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CST: 20/04/2019 02:11:24   

First Western Reports Fourth Quarter 2018 Financial Results

85 Days ago

Fourth Quarter 2018 Summary

  • Net income available to common shareholders of $1.7 million in Q4 2018, compared to net loss available to common shareholders of $0.5 million in Q4 2017
  • Diluted EPS of $0.22 in Q4 2018, compared to $0.19 in Q3 2018, and ($0.09) in Q4 2017
  • Gross loans, excluding loans held for sale, of $894.0 million, a 17.1% annualized increase from Q3 2018 and a 9.9% increase from Q4 2017
  • Total deposits of $937.8 million, a 26.9% annualized increase from Q3 2018 and a 14.9% increase from Q4 2017
  • Efficiency ratio of 80.6%, an improvement from 83.0% in Q3 2018, and 86.5% in Q4 2017

DENVER, Jan. 24, 2019 (GLOBE NEWSWIRE) -- First Western Financial, Inc., (“First Western” or the “Company”) (NASDAQ: MYFW), a financial services holding company, today reported financial results for the fourth quarter ended December 31, 2018.

For the fourth quarter of 2018, net income available to common shareholders was $1.7 million, or $0.22 per diluted share. This compares to $1.4 million, or $0.19 per diluted share, for the third quarter of 2018, which included $0.3 million of preferred stock dividends, and a loss of $0.5 million, or ($0.09) per share, for the fourth quarter of 2017, which included $0.6 million of preferred stock dividends. The preferred stock was redeemed in the third quarter of 2018.

“We executed well in the fourth quarter and continued to deliver a higher level of earnings for our shareholders,” said Scott C. Wylie, CEO of First Western.  “We saw positive trends in most areas of the company including strong balance sheet growth, improved operating efficiencies and continued strong credit quality.  The investments we have made in our business development platform are gaining traction, as we generated 17% annualized growth in total loans and 27% annualized growth in total deposits.  We believe we are well positioned to continue our positive momentum, capitalize on the disruption caused by recent bank consolidation in the Colorado market to add new clients and banking talent, and expand our team in the Arizona market.  As we continue to add scale and realize additional operating leverage, we expect to deliver another year of strong earnings growth in 2019 and further enhance the value of our franchise.”

                     
  For the Three Months Ended  
  December 31,
  September 30,   December 31,  
(Dollars in thousands, except per share data) 2018
  2018   2017  
Earnings Summary                    
Net interest income $  7,899     $  7,788     $  7,270    
Less: Provision (Recovery of) for credit losses    349        18        (4 )  
Total non-interest income    6,351        6,638        8,429    
Total non-interest expense    11,649        12,176        13,810    
Income before income taxes    2,252        2,232        1,893    
Income tax expense    528        543        1,848    
Net income    1,724        1,689        45    
Preferred stock dividends    —        (255 )      (560 )  
Net income (loss) available to common shareholders $  1,724     $  1,434     $  (515 )  
Basic and diluted earnings per common share $  0.22     $  0.19     $  (0.09 )  
                     
Return on average assets    0.66      0.65      0.02   %
Return on average shareholders' equity    5.98      5.10      (2.01 ) %
Return on tangible common equity(1)    7.52      6.46      (4.05 ) %
Net interest margin    3.29      3.29      3.30   %
Efficiency ratio(1)    80.60      82.96      86.50   %


(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 Fourth Quarter 2018

Revenue

Gross revenue (total income before non-interest expense, less gains on securities sold, plus provision for credit losses) was $14.3 million for the fourth quarter 2018, compared to $14.4 million for the third quarter 2018. The decline in revenue was primarily driven by a $0.3 million decrease in non-interest income, due in part to a decline in mortgage activity.

Relative to the fourth quarter of 2017, gross revenue decreased $1.5 million from $15.7 million. The decrease was attributable to a $2.1 million decline in non-interest income, which included a legal settlement of $0.8 million in 2017, and partially offset by a $0.6 million increase in net interest income.

Net Interest Income

Net interest income for the fourth quarter of 2018 was $7.9 million, an annualized increase of 5.7%. The increase in net interest income from the third quarter was primarily attributable to higher average loan balances.

