First Western Financial, Inc. (“First Western” or the “Company”)
(NASDAQ: MYFW), today reported financial results for the fourth
quarter ended December 31, 2023.
Net income available to common shareholders was
$0.3 million, or $0.03 per diluted share, for the fourth quarter of
2023. This compares to $3.1 million, or $0.32 per diluted
share, for the third quarter of 2023, and $5.5 million, or
$0.56 per diluted share, for the fourth quarter of 2022.
Scott C. Wylie, CEO of First Western, commented,
"While an increase in our estimated provision for credit losses
reduced our profitability in the fourth quarter, we continued to
execute on our strategic priorities including maintaining
disciplined expense control while adding new deposit relationships.
Our deposit focus resulted in 18% annualized growth in total
deposits during the quarter and further reduced our loan-to-deposit
ratio to be in-line with our year-end goal of 100%, while our new
loan production focused on clients that also bring deposits to the
bank.
"We believe we are positioned to perform well in
any economic scenario that emerges in 2024, with our strong balance
sheet and conservative underwriting criteria enabling us to
effectively manage through an economic downturn, while our business
development capabilities and unique value proposition will enable
us to take advantage of strengthening economic conditions and an
increase in loan demand. While economic conditions remain
uncertain, we will continue to prioritize prudent risk management
and be conservative in new loan production while focusing on core
deposit gathering, which should result in a modest level of asset
growth until economic conditions improve. With our disciplined
expense management, the continued leverage we expect to realize
from past investments in technology, banking talent, and office
expansion, as well as a liability-sensitive balance sheet that
should lead to net interest margin expansion as interest rates
decline, we believe we can deliver solid earnings growth in 2024
even with a modest level of balance sheet growth. Over the
long-term, we continue to believe that we are well positioned to
capitalize on our attractive markets to consistently add new
clients, generate profitable growth, and further enhance the value
of our franchise," said Mr. Wylie.
| |
For the Three Months Ended |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(Dollars in thousands, except per share data) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Earnings
Summary |
|
|
|
|
|
| Net interest income |
$ |
16,331 |
|
|
$ |
16,766 |
|
|
$ |
21,988 |
|
| Provision for credit
losses(1) |
|
3,942 |
|
|
|
329 |
|
|
|
1,197 |
|
| Total non-interest income |
|
6,081 |
|
|
|
6,099 |
|
|
|
6,415 |
|
| Total non-interest
expense |
|
18,276 |
|
|
|
18,314 |
|
|
|
19,905 |
|
| Income before income
taxes |
|
194 |
|
|
|
4,222 |
|
|
|
7,301 |
|
| Income tax
(benefit)/expense |
|
(61 |
) |
|
|
1,104 |
|
|
|
1,830 |
|
| Net income available to common
shareholders |
|
255 |
|
|
|
3,118 |
|
|
|
5,471 |
|
| Adjusted net income available
to common shareholders(2) |
|
282 |
|
|
|
3,140 |
|
|
|
5,617 |
|
| Basic earnings per common
share |
|
0.03 |
|
|
|
0.33 |
|
|
|
0.58 |
|
| Adjusted basic earnings per
common share(2) |
|
0.03 |
|
|
|
0.33 |
|
|
|
0.59 |
|
| Diluted earnings per common
share |
|
0.03 |
|
|
|
0.32 |
|
|
|
0.56 |
|
| Adjusted diluted earnings per
common share(2) |
|
0.03 |
|
|
|
0.32 |
|
|
|
0.58 |
|
| |
|
|
|
|
|
| Return on average assets
(annualized) |
|
0.04 |
% |
|
|
0.44 |
% |
|
|
0.79 |
% |
| Adjusted return on average
assets (annualized)(2) |
|
0.04 |
|
|
|
0.45 |
|
|
|
0.82 |
|
| Return on average
shareholders' equity (annualized) |
|
0.41 |
|
|
|
5.08 |
|
|
|
9.17 |
|
| Adjusted return on average
shareholders' equity (annualized)(2) |
|
0.45 |
|
|
|
5.12 |
|
|
|
9.41 |
|
| Return on tangible common
equity (annualized)(2) |
|
0.48 |
|
|
|
5.82 |
|
|
|
10.48 |
|
| Adjusted return on tangible
common equity (annualized)(2) |
|
0.53 |
|
|
|
5.86 |
|
|
|
10.76 |
|
| Net interest margin |
|
2.37 |
|
|
|
2.46 |
|
|
|
3.30 |
|
| Efficiency ratio(2) |
|
80.77 |
|
|
|
78.76 |
|
|
|
67.66 |
|
____________________(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 Fourth Quarter
2023
Revenue
Total income before non-interest expense was
$18.5 million for the fourth quarter of 2023, a decrease of
18.0%, compared to $22.5 million for the third quarter of
2023. Gross revenue(1) was $22.5 million for the fourth quarter of
2023, a decrease of 2.7%, from $23.1 million for the third quarter
of 2023. The decrease was primarily driven by a decrease in Net
interest income as a result of higher interest expense primarily
due to higher deposit costs, offset partially by higher interest
income. Relative to the fourth quarter of 2022, Total income before
non-interest expense decreased 32.1% from $27.2 million.
