UNITED STATES
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Washington, D.C. 20549
FORM
CURRENT REPORT
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The |
Item 2.02 Results of Operations and Financial Condition.
On April 28, 2022, First Western Financial, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2022. 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 7.01 Regulation FD Disclosure.
The Company intends to hold an investor call and webcast to discuss its financial results for the first quarter ended March 31, 2022 on Friday, April 29, 2022, at 10:00 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, 2022 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.
Exhibit | Description | |
99.1 | Press Release issued by First Western Financial, Inc. dated April 28, 2022 | |
99.2 | ||
104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) |
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.
FIRST WESTERN FINANCIAL, INC. | |||
Date: April 28, 2022 | By: /s/ Scott C. Wylie | ||
Scott C. Wylie | |||
Chairman, Chief Executive Officer and President |
3
Exhibit 99.1
First Western Reports First Quarter 2022 Financial Results
First Quarter 2022 Summary
| ● | Net income available to common shareholders of $5.5 million in Q1 2022, compared to $1.9 million in Q4 2021 and $6.0 million in Q1 2021 |
| ● | Diluted EPS of $0.57 in Q1 2022, compared to $0.23 in Q4 2021 and $0.74 in Q1 2021 |
| ● | Total income before non-interest expense of $26.7 million in Q1 2022, compared to $23.1 million in Q4 2021 and $23.7 million in Q1 2021 |
| ● | Book value per common share increased to $23.68, or 1.8%, from $23.25 as of Q4 2021, and was up 16.7% from $20.29 as of Q1 2021 |
| ● | Total assets of $2.58 billion, up 1.9% from Q4 2021 and up 16.5% from Q1 2021 |
Denver, Colo., April 28, 2022 – First Western Financial, Inc., (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the first quarter ended March 31, 2022.
Net income available to common shareholders was $5.5 million, or $0.57 per diluted share, for the first quarter of 2022. This compares to $1.9 million, or $0.23 per diluted share, for the fourth quarter of 2021, and $6.0 million, or $0.74 per diluted share, for the first quarter of 2021.
Scott C. Wylie, CEO of First Western, commented, “Our first quarter results reflect the positive impact that the Teton Financial Services acquisition is having on our level of profitability even before we realize most of the cost savings projected for this transaction. On an adjusted basis excluding acquisition-related expenses, our return on average assets, return on average equity, and return on average tangible common equity all significantly increased compared to the fourth quarter of 2021.
“We were able to deliver our strong financial performance despite a high level of payoffs that impacted our loan growth in the quarter. Many of the payoffs were the result of our high net worth and entrepreneurial clients selling businesses and properties to take advantage of significant appreciation in the value of these assets. The high level of payoffs resulted in excess liquidity during the first quarter, although it positions us well to redeploy these funds into higher yielding earning assets as interest rates increase.
“Our loan pipeline continues to build and we expect to see further improvement in our profitability as we generate a higher level of loan growth, redeploy our excess liquidity, and fully realize the cost savings from the Teton acquisition. While macroeconomic and geopolitical issues have created a more challenging operating environment, we believe that we are well positioned to manage through these headwinds and continue to deliver strong results for our shareholders,” said Mr. Wylie.
| | For the Three Months Ended |
| |||||||
| | March 31, | | December 31, | | March 31, |
| |||
(Dollars in thousands, except per share data) |
| 2022 |
| 2021 |
| 2021 |
| |||
Earnings Summary |
| |
|
| |
|
| |
| |
Net interest income | | $ | 18,284 | | $ | 14,387 | | $ | 13,053 | |
Less: provision for loan losses | |
| 210 | |
| 812 | |
| — | |
Total non-interest income | |
| 8,633 | |
| 9,542 | |
| 10,615 | |
Total non-interest expense | |
| 19,391 | |
| 20,530 | |
| 15,629 | |
Income before income taxes | |
| 7,316 | |
| 2,587 | |
| 8,039 | |
Income tax expense | |
| 1,792 | |
| 670 | |
| 2,040 | |
Net income available to common shareholders | | | 5,524 | | | 1,917 | | | 5,999 | |
Adjusted net income available to common shareholders(1) | | | 5,922 | | | 4,776 | | | 5,999 | |
Basic earnings per common share | | | 0.59 | | | 0.24 | | | 0.76 | |
Adjusted basic earnings per common share(1) | | | 0.63 | | | 0.59 | | | 0.76 | |
Diluted earnings per common share | | | 0.57 | | | 0.23 | | | 0.74 | |
Adjusted diluted earnings per common share(1) | | | 0.61 | | | 0.57 | | | 0.74 | |
| | | | | | | | | | |
Return on average assets (annualized) | |
| 0.85 | % |
| 0.37 | % |
| 1.16 | % |
Adjusted return on average assets (annualized)(1) | | | 0.92 | | | 0.91 | | | 1.16 | |
Return on average shareholders' equity (annualized) | |
| 9.98 | |
| 4.28 | |
| 14.95 | |
Adjusted return on average shareholders' equity (annualized)(1) | | | 10.70 | | | 10.66 | | | 14.95 | |
Return on tangible common equity (annualized)(1) | |
| 11.57 | |
| 4.10 | |
| 17.49 | |
Adjusted return on tangible common equity (annualized)(1) | | | 12.41 | | | 10.21 | | | 17.49 | |
Net interest margin | |
| 2.98 | |
| 2.92 | |
| 2.90 | |
Efficiency ratio(1) | |
| 69.80 | |
| 71.80 | |
| 66.02 | |
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Operating Results for the First Quarter 2022
Revenue
Gross revenue (1) was $26.9 million for the first quarter of 2022, an increase of 14.8% from $23.4 million for the fourth quarter of 2021, due primarily to an increase in net interest income driven by an increase in average interest-earning assets. Relative to the first quarter of 2021, gross revenue increased 13.7% from $23.7 million for the first quarter of 2021, primarily driven by growth in interest-earning assets.
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Net Interest Income
Net interest income for the first quarter of 2022 was $18.3 million, an increase of 27.1% from $14.4 million in the fourth quarter of 2021. The increase was due primarily to the increase in average interest-earning assets resulting from the Teton acquisition and strong organic growth in the fourth quarter of 2021, which drove an increase in average loans of $268.9 million and an increase in average interest-bearing deposits in other financial institutions of $196.7 million compared to December 31, 2021.
Relative to the first quarter of 2021, net interest income increased 40.1% from $13.1 million. The year-over-year increase in net interest income was due primarily to the increase in average interest-earning assets driven by an increase in average loans of $367.8 million and an increase in average interest-bearing deposits in other financial institutions of $261.0 million compared to March 31, 2021.
2
Net Interest Margin
Net interest margin for the first quarter of 2022 increased to 2.98% from 2.92% in the fourth quarter of 2021, primarily due to higher loan yields driven mainly by accretion income on acquired loans by $0.3 million as a result of the Teton acquisition last quarter, which positively impacted net interest margin by 5 bps in the first quarter of 2022, compared to a negative impact of 9 bps in the fourth quarter of 2021.
The cost of interest-bearing deposits decreased slightly to 0.23% in the first quarter of 2022, from 0.27% in the fourth quarter of 2021 and the yield on interest-earning assets remained unchanged at 3.20% in the first quarter of 2022 from the fourth quarter of 2021.
Relative to the first quarter of 2021, the net interest margin increased from 2.90%, primarily due to a positive PPP impact of 6 bps in the first quarter of 2022, compared to a negative impact of 6 bps in the first quarter of 2021.
Non-interest Income
Non-interest income for the first quarter of 2022 was $8.6 million, a decrease of 9.5% from $9.5 million in the fourth quarter of 2021. This was primarily due to a $0.6 million decrease in risk management and insurance fees and a $0.5 million net gain on equity interests recognized in the fourth quarter of 2021. Trust and investment management fees and net gain on mortgage loans remained flat quarter-over-quarter.
