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): April 25, 2019
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 April 25, 2019, First Western Financial, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2019. 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 first quarter ended March 31, 2019 on Friday, April 26, 2019, 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 first quarter ended March 31, 2019 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 April 25, 2019
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: April 25, 2019 |
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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 First Quarter 2019 Financial Results
First Quarter 2019 Summary
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· |
Net income available to common shareholders of $1.6 million in Q1 2019, compared to net income available to common shareholders of $0.6 million in Q1 2018 |
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· |
Diluted EPS of $0.21 in Q1 2019, compared to $0.22 in Q4 2018, and $0.11 in Q1 2018 |
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· |
Gross loans, excluding loans held for sale, of $931.2 million, a 16.7% annualized increase from Q4 2018 and a 13.9% increase from Q1 2018 |
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· |
Total deposits of $978.1 million, a 17.2% annualized increase from Q4 2018 and a 19.5% increase from Q1 2018 |
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· |
Efficiency ratio of 83.2%, compared to 80.6% in Q4 2018, and 89.1% in Q1 2018 |
Denver, Colo., April 25, 2019 – First Western Financial, Inc., (“First Western” or the “Company”) (NASDAQ: MYFW), a financial services holding company, today reported financial results for the first quarter ended March 31, 2019.
For the first quarter of 2019, net income available to common shareholders was $1.6 million, or $0.21 per diluted share. This compares to $1.7 million, or $0.22 per diluted share, for the fourth quarter of 2018, and $0.6 million, or $0.11 per share, for the first quarter of 2018, which included $0.6 million of preferred stock dividends. The preferred stock was redeemed in the third quarter of 2018.
“We delivered another solid quarter driven by continued improvement in our business development efforts,” said Scott C. Wylie, CEO of First Western. “The value proposition of our ‘one-stop-shop’ model is helping to attract new customers to First Western, which resulted in strong balance sheet growth and solid inflows of assets under management during the first quarter. Our loan production continues to be well diversified, with significant growth in all of our major portfolios with the exception of commercial real estate. Our new business pipeline remains strong and we expect to deliver a steady increase in profitability as we move through 2019, driven by continued quality balance sheet growth, higher non-interest income, and further improvement in operating efficiencies.”
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For the Three Months Ended |
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March 31, |
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December 31, |
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March 31, |
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(Dollars in thousands, except per share data) |
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2019 |
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2018 |
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2018 |
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Earnings Summary |
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Net interest income |
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$ |
7,971 |
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$ |
7,899 |
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$ |
7,360 |
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Less: Provision for (recovery of) credit losses |
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194 |
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349 |
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(187) |
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Total non-interest income |
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6,976 |
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6,351 |
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7,292 |
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Total non-interest expense |
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12,602 |
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11,649 |
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13,286 |
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Income before income taxes |
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2,151 |
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2,252 |
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1,553 |
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Income tax expense |
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524 |
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528 |
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367 |
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Net income |
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1,627 |
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1,724 |
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1,186 |
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Preferred stock dividends |
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— |
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— |
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(561) |
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Net income available to common shareholders |
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$ |
1,627 |
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$ |
1,724 |
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$ |
625 |
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Basic and diluted earnings per common share |
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$ |
0.21 |
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$ |
0.22 |
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$ |
0.11 |
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Return on average assets |
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0.57 |
% |
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0.66 |
% |
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0.48 |
% |
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Return on average shareholders' equity |
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5.50 |
% |
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5.98 |
% |
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4.59 |
% |
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Return on tangible common equity(1) |
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6.88 |
% |
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7.52 |
% |
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4.68 |
% |
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Net interest margin |
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3.03 |
% |
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3.29 |
% |
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3.25 |
% |
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Efficiency ratio(1) |
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83.15 |
% |
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80.60 |
% |
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89.11 |
% |
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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 First Quarter 2019
Revenue
Gross revenue (total income before non-interest expense, plus provision for credit losses) was $14.9 million for the first quarter of 2019, compared to $14.3 million for the fourth quarter of 2018. The increase in revenue was primarily driven by a $0.6 million increase in non-interest income, due to an increase in mortgage activity.
Relative to the first quarter of 2018, gross revenue increased $0.3 million from $14.7 million. The increase was primarily attributable to a $0.6 million increase in net interest income, partially offset by a $0.3 million decrease in non-interest income.
Net Interest Income
Net interest income for the first quarter of 2019 was $8.0 million, compared to $7.9 million for the fourth quarter of 2018. The increase in net interest income from the fourth quarter of 2018 was primarily attributable to higher average loan balances.
