Market Overview

First Western Reports Second Quarter 2018 Financial Results

Share:

Second Quarter 2018 Summary

  • Net income available to common shareholders of $0.5 million, compared to a net loss to common shareholders of $0.2 million in Q2 2017
  • Diluted EPS of $0.08, compared to $(0.03) in Q2 2017
  • Gross revenue of $14.5 million, compared to $13.1 million in Q2 2017
  • Total loans, excluding loans held for sale, of $841.5 million, a 12.4% annualized increase from Q1 2018 and a 13.7% increase from Q2 2017
  • Total deposits of $843.7 million, a 12.5% annualized increase from Q1 2018 and a 9.2% increase from Q2 2017
  • Total assets under management of $5.42 billion, a 4.3% annualized increase from Q1 2018 and a 6.0% increase from Q2 2017
  • Net interest margin of 3.29%, up 4 basis points from Q1 2018, up 19 basis points from Q2 2017

DENVER, Aug. 30, 2018 (GLOBE NEWSWIRE) -- First Western Financial, Inc., ("First Western" or the "Company") (NASDAQ:MYFW), a financial services holding company, today reported financial results for the second quarter ended June 30, 2018.

For the second quarter of 2018, net income available to common shareholders was $0.5 million, or $0.08 per diluted share, compared to $0.6 million, or $0.11 per diluted share, for the first quarter of 2018, and a net loss to common shareholders of $0.2 million, or $(0.03) per diluted share, for the second quarter of 2017.

"Our second quarter results are consistent with our expectations and reflect significant year-over-year improvement in our profitability, driven by strong revenue growth, a higher level of efficiencies and continued outstanding credit quality," said Scott C. Wylie, CEO of First Western.  "We are very pleased with the recent completion of our initial public offering.  The capital raised in the IPO should enable us to further our momentum and pursue the growth opportunities available to us.  We also made several changes during the first half of 2018 to streamline our operations and further enhance our efficiencies.  We believe we have reached an inflection point where we can generate higher balance sheet growth and realize greater operating leverage, which should result in continued steady improvement in our profitability in the second half of 2018 and beyond."

                   
    For the Three Months Ended
    June 30,   March 30,   June, 30
(Dollars in thousands, except per share data)   2018   2018   2017
Earnings Summary                  
Net interest income   $ 7,577     $ 7,360     $ 6,667  
Less: Provision for credit losses           (187 )     262  
Total non-interest income     6,892       7,292       6,489  
Total non-interest expense     13,084       13,286       12,282  
Income before income taxes     1,385       1,553       612  
Income tax expense     337       367       208  
Net income     1,048       1,186       404  
Preferred stock dividends     (562 )     (561 )     (573 )
Net income (loss) available to common shareholders   $ 486     $ 625     $ (169 )
Basic and diluted earnings per common share   $ 0.08     $ 0.11     $ (0.03 )
                   
Return on average assets     0.41 %     0.48 %     0.17 %
Return on average shareholders' equity     3.99 %     4.59 %     1.64 %
Return on tangible common equity(1)     0.89 %     1.17 %     (0.37 )%
Net interest margin     3.29 %     3.25 %     3.10 %
Efficiency ratio(1)     88.84 %     89.11 %     91.96 %
                         
(1) Represents a Non-GAAP financial measure. See "Reconciliation of Non-GAAP Measures" for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
                         

Operating Results for the Second Quarter 2018

Revenue

Gross revenue (total income before non-interest expense, less gains on securities sold, plus provision for credit losses) was $14.5 million for the second quarter 2018, compared to $14.7 million for the first quarter of 2018. The slight decline in revenue was driven by a $0.4 million decrease in non-interest income, partially offset by a $0.2 million increase in net interest income.

Relative to the second quarter of 2017, gross revenue increased 10.7% from $13.1 million. The increase in revenue from the second quarter of 2017 was attributable to a $0.9 million increase in net interest income and a $0.3 million increase in non-interest income (excluding gains on securities sold).

Net Interest Income

Net interest income for the second quarter of 2018 was $7.6 million, an increase of 2.9% from $7.4 million in the first quarter of 2018. The increase in net interest income from the first quarter was primarily attributable to a $14.5 million increase in average interest earning assets and the effect of a 4 basis point increase in the net interest margin.

Relative to the second quarter of 2017, net interest income increased 13.6% from $6.7 million. The increase in net interest income from the second quarter of 2017 was primarily driven by a $60.8 million increase in average interest earning assets, combined with the effect of a 19 basis point increase in the net interest margin.