Relative to the first quarter of 2021, non-interest income decreased 18.7% from $10.6 million. The decrease was primarily due to lower mortgage segment activity, partially offset by higher trust and investment management fees and bank fees.
Non-interest Expense
Non-interest expense for the first quarter of 2022 was $19.4 million, a decrease of 5.5% from $20.5 million in the fourth quarter of 2021. The decrease was primarily due to higher acquisition-related costs incurred in the fourth quarter of 2021, partially offset by the addition of Teton’s operations at the end of 2021.
Relative to the first quarter of 2021, non-interest expense increased 24.1% from $15.6 million. The increase is primarily due to the addition of Teton’s operations at the end of 2021.
3
The impact of the mergers and acquisition activity is as follows (in thousands):
|
| As of or for the Three Months Ended | |||||||
| | March 31, | | December 31, | | March 31, | |||
| | 2022 | | 2021 | | 2021 | |||
Adjusted Net Income Available to Common Shareholders(1) | | | | | | | | | |
Net income available to common shareholders | | $ | 5,524 | | $ | 1,917 | | $ | 5,999 |
Plus: acquisition related expenses | | | | | | | | | |
Salaries and employee benefits | | | 229 | | | 547 | | | — |
Professional services | | | 112 | | | 713 | | | — |
Data processing | | | 115 | | | 2,428 | | | — |
Marketing | | | 70 | | | — | | | — |
Other | | | 1 | | | 8 | | | — |
Less: income tax impact | | | 129 | | | 837 | | | — |
Adjusted net income available to shareholders(1) | | $ | 5,922 | | $ | 4,776 | | $ | 5,999 |
| | | | | | | | | |
Adjusted Diluted Earnings Per Share(1) | | | | | | | | | |
Diluted earnings per share | | $ | 0.57 | | $ | 0.23 | | $ | 0.74 |
Plus: acquisition related expenses net of income tax impact | | | 0.04 | | | 0.34 | | | — |
Adjusted diluted earnings per share(1) | | $ | 0.61 | | $ | 0.57 | | $ | 0.74 |
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
The Company’s efficiency ratio(1) was 69.8% in the first quarter of 2022, compared with 71.8% in the fourth quarter of 2021 and 66.0% in the first quarter of 2021.
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Income Taxes
The Company recorded income tax expense of $1.8 million for the first quarter of 2022, representing an effective tax rate of 24.5%, compared to 25.9% for the fourth quarter of 2021. The decrease in effective tax rate in the first quarter of 2022 was primarily attributable to temporary and permanent tax differences on acquisition costs as of December 31, 2021.
Loans
Total loans held for investment were $1.93 billion as of March 31, 2022, a decrease of 1.2% from $1.95 billion as of December 31, 2021, and an increase of 24.8% from $1.55 billion as of March 31, 2021. The decrease in total loans held for investment from December 31, 2021 was attributable to a decrease in PPP loans of $30.1 million as well as a high level of loan payoffs influenced by our high net worth and entrepreneurial clients selling businesses and properties to take advantage of significant appreciation in the value of those assets. Including the $252.3 million in loans acquired in the Teton acquisition and the decrease of $173.8 million in PPP loans, the net increase in total loans held for investment from March 31, 2021 was attributed to increases in each loan category. Excluding PPP loans, acquired loans, and loans accounted for under the fair value option, total loans held for investment were $1.59 billion as of March 31, 2022, an increase of $34.6 million, or 2.2%, from the end of the prior quarter and an increase of $345.2 million, or 27.8%, from March 31, 2021.
4
PPP loans were $16.7 million as of March 31, 2022, a net decrease of 64.4% from $46.8 million as of December 31, 2021, and 91.2% from $190.5 million as of March 31, 2021. As of March 31, 2022, there were $0.3 million remaining in net fees to be recognized upon forgiveness or repayment of PPP loans.
Deposits
Total deposits were $2.27 billion as of March 31, 2022, compared to $2.21 billion as of December 31, 2021, and $1.81 billion as of March 31, 2021. The increase in total deposits from December 31, 2021 was related to continued inflows of both noninterest-bearing and interest-bearing deposits from new business development efforts. The increase in total deposits from March 31, 2021 was related to $379.2 million in deposits added through the Teton acquisition and $85.1 million in remaining net growth.
Average total deposits for the first quarter of 2022 increased $469.3 million, or 104.0% annualized, from the fourth quarter of 2021 and increased $553.3 million, or 32.2%, from the first quarter of 2021. The quarter-over-quarter and year-over-year increase in average deposits was primarily attributable to the Teton acquisition and organic growth in non-interest bearing and interest checking accounts.
Borrowings
Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $27.6 million as of March 31, 2022, a decrease of $11.1 million from $38.6 million as of December 31, 2021, and a decrease of $170.5 million from $198.0 million as of March 31, 2021. The decrease from December 31, 2021 and from March 31, 2021 is attributable to the participation in the Paycheck Protection Program Loan Facility (“PPPLF”) from the Federal Reserve. Borrowing from this facility is expected to trend in the same direction as the balances of the PPP loans and the resulting net decrease in PPP loans drove the decrease to the PPPLF balance. As of March 31, 2022, the PPPLF had advances of $12.6 million compared to PPP loan balance of $16.7 million.
Assets Under Management
Total assets under management (“AUM”) decreased by $152.5 million during the first quarter to $7.20 billion as of March 31, 2022, compared to $7.35 billion as of December 31, 2021. This decrease was primarily attributable to unfavorable market conditions resulting in a decrease in the value of AUM balances. Total AUM increased by $713.7 million compared to March 31, 2021 from $6.49 billion, which was primarily attributable to improved market conditions throughout 2021 and the Teton acquisition.
Credit Quality
Non-performing assets totaled $4.3 million, or 0.17% of total assets, as of March 31, 2022, compared to $4.3 million, or 0.17% of total assets, as of December 31, 2021 and $4.0 million, or 0.18% of total assets, as of March 31, 2021.
The Company recorded a provision of $0.2 million in the first quarter of 2022, compared to no provision recorded in the first quarter of 2021. The Company recorded a provision for loan losses of $0.8 million in the fourth quarter of 2021. The provision recorded in the first quarter of 2022 represented general provisioning consistent with growth of the bank originated loan portfolio, excluding PPP loans, and changes in the portfolio mix, we believe the resulting allowance for loan loss is representative of continued strong credit quality in the portfolio.
5
Capital
As of March 31, 2022, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of March 31, 2022, the Bank was classified as “well capitalized,” as summarized in the following table:
|
| March 31, |
|
| | 2022 |
|
Consolidated Capital |
|
| |
Tier 1 capital to risk-weighted assets |
| 11.11 | % |
Common Equity Tier 1 ("CET1") to risk-weighted assets |
| 11.11 | |
Total capital to risk-weighted assets |
| 13.81 | |
Tier 1 capital to average assets |
| 7.67 | |
| | | |
Bank Capital |
| | |
Tier 1 capital to risk-weighted assets |
| 12.01 | |
CET1 to risk-weighted assets |
| 12.01 | |
Total capital to risk-weighted assets |
| 12.82 | |
Tier 1 capital to average assets |
| 8.27 | |
Book value per common share increased 1.8% from $23.25 as of December 31, 2021 to $23.68 as of March 31, 2022, and was up 16.7% from $20.29 as of March 31, 2021.
Tangible book value per common share (1) increased 1.9% from $19.87 as of December 31, 2021 to $20.25 as of March 31, 2022, and was up 17.5% from $17.24 as of March 31, 2021.
