EX-99.1 2 ex-99d1.htm EX-99.1 fwfi_Ex99_1

Exhibit 99.1

Picture 1

First Western Reports Third Quarter 2019 Financial Results

Third Quarter 2019 Summary

Net income available to common shareholders of $2.4 million in Q3 2019, compared to net income available to common shareholders of $1.4 million in Q2 2019 and $1.4 million in Q3 2018

Diluted EPS of $0.30 in Q3 2019, compared to $0.18 in Q2 2019 and $0.19 in Q3 2018

Total assets of $1.27 billion at September 30, 2019, representing annualized growth of 27.4%, compared to $1.19 billion at June 30, 2019 and an annualized growth of 16.0%

Total assets under management surpassed $6.1 billion at September 30, 2019, an increase of 8.7% from September 30, 2018

Average deposits increased $75.1 million from Q2 2019 to Q3 2019

Total deposits of $1.1 billion, a 41.3% annualized increase from Q2 2019 and a 26.2% increase from Q3 2018

Loan production of $55.4 million in Q3 2019 offset by elevated payoffs of $71.3 million, compared to loan production of $52.6 million and payoffs of $44.7 million in Q2 2019

Non-interest income increased 2.4% from Q2 2019 and 32.4% from Q3 2018

Sale of Los Angeles-based fixed income team now expected to close during Q4 2019

Denver, Colo., October 24, 2019 – First Western Financial, Inc., (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the third quarter ended September 30, 2019.

Net income available to common shareholders was $2.4 million, or $0.30 per diluted share, for the third quarter of 2019. This compares to $1.4 million, or $0.18 per diluted share, for the second quarter of 2019, and $1.4 million, or $0.19 per diluted share, for the third quarter of 2018, which included $0.3 million of preferred stock dividends. The preferred stock was redeemed in the third quarter of 2018.

“We had another good quarter of business development and client acquisitions, resulting in significant growth in total deposits and assets under management, as well as another quarter of strong contribution from our residential mortgage business,” said Scott C. Wylie, CEO of First Western. “We continue to generate strong loan production, although we saw a significant increase in payoffs in the third quarter, which negatively impacted our total loan growth and net interest income. Our loan pipeline remains healthy, which should result in continued strong loan production. However, we anticipate that elevated payoffs will continue to be a headwind to our total loan growth in the near-term. Over the longer-term, we are optimistic about our

opportunities to drive additional profitable growth as we put our rapid increase in liquid assets to work, continue to attract new clients, gain scale, and realize additional operating leverage.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(Dollars in thousands, except per share data)

    

2019

    

2019

    

2018

 

Earnings Summary

 

 

  

 

 

  

 

 

  

 

Net interest income

 

$

7,940 

 

$

7,960 

 

$

7,788 

 

Less: provision for (recovery of) credit losses

 

 

100 

 

 
(78)

 

 

18 

 

Total non-interest income

 

 

8,788 

 

 

8,586 

 

 

6,638 

 

Total non-interest expense(1)

 

 

13,442 

 

 

14,659 

 

 

12,176 

 

Income before income taxes

 

 

3,186 

 

 

1,965 

 

 

2,232 

 

Income tax expense

 

 

780 

 

 

561 

 

 

543 

 

Net income

 

 

2,406 

 

 

1,404 

 

 

1,689 

 

Preferred stock dividends

 

 

— 

 

 

— 

 

 
(255)

 

Net income available to common shareholders

 

 

2,406 

 

 

1,404 

 

 

1,434 

 

Adjusted net income available to common shareholders(2)

 

 

2,406 

 

 

2,586 

 

 

1,434 

 

Basic and diluted earnings per common share

 

 

0.30 

 

 

0.18 

 

 

0.19 

 

Adjusted basic and diluted earnings per common share(2)

 

$

0.30 

 

$

0.33 

 

$

0.19 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (annualized)

 

 

0.80 

%  

 

0.50 

%  

 

0.65 

%

Adjusted return on average assets (annualized) (2)

 

 

0.80 

 

 

0.91 

 

 

0.65 

 

Return on average shareholders’ equity (annualized)

 

 

7.74 

 

 

4.61 

 

 

6.01 

 

Adjusted return on average shareholders’ equity (annualized) (2)

 

 

7.74 

 

 

8.50 

 

 

6.01 

 

Return on tangible common equity (annualized) (2)

 

 

9.39 

 

 

5.68 

 

 

6.46 

 

Adjusted return on tangible common equity (annualized) (2)

 

 

9.39 

 

 

10.51 

 

 

6.46 

 

Net interest margin

 

 

2.95 

 

 

3.10 

 

 

3.29 

 

Efficiency ratio(2)

 

 

80.62 

%  

 

78.24 

%  

 

82.96 

%

(1)

Includes non-operating goodwill impairment charge of $1.6 million for the three months ended June 30, 2019.