Net Interest Margin

Net interest margin for the second quarter of 2018 was 3.29%, a 4 basis point increase from 3.25% for the first quarter of 2018. The increase in net interest margin was primarily attributable to a rising rate environment increasing the yield on interest earning assets from 3.98% to 4.13%, partially offset by an increase in total interest-bearing liabilities from 0.99% to 1.17%.

Relative to the second quarter of 2017, the net interest margin increased from 3.10%, primarily due to a rising rate environment increasing the yield on interest earning assets from 3.77%, partially offset by an increase in total interest-bearing liabilities from 0.89%.

Non-interest Income

Non-interest income for the second quarter of 2018 was $6.9 million, a decrease of 5.5% from $7.3 million in the first quarter of 2018. The decrease was primarily the result of a $0.3 million decrease in trust and investment management fees due primarily to closed accounts and withdrawals within our investment agency accounts.  In addition, other fees declined by $0.3 million, primarily due to stronger production of insurance in the first quarter as compared to the second quarter, as well as a reduction in bank fees due to the retention of more deposits on the balance sheet and a reduction in the revenues received from selling excess deposits.

Non-interest income increased $0.4 million from $6.5 million in the second quarter of 2017, primarily as a result of a $0.6 million increase in the gain on sale of loans due to an increase in the amount of residential mortgages sold in the secondary market.

Non-interest Expense

Non-interest expense for the second quarter of 2018 was $13.1 million, a decrease of 1.5% from $13.3 million for the first quarter of 2018. The decrease was primarily attributable to lower salaries and employee benefits and lower professional fees, partially offset by higher technology and data processing costs.

Relative to the second quarter of 2017, non-interest expense increased $0.8 million from $12.3 million. The increase was primarily due to an increase in personnel expenses as a result of the expansion of mortgage production capabilities with the acquisition of EMC and severance costs related to headcount reductions, partially offset by lower professional fees.

The Company's efficiency ratio was 88.8% in the second quarter of 2018, compared with 89.1% in the first quarter of 2018 and 92.0% in the second quarter of 2017.

Income Taxes

The Company recorded income tax expense of $0.3 million for the second quarter of 2018, representing an effective tax rate of 24.3%, compared to 23.6% reported for the first quarter of 2018 and 34.0% reported for the second quarter of 2017. The decrease in the effective tax rate in the second quarter of 2018, as compared to the second quarter of 2017, was attributable to the reduction in the federal corporate tax rate that was effective January 1, 2018.

Loan Portfolio

Gross loans, excluding mortgage loans held for sale, were $842.6 million at June 30, 2018, compared to $817.3 million at March 31, 2018 and $741.3 million at June 30, 2017.  The increase in total loans from March 31, 2018, was primarily attributable to growth in securities lending, 1-4 family residential, construction loans and owner occupied commercial real estate.

Deposits

Total deposits were $843.7 million at June 30, 2018, compared to $818.2 million at March 31, 2018, and $772.9 million at June 30, 2017.  The increase in total deposits from March 31, 2018 was due to an increase in money market deposits, primarily attributed to an increase in trust account related deposits.

Assets Under Management

Total assets under management were $5.42 billion at June 30, 2018, compared to $5.36 billion at March 31, 2018, and $5.11 billion at June 30, 2017. The increase in assets under management from March 31, 2018 was primarily attributable to an increase in managed trust assets and 401(k)/retirement assets.

The increase from June 30, 2017 was due to increases across most asset categories, driven by contributions and market gains.

Credit Quality

Non-performing assets totaled $3.7 million, or 0.35% of total assets, at June 30, 2018, a decrease from $4.1 million, or 0.41% of total assets, at March 31, 2018.

The Company did not record any charge-offs in the second quarter.

The Company recorded no provision for loan losses for the second quarter of 2018, reflecting the lack of charge-offs and positive trends in the loan portfolio.

Capital

At June 30, 2018, the First Western ("Consolidated") and First Western Trust ("Bank") exceeded the minimum levels required by their regulator, as summarized in the following table:

       
    June 30,  
    2018  
Consolidated Capital      
Common Equity Tier 1(CET1) to risk-weighted assets   7.04 %
Tier 1 capital to risk-weighted assets   9.42 %
Total capital to risk-weighted assets   12.12 %
Tier 1 capital to average assets   7.74 %
       
Bank Capital      
Common Equity Tier 1(CET1) to risk-weighted assets   10.17 %
Tier 1 capital to risk-weighted assets   10.17 %
Total capital to risk-weighted assets   11.07 %
Tier 1 capital to average assets   8.37 %
       

About First Western Financial Inc.