Relative to the first quarter of 2018, net interest income increased 8.3% from $7.4 million. The increase in net interest income from the first quarter of 2018 was primarily driven by higher average loan balances.
Net Interest Margin
Net interest margin for the first quarter of 2019 decreased to 3.03% from 3.29% in the fourth quarter of 2018. The decrease was due to an 11 basis point decrease in the average yield on interest earning assets, from 4.31% to 4.20%, driven by an unfavorable shift in the mix of earning assets and from a 17 basis point increase in the average cost of funds, from 1.06% to 1.23%. The increase in cost of funds was driven by rapid
2
growth in higher-cost trust and large client deposits beginning in the fourth quarter of 2018, which continued into the first quarter of 2019.
Relative to the first quarter of 2018, the net interest margin decreased to 3.03% from 3.25%, due to a 22 basis point increase in the average yield on interest earning assets, offset by a 49 basis point increase in the average cost of funds.
Non-interest Income
Non-interest income for the first quarter of 2019 was $7.0 million, an increase of 9.8% from $6.4 million in the fourth quarter of 2018. The increase was primarily attributable to higher net gains on mortgage loans sold as a result of a higher volume of mortgages sold in the first quarter of 2019.
Non-interest income decreased 4.3% from $7.3 million in the first quarter of 2018, primarily as a result of a $0.3 million decrease in trust and investment management fees and a $0.3 million decrease in bank fees, which were partially offset by a $0.2 million increase in net gains from mortgage loans sold.
Non-interest Expense
Non-interest expense for the first quarter of 2019 was $12.6 million, an increase of 8.2% from $11.6 million for the fourth quarter of 2018. The increase was primarily attributable to a $0.9 million increase in salaries and employee benefits expense resulting from an increase in incentive accruals and payroll taxes.
Non-interest expense decreased 5.1% from $13.3 million in the first quarter of 2018, primarily due to lower salary and employee benefits expense as a result of streamlining the cost structure in certain areas of the Company.
The Company’s efficiency ratio was 83.2% in the first quarter of 2019, compared with 80.6% in the fourth quarter of 2018 and 89.1% in the first quarter of 2018.
Income Taxes
The Company recorded income tax expense of $0.5 million for the first quarter of 2019, representing an effective tax rate of 24.4%, compared to 23.4% for the fourth quarter of 2018.
Loan Portfolio
Gross loans, excluding mortgage loans held for sale, totaled $931.2 million at March 31, 2019, compared to $894.0 million at December 31, 2018 and $817.3 million at March 31, 2018. The increase in gross loans from December 31, 2018 was attributable to growth in all of the Company’s major loan categories with the exception of commercial real estate.
Deposits
Total deposits were $978.1 million at March 31, 2019, compared to $937.8 million at December 31, 2018, and $818.2 million at March 31, 2018. The increase in total deposits from December 31, 2018 was due primarily to an increase in non-interest bearing and money market deposits.
3
Assets Under Management
Total assets under management increased by $546.1 million during the first quarter to $5.78 billion at March 31, 2019, compared to $5.24 billion at December 31, 2018, and $5.36 billion at March 31, 2018. The increase was attributed to market volatility resulting in an increase of $575.3 million which was partially off-set by net client outflows of $29.2 million in the first quarter of 2019.
Credit Quality
Non-performing assets totaled $19.4 million, or 1.69% of total assets, at March 31, 2019, a slight decrease from $19.7 million, or 1.82% of total assets, at December 31, 2018.
The Company recorded zero net charge-offs in the first quarter.
The Company recorded a provision for loan losses of $0.2 million for the first quarter of 2019, primarily attributable to the growth in the loan portfolio.
Capital
At March 31, 2019, First Western (“Consolidated”) and First Western Trust (“Bank”) exceeded the minimum capital levels required by their respective regulators. At March 31, 2019, the Bank was classified as “well capitalized”, as summarized in the following table:
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March 31, |
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2019 |
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Consolidated Capital |
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Common Equity Tier 1(CET1) to risk-weighted assets |
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11.13 |
% |
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Tier 1 capital to risk-weighted assets |
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11.13 |
% |
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Total capital to risk-weighted assets |
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12.78 |
% |
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Tier 1 capital to average assets |
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8.67 |
% |
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Bank Capital |
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Common Equity Tier 1(CET1) to risk-weighted assets |
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10.36 |
% |
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Tier 1 capital to risk-weighted assets |
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10.36 |
% |
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Total capital to risk-weighted assets |
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11.26 |
% |
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Tier 1 capital to average assets |
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8.07 |
% |
Conference Call, Webcast and Slide Presentation
The Company will host a conference call and webcast at 9:00 a.m. MT/ 11:00 p.m. ET on Friday, April 26, 2019. The call can be accessed via telephone at 877-405-1628; passcode 1193649. A recorded replay will be accessible through May 3, 2019 by dialing 855-859-2056; passcode 1193649.