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call and webcast at 10:00 a.m. MT/ 12:00 p.m. ET on Friday, April 29, 2022. The call can be accessed via telephone at 877-405-1628. A recorded replay will be accessible through May 6, 2022 by dialing 855-859-2056; passcode 3759275.
A slide presentation relating to the first quarter 2022 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Events and Presentations page of the Company’s investor relations website at https://myfw.gcs-web.com.
About First Western
First Western is a financial services holding company headquartered in Denver, Colorado, with operations in Colorado, Arizona, Wyoming and California. First Western and its subsidiaries provide a fully integrated suite of wealth management services on a private trust bank platform, which includes a comprehensive selection of deposit, loan, trust, wealth planning and investment management products and services. First Western’s common stock is traded on the Nasdaq Global Select Market under the symbol “MYFW.” For more information, please visit www.myfw.com.
6
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include “Tangible Common Equity,” “Tangible Common Book Value per Share,” “Return on Tangible Common Equity,” “Efficiency Ratio,” “Gross Revenue,” “Allowance for Loan Losses to Bank Originated Loans Excluding PPP,” “Adjusted Net Income Available to Common Shareholders,” “Adjusted Basic Earnings Per Share,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” and “Adjusted Return on Tangible Common Equity”. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies. Reconciliation of non-GAAP financial measures, to GAAP financial measures are provided at the end of this press release.
7
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,” “opportunity,” “could,” or “may.” The forward-looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, without limitation, the COVID-19 pandemic and its effects; integration risks and projected cost savings in connection with acquisitions; 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 loan losses and the risk in our ability to maintain a strong core deposit base or other low-cost funding sources. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 15, 2022 (“Form 10-K”), and other documents we file with the SEC from time to time. We urge readers of this news release to review the “Risk Factors” section our Form 10-K and any updates to those risk factors set forth in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our other filings with the SEC. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today’s date, or to make predictions based solely on historical financial performance. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Contacts:
Financial Profiles, Inc.
Tony Rossi
310-622-8221
MYFW@finprofiles.com
IR@myfw.com
8
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| | Three Months Ended | |||||||
| | March 31, | | December 31, | | March 31, | |||
(Dollars in thousands, except per share amounts) |
| 2022 | | 2021 | | 2021 | |||
Interest and dividend income: |
| |
|
| |
|
| |
|
Loans, including fees | | $ | 19,096 | | $ | 15,398 | | $ | 14,212 |
Investment securities | |
| 337 | |
| 225 | |
| 196 |
Interest-bearing deposits in other financial institutions | |
| 232 | |
| 109 | |
| 91 |
Total interest and dividend income | |
| 19,665 | |
| 15,732 | |
| 14,499 |
| | | | | | | | | |
Interest expense: | |
|
| |
|
| | | |
Deposits | |
| 943 | |
| 813 | |
| 974 |
Other borrowed funds | |
| 438 | |
| 532 | |
| 472 |
Total interest expense | |
| 1,381 | |
| 1,345 | |
| 1,446 |
Net interest income | |
| 18,284 | |
| 14,387 | |
| 13,053 |
Less: provision for loan losses | |
| 210 | |
| 812 | |
| — |
Net interest income, after provision for loan losses | |
| 18,074 | |
| 13,575 | |
| 13,053 |
| | | | | | | | | |
Non-interest income: | |
|
| |
|
| | | |
Trust and investment management fees | |
| 5,168 | |
| 5,197 | |
| 4,847 |
Net gain on mortgage loans | |
| 2,494 | |
| 2,470 | |
| 5,196 |
Bank fees | |
| 690 | |
| 622 | |
| 373 |
Risk management and insurance fees | |
| 109 | |
| 676 | |
| 51 |
Income on company-owned life insurance | |
| 86 | |
| 88 | |
| 88 |
Net gain on equity interests | | | 1 | | | 489 | | | — |
Other | | | 85 | | | — | | | 60 |
Total non-interest income | |
| 8,633 | |
| 9,542 | |
| 10,615 |
Total income before non-interest expense | |
| 26,707 | |
| 23,117 | |
| 23,668 |
| | | | | | | | | |
Non-interest expense: | |
|
| |
|
| | | |
Salaries and employee benefits | |
| 12,058 | |
| 11,013 | |
| 9,861 |
Occupancy and equipment | |
| 1,882 | |
| 1,588 | |
| 1,409 |
Professional services | |
| 1,526 | |
| 2,164 | |
| 1,279 |
Technology and information systems | |
| 1,046 | |
| 916 | |
| 942 |
Data processing | |
| 1,187 | |
| 3,307 | |
| 1,015 |
Marketing | |
| 557 | |
| 497 | |
| 321 |
Amortization of other intangible assets | |
| 77 | |
| 4 | |
| 4 |
Net (Gain)/loss on assets held for sale | |
| (1) | |
| — | |
| — |
Other | |
| 1,059 | |
| 1,041 | |
| 798 |
Total non-interest expense | |
| 19,391 | |
| 20,530 | |
| 15,629 |
Income before income taxes | |
| 7,316 | |
| 2,587 | |
| 8,039 |
Income tax expense | |
| 1,792 | |
| 670 | |
| 2,040 |
Net income available to common shareholders | | $ | 5,524 | | $ | 1,917 | | $ | 5,999 |
Earnings per common share: | |
| | |
| | | | |
Basic | | $ | 0.59 | | $ | 0.24 | | $ | 0.76 |
Diluted | | | 0.57 | | | 0.23 | | | 0.74 |
9
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| | March 31, | | December 31, | | March 31, | |||
(Dollars in thousands) | | 2022 | | 2021 | | 2021 | |||
Assets |
| |
|
| |
|
| |
|
Cash and cash equivalents: |
| |
|
| |
|
| |
|
Cash and due from banks | | $ | 5,961 | | $ | 6,487 | | $ | 2,295 |
Federal funds sold | | | 1,273 | | | 1,491 | | | — |
Interest-bearing deposits in other financial institutions | |
| 446,865 | |
| 379,005 | |
| 373,641 |
Total cash and cash equivalents | |
| 454,099 | |
| 386,983 | |
| 375,936 |
| | | | | | | | | |
Available-for-sale securities, at fair value | |
| 58,727 | |
| 55,562 | |
| 30,843 |
Correspondent bank stock, at cost | |
| 1,617 | |
| 2,584 | |
| 2,576 |
Mortgage loans held for sale, at fair value | |
| 33,663 | |
| 30,620 | |
| 176,644 |
Loans (includes $6,380, $0, and $0 measured at fair value, respectively) | |
| 1,923,825 | |
| 1,949,137 | |
| 1,543,926 |
Allowance for loan losses | | | (13,885) | | | (13,732) | | | (12,539) |
Premises and equipment, net | |
| 23,539 | |
| 23,976 | |
| 5,778 |
Accrued interest receivable | |
| 6,969 | |
| 7,151 | |
| 6,852 |
Accounts receivable | |
| 6,445 | |
| 5,267 | |
| 10,175 |
Other receivables | |
| 2,841 | |
| 1,949 | |
| 3,254 |
Goodwill and other intangible assets, net | |
| 32,335 | |
| 31,902 | |
| 24,254 |
Deferred tax assets, net | |
| 7,540 | |
| 6,845 | |
| 6,073 |
Company-owned life insurance | |
| 15,889 | |
| 15,803 | |
| 15,537 |
Other assets | |
| 22,940 | |
| 23,327 | |
