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First Western Reports Fourth Quarter 2023 Financial Results
Source: Nasdaq GlobeNewswire / 25 Jan 2024 17:21:25 America/New_York
Fourth Quarter 2023 Summary
- Total deposits increased to $2.53 billion, or 4.5%, from $2.42 billion as of Q3 2023
- Loan to deposit ratio improved to 100.7% in Q4 2023, compared to 105.1% in Q3 2023
- Net income available to common shareholders of $0.3 million in Q4 2023, compared to $3.1 million in Q3 2023 and pre-tax, pre-provision net income(1) of $4.1 million in Q4 2023, compared to $4.6 million in Q3 2023
- Diluted EPS of $0.03 in Q4 2023, compared to $0.32 in Q3 2023
- Total capital to risk-weighted assets ratio of 12.82% in Q4 2023, compared to 12.45% in Q3 2023
DENVER, Jan. 25, 2024 (GLOBE NEWSWIRE) -- First Western Financial, Inc. (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the fourth quarter ended December 31, 2023.
Net income available to common shareholders was $0.3 million, or $0.03 per diluted share, for the fourth quarter of 2023. This compares to $3.1 million, or $0.32 per diluted share, for the third quarter of 2023, and $5.5 million, or $0.56 per diluted share, for the fourth quarter of 2022.
Scott C. Wylie, CEO of First Western, commented, "While an increase in our estimated provision for credit losses reduced our profitability in the fourth quarter, we continued to execute on our strategic priorities including maintaining disciplined expense control while adding new deposit relationships. Our deposit focus resulted in 18% annualized growth in total deposits during the quarter and further reduced our loan-to-deposit ratio to be in-line with our year-end goal of 100%, while our new loan production focused on clients that also bring deposits to the bank.
"We believe we are positioned to perform well in any economic scenario that emerges in 2024, with our strong balance sheet and conservative underwriting criteria enabling us to effectively manage through an economic downturn, while our business development capabilities and unique value proposition will enable us to take advantage of strengthening economic conditions and an increase in loan demand. While economic conditions remain uncertain, we will continue to prioritize prudent risk management and be conservative in new loan production while focusing on core deposit gathering, which should result in a modest level of asset growth until economic conditions improve. With our disciplined expense management, the continued leverage we expect to realize from past investments in technology, banking talent, and office expansion, as well as a liability-sensitive balance sheet that should lead to net interest margin expansion as interest rates decline, we believe we can deliver solid earnings growth in 2024 even with a modest level of balance sheet growth. Over the long-term, we continue to believe that we are well positioned to capitalize on our attractive markets to consistently add new clients, generate profitable growth, and further enhance the value of our franchise," said Mr. Wylie.
For the Three Months Ended December 31, September 30, December 31, (Dollars in thousands, except per share data) 2023 2023 2022 Earnings Summary Net interest income $ 16,331 $ 16,766 $ 21,988 Provision for credit losses(1) 3,942 329 1,197 Total non-interest income 6,081 6,099 6,415 Total non-interest expense 18,276 18,314 19,905 Income before income taxes 194 4,222 7,301 Income tax (benefit)/expense (61 ) 1,104 1,830 Net income available to common shareholders 255 3,118 5,471 Adjusted net income available to common shareholders(2) 282 3,140 5,617 Basic earnings per common share 0.03 0.33 0.58 Adjusted basic earnings per common share(2) 0.03 0.33 0.59 Diluted earnings per common share 0.03 0.32 0.56 Adjusted diluted earnings per common share(2) 0.03 0.32 0.58 Return on average assets (annualized) 0.04 % 0.44 % 0.79 % Adjusted return on average assets (annualized)(2) 0.04 0.45 0.82 Return on average shareholders' equity (annualized) 0.41 5.08 9.17 Adjusted return on average shareholders' equity (annualized)(2) 0.45 5.12 9.41 Return on tangible common equity (annualized)(2) 0.48 5.82 10.48 Adjusted return on tangible common equity (annualized)(2) 0.53 5.86 10.76 Net interest margin 2.37 2.46 3.30 Efficiency ratio(2) 80.77 78.76 67.66 ____________________
(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 Fourth Quarter 2023Revenue
Total income before non-interest expense was $18.5 million for the fourth quarter of 2023, a decrease of 18.0%, compared to $22.5 million for the third quarter of 2023. Gross revenue(1) was $22.5 million for the fourth quarter of 2023, a decrease of 2.7%, from $23.1 million for the third quarter of 2023. The decrease was primarily driven by a decrease in Net interest income as a result of higher interest expense primarily due to higher deposit costs, offset partially by higher interest income. Relative to the fourth quarter of 2022, Total income before non-interest expense decreased 32.1% from $27.2 million. Relative to the fourth quarter of 2022, Gross revenue decreased 22.4% from $29.0 million. The decrease was driven by a decrease in Net interest income as a result of higher Interest expense due to 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 IncomeNet interest income for the fourth quarter of 2023 was $16.3 million, a decrease of 2.6% from $16.8 million in the third quarter of 2023. Relative to the fourth quarter of 2022, Net interest income decreased 25.7% from $22.0 million. The decreases were due to higher Interest expense driven primarily by higher deposit costs, offset partially by higher Interest income.