Relative to the fourth quarter of 2022, Gross revenue decreased
22.4% from $29.0 million. The decrease was driven by a decrease in
Net interest income as a result of higher Interest expense due to
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 fourth quarter of
2023 was $16.3 million, a decrease of 2.6% from $16.8 million
in the third quarter of 2023. Relative to the fourth quarter of
2022, Net interest income decreased 25.7% from $22.0 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 fourth quarter of
2023 decreased 9 basis points to 2.37% from 2.46% reported in the
third quarter of 2023, primarily due to growth in interest-bearing
deposits during the quarter and continued pricing pressure due to a
highly competitive deposit market.
The yield on interest-earning assets increased
16 basis points to 5.51% in the fourth quarter of 2023 from 5.35%
in the third quarter of 2023 and the cost of interest-bearing
deposits increased 19 basis points to 3.94% in the fourth quarter
of 2023 from 3.75% in the third quarter of 2023.
Relative to the fourth quarter of 2022, net
interest margin decreased from 3.30%, primarily due to a 172 basis
point increase in average cost of deposits, offset partially by a
59 basis point increase in loan yields.
Non-interest Income
Non-interest income for the fourth quarter of
2023 remained flat at $6.1 million, compared to the third
quarter of 2023, primarily driven by a decrease in Net gain on
mortgage loans and lower Trust and advisory fees during the fourth
quarter of 2023, partially offset by higher Insurance fees.
Relative to the fourth quarter of 2022,
Non-interest income decreased 5.2% from $6.4 million. The
decrease was primarily due to a decrease in Bank fees, Insurance
fees, and Net gain on mortgage loans, partially offset by increases
in Trust and investment management fees and lower Unrealized losses
on loans accounted for under the fair value option.
Non-interest Expense
Non-interest expense for the fourth quarter of
2023 remained flat at $18.3 million compared to the third
quarter of 2023. Relative to the fourth quarter of 2022,
Non-interest expense decreased 8.2% from $19.9 million, driven
primarily by lower Salaries and employee benefits related to
staffing reductions to better align with lower revenue.
The Company’s efficiency ratio(1) was 80.8% in
the fourth quarter of 2023, compared with 78.8% in the third
quarter of 2023 and 67.7% in the fourth 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 benefit of
$0.1 million for the fourth quarter of 2023, compared to
Income tax expense of $1.1 million for the third quarter of
2023 and Income tax expense of $1.8 million for the fourth
quarter of 2022. The tax benefit in the fourth quarter of 2023 was
primarily due to the impact of 2022 state return to provision
items.
Loans
Total loans held for investment were
$2.55 billion as of December 31, 2023, an increase of
0.5% from $2.54 billion as of September 30, 2023, due to
loan growth in residential mortgage and CRE portfolios, partially
offset by small declines in other portfolios. Relative to the
fourth quarter of 2022, Total loans held for investment increased
2.9% from $2.48 billion as of December 31, 2022,
attributable to loan growth primarily in our residential mortgage
portfolios.
Deposits
Total deposits were $2.53 billion as of
December 31, 2023, an increase of 4.5% from $2.42 billion as
of September 30, 2023, as a result of new and expanded deposit
relationships. Relative to the fourth quarter of 2022, Total
deposits increased 5.1% from $2.41 billion as of
December 31, 2022, driven primarily by new and expanded
deposit relationships.
Borrowings
Federal Home Loan Bank (“FHLB”) and Federal
Reserve borrowings were $125.7 million as of December 31,
2023, a decrease of $134.2 million from $259.9 million as of
September 30, 2023. Relative to the fourth quarter of 2022,
borrowings decreased $21.2 million from $146.9 million as
of December 31, 2022. The change in borrowings from
September 30, 2023 and December 31, 2022 is driven by a
decline in FHLB borrowing reliance as a result of increased
deposits.
Subordinated notes remained flat at
$52.3 million as of December 31, 2023, compared to
September 30, 2023. Subordinated notes increased
$0.2 million from $52.1 million as of December 31,
2022.
Assets Under Management
Assets Under Management ("AUM") increased by
$357.2 million during the fourth quarter to $6.75 billion as
of December 31, 2023, compared to $6.40 billion as of
September 30, 2023. This increase was primarily attributable
to an increase in market values throughout the fourth quarter of
2023, resulting in an increase in the value of AUM balances. Total
AUM increased by $646.0 million compared to December 31,
2022 from $6.11 billion, which was primarily attributable to
improving market conditions year-over-year resulting in an increase
in the value of AUM.