A slide presentation relating to the first 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 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
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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 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 Form 10-K with the U.S. Securities and Exchange Commission (“SEC”) on March 21, 2019 Annual Report on Form 10-K (“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, Quarterly 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
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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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March 31, |
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December 31, |
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March 31, |
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(Dollars in thousands, except per share data) |
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2019 |
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2018 |
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2018 |
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Interest and dividend income: |
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Loans, including fees |
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$ |
10,218 |
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$ |
9,866 |
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$ |
8,602 |
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Investment securities |
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310 |
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273 |
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277 |
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Federal funds sold and other |
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522 |
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206 |
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127 |
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Total interest and dividend income |
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11,050 |
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10,345 |
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9,006 |
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Interest expense: |
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Deposits |
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2,909 |
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2,179 |
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1,160 |
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Other borrowed funds |
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170 |
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267 |
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486 |
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Total interest expense |
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3,079 |
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2,446 |
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1,646 |
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Net interest income |
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7,971 |
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7,899 |
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7,360 |
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Less: Provision for (recovery of) credit losses |
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194 |
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349 |
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(187) |
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Net interest income, after provision for (recovery of) credit losses |
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7,777 |
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7,550 |
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7,547 |
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Non-interest income: |
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Trust and investment management fees |
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4,670 |
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4,752 |
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4,954 |
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Net gain on mortgage loans sold |
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1,456 |
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791 |
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1,251 |
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Bank fees |
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289 |
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333 |
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610 |
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Risk management and insurance fees |
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468 |
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380 |
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383 |
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Income on company-owned life insurance |
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93 |
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95 |
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94 |