Relative to the fourth quarter of 2017, net interest income increased 8.7% from $7.3 million. The increase in net interest income from the fourth quarter of 2017 was primarily driven by higher average loan balances.

Net Interest Margin

Net interest margin for the fourth quarter of 2018 was 3.29%, unchanged from the third quarter of 2018. An 11 basis point increase in the average yield on interest earning assets, from 4.20% to 4.31%, was offset by a 13 basis point increase in the average cost of funds, from 0.93% to 1.06%.

Relative to the fourth quarter of 2017, the net interest margin decreased slightly from 3.30%. A 32 basis point increase in the average yield on interest earning assets was offset by a 36 basis point increase in the average cost of funds.

Non-interest Income

Non-interest income for the fourth quarter of 2018 was $6.4 million, a decrease of 4.3% from $6.6 million in the third quarter of 2018. The decrease was primarily attributable to lower net gains on mortgage loans sold as a result of a lower volume of mortgages sold in the quarter.  This was partially offset by a $0.1 million increase in risk management and insurance fees.

Non-interest income decreased 24.7% from $8.4 million in the fourth quarter of 2017, primarily as a result of a gain on legal settlement and higher mortgage and insurance revenues recorded in the prior period.

Non-interest Expense

Non-interest expense for the fourth quarter of 2018 was $11.6 million, a decrease of 4.3% from $12.2 million for the third quarter of 2018. The decrease was primarily attributable to lower compensation expense resulting from a decrease in incentive accruals.

Non-interest expense decreased 15.6% from $13.8 million in the fourth quarter of 2017, primarily due to lower salary and employee benefits expense as a result of streamlining the cost structure in certain areas of the Company and a decrease in accrued incentive compensation.

The Company’s efficiency ratio was 80.6% in the fourth quarter of 2018, compared with 83.0% in the third quarter of 2018 and 86.5% in the fourth quarter of 2017.

Income Taxes

The Company recorded income tax expense of $0.5 million for the fourth quarter of 2018, representing an effective tax rate of 23.4%, compared to 24.3% for the third quarter of 2018.

Loan Portfolio

Gross loans, excluding mortgage loans held for sale, totaled $894.0 million at December 31, 2018, compared to $857.3 million at September 30, 2018 and $813.7 million at December 31, 2017.  The increase in gross loans from September 30, 2018 was attributable to growth in the 1-4 family residential, commercial real estate, and commercial and industrial portfolios.

Deposits

Total deposits were $937.8 million at December 31, 2018, compared to $878.6 million at September 30, 2018, and $816.1 million at December 31, 2017. The increase in total deposits from September 30, 2018 was due to an increase in money market and time deposits.

Assets Under Management

Total assets under management decreased by $391.0 million during the fourth quarter to $5.24 billion at December 31, 2018, compared to $5.63 billion at September 30, 2018, and $5.37 billion at December 31, 2017.  The decline was attributed to market volatility resulting in a reduction of $403.8 million which was partially off-set by net client inflows in Q4 2018 of $12.8 million.  New accounts added in the fourth quarter of 2018 contributed $158.0 million in new assets, an increase of $62.2 million compared to $95.8 million in new assets added in the third quarter of 2018.

Credit Quality

Non-performing assets totaled $19.7 million, or 1.82% of total assets, at December 31, 2018, an increase from $19.0 million, or 1.81% of total assets, at September 30, 2018.  The increase in non-performing assets was primarily related to the addition of a TDR still accruing, partially offset by two credits that are now performing following administrative delays in renewing the credits during the previous quarter.

The Company recorded a provision for loan losses of $0.3 million for the fourth quarter of 2018, primarily attributable to the growth in the loan portfolio.

Capital

At December 31, 2018, First Western (“Consolidated”) and First Western Trust (“Bank”) exceeded the minimum “well capitalized” capital levels required by their respective regulators, as summarized in the following table:

       
  December 31,    
  2018    
Consolidated Capital      
Common Equity Tier 1(CET1) to risk-weighted assets  11.35   %
Tier 1 capital to risk-weighted assets  11.35   %
Total capital to risk-weighted assets  13.06   %
Tier 1 capital to average assets  9.28   %
       
Bank Capital      
Common Equity Tier 1(CET1) to risk-weighted assets  10.55   %
Tier 1 capital to risk-weighted assets  10.55   %
Total capital to risk-weighted assets  11.47   %
Tier 1 capital to average assets  8.63   %
       

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, January 25, 2019.  The call can be accessed via telephone at 877-405-1628; passcode 1293539.  A recorded replay will be accessible through February 1, 2019 by dialing 855-859-2056; passcode 1293539.

