UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 25, 2018
FIRST WESTERN FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
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Colorado |
001-38595 |
37-1442266 |
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(State or other jurisdiction of |
(Commission |
(I.R.S. Employer |
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incorporation or organization) |
File Number) |
Identification No.) |
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1900 16th Street, Suite 1200 |
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Denver, Colorado |
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80202 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (303) 531-8100
Former name or former address, if changed since last report: Not Applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☒ Emerging growth company
☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 2.02 Results of Operations and Financial Condition.
On October 25, 2018, First Western Financial, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2018. A copy of the press release is furnished as Exhibit 99.1 and is incorporated by reference herein.
The information in this Item 2.02, including Exhibit 99.1, is being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, unless specifically identified therein as being incorporated therein by reference.
Item 7.01Regulation FD Disclosure.
The Company intends to hold an investor call and webcast to discuss its financial results for the third quarter ended September 30, 2018 on Friday, October 26, 2018, at 9:00 a.m. Mountain Time. The Company’s presentation to analysts and investors contains additional information about the Company’s financial results for the third quarter ended September 30, 2018 and is furnished as Exhibit 99.2 and is incorporated by reference herein.
The information in this Item 7.01, including Exhibit 99.2, is being furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, unless specifically identified therein as being incorporated therein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit |
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Description |
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99.1
99.2 |
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Press Release issued by First Western Financial, Inc. dated October 25, 2018
First Western Financial, Inc. Investor Presentation
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2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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FIRST WESTERN FINANCIAL, INC. |
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Date: October 25, 2018 |
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By: /s/ Scott C. Wylie |
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Scott C. Wylie |
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Chairman, Chief Executive Officer and President |
3
Exhibit 99.1
First Western Reports Third Quarter 2018 Financial Results
Third Quarter 2018 Summary
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· |
Completed initial public offering, raising net proceeds before expenses of $34.1 million |
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· |
Net income available to common shareholders of $1.4 million, compared to net income available to common shareholders of $0.5 million in Q3 2017 |
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· |
Diluted EPS of $0.19, compared to $0.08 in Q3 2017 |
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· |
Gross revenue of $14.4 million, compared to $14.1 million in Q3 2017 |
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· |
Average loans increase $27.7 million, or 13.4% annualized from Q2 2018 |
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· |
Total loans, excluding loans held for sale, of $857.3 million, a 7.0% annualized increase from Q2 2018 and an 8.5% increase from Q3 2017 |
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· |
Total deposits of $878.6 million, a 16.5% annualized increase from Q2 2018 and an 8.1% increase from Q3 2017 |
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· |
Total assets under management of $5.63 billion, a 15.5% annualized increase from Q2 2018 and an 8.6% increase from Q3 2017 |
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· |
Efficiency ratio of 83.0%, an improvement from 88.8% in Q2 2018 |
Denver, Colo., October 24, 2018 – First Western Financial, Inc., (“First Western” or the “Company”) (NASDAQ: MYFW), a financial services holding company, today reported financial results for the third quarter ended September 30, 2018.
For the third quarter of 2018, net income available to common shareholders was $1.4 million, or $0.19 per diluted share, which included $0.3 million of preferred stock dividends. This compares to $0.5 million, or $0.08 per diluted share, for the second quarter of 2018, which included $0.6 million of preferred stock dividends, and $0.5 million, or $0.08 per diluted share, for the third quarter of 2017, which included $0.6 million of preferred stock dividends.
“We delivered a strong quarter of improvement in our financial results, with our earnings per share increasing 138% from the prior quarter and generating a higher level of return on assets and return on equity,” said Scott C. Wylie, CEO of First Western. “We executed on the near-term drivers of earnings growth that we identified including redeeming our higher cost capital and streamlining our cost structure. As a result of our expense reduction actions, our operating efficiency ratio improved to 83.0% from 88.8% last quarter. We were able to generate solid growth in total loans, although not at the level we anticipated. Over the past year, we have made a number of enhancements to our business development platform that we expect to positively impact our client acquisition efforts in the future. As we gain more traction in business development, we expect to generate a higher level of revenue, realize greater operating leverage, and drive further earnings growth that we believe will create additional value for our shareholders.”