(2)

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.

Operating Results for the Third Quarter 2019

Revenue

Gross revenue (total income before non-interest expense,  less net gains on sale of securities and plus provision for credit losses) was $16.6 million for the third quarter of 2019, compared to $16.5 million for the second quarter of 2019. The increase in revenue was primarily driven by a $0.1 million increase in trust and investment management fees.

Relative to the third quarter of 2018, gross revenue increased $2.2 million from $14.4 million. The increase was due to growth in all major categories of gross revenues including net interest income, trust and investment management fees, and net gain on mortgage loans sold resulting from increased mortgage activity and improvement in operational efficiencies within the Mortgage segment.

Net Interest Income

Net interest income for the third quarter of 2019 was $7.9 million, materially unchanged from the second quarter of 2019, as interest-bearing deposit growth increased on-balance sheet liquidity and outpaced loan growth.  On a quarter-over-quarter basis, net interest income was impacted by an $84.5 million increase in average interest-bearing deposits, partially offset by average loan growth of $2.2 million.  The cost of

2

interest-bearing deposits increased 2 basis points to 1.63%, while average loan yields increased 2 basis points to 4.55%.

Relative to the third quarter of 2018, net interest income increased 2.0% from $7.8 million. The year-over-year increase in net interest income was due primarily to growth in average loans, partially offset by increases in average interest-bearing liabilities and funding costs.

Net Interest Margin

Net interest margin for the third quarter of 2019 decreased to 2.95% from 3.10% in the second quarter of 2019. The decrease was primarily driven by the on-boarding deposits from new high net worth clients. This drove an increase in MMDA balances and corresponding interest expense, and an unfavorable shift in the mix of earning assets.

Relative to the third quarter of 2018, the net interest margin decreased from 3.29%, primarily due to a  40 basis point increase in the average cost of funds, which was partially offset by a 6 basis point increase in the average yield on interest earning assets.

Non-interest Income

Non-interest income for the third quarter of 2019 was $8.8 million, an increase of 2.4% from $8.6 million in the second quarter of 2019.  The increase was primarily due to higher trust and investment management fees and a gain on the sale of securities.

Relative to the third quarter of 2018, non-interest income increased 32.4% from $6.6 million.  The increase was primarily attributable to higher net gains on mortgage loans sold as a result of a higher volume of mortgages sold in 2019.

Non-interest Expense

Non-interest expense for the third quarter of 2019 was $13.4 million, a decrease of 8.3% from $14.7 million for the second quarter of 2019.  Non-interest expense for the second quarter of 2019 included a $1.6 million goodwill impairment charge related to the July 2019 agreement to sell the Company’s Los Angeles-based fixed income team.  Excluding the goodwill impairment charge, non-interest expense increased 2.7%.  Non-interest expense also increased 10.4% from $12.2 million in the third quarter of 2018.  Relative to both prior periods, the higher non-interest expense in the third quarter of 2019 was primarily attributable to an increase in salaries and employee benefits.

The increase in salary and employee benefits was primarily driven by $0.5 million increase in non-operating equity compensation expenses for performance related earnout payouts as a result of the September 2017 acquisition of EMC Holdings, LLC (“EMC”) along with $0.4 million of higher incentive compensation accruals.

As part of the EMC acquisition agreement, the effective date of the performance related payout is August 31 of each year.  If mortgage volume and income remain flat compared to the September 30, 2019 results and using the August 31, 2019 MYFW stock price, the Company expects to recognize the remaining equity compensation expense allowable under this agreement, approximately $0.4 million of additional expense,  by the end of the first quarter 2020.

3

Non-interest expense for the third quarter of 2019 also included approximately $0.14 million in non-recurring professional services fees related to the pending sale of the Company’s Los Angeles-based fixed income team.