A slide presentation relating to the fourth quarter 2018 results will be accessible prior to the scheduled conference call.  The slide presentation and webcast of the conference call can be accessed on the Events and Presentations page of the Company’s investor relations website at https://myfw.gcs-web.com.

About First Western Financial Inc.

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

Non-GAAP Financial Measures

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

Forward-Looking Statements

Statements in this news release regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “outlook,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” The forward looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, without limitation, the risk of geographic concentration in Colorado, Arizona, Wyoming and California; the risk of changes in the economy affecting real estate values and liquidity; the risk in our ability to continue to originate residential real estate loans and sell such loans; risks specific to commercial loans and borrowers; the risk of claims and litigation pertaining to our fiduciary responsibilities; the risk of competition for investment managers and professionals; the risk of fluctuation in the value of our investment securities; the risk of changes in interest rates; and the risk of the adequacy of our 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
  December 31,
  September 30,   December 31,
(Dollars in thousands, except per share data) 2018
  2018   2017
Interest and dividend income:                  
Loans, including fees $  9,866     $  9,468     $  8,386  
Investment securities    273        266        326  
Federal funds sold and other    206        206        90  
Total interest and dividend income    10,345        9,940        8,802  
                   
Interest expense:                  
Deposits    2,179        1,761        1,062  
Other borrowed funds    267        391        470  
Total interest expense    2,446        2,152        1,532  
Net interest income    7,899        7,788        7,270  
Less: Provision (Recovery of) for credit losses    349        18        (4 )
Net interest income, after provision (recovery of) for credit losses    7,550        7,770        7,274  
                   
Non-interest income:                  
Trust and investment management fees    4,752        4,770        5,057  
Net gain on mortgage loans sold    791        1,159        1,247  
Bank fees    333        361        502  
Risk management and insurance fees    380        249        742  
Income on company-owned life insurance    95        99        101  
Net (loss) on sale of securities    —        —        (45 )
Gain on legal settlement    —        —        825  
Total non-interest income    6,351        6,638        8,429  
Total income before non-interest expense    13,901        14,408        15,703  
                   
Non-interest expense:                  
Salaries and employee benefits    6,710        7,221        8,211  
Occupancy and equipment    1,414        1,427        1,497  
Professional services    814        805        915  
Technology and information systems    954        965        1,096  
Data processing    659        697        568  
Marketing    378        274        420  
Amortization of other intangible assets    163        208        230  
Total loss on sales/provision of other real estate owned    —        —        75  
Other    557        579        798  
Total non-interest expense    11,649        12,176        13,810  
Income before income taxes    2,252        2,232        1,893  
Income tax expense    528        543        1,848  
Net income    1,724        1,689        45  
Preferred stock dividends    —        (255 )      (560 )
Net income (loss) available to common shareholders $  1,724     $  1,434     $  (515 )
Earnings per common share:                  
Basic and diluted $  0.22     $  0.19     $  (0.09 )
                       


First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
                       
  December 31,   September 30,   December 31,
  2018   2018   2017
(Dollars in thousands)                      
ASSETS                      
Cash and cash equivalents:                      
Cash and due from banks $  1,574     $  1,232     $  1,370  
Interest-bearing deposits in other financial institutions    71,783        69,186        8,132  
Total cash and cash equivalents    73,357        70,418        9,502  
                       
Available-for-sale securities    44,901        45,492        53,650  
Correspondent bank stock, at cost    2,488        2,392        1,555  
Mortgage loans held for sale    14,832        19,238        22,940  
Loans, net of allowance of $7,451, $7,118, and $7,287    886,515        850,199        806,402  
Promissory notes from related parties    —        —        5,792  
Premises and equipment, net    6,100        6,263        6,777  
Accrued interest receivable    2,844        2,854        2,421  
Accounts receivable    4,492        4,736        5,592  
Other receivables    1,391        1,841        6,324  
Other real estate owned, net    658        658        658  
Goodwill    24,811        24,811        24,811  
Other intangible assets, net    402        565        1,233  
Deferred tax assets, net    4,306        4,626        5,987  
Company-owned life insurance    14,709        14,614        14,316  
Other assets    2,518        2,820        1,699  
Total assets $  1,084,324     $  1,051,527     $  969,659  
                       