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For the Three Months Ended |
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September 30, |
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June 30, |
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September 30, |
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(Dollars in thousands, except per share data) |
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2018 |
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2018 |
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2017 |
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Earnings Summary |
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Net interest income |
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$ |
7,788 |
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$ |
7,577 |
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$ |
7,375 |
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Less: Provision for credit losses |
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18 |
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— |
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306 |
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Total non-interest income |
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6,638 |
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6,892 |
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6,745 |
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Total non-interest expense |
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12,176 |
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13,084 |
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12,134 |
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Income before income taxes |
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2,232 |
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1,385 |
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1,680 |
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Income tax expense |
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543 |
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337 |
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632 |
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Net income |
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1,689 |
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1,048 |
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1,048 |
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Preferred stock dividends |
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(255) |
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(562) |
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(584) |
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Net income available to common shareholders |
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$ |
1,434 |
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$ |
486 |
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$ |
464 |
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Basic and diluted earnings per common share |
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$ |
0.19 |
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$ |
0.08 |
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$ |
0.08 |
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Return on average assets |
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0.65 |
% |
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0.41 |
% |
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0.43 |
% |
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Return on average shareholders' equity |
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6.01 |
% |
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3.99 |
% |
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4.26 |
% |
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Return on tangible common equity(1) |
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1.62 |
% |
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0.89 |
% |
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0.93 |
% |
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Net interest margin |
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3.29 |
% |
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3.29 |
% |
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3.35 |
% |
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Efficiency ratio(1) |
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82.96 |
% |
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88.84 |
% |
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84.62 |
% |
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(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. |
Operating Results for the Third Quarter 2018
Revenue
Gross revenue (total income before non-interest expense, less gains on securities sold, plus provision for credit losses) was $14.4 million for the third quarter 2018, compared to $14.5 million for the second quarter of 2018. The slight decline in revenue was driven by a $0.3 million decrease in non-interest income, primarily due to a decline in mortgage activity. This was partially offset by a $0.2 million increase in net interest income.
Relative to the third quarter of 2017, gross revenue increased $0.3 million from $14.1 million. The increase was attributable to a $0.4 million increase in net interest income, partially offset by a $0.1 million decrease in non-interest income.
Net Interest Income
Net interest income for the third quarter of 2018 was $7.8 million, an increase of 2.8% from $7.6 million in the second quarter of 2018. The increase in net interest income from the second quarter was primarily attributable to higher average loan balances.
Relative to the third quarter of 2017, net interest income increased 5.6% from $7.4 million. The increase in net interest income from the third quarter of 2017 was primarily driven by higher average loan balances.
Net Interest Margin
Net interest margin for the third quarter of 2018 was 3.29%, unchanged from the second quarter of 2018. An 8 basis point increase in the average yield on loans, from 4.34% to 4.42%, was offset by a 9 basis point increase in the average cost of funds, from 0.84% to 0.93%.
2
Relative to the third quarter of 2017, the net interest margin decreased from 3.35%. A 3 basis point increase in the average yield on loans was offset by a 24 basis point increase in the average cost of funds.
Non-interest Income
Non-interest income for the third quarter of 2018 was $6.6 million, a decrease of 3.7% from $6.9 million in the second quarter of 2018. The decrease was primarily attributable to lower net gains on mortgage loans sold as a result of a lower volume of mortgages sold in the quarter. This was partially offset by a 1.7% increase in trust and investment management fees due to growth in assets under management.
Non-interest income decreased 1.6% from $6.8 million in the third quarter of 2017, primarily as a result of a decline in trust and investment management fees and bank fees, partially offset by higher net gains on mortgage loans sold.
Non-interest Expense
Non-interest expense for the third quarter of 2018 was $12.2 million, a decrease of 6.9% from $13.1 million for the second quarter of 2018. The decrease was primarily attributable to lower salary expense and employee benefits expense as a result of streamlining the cost structure in certain areas of the Company, as well as lower professional fees.
Relative to the third quarter of 2017, non-interest expense was essentially flat.
The Company’s efficiency ratio was 83.0% in the third quarter of 2018, compared with 88.8% in the second quarter of 2018 and 84.6% in the third quarter of 2017.
Income Taxes
The Company recorded income tax expense of $0.5 million for the third quarter of 2018, representing an effective tax rate of 24.3%, compared to 24.3% for the second quarter of 2018 and 37.6% for the third quarter of 2017. The decrease in the effective tax rate in the third quarter of 2018, as compared to the third quarter of 2017, was attributable to the reduction in the federal corporate tax rate that was effective January 1, 2018.
Loan Portfolio
Gross loans, excluding mortgage loans held for sale, totaled $857.3 million at September 30, 2018, compared to $842.6 million at June 30, 2018 and $789.9 million at September 30, 2017. The increase in total loans from June 30, 2018, was primarily attributable to growth in the 1-4 family residential portfolio.
Deposits
Total deposits were $878.6 million at September 30, 2018, compared to $843.7 million at June 30, 2018, and $813.0 million at September 30, 2017. The increase in total deposits from June 30, 2018 was due to an increase money market deposits, primarily attributed to an increase in trust account related deposits.
3
Assets Under Management
Total assets under management increased by $210.2 million during the third quarter to $5.63 billion at September 30, 2018, compared to $5.42 billion at June 30, 2018 and $5.18 billion at September 30, 2017. The increase in assets under management from June 30, 2018 was primarily attributable to new client acquisitions and an increase in managed trust assets.
The increase from September 30, 2017 was due to increases across most asset categories, driven by contributions and market gains.