The Company’s efficiency ratio was 80.6% in the third quarter of 2019, compared with 78.2% in the second quarter of 2019 and 83.0% in the third quarter of 2018.  The efficiency ratio was negatively impacted during the third quarter 2019 by various acquisition and disposition related expenses.  The impact of the above noted items on the third quarter 2019 net income available to shareholders and on earnings per share are as follows:

 

 

 

 

As of and for the Three Months Ended

 

September 30,

(Dollars in thousands, except share and per share data)

    

2019

Impact of Acquisition/Disposition Related Expenses on Net Income Available To Common Shareholders(1)

 

 

 

Net income available to common shareholders

 

$

2,406 

Plus acquisition/disposition related expenses net of income tax impact:

 

 

 

EMC performance related earnout payouts

 

 

350 

Expenses related to sale of L.A. fixed income team

 

 

99 

Net income available to shareholders adjusted for impact of acquisition/disposition expenses(1)

 

$

2,855 

 

 

 

 

Impact of Acquisition/Disposition Related Expenses on Earnings Per Share(1)

 

 

 

Earnings per share

 

$

0.30 

Plus acquisition/disposition related expenses net of income tax impact:

 

 

 

EMC performance related earnout payments

 

 

0.04 

Expenses related to sale of L.A. fixed income team

 

 

0.01 

Earnings per share adjusted for impact of acquisition/disposition expenses(1)

 

$

0.35 

(1)

This table contains certain non-GAAP financial measures that are intended to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of the Company’s core financial performance.

Income Taxes

The Company recorded income tax expense of $0.8 million for the third quarter of 2019, representing an effective tax rate of 24.5%, compared to 28.5% for the second quarter of 2019.  The second quarter expense was higher primarily due to the vesting of Restricted Stock Units which occurred during the three months ended June 30, 2019.

Loan Portfolio

Total gross loans including mortgage loans held for sale were $995.8 million at September 30, 2019, an increase of $20.2 million from the end of the prior quarter, representing an annualized growth of 8.3% and an increase of $119.3 million from September 30, 2018,  or 13.6% growth.

Gross loans, excluding mortgage loans held for sale, totaled $926.6 million at September 30, 2019, compared to $939.4 million at June 30, 2019 and $857.3 million at September 30, 2018. The decrease in gross loans from June  30, 2019 was primarily attributable to elevated payoffs and paydowns experienced in the 1-4 family residential and non-owner occupied commercial real estate portfolios. Net loan payoffs in the loan portfolio totaled $71.3 million in the third quarter of 2019, an increase from $44.7 million in the second quarter of 2019.

4

Deposits

Total deposits were $1.1  billion at September 30, 2019, compared to $1.0 billion at June 30, 2019, and $878.6 million at September 30, 2018, which represents a 41.3% annualized increase from the second quarter 2019 and a 26.2% increase from the third quarter 2018. The increase in total deposits from June 30, 2019 was due primarily to an increase in money market accounts related to the addition of new high net worth clients.

Average total deposits for the third quarter of 2019 increased $75.1 million, or 31.0%  annualized, from the second quarter of 2019 and increased $180.3 million, or 20.9%, from the third quarter of 2018.

Assets Under Management

Total assets under management increased by $148.2 million during the third quarter to $6.12 billion at September 30, 2019, compared to $5.97 billion at June 30, 2019, and $5.63 billion at September 30, 2018.  The increase was primarily attributable to market gains.

Credit Quality

Non-performing assets totaled $14.6 million, or 1.15% of total assets, at September 30, 2019, up from $13.5 million, or 1.13% of total assets, at June  30, 2019 due to an increase in TDR balances.

Consistent with the prior eleven quarters, the Company did not record any charge-offs in the third quarter of 2019.

The Company recorded a provision for loan losses of $0.1 million in the third quarter of 2019, primarily due to an increase in substandard loans.

Capital

At September 30, 2019, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. At September 30, 2019, the Bank was classified as “well capitalized,” as summarized in the following table:

 

 

 

 

 

    

September 30,

 

 

 

2019

 

Consolidated Capital

 

 

 

Common Equity Tier 1(CET1) to risk-weighted assets

 

11.73 

%

Tier 1 capital to risk-weighted assets

 

11.73 

 

Total capital to risk-weighted assets

 

13.36 

 

Tier 1 capital to average assets

 

8.76 

 

 

 

 

 

Bank Capital

 

 

 

Common Equity Tier 1(CET1) to risk-weighted assets

 

10.98 

 

Tier 1 capital to risk-weighted assets

 

10.98 

 

Total capital to risk-weighted assets

 

11.87 

 

Tier 1 capital to average assets

 

8.19 

%

 

Tangible book value per common share increased 3.6% to $12.83 at September 30, 2019, from  $12.38 at June 30, 2019.