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Total non-interest income |
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6,976 |
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6,351 |
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7,292 |
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Total income before non-interest expense |
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14,753 |
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13,901 |
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14,839 |
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Non-interest expense: |
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Salaries and employee benefits |
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7,618 |
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6,710 |
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8,180 |
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Occupancy and equipment |
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1,407 |
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1,414 |
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1,485 |
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Professional services |
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777 |
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814 |
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|
824 |
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Technology and information systems |
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1,069 |
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954 |
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1,063 |
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Data processing |
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687 |
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659 |
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640 |
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Marketing |
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278 |
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378 |
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285 |
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Amortization of other intangible assets |
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173 |
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163 |
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230 |
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Other |
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593 |
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557 |
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579 |
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Total non-interest expense |
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12,602 |
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11,649 |
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13,286 |
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Income before income taxes |
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2,151 |
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|
2,252 |
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|
1,553 |
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Income tax expense |
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|
524 |
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|
528 |
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|
367 |
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Net income |
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1,627 |
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|
1,724 |
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|
1,186 |
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Preferred stock dividends |
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|
— |
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— |
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(561) |
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Net income available to common shareholders |
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$ |
1,627 |
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$ |
1,724 |
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$ |
625 |
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Earnings per common share: |
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Basic and diluted |
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$ |
0.21 |
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$ |
0.22 |
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$ |
0.11 |
7
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
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March 31, |
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December 31, |
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March 31, |
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2019 |
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2018 |
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2018 |
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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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$ |
2,164 |
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$ |
1,574 |
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$ |
1,287 |