Credit Quality
Non-performing assets totaled $19.0 million, or 1.81% of total assets, at September 30, 2018, an increase from $3.7 million, or 0.35% of total assets, at June 30, 2018. Approximately $11.3 million of the increase was related to a Cash, Securities, and Other loan. The credit is currently in the workout process and no specific reserve was required during the third quarter of 2018. The remainder of the increase in non-performing assets was related to administrative delays in renewing two credits that matured during the quarter.
The Company did not record any charge-offs in the third quarter. This marked the seventh consecutive quarter of no net charge-offs.
The Company recorded an immaterial amount of provision for loan losses for the third quarter of 2018. The modest provision reflected the lack of net charge-offs.
Capital
At September 30, 2018, First Western (“Consolidated”) and First Western Trust (“Bank”) exceeded the minimum capital levels required by their respective regulators, as summarized in the following table:
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September 30, |
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2018 |
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Consolidated Capital |
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Common Equity Tier 1(CET1) to risk-weighted assets |
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11.22 |
% |
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Tier 1 capital to risk-weighted assets |
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11.22 |
% |
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Total capital to risk-weighted assets |
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12.90 |
% |
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Tier 1 capital to average assets |
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9.09 |
% |
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Bank Capital |
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Common Equity Tier 1(CET1) to risk-weighted assets |
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10.42 |
% |
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Tier 1 capital to risk-weighted assets |
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10.42 |
% |
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Total capital to risk-weighted assets |
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11.31 |
% |
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Tier 1 capital to average assets |
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8.45 |
% |
4
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 26, 2018. The call can be accessed via telephone at 877-405-1628; passcode 8376176. A recorded replay will be accessible through November 2, 2019 by dialing 855-859-2056; passcode 8376176.
A slide presentation relating to the third quarter 2018 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 Financial Inc.
First Western Financial, Inc. 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,” and “Gross Revenue.” 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,” “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
5
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 Prospectus filed with the U.S. Securities and Exchange Commission (“SEC”) dated July 18, 2018 (“Prospectus”), 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 of that Prospectus and the Risk Factors section of other documents we file with the SEC from time to time. 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
6
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
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Three Months Ending |
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September 30, |
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June 30, |
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September 30, |
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(Dollars in thousands, except per share data) |
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2018 |
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2018 |
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2017 |
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Interest and dividend income: |
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Loans, including fees |
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$ |
9,468 |
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$ |
9,074 |
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$ |
8,264 |
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Investment securities |
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266 |
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281 |
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530 |
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Federal funds sold and other |
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206 |
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150 |
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91 |
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Total interest and dividend income |
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9,940 |
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9,505 |
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8,885 |
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Interest expense: |
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Deposits |
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1,761 |
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1,411 |
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1,016 |
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Other borrowed funds |
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391 |
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|