5

During the third quarter of 2019, the Company repurchased 582 shares of its common stock at an average price of $14.00 under its stock repurchase program, which authorized the repurchase of up to 300,000 shares of its common stock.  As of September 30, 2019, the Company had up to 299,418 shares remaining under the current stock repurchase authorization.

Sale of Los Angeles-based Fixed Income Team

On July 19, 2019, the Company announced that it had entered into an agreement to sell its Los Angeles-based fixed income portfolio management team (“LA fixed income team”) and certain advisory and sub-advisory arrangements to Lido Advisors, LLC and Oakhurst Advisors, LLC.  The sale of the LA fixed income team is now expected to close during the fourth quarter of 2019. As a result of the pending sale, $3.6 million in assets and $0.1 in liabilities were moved to held for sale during the period.

The Company continues to expect the sale to result in an estimated positive impact to tangible common equity of approximately $3.3 million to $3.9 million to be recognized at closing.

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, October 25, 2019. The call can be accessed via telephone at 877-405-1628; passcode 7935958.  A recorded replay will be accessible through November 1, 2019 by dialing 855-859-2056; passcode 7935958.

A slide presentation relating to the third quarter 2019 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 and California.  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,” “Adjusted Net Income Available to Common Shareholders,” “Adjusted 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.

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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,” “outlook,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “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 risk of geographic concentration in Colorado, Arizona, Wyoming and California; 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 21, 2019 (“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 Rossi

310-622-8221

Larry Clark

310-622-8223

MYFW@finprofiles.com

IR@myfw.com

 

 

 

7

First Western Financial, Inc.

Consolidated Financial Summary (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

September 30,

 

June 30,

 

September 30,

(Dollars in thousands, except per share data)

    

2019

    

2019

    

2018

Interest and dividend income:

 

 

  

 

 

  

 

 

  

Loans, including fees

 

$

10,672 

 

$

10,600 

 

$

9,468 

Investment securities

 

 

312 

 

 

331 

 

 

266 

Federal funds sold and other

 

 

489 

 

 

243 

 

 

206 

Total interest and dividend income

 

 

11,473 

 

 

11,174 

 

 

9,940 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

 

3,363 

 

 

2,995 

 

 

1,761 

Other borrowed funds

 

 

170 

 

 

219 

 

 

391 

Total interest expense

 

 

3,533 

 

 

3,214 

 

 

2,152 

Net interest income

 

 

7,940 

 

 

7,960 

 

 

7,788 

Less: provision for (recovery of) credit losses

 

 

100 

 

 
(78)

 

 

18 

Net interest income, after provision for (recovery of) credit losses

 

 

7,840 

 

 

8,038 

 

 

7,770 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Trust and investment management fees

 

 

4,824 

 

 

4,693 

 

 

4,770 

Net gain on mortgage loans sold

 

 

3,291 

 

 

3,262 

 

 

1,159 

Bank fees

 

 

283 

 

 

341 

 

 

361 

Risk management and insurance fees

 

 

176 

 

 

194 

 

 

249 

Net gain on securities

 

 

119 

 

 

— 

 

 

— 

Income on company-owned life insurance

 

 

95 

 

 

96 

 

 

99 

Total non-interest income

 

 

8,788 

 

 

8,586 

 

 

6,638 

Total income before non-interest expense

 

 

16,628 

 

 

16,624 

 

 

14,408 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

8,504 

 

 

7,699 

 

 

7,221 

Occupancy and equipment

 

 

1,388 

 

 

1,398 

 

 

1,427 

Professional services

 

 

745 

 

 

1,036 

 

 

805 

Technology and information systems

 

 

961 

 

 

1,016 

 

 

965 

Data processing

 

 

854 

 

 

742 

 

 

697 

Marketing

 

 

272 

 

 

441 

 

 

274 

Amortization of other intangible assets

 

 

52 

 

 

142 

 

 