Credit Quality
Non-performing assets totaled
$59.7 million, or 2.00% of total assets, as of
December 31, 2023, compared to $56.1 million, or 1.87% of
total assets, as of September 30, 2023. The increase was
primarily attributable to two loans within the Construction and
Development and Commercial and Industrial classifications moving to
non-accrual during the fourth quarter of 2023, totaling $3.9
million. As of December 31, 2022, non-performing assets
totaled $12.3 million, or 0.43% of total assets. Relative to
the fourth quarter of 2022, the increase in non-performing assets
was driven primarily by the addition of $42.2 million in loans
during the third quarter of 2023.
During the fourth quarter of 2023 the Company
recorded a provision expense of $3.9 million, compared to a
provision expense of $0.3 million in the third quarter of 2023
and a $1.2 million provision expense in the fourth quarter of
2022. The provision expense recorded in the fourth quarter of 2023
reflects an increase in allowance on pooled loans driven primarily
by loan growth, as well as an allowance established on individually
analyzed loans that were downgraded to non-performing in a prior
quarter and two loans downgraded to non-performing in the fourth
quarter of 2023, partially offset by a provision release related to
a net decrease in off-balance sheet commitments.
Capital
As of December 31, 2023, First Western
(“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the
minimum capital levels required by their respective regulators. As
of December 31, 2023, the Bank was classified as “well
capitalized,” as summarized in the following table:
| |
December 31, |
| |
2023 |
| Consolidated
Capital |
|
|
Tier 1 capital to risk-weighted assets |
9.48 |
% |
| Common Equity Tier 1 ("CET1")
to risk-weighted assets |
9.48 |
|
| Total capital to risk-weighted
assets |
12.82 |
|
| Tier 1 capital to average
assets |
7.89 |
|
| |
|
| Bank
Capital |
|
| Tier 1 capital to
risk-weighted assets |
10.62 |
|
| CET1 to risk-weighted
assets |
10.62 |
|
| Total capital to risk-weighted
assets |
11.69 |
|
| Tier 1 capital to average
assets |
8.83 |
|
Book value per common share decreased 0.2% from
$25.76 as of September 30, 2023 to $25.70 as of
December 31, 2023. The fourth quarter of 2023 included a
decrease of $0.6 million in accumulated other comprehensive income
due to the effect of our cash flow hedge of certain FHLB
borrowings. Book value per common share increased 1.3% from $25.37
as of December 31, 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)
decreased 0.2% from $22.42 as of September 30, 2023, to $22.37
as of December 31, 2023. Tangible book value per common share
increased 1.7% from $21.99 as of December 31, 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, January 26, 2024. Telephone
access:
https://register.vevent.com/register/BI06726eadbe6744a39e0d0f89507793ba
A slide presentation relating to the fourth
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 |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(Dollars in thousands, except per share
amounts) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Interest and dividend
income: |
|
|
|
|
|
|
Loans, including fees |
$ |
35,625 |
|
|
$ |
34,141 |
|
|
$ |
30,349 |
|
|
Loans accounted for under the fair value option |
|
257 |
|
|
|
300 |
|
|
|