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Interest-bearing deposits in other financial institutions |
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67,602 |
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71,783 |
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|
35,789 |
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Total cash and cash equivalents |
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69,766 |
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73,357 |
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|
37,076 |
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|
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|
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|
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Available-for-sale securities |
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53,610 |
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|
43,695 |
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48,842 |
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Correspondent bank stock, at cost |
|
|
993 |
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|
2,488 |
|
|
2,326 |
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Mortgage loans held for sale |
|
|
19,778 |
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|
14,832 |
|
|
22,146 |
|
Loans, net of allowance of $7,645, $7,451, and $7,100 |
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|
923,545 |
|
|
886,515 |
|
|
810,192 |
|
Promissory notes from related parties |
|
|
— |
|
|
— |
|
|
5,795 |
|
Premises and equipment, net |
|
|
5,815 |
|
|
6,100 |
|
|
6,477 |
|
Accrued interest receivable |
|
|
3,053 |
|
|
2,844 |
|
|
2,378 |
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Accounts receivable |
|
|
4,561 |
|
|
4,492 |
|
|
5,504 |
|
Other receivables |
|
|
881 |
|
|
1,391 |
|
|
1,009 |
|
Other real estate owned, net |
|
|
658 |
|
|
658 |
|
|
658 |
|
Goodwill |
|
|
24,811 |
|
|
24,811 |
|
|
24,811 |
|
Other intangible assets, net |
|
|
229 |
|
|
402 |
|
|
1,003 |
|
Deferred tax assets, net |
|
|
4,549 |
|
|
4,306 |
|
|
5,810 |
|
Company-owned life insurance |
|
|
14,803 |
|
|
14,709 |
|
|
14,410 |
|
Other assets |
|
|
17,636 |
|
|
3,724 |
|
|
3,184 |
|
Total assets |
|
$ |
1,144,688 |
|
$ |
1,084,324 |
|
$ |
991,621 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing |
|
$ |
226,484 |
|
$ |
202,856 |
|
$ |
223,582 |
|
Interest-bearing |
|
|
751,617 |
|
|
734,902 |
|
|
594,645 |
|
Total deposits |
|
|
978,101 |
|
|
937,758 |
|
|
818,227 |
|
Borrowings: |
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank Topeka borrowings |
|
|
20,361 |
|
|
15,000 |
|
|
47,928 |
|
Subordinated Notes |
|
|
6,560 |
|
|
6,560 |
|
|
13,435 |
|
Accrued interest payable |
|
|
329 |
|
|
231 |
|
|
216 |
|
Other liabilities |
|
|
19,669 |
|
|
7,900 |
|
|
7,660 |
|
Total liabilities |
|
|
1,025,020 |
|
|
967,449 |
|
|
887,466 |
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity |
|
|
119,668 |
|
|
116,875 |
|
|
104,155 |
|
Total liabilities and shareholders’ equity |
|
$ |
1,144,688 |
|
$ |
1,084,324 |
|
$ |
991,621 |
8
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
|
|
|
As of |
|||||||
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|||
|
(Dollars in thousands) |
|
2019 |
|
2018 |
|
2018 |
|||
|
Loan Portfolio |
|
|
|
|
|
|
|
|
|
|
Cash, Securities and Other |
|
$ |
130,641 |
|
$ |
114,165 |
|
$ |
123,659 |
|
Construction and Development |
|
|
37,128 |
|
|
31,897 |
|
|
29,150 |
|
1 - 4 Family Residential |
|
|
360,607 |
|
|
350,852 |
|
|
298,007 |
|
Non-Owner Occupied CRE |
|
|
172,014 |
|
|
173,741 |
|
|
167,617 |
|
Owner Occupied CRE |
|
|
108,873 |
|
|
108,480 |
|
|
92,508 |
|
Commercial and Industrial |
|
|
120,602 |
|
|
113,660 |
|
|
105,265 |
|
Total loans held for investment |
|
$ |
929,865 |
|
$ |
892,795 |
|
$ |
816,206 |
|
Deferred costs, net |
|
|
1,325 |
|
|
1,171 |
|
|
1,086 |
|
Gross loans |
|
$ |
931,190 |
|
$ |
893,966 |
|
$ |
817,292 |
|
Total loans held for sale |
|
$ |
19,778 |
|
$ |
14,832 |
|
$ |
22,146 |
|
|
|
|
|
|
|
|
|
|
|
|
Deposit Portfolio |
|
|
|
|
|
|
|
|
|
|
Money market deposit accounts |
|
$ |
513,328 |
|
$ |
489,506 |
|
$ |
328,427 |
|
Time deposits |
|
|
176,312 |
|
|
178,743 |
|
|
185,459 |
|
Negotiable order of withdrawal accounts |
|
|
59,464 |
|
|
64,853 |
|
|
78,970 |
|
Savings accounts |
|
|
2,513 |
|
|
1,800 |
|
|
1,789 |
|
Total interest-bearing deposits |
|
$ |
751,617 |
|
$ |
734,902 |
|
$ |
594,645 |
|
Noninterest-bearing accounts |
|
$ |
226,484 |
|
$ |
202,856 |
|
$ |
223,582 |
|
Total deposits |
|
$ |
978,101 |
|
$ |
937,758 |
|
$ |
818,227 |
9
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
|
|
|
For the Three Months Ended |
|
|||||||
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|||
|
(Dollars in thousands) |
|
2019 |
|
2018 |
|
2018 |
|
|||
|
Average Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
Average Assets |
|
|
|
|
|
|
|
|
|
|
|
Interest-earnings assets: |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in other financial institutions |
|
$ |
85,826 |
|
$ |
36,563 |
|
$ |
36,375 |
|
|
Available-for-sale securities |
|
|
50,474 |
|
|
46,219 |
|
|
51,732 |
|
|
Loans |
|
|
915,921 |
|
|
878,145 |
|
|
812,306 |
|
|
Promissory notes from related parties (1) |
|
|
— |
|
|
— |
|
|
5,756 |
|
|
Interest earning-assets |
|
|