208 

Goodwill impairment

 

 

— 

 

 

1,572 

 

 

— 

Other

 

 

666 

 

 

613 

 

 

579 

Total non-interest expense

 

 

13,442 

 

 

14,659 

 

 

12,176 

Income before income taxes

 

 

3,186 

 

 

1,965 

 

 

2,232 

Income tax expense

 

 

780 

 

 

561 

 

 

543 

Net income

 

 

2,406 

 

 

1,404 

 

 

1,689 

Preferred stock dividends

 

 

— 

 

 

— 

 

 
(255)

Net income available to common shareholders

 

$

2,406 

 

$

1,404 

 

$

1,434 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

0.30 

 

$

0.18 

 

$

0.19 

 

 

 

8

First Western Financial, Inc.

Consolidated Financial Summary (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

June 30,

    

September 30,

 

 

2019

 

2019

 

2018

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

ASSETS

 

 

  

 

 

  

 

 

  

Cash and cash equivalents:

 

 

  

 

 

  

 

 

  

Cash and due from banks

 

$

3,828 

 

$

1,974 

 

$

1,232 

Interest-bearing deposits in other financial institutions

 

 

142,348 

 

 

90,795 

 

 

69,186 

Total cash and cash equivalents

 

 

146,176 

 

 

92,769 

 

 

70,418 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

 

61,491 

 

 

51,698 

 

 

45,492 

Correspondent bank stock, at cost

 

 

582 

 

 

1,649 

 

 

2,392 

Mortgage loans held for sale

 

 

69,231 

 

 

36,269 

 

 

19,238 

Loans, net of allowance of $7,675, $7,575 and $7,118

 

 

918,911 

 

 

931,820 

 

 

850,199 

Premises and equipment, net

 

 

5,483 

 

 

5,683 

 

 

6,263 

Accrued interest receivable

 

 

2,968 

 

 

3,184 

 

 

2,854 

Accounts receivable

 

 

4,978 

 

 

4,718 

 

 

4,736 

Other receivables

 

 

865 

 

 

872 

 

 

1,841 

Other real estate owned, net

 

 

658 

 

 

658 

 

 

658 

Goodwill

 

 

19,686 

 

 

23,239 

 

 

24,811 

Other intangible assets, net

 

 

36 

 

 

88 

 

 

565 

Deferred tax assets, net

 

 

4,765 

 

 

4,607 

 

 

4,626 

Company-owned life insurance

 

 

14,993 

 

 

14,898 

 

 

14,614 

Other assets

 

 

17,549 

 

 

18,313 

 

 

2,820 

Assets held for sale

 

 

3,553 

 

 

— 

 

 

— 

Total assets

 

$

1,271,925 

 

$

1,190,465 

 

$

1,051,527 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

231,535 

 

$

229,266 

 

$

219,400 

Interest-bearing

 

 

877,369 

 

 

775,911 

 

 

659,239 

Total deposits

 

 

1,108,904 

 

 

1,005,177 

 

 

878,639 

Borrowings:

 

 

 

 

 

 

 

 

 

Federal Home Loan Bank Topeka borrowings

 

 

10,000 

 

 

36,060 

 

 

44,598 

Subordinated Notes

 

 

6,560 

 

 

6,560 

 

 

6,560 

Accrued interest payable

 

 

356 

 

 

274 

 

 

211 

Other liabilities

 

 

20,262 

 

 

20,237 

 

 

7,355 

Liabilities held for sale

 

 

111 

 

 

— 

 

 

— 

Total liabilities

 

 

1,146,193 

 

 

1,068,308 

 

 

937,363 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Total shareholders’ equity

 

 

125,732 

 

 

122,157 

 

 

114,164 

Total liabilities and shareholders’ equity

 

$

1,271,925 

 

$

1,190,465 

 

$

1,051,527 

9

First Western Financial, Inc.