488 |
|
|
Investment securities |
|
600 |
|
|
|
607 |
|
|
|
645 |
|
|
Interest-bearing deposits in other financial institutions |
|
1,350 |
|
|
|
1,292 |
|
|
|
931 |
|
|
Dividends, restricted stock |
|
161 |
|
|
|
141 |
|
|
|
238 |
|
|
Total interest and dividend income |
|
37,993 |
|
|
|
36,481 |
|
|
|
32,651 |
|
| |
|
|
|
|
|
| Interest expense: |
|
|
|
|
|
|
Deposits |
|
19,037 |
|
|
|
17,467 |
|
|
|
8,260 |
|
|
Other borrowed funds |
|
2,625 |
|
|
|
2,248 |
|
|
|
2,403 |
|
|
Total interest expense |
|
21,662 |
|
|
|
19,715 |
|
|
|
10,663 |
|
| Net interest income |
|
16,331 |
|
|
|
16,766 |
|
|
|
21,988 |
|
|
Less: provision for credit losses(1) |
|
3,942 |
|
|
|
329 |
|
|
|
1,197 |
|
| Net interest income, after
provision for credit losses(1) |
|
12,389 |
|
|
|
16,437 |
|
|
|
20,791 |
|
| |
|
|
|
|
|
| Non-interest income: |
|
|
|
|
|
|
Trust and investment management fees |
|
4,705 |
|
|
|
4,846 |
|
|
|
4,358 |
|
|
Net gain on mortgage loans |
|
379 |
|
|
|
654 |
|
|
|
629 |
|
|
Net loss on loans held for sale |
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
Bank fees |
|
412 |
|
|
|
427 |
|
|
|
812 |
|
|
Risk management and insurance fees |
|
544 |
|
|
|
145 |
|
|
|
924 |
|
|
Income on company-owned life insurance |
|
101 |
|
|
|
96 |
|
|
|
88 |
|
|
Net loss on loans accounted for under the fair value option |
|
(91 |
) |
|
|
(252 |
) |
|
|
(602 |
) |
|
Unrealized loss recognized on equity securities |
|
(2 |
) |
|
|
(19 |
) |
|
|
— |
|
|
Other |
|
33 |
|
|
|
202 |
|
|
|
218 |
|
|
Total non-interest income |
|
6,081 |
|
|
|
6,099 |
|
|
|
6,415 |
|
|
Total income before non-interest expense |
|
18,470 |
|
|
|
22,536 |
|
|
|
27,206 |
|
| |
|
|
|
|
|
| Non-interest expense: |
|
|
|
|
|
|
Salaries and employee benefits |
|
9,988 |
|
|
|
10,968 |
|
|
|
11,679 |
|
|
Occupancy and equipment |
|
1,937 |
|
|
|
1,807 |
|
|
|
1,910 |
|
|
Professional services |
|
1,990 |
|
|
|
1,867 |
|
|
|
2,027 |
|
|
Technology and information systems |
|
928 |
|
|
|
906 |
|
|
|
1,168 |
|
|
Data processing |
|
1,189 |
|
|
|
1,159 |
|
|
|
1,223 |
|
|
Marketing |
|
415 |
|
|
|
355 |
|
|
|
500 |
|
|
Amortization of other intangible assets |
|
62 |
|
|
|
62 |
|
|
|
77 |
|
|
Net gain on sale of other real estate owned |
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
Other |
|
1,767 |
|
|
|
1,190 |
|
|
|
1,324 |
|
|
Total non-interest expense |
|
18,276 |
|
|
|
18,314 |
|
|
|
19,905 |
|
| Income before income
taxes |
|
194 |
|
|
|
4,222 |
|
|
|
7,301 |
|
|
Income tax (benefit)/expense |
|
(61 |
) |
|
|
1,104 |
|
|
|
1,830 |
|
| Net income available to common
shareholders |
$ |
255 |
|
|
$ |
3,118 |
|
|
$ |
5,471 |
|
| Earnings per common
share: |
|
|
|
|
|
|
Basic |
$ |
0.03 |
|
|
$ |
0.33 |
|
|
$ |
0.58 |
|
|
Diluted |
|
0.03 |
|
|
|
0.32 |
|
|
|
0.56 |
|
____________________(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) |
| |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(Dollars in thousands) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Assets |
|
|
|
|
|
| Cash and cash
equivalents: |
|
|
|
|
|
|
Cash and due from banks |
$ |
7,284 |
|
|
$ |
6,439 |
|
|
$ |
4,926 |
|
|
Interest-bearing deposits in other financial institutions |
|
247,158 |
|
|
|
265,045 |
|
|
|
191,586 |
|
|
Total cash and cash equivalents |
|
254,442 |
|
|
|
271,484 |
|
|
|
196,512 |
|
| |
|
|
|