| 22,269 |
Assets held for sale | |
| 117 | |
| 115 | |
| — |
Total assets | | $ | 2,576,661 | | $ | 2,527,489 | | $ | 2,211,578 |
| | | | | | | | | |
Liabilities | |
| | | | | |
| |
Deposits: | |
|
| |
|
| |
| |
Noninterest-bearing | | $ | 654,401 | | $ | 636,304 | | $ | 593,388 |
Interest-bearing | |
| 1,617,711 | |
| 1,569,399 | |
| 1,214,437 |
Total deposits | |
| 2,272,112 | |
| 2,205,703 | |
| 1,807,825 |
Borrowings: | |
|
| |
|
| |
| |
FHLB and Federal Reserve borrowings | |
| 27,576 | |
| 38,629 | |
| 198,041 |
Subordinated notes | |
| 32,523 | |
| 39,031 | |
| 24,248 |
Accrued interest payable | |
| 312 | |
| 355 | |
| 612 |
Other liabilities | | | 20,872 | | | 24,730 | | | 19,413 |
Total liabilities | |
| 2,353,395 | |
| 2,308,448 | |
| 2,050,139 |
| | | | | | | | | |
Shareholders' Equity | |
|
| |
|
| |
|
|
Total shareholders’ equity | |
| 223,266 | |
| 219,041 | |
| 161,439 |
Total liabilities and shareholders’ equity | | $ | 2,576,661 | | $ | 2,527,489 | | $ | 2,211,578 |
10
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| | March 31, | | December 31, | | March 31, | |||
(Dollars in thousands) |
| 2022 | | 2021 | | 2021 | |||
Loan Portfolio |
| |
|
| |
|
| |
|
Cash, Securities and Other(1) | | $ | 271,811 | | $ | 295,948 | | $ | 363,155 |
Construction and Development | |
| 151,651 | |
| 178,716 | |
| 110,024 |
1-4 Family Residential | |
| 602,412 | |
| 580,872 | |
| 452,591 |
Non-Owner Occupied CRE | |
| 455,715 | |
| 482,622 | |
| 317,457 |
Owner Occupied CRE | |
| 212,401 | |
| 212,426 | |
| 161,787 |
Commercial and Industrial | |
| 237,144 | |
| 203,584 | |
| 141,770 |
Total loans held for investment | | | 1,931,134 | | | 1,954,168 | | | 1,546,784 |
Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net | |
| (7,309) | |
| (5,031) | |
| (2,858) |
Gross loans | | $ | 1,923,825 | | $ | 1,949,137 | | $ | 1,543,926 |
Mortgage loans held for sale, at fair value | | $ | 33,663 | | $ | 30,620 | | $ | 176,644 |
| | | | | | | | | |
Deposit Portfolio | | | | | | | | | |
Money market deposit accounts | | $ | 1,108,315 | | $ | 1,056,669 | | $ | 918,940 |
Time deposits | |
| 156,678 | |
| 170,491 | |
| 157,072 |
Negotiable order of withdrawal accounts | |
| 319,648 | |
| 309,940 | |
| 130,540 |
Savings accounts | |
| 33,070 | |
| 32,299 | |
| 7,885 |
Total interest-bearing deposits | | | 1,617,711 | | | 1,569,399 | | | 1,214,437 |
Noninterest-bearing accounts | | | 654,401 | | | 636,304 | | | 593,388 |
Total deposits | | $ | 2,272,112 | | $ | 2,205,703 | | $ | 1,807,825 |
(1) Includes PPP loans of $16.7 million as of March 31, 2022, $46.8 million as of December 31, 2021, and $190.5 million as of March 31, 2021. Also includes loans held for investment accounted for under fair value option of $6.4 million as of March 31, 2022.
11
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
| | As of or for the Three Months Ended |
| |||||||
| | March 31, | | December 31, | | March 31, |
| |||
(Dollars in thousands) |
| 2022 | | 2021 | | 2021 |
| |||
Average Balance Sheets |
| |
|
| |
|
| |
| |
Assets |
| |
|
| |
|
| |
| |
Interest-earning assets: |
| |
|
| |
|
| |
| |
Interest-bearing deposits in other financial institutions | | $ | 474,593 | | $ | 277,915 | | $ | 213,577 | |
Federal funds sold | | | 1,349 | | | 1,491 | | | — | |
Available-for-sale securities | |
| 55,739 | |
| 36,001 | |
| 31,935 | |
Loans | |
| 1,922,770 | |
| 1,653,919 | |
| 1,554,990 | |
Interest-earning assets | |
| 2,454,451 | |
| 1,969,326 | |
| 1,800,502 | |
Mortgage loans held for sale | |
| 22,699 | |
| 39,112 | |
| 175,891 | |
Total interest-earning assets, plus mortgage loans held for sale | |
| 2,477,150 | |
| 2,008,438 | |
| 1,976,393 | |
Allowance for loan losses | |
| (13,715) | |
| (13,224) | |
| (12,541) | |
Noninterest-earning assets | |
| 121,650 | |
| 96,333 | |
| 100,415 | |
Total assets | | $ | 2,585,085 | | $ | 2,091,547 | | $ | 2,064,267 | |
| | | | | | | | | | |
Liabilities and Shareholders’ Equity | |
|
| |
|
| |
|
| |
Interest-bearing liabilities: | |
|
| |
|
| |
|
| |
Interest-bearing deposits | | $ | 1,605,314 | | $ | 1,195,986 | | $ | 1,163,010 | |
FHLB and Federal Reserve borrowings | |
| 33,104 | |
| 49,115 | |
| 137,626 | |
Subordinated notes | |
| 32,939 | |
| 39,017 | |
| 24,259 | |
Total interest-bearing liabilities | | | 1,671,357 | | | 1,284,118 | | | 1,324,895 | |
Noninterest-bearing liabilities: | |
|
| |
|
| |
|
| |
Noninterest-bearing deposits | |
| 668,705 | |
| 608,693 | |
| 557,707 | |
Other liabilities | |
| 23,555 | |
| 19,566 | |
| 21,151 | |
Total noninterest-bearing liabilities | | | 692,260 | | | 628,259 | | | 578,858 | |
Total shareholders’ equity | | | 221,468 | | | 179,170 | | | 160,514 | |
Total liabilities and shareholders’ equity | | $ | 2,585,085 | | $ | 2,091,547 | | $ | 2,064,267 | |
| | | | | | | | | | |
Yields/Cost of funds (annualized) | |
|
| |
|
| |
|
| |
Interest-bearing deposits in other financial institutions | |
| 0.20 | % |
| 0.16 | % |
| 0.17 | % |
Available-for-sale securities | |
| 2.42 | |
| 2.50 | |
| 2.45 | |
Loans | |
| 3.97 | |
| 3.72 | |
| 3.66 | |
Interest-earning assets | |
| 3.20 | |
| 3.20 | |
| 3.22 | |
Mortgage loans held for sale | |
| 3.37 | |
| 3.14 | |
| 2.62 | |
Total interest-earning assets, plus mortgage loans held for sale | |
| 3.21 | |
| 3.19 | |
| 3.17 | |
Interest-bearing deposits | |
| 0.23 | |
| 0.27 | |
| 0.33 | |
FHLB and Federal Reserve borrowings | |
| 0.47 | |
| 0.45 | |
| 0.38 | |
Subordinated notes | |
| 4.85 | |
| 4.89 | |
| 5.61 | |
Total interest-bearing liabilities | |
| 0.33 | |
| 0.42 | |
| 0.44 | |
Net interest margin | |
| 2.98 | |
| 2.92 | |
| 2.90 | |
Net interest rate spread | |
| 2.87 | |
| 2.78 | |
| 2.78 | |
12
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
| | As of or for the Three Months Ended |
| |||||||
| | March 31, | | December 31, | | March 31, |
| |||
(Dollars in thousands, except share and per share amounts) |
| 2022 | | 2021 | | 2021 |
| |||
Asset Quality |
| |
|
| |
|
| | | |
Non-performing loans | | $ | 4,309 | | $ | 4,327 | | $ | 4,021 | |
Non-performing assets | |
| 4,309 | |
| 4,327 | |
| 4,021 | |
Net charge-offs/(recoveries) | | | 57 | | | 44 | | | — | |
Non-performing loans to total loans | |
| 0.22 | % |
| 0.22 | % |
| 0.26 | % |
Non-performing assets to total assets | |
| 0.17 | |
| 0.17 | |
| 0.18 | |
Allowance for loan losses to non-performing loans | |
| 322.23 | |
| 317.36 | |
| 311.84 | |
Allowance for loan losses to total loans | |
| 0.72 | |
| 0.70 | |
| 0.81 | |
Allowance for loan losses to bank originated loans excluding PPP(1) | | | 0.87 | | | 0.88 | | | 1.01 | |
Net charge-offs to average loans(2) | |
| 0.00 | |
| 0.00 | |
| 0.00 | |
| | | | | | | | | | |
Assets Under Management | | $ | 7,199,328 | | $ | 7,351,840 | | $ | 6,485,647 | |
| | | | | | | | | | |
Market Data | | | | | | | | | | |
Book value per share at period end | | $ | 23.68 | | $ | 23.25 | | $ | 20.29 | |