Consolidated Financial Summary (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

September 30,

 

June 30,

 

September 30,

(Dollars in thousands)

    

2019

    

2019

    

2018

Loan Portfolio

 

 

  

 

 

  

 

 

  

Cash, Securities and Other

 

$

146,622 

 

$

149,503 

 

$

132,920 

Construction and Development

 

 

42,059 

 

 

40,826 

 

 

37,423 

1 - 4 Family Residential

 

 

366,238 

 

 

373,836 

 

 

327,674 

Non-Owner Occupied CRE

 

 

138,753 

 

 

152,664 

 

 

165,670 

Owner Occupied CRE

 

 

119,497 

 

 

112,660 

 

 

94,698 

Commercial and Industrial

 

 

111,187 

 

 

108,516 

 

 

97,772 

Total loans held for investment

 

$

924,356 

 

$

938,005 

 

$

856,157 

Deferred costs, net

 

 

2,230 

 

 

1,390 

 

 

1,160 

Gross loans

 

$

926,586 

 

$

939,395 

 

$

857,317 

Mortgage loans held for sale

 

$

69,231 

 

$

36,269 

 

$

19,238 

 

 

 

 

 

 

 

 

 

 

Deposit Portfolio

 

 

 

 

 

 

 

 

 

Money market deposit accounts

 

$

620,434 

 

$

508,263 

 

$

444,580 

Time deposits

 

 

170,457 

 

 

176,128 

 

 

148,425 

Negotiable order of withdrawal accounts

 

 

83,022 

 

 

88,687 

 

 

64,777 

Savings accounts

 

 

3,456 

 

 

2,833 

 

 

1,457 

Total interest-bearing deposits

 

$

877,369 

 

$

775,911 

 

$

659,239 

Noninterest-bearing accounts

 

$

231,535 

 

$

229,266 

 

$

219,400 

Total deposits

 

$

1,108,904 

 

$

1,005,177 

 

$

878,639 

10

First Western Financial, Inc.

Consolidated Financial Summary (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(Dollars in thousands)

    

2019

    

2019

    

2018

 

Average Balance Sheets

 

 

 

 

 

 

 

 

 

 

Average Assets

 

 

 

 

 

 

 

 

 

 

Interest-earnings assets:

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits in other financial institutions

 

$

88,782 

 

$

40,755 

 

$

41,538 

 

Available-for-sale securities

 

 

51,368 

 

 

52,852 

 

 

48,438 

 

Loans

 

 

937,260 

 

 

935,025 

 

 

857,676 

 

Interest earning-assets

 

 

1,077,410 

 

 

1,028,632 

 

 

947,652 

 

Mortgage loans held for sale

 

 

52,546 

 

 

31,454 

 

 

22,294 

 

Total interest earning-assets, plus mortgage loans held for sale

 

 

1,129,956 

 

 

1,060,086 

 

 

969,946 

 

Allowance for loan losses

 

 
(7,584)

 

 
(7,648)

 

 
(7,141)

 

Noninterest-earnings assets

 

 

81,171 

 

 

79,735 

 

 

72,922 

 

Total assets

 

$

1,203,543 

 

$

1,132,173 

 

$

1,035,727 

 

 

 

 

 

 

 

 

 

 

 

 

Average Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

 

$

826,490 

 

$

742,002 

 

$

640,507 

 

Federal Home Loan Bank Topeka borrowings

 

 

10,567 

 

 

17,922 

 

 

44,804 

 

Subordinated notes

 

 

6,560 

 

 

6,560 

 

 

8,489 

 

Total interest-bearing liabilities

 

$

843,617 

 

$

766,484 

 

$

693,800 

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

215,721 

 

 

225,153 

 

 

221,411 

 

Other liabilities

 

 

19,881 

 

 

18,830 

 

 

8,132 

 

Total noninterest-bearing liabilities

 

$

235,602 

 

$

243,983 

 

$

229,543 

 

Shareholders’ equity

 

$

124,324 

 

$

121,706 

 

$

112,384 

 

Total liabilities and shareholders’ equity

 

$

1,203,543 

 

$

1,132,173 

 

$

1,035,727 

 

 

 

 

 

 

 

 

 

 

 

 

Yields (annualized)

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits in other financial institutions

 

 

2.20 

%  

 

2.38 

%  

 

1.98 

%

Available-for-sale securities

 

 

2.43 

 

 

2.51 

 

 

2.20 

 

Loans

 

 

4.55 

 

 

4.53 

 

 

4.42 

 

Interest earning-assets

 

 

4.26 

 

 

4.35 

 

 

4.20 

 

Mortgage loans held for sale

 

 

3.46 

 

 

3.73 

 

 

4.36 

 

Total interest earning-assets, plus loans held for sale

 

 

4.22 

 

 

4.33 

 

 

