are supplemental and are not a substitute for
any analysis based on GAAP financial measures. Not all companies
use the same calculation of these measures; therefore, this
presentation may not be comparable to other similarly titled
measures as presented by other companies. Reconciliation of
non-GAAP financial measures, to GAAP financial measures are
provided at the end of this press release.
Forward-Looking Statements
Statements in this news release regarding our
expectations and beliefs about our future financial performance and
financial condition, as well as trends in our business and markets
are “forward-looking statements” as defined in the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements often include words such as “believe,” “expect,”
“anticipate,” “intend,” “plan,” “estimate,” “project,” “position,”
“outlook,” or words of similar meaning, or future or conditional
verbs such as “will,” “would,” “should,” “opportunity,” “could,” or
“may.” The forward-looking statements in this news release are
based on current information and on assumptions that we make about
future events and circumstances that are subject to a number of
risks and uncertainties that are often difficult to predict and
beyond our control. As a result of those risks and uncertainties,
our actual financial results in the future could differ, possibly
materially, from those expressed in or implied by the
forward-looking statements contained in this news release and could
cause us to make changes to our future plans. Those risks and
uncertainties include, without limitation, the lack of soundness of
other financial institutions or financial market utilities may
adversely affect the Company; the Company’s ability to engage in
routine funding and other transactions could be adversely affected
by the actions and commercial soundness of other financial
institutions; financial institutions are interrelated because of
trading, clearing, counterparty or other relationships; defaults
by, or even rumors or questions about, one or more financial
institutions or financial market utilities, or the financial
services industry generally, may lead to market-wide liquidity
problems and losses of client, creditor and counterparty confidence
and could lead to losses or defaults by other financial
institutions, or the Company; integration risks and projected cost
savings in connection with acquisitions; the risk of geographic
concentration in Colorado, Arizona, Wyoming, California, and
Montana; the risk of changes in the economy affecting real estate
values and liquidity; the risk in our ability to continue to
originate residential real estate loans and sell such loans; risks
specific to commercial loans and borrowers; the risk of claims and
litigation pertaining to our fiduciary responsibilities; the risk
of competition for investment managers and professionals; the risk
of fluctuation in the value of our investment securities; the risk
of changes in interest rates; and the risk of the adequacy of our
allowance for credit losses and the risk in our ability to maintain
a strong core deposit base or other low-cost funding sources.
Additional information regarding these and other risks and
uncertainties to which our business and future financial
performance are subject is contained in our Annual Report on Form
10-K filed with the U.S. Securities and Exchange Commission (“SEC”)
on March 15, 2023 (“Form 10-K”), and other documents we file with
the SEC from time to time. We urge readers of this news release to
review the “Risk Factors” section our Form 10-K and any updates to
those risk factors set forth in our subsequent Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, and our other filings with
the SEC. Also, our actual financial results in the future may
differ from those currently expected due to additional risks and
uncertainties of which we are not currently aware or which we do
not currently view as, but in the future may become, material to
our business or operating results. Due to these and other possible
uncertainties and risks, readers are cautioned not to place undue
reliance on the forward-looking statements contained in this news
release, which speak only as of today’s date, or to make
predictions based solely on historical financial performance. Any
forward-looking statement speaks only as of the date on which it is
made, and we do not undertake any obligation to update or review
any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as required
by law.