517 |
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|
494 |
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Total interest expense |
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2,152 |
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1,928 |
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1,510 |
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Net interest income |
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7,788 |
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7,577 |
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7,375 |
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Less: Provision for credit losses |
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18 |
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— |
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306 |
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Net interest income, after provision for credit losses |
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7,770 |
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7,577 |
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7,069 |
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Non-interest income: |
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Trust and investment management fees |
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4,770 |
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4,689 |
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4,815 |
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Net gain on mortgage loans sold |
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1,159 |
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1,359 |
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|
899 |
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Bank fees |
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361 |
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455 |
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674 |
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Risk management and insurance fees |
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249 |
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284 |
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209 |
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Income on company-owned life insurance |
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|
99 |
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105 |
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|
105 |
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Net gain on sale of securities |
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— |
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— |
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43 |
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Total non-interest income |
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6,638 |
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6,892 |
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6,745 |
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Total income before non-interest expense |
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14,408 |
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14,469 |
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13,814 |
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Non-interest expense: |
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|
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|
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|
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Salaries and employee benefits |
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7,221 |
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7,660 |
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7,081 |
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Occupancy and equipment |
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1,427 |
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1,527 |
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1,422 |
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Professional services |
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805 |
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1,008 |
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682 |
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Technology and information systems |
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965 |
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1,000 |
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980 |
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Data processing |
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697 |
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|
687 |
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598 |
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Marketing |
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274 |
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316 |
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377 |
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Amortization of other intangible assets |
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208 |
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230 |
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185 |
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Total loss on sales/provision of other real estate owned |
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— |
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— |
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236 |
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Other |
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579 |