|
|
| Held-to-maturity securities,
at amortized cost (fair value of $66,617, $66,487 and $74,718,
respectively), net of allowance for credit losses |
|
74,102 |
|
|
|
75,539 |
|
|
|
81,056 |
|
| Correspondent bank stock, at
cost |
|
7,155 |
|
|
|
11,305 |
|
|
|
7,110 |
|
| Mortgage loans held for sale,
at fair value |
|
7,254 |
|
|
|
12,105 |
|
|
|
8,839 |
|
| Loans held for sale, at fair
value |
|
— |
|
|
|
— |
|
|
|
1,965 |
|
| Loans (includes $13,726,
$15,464, and $23,321 measured at fair value, respectively) |
|
2,539,466 |
|
|
|
2,530,459 |
|
|
|
2,469,413 |
|
| Allowance for credit
losses(1) |
|
(27,931 |
) |
|
|
(23,175 |
) |
|
|
(17,183 |
) |
| Loans, net |
|
2,511,535 |
|
|
|
2,507,284 |
|
|
|
2,452,230 |
|
| Premises and equipment,
net |
|
25,256 |
|
|
|
25,410 |
|
|
|
25,118 |
|
| Accrued interest
receivable |
|
11,428 |
|
|
|
11,633 |
|
|
|
10,445 |
|
| Accounts receivable |
|
5,095 |
|
|
|
5,292 |
|
|
|
4,873 |
|
| Other receivables |
|
2,457 |
|
|
|
3,052 |
|
|
|
1,973 |
|
| Goodwill and other intangible
assets, net |
|
31,854 |
|
|
|
31,916 |
|
|
|
32,104 |
|
| Deferred tax assets, net |
|
7,339 |
|
|
|
6,624 |
|
|
|
6,914 |
|
| Company-owned life
insurance |
|
16,530 |
|
|
|
16,429 |
|
|
|
16,152 |
|
| Other assets |
|
24,490 |
|
|
|
24,680 |
|
|
|
21,457 |
|
|
Total assets |
$ |
2,978,937 |
|
|
$ |
3,002,753 |
|
|
$ |
2,866,748 |
|
| |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
| Deposits: |
|
|
|
|
|
|
Noninterest-bearing |
$ |
482,579 |
|
|
$ |
476,308 |
|
|
$ |
583,092 |
|
|
Interest-bearing |
|
2,046,460 |
|
|
|
1,943,688 |
|
|
|
1,822,137 |
|
|
Total deposits |
|
2,529,039 |
|
|
|
2,419,996 |
|
|
|
2,405,229 |
|
| Borrowings: |
|
|
|
|
|
|
Federal Home Loan Bank and Federal Reserve borrowings |
|
125,711 |
|
|
|
259,930 |
|
|
|
146,886 |
|
|
Subordinated notes |
|
52,340 |
|
|
|
52,279 |
|
|
|
52,132 |
|
| Accrued interest payable |
|
3,793 |
|
|
|
3,203 |
|
|
|
1,125 |
|
| Other liabilities |
|
21,842 |
|
|
|
21,089 |
|
|
|
20,512 |
|
|
Total liabilities |
|
2,732,725 |
|
|
|
2,756,497 |
|
|
|
2,625,884 |
|
| |
|
|
|
|
|
| Shareholders’
Equity |
|
|
|
|
|
|
Total shareholders’ equity |
|
246,212 |
|
|
|
246,256 |
|
|
|
240,864 |
|
|
Total liabilities and shareholders’ equity |
$ |
2,978,937 |
|
|
$ |
3,002,753 |
|
|
$ |
2,866,748 |
|
____________________(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) |
| |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(Dollars in thousands) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Loan
Portfolio |
|
|
|
|
|
| Cash, Securities, and
Other(1) |
$ |
140,053 |
|
|
$ |
148,669 |
|
|
$ |
165,670 |
|
| Consumer and Other |
|
23,596 |
|
|
|
23,975 |
|
|
|
26,539 |
|
| Construction and
Development |
|
347,515 |
|
|
|
349,436 |
|
|
|
288,497 |
|
| 1-4 Family Residential |
|
933,684 |
|
|
|
913,085 |
|
|
|
898,154 |
|
| Non-Owner Occupied CRE |
|
546,966 |
|
|
|
527,377 |
|
|
|
496,776 |
|
| Owner Occupied CRE |
|
197,205 |
|
|
|
208,341 |
|
|
|
216,056 |
|
| Commercial and Industrial |
|
345,393 |
|
|
|
349,515 |
|
|
|
361,028 |
|
|
Total |
|
2,534,412 |
|
|
|
2,520,398 |
|
|
|
2,452,720 |
|
| Loans accounted for under the
fair value option |
|
14,129 |
|
|
|
16,105 |
|
|
|
23,415 |
|
|
Total loans held for investment |
|
2,548,541 |
|
|
|
2,536,503 |
|
|
|
2,476,135 |
|
| Deferred (fees) costs and