Contacts:Financial Profiles,
Inc.Tony Rossi310-622-8221MYFW@finprofiles.comIR@myfw.com
First Western Financial,
Inc.Consolidated Financial Summary
(unaudited)
| |
Three Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
| (Dollars in thousands,
except per share amounts) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Interest and dividend
income: |
|
|
|
|
|
|
Loans, including fees |
$ |
33,583 |
|
|
$ |
32,080 |
|
|
$ |
20,546 |
|
|
Loans accounted for under the fair value option |
|
351 |
|
|
|
427 |
|
|
|
346 |
|
|
Investment securities |
|
627 |
|
|
|
629 |
|
|
|
418 |
|
|
Interest-bearing deposits in other financial institutions |
|
1,666 |
|
|
|
1,403 |
|
|
|
549 |
|
|
Dividends, restricted stock |
|
145 |
|
|
|
173 |
|
|
|
14 |
|
|
Total interest and dividend income |
|
36,372 |
|
|
|
34,712 |
|
|
|
21,873 |
|
| |
|
|
|
|
|
| Interest expense: |
|
|
|
|
|
|
Deposits |
|
15,864 |
|
|
|
13,092 |
|
|
|
1,103 |
|
|
Other borrowed funds |
|
2,073 |
|
|
|
2,060 |
|
|
|
390 |
|
|
Total interest expense |
|
17,937 |
|
|
|
15,152 |
|
|
|
1,493 |
|
| Net interest income |
|
18,435 |
|
|
|
19,560 |
|
|
|
20,380 |
|
|
Less: provision (release) for credit losses(1) |
|
1,843 |
|
|
|
(310) |
|
|
|
519 |
|
| Net interest income, after
provision (release) for credit losses(1) |
|
16,592 |
|
|
|
19,870 |
|
|
|
19,861 |
|
| |
|
|
|
|
|
| Non-interest income: |
|
|
|
|
|
|
Trust and investment management fees |
|
4,602 |
|
|
|
4,635 |
|
|
|
4,781 |
|
|
Net gain on mortgage loans |
|
774 |
|
|
|
1,019 |
|
|
|
924 |
|
|
Net loss on loans held for sale |
|
— |
|
|
|
(178) |
|
|
|
— |
|
|
Bank fees |
|
591 |
|
|
|
592 |
|
|
|
590 |
|
|
Risk management and insurance fees |
|
103 |
|
|
|
127 |
|
|
|
83 |
|
|
Income on company-owned life insurance |
|
91 |
|
|
|
90 |
|
|
|
87 |
|
|
Net loss on loans accounted for under the fair value option |
|
(1,124) |
|
|
|
(543) |
|
|
|
(155) |
|
|
Unrealized (loss)/gain recognized on equity securities |
|
(11) |
|
|
|
10 |
|
|
|
299 |
|
|
Other |
|
(1,064) |
|
|
|
67 |
|
|
|
89 |
|
|
Total non-interest income |
|
3,962 |
|
|
|
5,819 |
|
|
|
6,698 |
|
|
Total income before non-interest expense |
|
20,554 |
|
|
|
25,689 |
|
|
|
26,559 |
|
| |
|
|
|
|
|
| Non-interest expense: |
|
|
|
|
|
|
Salaries and employee benefits |
|
11,148 |
|
|
|
13,098 |
|
|
|
12,945 |
|
|
Occupancy and equipment |
|
1,939 |
|
|
|
1,914 |
|
|
|
1,892 |
|
|
Professional services |
|
1,858 |
|
|
|
1,923 |
|
|
|
2,027 |
|
|
Technology and information systems |
|
831 |
|
|
|
832 |
|
|
|
1,076 |
|
|
Data processing |
|
1,052 |
|
|
|
1,139 |
|
|
|
987 |
|
|
Marketing |
|
379 |
|
|
|
391 |
|
|
|
428 |
|
|
Amortization of other intangible assets |
|
62 |
|
|
|
64 |
|
|
|
77 |
|
|
Net (gain)/loss on assets held for sale |
|
— |
|
|
|
— |
|
|
|
(2) |
|
|
Other |
|
1,250 |
|
|
|
1,167 |
|
|
|
1,153 |
|
|
Total non-interest expense |
|
18,519 |
|
|
|
20,528 |
|
|
|
20,583 |
|
| Income before income
taxes |
|
2,035 |
|
|
|
5,161 |
|
|
|
5,976 |
|
|
Income tax expense |
|
529 |
|
|
|
1,341 |
|
|
|
1,494 |
|
| Net income available to common
shareholders |
$ |
1,506 |
|
|
$ |
3,820 |
|
|
$ |
4,482 |
|
| Earnings per common
share: |
|
|
|
|
|
|
Basic |
$ |
0.16 |
|
|
$ |
0.40 |
|
|
$ |
0.47 |
|
|
Diluted |
|
0.16 |
|
|
|
0.39 |
|
|
|
0.46 |
|
(1) Provision for credit loss amounts for periods prior to the
ASC 326 adoption date of January 1, 2023 are reported in accordance
with previously applicable GAAP.