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|
656 |
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|
573 |
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Total non-interest expense |
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12,176 |
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13,084 |
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|
12,134 |
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Income before income taxes |
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|
2,232 |
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|
1,385 |
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|
1,680 |
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Income tax expense |
|
|
543 |
|
|
337 |
|
|
632 |
|
Net income |
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|
1,689 |
|
|
1,048 |
|
|
1,048 |
|
Preferred stock dividends |
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(255) |
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(562) |
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(584) |
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Net income available to common shareholders |
|
$ |
1,434 |
|
$ |
486 |
|
$ |
464 |
|
Earnings per common share: |
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Basic and diluted |
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$ |
0.19 |
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$ |
0.08 |
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$ |
0.08 |
7
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
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September 30, |
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June 30, |
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September 30, |
|||
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2018 |
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2018 |
|
2017 |
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(Dollars in thousands) |
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ASSETS |
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Cash and cash equivalents: |
|
|
|
|
|
|
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Cash and due from banks |
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$ |
1,232 |
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$ |
994 |
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$ |
519 |
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Interest-bearing deposits in other financial institutions |
|
|
69,186 |
|
|
57,470 |
|
|
19,795 |
|
Total cash and cash equivalents |
|
|
70,418 |
|
|
58,464 |
|
|
20,314 |
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
45,492 |
|
|
47,890 |
|
|
64,332 |
|
Correspondent bank stock, at cost |
|
|
2,392 |
|
|
3,477 |
|
|
2,984 |
|
Mortgage loans held for sale |
|
|
19,238 |
|
|
35,064 |
|
|
25,231 |
|
Loans, net of allowance of $7,118, $7,100, and $7,289 |
|
|
850,199 |
|
|
835,544 |
|
|
782,569 |
|
Promissory notes from related parties |
|
|
— |
|
|
2,125 |
|
|
5,782 |
|
Premises and equipment, net |
|
|
6,263 |
|
|
6,255 |
|
|
7,285 |
|
Accrued interest receivable |
|
|
2,854 |
|
|
2,565 |
|
|
2,272 |
|
Accounts receivable |
|
|
4,736 |
|
|
5,504 |
|
|
6,559 |
|
Other receivables |
|
|
1,841 |
|
|
1,908 |
|
|
— |
|
Other real estate owned, net |
|
|
658 |
|
|
658 |
|
|
658 |
|
Goodwill |
|
|
24,811 |
|
|
24,811 |
|
|
24,811 |
|
Other intangible assets, net |
|
|
565 |
|
|
773 |
|
|
1,463 |
|
Deferred tax assets, net |
|
|
4,626 |
|
|
4,971 |
|
|
7,608 |
|
Company-owned life insurance |
|
|
14,614 |
|
|
14,515 |
|
|
14,215 |
|
Other assets |
|
|
2,820 |
|
|
2,049 |
|
|
2,362 |
|
Total assets |
|
$ |
1,051,527 |
|
$ |
1,046,573 |
|
$ |
968,445 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing |
|
$ |
219,400 |
|
$ |
212,225 |
|
$ |
218,102 |
|
Interest-bearing |
|
|
659,239 |
|
|
631,517 |
|
|
594,943 |
|
Total deposits |
|
|
878,639 |
|
|
843,742 |
|
|
813,045 |
|
Borrowings: |
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank Topeka borrowings |
|
|
44,598 |
|
|
75,598 |
|
|
31,863 |
|
Subordinated Notes |
|
|
6,560 |
|
|
13,435 |
|
|
13,435 |
|
Accrued interest payable |
|
|
211 |
|
|
231 |
|
|
207 |
|
Other liabilities |
|
|
7,355 |
|
|
8,609 |
|
|
8,725 |
|
Total liabilities |
|
|
937,363 |
|
|
941,615 |
|
|
867,275 |
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
|
114,164 |
|
|
104,958 |
|
|
101,170 |
|
Total liabilities and shareholders’ equity |
|
$ |
1,051,527 |
|
$ |
1,046,573 |
|
$ |
968,445 |
8
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
|
|
|
As of |
|||||||
|
|
|
September 30, |
|
June 30, |
|
September 30, |
|||
|
(Dollars in thousands) |
|
2018 |
|
2018 |
|
2017 |
|||
|
Loan Portfolio |
|
|
|
|
|
|
|
|
|
|
Cash, Securities and Other |
|
$ |
132,920 |
|
$ |
135,393 |
|
$ |
130,253 |
|
Construction and Development |
|
|
37,423 |
|
|
35,760 |
|
|
34,471 |
|
1 - 4 Family Residential |
|
|
327,674 |
|
|
307,794 |
|
|
264,058 |
|
Non-Owner Occupied CRE |
|
|
165,670 |
|
|
164,438 |
|
|
177,962 |
|
Owner Occupied CRE |
|
|
94,698 |
|
|
98,393 |
|
|
92,429 |
|
Commercial and Industrial |
|
|
97,772 |
|
|
99,711 |
|
|
89,814 |
|
Total loans held for investment |
|
$ |
856,157 |
|
$ |
841,489 |
|
$ |
788,987 |
|
Deferred costs, net |
|
|
1,160 |
|
|
1,155 |
|
|
871 |
|
Gross loans |
|
$ |
857,317 |
|
$ |
842,644 |
|
$ |
789,858 |
|
Total loans held for sale |
|
$ |
19,238 |
|
$ |
35,064 |
|
$ |
25,231 |
|
|
|
|
|
|
|
|
|
|
|
|
Deposit Portfolio |
|
|
|
|
|
|
|
|
|
|
Money market deposit accounts |
|
$ |
444,580 |
|
$ |
394,759 |
|
$ |
285,418 |
|
Time deposits |
|
|
148,425 |
|
|
166,670 |
|
|
224,224 |
|
Negotiable order of withdrawal accounts |
|
|
64,777 |
|
|
68,742 |
|
|
83,654 |
|
Savings accounts |
|
|
1,457 |
|
|
1,346 |
|
|
1,647 |
|
Total interest-bearing deposits |
|
$ |
659,239 |