unamortized premiums/(unaccreted discounts), net(2) |
|
(9,075 |
) |
|
|
(6,044 |
) |
|
|
(6,722 |
) |
|
Loans (includes $13,726, $15,464, and $23,321 measured at fair
value, respectively) |
$ |
2,539,466 |
|
|
$ |
2,530,459 |
|
|
$ |
2,469,413 |
|
| Mortgage loans held for
sale |
|
7,254 |
|
|
|
12,105 |
|
|
|
8,839 |
|
| Loans held for sale |
|
— |
|
|
|
— |
|
|
|
1,965 |
|
| |
|
|
|
|
|
| Deposit
Portfolio |
|
|
|
|
|
| Money market deposit
accounts |
$ |
1,386,149 |
|
|
$ |
1,388,726 |
|
|
$ |
1,336,092 |
|
| Time deposits |
|
496,452 |
|
|
|
373,459 |
|
|
|
224,090 |
|
| Negotiable order of withdrawal
accounts |
|
147,488 |
|
|
|
164,000 |
|
|
|
234,778 |
|
| Savings accounts |
|
16,371 |
|
|
|
17,503 |
|
|
|
27,177 |
|
|
Total interest-bearing deposits |
|
2,046,460 |
|
|
|
1,943,688 |
|
|
|
1,822,137 |
|
| Noninterest-bearing
accounts |
|
482,579 |
|
|
|
476,308 |
|
|
|
583,092 |
|
|
Total deposits |
$ |
2,529,039 |
|
|
$ |
2,419,996 |
|
|
$ |
2,405,229 |
|
____________________(1) Includes PPP loans of $4.3 million
as of December 31, 2023, $4.9 million as of
September 30, 2023, and $7.1 million as of
December 31, 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 |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(Dollars in thousands) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Average Balance
Sheets |
|
|
|
|
|
| Assets |
|
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
Interest-bearing deposits in other financial institutions |
$ |
104,789 |
|
|
$ |
102,510 |
|
|
$ |
103,190 |
|
|
Federal funds sold |
|
— |
|
|
|
— |
|
|
|
— |
|
|
Investment securities |
|
76,331 |
|
|
|
78,057 |
|
|
|
84,017 |
|
|
Correspondent bank stock |
|
7,576 |
|
|
|
7,162 |
|
|
|
11,880 |
|
|
Loans |
|
2,536,379 |
|
|
|
2,502,419 |
|
|
|
2,436,273 |
|
|
Interest-earning assets |
|
2,725,075 |
|
|
|
2,690,148 |
|
|
|
2,635,360 |
|
|
Mortgage loans held for sale |
|
9,915 |
|
|
|
12,680 |
|
|
|
9,065 |
|
|
Total interest-earning assets, plus mortgage loans held for
sale |
|
2,734,990 |
|
|
|
2,702,828 |
|
|
|
2,644,425 |
|
|
Allowance for credit losses(1) |
|
(23,352 |
) |
|
|
(22,122 |
) |
|
|
(16,724 |
) |
|
Noninterest-earning assets |
|
126,122 |
|
|
|
125,774 |
|
|
|
125,355 |
|
|
Total assets |
$ |
2,837,760 |
|
|
$ |
2,806,480 |
|
|
$ |
2,753,056 |
|
| |
|
|
|
|
|
| Liabilities and
Shareholders’ Equity |
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
Interest-bearing deposits |
$ |
1,914,856 |
|
|
$ |
1,846,318 |
|
|
$ |
1,582,587 |
|
|
FHLB and Federal Reserve borrowings |
|
139,316 |
|
|
|
125,250 |
|
|
|
212,693 |
|
|
Subordinated notes |
|
52,299 |
|
|
|
52,242 |
|
|
|
38,335 |
|
|
Total interest-bearing liabilities |
|
2,106,471 |
|
|
|
2,023,810 |
|
|
|
1,833,615 |
|
|
Noninterest-bearing liabilities: |
|
|
|
|
|
|
Noninterest-bearing deposits |
|
456,787 |
|
|
|
512,956 |
|
|
|
659,076 |
|
|
Other liabilities |
|
25,387 |
|
|
|
24,228 |
|
|
|
21,660 |
|
|
Total noninterest-bearing liabilities |
|
482,174 |
|
|
|
537,184 |
|
|
|
680,736 |
|
|
Total shareholders’ equity |
|
249,115 |
|
|
|
245,486 |
|
|
|
238,705 |
|
|
Total liabilities and shareholders’ equity |
$ |
2,837,760 |
|
|
$ |
2,806,480 |
|
|
$ |
2,753,056 |
|
| |
|
|
|
|
|
| Yields/Cost of funds
(annualized) |
|
|
|
|
|
|
Interest-bearing deposits in other financial institutions |
|
5.11 |
% |