Net Interest Margin
Net interest margin for the fourth quarter of 2023 decreased 9 basis points to 2.37% from 2.46% reported in the third quarter of 2023, primarily due to growth in interest-bearing deposits during the quarter and continued pricing pressure due to a highly competitive deposit market.
The yield on interest-earning assets increased 16 basis points to 5.51% in the fourth quarter of 2023 from 5.35% in the third quarter of 2023 and the cost of interest-bearing deposits increased 19 basis points to 3.94% in the fourth quarter of 2023 from 3.75% in the third quarter of 2023.
Relative to the fourth quarter of 2022, net interest margin decreased from 3.30%, primarily due to a 172 basis point increase in average cost of deposits, offset partially by a 59 basis point increase in loan yields.
Non-interest Income
Non-interest income for the fourth quarter of 2023 remained flat at $6.1 million, compared to the third quarter of 2023, primarily driven by a decrease in Net gain on mortgage loans and lower Trust and advisory fees during the fourth quarter of 2023, partially offset by higher Insurance fees.
Relative to the fourth quarter of 2022, Non-interest income decreased 5.2% from $6.4 million. The decrease was primarily due to a decrease in Bank fees, Insurance fees, and Net gain on mortgage loans, partially offset by increases in Trust and investment management fees and lower Unrealized losses on loans accounted for under the fair value option.
Non-interest Expense
Non-interest expense for the fourth quarter of 2023 remained flat at $18.3 million compared to the third quarter of 2023. Relative to the fourth quarter of 2022, Non-interest expense decreased 8.2% from $19.9 million, driven primarily by lower Salaries and employee benefits related to staffing reductions to better align with lower revenue.
The Company’s efficiency ratio(1) was 80.8% in the fourth quarter of 2023, compared with 78.8% in the third quarter of 2023 and 67.7% in the fourth 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 benefit of $0.1 million for the fourth quarter of 2023, compared to Income tax expense of $1.1 million for the third quarter of 2023 and Income tax expense of $1.8 million for the fourth quarter of 2022. The tax benefit in the fourth quarter of 2023 was primarily due to the impact of 2022 state return to provision items.
Loans
Total loans held for investment were $2.55 billion as of December 31, 2023, an increase of 0.5% from $2.54 billion as of September 30, 2023, due to loan growth in residential mortgage and CRE portfolios, partially offset by small declines in other portfolios. Relative to the fourth quarter of 2022, Total loans held for investment increased 2.9% from $2.48 billion as of December 31, 2022, attributable to loan growth primarily in our residential mortgage portfolios.
Deposits
Total deposits were $2.53 billion as of December 31, 2023, an increase of 4.5% from $2.42 billion as of September 30, 2023, as a result of new and expanded deposit relationships. Relative to the fourth quarter of 2022, Total deposits increased 5.1% from $2.41 billion as of December 31, 2022, driven primarily by new and expanded deposit relationships.
Borrowings
Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $125.7 million as of December 31, 2023, a decrease of $134.2 million from $259.9 million as of September 30, 2023. Relative to the fourth quarter of 2022, borrowings decreased $21.2 million from $146.9 million as of December 31, 2022. The change in borrowings from September 30, 2023 and December 31, 2022 is driven by a decline in FHLB borrowing reliance as a result of increased deposits.
Subordinated notes remained flat at $52.3 million as of December 31, 2023, compared to September 30, 2023. Subordinated notes increased $0.2 million from $52.1 million as of December 31, 2022.