Tangible book value per common share(1) | | | 20.25 | | | 19.87 | | | 17.24 | |
Weighted average outstanding shares, basic | | | 9,418,318 | | | 8,043,469 | | | 7,935,664 | |
Weighted average outstanding shares, diluted | | | 9,762,602 | | | 8,370,998 | | | 8,103,603 | |
Shares outstanding at period end | |
| 9,430,007 | |
| 9,419,271 | |
| 7,957,900 | |
| | | | | | | | | | |
Consolidated Capital | | | | | | | | | | |
Tier 1 capital to risk-weighted assets | |
| 11.11 | % |
| 10.54 | % | | 10.31 | % |
CET1 to risk-weighted assets | |
| 11.11 | |
| 10.54 | | | 10.31 | |
Total capital to risk-weighted assets | |
| 13.81 | |
| 13.54 | | | 13.11 | |
Tier 1 capital to average assets | |
| 7.67 | |
| 9.31 | | | 7.35 | |
| | | | | | | | | | |
Bank Capital | | | | | | | | | | |
Tier 1 capital to risk-weighted assets | |
| 12.01 | % |
| 11.40 | % | | 10.60 | % |
CET1 to risk-weighted assets | |
| 12.01 | |
| 11.40 | | | 10.60 | |
Total capital to risk-weighted assets | |
| 12.82 | |
| 12.19 | | | 11.57 | |
Tier 1 capital to average assets | |
| 8.27 | |
| 10.05 | | | 7.53 | |
(1) Represents a Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
(2) Value results in an immaterial amount.
13
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
Reconciliations of Non-GAAP Financial Measures
|
| As of or for the Three Months Ended |
| |||||||
| | March 31, | | December 31, | | March 31, |
| |||
(Dollars in thousands, except share and per share amounts) | | 2022 | | 2021 | | 2021 |
| |||
Tangible Common |
| |
|
| |
|
| |
| |
Total shareholders' equity | | $ | 223,266 | | $ | 219,041 | | $ | 161,439 | |
Less: goodwill and other intangibles, net | |
| 32,335 | |
| 31,902 | |
| 24,254 | |
Tangible common equity | | $ | 190,931 | | $ | 187,139 | | $ | 137,185 | |
| | | | | | | | | | |
Common shares outstanding, end of period | |
| 9,430,007 | |
| 9,419,271 | |
| 7,957,900 | |
Tangible common book value per share | | $ | 20.25 | | $ | 19.87 | | $ | 17.24 | |
| | | | | | | | | | |
Net income available to common shareholders | | $ | 5,524 | | $ | 1,917 | | $ | 5,999 | |
Return on tangible common equity (annualized) | |
| 11.57 | % |
| 4.10 | % |
| 17.49 | % |
| | | | | | | | | | |
Efficiency | |
|
| |
|
| |
|
| |
Non-interest expense | | $ | 19,391 | | $ | 20,530 | | $ | 15,629 | |
Less: amortization | |
| 77 | |
| 4 | |
| 4 | |
Less: acquisition related expenses | |
| 527 | |
| 3,696 | |
| — | |
Adjusted non-interest expense | | $ | 18,787 | | $ | 16,830 | | $ | 15,625 | |
| | | | | | | | | | |
Total income before non-interest expense | | $ | 26,707 | | $ | 23,117 | | $ | 23,668 | |
Less: net gain on equity interests | |
| 1 | |
| 489 | |
| — | |
Plus: provision for loan losses | |
| 210 | |
| 812 | |
| — | |
Gross revenue | | $ | 26,916 | | $ | 23,440 | | $ | 23,668 | |
Efficiency ratio | | | 69.80 | % | | 71.80 | % | | 66.02 | % |
| | | | | | | | | | |
Allowance to Bank Originated Loans Excluding PPP | | | | | | | | | | |
Total loans held for investment | | $ | 1,931,134 | | $ | 1,954,168 | | $ | 1,546,784 | |
Less: loans acquired | | | 323,563 | | | 360,661 | | | 120,839 | |
Less: bank originated PPP loans | |
| 13,109 | |
| 40,062 | |
| 183,005 | |
Less: purchased loans accounted for under fair value | | | 6,368 | | | — | | | — | |
Bank originated loans excluding PPP | | $ | 1,588,094 | | $ | 1,553,445 | | $ | 1,242,940 | |
| | | | | | | | | | |
Allowance for loan losses | | $ | 13,885 | | $ | 13,732 | | $ | 12,539 | |
Allowance for loan losses to bank originated loans excluding PPP | | | 0.87 | % | | 0.88 | % | | 1.01 | % |
14
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
|
| As of or for the Three Months Ended |
| |||||||
| | March 31, | | December 31, | | March 31, |
| |||
(Dollars in thousands, except share and per share data) | | 2022 | | 2021 | | 2021 |
| |||
Adjusted Net Income Available to Common Shareholders | | | | | | | | | | |
Net income available to common shareholders | | $ | 5,524 | | $ | 1,917 | | $ | 5,999 | |
Plus: acquisition related expenses | | | 527 | | | 3,696 | | | — | |
Less: income tax impact | | | 129 | | | 837 | | | — | |
Adjusted net income available to shareholders | | $ | 5,922 | | $ | 4,776 | | $ | 5,999 | |
| | | | | | | | | | |
Adjusted Basic Earnings Per Share | | | | | | | | | | |
Basic earnings per share | | $ | 0.59 | | $ | 0.24 | | $ | 0.76 | |
Plus: acquisition related expenses net of income tax impact | | | 0.04 | | | 0.35 | | | — | |
Adjusted basic earnings per share | | $ | 0.63 | | $ | 0.59 | | $ | 0.76 | |
| | | | | | | | | | |
Adjusted Diluted Earnings Per Share | | | | | | | | | | |
Diluted earnings per share | | $ | 0.57 | | $ | 0.23 | | $ | 0.74 | |
Plus: acquisition related expenses net of income tax impact | | | 0.04 | | | 0.34 | | | — | |
Adjusted diluted earnings per share | | $ | 0.61 | | $ | 0.57 | | $ | 0.74 | |
| | | | | | | | | | |
Adjusted Return on Average Assets (annualized) | | | | | | | | | | |
Return on average assets | | | 0.85 | % | | 0.37 | % | | 1.16 | % |
Plus: acquisition related expenses net of income tax impact | | | 0.07 | | | 0.54 | | | — | |
Adjusted return on average assets | | | 0.92 | % | | 0.91 | % | | 1.16 | % |
| | | | | | | | | | |
Adjusted Return on Average Shareholders' Equity (annualized) | | | | | | | | | | |
Return on average shareholders' equity | | | 9.98 | % | | 4.28 | % | | 14.95 | % |
Plus: acquisition related expenses net of income tax impact | | | 0.72 | | | 6.38 | | | — | |
Adjusted return on average shareholders' equity | | | 10.70 | % | | 10.66 | % | | 14.95 | % |
| | | | | | | | | | |
Adjusted Return on Tangible Common Equity (annualized) | | | | | | | | | | |
Return on tangible common equity | | | 11.57 | % | | 4.10 | % | | 17.49 | % |
Plus: acquisition related expenses net of income tax impact | | | 0.84 | | | 6.11 | | | — | |
Adjusted return on tangible common equity | | | 12.41 | % | | 10.21 | % | | 17.49 | % |
15
| First Quarter 2022 Conference Call |