First Western Financial,
Inc.Consolidated Financial Summary
(unaudited)
| |
June 30, |
|
March 31, |
June 30, |
| (Dollars in
thousands) |
|
2023 |
|
|
|
2023 |
|
2022 |
|
| Assets |
|
|
|
|
|
| Cash and cash
equivalents: |
|
|
|
|
|
|
Cash and due from banks |
$ |
6,285 |
|
|
$ |
6,920 |
|
|
$ |
11,790 |
|
|
Federal funds sold |
|
— |
|
|
|
— |
|
|
|
385 |
|
|
Interest-bearing deposits in other financial institutions |
|
291,283 |
|
|
|
288,147 |
|
|
|
159,431 |
|
|
Total cash and cash equivalents |
|
297,568 |
|
|
|
295,067 |
|
|
|
171,606 |
|
| |
|
|
|
|
|
| Held-to-maturity securities,
at amortized cost (fair value of $69,551, $73,570 and $84,742,
respectively), net of allowance for credit losses |
|
77,469 |
|
|
|
79,565 |
|
|
|
87,029 |
|
| Correspondent bank stock, at
cost |
|
13,518 |
|
|
|
13,222 |
|
|
|
4,352 |
|
| Mortgage loans held for sale,
at fair value |
|
19,746 |
|
|
|
9,873 |
|
|
|
26,202 |
|
| Loans (includes $17,523,
$20,807, and $21,477 measured at fair value, respectively) |
|
2,495,582 |
|
|
|
2,469,038 |
|
|
|
2,146,394 |
|
| Allowance for credit
losses(1) |
|
(22,044) |
|
|
|
(19,843) |
|
|
|
(14,357) |
|
| Loans, net |
|
2,473,538 |
|
|
|
2,449,195 |
|
|
|
2,132,037 |
|
| Premises and equipment,
net |
|
25,473 |
|
|
|
25,383 |
|
|
|
24,236 |
|
| Accrued interest
receivable |
|
11,135 |
|
|
|
10,976 |
|
|
|
7,884 |
|
| Accounts receivable |
|
5,116 |
|
|
|
4,713 |
|
|
|
5,192 |
|
| Other receivables |
|
3,331 |
|
|
|
2,396 |
|
|
|
4,575 |
|
| Other real estate owned,
net |
|
— |
|
|
|
— |
|
|
|
378 |
|
| Goodwill and other intangible
assets, net |
|
31,977 |
|
|
|
32,040 |
|
|
|
32,258 |
|
| Deferred tax assets, net |
|
7,202 |
|
|
|
6,792 |
|
|
|
7,662 |
|
| Company-owned life
insurance |
|
16,333 |
|
|
|
16,242 |
|
|
|
15,976 |
|
| Other assets |
|
23,240 |
|
|
|
23,043 |
|
|
|
21,960 |
|
| Assets held for sale |
|
— |
|
|
|
— |
|
|
|
146 |
|
|
Total assets |
$ |
3,005,646 |
|
|
$ |
2,968,507 |
|
|
$ |
2,541,493 |
|
| |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
| Deposits: |
|
|
|
|
|
|
Noninterest-bearing |
$ |
514,241 |
|
|
$ |
545,064 |
|
|
$ |
668,342 |
|
|
Interest-bearing |
|
1,861,153 |
|
|
|
1,846,863 |
|
|
|
1,501,656 |
|
|
Total deposits |
|
2,375,394 |
|
|
|
2,391,927 |
|
|
|
2,169,998 |
|
| Borrowings: |
|
|
|
|
|
|
Federal Home Loan Bank and Federal Reserve borrowings |
|
312,600 |
|
|
|
261,385 |
|
|
|
87,223 |
|
|
Subordinated notes |
|
52,223 |
|
|
|
52,167 |
|
|
|
32,553 |
|
| Accrued interest payable |
|
1,788 |
|
|
|
1,786 |
|
|
|
304 |
|
| Other liabilities |
|
21,399 |
|
|
|
21,420 |
|
|
|
23,391 |
|
|
Total liabilities |
|
2,763,404 |
|
|
|
2,728,685 |
|
|
|
2,313,469 |
|
| |
|
|
|
|
|
| Shareholders’
Equity |
|
|
|
|
|
|
Total shareholders’ equity |
|
242,242 |
|
|
|
239,822 |
|
|
|
228,024 |
|
|
Total liabilities and shareholders’ equity |
$ |
3,005,646 |
|
|
$ |
2,968,507 |
|
|
$ |
2,541,493 |
|
(1) Allowance for credit loss amounts for periods prior to the
ASC 326 adoption date of January 1, 2023 are reported in accordance
with previously applicable GAAP.