|
|
5.00 |
% |
|
|
3.57 |
% |
|
Investment securities |
|
3.12 |
|
|
|
3.09 |
|
|
|
3.05 |
|
|
Correspondent bank stock |
|
8.43 |
|
|
|
7.81 |
|
|
|
7.95 |
|
|
Loans |
|
5.59 |
|
|
|
5.43 |
|
|
|
5.00 |
|
|
Mortgage loans held for sale |
|
6.60 |
|
|
|
6.70 |
|
|
|
6.39 |
|
|
Total interest-earning assets |
|
5.51 |
|
|
|
5.35 |
|
|
|
4.90 |
|
|
Interest-bearing deposits |
|
3.94 |
|
|
|
3.75 |
|
|
|
2.07 |
|
|
Cost of deposits |
|
3.18 |
|
|
|
2.94 |
|
|
|
1.46 |
|
|
FHLB and Federal Reserve borrowings |
|
5.36 |
|
|
|
4.58 |
|
|
|
3.58 |
|
|
Subordinated notes |
|
5.63 |
|
|
|
6.08 |
|
|
|
5.03 |
|
|
Total interest-bearing liabilities |
|
4.08 |
|
|
|
3.86 |
|
|
|
2.31 |
|
|
Net interest margin |
|
2.37 |
|
|
|
2.46 |
|
|
|
3.30 |
|
|
Net interest rate spread |
|
1.43 |
|
|
|
1.49 |
|
|
|
2.59 |
|
____________________(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 |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(Dollars in thousands, except share and per share
amounts) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Asset
Quality |
|
|
|
|
|
| Non-performing loans |
$ |
59,675 |
|
|
$ |
56,146 |
|
|
$ |
12,349 |
|
| Non-performing assets |
|
59,675 |
|
|
|
56,146 |
|
|
|
12,349 |
|
| Net charge-offs |
|
44 |
|
|
|
190 |
|
|
|
95 |
|
| Non-performing loans to total
loans |
|
2.34 |
% |
|
|
2.21 |
% |
|
|
0.50 |
% |
| Non-performing assets to total
assets |
|
2.00 |
|
|
|
1.87 |
|
|
|
0.43 |
|
| Allowance for credit losses to
non-performing loans(3) |
|
46.81 |
|
|
|
41.28 |
|
|
|
139.14 |
|
| Allowance for credit losses to
total loans(3) |
|
1.10 |
|
|
|
0.92 |
|
|
|
0.70 |
|
| Allowance for credit losses to
adjusted loans(1)(3) |
|
1.10 |
|
|
|
0.92 |
|
|
|
0.78 |
|
| Net charge-offs to average
loans(2) |
|
— |
|
|
|
0.01 |
|
|
* |
| |
|
|
|
|
|
| Assets Under Management |
$ |
6,752,981 |
|
|
$ |
6,395,786 |
|
|
$ |
6,106,973 |
|
| |
|
|
|
|
|
| Market
Data |
|
|
|
|
|
| Book value per share at period
end |
|
25.70 |
|
|
|
25.76 |
|
|
|
25.37 |
|
| Tangible book value per common
share(1) |
|
22.37 |
|
|
|
22.42 |
|
|
|
21.99 |
|
| Weighted average outstanding
shares, basic |
|
9,572,582 |
|
|
|
9,553,331 |
|
|
|
9,493,732 |
|
| Weighted average outstanding
shares, diluted |
|
9,739,117 |
|
|
|
9,743,270 |
|
|
|
9,702,908 |
|
| Shares outstanding at period
end |
|
9,581,183 |
|
|
|
9,560,209 |
|
|
|
9,495,440 |
|
| |
|
|
|
|
|
| Consolidated
Capital |
|
|
|
|
|
| Tier 1 capital to
risk-weighted assets |
|
9.48 |
% |
|
|
9.32 |
% |
|
|
9.28 |
% |
| CET1 to risk-weighted
assets |
|
9.48 |
|
|
|
9.32 |
|
|
|
9.28 |
|
| Total capital to risk-weighted
assets |
|
12.82 |
|
|
|
12.45 |
|
|
|
12.37 |
|
| Tier 1 capital to average
assets |
|
7.89 |
|
|
|
7.96 |
|
|
|
7.81 |
|
| |
|
|
|
|
|
| Bank
Capital |
|
|
|
|
|
| Tier 1 capital to
risk-weighted assets |
|
10.62 |
|
|
|
10.42 |
|
|
|
10.29 |
|
| CET1 to risk-weighted
assets |
|
10.62 |
|
|
|
10.42 |
|
|
|
10.29 |
|
| Total capital to risk-weighted
assets |
|
11.69 |
|
|
|
11.31 |
|
|
|
11.06 |
|
| Tier 1 capital to average
assets |
|
8.83 |
|
|
|
8.88 |
|
|
|
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 |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(Dollars in thousands, except share and per share
amounts) |
|
2023 |
|
|
|
2023 |
|
|
|
2022 |
|
| Tangible
Common |
|
|
|
|
|
| Total shareholders'
