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): July 27, 2023
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
| (Address of principal executive offices) | (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. | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Item 2.02 Results of Operations and Financial Condition.
On July 27, 2023, First Western Financial, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2023. 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 second quarter ended June 30, 2023 on Friday, July 28, 2023, 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 second quarter ended June 30, 2023 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 Number | Description | |||||||
| 99.1 | ||||||||
| 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: July 27, 2023 | By: /s/ Scott C. Wylie | |||||||
| Scott C. Wylie | ||||||||
| Chairman, Chief Executive Officer and President | ||||||||
3
Exhibit 99.1
First Western Reports Second Quarter 2023 Financial Results
Second Quarter 2023 Summary
•Total assets of $3.0 billion and assets under management of $6.5 billion
•Net income available to common shareholders of $1.5 million in Q2 2023, compared to $3.8 million in Q1 2023 and $4.5 million in Q2 2022
•Diluted EPS of $0.16 in Q2 2023, compared to $0.39 in Q1 2023 and $0.46 in Q2 2022
•Second quarter 2023 included net of tax impacts of $1.5 million related to an allowance recorded on individually analyzed loans, $0.9 million of impairment to the carrying value of contingent consideration assets, and $0.8 million of losses on loans accounted for under the fair value option, with diluted EPS impacts, net of tax, of $0.15, $0.09, and $0.08, respectively
•Book value per common share increased to $25.38, or 0.6%, from $25.22 as of Q1 2023, and was up 5.5% from $24.06 as of Q2 2022
•Total deposits decreased slightly to $2.38 billion, or 0.7%, from $2.39 billion as of Q1 2023, and were up 9.5% from $2.17 billion as of Q2 2022
Denver, Colo., July 27, 2023 – First Western Financial, Inc. (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the second quarter ended June 30, 2023.
Net income available to common shareholders was $1.5 million, or $0.16 per diluted share, for the second quarter of 2023. This compares to $3.8 million, or $0.39 per diluted share, for the first quarter of 2023, and $4.5 million, or $0.46 per diluted share, for the second quarter of 2022. Net income for the second quarter of 2023 was negatively impacted by net of tax impacts of $1.5 million related to an allowance recorded on individually analyzed loans, $0.9 million of impairment to the carrying value of contingent consideration assets, and $0.8 million of losses on loans accounted for under the fair value option.
Scott C. Wylie, CEO of First Western, commented, “Our second quarter performance reflects the strength of the franchise we have built as we continued to see good stability in our deposit base and healthy asset quality despite the challenging operating environment. While remaining conservative and disciplined in our underwriting and pricing criteria, our total loans increased at an annualized rate of 4% despite a lower level of loan demand that we are seeing due to higher interest rates and concerns about a slowing economy. While we experienced some non-recurring expenses in the second quarter, our solid financial performance and prudent balance sheet management resulted in an increase in our capital ratios and further growth in tangible book value per share during the second quarter.
“While economic conditions remain uncertain, we will continue to prioritize prudent risk management and maintain high levels of liquidity, capital, and reserves. However, we remain committed to acting in the best long-term interests of our shareholders, and we will continue to evaluate opportunities for capital utilization that can create additional value for shareholders,” said Mr. Wylie.
For the Three Months Ended | |||||||||||||||||
| June 30, | March 31, | June 30, | |||||||||||||||
| (Dollars in thousands, except per share data) | 2023 | 2023 | 2022 | ||||||||||||||
| Earnings Summary | |||||||||||||||||
| Net interest income | $ | 18,435 | $ | 19,560 | $ | 20,380 | |||||||||||
Provision (release) for credit losses(1) | 1,843 | (310) | 519 | ||||||||||||||
| Total non-interest income | 3,962 | 5,819 | 6,698 | ||||||||||||||
| Total non-interest expense | 18,519 | 20,528 | 20,583 | ||||||||||||||
| Income before income taxes | 2,035 | 5,161 | 5,976 | ||||||||||||||
| Income tax expense | 529 | 1,341 | 1,494 | ||||||||||||||
| Net income available to common shareholders | 1,506 | 3,820 | 4,482 | ||||||||||||||
Adjusted net income available to common shareholders(2) | 2,440 | 3,847 | 4,742 | ||||||||||||||
| Basic earnings per common share | 0.16 | 0.40 | 0.47 | ||||||||||||||
Adjusted basic earnings per common share(2) | 0.25 | 0.40 | 0.50 | ||||||||||||||
| Diluted earnings per common share | 0.16 | 0.39 | 0.46 | ||||||||||||||
Adjusted diluted earnings per common share(2) | 0.25 | 0.39 | 0.49 | ||||||||||||||
| Return on average assets (annualized) | 0.21 | % | 0.54 | % | 0.71 | % | |||||||||||
Adjusted return on average assets (annualized)(2) | 0.35 | 0.55 | 0.75 | ||||||||||||||
| Return on average shareholders' equity (annualized) | 2.49 | 6.40 | 7.89 | ||||||||||||||
Adjusted return on average shareholders' equity (annualized)(2) | 4.04 | 6.45 | 8.35 | ||||||||||||||
Return on tangible common equity (annualized)(2) | 2.86 | 7.35 | 9.16 | ||||||||||||||
Adjusted return on tangible common equity (annualized)(2) | 4.64 | 7.41 | 9.69 | ||||||||||||||
| Net interest margin | 2.73 | 2.93 | 3.38 | ||||||||||||||
Efficiency ratio(2) | 74.42 | % | 78.29 | % | 74.85 | % | |||||||||||
(1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
(2) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Operating Results for the Second Quarter 2023
Revenue
Gross revenue (1) was $24.8 million for the second quarter of 2023, a decrease of 5.0% from $26.1 million for the first quarter of 2023. The decrease was primarily driven by a decrease in net interest income as a result of higher interest expense driven by higher deposit costs, offset partially by higher interest income. Relative to the second quarter of 2022, gross revenue decreased 8.0% from $26.9 million. The decrease was driven by a decrease in net interest income as a result of higher interest expense driven by higher deposit costs, offset partially by higher interest income.
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Net Interest Income
Net interest income for the second quarter of 2023 was $18.4 million, a decrease of 5.8% from $19.6 million in the first quarter of 2023. Relative to the second quarter of 2022, net interest income decreased 9.5% from $20.4 million. The decreases were due to higher interest expense driven primarily by higher deposit costs, offset partially by higher interest income.
2
Net Interest Margin
Net interest margin for the second quarter of 2023 decreased 20 basis points to 2.73% from 2.93% reported in the first quarter of 2023, primarily due to a 42 basis point increase in average cost of deposits, driven by a rising rate environment and a highly competitive deposit market.
The yield on interest-earning assets increased 18 basis points to 5.38% in the second quarter of 2023 from 5.20% in the first quarter of 2023 and the cost of interest-bearing deposits increased 50 basis points to 3.44% in the second quarter of 2023 from 2.94% in the first quarter of 2023.
Relative to the second quarter of 2022, net interest margin decreased from 3.38%, primarily due to a 248 basis point increase in average cost of deposits, offset partially by a 135 basis point increase in loan yields.
Non-interest Income
Non-interest income for the second quarter of 2023 was $4.0 million, a decrease of 31.9%, from $5.8 million in the first quarter of 2023. This was primarily due to a $1.2 million impairment to the carrying value of contingent consideration assets related to the sale of First Western Capital Management in 2020. The value was established using asset growth assumptions provided by the buyer, which had not materialized. The decrease in Non-interest income was further driven by losses of $1.1 million recorded on loans accounted for under the fair value option during the second quarter of 2023.