First Western Financial, Inc. is a financial services holding company headquartered in Denver, Colorado, with operations in Colorado, Arizona, Wyoming and California.  First Western and its subsidiaries provide a fully integrated suite of wealth management services on a private trust bank platform, which includes a comprehensive selection of deposit, loan, trust, wealth planning and investment management products and services. First Western's common stock is traded on the Nasdaq Global Select Market under the symbol "MYFW." For more information, please visit www.myfw.com.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States ("GAAP").   These non-GAAP financial measures include "Tangible Common Equity," "Tangible Common Book Value per Share," "Return on Tangible Common Equity," "Efficiency Ratio," and "Gross Revenue." The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company's financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies. Reconciliation of non-GAAP financial measures to GAAP financial measures are provided at the end of this press release.

Forward-Looking Statements

Statements in this news release regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "outlook," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." The forward looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, without limitation, the risk of geographic concentration in Colorado, Arizona, Wyoming and California; the risk of changes in the economy affecting real estate values and liquidity; the risk in our ability to continue to originate residential real estate loans and sell such loans; risks specific to commercial loans and borrowers; the risk of claims and litigation pertaining to our fiduciary responsibilities; the risk of competition for investment managers and professionals; the risk of fluctuation in the value of our investment securities; the risk of changes in interest rates; and the risk of the adequacy of our allowance for credit losses and the risk in our ability to maintain a strong core deposit base or other low-cost funding sources. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Prospectus filed with the U.S. Securities and Exchange Commission ("SEC") dated July 18, 2018 ("Prospectus"), and other documents we file with the SEC from time to time. We urge readers of this news release to review the Risk Factors section of that Prospectus and the Risk Factors section of other documents we file with the SEC from time to time. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today's date, or to make predictions based solely on historical financial performance. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Contacts:
Financial Profiles, Inc.
Tony Rossi
310-622-8221

Larry Clark
310-622-8223
MYFW@finprofiles.com
IR@myfw.com

                   
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
                   
    Three Months Ending
    June 30,   March 31,   June, 30
(Dollars in thousands, except per share data)   2018   2018   2017
Interest and dividend income:                  
Loans, including fees   $ 9,074     $ 8,602     $ 7,372  
Investment securities     281       277       667  
Federal funds sold and other     150       127       65  
Total interest and dividend income     9,505       9,006       8,104  
                   
Interest expense:                  
Deposits     1,411       1,160       889  
Other borrowed funds     517       486       548  
Total interest expense     1,928       1,646       1,437  
Net interest income     7,577       7,360       6,667  
Less: Provision for credit losses           (187 )     262  
Net interest income, after provision for credit losses     7,577       7,547       6,405  
                   
Non-interest income:                  
Trust and investment management fees     4,689       4,954       4,810  
Net gain on mortgage loans sold     1,359       1,251       771  
Bank fees     455       610       553  
Risk management and insurance fees     284       383       165  
Income on company-owned life insurance     105       94       107  
Net gain on sale of securities                 83  
Total non-interest income     6,892       7,292       6,489  
Total income before non-interest expense     14,469       14,839       12,894  
                   
Non-interest expense:                  
Salaries and employee benefits     7,660       8,180       6,831  
Occupancy and equipment     1,527       1,485       1,516  
Professional services     1,008       1,063       1,160  
Technology and information systems     1,000       824       937  
Data processing     687       640       647  
Marketing     316       285       366  
Amortization of other intangible assets     230       230       184  
Other     656       579       641  
Total non-interest expense     13,084       13,286       12,282  
Income before income taxes     1,385       1,553       612  
Income tax expense     337       367       208  
Net income     1,048       1,186       404  
Preferred stock dividends     (562 )     (561 )     (573 )
Net income (loss) available to common shareholders   $ 486     $ 625     $ (169 )
Earnings (Loss) per common share:                  
Basic and diluted   $ 0.08     $ 0.11     $ (0.03 )
                         


                   
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued) 
                   
    June 30,   March 31,   June 30,
    2018   2018   2017
(Dollars in thousands)                  
ASSETS                  
Cash and cash equivalents:                  
Cash and due from banks   $ 994   $ 1,287   $ 939
Interest-bearing deposits in other financial institutions     57,470     35,789     29,551
Total cash and cash equivalents     58,464     37,076     30,490
                   