1,052,221 |
|
|
960,927 |
|
|
906,169 |
|
|
Mortgage loans held-for-sale |
|
|
13,277 |
|
|
15,148 |
|
|
18,416 |
|
|
Total interest earning-assets, plus loans held-for-sale |
|
|
1,065,498 |
|
|
976,075 |
|
|
924,585 |
|
|
Allowance for loan losses |
|
|
(7,567) |
|
|
(7,240) |
|
|
(7,170) |
|
|
Noninterest-earnings assets |
|
|
77,780 |
|
|
68,962 |
|
|
72,070 |
|
|
Total assets |
|
$ |
1,135,711 |
|
$ |
1,037,797 |
|
$ |
989,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
|
$ |
760,507 |
|
$ |
674,691 |
|
$ |
595,148 |
|
|
Federal Home Loan Bank Topeka borrowings |
|
|
10,401 |
|
|
26,959 |
|
|
55,517 |
|
|
Subordinated notes |
|
|
6,560 |
|
|
6,560 |
|
|
13,436 |
|
|
Total interest-bearing liabilities |
|
$ |
777,468 |
|
$ |
708,210 |
|
$ |
664,101 |
|
|
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing deposits |
|
|
220,408 |
|
|
205,059 |
|
|
214,980 |
|
|
Other liabilities |
|
|
19,413 |
|
|
9,214 |
|
|
7,049 |
|
|
Total noninterest-bearing liabilities |
|
$ |
239,821 |
|
$ |
214,273 |
|
$ |
222,029 |
|
|
Shareholders’ equity |
|
$ |
118,422 |
|
$ |
115,314 |
|
$ |
103,355 |
|
|
Total liabilities and shareholders’ equity |
|
$ |
1,135,711 |
|
$ |
1,037,797 |
|
$ |
989,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yields (annualized) |
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits in other financial institutions |
|
|
2.43 |
% |
|
2.25 |
% |
|
1.40 |
% |
|
Available-for-sale securities |
|
|
2.46 |
% |
|
2.36 |
% |
|
2.14 |
% |
|
Loans |
|
|
4.46 |
% |
|
4.49 |
% |
|
4.20 |
% |
|
Promissory notes from related parties |
|
|
— |
% |
|
— |
% |
|
4.52 |
% |
|
Interest earning-assets |
|
|
4.20 |
% |
|
4.31 |
% |
|
3.98 |
% |
|
Mortgage loans held-for-sale |
|
|
3.80 |
% |
|
4.33 |
% |
|
4.34 |
% |
|
Total interest earning-assets, plus loans held-for-sale |
|
|
4.20 |
% |
|
4.31 |
% |
|
3.98 |
% |
|
Interest-bearing deposits |
|
|
1.53 |
% |
|
1.29 |
% |
|
0.78 |
% |
|
Federal Home Loan Bank Topeka borrowings |
|
|
1.92 |
% |
|
2.20 |
% |
|
1.65 |
% |
|
Subordinated notes |
|
|
7.32 |
% |
|
7.26 |
% |
|
7.65 |
% |
|
Total interest-bearing liabilities |
|
|
1.58 |
% |
|
1.38 |
% |
|
0.99 |
% |
|
Net interest margin |
|
|
3.03 |
% |
|
3.29 |
% |
|
3.25 |
% |
|
Interest rate spread |
|
|
2.62 |
% |
|
2.93 |
% |
|
2.99 |
% |
|
(1) |
Promissory notes from related parties were reclassified to loans in 2018 due to change in composition of related parties. |
10
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
|
|
|
As of and for the Three Months Ended |
|
|||||||
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|||
|
(Dollars in thousands, except per share data) |
|
2019 |
|
2018 |
|
2018 |
|
|||
|
Asset Quality |
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans |
|
$ |
18,713 |
|
$ |
19,052 |
|
$ |
3,394 |
|
|
Nonperforming assets |
|
|
19,371 |
|
|
19,710 |
|
|
4,052 |
|
|
Net charge-offs |
|
|
— |
|
|
16 |
|
|
— |
|
|
Nonperforming loans to total loans |
|
|
2.01 |
% |
|
2.13 |
% |
|
0.42 |
% |
|
Nonperforming assets to total assets |
|
|
1.69 |
% |
|
1.82 |
% |
|
0.41 |
% |
|
Allowance for loan losses to nonperforming loans |
|
|
40.85 |
% |
|
39.11 |
% |
|
209.19 |
% |
|
Allowance for loan losses to total loans |
|
|
0.82 |
% |
|
0.83 |
% |
|
0.87 |
% |
|
Net charge-offs to average loans |
|
|
— |
% |
|
— |
% |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under management |
|
$ |
5,781,297 |
|
$ |
5,235,177 |
|
$ |
5,358,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Data |
|
|
|
|
|
|
|
|
|
|
|
Book value per share at period end |
|
$ |
15.02 |
|
$ |
14.67 |
|
$ |
13.42 |
|
|
Tangible book value per common share(1) |
|
$ |
11.88 |
|
$ |
11.50 |
|
$ |
9.05 |
|
|
Weighted average outstanding shares, basic |
|
|
7,873,718 |
|
|
7,873,718 |
|
|
5,870,813 |
|
|
Weighted average outstanding shares, diluted |
|
|
7,889,644 |
|
|
7,887,512 |
|
|
5,938,426 |
|
|
Shares outstanding at period end |
|
|
7,968,420 |
|
|
7,968,420 |
|
|
5,900,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Capital |
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1(CET1) to risk-weighted assets |
|
|
11.13 |
% |
|
11.35 |
% |
|
7.04 |
% |
|
Tier 1 capital to risk-weighted assets |
|
|
11.13 |
% |
|
11.35 |
% |
|
9.44 |
% |
|
Total capital to risk-weighted assets |
|
|
12.78 |
% |
|
13.06 |
% |
|
12.31 |
% |
|
Tier 1 capital to average assets |
|
|
8.67 |
% |
|
9.28 |
% |
|
7.72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Capital |
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1(CET1) to risk-weighted assets |
|
|
10.36 |
% |
|
10.55 |
% |
|
10.36 |
% |
|
Tier 1 capital to risk-weighted assets |
|
|
10.36 |
% |
|
10.55 |
% |
|
10.36 |
% |
|
Total capital to risk-weighted assets |
|
|
11.26 |
% |
|
11.47 |
% |
|
11.29 |
% |
|
Tier 1 capital to average assets |
|
|
8.07 |
% |
|
8.63 |
% |
|
8.43 |
% |
|
(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 |
|
|||||||
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|||
|
(Dollars in thousands, except share and per share data) |
|
2019 |
|
2018 |
|
2018 |
|
|||
|
Tangible common |
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
$ |
119,668 |
|
$ |
116,875 |
|
$ |
104,155 |
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
Preferred stock (liquidation preference) |
|
|
— |
|
|
— |
|
|
24,968 |
|
|
Goodwill |
|
|
24,811 |
|
|
24,811 |
|
|
24,811 |
|