First Western Financial,
Inc.Consolidated Financial Summary
(unaudited)
| |
June 30, |
|
March 31, |
June 30, |
| (Dollars in
thousands) |
|
2023 |
|
|
|
2023 |
|
2022 |
|
| Loan
Portfolio |
|
|
|
|
|
|
Cash, Securities, and Other(1) |
$ |
150,679 |
|
|
$ |
157,308 |
|
|
$ |
180,738 |
|
| Consumer and Other |
|
21,866 |
|
|
|
22,183 |
|
|
|
26,706 |
|
| Construction and
Development |
|
313,227 |
|
|
|
283,999 |
|
|
|
162,426 |
|
| 1-4 Family Residential |
|
878,670 |
|
|
|
889,782 |
|
|
|
732,725 |
|
| Non-Owner Occupied CRE |
|
561,880 |
|
|
|
536,679 |
|
|
|
489,111 |
|
| Owner Occupied CRE |
|
218,651 |
|
|
|
223,449 |
|
|
|
224,597 |
|
| Commercial and Industrial |
|
338,679 |
|
|
|
340,632 |
|
|
|
312,696 |
|
|
Total |
|
2,483,652 |
|
|
|
2,454,032 |
|
|
|
2,128,999 |
|
| Loans accounted for under the
fair value option |
|
18,274 |
|
|
|
21,052 |
|
|
|
21,149 |
|
|
Total loans held for investment |
|
2,501,926 |
|
|
|
2,475,084 |
|
|
|
2,150,148 |
|
| Deferred (fees) costs and
unamortized premiums/(unaccreted discounts), net(2) |
|
(6,344) |
|
|
|
(6,046) |
|
|
|
(3,754) |
|
|
Loans (includes $17,523, $20,807, and $21,477 measured at fair
value, respectively) |
$ |
2,495,582 |
|
|
$ |
2,469,038 |
|
|
$ |
2,146,394 |
|
| Mortgage loans held for
sale |
|
19,746 |
|
|
|
9,873 |
|
|
|
26,202 |
|
| |
|
|
|
|
|
| Deposit
Portfolio |
|
|
|
|
|
| Money market deposit
accounts |
$ |
1,297,732 |
|
|
$ |
1,277,988 |
|
|
$ |
1,033,739 |
|
| Time deposits |
|
376,147 |
|
|
|
354,545 |
|
|
|
147,623 |
|
| Negotiable order of withdrawal
accounts |
|
168,537 |
|
|
|
192,011 |
|
|
|
287,195 |
|
| Savings accounts |
|
18,737 |
|
|
|
22,319 |
|
|
|
33,099 |
|
|
Total interest-bearing deposits |
|
1,861,153 |
|
|
|
1,846,863 |
|
|
|
1,501,656 |
|
| Noninterest-bearing
accounts |
|
514,241 |
|
|
|
545,064 |
|
|
|
668,342 |
|
|
Total deposits |
$ |
2,375,394 |
|
|
$ |
2,391,927 |
|
|
$ |
2,169,998 |
|
(1) Includes PPP loans of $5.6 million as of June 30, 2023,
$6.1 million as of March 31, 2023, and $10.7 million as of
June 30, 2022.(2) Includes fair value adjustments on loans
held for investment accounted for under the fair value option.