| Safe Harbor 2 This presentation contains “forward - looking statements” within the meaning of Section 27 A of the Securities Act of 1933 , as amended, and Section 21 E 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 .. Those following risks and uncertainties, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward - looking statements : the COVID - 19 pandemic and its effects ; integration risks in connection with acquisitions ; the risk of geographic concentration in Colorado, Arizona, Wyoming and California ; the risk of changes in the economy affecting real estate values and liquidity ; the risk in our ability to continue to originate residential real estate loans and sell such loans ; risks specific to commercial loans and borrowers ; the risk of claims and litigation pertaining to our fiduciary responsibilities ; the risk of competition for investment managers and professionals ; the risk of fluctuation in the value of our investment securities ; the risk of changes in interest rates ; and the risk of the adequacy of our allowance for credit losses and the risk in our ability to maintain a strong core deposit base or other low - cost funding sources .. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10 - K filed with the U .. S .. Securities and Exchange Commission (“SEC”) on March 15 , 2022 and other documents we file with the SEC from time to time .. 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 .. Our common stock is not a deposit or savings account .. Our common stock is not insured by the Federal Deposit Insurance Corporation or any governmental agency or instrumentality .. This presentation is not an offer to sell any securities and it is not soliciting an offer to buy any securities in any state or jurisdiction where the offer or sale is not permitted .. Neither the SEC nor any state securities commission has approved or disapproved of the securities of the Company or passed upon the accuracy or adequacy of this presentation .. Any representation to the contrary is a criminal offense .. Except as otherwise indicated, this presentation speaks as of the date hereof .. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of the Company after the date hereof .. |
| 3 Overview of 1Q22 Payoffs Impact Loan Growth 1Q22 Earnings Increasing Profitability ▪ Teton acquisition having positive impact on profitability prior to realization of most of the cost savings ▪ Larger balance sheet resulted in 27% increase in net interest income from 4Q21 ▪ Significant increases in adjusted ROAA, ROAE, and ROTCE from 4Q21 ▪ Non - performing assets remained consistent at 0.17% of total assets ▪ History of exceptionally low charge - offs continues Asset Quality Remains Exceptional ▪ High level of payoffs resulting from asset sales among high net worth and entrepreneurial clients ▪ Seasonally lighter loan production in first quarter ▪ Payoffs and lighter loan production result in excess liquidity during the first quarter ▪ Net income available to common shareholders of $5.5 million ▪ Diluted EPS of $0.57 ▪ Excluding acquisition - related expenses, adjusted net income of $5.9 million, or $0.61 per diluted share (1) (1) See Non - GAAP reconciliation |
| 4 Net Income Available to Common Shareholders and Earnings per Share ▪ Net income of $5.5 million, or $0.57 diluted earnings per share, in 1Q22 ▪ Excluding acquisition - related expenses, adjusted diluted earnings per share (1) of $0.61 in 1Q22 ▪ Strong profitability resulted in 1.8% and 1.9% increase in book value per share and tangible book value per share (1) , respectively, from 4Q21 ▪ Strategic decision to maintain excess liquidity during 2021 rather than redeploying funds into investment securities has preserved book value as interest rates have increased in 2022 $6,277 $6,417 $1,917 $5,524 $5,999 $6,331 $6,669 $4,776 $5,922 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Net Income Adjustments to Net Income (1) $0.76 $0.78 $0.23 $0.57 $0.74 $0.77 $0.81 $0.57 $0.61 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Net Income Adjustments to Net Income Net Income Available to Common Shareholders Diluted Earnings per Share (1) See Non - GAAP reconciliation (1) (1) (1) (1) (1) (1) (1) |
| 5 Wealth Management Segment Earnings (1) See Non - GAAP reconciliation $0.73 $0.86 $0.79 $0.71 $0.77 $0.99 $1.01 $1.07 $0.75 $0.80 $0.00 $0.50 $1.00 $1.50 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Wealth Management Segment Consolidated ▪ Wealth Management segment earnings reflects contribution of private banking, commercial banking, and trust and investment management business lines ▪ Growth in private banking, commercial banking, and TIM businesses replacing earnings generated by mortgage segment during refinancing boom and creating sustainable path to higher profitability over long - term ▪ Increase in wealth management segment earnings from 4Q21 primarily due to an increase in average interest - earning assets Wealth Management Segment Diluted Pre - Tax Earnings Per Share (1) |
| 6 Loan Portfolio ▪ Total loans HFI decreased $ 23.0 million from prior quarter due to high level of payoffs and a decrease in PPP loans of $30.1 million ▪ Seasonally lighter loan production in first quarter ▪ Growth in C&I loans partially offset payoffs of construction loans following project completions and CRE loans resulting from asset sales ▪ Loans HFI, excluding PPP increased 41.2% year - over - year and Bank Originated Loans, excluding PPP increased 27.8% year - over - year 1Q 2021 4Q 2021 1Q 2022 Cash, Securities and Other $363,155 $295,948 $ 271,811 Construction and Development 110,024 178,716 151,651 1 - 4 Family Residential 452,591 580,872 602,412 Non - Owner Occupied CRE 317,457 482,622 455,715 Owner Occupied CRE 161,787 212,426 212,401 Commercial and Industrial 141,770 203,584 237,144 Total Loans HFI $1,546,784 $1,954,168 $ 1,931,134 Mortgage loans held - for - sale (HFS) 175,752 29,857 33,713 Total Loans $ 1,722,536 $ 1,984,025 $ 1,964,847 $252.3 $144.6 $142.5 $133.4 $224.6 $101.8 $122.6 $91.5 $84.4 $122.3 $154.2 $30.5 $91.4 $40.6 $21.5 $25.6 $0 $50 $100 $150 $200 $250 $300 1Q21 2Q21 3Q21 4Q21 1Q22 Teton Acquired Production Loan Payoffs PPP Forgiveness (in millions) $1,731 $1,660 $1,648 $1,693 $1,945 $1,984 $1,965 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 1Q21 2Q21 3Q21 4Q21 1Q22 4Q21 1Q22 HFI HFS (1) Represents unpaid principal balance. Excludes deferred (fees) costs, and amortized premium / ( unaccreted discount ) and fair value adjustments on loans accounted for under the fair value option. ($ in thousands, as of quarter end) Loan Portfolio Composition (1) Loan Portfolio Details Loan Production & Loan Payoffs Average Total Loans (1) Average Period End |
| 7 Total Deposits ▪ Total deposits increased $66.4 million from end of prior quarter ▪ Continued improvement in deposit mix as growth in noninterest - bearing and low - cost interest - bearing deposits offset decline in time deposits ▪ Strong new client acquisition activity resulted in $92.3 million in new deposit accounts in 1Q22 1Q 2021 4Q 2021 1Q 2022 Money market deposit accounts $918,940 $1,056,669 $1,108,315 Time deposits 157,072 170,491 156,678 NOW 130,540 309,940 319,648 Savings accounts 7,885 32,299 33,070 Noninterest - bearing accounts 593,388 636,304 654,401 Total Deposits $1,807,825 $2,205,703 $2,272,112 $1,721 $1,705 $1,723 $1,805 $2,274 $2,206 $2,272 $0 $500 $1,000 $1,500 $2,000 $2,500 1Q21 2Q21 3Q21 4Q21 1Q22 4Q21 1Q22 Average Period End ($ in millions) Deposit Portfolio Composition Total Deposits |
| 8 Trust and Investment Management ▪ Total assets under management decreased $ 152.5 million from December 31, 2021 to $7.20 billion at March 31, 2022 ▪ The decrease in asset balances was attributable to unfavorable market conditions resulting in a decrease in the value of assets under management balances. $6,486 $6,762 $6,906 $7,352 $7,199 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Investment Agency Managed Trust 401(k)/Retirement Directed Trust Custody (in millions, as of quarter end) Total Assets Under Management |