Available-for-sale securities     47,890     49,859     99,932
Correspondent bank stock, at cost     3,477     2,326     4,750
Mortgage loans held for sale     35,064     22,146     10,679
Loans, net of allowance of $7,100, $7,100, $7,287, and $6,981     835,544     810,192     734,271
Promissory notes from related parties     2,125     5,795     5,770
Premises and equipment, net     6,255     6,477     7,532
Accrued interest receivable     2,565     2,378     2,103
Accounts receivable     5,504     5,504     4,626
Other receivables     1,908     1,009    
Other real estate owned, net     658     658     2,761
Goodwill     24,811     24,811     24,811
Other intangible assets, net     773     1,003     1,082
Deferred tax assets, net     4,971     5,810     8,382
Company-owned life insurance     14,515     14,410     14,110
Other assets     2,049     2,167     1,718
Total assets   $ 1,046,573   $ 991,621   $ 953,017
                   
LIABILITIES                  
Deposits:                  
Noninterest-bearing   $ 212,225   $ 223,582   $ 208,490
Interest-bearing     631,517     594,645     564,459
Total deposits     843,742     818,227     772,949
Borrowings:                  
Federal Home Loan Bank Topeka borrowings     75,598     47,928     61,563
Subordinated Notes     13,435     13,435     13,435
Accrued interest payable     231     216     191
Other liabilities     8,609     7,660     7,840
Total liabilities     941,615     887,466     855,978
                   
SHAREHOLDERS' EQUITY                  
Total shareholders' equity     104,958     104,155     97,039
Total liabilities and shareholders' equity   $ 1,046,573   $ 991,621   $ 953,017
                   


                   
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
                   
    As of
    June 30,   March 31,   June, 30
(Dollars in thousands)   2018   2018   2017
Loan Portfolio                  
Cash, Securities and Other   $ 135,393   $ 123,659   $ 128,313
Construction and Development     35,760     29,150     29,860
1 - 4 Family Residential     307,794     298,007     257,153
Non-Owner Occupied CRE     164,438     167,617     164,967
Owner Occupied CRE     98,393     92,508     79,967
Commercial and Industrial     99,711     105,265     80,144
Total loans held for investment   $ 841,489   $ 816,206   $ 740,404
Deferred costs, net     1,155     1,086     848
Gross loans   $ 842,644   $ 817,292   $ 741,252
Total loans held for sale   $ 35,064   $ 22,146   $ 10,679
                   
Deposit Portfolio                  
Money market deposit accounts   $ 394,759   $ 328,427   $ 271,457
Demand deposit accounts     166,670     185,459     216,605
Time deposits     68,742     78,970     74,877
Savings accounts     1,346     1,789     1,520
Total interest-bearing deposits   $ 631,517   $ 594,645   $ 564,459
Noninterest-bearing accounts   $ 212,225   $ 223,582   $ 208,490
Total deposits   $ 843,742   $ 818,227   $ 772,949
                   


                   
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued) 
                   
    For the Three Months Ended
    June 30,   March 31,   June, 30
(Dollars in thousands)   2018
  2018    2017 
Average Balance Sheets                  
Average Assets                  
Interest-earnings assets:                  
Interest-bearing deposits in other financial institutions   $  35,550     $  36,375     $  27,326  
Available-for-sale securities      49,821        51,732        116,057  
Loans      829,944        812,306        706,009  
Promissory notes from related parties      5,305        5,756        10,441  
Interest earning-assets      920,620        906,169        859,833  
Mortgage loans held-for-sale      31,570        18,416        8,805  
Total interest earning-assets, plus loans held-for-sale      952,190        924,585        868,638  
Allowance for loan losses      (7,100 )      (7,170 )      (6,728 )
Noninterest-earnings assets      73,245        72,070        87,458  
Total assets   $  1,018,335     $  989,485     $  949,368  
                   
Average Liabilities and Shareholders' Equity                  
Interest-bearing liabilities:                  
Interest-bearing deposits   $  588,916     $  595,148     $  569,146  
Federal Home Loan Bank Topeka borrowings      54,185        55,517        55,620  
Convertible subordinated debentures      —        —        4,717  
Subordinated notes      13,435        13,436        13,435  
Term Promissory Note      —        —        990  
Total interest-bearing liabilities   $  656,536     $  664,101     $  643,908  
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits      249,085        214,980        200,795  
Other liabilities      7,875        7,049        6,287  
Total noninterest-bearing liabilities   $  256,960     $  222,029     $  207,082  
Shareholders' equity   $  104,839     $  103,355     $  98,378  
Total liabilities and shareholders' equity   $  1,018,335     $  989,485     $  949,368  
                   