First Western Financial,
Inc.Consolidated Financial Summary (unaudited)
(continued)
| |
As of or for the Three Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
(Dollars in thousands) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Average Balance
Sheets |
|
|
|
|
|
| Assets |
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
Interest-bearing deposits in other financial institutions |
$ |
135,757 |
|
|
$ |
127,608 |
|
|
$ |
320,656 |
|
|
Federal funds sold |
|
— |
|
|
|
— |
|
|
|
1,017 |
|
|
Investment securities |
|
80,106 |
|
|
|
82,106 |
|
|
|
69,320 |
|
|
Correspondent bank stock |
|
8,844 |
|
|
|
9,592 |
|
|
|
1,555 |
|
|
Loans |
|
2,471,587 |
|
|
|
2,479,644 |
|
|
|
2,010,024 |
|
|
Interest-earning assets |
|
2,696,294 |
|
|
|
2,698,950 |
|
|
|
2,402,572 |
|
|
Mortgage loans held for sale |
|
15,841 |
|
|
|
7,521 |
|
|
|
19,452 |
|
|
Total interest-earning assets, plus mortgage loans held for
sale |
|
2,712,135 |
|
|
|
2,706,471 |
|
|
|
2,422,024 |
|
|
Allowance for credit losses(1) |
|
(20,077) |
|
|
|
(20,325) |
|
|
|
(13,257) |
|
|
Noninterest-earning assets |
|
124,561 |
|
|
|
125,201 |
|
|
|
118,302 |
|
|
Total assets |
$ |
2,816,619 |
|
|
$ |
2,811,347 |
|
|
$ |
2,527,069 |
|
| |
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
Interest-bearing deposits |
$ |
1,847,788 |
|
|
$ |
1,805,994 |
|
|
$ |
1,547,901 |
|
|
FHLB and Federal Reserve borrowings |
|
123,578 |
|
|
|
142,642 |
|
|
|
20,815 |
|
|
Subordinated notes |
|
52,186 |
|
|
|
52,135 |
|
|
|
32,533 |
|
|
Total interest-bearing liabilities |
|
2,023,552 |
|
|
|
2,000,771 |
|
|
|
1,601,249 |
|
|
Noninterest-bearing liabilities: |
|
|
|
|
|
|
Noninterest-bearing deposits |
|
527,562 |
|
|
|
545,670 |
|
|
|
679,531 |
|
|
Other liabilities |
|
23,850 |
|
|
|
26,206 |
|
|
|
19,194 |
|
|
Total noninterest-bearing liabilities |
|
551,412 |
|
|
|
571,876 |
|
|
|
698,725 |
|
|
Total shareholders’ equity |
|
241,655 |
|
|
|
238,700 |
|
|
|
227,095 |
|
|
Total liabilities and shareholders’ equity |
$ |
2,816,619 |
|
|
$ |
2,811,347 |
|
|
$ |
2,527,069 |
|
| |
|
|
|
|
|
| Yields/Cost of funds
(annualized) |
|
|
|
|
|
|
Interest-bearing deposits in other financial institutions |
|
4.92% |
|
|
|
4.46% |
|
|
|
0.68% |
|
|
Investment securities |
|
3.14 |
|
|
|
3.11 |
|
|
|
2.42 |
|
|
Correspondent bank stock |
|
6.58 |
|
|
|
7.31 |
|
|
|
3.61 |
|
|
Loans |
|
5.47 |
|
|
|
5.30 |
|
|
|
4.12 |
|
|
Mortgage loans held for sale |
|
5.82 |
|
|
|
6.04 |
|
|
|
4.72 |
|
|
Total interest-earning assets |
|
5.38 |
|
|
|
5.20 |
|
|
|
3.62 |
|
|
Interest-bearing deposits |
|
3.44 |
|
|
|
2.94 |
|
|
|
0.29 |
|
|
Cost of deposits |
|
2.68 |
|
|
|
2.26 |
|
|
|
0.20 |
|
|
FHLB and Federal Reserve borrowings |
|
4.42 |
|
|
|
3.89 |
|
|
|
0.54 |
|
|
Subordinated notes |
|
5.47 |
|
|
|
5.38 |
|
|
|
4.46 |
|
|
Total interest-bearing liabilities |
|
3.56 |
|
|
|
3.07 |
|
|
|
0.37 |
|
|
Net interest margin |
|
2.73 |
|
|
|
2.93 |
|
|
|
3.38 |
|
|
Net interest rate spread |
|
1.82 |
|
|
|
2.13 |
|
|
|
3.25 |
|
(1) Allowance for credit loss amounts for periods prior to the
ASC 326 adoption date of January 1, 2023 are reported in accordance
with previously applicable GAAP.