|
$ |
631,517 |
|
$ |
594,943 |
|
Noninterest-bearing accounts |
|
$ |
219,400 |
|
$ |
212,225 |
|
$ |
218,102 |
|
Total deposits |
|
$ |
878,639 |
|
$ |
843,742 |
|
$ |
813,045 |
9
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
|
|
|
For the Three Months Ended |
|
|||||||
|
|
|
September 30, |
|
June 30, |
|
September 30, |
|
|||
|
(Dollars in thousands) |
|
2018 |
|
2018 |
|
2017 |
|
|||
|
Average Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
Average Assets |
|
|
|
|
|
|
|
|
|
|
|
Interest-earnings assets: |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in other financial institutions |
|
$ |
41,538 |
|
$ |
35,550 |
|
$ |
33,008 |
|
|
Available-for-sale securities |
|
|
48,438 |
|
|
49,821 |
|
|
93,884 |
|
|
Loans |
|
|
857,676 |
|
|
829,944 |
|
|
748,673 |
|
|
Promissory notes from related parties |
|
|
— |
|
|
5,305 |
|
|
5,759 |
|
|
Interest earning-assets |
|
|
947,652 |
|
|
920,620 |
|
|
881,324 |
|
|
Mortgage loans held-for-sale |
|
|
22,294 |
|
|
31,570 |
|
|
9,884 |
|
|
Total interest earning-assets, plus loans held-for-sale |
|
|
969,946 |
|
|
952,190 |
|
|
891,208 |
|
|
Allowance for loan losses |
|
|
(7,141) |
|
|
(7,100) |
|
|
(7,188) |
|
|
Noninterest-earnings assets |
|
|
72,922 |
|
|
73,245 |
|
|
93,361 |
|
|
Total assets |
|
$ |
1,035,727 |
|
$ |
1,018,335 |
|
$ |
977,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
$ |
640,507 |
|
$ |
588,916 |
|
$ |
581,526 |
|
|
Federal Home Loan Bank Topeka borrowings |
|
|
44,804 |
|
|
54,185 |
|
|
65,385 |
|
|
Subordinated notes |
|
|
8,489 |
|
|
13,435 |
|
|
13,435 |
|
|
Total interest-bearing liabilities |
|
$ |
693,800 |
|
$ |
656,536 |
|
$ |
660,346 |
|
|
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
|
221,411 |
|
|
249,085 |
|
|
210,523 |
|
|
Other liabilities |
|
|
8,132 |
|
|
7,875 |
|
|
8,209 |
|
|
Total noninterest-bearing liabilities |
|
$ |
229,543 |
|
$ |
256,960 |
|
$ |
218,732 |
|
|
Shareholders’ equity |
|
$ |
112,384 |
|
$ |
104,839 |
|
$ |
98,303 |
|
|
Total liabilities and shareholders’ equity |
|
$ |
1,035,727 |
|
$ |
1,018,335 |
|
$ |
977,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yields (annualized) |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in other financial institutions |
|
|
1.98 |
% |
|
1.69 |
% |
|
1.10 |
% |
|
Available-for-sale securities |
|
|
2.20 |
% |
|
2.26 |
% |
|
2.26 |
% |
|
Loans |
|
|
4.42 |
% |
|
4.34 |
% |
|
4.39 |
% |
|
Promissory notes from related parties |
|
|
— |
% |
|
4.75 |
% |
|
3.54 |
% |
|
Interest earning-assets |
|
|
4.20 |
% |
|
4.13 |
% |
|
4.03 |
% |
|
Mortgage loans held-for-sale |
|
|
4.36 |
% |
|
3.81 |
% |
|
4.13 |
% |
|
Total interest earning-assets, plus loans held-for-sale |
|
|
4.20 |
% |
|
4.12 |
% |
|
4.03 |
% |
|
Interest-bearing deposits |
|
|
1.10 |
% |
|
0.96 |
% |
|
0.70 |
% |
|
Federal Home Loan Bank Topeka borrowings |
|
|
2.05 |
% |
|
1.92 |
% |
|
1.46 |
% |
|
Subordinated notes |
|
|
7.59 |
% |
|
7.65 |
% |
|
7.62 |
% |
|
Total interest-bearing liabilities |
|
|
1.24 |
% |
|
1.17 |
% |
|
0.91 |
% |
|
Net interest margin |
|
|
3.29 |
% |
|
3.29 |
% |
|
3.35 |
% |
|
Interest rate spread |
|
|
2.96 |
% |
|
2.96 |
% |
|
3.12 |
% |
10
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) |
|
2018 |
|
2018 |
|
2017 |
|
|||
|
Asset Quality |
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans |
|
$ |
18,388 |
|
$ |
3,052 |
|
$ |
5,231 |
|
|
Nonperforming assets |
|
|
19,046 |
|
|
3,710 |
|
|
5,889 |
|
|
Net charge-offs (recoveries) |
|
|
— |
|
|
— |
|
|
(1) |
|
|
Nonperforming loans to total loans |
|
|
2.14 |
% |
|
0.36 |
% |
|
0.66 |
% |
|
Nonperforming assets to total assets |
|
|
1.81 |
% |
|
0.35 |
% |
|
0.61 |
% |
|
Allowance for loan losses to nonperforming loans |
|
|
38.71 |
% |
|
232.63 |
% |
|
139.34 |
% |
|
Allowance for loan losses to total loans |
|
|
0.83 |
% |
|
0.84 |
% |
|
0.92 |
% |
|
Net charge-offs to average loans |
|
|
— |
% |
|
— |
% |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under management |
|
$ |
5,626,163 |
|
$ |
5,415,918 |
|
$ |
5,179,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Data |
|
|
|
|
|
|
|
|
|
|
|
Book value per share at period end |
|
$ |
14.33 |
|
$ |
13.52 |
|
$ |
13.16 |
|
|
Tangible book value per common share(1) |
|
$ |
11.14 |
|
$ |
9.19 |
|
$ |
8.62 |
|
|
Shares outstanding at period end |
|
|
7,968,420 |
|
|
5,917,667 |
|
|
5,791,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Capital |
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1(CET1) to risk-weighted assets |
|
|
11.22 |
% |
|
7.04 |
% |
|
5.91 |
% |
|
Tier 1 capital to risk-weighted assets |
|
|
11.22 |
% |
|
9.42 |
% |
|
7.97 |
% |
|
Total capital to risk-weighted assets |
|
|
12.90 |
% |
|
12.12 |
% |
|
11.01 |
% |
|
Tier 1 capital to average assets |
|
|
9.09 |
% |
|
7.74 |
% |
|
6.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Capital |
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1(CET1) to risk-weighted assets |
|
|
10.42 |
% |
|
10.17 |
% |
|
9.54 |
% |
|
Tier 1 capital to risk-weighted assets |
|
|
10.42 |
% |
|
10.17 |
% |
|
9.54 |
% |
|
Total capital to risk-weighted assets |
|
|
11.31 |
% |
|
11.07 |
% |
|
10.47 |
% |
|
Tier 1 capital to average assets |
|
|
8.45 |
% |
|
8.37 |
% |
|
8.27 |
% |
|
(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. |
11
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) |
|
2018 |
|
2018 |
|
2017 |
|
|||
|
Tangible common |
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
$ |
114,164 |
|
$ |
104,958 |
|
$ |
101,170 |
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
Preferred stock (liquidation preference) |
|
|
— |
|
|
24,968 |
|
|
24,968 |
|
|
Goodwill |
|
|
24,811 |
|
|
24,811 |
|
|
24,811 |
|
|
Other intangibles, net |
|
|
565 |
|
|
773 |
|
|
1,463 |
|
|
Tangible common equity |
|
$ |
88,788 |
|
$ |
54,406 |
|
$ |