|
Other intangibles, net |
|
|
229 |
|
|
402 |
|
|
1,003 |
|
|
Tangible common equity |
|
$ |
94,628 |
|
$ |
91,662 |
|
$ |
53,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding, end of period |
|
|
7,968,420 |
|
|
7,968,420 |
|
|
5,900,698 |
|
|
Tangible common book value per share |
|
$ |
11.88 |
|
$ |
11.50 |
|
$ |
9.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as reported |
|
$ |
1,627 |
|
$ |
1,724 |
|
$ |
1,186 |
|
|
Less: Preferred stock dividends |
|
|
— |
|
|
— |
|
|
561 |
|
|
Income available to common shareholders |
|
$ |
1,627 |
|
$ |
1,724 |
|
$ |
625 |
|
|
Return on tangible common equity |
|
|
6.88 |
% |
|
7.52 |
% |
|
4.68 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency |
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense |
|
$ |
12,602 |
|
$ |
11,649 |
|
$ |
13,286 |
|
|
Less: Amortization |
|
|
173 |
|
|
163 |
|
|
230 |
|
|
Adjusted non-interest expense |
|
$ |
12,429 |
|
$ |
11,486 |
|
$ |
13,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ |
7,971 |
|
$ |
7,899 |
|
$ |
7,360 |
|
|
Non-interest income |
|
|
6,976 |
|
|
6,351 |
|
|
7,292 |
|
|
Total income |
|
$ |
14,947 |
|
$ |
14,250 |
|
$ |
14,652 |
|
|
Efficiency ratio |
|
|
83.15 |
% |
|
80.60 |
% |
|
89.11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income before non-interest expense |
|
$ |
14,753 |
|
$ |
13,901 |
|
$ |
14,839 |
|
|
Plus: Provision for (recovery of) credit losses |
|
|
194 |
|
|
349 |
|
|
(187) |
|
|
Gross revenue |
|
$ |
14,947 |
|
$ |
14,250 |
|
$ |
14,652 |
|
12
Exhibit 99.2
| First Western Financial, Inc. The First, Western-Based Private Trust Bank First Quarter 2019 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 1Q19 Well Diversified Loan Production Consistent Earnings Performance Strong Balance Sheet Growth .. Gross loans increased at 16.7% annualized rate in 1Q19 .. Deposits increased at 17.2% annualized rate in 1Q19 .. Average deposits increased at 46.0% annualized rate in 1Q19 .. Net interest margin declined due to increase in cost of deposits .. Higher 4Q18 deposit costs carried into 1Q19 .. Continued strong credit quality Key Operating Trends .. Growth in all major loan categories other than commercial real estate .. Strong quarter of mortgage production despite seasonality 3 ..Net income available to common shareholders of $1.6 million, or $0.21 EPS .. Net income available to common shareholders increased 160% from 1Q18 .. EPS increased 91% from 1Q18 |
| $0.11 $0.08 $0.19 $0.22 $0.21 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Net Income Available to Common Shareholders and Earnings per Share 4 Net Income Available to Common Shareholders .. Continued execution on embedded growth drivers producing consistent level of higher earnings .. Asset growth offset by margin pressure from rapid growth in higher cost trust and large client deposits .. Growth in revenue offset by higher expenses, resulting in slight decline in net income .. Earnings per share declined $0.01 from prior quarter and increased 91% year over year Earnings per Share (in thousands) $625 $486 $1,434 $1,724 $1,627 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 |
| $831 $862 $880 $893 $929 $908 $950 1Q18 2Q18 3Q18 4Q18 1Q19 4Q18 1Q19 HFI HFSAverage Period End Loan Portfolio 5 Loan Portfolio Composition(1) .. Annualized gross loan growth of 16.7% in Q1 2019 .. Total new loan production of $64 million in Q1 2019 vs $102 million in Q4 2018 .. Well diversified growth with increases in Residential Mortgage, C&I, and Cash, Securities, and Other portfolios .. Payoffs declined from elevated level in prior quarter (in thousands, as of quarter-end) Total Loans(1) (in millions) (1) Excludes deferred costs, net 1Q 2018 4Q 2018 1Q 2019 Cash, Securities and Other $123,659 $114,165 $130,641 Construction and Development 29,150 31,897 37,128 1 - 4 Family Residential 298,007 350,852 360,607 Non-Owner Occupied CRE 167,617 173,741 172,014 Owner Occupied CRE 92,508 108,480 108,873 Commercial and Industrial 105,265 113,660 120,602 Gross Loans $816,206 $892,795 $929,865 Mortgage loans held for sale 22,146 14,832 19,778 Total Loans $838,352 $907,627 $949,643 |
| $810 $838 $862 $880 $981 $938 $978 1Q18 2Q18 3Q18 4Q18 1Q19 4Q18 1Q19 Average Period End Total Deposits 6 Deposit Portfolio Composition .. Total deposits increased $40.3 million from Q4 2018, annualized growth of 17.2% ..Average deposits increased 46.0% annualized on linked quarter basis .. Strongest growth in money market deposit accounts .. Inflows of trust and large client deposits driving growth 1Q 2018 4Q 2018 1Q 2019 Money market deposit accounts $328,427 $489,506 $513,328 Time deposits 185,459 178,743 176,312 NOW 78,970 64,853 59,464 Savings accounts 1,789 1,800 2,513 Noninterest-bearing accounts 223,582 202,856 226,484 Total Deposits $818,227 $937,758 $978,101 (in thousands, as of quarter-end) Total Deposits (in millions) |
| Trust and Investment Management .. Total assets under management increased $546 million from Q4 2018 .. Increase largely related to increase in equity market (S&P up 13.1% in Q1 2019) .. New accounts provided $53 million in new assets and contributions added $153 million in Q1 2019 $5,358 $5,416 $5,626 $5,235 $5,781 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Investment Agency Managed Trust 401(k)/Retirement Directed Trust Custody (in millions, as of quarter-end) 7 |