First Western Financial,
Inc.Consolidated Financial Summary (unaudited)
(continued)
| |
As of or for the Three Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
(Dollars in thousands, except share and per share
amounts) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Asset
Quality |
|
|
|
|
|
| Non-performing loans |
$ |
10,273 |
|
|
$ |
12,460 |
|
|
$ |
3,931 |
|
| Non-performing assets |
|
10,273 |
|
|
|
12,460 |
|
|
|
4,309 |
|
| Net charge-offs |
|
8 |
|
|
|
5 |
|
|
|
47 |
|
| Non-performing loans to total
loans |
|
0.41% |
|
|
|
0.50% |
|
|
|
0.18% |
|
| Non-performing assets to total
assets |
|
0.36 |
|
|
|
0.42 |
|
|
|
0.17 |
|
| Allowance for credit losses to
non-performing loans(3) |
|
214.58 |
|
|
|
159.25 |
|
|
|
365.23 |
|
| Allowance for credit losses to
total loans(3) |
|
0.89 |
|
|
|
0.80 |
|
|
|
0.67 |
|
| Allowance for credit losses to
adjusted loans(1)(3) |
|
0.89 |
|
|
|
0.81 |
|
|
|
0.78 |
|
| Net charge-offs to average
loans(2) |
* |
|
* |
|
* |
| |
|
|
|
|
|
| Assets Under Management |
$ |
6,503,964 |
|
|
$ |
6,382,036 |
|
|
$ |
6,277,588 |
|
| |
|
|
|
|
|
| Market
Data |
|
|
|
|
|
| Book value per share at period
end |
|
25.38 |
|
|
|
25.22 |
|
|
|
24.06 |
|
| Tangible book value per common
share(1) |
|
22.03 |
|
|
|
21.85 |
|
|
|
20.65 |
|
| Weighted average outstanding
shares, basic |
|
9,532,397 |
|
|
|
9,503,715 |
|
|
|
9,450,987 |
|
| Weighted average outstanding
shares, diluted |
|
9,686,401 |
|
|
|
9,732,674 |
|
|
|
9,717,667 |
|
| Shares outstanding at period
end |
|
9,545,071 |
|
|
|
9,507,564 |
|
|
|
9,478,710 |
|
| |
|
|
|
|
|
| Consolidated
Capital |
|
|
|
|
|
| Tier 1 capital to
risk-weighted assets |
|
9.26% |
|
|
|
9.28% |
|
|
|
10.15% |
|
| CET1 to risk-weighted
assets |
|
9.26 |
|
|
|
9.28 |
|
|
|
10.15 |
|
| Total capital to risk-weighted
assets |
|
12.41 |
|
|
|
12.39 |
|
|
|
12.58 |
|
| Tier 1 capital to average
assets |
|
7.80 |
|
|
|
7.75 |
|
|
|
8.00 |
|
| |
|
|
|
|
|
| Bank
Capital |
|
|
|
|
|
| Tier 1 capital to
risk-weighted assets |
|
10.34 |
|
|
|
10.29 |
|
|
|
10.99 |
|
| CET1 to risk-weighted
assets |
|
10.34 |
|
|
|
10.29 |
|
|
|
10.99 |
|
| Total capital to risk-weighted
assets |
|
11.23 |
|
|
|
11.12 |
|
|
|
11.75 |
|
| Tier 1 capital to average
assets |
|
8.70 |
|
|
|
8.59 |
|
|
|
8.65 |
|
(1) Represents a Non-GAAP financial measure. See “Reconciliation
of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures
to the most directly comparable GAAP financial measure.(2) Value
results in an immaterial amount. (3) Allowance for credit loss
amounts for periods prior to the ASC 326 adoption date of January
1, 2023 are reported in accordance with previously applicable GAAP.
Total loans does not include loans accounted for under the fair
value option.