Assets Under Management
Assets Under Management ("AUM") increased by $357.2 million during the fourth quarter to $6.75 billion as of December 31, 2023, compared to $6.40 billion as of September 30, 2023. This increase was primarily attributable to an increase in market values throughout the fourth quarter of 2023, resulting in an increase in the value of AUM balances. Total AUM increased by $646.0 million compared to December 31, 2022 from $6.11 billion, which was primarily attributable to improving market conditions year-over-year resulting in an increase in the value of AUM.
Credit Quality
Non-performing assets totaled $59.7 million, or 2.00% of total assets, as of December 31, 2023, compared to $56.1 million, or 1.87% of total assets, as of September 30, 2023. The increase was primarily attributable to two loans within the Construction and Development and Commercial and Industrial classifications moving to non-accrual during the fourth quarter of 2023, totaling $3.9 million. As of December 31, 2022, non-performing assets totaled $12.3 million, or 0.43% of total assets. Relative to the fourth quarter of 2022, the increase in non-performing assets was driven primarily by the addition of $42.2 million in loans during the third quarter of 2023.
During the fourth quarter of 2023 the Company recorded a provision expense of $3.9 million, compared to a provision expense of $0.3 million in the third quarter of 2023 and a $1.2 million provision expense in the fourth quarter of 2022. The provision expense recorded in the fourth quarter of 2023 reflects an increase in allowance on pooled loans driven primarily by loan growth, as well as an allowance established on individually analyzed loans that were downgraded to non-performing in a prior quarter and two loans downgraded to non-performing in the fourth quarter of 2023, partially offset by a provision release related to a net decrease in off-balance sheet commitments.
Capital
As of December 31, 2023, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of December 31, 2023, the Bank was classified as “well capitalized,” as summarized in the following table:
December 31, 2023 Consolidated Capital Tier 1 capital to risk-weighted assets 9.48 % Common Equity Tier 1 ("CET1") to risk-weighted assets 9.48 Total capital to risk-weighted assets 12.82 Tier 1 capital to average assets 7.89 Bank Capital Tier 1 capital to risk-weighted assets 10.62 CET1 to risk-weighted assets 10.62 Total capital to risk-weighted assets 11.69 Tier 1 capital to average assets 8.83
Book value per common share decreased 0.2% from $25.76 as of September 30, 2023 to $25.70 as of December 31, 2023. The fourth quarter of 2023 included a decrease of $0.6 million in accumulated other comprehensive income due to the effect of our cash flow hedge of certain FHLB borrowings. Book value per common share increased 1.3% from $25.37 as of December 31, 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) decreased 0.2% from $22.42 as of September 30, 2023, to $22.37 as of December 31, 2023. Tangible book value per common share increased 1.7% from $21.99 as of December 31, 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 PresentationThe Company will host a conference call and webcast at 10:00 a.m. MT/ 12:00 p.m. ET on Friday, January 26, 2024. Telephone access: https://register.vevent.com/register/BI06726eadbe6744a39e0d0f89507793ba
A slide presentation relating to the fourth 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.
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.
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.comFirst Western Financial, Inc.
Consolidated Financial Summary (unaudited)Three Months Ended December 31, September 30, December 31, (Dollars in thousands, except per share amounts) 2023 2023 2022 Interest and dividend income: Loans, including fees $ 35,625 $ 34,141 $ 30,349 Loans accounted for under the fair value option 257 300 488 Investment securities 600 607 645 Interest-bearing deposits in other financial institutions 1,350 1,292 931 Dividends, restricted stock 161 141 238 Total interest and dividend income 37,993 36,481 32,651 Interest expense: Deposits 19,037 17,467 8,260 Other borrowed funds 2,625 2,248 2,403 Total interest expense 21,662 19,715 10,663 Net interest income 16,331 16,766 21,988 Less: provision for credit losses(1) 3,942 329 1,197 Net interest income, after provision for credit losses(1) 12,389 16,437 20,791 Non-interest income: Trust and investment management fees 4,705 4,846 4,358 Net gain on mortgage loans 379 654 629 Net loss on loans held for sale — — (12 ) Bank fees 412 427 812 Risk management and insurance fees 544 145 924 Income on company-owned life insurance 101 96 88 Net loss on loans accounted for under the fair value option (91 ) (252 ) (602 ) Unrealized loss recognized on equity securities (2 ) (19 ) — Other 33 202 218 Total non-interest income 6,081 6,099 6,415 Total income before non-interest expense 18,470 22,536 27,206 Non-interest expense: Salaries and employee benefits 9,988 10,968 11,679 Occupancy and equipment 1,937 1,807 1,910 Professional services 1,990 1,867 2,027 Technology and information systems 928 906 1,168 Data processing 1,189 1,159 1,223 Marketing 415 355 500 Amortization of other intangible assets 62 62 77 Net gain on sale of other real estate owned — — (3 ) Other 1,767 1,190 1,324 Total non-interest expense 18,276 18,314 19,905 Income before income taxes 194 4,222 7,301 Income tax (benefit)/expense (61 ) 1,104 1,830 Net income available to common shareholders $ 255 $ 3,118 $ 5,471 Earnings per common share: Basic $ 0.03 $ 0.33 $ 0.58 Diluted 0.03 0.32 0.56 ____________________
(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.First Western Financial, Inc.