Relative to the second quarter of 2022, non-interest income decreased 40.8% from $6.7 million. The decrease was primarily due to a $1.2 million impairment to the fair value of contingent consideration assets, and losses of $1.1 million recorded on loans accounted for under the fair value option.
Non-interest Expense
Non-interest expense for the second quarter of 2023 was $18.5 million, a decrease of 9.8%, from $20.5 million in the first quarter of 2023. Relative to the second quarter of 2022, non-interest expense decreased 10.0% from $20.6 million. The decreases were primarily driven by lower salaries and employee benefits related to staffing reductions to better align with lower revenue. Headcount decreased 10.5% as of June 30, 2023 compared to March 31, 2023 as a result of the staffing reductions.
The Company’s efficiency ratio(1) was 74.4% in the second quarter of 2023, compared with 78.3% in the first quarter of 2023 and 74.9% in the second quarter of 2022.
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Income Taxes
The Company recorded income tax expense of $0.5 million for the second quarter of 2023, representing an effective tax rate of 26.0%, compared to 26.0% for the first quarter of 2023 and 25.0% for the second quarter of 2022.
Loans
Total loans held for investment were $2.50 billion as of June 30, 2023, an increase of 1.1% from $2.48 billion as of March 31, 2023. Relative to the second quarter of 2022, total loans held for investment increased 16.4% from $2.15 billion as of June 30, 2022. The increase in total loans held for investment from June 30, 2022 was attributable to loan growth primarily in our commercial real estate and residential mortgage portfolios.
3
Deposits
Total deposits were $2.38 billion as of June 30, 2023, a decrease of 0.7% from $2.39 billion as of March 31, 2023, as a result of seasonal factors and a highly competitive deposit market. Relative to the second quarter of 2022, total deposits increased 9.5% from $2.17 billion as of June 30, 2022, driven primarily by organic growth through new and expanded client relationships.
Borrowings
Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $312.6 million as of June 30, 2023, an increase of $51.2 million from $261.4 million as of March 31, 2023, and an increase of $225.4 million from $87.2 million as of June 30, 2022. Relative to the first quarter of 2023 and second quarter of 2022, total borrowings increased to support balance sheet growth and liquidity.
Subordinated notes remained consistent at $52.2 million as of June 30, 2023, compared to March 31, 2023. Subordinated notes increased $19.7 million from $32.6 million as of June 30, 2022.
Assets Under Management
AUM increased by $121.9 million during the second quarter to $6.50 billion as of June 30, 2023, compared to $6.38 billion as of March 31, 2023. This increase was attributable to an increase in market values at the end of the second quarter 2023. Total AUM increased by $226.4 million compared to June 30, 2022 from $6.28 billion, which was primarily attributable to improving market conditions year-over-year resulting in an increase in the value of assets under management balances.
Credit Quality
Non-performing assets totaled $10.3 million, or 0.36% of total assets, as of June 30, 2023, compared to $12.5 million, or 0.42% of total assets, as of March 31, 2023. The decrease was attributable to the two non-accrual loans being paid off during the quarter. Total classified loans decreased 46.8%, to $10.1 million as of June 30, 2023, compared to $19.0 million as of March 31, 2023, driven primarily by four classified loans being paid off during the second quarter of 2023. As of June 30, 2022, non-performing assets totaled $4.3 million, or 0.17% of total assets. Relative to the second quarter of 2022, the increase in non-performing assets was driven by the addition of $8.9 million in loans at the end of the fourth quarter of 2022, partially offset by two non-accrual loans being paid off during the quarter.
During the second quarter of 2023, the Company recorded a provision expense of $1.8 million, compared to a provision release of $0.3 million in the first quarter of 2023 and a $0.5 million provision expense in the second quarter of 2022. The provision recorded in the second quarter of 2023 reflects a $2.0 million allowance on individually analyzed loans, partially offset by the impact of improved economic forecasts which decreased probability of default rates and loss given default rates, which in turn reduced our quantitative model loss rates.
4
Capital
As of June 30, 2023, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of June 30, 2023, the Bank was classified as “well capitalized,” as summarized in the following table:
| June 30, | |||||
| 2023 | |||||
| Consolidated Capital | |||||
| Tier 1 capital to risk-weighted assets | 9.26 | % | |||
| Common Equity Tier 1 ("CET1") to risk-weighted assets | 9.26 | ||||
| Total capital to risk-weighted assets | 12.41 | ||||
| Tier 1 capital to average assets | 7.80 | ||||
| Bank Capital | |||||
| Tier 1 capital to risk-weighted assets | 10.34 | ||||
| CET1 to risk-weighted assets | 10.34 | ||||
| Total capital to risk-weighted assets | 11.23 | ||||
| Tier 1 capital to average assets | 8.70 | ||||
Book value per common share increased 0.6% from $25.22 as of March 31, 2023 to $25.38 as of June 30, 2023. Book value per common share was up 5.5% from $24.06 as of June 30, 2022. The adoption of CECL on January 1, 2023 resulted in a $0.56 reduction of book value per common share.
Tangible book value per common share (1) increased 0.8% from $21.85 as of March 31, 2023, to $22.03 as of June 30, 2023. Tangible book value per common share was up 6.7% from $20.65 as of June 30, 2022. The adoption of CECL on January 1, 2023 resulted in a $0.56 reduction of tangible book value per common share.
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call and webcast at 10:00 a.m. MT/ 12:00 p.m. ET on Friday, July 28, 2023. Telephone access: https://register.vevent.com/register/BI8ae2876802dc4a1d986948ac4226140e
A slide presentation relating to the second quarter 2023 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Events and Presentations page of the Company’s investor relations website at https://myfw.gcs-web.com.
About First Western
First Western is a financial services holding company headquartered in Denver, Colorado, with operations in Colorado, Arizona, Wyoming, California, and Montana. First Western and its subsidiaries provide a fully integrated suite of wealth management services on a private trust bank platform, which includes a comprehensive selection of deposit, loan, trust, wealth planning and investment management products and services. First Western’s common stock is traded on the Nasdaq Global Select Market under the symbol “MYFW.” For more information, please visit www.myfw.com.
5
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include “Tangible Common Equity,” “Tangible Common Book Value per Share,” “Return on Tangible Common Equity,” “Efficiency Ratio,” “Gross Revenue,” “Allowance for Credit Losses to Adjusted Loans,” “Adjusted Net Income Available to Common Shareholders,” “Adjusted Basic Earnings Per Share,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” and “Adjusted Return on Tangible Common Equity”. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies. Reconciliation of non-GAAP financial measures, to GAAP financial measures are provided at the end of this press release.
6
Forward-Looking Statements
Statements in this news release regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “position,” “outlook,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “opportunity,” “could,” or “may.” The forward-looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, without limitation, the lack of soundness of other financial institutions or financial market utilities may adversely affect the Company; the Company’s ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions; financial institutions are interrelated because of trading, clearing, counterparty or other relationships; defaults by, or even rumors or questions about, one or more financial institutions or financial market utilities, or the financial services industry generally, may lead to market-wide liquidity problems and losses of client, creditor and counterparty confidence and could lead to losses or defaults by other financial institutions, or the Company; integration risks and projected cost savings in connection with acquisitions; the risk of geographic concentration in Colorado, Arizona, Wyoming, California, and Montana; the risk of changes in the economy affecting real estate values and liquidity; the risk in our ability to continue to originate residential real estate loans and sell such loans; risks specific to commercial loans and borrowers; the risk of claims and litigation pertaining to our fiduciary responsibilities; the risk of competition for investment managers and professionals; the risk of fluctuation in the value of our investment securities; the risk of changes in interest rates; and the risk of the adequacy of our allowance for credit losses and the risk in our ability to maintain a strong core deposit base or other low-cost funding sources. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 15, 2023 (“Form 10-K”), and other documents we file with the SEC from time to time. We urge readers of this news release to review the “Risk Factors” section our Form 10-K and any updates to those risk factors set forth in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our other filings with the SEC. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today’s date, or to make predictions based solely on historical financial performance. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Contacts:
Financial Profiles, Inc.