Yields                  
Interest-bearing deposits in other financial institutions      1.69      1.40      0.95 %
Available-for-sale securities      2.26      2.14      2.30 %
Loans      4.34      4.20      4.09 %
Promissory notes from related parties      4.75      4.52      5.94 %
Interest earning-assets      4.13      3.98      3.77 %
Mortgage loans held-for-sale      3.81      4.34      3.82 %
Total interest earning-assets, plus loans held-for-sale      4.12      3.98      3.77 %
Interest-bearing deposits      0.96      0.78      0.62 %
Federal Home Loan Bank Topeka borrowings      1.92      1.65      1.38 %
Convertible subordinated debentures      —      —      7.29 %
Subordinated notes      7.65      7.65      7.65 %
Term Promissory Note      —      —      5.25 %
Total interest-bearing liabilities      1.17      0.99      0.89 %
Net interest margin      3.29      3.25      3.10 %
Interest rate spread      2.96      2.99      2.88 %
                         


                     
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
                     
    As of and for the Three Months Ended  
    June 30,   March 30,   June, 30  
(Dollars in thousands, except per share data)   2018   2018   2017  
Asset Quality                    
Nonperforming loans   $ 3,052   $ 3,394   $ 5,323  
Nonperforming assets     3,710     4,052     8,084  
Net charge-offs (recoveries)             (18 )
Nonperforming loans to total loans     0.36 %   0.42 %   0.72 %
Nonperforming assets to total assets     0.35 %   0.41 %   0.85 %
Allowance for loan losses to nonperforming loans     232.63 %   209.19 %   131.17 %
Allowance for loan losses to total loans     0.84 %   0.87 %   0.94 %
Net charge-offs to average loans     %   %   %
                     
Assets under management   $ 5,415,918   $ 5,358,316   $ 5,109,887  
                     
Market Data                    
Book value per share at period end   $ 13.52   $ 13.42   $ 12.91  
Tangible book value per common share(1)   $ 9.19   $ 9.05   $ 8.24  
Shares outstanding at period end     5,917,667     5,900,698     5,544,078  
                     
Consolidated Capital                    
Common Equity Tier 1(CET1) to risk-weighted assets     7.04 %   7.04 %   5.84 %
Tier 1 capital to risk-weighted assets     9.42 %   9.44 %   7.98 %
Total capital to risk-weighted assets     12.12 %   12.31 %   11.46 %
Tier 1 capital to average assets     7.74 %   7.72 %   6.74 %
                     
Bank Capital                    
Common Equity Tier 1(CET1) to risk-weighted assets     10.17 %   10.36 %   9.64 %
Tier 1 capital to risk-weighted assets     10.17 %   10.36 %   9.64 %
Total capital to risk-weighted assets     11.07 %   11.29 %   10.59 %
Tier 1 capital to average assets     8.37 %   8.43 %   8.17 %
                     
(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.
                     


                     
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
                     
Reconciliations of Non-GAAP Financial Measures                    
    As of and for the Three Months Ended
    June 30,   March 31,   June, 30
(Dollars in thousands, except share and per share data)   2018   2018    2017 
Tangible common                    
Total shareholders' equity   $  104,958     $  104,155     $  97,039  
Less:                    
Preferred stock (liquidation preference)      24,968        24,968        25,468  
Goodwill      24,811        24,811        24,811  
Other intangibles, net      773        1,003        1,082  
Tangible common equity   $  54,406     $  53,373     $  45,678  
                     
Common shares outstanding, end of period      5,917,667        5,900,698        5,544,078  
Tangible common book value per share   $  9.19     $  9.05     $  8.24  
                     
Net income, as reported   $  1,048     $  1,186     $  404  
Less: Preferred stock dividends      562        561        573  
Income (loss) available to common shareholders   $  486     $  625     $  (169 )
Return on tangible common equity      0.89      1.17      (0.37 )%
                     
Efficiency                    
Non-interest expense   $  13,084     $  13,286     $  12,282  
Less: Amortization      230        230        184  
Adjusted non-interest expense   $  12,854     $  13,056     $  12,098  
                     
Net interest income   $  7,577     $  7,360     $  6,667  
Non-interest income      6,892        7,292        6,489  
Total income   $  14,469     $  14,652     $  13,156  
Efficiency ratio      88.84      89.11      91.96 %
                     
Total income before non-interest expense   $  14,469     $  14,839     $  12,894  
Less: Net gain on sale of securities      —        —        83  
Plus: (Release) provision for credit losses      —        (187 )      262  
Gross Revenue   $  14,469     $  14,652     $  13,073  
                         

 

FWF Logo.jpg

View Comments and Join the Discussion!