LIABILITIES                      
Deposits:                      
Noninterest-bearing $  202,856     $  219,400     $  198,685  
Interest-bearing    734,902        659,239        617,432  
Total deposits    937,758        878,639        816,117  
Borrowings:                      
Federal Home Loan Bank Topeka borrowings    15,000        44,598        28,563  
Subordinated Notes    6,560        6,560        13,435  
Accrued interest payable    231        211        197  
Other liabilities    7,900        7,355        9,501  
Total liabilities    967,449        937,363        867,813  
                       
SHAREHOLDERS’ EQUITY                      
Total shareholders’ equity    116,875        114,164        101,846  
Total liabilities and shareholders’ equity $  1,084,324     $  1,051,527     $  969,659  
                       


First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
                       
  As of
  December 31,
  September 30,
  December 31,
(Dollars in thousands) 2018
  2018
  2017
Loan Portfolio                      
Cash, Securities and Other $  114,165     $  132,920     $  131,756  
Construction and Development    31,897        37,423        24,914  
1 - 4 Family Residential    350,852        327,674        282,014  
Non-Owner Occupied CRE    173,741        165,670        176,987  
Owner Occupied CRE    108,480        94,698        92,742  
Commercial and Industrial    113,660        97,772        104,284  
Total loans held for investment $  892,795     $  856,157     $  812,697  
Deferred costs, net    1,171        1,160        992  
Gross loans $  893,966     $  857,317     $  813,689  
Total loans held for sale $  14,832     $  19,238     $  22,940  
                       
Deposit Portfolio                      
Money market deposit accounts $  489,506     $  444,580     $  331,039  
Time deposits    178,743        148,425        210,292  
Negotiable order of withdrawal accounts    64,853        64,777        74,300  
Savings accounts    1,800        1,457        1,801  
Total interest-bearing deposits $  734,902     $  659,239     $  617,432  
Noninterest-bearing accounts $  202,856     $  219,400     $  198,685  
Total deposits $  937,758     $  878,639     $  816,117  
                       


First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
                   
  For the Three Months Ended  
  December 31,   September 30,   December 31,  
(Dollars in thousands) 2018   2018   2017  
Average Balance Sheets                  
Average Assets                  
Interest-earnings assets:                  
Interest-bearing deposits in other financial institutions $  36,563     $  41,538     $  32,258    
Available-for-sale securities    46,219        48,438        61,760    
Loans    878,145        857,676        782,717    
Promissory notes from related parties (1)    —        —        5,781    
Interest earning-assets    960,927        947,652        882,516    
Mortgage loans held-for-sale    15,148        22,294        25,316    
Total interest earning-assets, plus loans held-for-sale    976,075        969,946        907,832    
Allowance for loan losses    (7,240 )      (7,141 )      (7,289 )  
Noninterest-earnings assets    68,962        72,922        79,931    
Total assets $  1,037,797     $  1,035,727     $  980,474    
                   
Average Liabilities and Shareholders’ Equity                  
Interest-bearing liabilities:                  
Interest-bearing deposits $  674,691     $  640,507     $  578,940    
Federal Home Loan Bank Topeka borrowings    26,959        44,804        55,921    
Subordinated notes    6,560        8,489        13,435    
Total interest-bearing liabilities $  708,210     $  693,800     $  648,296    
Noninterest-bearing liabilities:                  
Noninterest-bearing deposits    205,059        221,411        222,361    
Other liabilities    9,214        8,132        7,197    
Total noninterest-bearing liabilities $  214,273     $  229,543     $  229,558    
Shareholders’ equity $  115,314     $  112,384     $  102,620    
Total liabilities and shareholders’ equity $  1,037,797     $  1,035,727     $  980,474    
                   