Tony Rossi
310-622-8221
MYFW@finprofiles.com
IR@myfw.com
7
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| Three Months Ended | |||||||||||||||||
| June 30, | March 31, | June 30, | |||||||||||||||
| (Dollars in thousands, except per share amounts) | 2023 | 2023 | 2022 | ||||||||||||||
| Interest and dividend income: | |||||||||||||||||
| Loans, including fees | $ | 33,583 | $ | 32,080 | $ | 20,546 | |||||||||||
| Loans accounted for under the fair value option | 351 | 427 | 346 | ||||||||||||||
| Investment securities | 627 | 629 | 418 | ||||||||||||||
| Interest-bearing deposits in other financial institutions | 1,666 | 1,403 | 549 | ||||||||||||||
| Dividends, restricted stock | 145 | 173 | 14 | ||||||||||||||
| Total interest and dividend income | 36,372 | 34,712 | 21,873 | ||||||||||||||
| Interest expense: | |||||||||||||||||
| Deposits | 15,864 | 13,092 | 1,103 | ||||||||||||||
| Other borrowed funds | 2,073 | 2,060 | 390 | ||||||||||||||
| Total interest expense | 17,937 | 15,152 | 1,493 | ||||||||||||||
| Net interest income | 18,435 | 19,560 | 20,380 | ||||||||||||||
Less: provision (release) for credit losses(1) | 1,843 | (310) | 519 | ||||||||||||||
Net interest income, after provision (release) for credit losses(1) | 16,592 | 19,870 | 19,861 | ||||||||||||||
| Non-interest income: | |||||||||||||||||
| Trust and investment management fees | 4,602 | 4,635 | 4,781 | ||||||||||||||
| Net gain on mortgage loans | 774 | 1,019 | 924 | ||||||||||||||
| Net loss on loans held for sale | — | (178) | — | ||||||||||||||
| Bank fees | 591 | 592 | 590 | ||||||||||||||
| Risk management and insurance fees | 103 | 127 | 83 | ||||||||||||||
| Income on company-owned life insurance | 91 | 90 | 87 | ||||||||||||||
| Net loss on loans accounted for under the fair value option | (1,124) | (543) | (155) | ||||||||||||||
| Unrealized (loss)/gain recognized on equity securities | (11) | 10 | 299 | ||||||||||||||
| Other | (1,064) | 67 | 89 | ||||||||||||||
| Total non-interest income | 3,962 | 5,819 | 6,698 | ||||||||||||||
| Total income before non-interest expense | 20,554 | 25,689 | 26,559 | ||||||||||||||
| Non-interest expense: | |||||||||||||||||
| Salaries and employee benefits | 11,148 | 13,098 | 12,945 | ||||||||||||||
| Occupancy and equipment | 1,939 | 1,914 | 1,892 | ||||||||||||||
| Professional services | 1,858 | 1,923 | 2,027 | ||||||||||||||
| Technology and information systems | 831 | 832 | 1,076 | ||||||||||||||
| Data processing | 1,052 | 1,139 | 987 | ||||||||||||||
| Marketing | 379 | 391 | 428 | ||||||||||||||
| Amortization of other intangible assets | 62 | 64 | 77 | ||||||||||||||
| Net (gain)/loss on assets held for sale | — | — | (2) | ||||||||||||||
| Other | 1,250 | 1,167 | 1,153 | ||||||||||||||
| Total non-interest expense | 18,519 | 20,528 | 20,583 | ||||||||||||||
| Income before income taxes | 2,035 | 5,161 | 5,976 | ||||||||||||||
| Income tax expense | 529 | 1,341 | 1,494 | ||||||||||||||
| Net income available to common shareholders | $ | 1,506 | $ | 3,820 | $ | 4,482 | |||||||||||
| Earnings per common share: | |||||||||||||||||
| Basic | $ | 0.16 | $ | 0.40 | $ | 0.47 | |||||||||||
| Diluted | 0.16 | 0.39 | 0.46 | ||||||||||||||
8
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| June 30, | March 31, | June 30, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2023 | 2022 | ||||||||||||||
| Assets | |||||||||||||||||
| Cash and cash equivalents: | |||||||||||||||||
| Cash and due from banks | $ | 6,285 | $ | 6,920 | $ | 11,790 | |||||||||||
| Federal funds sold | — | — | 385 | ||||||||||||||
| Interest-bearing deposits in other financial institutions | 291,283 | 288,147 | 159,431 | ||||||||||||||
| Total cash and cash equivalents | 297,568 | 295,067 | 171,606 | ||||||||||||||
| Held-to-maturity securities, at amortized cost (fair value of $69,551, $73,570 and $84,742, respectively), net of allowance for credit losses | 77,469 | 79,565 | 87,029 | ||||||||||||||
| Correspondent bank stock, at cost | 13,518 | 13,222 | 4,352 | ||||||||||||||
| Mortgage loans held for sale, at fair value | 19,746 | 9,873 | 26,202 | ||||||||||||||
| Loans (includes $17,523, $20,807, and $21,477 measured at fair value, respectively) | 2,495,582 | 2,469,038 | 2,146,394 | ||||||||||||||
Allowance for credit losses(1) | (22,044) | (19,843) | (14,357) | ||||||||||||||
| Loans, net | 2,473,538 | 2,449,195 | 2,132,037 | ||||||||||||||
| Premises and equipment, net | 25,473 | 25,383 | 24,236 | ||||||||||||||
| Accrued interest receivable | 11,135 | 10,976 | 7,884 | ||||||||||||||
| Accounts receivable | 5,116 | 4,713 | 5,192 | ||||||||||||||
| Other receivables | 3,331 | 2,396 | 4,575 | ||||||||||||||
| Other real estate owned, net | — | — | 378 | ||||||||||||||
| Goodwill and other intangible assets, net | 31,977 | 32,040 | 32,258 | ||||||||||||||
| Deferred tax assets, net | 7,202 | 6,792 | 7,662 | ||||||||||||||
| Company-owned life insurance | 16,333 | 16,242 | 15,976 | ||||||||||||||
| Other assets | 23,240 | 23,043 | 21,960 | ||||||||||||||
| Assets held for sale | — | — | 146 | ||||||||||||||
| Total assets | $ | 3,005,646 | $ | 2,968,507 | $ | 2,541,493 | |||||||||||
| Liabilities | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Noninterest-bearing | $ | 514,241 | $ | 545,064 | $ | 668,342 | |||||||||||
| Interest-bearing | 1,861,153 | 1,846,863 | 1,501,656 | ||||||||||||||
| Total deposits | 2,375,394 | 2,391,927 | 2,169,998 | ||||||||||||||
| Borrowings: | |||||||||||||||||
| Federal Home Loan Bank and Federal Reserve borrowings | 312,600 | 261,385 | 87,223 | ||||||||||||||
| Subordinated notes | 52,223 | 52,167 | 32,553 | ||||||||||||||
| Accrued interest payable | 1,788 | 1,786 | 304 | ||||||||||||||
| Other liabilities | 21,399 | 21,420 | 23,391 | ||||||||||||||
| Total liabilities | 2,763,404 | 2,728,685 | 2,313,469 | ||||||||||||||
| Shareholders’ Equity | |||||||||||||||||
| Total shareholders’ equity | 242,242 | 239,822 | 228,024 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,005,646 | $ | 2,968,507 | $ | 2,541,493 | |||||||||||
9
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| June 30, | March 31, | June 30, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2023 | 2022 | ||||||||||||||
| Loan Portfolio | |||||||||||||||||
Cash, Securities, and Other(1) | $ | 150,679 | $ | 157,308 | $ | 180,738 | |||||||||||
| Consumer and Other | 21,866 | 22,183 | 26,706 | ||||||||||||||
| Construction and Development | 313,227 | 283,999 | 162,426 | ||||||||||||||
| 1-4 Family Residential | 878,670 | 889,782 | 732,725 | ||||||||||||||
| Non-Owner Occupied CRE | 561,880 | 536,679 | 489,111 | ||||||||||||||
| Owner Occupied CRE | 218,651 | 223,449 | 224,597 | ||||||||||||||
| Commercial and Industrial | 338,679 | 340,632 | 312,696 | ||||||||||||||