First Western Financial,
Inc.Consolidated Financial Summary (unaudited)
(continued)
Reconciliations of Non-GAAP Financial
Measures
| |
As of or for the Three Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
(Dollars in thousands, except share and per share
amounts) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Tangible
Common |
|
|
|
|
|
| Total shareholders'
equity |
$ |
242,242 |
|
|
$ |
239,822 |
|
|
$ |
228,024 |
|
|
Less: goodwill and other intangibles, net |
|
31,977 |
|
|
|
32,040 |
|
|
|
32,258 |
|
| Tangible common equity |
$ |
210,265 |
|
|
$ |
207,782 |
|
|
$ |
195,766 |
|
| |
|
|
|
|
|
| Common shares outstanding, end
of period |
|
9,545,071 |
|
|
|
9,507,564 |
|
|
|
9,478,710 |
|
| Tangible common book value per
share |
$ |
22.03 |
|
|
$ |
21.85 |
|
|
$ |
20.65 |
|
| Net income available to common
shareholders |
|
1,506 |
|
|
|
3,820 |
|
|
|
4,482 |
|
| Return on tangible common
equity (annualized) |
|
2.86% |
|
|
|
7.35% |
|
|
|
9.16% |
|
| |
|
|
|
|
|
|
Efficiency |
|
|
|
|
|
| Non-interest expense |
$ |
18,519 |
|
|
$ |
20,528 |
|
|
$ |
20,583 |
|
|
Less: amortization |
|
62 |
|
|
|
64 |
|
|
|
77 |
|
|
Less: acquisition related expenses |
|
14 |
|
|
|
37 |
|
|
|
347 |
|
| Adjusted non-interest
expense |
$ |
18,443 |
|
|
$ |
20,427 |
|
|
$ |
20,159 |
|
| |
|
|
|
|
|
| Total income before
non-interest expense |
$ |
20,554 |
|
|
$ |
25,689 |
|
|
$ |
26,559 |
|
|
Less: unrealized (loss)/gain recognized on equity securities |
|
(11) |
|
|
|
10 |
|
|
|
299 |
|
|
Less: net (loss)/gain on loans accounted for under the fair value
option |
|
(1,124) |
|
|
|
(543) |
|
|
|
(155) |
|
|
Less: impairment of contingent consideration assets |
|
(1,249) |
|
|
|
— |
|
|
|
— |
|
|
Less: net (loss)/gain on loans held for sale at fair value(1) |
|
— |
|
|
|
(178) |
|
|
|
— |
|
|
Plus: provision (release) for credit losses(2) |
|
1,843 |
|
|
|
(310) |
|
|
|
519 |
|
| Gross revenue |
$ |
24,781 |
|
|
$ |
26,090 |
|
|
$ |
26,934 |
|
| Efficiency ratio |
|
74.42% |
|
|
|
78.29% |
|
|
|
74.85% |
|
| |
|
|
|
|
|
| Allowance for Credit
Loss to Adjusted Loans |
|
|
|
|
|
| Total loans held for
investment |
|
2,501,926 |
|
|
|
2,475,084 |
|
|
|
2,150,148 |
|
|
Less: loans acquired(3) |
|
— |
|
|
|
— |
|
|
|
287,623 |
|
|
Less: PPP loans(4) |
|
5,558 |
|
|
|
6,100 |
|
|
|
9,053 |
|
|
Less: loans accounted for under fair value |
|
18,274 |
|
|
|
21,052 |
|
|
|
21,149 |
|
| Adjusted loans |
$ |
2,478,094 |
|
|
$ |
2,447,932 |
|
|
$ |
1,832,323 |
|
| |
|
|
|
|
|
| Allowance for credit
losses(2) |
$ |
22,044 |
|
|
$ |
19,843 |
|
|
$ |
14,357 |
|
| Allowance for credit losses to
adjusted loans(2) |
|
0.89% |
|
|
|
0.81% |
|
|
|
0.78% |
|
(1) Presented in Other Non-interest income on the Consolidated
Financial Summary statements(2) Provision and allowance for credit
loss amounts for periods prior to the ASC 326 adoption date of
January 1, 2023 are reported in accordance with previously
applicable GAAP. (3)As of June 30, 2023 and March 31, 2023,
acquired loans totaling $225.4 million and $233.3 million,
respectively, are included in the allowance for credit loss
calculation and are therefore not removed in calculating adjusted
total loans.(4)As of June 30, 2023 and March 31, 2023, the
adjustment for PPP loans includes acquired PPP loans as acquired
loans are included in total loans held for investment as a result
of the adoption of ASC 326. As of June 30, 2022, the adjustment for
PPP loans did not include acquired PPP loans, as those were already
included in the loans acquired adjustment.