4.20 

 

Interest-bearing deposits

 

 

1.63 

 

 

1.61 

 

 

1.10 

 

Federal Home Loan Bank Topeka borrowings

 

 

1.93 

 

 

2.23 

 

 

2.05 

 

Subordinated notes

 

 

7.26 

 

 

7.26 

 

 

7.59 

 

Total interest-bearing liabilities

 

 

1.68 

 

 

1.68 

 

 

1.24 

 

Net interest margin

 

 

2.95 

 

 

3.10 

 

 

3.29 

 

Interest rate spread

 

 

2.58 

%  

 

2.67 

%  

 

2.96 

%

11

First Western Financial, Inc.

Consolidated Financial Summary (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the Three Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(Dollars in thousands, except per share data)

    

2019

    

2019

    

2018

 

Asset Quality

 

 

 

 

 

 

 

 

  

 

Nonperforming loans

 

$

13,980 

 

$

12,803 

 

$

18,388 

 

Nonperforming assets

 

 

14,638 

 

 

13,461 

 

 

19,046 

 

Net recoveries

 

 

— 

 

 
(8)

 

 

— 

 

Nonperforming loans to total loans

 

 

1.51 

%  

 

1.36 

%  

 

2.14 

%

Nonperforming assets to total assets

 

 

1.15 

 

 

1.13 

 

 

1.81 

 

Allowance for loan losses to nonperforming loans

 

 

54.90 

 

 

59.17 

 

 

38.71 

 

Allowance for loan losses to total loans

 

 

0.83 

 

 

0.81 

 

 

0.83 

 

Net charge-offs to average loans

 

 

— 

%  

 

— 

%  

 

— 

%

 

 

 

 

 

 

 

 

 

 

 

Assets under management

 

$

6,116,510 

 

$

5,968,318 

 

$

5,626,163 

 

 

 

 

 

 

 

 

 

 

 

 

Market Data

 

 

 

 

 

 

 

 

 

 

Book value per share at period end

 

$

15.75 

 

$

15.30 

 

$

14.33 

 

Tangible book value per common share(1)

 

$

12.83 

 

$

12.38 

 

$

11.14 

 

Weighted average outstanding shares, basic

 

 

7,890,959 

 

 

7,881,999 

 

 

7,373,770 

 

Weighted average outstanding shares, diluted

 

 

7,914,959 

 

 

7,897,092 

 

 

7,388,845 

 

Shares outstanding at period end

 

 

7,983,866 

 

 

7,983,866 

 

 

7,968,420 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Capital

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1(CET1) to risk-weighted assets

 

 

11.73 

%  

 

11.41 

%  

 

11.22 

%

Tier 1 capital to risk-weighted assets

 

 

11.73 

 

 

11.41 

 

 

11.22 

 

Total capital to risk-weighted assets

 

 

13.36 

 

 

13.04 

 

 

12.90 

 

Tier 1 capital to average assets

 

 

8.76 

 

 

9.01 

 

 

9.09 

 

 

 

 

 

 

 

 

 

 

 

 

Bank Capital

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1(CET1) to risk-weighted assets

 

 

10.98 

 

 

10.65 

 

 

10.42 

 

Tier 1 capital to risk-weighted assets

 

 

10.98 

 

 

10.65 

 

 

10.42 

 

Total capital to risk-weighted assets

 

 

11.87 

 

 

11.53 

 

 

11.31 

 

Tier 1 capital to average assets

 

 

8.19 

%  

 

8.42 

%  

 

8.45 

%

(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.

 

12

First Western Financial, Inc.

Consolidated Financial Summary (unaudited) (continued)

 

Reconciliations of Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

    

As of and for the Three Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(Dollars in thousands, except share and per share data)

 

2019

 

2019

 

2018

 

Tangible common

 

 

  

 

 

  

 

 

  

 

Total shareholders' equity

 

$

125,732 

 

$

122,157 

 

$

114,164 

 

Less:

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

19,686 

 

 

23,239 

 

 

24,811 

 

Assets held for sale(1)

 

 

3,553 

 

 

— 

 

 

— 

 

Other intangibles, net

 

 

36 

 

 

88 

 

 

565 

 

Tangible common equity

 

$

102,457 

 

$

98,830 

 

$

88,788 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding, end of period

 

 

7,983,866 

 

 

7,983,866 

 