49,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, end of period |
|
|
7,968,420 |
|
|
5,917,667 |
|
|
5,791,064 |
|
|
Tangible common book value per share |
|
$ |
11.14 |
|
$ |
9.19 |
|
$ |
8.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as reported |
|
$ |
1,689 |
|
$ |
1,048 |
|
$ |
1,048 |
|
|
Less: Preferred stock dividends |
|
|
255 |
|
|
562 |
|
|
584 |
|
|
Income available to common shareholders |
|
$ |
1,434 |
|
$ |
486 |
|
$ |
464 |
|
|
Return on tangible common equity |
|
|
1.62 |
% |
|
0.89 |
% |
|
0.93 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency |
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense |
|
$ |
12,176 |
|
$ |
13,084 |
|
$ |
12,134 |
|
|
Less: Amortization |
|
|
208 |
|
|
230 |
|
|
185 |
|
|
Adjusted non-interest expense |
|
$ |
11,968 |
|
$ |
12,854 |
|
$ |
11,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
7,788 |
|
$ |
7,577 |
|
$ |
7,375 |
|
|
Non-interest income |
|
|
6,638 |
|
|
6,892 |
|
|
6,745 |
|
|
Total income |
|
$ |
14,426 |
|
$ |
14,469 |
|
$ |
14,120 |
|
|
Efficiency ratio |
|
|
82.96 |
% |
|
88.84 |
% |
|
84.62 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income before non-interest expense |
|
$ |
14,408 |
|
$ |
14,469 |
|
$ |
13,814 |
|
|
Less: Net gain on sale of securities |
|
|
— |
|
|
— |
|
|
43 |
|
|
Plus: Provision for credit losses |
|
|
18 |
|
|
— |
|
|
306 |
|
|
Gross revenue |
|
$ |
14,426 |
|
$ |
14,469 |
|
$ |
14,077 |
|
12
Exhibit 99.2
| First Western Financial, Inc. The First, Western-Based Private Trust Bank Third Quarter 2018 Financial Results |
| Safe Harbor 2 This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect the current views of First Western Financial, Inc.’s (“First Western”) management with respect to, among other things, future events and First Western’s financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “future” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about First Western’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond First Western’s control. Accordingly, First Western cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although First Western believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. All subsequent written and oral forward-looking statements attributable to First Western or persons acting on First Western’s behalf are expressly qualified in their entirety by this paragraph. Forward-looking statements speak only as of the date of this presentation. First Western undertakes no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise (except as required by law). Certain of the information contained herein may be derived from information provided by industry sources. The Company believes that such information is accurate and the sources from which it has been obtained are reliable; however, the Company cannot guaranty the accuracy of such information and has not independently verified such information. This presentation contains certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided at the end of this presentation. Numbers in the presentation may not sum due to rounding. |
| Overview of 3Q18 Growing Business Development Momentum .. Net proceeds before expenses of $34.1 million supports future growth of franchise Improved Capital Structure Strong Earnings Growth .. Net income available to common shareholders of $1.4 million, or $0.19 per diluted share, an increase of 138% from prior quarter .. Net income available to common shareholders increased $0.9 million from prior quarter (including $0.3 million in preferred stock dividends) Successful IPO .. Reduced cost structure from expense management actions in 1H18 .. Efficiency ratio(1) improved to 83.0% from 88.8% in prior quarter Improved Efficiencies .. Gross loans increased at 7.0% annualized rate .. Deposits increased at 16.5% annualized rate .. Assets under management increased at a 15.5% annualized rate 3 .. Redemption of preferred stock and subordinated notes reduces funding costs .. Simplified capital structure (1) See Non-GAAP reconciliation |
| $0.11 $0.08 $0.19 Q1 2018 Q2 2018 Q3 2018 Net Income Available to Common Shareholders and Earnings per Share 4 Net Income Available to Common Shareholders .. Execution on embedded growth drivers produced strong improvement in profitability .. Net income available to common shareholders increased 195% from prior quarter .. Earnings per share increased 138% from prior quarter Earnings per Share (in thousands) $625 $486 $1,434 Q1 2018 Q2 2018 Q3 2018 |
| $749 $783 $812 $830 $858 $843 $857 3Q17 4Q17 1Q18 2Q18 3Q18 2Q18 3Q18 Average Period End Loan Portfolio 5 Loan Portfolio Composition(1) .. Annualized growth of 7.0% from Q2 2018 .. Strongest growth in residential mortgage portfolio .. Late quarter payoffs impacted end of period loan balances 3Q 2018 2Q 2018 3Q 2017 Cash, Securities and Other $132,920 $135,393 $130,253 Construction and Development 37,423 35,760 34,471 1 - 4 Family Residential 327,674 307,794 264,058 Non-Owner Occupied CRE 165,670 164,438 177,962 Owner Occupied CRE 94,698 98,393 92,429 Commercial and Industrial 97,772 99,711 89,814 Total Loans $ 856,157 $ 841,489$ 788,987 (in thousands, as of quarter-end) Total Loans (in millions) (1) Excludes deferred costs, net and loans held for sale |
| $792 $801 $810 $838 $862 $844 $879 3Q17 4Q17 1Q18 2Q18 3Q18 2Q18 3Q18 Average Period End Total Deposits 6 Deposit Portfolio Composition .. Total deposits increased $34.9 million from Q2 2018, annualized growth of 16.5% .. Strongest growth in money market deposit accounts .. Inflows of trust deposits driving growth 3Q 2018 2Q 2018 3Q 2017 Money market deposit accounts $ 444,580 $394,759 $285,418 Time deposits 148,425 166,670 224,224 NOW 64,777 68,742 83,654 Savings accounts 1,457 1,346 1,647 Noninterest-bearing Accounts 219,400 212,225 218,102 Total Deposits $ 878,639 $ 843,742 $ 813,045 (in thousands, as of quarter-end) Total Deposits (in millions) |