First Western Financial,
Inc.Consolidated Financial Summary (unaudited)
(continued)
| |
As of or for the Three Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
(Dollars in thousands, except share and per share
data) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Adjusted Net Income
Available to Common Shareholders |
|
|
|
|
|
| Net income available to common
shareholders |
$ |
1,506 |
|
|
$ |
3,820 |
|
|
$ |
4,482 |
|
|
Plus: impairment of contingent consideration assets |
|
1,249 |
|
|
|
— |
|
|
|
— |
|
|
Plus: acquisition related expenses |
|
14 |
|
|
|
37 |
|
|
|
347 |
|
|
Less: income tax impact from impairment of contingent consideration
assets |
|
325 |
|
|
|
— |
|
|
|
— |
|
|
Less: income tax impact from acquisition related expenses |
|
4 |
|
|
|
10 |
|
|
|
87 |
|
| Adjusted net income available
to shareholders |
$ |
2,440 |
|
|
$ |
3,847 |
|
|
$ |
4,742 |
|
| |
|
|
|
|
|
| Pre-Tax, Pre-Provision
Net Income |
|
|
|
|
|
| Income before income
taxes |
$ |
2,035 |
|
|
$ |
5,161 |
|
|
$ |
5,976 |
|
|
Plus: provision (release) for credit losses |
|
1,843 |
|
|
|
(310 |
) |
|
|
519 |
|
| Pre-tax, pre-provision net
income |
$ |
3,878 |
|
|
$ |
4,851 |
|
|
$ |
6,495 |
|
| |
|
|
|
|
|
| Adjusted Basic
Earnings Per Share |
|
|
|
|
|
| Basic earnings per share |
$ |
0.16 |
|
|
$ |
0.40 |
|
|
$ |
0.47 |
|
|
Plus: impairment of contingent consideration assets net of income
tax impact |
|
0.09 |
|
|
|
— |
|
|
|
— |
|
|
Plus: acquisition related expenses net of income tax impact |
* |
|
* |
|
|
0.03 |
|
| Adjusted basic earnings per
share |
$ |
0.25 |
|
|
$ |
0.40 |
|
|
$ |
0.50 |
|
| |
|
|
|
|
|
| Adjusted Diluted
Earnings Per Share |
|
|
|
|
|
| Diluted earnings per
share |
$ |
0.16 |
|
|
$ |
0.39 |
|
|
$ |
0.46 |
|
|
Plus: impairment of contingent consideration assets net of income
tax impact |
|
0.09 |
|
|
|
— |
|
|
|
— |
|
|
Plus: acquisition related expenses net of income tax impact |
* |
|
* |
|
|
0.03 |
|
| Adjusted diluted earnings per
share |
$ |
0.25 |
|
|
$ |
0.39 |
|
|
$ |
0.49 |
|
| |
|
|
|
|
|
| Adjusted Return on
Average Assets (annualized) |
|
|
|
|
|
| Return on average assets |
|
0.21% |
|
|
|
0.54% |
|
|
|
0.71% |
|
|
Plus: impairment of contingent consideration assets net of income
tax impact |
|
0.13 |
|
|
|
— |
|
|
|
— |
|
|
Plus: acquisition related expenses net of income tax impact |
|
0.01 |
|
|
|
0.01 |
|
|
|
0.04 |
|
| Adjusted return on average
assets |
|
0.35% |
|
|
|
0.55% |
|
|
|
0.75% |
|
| |
|
|
|
|
|
| Adjusted Return on
Average Shareholders' Equity (annualized) |
|
|
|
|
|
| Return on average
shareholders' equity |
|
2.49% |
|
|
|
6.40% |
|
|
|
7.89% |
|
|
Plus: impairment of contingent consideration assets net of income
tax impact |
|
1.53 |
|
|
|
— |
|
|
|
— |
|
|
Plus: acquisition related expenses net of income tax impact |
|
0.02 |
|
|
|
0.05 |
|
|
|
0.46 |
|
| Adjusted return on average
shareholders' equity |
|
4.04% |
|
|
|
6.45% |
|
|
|
8.35% |
|
| |
|
|
|
|
|
| Adjusted Return on
Tangible Common Equity (annualized) |
|
|
|
|
|
| Return on tangible common
equity |
|
2.86% |
|
|
|
7.35% |
|
|
|
9.16% |
|
|
Plus: impairment of contingent consideration assets net of income
tax impact |
|
1.76 |
|
|
|
— |
|
|
|
— |
|
|
Plus: acquisition related expenses net of income tax impact |
|
0.02 |
|
|
|
0.06 |
|
|
|
0.53 |
|
| Adjusted return on tangible
common equity |
|
4.64% |
|
|
|
7.41% |
|
|
|
9.69% |
|
* Represents an immaterial impact to adjusted earnings per
share.
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