 

7,968,420 

 

Tangible common book value per share

 

$

12.83 

 

$

12.38 

 

$

11.14 

 

 

 

 

 

 

 

 

 

 

 

 

Net income, as reported

 

$

2,406 

 

$

1,404 

 

$

1,689 

 

Less: Preferred stock dividends

 

 

— 

 

 

— 

 

 

255 

 

Income available to common shareholders

 

$

2,406 

 

$

1,404 

 

$

1,434 

 

Return on tangible common equity (annualized)

 

 

9.39 

%  

 

5.68 

%  

 

6.46 

%

 

 

 

 

 

 

 

 

 

 

 

Efficiency

 

 

 

 

 

 

 

 

 

 

Non-interest expense

 

$

13,442 

 

$

14,659 

 

$

12,176 

 

Less: Amortization

 

 

52 

 

 

142 

 

 

208 

 

Less: Goodwill impairment

 

 

— 

 

 

1,572 

 

 

— 

 

Adjusted non-interest expense

 

$

13,390 

 

$

12,945 

 

$

11,968 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

7,940 

 

$

7,960 

 

$

7,788 

 

Non-interest income

 

 

8,788 

 

 

8,586 

 

 

6,638 

 

Less: Net gain on sale of securities

 

 

119 

 

 

— 

 

 

— 

 

Total income

 

$

16,609 

 

$

16,546 

 

$

14,426 

 

Efficiency ratio

 

 

80.62 

%  

 

78.24 

%  

 

82.96 

%

 

 

 

 

 

 

 

 

 

 

 

Total income before non-interest expense

 

$

16,628 

 

$

16,624 

 

$

14,408 

 

Less: Net gain on sale of securities

 

 

119 

 

 

— 

 

 

— 

 

Plus: provision for (recovery of) credit losses

 

 

100 

 

 
(78)

 

 

18 

 

Gross revenue

 

$

16,609 

 

$

16,546 

 

$

14,426 

 

(1)

Goodwill held for sale related to the sale of the Los Angeles-based Fixed Income Team

 

13

First Western Financial, Inc.

Consolidated Financial Summary (unaudited) (continued)

 

Reconciliations of Non-GAAP Financial Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

    

As of and for the Three Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

(Dollars in thousands, except share and per share data)

 

2019

 

2019

 

2018

 

Adjusted Net Income Available To Common Shareholders

 

 

 

 

 

 

 

 

 

 

Net income available to common shareholders

 

$

2,406 

 

$

1,404 

 

$

1,434 

 

Plus: Goodwill impairment including income tax impact

 

 

— 

 

 

1,182 

 

 

— 

 

Adjusted net income available to shareholders

 

$

2,406 

 

$

2,586 

 

$

1,434 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Earnings Per Share

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

0.30 

 

$

0.18 

 

$

0.19 

 

Plus: Goodwill impairment including income tax impact

 

 

— 

 

 

0.15 

 

 

— 

 

Adjusted earnings per share

 

$

0.30 

 

$

0.33 

 

$

0.19 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Return on Average Assets (annualized)

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

 

0.80 

%

 

0.50 

%

 

0.65 

%

Plus: Goodwill impairment including income tax impact

 

 

— 

 

 

0.41 

 

 

— 

 

Adjusted return on average assets

 

 

0.80 

%

 

0.91 

%

 

0.65 

%

 

 

 

 

 

 

 

 

 

 

 

Adjusted Return on Average Shareholders' Equity (annualized)

 

 

 

 

 

 

 

 

 

 

Return on average shareholders' equity

 

 

7.74 

%

 

4.61 

%

 

6.01 

%

Plus: Goodwill impairment including income tax impact

 

 

— 

 

 

3.89 

 

 

— 

 

Adjusted return on average shareholders' equity

 

 

7.74 

%

 

8.50 

%

 

6.01 

%

 

 

 

 

 

 

 

 

 

 

 

Adjusted Return on Tangible Common Equity (annualized)

 

 

 

 

 

 

 

 

 

 

Return on tangible common equity

 

 

9.39 

%

 

5.68 

%

 

6.46 

%

Plus: Goodwill impairment including income tax impact

 

 

— 

 

 

4.83 

 

 

— 

 

Adjusted return on tangible common equity

 

 

9.39 

%

 

10.51 

%

 

6.46 

%

 

14