| Trust and Investment Management .. Total assets under management increased $210.2 million from Q2 2018 .. Strong quarter for new client acquisitions .. Growth offset by client departures to former wealth management associate .. Strong relative investment performance $5,180 $5,374 $5,358 $5,416 $5,626 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Investment Agency Managed Trust 401(k)/Retirement Directed Trust Custody (in millions, as of quarter-end) 7 |
| Non-interest Income $6.6 MillionNet Interest Income $7.8 Million 54.0% 46.0% Total Revenue 8(1) See Non-GAAP reconciliation Q3 2018 Gross Revenue(1) .. Total revenue stable with prior quarter .. Increase in total loans drove a 2.8% increase in net interest income .. Total revenue impacted by decline in residential mortgage production Gross Revenue(1) ($millions) $14.1 $15.7 $14.7 $14.5 $14.4 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 |
| Net Interest Income & Net Interest Margin 9 Net Interest Income .. Net interest income increased 2.8%, primarily due to higher average loan balances .. Net interest margin remains stable at 3.29% .. Increase in loan yields largely offsetting increase in deposit costs .. Increases in deposit rates for largest clients resulted in higher deposit beta Net Interest Margin 3.35% 3.30% 3.25% 3.29% 3.29% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 $7,375 $7,270 $7,360 $7,577 $7,788 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 (in thousands) |
| Non-Interest Income 10 Total Non-Interest Income .. Total non-interest income declined 3.7%, primarily due to lower gains on mortgage loans sold .. Trust and investment management fees increased 1.7% due to growth in AUM Trust & Investment Management Fees $6,745 $8,429 $7,292 $6,892 $6,638 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Trust and Investment Management Fees Net Gain on Mortgage Loans Sold Bank Fees Risk Management and Insurance Fees Income on Company-Owned Life Insurance Net Gain on Sale of Securities Other (in thousands)(in thousands) $4,815 $5,057 $4,954 $4,689 $4,770 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 |
| Non-Interest Expense and Efficiency Ratio 11 Total Non-Interest Expense .. Total non-interest expensed declined 6.9%, primarily due to expense reductions in capital management business, as previously expected .. Salaries and employee benefits declined 5.7%, primarily due to staff reductions and lower bonus accruals due to reduced loan production .. Efficiency ratio(1) improved to 83.0% from 88.8% Operating Efficiency Ratio(1) 84.6% 86.5% 89.1% 88.8% 83.0% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 $12,134 $13,810 $13,286 $13,084 $12,176 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 (in thousands) (1) See Non-GAAP reconciliation |
| Asset Quality 12 Non-Performing Assets/Total Assets .. NPAs increased $15.3 million from prior quarter $11.3 million related to a Cash, Securities and Other loan (currently in workout process with no specific reserve required) Remaining increase related to administrative delays in renewing two credits that matured during the quarter .. Seventh consecutive quarter of no net charge-offs Net Charge-Offs/Average Loans 0.00% 0.00% 0.00% 0.00% 0.00% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 0.61% 0.50% 0.41% 0.35% 1.81% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 |
| Progress Report on Earnings Drivers 13 Earnings Driver 3Q18 Update Lower capital costs • Redeemed preferred stock of $25.4 million and sub debt of $6.9 million • $2.7 million annual savings Increased loan growth • IPO removed existing capital constraints • Average loans in 3Q18 up 14.6% year-over-year Higher fee income • Growth in AUM driving higher Trust and Investment Management fees Improved operating leverage • 2018 expense reductions eliminated redundancies • Lower expense driving improved efficiency ratio Profit centers gaining scale YTD total revenue increases • Aspen: +40.2% • Jackson Hole: +20.7% • Cherry Creek: +26.6% • Scottsdale: +29.6% • Denver: +29.5% • Remaining: -2.1% |
| Strong Foundation for Long-Term Growth 14 Investments in Revenue Generation Made in 2017 - 2018 .. Experienced executive leadership added: Colorado/Wyoming Profit Center President Chief Credit Officer Chief Investment Officer Senior Trust Officer .. Business Development Officers added in every full service office (4 in 2017, 10 in 2018) .. Mortgage Loan Originators added and working with offices in 2018 $54.4 million in portfolio loans produced in 2018 ..“Local” marketing campaign launched in 4Q18 First Western is well positioned to capitalize on dislocation in Colorado banking market |
| Appendix |
| 16 Non-GAAP Reconciliation (1) Quarterly information has not been audited or reviewed Consolidated Efficiency Ratio For the Three Months Ended, (Dollars in thousands) September 30, 2017 December 31, 2017(1) March 31, 2018 June 30, 2018 September 30, 2018 Non-interest expense $ 12,134 $ 13,810 $ 13,286 $ 13,084 $ 12,176 Less: Amortization 185 230 230 230 208 Adjusted non-interest expense $ 11,949 $ 13,580 $ 13,056 $ 12,854 $ 11,968 Net interest income $ 7,375 $ 7,270 $ 7,360 $ 7,577 $ 7,788 Non-interest income 6,745 8,429 7,292 6,892 6,638 Total Income $ 14,120 $ 15,699 $ 14,652 $ 14,469 $ 14,426 Efficiency ratio 84.6% 86.5% 89.1% 88.8% 83.0% Consolidated Gross Revenue For the Three Months Ended, (Dollars in thousands) September 30, 2017 December 31, 2017(1) March 31, 2018 June 30, 2018 September 30, 2018 Total income before non-interest expense $ 13,814 $ 15,703 $ 14,839 $ 14,469 $ 14,408 Less: Net gain on sale of securities 43 (44) --- Plus: Provision (release) of credit loss 306 (4) (187) - 18 Gross Revenue $ 14,077 $ 15,743 $ 14,652 $ 14,469 $ 14,426 |