| (1) All numbers represented do not include the impact of taxes (2) The deferred loan origination expenses are recorded in non - interest expenses (Salaries and Benefits) and amortized throug h net interest income (3 ) Includes $ 0.4 million in SBA fee income less $0.1 million of deferred loan origination expense Paycheck Protection Program Overview Impact on 1Q22 Financials (1) ($ in Millions) Net Interest Income Amortization of SBA fee income and deferred loan origination expense (2) $ 0.4 Interest income from PPP loans, less PPPLF funding cost $0.1 Net Interest Income $ 0.5 Net Interest Margin Impact 6 bps ($ in Millions) As of 3/31/22 Total Loans (existing PPP) $16.7 Total Loans Forgiven $301.1 PPPLF advances $12.6 Remaining Fees to be Recognized Pre - Tax (3) $ 0.3 9 |
| (1) See Non - GAAP reconciliation Gross Revenue ▪ Gross revenue (1) increased 14.8% from 4Q21 due to higher net interest income ▪ Most areas of non - interest income were consistent with prior quarter with exception of decline in risk management and insurance fees and net gain on equity interests ▪ 4Q21 included $0.5 million net gain on equity interests Non - interest Income $8,633 Net Interest Income $18,284 32.1% 67.9% $23.7 $23.7 $25.3 $23.4 $26.9 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Wealth Management Mortgage (in millions) 1Q22 Gross Revenue (1) Gross Revenue (1) 10 |
| 11 Net Interest Income and Net Interest Margin ▪ Net interest income increased 27.1% from 4Q21, primarily due to higher average loan balances ▪ Excluding PPP fees and purchase accretion income, net interest income increased $3.3 million from 4Q21 ▪ Net interest margin, including PPP and purchase accretion, increased 6 bps to 2.98% ▪ Net interest margin, excluding PPP and purchase accretion (1 ) , decreased 8 bps to 2.87%, primarily due to excess liquidity resulting from high level of loan payoffs and deposit growth ▪ Net interest margin should expand as excess liquidity is used to fund loan growth and asset sensitive balance sheet benefits from additional increases in interest rates $13,053 $14,223 $14,846 $14,387 $18,284 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 2.88% (1) 2.88% (1) 3.06% (1) 2.95% 2.98% 2.90% 3.01% 3.14% 2.92% 2.87% (1) -0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Net Interest Margin Adjusted Net Interest Margin (1) (in thousands) (1) See Non - GAAP reconciliation Net Interest Income Net Interest Margin |
| 12 Non - Interest Income ▪ Non - interest income decreased 9.5% from 4Q21 ▪ Excluding net gain on equity interests in 4Q21, adjusted non - interest income (1) decreased 4.6%, primarily due to lower risk management and insurance fees, which are seasonally higher in Q4 compared to the rest of the fiscal year ▪ Largest sources of non - interest income – TIM fees and net gain on mortgage loans – were relatively consistent with prior quarter despite challenging market conditions for both businesses $10,615 $9,498 $10,495 $9,542 $8,633 $0 $5,000 $10,000 $15,000 $20,000 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Trust and Investment Management Fees Net Gain on Mortgage Loans Bank Fees Risk Management and Insurance Fees Income on Company-Owned Life Insurance Other $4,847 $5,009 $5,167 $5,197 $5,168 $4,000 $4,200 $4,400 $4,600 $4,800 $5,000 $5,200 $5,400 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 (in thousands) (in thousands) Total Non - Interest Income Trust and Investment Management Fees (1) See Non - GAAP reconciliation |
| 13 Mortgage Operations ▪ Mortgage locks up 4.5% from prior quarter ▪ Refi/Purchase mix of 41% / 59% in 1Q22 compared to 41% / 59% in 4Q21 and 39% / 61% in 3Q21 ▪ Profit margin remained consistent quarter - over - quarter ▪ Non - interest expense down 28.0% in Mortgage segment from 1Q21 $490.8 $319.7 $256.1 $196.7 $148.6 $33.9 $41.2 $36.5 $34.3 $38.5 $0 $100 $200 $300 $400 $500 $600 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Originations for Sale Originations for Porfolio $359.4 $268.2 $279.0 $170.3 $178.0 $0 $50 $100 $150 $200 $250 $300 $350 $400 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 (in millions) $2.1 $1.2 $2.3 $0.3 $0.3 $5.2 $3.9 $4.5 $2.5 $2.5 41% 31% 50% 12% 12% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Net Income Revenue Profit Margin (in millions) Mortgage Originations Mortgage Details Net Income, Revenue and Profit Margin Mortgage Loan Locks |
| 14 Non - Interest Expense and Efficiency Ratio ▪ Non - interest expense decreased 5.5% from 4Q21 ▪ 1Q22 included $0.5 million of acquisition - related expense, compared with $3.7 million in 4Q21 ▪ Excluding acquisition - related expense, adjusted non - interest expense (1) increased from 4Q21 primarily due to impact of adding Teton’s operations ▪ Operating efficiency ratio (1) improved to 69.8% from 71.8% in 4Q21 $4 (1) $74 (1) $337 (1) $3,700 (1) $604 $15,629 $15,521 $16,469 $20,530 $19,391 $0 $5,000 $10,000 $15,000 $20,000 $25,000 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Non-Interest Expense Adjustments to Non-Interest Expense (1) 66.0% 65.1% 63.7% 71.8% 69.8% 0% 20% 40% 60% 80% 100% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 (1) See Non - GAAP reconciliation Total Non - Interest Expense Operating Efficiency Ratio (1) (in thousands) (1) |
| 15 Asset Quality ▪ Stable asset quality across the portfolio ▪ Immaterial net charge - offs again in the quarter ▪ $0.2 million provision for loan losses related to growth in total loans, excluding PPP loans, and changes in portfolio mix ▪ Non - performing assets remained consistent at 0.17% of total assets ▪ ALLL/Adjusted Total Loans (1) decreased to 0.87% in 1Q22 from 0.88% in 4Q21, consistent with strong asset quality and immaterial losses 0.18% 0.16% 0.21% 0.17% 0.17% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Non - Performing Assets/Total Assets Net Charge - Offs/Average Loans (1) Adjusted Total Loans – Total Loans minus PPP loans, acquired loans, and loans accounted for under fair value option; see non - GAAP reconciliation |
| 16 Near - Term Outlook ▪ Growing reputation and larger balance sheet positively impacting ability to attract experienced banking talent and expand business development capabilities across all markets ▪ Loan pipeline continues to build and should lead to higher loan growth over remainder of 2022 ▪ Higher loan growth and reduction in excess liquidity expected to drive increases in net interest income and net interest margin ▪ Realization of costs savings from Teton acquisition will further improve profitability during the second half of 2022 ▪ Strength of client base and business model positions First Western to effectively manage through macroeconomic and geopolitical headwinds and continue delivering strong results for shareholders |
| Appendix 17 |