Consolidated Financial Summary (unaudited)December 31, September 30, December 31, (Dollars in thousands) 2023 2023 2022 Assets Cash and cash equivalents: Cash and due from banks $ 7,284 $ 6,439 $ 4,926 Interest-bearing deposits in other financial institutions 247,158 265,045 191,586 Total cash and cash equivalents 254,442 271,484 196,512 Held-to-maturity securities, at amortized cost (fair value of $66,617, $66,487 and $74,718, respectively), net of allowance for credit losses 74,102 75,539 81,056 Correspondent bank stock, at cost 7,155 11,305 7,110 Mortgage loans held for sale, at fair value 7,254 12,105 8,839 Loans held for sale, at fair value — — 1,965 Loans (includes $13,726, $15,464, and $23,321 measured at fair value, respectively) 2,539,466 2,530,459 2,469,413 Allowance for credit losses(1) (27,931 ) (23,175 ) (17,183 ) Loans, net 2,511,535 2,507,284 2,452,230 Premises and equipment, net 25,256 25,410 25,118 Accrued interest receivable 11,428 11,633 10,445 Accounts receivable 5,095 5,292 4,873 Other receivables 2,457 3,052 1,973 Goodwill and other intangible assets, net 31,854 31,916 32,104 Deferred tax assets, net 7,339 6,624 6,914 Company-owned life insurance 16,530 16,429 16,152 Other assets 24,490 24,680 21,457 Total assets $ 2,978,937 $ 3,002,753 $ 2,866,748 Liabilities Deposits: Noninterest-bearing $ 482,579 $ 476,308 $ 583,092 Interest-bearing 2,046,460 1,943,688 1,822,137 Total deposits 2,529,039 2,419,996 2,405,229 Borrowings: Federal Home Loan Bank and Federal Reserve borrowings 125,711 259,930 146,886 Subordinated notes 52,340 52,279 52,132 Accrued interest payable 3,793 3,203 1,125 Other liabilities 21,842 21,089 20,512 Total liabilities 2,732,725 2,756,497 2,625,884 Shareholders’ Equity Total shareholders’ equity 246,212 246,256 240,864 Total liabilities and shareholders’ equity $ 2,978,937 $ 3,002,753 $ 2,866,748 ____________________
(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.First Western Financial, Inc.
Consolidated Financial Summary (unaudited)December 31, September 30, December 31, (Dollars in thousands) 2023 2023 2022 Loan Portfolio Cash, Securities, and Other(1) $ 140,053 $ 148,669 $ 165,670 Consumer and Other 23,596 23,975 26,539 Construction and Development 347,515 349,436 288,497 1-4 Family Residential 933,684 913,085 898,154 Non-Owner Occupied CRE 546,966 527,377 496,776 Owner Occupied CRE 197,205 208,341 216,056 Commercial and Industrial 345,393 349,515 361,028 Total 2,534,412 2,520,398 2,452,720 Loans accounted for under the fair value option 14,129 16,105 23,415 Total loans held for investment 2,548,541 2,536,503 2,476,135 Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net(2) (9,075 ) (6,044 ) (6,722 ) Loans (includes $13,726, $15,464, and $23,321 measured at fair value, respectively) $ 2,539,466 $ 2,530,459 $ 2,469,413 Mortgage loans held for sale 7,254 12,105 8,839 Loans held for sale — — 1,965 Deposit Portfolio Money market deposit accounts $ 1,386,149 $ 1,388,726 $ 1,336,092 Time deposits 496,452 373,459 224,090 Negotiable order of withdrawal accounts 147,488 164,000 234,778 Savings accounts 16,371 17,503 27,177 Total interest-bearing deposits 2,046,460 1,943,688 1,822,137 Noninterest-bearing accounts 482,579 476,308 583,092 Total deposits $ 2,529,039 $ 2,419,996 $ 2,405,229 ____________________
(1) Includes PPP loans of $4.3 million as of December 31, 2023, $4.9 million as of September 30, 2023, and $7.1 million as of December 31, 2022.