| Total | 2,483,652 | 2,454,032 | 2,128,999 | ||||||||||||||
| Loans accounted for under the fair value option | 18,274 | 21,052 | 21,149 | ||||||||||||||
| Total loans held for investment | 2,501,926 | 2,475,084 | 2,150,148 | ||||||||||||||
Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net(2) | (6,344) | (6,046) | (3,754) | ||||||||||||||
| Loans (includes $17,523, $20,807, and $21,477 measured at fair value, respectively) | $ | 2,495,582 | $ | 2,469,038 | $ | 2,146,394 | |||||||||||
| Mortgage loans held for sale | 19,746 | 9,873 | 26,202 | ||||||||||||||
| Deposit Portfolio | |||||||||||||||||
| Money market deposit accounts | $ | 1,297,732 | $ | 1,277,988 | $ | 1,033,739 | |||||||||||
| Time deposits | 376,147 | 354,545 | 147,623 | ||||||||||||||
| Negotiable order of withdrawal accounts | 168,537 | 192,011 | 287,195 | ||||||||||||||
| Savings accounts | 18,737 | 22,319 | 33,099 | ||||||||||||||
| Total interest-bearing deposits | 1,861,153 | 1,846,863 | 1,501,656 | ||||||||||||||
| Noninterest-bearing accounts | 514,241 | 545,064 | 668,342 | ||||||||||||||
| Total deposits | $ | 2,375,394 | $ | 2,391,927 | $ | 2,169,998 | |||||||||||
____________________
(1) Includes PPP loans of $5.6 million as of June 30, 2023, $6.1 million as of March 31, 2023, and $10.7 million as of June 30, 2022.
(2) Includes fair value adjustments on loans held for investment accounted for under the fair value option.
10
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
| As of or for the Three Months Ended | |||||||||||||||||
| June 30, | March 31, | June 30, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2023 | 2022 | ||||||||||||||
| Average Balance Sheets | |||||||||||||||||
| Assets | |||||||||||||||||
| Interest-earning assets: | |||||||||||||||||
| Interest-bearing deposits in other financial institutions | $ | 135,757 | $ | 127,608 | $ | 320,656 | |||||||||||
| Federal funds sold | — | — | 1,017 | ||||||||||||||
| Investment securities | 80,106 | 82,106 | 69,320 | ||||||||||||||
| Correspondent bank stock | 8,844 | 9,592 | 1,555 | ||||||||||||||
| Loans | 2,471,587 | 2,479,644 | 2,010,024 | ||||||||||||||
| Interest-earning assets | 2,696,294 | 2,698,950 | 2,402,572 | ||||||||||||||
| Mortgage loans held for sale | 15,841 | 7,521 | 19,452 | ||||||||||||||
| Total interest-earning assets, plus mortgage loans held for sale | 2,712,135 | 2,706,471 | 2,422,024 | ||||||||||||||
Allowance for credit losses(1) | (20,077) | (20,325) | (13,257) | ||||||||||||||
| Noninterest-earning assets | 124,561 | 125,201 | 118,302 | ||||||||||||||
| Total assets | $ | 2,816,619 | $ | 2,811,347 | $ | 2,527,069 | |||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||
| Interest-bearing deposits | $ | 1,847,788 | $ | 1,805,994 | $ | 1,547,901 | |||||||||||
| FHLB and Federal Reserve borrowings | 123,578 | 142,642 | 20,815 | ||||||||||||||
| Subordinated notes | 52,186 | 52,135 | 32,533 | ||||||||||||||
| Total interest-bearing liabilities | 2,023,552 | 2,000,771 | 1,601,249 | ||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||
| Noninterest-bearing deposits | 527,562 | 545,670 | 679,531 | ||||||||||||||
| Other liabilities | 23,850 | 26,206 | 19,194 | ||||||||||||||
| Total noninterest-bearing liabilities | 551,412 | 571,876 | 698,725 | ||||||||||||||
| Total shareholders’ equity | 241,655 | 238,700 | 227,095 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,816,619 | $ | 2,811,347 | $ | 2,527,069 | |||||||||||
| Yields/Cost of funds (annualized) | |||||||||||||||||
| Interest-bearing deposits in other financial institutions | 4.92 | % | 4.46 | % | 0.68 | % | |||||||||||
| Investment securities | 3.14 | 3.11 | 2.42 | ||||||||||||||
| Correspondent bank stock | 6.58 | 7.31 | 3.61 | ||||||||||||||
| Loans | 5.47 | 5.30 | 4.12 | ||||||||||||||
| Mortgage loans held for sale | 5.82 | 6.04 | 4.72 | ||||||||||||||
| Total interest-earning assets | 5.38 | 5.20 | 3.62 | ||||||||||||||
| Interest-bearing deposits | 3.44 | 2.94 | 0.29 | ||||||||||||||
| Cost of deposits | 2.68 | 2.26 | 0.20 | ||||||||||||||
| FHLB and Federal Reserve borrowings | 4.42 | 3.89 | 0.54 | ||||||||||||||
| Subordinated notes | 5.47 | 5.38 | 4.46 | ||||||||||||||
| Total interest-bearing liabilities | 3.56 | 3.07 | 0.37 | ||||||||||||||
| Net interest margin | 2.73 | 2.93 | 3.38 | ||||||||||||||
| Net interest rate spread | 1.82 | 2.13 | 3.25 | ||||||||||||||
(1) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
11
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
| As of or for the Three Months Ended | |||||||||||||||||
| June 30, | March 31, | June 30, | |||||||||||||||
| (Dollars in thousands, except share and per share amounts) | 2023 | 2023 | 2022 | ||||||||||||||
| Asset Quality | |||||||||||||||||
| Non-performing loans | $ | 10,273 | $ | 12,460 | $ | 3,931 | |||||||||||
| Non-performing assets | 10,273 | 12,460 | 4,309 | ||||||||||||||
| Net charge-offs | 8 | 5 | 47 | ||||||||||||||
| Non-performing loans to total loans | 0.41 | % | 0.50 | % | 0.18 | % | |||||||||||
| Non-performing assets to total assets | 0.36 | 0.42 | 0.17 | ||||||||||||||
Allowance for credit losses to non-performing loans(3) | 214.58 | 159.25 | 365.23 | ||||||||||||||
Allowance for credit losses to total loans(3) | 0.89 | 0.80 | 0.67 | ||||||||||||||
Allowance for credit losses to adjusted loans(1)(3) | 0.89 | 0.81 | 0.78 | ||||||||||||||
Net charge-offs to average loans(2) | * | * | * | ||||||||||||||
| Assets Under Management | $ | 6,503,964 | $ | 6,382,036 | $ | 6,277,588 | |||||||||||
| Market Data | |||||||||||||||||
| Book value per share at period end | 25.38 | 25.22 | 24.06 | ||||||||||||||
Tangible book value per common share(1) | 22.03 | 21.85 | 20.65 | ||||||||||||||
| Weighted average outstanding shares, basic | 9,532,397 | 9,503,715 | 9,450,987 | ||||||||||||||
| Weighted average outstanding shares, diluted | 9,686,401 | 9,732,674 | 9,717,667 | ||||||||||||||
| Shares outstanding at period end | 9,545,071 | 9,507,564 | 9,478,710 | ||||||||||||||
| Consolidated Capital | |||||||||||||||||
| Tier 1 capital to risk-weighted assets | 9.26 | % | 9.28 | % | 10.15 | % | |||||||||||
| CET1 to risk-weighted assets | 9.26 | 9.28 | 10.15 | ||||||||||||||
| Total capital to risk-weighted assets | 12.41 | 12.39 | 12.58 | ||||||||||||||
| Tier 1 capital to average assets | 7.80 | 7.75 | 8.00 | ||||||||||||||
| Bank Capital | |||||||||||||||||
| Tier 1 capital to risk-weighted assets | 10.34 | 10.29 | 10.99 | ||||||||||||||
| CET1 to risk-weighted assets | 10.34 | 10.29 | 10.99 | ||||||||||||||
| Total capital to risk-weighted assets | 11.23 | 11.12 | 11.75 | ||||||||||||||
| Tier 1 capital to average assets | 8.70 | 8.59 | 8.65 | ||||||||||||||
____________________
(1) Represents a Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
(2) Value results in an immaterial amount.