| Non-interest Income 6,976 Net Interest Income 7,971 53.3% 46.7% Gross Revenue 8(1) See Non-GAAP reconciliation Q1 2019 Gross Revenue(1) .. Gross revenue increased 4.9% from prior quarter .. Balance sheet growth drove 8.3% increase in net interest income year-over-year .. Strong quarter of mortgage activity drove increase in non-interest income from prior quarter Gross Revenue(1) ($millions) $14.7 $14.5 $14.4 $14.3 $14.9 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Wealth Management Capital Management Mortgage |
| Net Interest Income & Net Interest Margin 9 Net Interest Income .. Net interest income increased 0.9%, primarily due to higher average loan balances .. Net interest margin decreased to 3.03% .. Inflows of high beta trust deposits impacting deposit costs Net Interest Margin 3.25% 3.29% 3.29% 3.29% 3.03% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 $7,360 $7,577 $7,788 $7,899 $7,971 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 (in thousands) |
| Non-Interest Income 10 Total Non-Interest Income .. Total non-interest income increased by 9.8% due to higher gains on mortgage loans sold .. Trust and investment management fees declined due to lower starting point for AUM in 1Q19 Trust & Investment Management Fees $7,292 $6,892 $6,638 $6,351 $6,976 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Trust and Investment Management Fees Net Gain on Mortgage Loans Sold Bank Fees Risk Management and Insurance Fees Income on Company-Owned Life Insurance (in thousands)(in thousands) $4,954 $4,689 $4,770 $4,752 $4,670 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 |
| Non-Interest Expense and Efficiency Ratio 11 Total Non-Interest Expense .. Total non-interest expense increased 8.2%, primarily due to higher bonus accrual and payroll tax .. Efficiency ratio(1) increases to 83.2% due to higher expense levels .. Year-over-year improvement in efficiency ratio demonstrates longer-term progress Operating Efficiency Ratio(1) 89.1% 88.8% 83.0% 80.6% 83.2% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 $13,286 $13,084 $12,176 $11,649 $12,602 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 (in thousands) (1) See Non-GAAP reconciliation |
| Asset Quality 12 Non-Performing Assets/Total Assets .. Total NPAs decline from prior quarter due to paydowns .. Loss experience continues to be extremely low .. Provision expense of $0.2 million driven by growth in loan portfolio Net Charge-Offs/Average Loans 0.0% 0.0% 0.0% 0.0% 0.0% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 0.41% 0.35% 1.81% 1.82% 1.69% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 |
| Outlook 13 ..Business development platform expected to continue to gain traction and drive further increases in gross revenue .. Second half of 2019 expected to be stronger than first half .. Loan production continues to be well diversified .. Lower mortgage rates and seasonal factors driving increase in refinancing volumes .. Continued improvement in operating efficiencies despite further investment in revenue generating positions .. Consolidation in Colorado banking market creating opportunities to add clients and experienced talent |
| Appendix |
| 15 Non-GAAP Reconciliation Consolidated Efficiency Ratio For the Three Months Ended, (Dollars in thousands) March 31, 2018 June 30, 2018 September 30, 2018 December 31, 2018 March 31, 2019 Non-interest expense $13,286 $13,084 $12,176 $11,649 $12,602 Less: Amortization 230 230 208 163 173 Adjusted non-interest expense $13,056 $12,854 $11,968 $11,486 12,429 Net interest income $7,360 $7,577 $7,788 $7,899 7,971 Non-interest income 7,292 6,892 6,638 6,351 6,976 Total Income(1) $14,652 $14,469 $14,426 $14,250 14,947 Efficiency ratio 89.1% 88.8% 83.0% 80.6% 83.2% (1) Total income equals gross revenue as no net gain (loss) on sale of securities occurred during the periods presented. |
| 16 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2018 June 30, 2018 September 30, 2018 December 31, 2018 March 31, 2019 Total income before non-interest expense $12,711 $12,257 $12,383 $12,289 $12,509 Less: Net gain (loss) on sale of securities ----- Plus: Provision for (recovery of) credit loss (187) - 18 349 194 Gross Revenue $12,524 $12,257 $12,401 $12,638 $12,703 Capital Management Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2018 June 30, 2018 September 30, 2018 December 31, 2018 March 31, 2019 Total income before non-interest expense $861 $845 $850 $794 $765 Less: Net gain (loss) on sale of securities ----- Plus: Provision for (recovery of) credit loss ----- Gross Revenue $861 $845 $850 $794 $765 Mortgage Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2018 June 30, 2018 September 30, 2018 December 31, 2018 March 31, 2019 Total income before non-interest expense $1,267 $1,367 $1,175 $818 $1,479 Less: Net gain (loss) on sale of securities ----- Plus: Provision for (recovery of) credit loss ----- Gross Revenue $1,267 $1,367 $1,175 $818 $1,479 Consolidated Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2018 June 30, 2018 September 30, 2018 December 31, 2018 March 31, 2019 Total income before non-interest expense $14,839 $14,469 $14,408 $13,901 $14,753 Less: Net gain (loss) on sale of securities ----- Plus: Provision for (recovery of) credit loss (187) - 18 349 194 Gross Revenue $14,652 $14,469 $14,426 $14,250 $14,947 |