(2) Includes fair value adjustments on loans held for investment accounted for under the fair value option.First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)As of or for the Three Months Ended December 31, September 30, December 31, (Dollars in thousands) 2023 2023 2022 Average Balance Sheets Assets Interest-earning assets: Interest-bearing deposits in other financial institutions $ 104,789 $ 102,510 $ 103,190 Federal funds sold — — — Investment securities 76,331 78,057 84,017 Correspondent bank stock 7,576 7,162 11,880 Loans 2,536,379 2,502,419 2,436,273 Interest-earning assets 2,725,075 2,690,148 2,635,360 Mortgage loans held for sale 9,915 12,680 9,065 Total interest-earning assets, plus mortgage loans held for sale 2,734,990 2,702,828 2,644,425 Allowance for credit losses(1) (23,352 ) (22,122 ) (16,724 ) Noninterest-earning assets 126,122 125,774 125,355 Total assets $ 2,837,760 $ 2,806,480 $ 2,753,056 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 1,914,856 $ 1,846,318 $ 1,582,587 FHLB and Federal Reserve borrowings 139,316 125,250 212,693 Subordinated notes 52,299 52,242 38,335 Total interest-bearing liabilities 2,106,471 2,023,810 1,833,615 Noninterest-bearing liabilities: Noninterest-bearing deposits 456,787 512,956 659,076 Other liabilities 25,387 24,228 21,660 Total noninterest-bearing liabilities 482,174 537,184 680,736 Total shareholders’ equity 249,115 245,486 238,705 Total liabilities and shareholders’ equity $ 2,837,760 $ 2,806,480 $ 2,753,056 Yields/Cost of funds (annualized) Interest-bearing deposits in other financial institutions 5.11 % 5.00 % 3.57 % Investment securities 3.12 3.09 3.05 Correspondent bank stock 8.43 7.81 7.95 Loans 5.59 5.43 5.00 Mortgage loans held for sale 6.60 6.70 6.39 Total interest-earning assets 5.51 5.35 4.90 Interest-bearing deposits 3.94 3.75 2.07 Cost of deposits 3.18 2.94 1.46 FHLB and Federal Reserve borrowings 5.36 4.58 3.58 Subordinated notes 5.63 6.08 5.03 Total interest-bearing liabilities 4.08 3.86 2.31 Net interest margin 2.37 2.46 3.30 Net interest rate spread 1.43 1.49 2.59 ____________________
(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.First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)As of or for the Three Months Ended December 31, September 30, December 31, (Dollars in thousands, except share and per share amounts) 2023 2023 2022 Asset Quality Non-performing loans $ 59,675 $ 56,146 $ 12,349 Non-performing assets 59,675 56,146 12,349 Net charge-offs 44 190 95 Non-performing loans to total loans 2.34 % 2.21 % 0.50 % Non-performing assets to total assets 2.00 1.87 0.43 Allowance for credit losses to non-performing loans(3) 46.81 41.28 139.14 Allowance for credit losses to total loans(3) 1.10 0.92 0.70 Allowance for credit losses to adjusted loans(1)(3) 1.10 0.92 0.78 Net charge-offs to average loans(2) — 0.01 * Assets Under Management $ 6,752,981 $ 6,395,786 $ 6,106,973 Market Data Book value per share at period end 25.70 25.76 25.37 Tangible book value per common share(1) 22.37 22.42 21.99 Weighted average outstanding shares, basic 9,572,582 9,553,331 9,493,732 Weighted average outstanding shares, diluted 9,739,117 9,743,270 9,702,908 Shares outstanding at period end 9,581,183 9,560,209 9,495,440 Consolidated Capital Tier 1 capital to risk-weighted assets 9.48 % 9.32 % 9.28 % CET1 to risk-weighted assets 9.48 9.32 9.28 Total capital to risk-weighted assets 12.82 12.45 12.37 Tier 1 capital to average assets 7.89 7.96 7.81 Bank Capital Tier 1 capital to risk-weighted assets 10.62 10.42 10.29 CET1 to risk-weighted assets 10.62 10.42 10.29 Total capital to risk-weighted assets 11.69 11.31 11.06 Tier 1 capital to average assets 8.83 8.88 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.First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)Reconciliations of Non-GAAP Financial Measures As of or for the Three Months Ended December 31, September 30, December 