(3) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP. Total loans does not include loans accounted for under the fair value option.
12
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
Reconciliations of Non-GAAP Financial Measures
| As of or for the Three Months Ended | |||||||||||||||||
| June 30, | March 31, | June 30, | |||||||||||||||
| (Dollars in thousands, except share and per share amounts) | 2023 | 2023 | 2022 | ||||||||||||||
| Tangible Common | |||||||||||||||||
| Total shareholders' equity | $ | 242,242 | $ | 239,822 | $ | 228,024 | |||||||||||
| Less: goodwill and other intangibles, net | 31,977 | 32,040 | 32,258 | ||||||||||||||
| Tangible common equity | $ | 210,265 | $ | 207,782 | $ | 195,766 | |||||||||||
| Common shares outstanding, end of period | 9,545,071 | 9,507,564 | 9,478,710 | ||||||||||||||
| Tangible common book value per share | $ | 22.03 | $ | 21.85 | $ | 20.65 | |||||||||||
| Net income available to common shareholders | 1,506 | 3,820 | 4,482 | ||||||||||||||
| Return on tangible common equity (annualized) | 2.86 | % | 7.35 | % | 9.16 | % | |||||||||||
| Efficiency | |||||||||||||||||
| Non-interest expense | $ | 18,519 | $ | 20,528 | $ | 20,583 | |||||||||||
| Less: amortization | 62 | 64 | 77 | ||||||||||||||
| Less: acquisition related expenses | 14 | 37 | 347 | ||||||||||||||
| Adjusted non-interest expense | $ | 18,443 | $ | 20,427 | $ | 20,159 | |||||||||||
| Total income before non-interest expense | $ | 20,554 | $ | 25,689 | $ | 26,559 | |||||||||||
| Less: unrealized (loss)/gain recognized on equity securities | (11) | 10 | 299 | ||||||||||||||
| Less: net (loss)/gain on loans accounted for under the fair value option | (1,124) | (543) | (155) | ||||||||||||||
| Less: impairment of contingent consideration assets | (1,249) | — | — | ||||||||||||||
Less: net (loss)/gain on loans held for sale at fair value(1) | — | (178) | — | ||||||||||||||
Plus: provision (release) for credit losses(2) | 1,843 | (310) | 519 | ||||||||||||||
| Gross revenue | $ | 24,781 | $ | 26,090 | $ | 26,934 | |||||||||||
| Efficiency ratio | 74.42 | % | 78.29 | % | 74.85 | % | |||||||||||
| Allowance for Credit Loss to Adjusted Loans | |||||||||||||||||
| Total loans held for investment | 2,501,926 | 2,475,084 | 2,150,148 | ||||||||||||||
Less: loans acquired(3) | — | — | 287,623 | ||||||||||||||
Less: PPP loans(4) | 5,558 | 6,100 | 9,053 | ||||||||||||||
| Less: loans accounted for under fair value | 18,274 | 21,052 | 21,149 | ||||||||||||||
| Adjusted loans | $ | 2,478,094 | $ | 2,447,932 | $ | 1,832,323 | |||||||||||
Allowance for credit losses(2) | $ | 22,044 | $ | 19,843 | $ | 14,357 | |||||||||||
Allowance for credit losses to adjusted loans(2) | 0.89 | % | 0.81 | % | 0.78 | % | |||||||||||
(1) Presented in Other Non-interest income on the Consolidated Financial Summary statements
(2) Provision and allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
(3)As of June 30, 2023 and March 31, 2023, acquired loans totaling $225.4 million and $233.3 million, respectively, are included in the allowance for credit loss calculation and are therefore not removed in calculating adjusted total loans.
(4)As of June 30, 2023 and March 31, 2023, the adjustment for PPP loans includes acquired PPP loans as acquired loans are included in total loans held for investment as a result of the adoption of ASC 326. As of June 30, 2022, the adjustment for PPP loans did not include acquired PPP loans, as those were already included in the loans acquired adjustment.