Yields (annualized)                  
Interest-bearing deposits in other financial institutions    2.25      1.98      1.12   %
Available-for-sale securities    2.36      2.20      2.11   %
Loans    4.49      4.42      4.25   %
Promissory notes from related parties    —      —      4.91   %
Interest earning-assets    4.31      4.20      3.99   %
Mortgage loans held-for-sale    4.33      4.36      4.01   %
Total interest earning-assets, plus loans held-for-sale    4.31      4.20      3.99   %
Interest-bearing deposits    1.29      1.10      0.73   %
Federal Home Loan Bank Topeka borrowings    2.20      2.05      1.52   %
Subordinated notes    7.26      7.59      7.65   %
Total interest-bearing liabilities    1.38      1.24      0.95   %
Net interest margin    3.29      3.29      3.30   %
Interest rate spread    2.93      2.96      3.04   %
                         


(1)   Promissory notes from related parties were reclassed to loans as of September 30, 2018 due to change in composition of related parties.
     


First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
                       
  As of and for the Three Months Ended  
  December 31,
  September 30,
  December 31,  
(Dollars in thousands, except per share data) 2018
  2018
  2017  
Asset Quality                      
Nonperforming loans $  19,052     $  18,388     $  4,223    
Nonperforming assets    19,710        19,046        4,881    
Net charge-offs (recoveries)    16        —        (2 )  
Nonperforming loans to total loans    2.13      2.14      0.52   %
Nonperforming assets to total assets    1.82      1.81      0.50   %
Allowance for loan losses to nonperforming loans    39.11      38.71      172.55   %
Allowance for loan losses to total loans    0.83      0.83      0.90   %
Net charge-offs to average loans    —      —      —   %
                       
Assets under management $  5,235,177     $  5,626,163     $  5,374,471    
                       
Market Data                      
Book value per share at period end $  14.67     $  14.33     $  13.18    
Tangible book value per common share(1) $  11.50     $  11.14     $  8.71    
Shares outstanding at period end    7,968,420        7,968,420        5,833,456    
                       
Consolidated Capital                      
Common Equity Tier 1(CET1) to risk-weighted assets    11.35      11.22      6.56  
Tier 1 capital to risk-weighted assets    11.35      11.22      8.79  
Total capital to risk-weighted assets    13.06      12.90      11.70  
Tier 1 capital to average assets    9.28      9.09      7.41  
                       
Bank Capital                      
Common Equity Tier 1(CET1) to risk-weighted assets    10.55      10.42      9.81  
Tier 1 capital to risk-weighted assets    10.55      10.42      9.81  
Total capital to risk-weighted assets    11.47      11.31      10.75  
Tier 1 capital to average assets    8.63      8.45      8.27  
                         


(1)   Represents a Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
     


First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
 
Reconciliations of Non-GAAP Financial Measures
                       
  As of and for the Three Months Ended  
  December 31,
  September 30,
  December 31,  
(Dollars in thousands, except share and per share data) 2018
  2018
  2017  
Tangible common                      
Total shareholders' equity $  116,875     $  114,164     $  101,846    
Less:                      
Preferred stock (liquidation preference)    —        —        24,968    
Goodwill    24,811        24,811        24,811    
Other intangibles, net    402        565        1,233    
Tangible common equity $  91,662     $  88,788     $  50,834    
                       
Common shares outstanding, end of period    7,968,420        7,968,420        5,833,456    
Tangible common book value per share $  11.50     $  11.14     $  8.71    
                       
Net income, as reported $  1,724     $  1,689     $  45    
Less: Preferred stock dividends    —        255        560    
Income available to common shareholders $  1,724     $  1,434     $  (515 )  
Return on tangible common equity    7.52      6.46      (4.05 ) %
                       
Efficiency                      
Non-interest expense $  11,649     $  12,176     $  13,810    
Less: Amortization    163        208        230    
Adjusted non-interest expense $  11,486     $  11,968     $  13,580    
                       
Net interest income $  7,899     $  7,788     $  7,270    
Non-interest income    6,351        6,638        8,429    
Total income $  14,250     $  14,426     $  15,699    
Efficiency ratio    80.60      82.96      86.50   %
                       
Total income before non-interest expense $  13,901     $  14,408     $  15,703    
Less: Net gain (loss) on sale of securities    —        —        (45 )  
Plus: Provision (Recovery of) for credit losses    349        18        (4 )  
Gross revenue $  14,250     $  14,426     $  15,744    

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