| 18 Capital and Liquidity Overview 11.11% 11.11% 13.81% 7.67% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% Tier 1 Capital to Risk-Weighted Assets CET1 to Risk- Weighted Assets Total Capital to Risk-Weighted Assets Tier 1 Capital to Average Assets Liquidity Funding Sources (as of 3/31/22) Liquidity Reserves: Total Available Cash $ 450,727 Unpledged Investment Securities 42,696 Borrowed Funds: Unsecured : Credit Lines 54,000 Secured : FHLB Available 541,207 Brokered Remaining Capacity 521,397 Total Liquidity Funding Sources $ 1,611,733 Loan to Deposit Ratio 84.7% $91,662 $104,411 $130,704 $187,139 $190,931 $11.50 $13.15 $16.44 $19.87 $20.25 $10.00 $15.00 $20.00 $25.00 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 4Q18 4Q19 4Q20 4Q21 1Q22 TCE TBV/Share (in thousands) (1) See Non - GAAP reconciliation Consolidated Capital Ratios (as of 3/31/22) Tangible Common Equity / TBV per Share (1) (in thousands) |
| 19 Non - GAAP Reconciliation Consolidated Tangible Common Book Value Per Share As of the Three Months Ended, (Dollars in thousands) Dec. 31, 2018 Dec. 31, 2019 Dec. 31, 2020 Dec. 31 , 2021 Mar. 31 , 2022 Total shareholders' equity $116,875 $127,678 $154,962 $219,041 $223,266 Less: Goodwill and other intangibles, net 25,213 19,714 24,258 31,902 32,335 Intangibles held for sale (1) - 3,553 - - - Tangible common equity 91,662 104,411 $130,704 187,139 190,931 Common shares outstanding, end of period 7,968,420 7,940,168 7,951,773 9,419,271 9,430,007 Tangible common book value per share $11.50 $13.15 $16.44 $19.87 $20.25 Net income available to common shareholders $5,524 Return on tangible common equity (annualized) 11.57% (1) Represents the intangible portion of assets held for sale Consolidated Efficiency Ratio For the Three Months Ended, (Dollars in thousands) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Non - interest expense $15,629 $15,521 $16,469 $20,530 $19,391 Less: amortization 4 4 5 4 77 Less: acquisition related expenses - 70 332 3,696 527 Adjusted non - interest expense $15,625 $15,447 $16,132 $16,830 $ 18,787 Net interest income $13,053 $14,223 $14,846 $14,387 $18,284 Non - interest income 10,615 9,498 10,495 9,542 8,633 Less: Net gain on equity interests - - - 489 1 Adjusted non - interest income 10,615 9,498 10,495 9,053 8,632 Total income $23,668 $23,721 $25,341 $23,440 $ 26,916 Efficiency ratio 66.0% 65.1% 63.7% 71.8% 69.8% |
| 20 Non - GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Total income before non - interest expense $18,471 $19,782 $20,438 $20,619 $ 24,189 Less: Net gain on equity interests - - - 489 1 Plus: Provision for loan loss - 12 406 812 210 Gross revenue $18,471 $19,794 $20,844 $20,942 $ 24,398 Mortgage Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Total income before non - interest expense $5,197 $3,927 $4,497 $2,498 $ 2,518 Plus: Provision for loan loss - - - - - Gross revenue $5,197 $3,927 $4,497 $2,498 $ 2,518 Consolidated Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Total income before non - interest expense $23,668 $23,709 $24,935 $23,117 $26,707 Less: Net gain on equity interests - - - 489 1 Plus: Provision for loan loss - 12 406 812 210 Gross revenue $23,668 $23,721 $25,341 $23,440 $ 26,916 Diluted Pre - Tax Earnings Per Share For The Three Months Ended (Dollars in thousands) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Non - Mortgage income before income tax $5,917 $6,983 $6,199 $2,279 $7,011 Plus: Acquisition - related expenses - 70 332 3,696 527 Plus: Mortgage income before income tax 2,122 1,205 2,267 308 305 Less: Income tax expense including acquisition tax effect 2,040 1,927 2,129 1,507 1,921 Net income available to common shareholders $5,999 $6,331 $6,669 $4,776 $5,922 Diluted weighted average shares 8,098,680 8,213,900 8,246,353 8,370,998 9,762,602 Non - Mortgage Segment Diluted Pre - Tax Earnings Per Share $0.73 $0.86 $0.79 $0.71 $ 0.77 Consolidated Diluted Pre - Tax Earnings Per Share $0.99 $1.01 $1.07 $0.75 $ 0.80 |
| 21 Non - GAAP Reconciliation Adjusted net income available to common shareholders For the Three Months Ended, (Dollars in thousands, except per share data) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Net income available to common shareholders $5,999 $6,277 $6,417 $1,917 $5,524 Plus: acquisition related expense including tax impact - 54 252 2,859 398 Adjusted net income to common shareholders $5,999 $6,331 $6,669 $4,776 $5,922 Adjusted diluted earnings per share For the Three Months Ended, (Dollars in thousands, except per share data) March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 March 31, 2022 Earnings per share $0.74 $0.76 $0.78 $0.23 $0.57 Plus: acquisition related expenses including tax impact - 0.01 0.03 0.34 0.04 Adjusted earnings per share $0.74 $0.77 $0.81 $0.57 $0.61 Allowance for loan losses to Bank originated loans excluding PPP As of (Dollars in thousands) December 31, 2021 March 31, 2022 Total loans held for investment $1,954,168 $ 1,931,134 Less: Branch acquisition 360,661 323,563 Less: PPP loans 40,062 13,109 Less: Purchased loans accounted for under fair value - 6,368 Loans excluding acquired and PPP 1,553,445 1,588.094 Allowance for loan losses 13,732 13,885 Allowance for loan losses to Bank originated loans excluding PPP 0.88% 0.87% |
| 22 Non - GAAP Reconciliation Adjusted net interest margin For the Three Months Ended March 31, 2021 For the Three Months Ended June 30, 2021 For the Three Months Ended September 30, 2021 For the Three Months Ended December 31, 2021 For the Three Months Ended March 31, 2022 (Dollars in thousands) Average Balance Interest Earned/Paid Average Yield/Rate Average Balance Interest Earned/Paid Average Yield/Rate Average Balance Interest Earned/Paid Average Yield/Rate Average Balance Interest Earned/Paid Average Yield/Rate Average Balance Interest Earned/Paid Average Yield/Rate Interest - bearing deposits in other financial institutions 213,577 91 292,615 92 266,614 105 279,406 109 475,942 232 PPP adjustment 21,173 5 17,115 4 1,636 - 9,556 3 12,378 6 Available - for - sale securities 31,936 196 26,474 169 29,130 180 36,001 226 55,739 337 PPP adjustment - - - - - - - - - - Loans 1,554,990 14,212 1,573,553 15,287 1,592,800 15,861 1,653,920 15,398 1,922,770 19,096 PPP adjustment (171,263) (945) (176,396) (1,583) (81,476) (1,081) (51,825) (622) (30,481) (491) Purchase Accretion adjustment - (344) - (260) - 35 - 398 - (328) Adjusted total Interest - earning assets 1,650,413 13,215 1,773,360 13,709 1,808,704 15,100 1,927,058 15,512 2,436,348 18,852 Interest - bearing deposits 974 866 829 813 943 PPP adjustment - - - - - Federal Home Loan Bank Topeka and Federal Reserve borrowings 132 117 82 55 39 PPP adjustment (109) (93) (59) (31) (16) Subordinated notes 340 342 389 477 400 Adjusted total interest - bearing liabilities 1,337 1,232 1,241 1,314 1,366 Net interest income 11,878 12,477 13,859 14,198 17,486 Adjusted net interest margin 2.88% 2.88% 3.06% 2.95% 2.87% |