13
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
| As of or for the Three Months Ended | |||||||||||||||||
| June 30, | March 31, | June 30, | |||||||||||||||
| (Dollars in thousands, except share and per share data) | 2023 | 2023 | 2022 | ||||||||||||||
| Adjusted Net Income Available to Common Shareholders | |||||||||||||||||
| Net income available to common shareholders | $ | 1,506 | $ | 3,820 | $ | 4,482 | |||||||||||
| Plus: impairment of contingent consideration assets | 1,249 | — | — | ||||||||||||||
| Plus: acquisition related expenses | 14 | 37 | 347 | ||||||||||||||
| Less: income tax impact from impairment of contingent consideration assets | 325 | — | — | ||||||||||||||
| Less: income tax impact from acquisition related expenses | 4 | 10 | 87 | ||||||||||||||
| Adjusted net income available to shareholders | $ | 2,440 | $ | 3,847 | $ | 4,742 | |||||||||||
| Pre-Tax, Pre-Provision Net Income | |||||||||||||||||
| Income before income taxes | $ | 2,035 | $ | 5,161 | $ | 5,976 | |||||||||||
| Plus: provision (release) for credit losses | 1,843 | (310) | 519 | ||||||||||||||
| Pre-tax, pre-provision net income | $ | 3,878 | $ | 4,851 | $ | 6,495 | |||||||||||
| Adjusted Basic Earnings Per Share | |||||||||||||||||
| Basic earnings per share | $ | 0.16 | $ | 0.40 | $ | 0.47 | |||||||||||
| Plus: impairment of contingent consideration assets net of income tax impact | 0.09 | — | — | ||||||||||||||
| Plus: acquisition related expenses net of income tax impact | * | * | 0.03 | ||||||||||||||
| Adjusted basic earnings per share | $ | 0.25 | $ | 0.40 | $ | 0.50 | |||||||||||
| Adjusted Diluted Earnings Per Share | |||||||||||||||||
| Diluted earnings per share | $ | 0.16 | $ | 0.39 | $ | 0.46 | |||||||||||
| Plus: impairment of contingent consideration assets net of income tax impact | 0.09 | — | — | ||||||||||||||
| Plus: acquisition related expenses net of income tax impact | * | * | 0.03 | ||||||||||||||
| Adjusted diluted earnings per share | $ | 0.25 | $ | 0.39 | $ | 0.49 | |||||||||||
| Adjusted Return on Average Assets (annualized) | |||||||||||||||||
| Return on average assets | 0.21 | % | 0.54 | % | 0.71 | % | |||||||||||
| Plus: impairment of contingent consideration assets net of income tax impact | 0.13 | — | — | ||||||||||||||
| Plus: acquisition related expenses net of income tax impact | 0.01 | 0.01 | 0.04 | ||||||||||||||
| Adjusted return on average assets | 0.35 | % | 0.55 | % | 0.75 | % | |||||||||||
| Adjusted Return on Average Shareholders' Equity (annualized) | |||||||||||||||||
| Return on average shareholders' equity | 2.49 | % | 6.40 | % | 7.89 | % | |||||||||||
| Plus: impairment of contingent consideration assets net of income tax impact | 1.53 | — | — | ||||||||||||||
| Plus: acquisition related expenses net of income tax impact | 0.02 | 0.05 | 0.46 | ||||||||||||||
| Adjusted return on average shareholders' equity | 4.04 | % | 6.45 | % | 8.35 | % | |||||||||||
| Adjusted Return on Tangible Common Equity (annualized) | |||||||||||||||||
| Return on tangible common equity | 2.86 | % | 7.35 | % | 9.16 | % | |||||||||||
| Plus: impairment of contingent consideration assets net of income tax impact | 1.76 | — | — | ||||||||||||||
| Plus: acquisition related expenses net of income tax impact | 0.02 | 0.06 | 0.53 | ||||||||||||||
| Adjusted return on tangible common equity | 4.64 | % | 7.41 | % | 9.69 | % | |||||||||||
14
Second Quarter 2023 Conference Call
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,” “position,” “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. The 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: integration risks in connection with acquisitions; the risk of geographic concentration in Colorado, Arizona, Wyoming, California, and Montana; the risk of changes in the economy affecting real estate values and liquidity; the risk in our ability to continue to originate residential real estate loans and sell such loans; risks specific to commercial loans and borrowers; the risk of claims and litigation pertaining to our fiduciary responsibilities; the risk of competition for investment managers and professionals; the risk of fluctuation in the value of our investment securities; the risk of changes in interest rates; and the risk of the adequacy of our allowance for credit losses and the risk in our ability to maintain a strong core deposit base or other low-cost funding sources. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 15, 2023 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 2Q23 Prudent Risk Management 2Q23 Earnings Stable Balance Sheet • Total deposits relatively unchanged from end of prior quarter • Noninterest-bearing deposits increased during the month of June • 4% annualized loan growth while maintaining conservative underwriting criteria and disciplined pricing • Strong relationship deposits and declining level of uninsured deposits to 30.8% from 37.3% in 1Q23 • Continued to maintain higher than normal level of cash balances • NPAs/Total Assets declined 6 bps to 0.36% • Immaterial level of charge-offs • Net income available to common shareholders of $1.5 million, or $0.16 per diluted share • Second quarter 2023 included net of tax impacts of $1.5 million related to an allowance recorded on individually analyzed loans, $0.9 million of impairment to carrying value of contingent consideration assets, and $0.8 million of losses on loans accounted for under the fair value option, with diluted EPS impacts, net of tax, of $0.15, $0.09, and $0.08, respectively • Pre-tax, pre-provision net income of $3.9 million(1) (1) See Non-GAAP reconciliation
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato(regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 4 Net Income Available to Common Shareholders and Earnings per Share • Net income of $1.5 million, or $0.16 diluted earnings per share, in 2Q23 • Including the impact of impairment to contingent consideration assets, adjusted net income(1) of $2.4 million in 2Q23 • Profitability and prudent balance sheet management resulted in book value and tangible book value per share(1) increasing by 5.5% and 6.7%, respectively, from 2Q22 Net Income Available to Common Shareholders Diluted Earnings per Share (1) See Non-GAAP reconciliation $4,742 $6,337 $5,617 $3,847 $2,440 $4,482 $6,221 $5,471 $3,820 $1,506 Net Income Adjustments to Net Income Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $— $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $0.49 $0.66 $0.58 $0.39 $0.25 $0.46 $0.64 $0.56 $0.39 $0.16 Net Income Adjustments to Net Income Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $— $0.25 $0.50 $0.75 (1) (1) (1) (1) (1) (1) (1) (1) (1) (1)
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 5 Loan Portfolio • Total loans held for investment increased $26.8 million from prior quarter • Growth driven by CRE loans and draws on existing construction lines • Average rate on new loan production increased 23 bps to 7.41% compared to prior quarter, and was 7.79% in June 2Q 2022 1Q 2023 2Q 2023 Cash, Securities and Other $ 180,738 $ 157,308 $ 150,679 Consumer and Other 26,706 22,183 21,866 Construction and Development 162,426 283,999 313,227 1-4 Family Residential 732,725 889,782 878,670 Non-Owner Occupied CRE 489,111 536,679 561,880 Owner Occupied CRE 224,597 223,449 218,651 Commercial and Industrial 312,696 340,632 338,679 Total $ 2,128,999 $ 2,454,032 $ 2,483,652 Loans accounted for at fair value(2) 21,149 21,052 18,274 Total Loans HFI $ 2,150,148 $ 2,475,084 $ 2,501,926 Loans held-for-sale (HFS) 26,202 9,873 19,746 Total Loans $ 2,176,350 $ 2,484,957 $ 2,521,672 (1) Represents unpaid principal balance. Excludes deferred (fees) costs, and amortized premium/ (unaccreted discount). (2) Excludes 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 Total Loans(1) $2,029 $2,253 $2,445 $2,487 $2,487 $2,485 $2,522 2Q22 3Q22 4Q22 1Q23 2Q23 1Q23 2Q23 $— $400 $800 $1,200 $1,600 $2,000 $2,400 $2,800 $3,200 Average Period End