equity |
$ |
246,212 |
|
|
$ |
246,256 |
|
|
$ |
240,864 |
|
|
Less: goodwill and other intangibles, net |
|
31,854 |
|
|
|
31,916 |
|
|
|
32,104 |
|
| Tangible common equity |
$ |
214,358 |
|
|
$ |
214,340 |
|
|
$ |
208,760 |
|
| |
|
|
|
|
|
| Common shares outstanding, end
of period |
|
9,581,183 |
|
|
|
9,560,209 |
|
|
|
9,495,440 |
|
| Tangible common book value per
share |
$ |
22.37 |
|
|
$ |
22.42 |
|
|
$ |
21.99 |
|
| Net income available to common
shareholders |
|
255 |
|
|
|
3,118 |
|
|
|
5,471 |
|
| Return on tangible common
equity (annualized) |
|
0.48 |
% |
|
|
5.82 |
% |
|
|
10.48 |
% |
| |
|
|
|
|
|
|
Efficiency |
|
|
|
|
|
| Non-interest expense |
$ |
18,276 |
|
|
$ |
18,314 |
|
|
$ |
19,905 |
|
|
Less: amortization |
|
62 |
|
|
|
62 |
|
|
|
77 |
|
|
Less: acquisition related expenses |
|
36 |
|
|
|
30 |
|
|
|
195 |
|
| Adjusted non-interest
expense |
$ |
18,178 |
|
|
$ |
18,222 |
|
|
$ |
19,633 |
|
| |
|
|
|
|
|
| Total income before
non-interest expense |
$ |
18,470 |
|
|
$ |
22,536 |
|
|
$ |
27,206 |
|
|
Less: unrealized loss recognized on equity securities |
|
(2 |
) |
|
|
(19 |
) |
|
|
— |
|
|
Less: net loss on loans accounted for under the fair value
option |
|
(91 |
) |
|
|
(252 |
) |
|
|
(602 |
) |
|
Less: net loss on loans held for sale at fair value |
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
Plus: provision for credit losses(1) |
|
3,942 |
|
|
|
329 |
|
|
|
1,197 |
|
| Gross revenue |
$ |
22,505 |
|
|
$ |
23,136 |
|
|
$ |
29,017 |
|
| Efficiency ratio |
|
80.77 |
% |
|
|
78.76 |
% |
|
|
67.66 |
% |
| |
|
|
|
|
|
| Allowance for Credit
Loss to Adjusted Loans |
|
|
|
|
|
| Total loans held for
investment |
|
2,548,541 |
|
|
|
2,536,503 |
|
|
|
2,476,135 |
|
|
Less: loans acquired(2) |
|
— |
|
|
|
— |
|
|
|
234,717 |
|
|
Less: PPP loans(3) |
|
4,343 |
|
|
|
4,876 |
|
|
|
6,378 |
|
|
Less: loans accounted for under fair value |
|
14,129 |
|
|
|
16,105 |
|
|
|
23,415 |
|
| Adjusted loans |
$ |
2,530,069 |
|
|
$ |
2,515,522 |
|
|
$ |
2,211,625 |
|
| |
|
|
|
|
|
| Allowance for credit
losses(1) |
$ |
27,931 |
|
|
$ |
23,175 |
|
|
$ |
17,183 |
|
| Allowance for credit losses to
adjusted loans(1) |
|
1.10 |
% |
|
|
0.92 |
% |
|
|
0.78 |
% |
___________________(1) 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.
(2) As of December 31, 2023 and September 30, 2023,
acquired loans totaling $212.3 million and $216.1 million,
respectively, are included in the allowance for credit loss
calculation and are therefore not removed in calculating adjusted
total loans.(3) As of December 31, 2023 and
September 30, 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
December 31, 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 |
| |
December 31, |
|
September 30, |
|
December 31, |
|
(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 |
$ |
255 |
|
|
$ |
3,118 |
|
|
$ |
5,471 |
|
|
Plus: acquisition related expenses |
|
36 |
|
|
|
30 |
|
|
|
195 |
|
|
Less: income tax impact from acquisition related expenses |
|
9 |
|
|
|
8 |
|
|
|
49 |
|
| Adjusted net income available
to shareholders |
$ |
282 |
|
|
$ |
3,140 |
|
|
$ |
5,617 |
|
| |
|
|
|
|
|
| Pre-Tax, Pre-Provision
Net Income |
|
|
|
|
|
| Income before income
taxes |
$ |
194 |
|
|
$ |
4,222 |
|
|
$ |
7,301 |
|
|
Plus: provision for credit losses |
|
3,942 |
|
|
|
329 |
|
|
|
1,197 |
|
| Pre-tax, pre-provision net
income |
$ |
4,136 |
|
|
$ |
4,551 |
|
|
$ |
8,498 |
|
| |
|
|
|
|
|
| Adjusted Basic
Earnings Per Share |
|
|
|
|
|
| Basic earnings per share |
$ |
0.03 |
|
|
$ |
0.33 |
|
|
$ |
0.58 |
|
|
Plus: acquisition related expenses net of income tax impact |
* |
|
* |
|
|
0.01 |
|
| Adjusted basic earnings per
share |
$ |
0.03 |
|
|
$ |
0.33 |
|
|
$ |
0.59 |
|
| |
|
|
|
|
|
| Adjusted Diluted
Earnings Per Share |
|
|
|
|
|
| Diluted earnings per
share |
$ |
0.03 |
|
|
$ |
0.32 |
|
|
$ |
0.56 |
|
|
Plus: acquisition related expenses net of income tax impact |
* |
|
* |
|
|
0.02 |
|
| Adjusted diluted earnings per
share |
$ |
0.03 |
|
|
$ |
0.32 |
|
|
$ |
0.58 |
|
| |
|
|
|
|
|
| Adjusted Return on
Average Assets (annualized) |
|
|
|
|
|
| Return on average assets |
|
0.04 |
% |
|
|
0.44 |
% |
|
|
0.79 |
% |
|
Plus: acquisition related expenses net of income tax impact |
* |
|
|
0.01 |
|
|
|
0.03 |
|
| Adjusted return on average
assets |
|
0.04 |
% |
|
|
0.45 |
% |
|
|
0.82 |
% |
| |
|
|
|
|
|
| Adjusted Return on
Average Shareholders' Equity (annualized) |
|
|
|
|
|
| Return on average
shareholders' equity |
|
0.41 |
% |
|
|
5.08 |
% |
|
|
9.17 |
% |
|
Plus: acquisition related expenses net of income tax impact |
|
0.04 |
|
|
|
0.04 |
|
|
|
0.24 |
|
| Adjusted return on average
shareholders' equity |
|
0.45 |
% |
|
|
5.12 |
% |
|
|
9.41 |
% |
| |
|
|
|
|
|
| Adjusted Return on
Tangible Common Equity (annualized) |
|
|
|
|
|
| Return on tangible common
equity |
|
0.48 |
% |
|
|
5.82 |
% |
|
|
10.48 |
% |
|
Plus: acquisition related expenses net of income tax impact |
|
0.05 |
|
|
|
0.04 |
|
|
|
0.28 |
|
| Adjusted return on tangible
common equity |
|
0.53 |
% |
|
|
5.86 |
% |
|
|
10.76 |
% |
* Represents an immaterial impact to adjusted earnings per
share.
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