31, (Dollars in thousands, except share and per share amounts) 2023 2023 2022 Tangible Common Total shareholders' equity $ 246,212 $ 246,256 $ 240,864 Less: goodwill and other intangibles, net 31,854 31,916 32,104 Tangible common equity $ 214,358 $ 214,340 $ 208,760 Common shares outstanding, end of period 9,581,183 9,560,209 9,495,440 Tangible common book value per share $ 22.37 $ 22.42 $ 21.99 Net income available to common shareholders 255 3,118 5,471 Return on tangible common equity (annualized) 0.48 % 5.82 % 10.48 % Efficiency Non-interest expense $ 18,276 $ 18,314 $ 19,905 Less: amortization 62 62 77 Less: acquisition related expenses 36 30 195 Adjusted non-interest expense $ 18,178 $ 18,222 $ 19,633 Total income before non-interest expense $ 18,470 $ 22,536 $ 27,206 Less: unrealized loss recognized on equity securities (2 ) (19 ) — Less: net loss on loans accounted for under the fair value option (91 ) (252 ) (602 ) Less: net loss on loans held for sale at fair value — — (12 ) Plus: provision for credit losses(1) 3,942 329 1,197 Gross revenue $ 22,505 $ 23,136 $ 29,017 Efficiency ratio 80.77 % 78.76 % 67.66 % Allowance for Credit Loss to Adjusted Loans Total loans held for investment 2,548,541 2,536,503 2,476,135 Less: loans acquired(2) — — 234,717 Less: PPP loans(3) 4,343 4,876 6,378 Less: loans accounted for under fair value 14,129 16,105 23,415 Adjusted loans $ 2,530,069 $ 2,515,522 $ 2,211,625 Allowance for credit losses(1) $ 27,931 $ 23,175 $ 17,183 Allowance for credit losses to adjusted loans(1) 1.10 % 0.92 % 0.78 % ___________________
(1) 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.
(2) As of December 31, 2023 and September 30, 2023, acquired loans totaling $212.3 million and $216.1 million, respectively, are included in the allowance for credit loss calculation and are therefore not removed in calculating adjusted total loans.
(3) As of December 31, 2023 and September 30, 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 December 31, 2022, the adjustment for PPP loans did not include acquired PPP loans, as those were already included in the loans acquired adjustment.First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)As of or for the Three Months Ended December 31, September 30, December 31, (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 $ 255 $ 3,118 $ 5,471 Plus: acquisition related expenses 36 30 195 Less: income tax impact from acquisition related expenses 9 8 49 Adjusted net income available to shareholders $ 282 $ 3,140 $ 5,617 Pre-Tax, Pre-Provision Net Income Income before income taxes $ 194 $ 4,222 $ 7,301 Plus: provision for credit losses 3,942 329 1,197 Pre-tax, pre-provision net income $ 4,136 $ 4,551 $ 8,498 Adjusted Basic Earnings Per Share Basic earnings per share $ 0.03 $ 0.33 $ 0.58 Plus: acquisition related expenses net of income tax impact * * 0.01 Adjusted basic earnings per share $ 0.03 $ 0.33 $ 0.59 Adjusted Diluted Earnings Per Share Diluted earnings per share $ 0.03 $ 0.32 $ 0.56 Plus: acquisition related expenses net of income tax impact * * 0.02 Adjusted diluted earnings per share $ 0.03 $ 0.32 $ 0.58 Adjusted Return on Average Assets (annualized) Return on average assets 0.04 % 0.44 % 0.79 % Plus: acquisition related expenses net of income tax impact * 0.01 0.03 Adjusted return on average assets 0.04 % 0.45 % 0.82 % Adjusted Return on Average Shareholders' Equity (annualized) Return on average shareholders' equity 0.41 % 5.08 % 9.17 % Plus: acquisition related expenses net of income tax impact 0.04 0.04 0.24 Adjusted return on average shareholders' equity 0.45 % 5.12 % 9.41 % Adjusted Return on Tangible Common Equity (annualized) Return on tangible common equity 0.48 % 5.82 % 10.48 % Plus: acquisition related expenses net of income tax impact 0.05 0.04 0.28 Adjusted return on tangible common equity 0.53 % 5.86 % 10.76 % * Represents an immaterial impact to adjusted earnings per share.