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 6 Total Deposits • Noninterest-bearing deposits increased during the month of June • Success in new business development, with $37.4 million in new deposit relationships added in 2Q23, lessened the typical seasonal impact of outflows from tax payments • Continued but slower migration of noninterest-bearing deposits into interest-bearing categories as clients seek higher rates for their excess liquidity 2Q 2022 1Q 2023 2Q 2023 Money market deposit accounts $ 1,033,739 $ 1,277,988 $ 1,297,732 Time deposits 147,623 354,545 376,147 NOW 287,195 192,011 168,537 Savings accounts 33,099 22,319 18,737 Noninterest-bearing accounts 668,342 545,064 514,241 Total Deposits $ 2,169,998 $ 2,391,927 $ 2,375,394 Deposit Portfolio Composition Total Deposits $2,227 $2,154 $2,242 $2,352 $2,375 $2,392 $2,375 2Q22 3Q22 4Q22 1Q23 2Q23 1Q23 2Q23 $— $500 $1,000 $1,500 $2,000 $2,500 $3,000 Average Period End
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 7 Trust and Investment Management • Total assets under management increased $121.9 million from March 31, 2023 to $6.50 billion as of June 30, 2023 • Client accounts benefited from improved market conditions in the second quarter • Excluding custody, all product categories increased quarter-over-quarter (in millions, as of quarter end) Total Assets Under Management $6,278 $5,918 $6,107 $6,382 $6,504 Investment Agency Managed Trust 401(k)/Retirement Directed Trust Custody Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $— $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions (1) See Non-GAAP reconciliation Gross Revenue • Gross revenue(1) declined 5.0% from prior quarter • Decrease primarily driven by a decrease in net interest income as a result of higher interest expense driven by higher deposit costs, offset partially by higher interest income • Net interest income decline due to NIM pressure 2Q23 Gross Revenue(1) Gross Revenue(1) 8 $26.9 $29.3 $29.0 $26.1 $24.8 Wealth Management Mortgage Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $— $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 9 Net Interest Income and Net Interest Margin • Net interest income decreased to $18.4 million, or 5.8%, from $19.6 million in 1Q23 • Net interest income decreased from 1Q23 due to higher interest expense resulting from increase in average cost of deposits • Net interest margin decreased 20 bps to 2.73%, driven by the increase in interest bearing deposit costs offset partially by the increase in yields on average earning assets • Average loan yields increased 15 bps in June while average deposit costs were flat (in thousands) (1) See Non-GAAP reconciliation Net Interest Income Net Interest Margin $20,380 $22,906 $21,842 $19,560 $18,435 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $— $5,000 $10,000 $15,000 $20,000 $25,000
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 10 Non-Interest Income • Non-interest income decreased to $4.0 million, or 31.9%, from $5.8 million in 1Q23, primarily due to a $1.2 million impairment to carrying value of contingent consideration assets related to the sale of First Western Capital Management in 2020. The decrease to Non-interest income was further driven by losses of $1.1 million on loans accounted for under carrying value option • Trust and Investment Management fees were consistent with prior quarter • Net gain on mortgage loans decreased to $0.8 million, or 24.0%, from $1.0 million in 1Q23, as higher rates continue to impact loan demand (in thousands)(in thousands) Total Non-Interest Income Trust and Investment Management Fees $6,698 $6,561 $5,819 $3,962$6,345 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $(4,000) $(2,000) $— $2,000 $4,000 $6,000 $8,000 $10,000 $4,781 $4,664 $4,358 $4,635 $4,602 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $— $2,000 $4,000 $6,000
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 11 Non-Interest Expense and Efficiency Ratio • Non-interest expense decreased 9.8% from 1Q23 • Decrease in expense levels resulted from intentional delays in new initiatives and staffing reductions implemented in the first quarter and in April to better align with current revenue • Disciplined expense management resulted in non-interest expense coming in below targeted range • Organizational-wide review of expense levels resulted in additional cost savings that are expected to reduce non-interest expenses within the range of $18 million to $19 million for the remainder of 2023 (1) (1) See Non-GAAP reconciliation Total Non-Interest Expense Operating Efficiency Ratio(1) (in thousands) (1) (1) (1) (1) $20,583 $19,260 $19,905 $20,528 $18,519 $424 $231 $272 $101 $76 Non-Interest Expense Adjustments to Non-Interest Expense Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 $— $5,000 $10,000 $15,000 $20,000 $25,000 74.85% 64.94% 67.66% 78.29% 74.42% Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 —% 20.00% 40.00% 60.00% 80.00% 100.00% (1) (1) (1)(1) (1)
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 12 Asset Quality • NPAs declined 18% from prior quarter due to full payoffs on two non-performing loans • $1.8 million provision for credit losses driven primarily by an allowance recorded on individually analyzed loan previously identified as non-performing loan • ACL/Adjusted Total Loans(1) increased to 0.89% in 2Q23 from 0.81% in 1Q23 • Continue to experience immaterial amount of credit losses Non-Performing Assets/Total Assets Net Charge-Offs/Average Loans (1) Adjusted Total Loans – Total Loans minus PPP loans and loans accounted for under fair value option; see non-GAAP reconciliation 0.17% 0.14% 0.43% 0.42% 0.36% Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 —% 0.20% 0.40% 0.60% 0.80% 1.00% Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 —% 0.20% 0.40% 0.60% 0.80% 1.00%
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 13 Consistent Value Creation TBV/Share(1) Up 140% Since July 2018 IPO Consistent increases in tangible book value per share driven by: • Organic growth that has increased operating leverage • Accretive acquisitions that have been well priced and smoothly integrated to realize all projected cost savings • Conservative underwriting criteria that has resulted in extremely low level of losses in the portfolio throughout the history of the company • Prudent asset/liability management including not investing excess liquidity accumulated during the pandemic in low-yielding bonds
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato(regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 14 Near-Term Outlook • Prudent risk management will remain top priority while economic uncertainty remains, which will impact level of profitability in short term • Loan growth expected to remain at lower level in near future, although unfunded commitments provides potential catalyst for higher level of loan growth as borrowers increase utilization of credit lines • Deposit gathering continues to be emphasized throughout the organization including capitalizing on current environment to continue adding new clients looking for a stronger financial institution • Continued evaluation of opportunities for capital utilization that can create additional value for shareholders
Appendix 15
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 16 Capital and Liquidity Overview Liquidity Funding Sources (as of 6/30/23) (1) See Non-GAAP reconciliation (2) Based on internal policy guidelines Consolidated Capital Ratios (as of 6/30/23) Tangible Common Equity / TBV per Share(1) (in thousands) Liquidity Reserves: Total Available Cash $295,909 Unpledged Investment Securities 21,149 Borrowed Funds: Secured: FHLB Available 646,823 FRB Available 16,605 Other: Brokered Remaining Capacity 172,818(2) Unsecured: Credit Lines 29,000 Total Liquidity Funding Sources $1,182,304 Loan to Deposit Ratio 105.1 % 9.26% 9.26% 12.41% 7.80% Tier 1 Capital to Risk- Weighted Assets CET1 to Risk- Weighted Assets Total Capital to Risk- Weighted Assets Tier 1 Capital to Average Assets —% 5.00% 10.00% 15.00%
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 17 Non-GAAP Reconciliation Consolidated Tangible Common Book Value Per Share As of, (Dollars in thousands) Dec. 31, 2018 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2021 June 30, 2022 Dec. 31, 2022 June 30, 2023 Total shareholders' equity $116,875 $127,678 $154,962 $219,041 $228,024 $240,864 $242,242 Less: Goodwill and other intangibles, net 25,213 19,714 24,258 31,902 32,258 32,104 31,977 Intangibles held for sale(1) - 3,553 - - - - - Tangible common equity 91,662 104,411 $130,704 187,139 195,766 208,760 210,265 Common shares outstanding, end of period 7,968,420 7,940,168 7,951,773 9,419,271 9,478,710 9,495,440 9,545,071 Tangible common book value per share $11.50 $13.15 $16.44 $19.87 $20.65 $21.99 $22.03 Net income available to common shareholders $1,506 Return on tangible common equity (annualized) 2.86% (1) Represents the intangible portion of assets held for sale Consolidated Efficiency Ratio For the Three Months Ended, (Dollars in thousands) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Non-interest expense $20,583 $19,260 $19,905 $20,528 $18,519 Less: amortization 77 77 77 64 62 Less: acquisition related expenses 347 154 195 37 14 Adjusted non-interest expense $20,159 $19,029 $19,633 $20,427 $18,443 Net interest income $20,380 $22,906 $21,842 $19,560 $18,435 Non-interest income 6,698 6,345 6,561 5,819 3,962 Less: unrealized gains/(losses) recognized on equity securities 299 75 - 10 (11) Less: impairment of contingent consideration assets - - - - (1,249) Less: net gain/(loss) on loans accounted for under the fair value option (155) (134) (602) (543) (1,124) Less: net gain on equity interests - 6 - - - Less: net (loss)/gain on loans held for sale at fair value - - (12) (178) - Adjusted non-interest income 6,554 6,398 7,175 6,530 6,346 Total income $26,934 $29,304 $29,017 $26,090 $24,781 Efficiency ratio 74.85% 64.94% 67.66% 78.29% 74.42%
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 18 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Total income before non-interest expense $25,281 $26,555 $26,623 $24,543 $19,529 Less: unrealized gains/(losses) recognized on equity securities 299 75 - 10 (11) Less: impairment of contingent consideration assets - - - - (1,249) Less: net gain/(loss) on loans accounted for under the fair value option (155) (134) (602) (543) (1,124) Less: net gain on equity interests - 6 - - - Less: net (loss)/gain on loans held for sale at fair value - - (12) (178) - Plus: provision for credit loss 519 1,756 1,197 (310) 1,843 Gross revenue $25,656 $28,364 $28,434 $24,944 $23,756 Mortgage Gross Revenue For the Three Months Ended, (Dollars in thousands) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Total income before non-interest expense $1,278 $940 $583 $1,146 $1,025 Plus: provision for credit loss - - - - - Gross revenue $1,278 $940 $583 $1,146 $1,025 Consolidated Gross Revenue For the Three Months Ended, (Dollars in thousands) June 30, 2022 September 30, 2022 December 31, 2022 March 30, 2023 June 30, 2023 Total income before non-interest expense $26,559 $27,495 $27,206 $25,689 $20,554 Less: unrealized gains/(losses) recognized on equity securities 299 75 - 10 (11) Less: impairment of contingent consideration assets - - - - (1,249) Less: net gain/(loss) on loans accounted for under the fair value option (155) (134) (602) (543) (1,124) Less: net gain on equity interests - 6 - - - Less: net (loss)/gain on loans held for sale at fair value - - (12) (178) - Plus: provision for credit loss 519 1,756 1,197 (310) 1,843 Gross revenue $26,934 $29,304 $29,017 $26,090 $24,781 Gross Revenue excluding net gain on mortgage loans For the Three Months Ended, (Dollars in thousands) December 31, 2021 December 31, 2022 June 30, 2023 Gross revenue $23,440 $29,017 $24,781 Less: net gain on mortgage loans 2,470 775 774 Gross revenue excluding net gain on mortgage loans $20,970 $28,242 $24,007
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 19 Non-GAAP Reconciliation Adjusted net income available to common shareholders For the Three Months Ended, (Dollars in thousands, except per share data) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Net income available to common shareholders $4,482 $6,221 $5,471 $3,820 $1,506 Plus: impairment of contingent consideration assets including tax impact - - - - 924 Plus: acquisition related expense including tax impact 260 116 146 27 10 Adjusted net income to common shareholders $4,742 $6,337 $5,617 $3,847 $2,440 Adjusted diluted earnings per share For the Three Months Ended, (Dollars in thousands, except per share data) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Diluted earnings per share $0.46 $0.64 $0.56 $0.39 $0.16 Plus: impairment of contingent consideration assets including tax impact - - - - 0.09 Plus: acquisition related expenses including tax impact 0.03 0.02 0.02 - - Adjusted diluted earnings per share $0.49 $0.66 $0.58 $0.39 $0.25 Allowance for credit losses to Bank originated loans excluding PPP As of (Dollars in thousands) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Total loans held for investment $2,150,148 $2,354,898 $2,476,135 $2,475,084 $2,501,926 Less: Acquired loans 287,623 248,573 234,717 — — Less: PPP loans 9,053 6,905 6,378 6,100 5,558 Less: Purchased loans accounted for under fair value ("FVO") 21,149 22,648 23,415 21,052 18,274 Adjusted Loans excluding acquired, PPP and FVO $1,832,323 $2,076,772 $2,211,625 $2,447,932 $2,478,094 Allowance for credit losses 14,357 16,081 17,183 19,843 22,044 Allowance for credit losses to adjusted loans 0.78% 0.77% 0.78% 0.81% 0.89% Pre-tax, pre-provision net income For the Three Months Ended, (Dollars in thousands) December 31, 2022 March 31, 2023 June 30, 2023 Income before income taxes $7,301 $5,161 $2,035 Plus: provision for credit losses 1,197 (310) 1,843 Pre-tax, pre-provision net income $8,498 $4,851 $3,878 (2) (1) Subsequent to the adoption of CECL on January 1, 2023, acquired loans are included in the Allowance for Credit Losses and therefore are no longer excluded from the total adjusted loan calculation. (2)
157 180 196 164 166 168 62 94 111 154 161 132 122 125 129 76 78 86 255 255 255 Chart color Table color Special Headlines Slide Headlines / Text on light background Primary Colors Secondary Colors Primary Background / Call Out Boxes / Text on dark background Chart color Table Color Tertiary Colors Chart color Table Color Chart Color Chart Color Approved Fonts AaBbCc 1 23 Lora (bold) Slide Headlines / Special Headlines AaBbCc 123 Lato (regular, bold, italics) Body Copy / Subheadings / Small Text Descriptions 20 Non-GAAP Reconciliation Adjusted net interest margin For the Three Months Ended June 30, 2022 For the Three Months Ended September 30, 2022 For the Three Months Ended December 31, 2022 For the Three Months Ended March 31, 2023 For the Three Months Ended June 30, 2023 (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 $321,673 $549 $101,824 $533 $103,190 $931 $127,608 $1,403 $135,757 $1,669 PPP adjustment 4,493 9 2,798 16 1,736 16 1,502 17 1,376 17 Investment securities 69,320 418 87,340 653 84,017 645 82,106 629 80,106 626 Correspondent bank stock 1,555 13 4,924 109 11,880 237 9,592 173 8,844 145 Loans 2,010,024 20,663 2,241,343 25,345 2,436,252 30,691 2,469,129 32,239 2,471,588 33,704 Loans HFS 19,389 229 11,531 157 9,065 146 18,036 268 15,841 230 PPP adjustment (13,385) (148) (9,026) (73) (7,350) (32) (6,470) (37) (5,811) (27) Purchase Accretion adjustment - (288) - 114 - (87) - (64) - (80) Adjusted total Interest- earning assets 2,413,069 21,445 2,443,734 26,854 2,638,790 32,547 2,701,503 34,628 2,707,701 36,284 Interest-bearing deposits 1,103 2,706 8,260 13,092 15,864 PPP adjustment - - - - - Federal Home Loan Bank Topeka and Federal Reserve borrowings 28 666 1,916 1,374 1,361 PPP adjustment (8) (3) (6) (5) (4) Subordinated notes 361 362 486 674 712 Adjusted total interest- bearing liabilities 1,484 3,731 10,656 15,135 17,933 Net interest income 19,961 23,123 21,891 19,493 18,351 Adjusted net interest margin 3.32% 3.84% 3.29% 2.93 % 2.72 %