First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — Investor Presentation (May 2023)
51 slides from First Western Financial's investor presentation, May 12, 2023
Slide 1: Investor Presentation May 2023
INVESTOR PRESENTATION May 2023
Slide 2: Safe Harbor
Safe Harbor 2 This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect the current views of First Western Financial
Slide 3: An Emerging High Performing Institution
3 An Emerging High Performing Institution Overview ▪ Niche-focused regional wealth manager built on a private trust bank platform ▪ Headquartered in Denver, Colorado and positioned in desirable, affluent and high growth markets Target Market ▪ Households of $1+ million liquid net worth ▪ High net wo
Slide 4: Investment Highlights
4 Investment Highlights Proven Execution on Growth Strategies Attractive Markets and Business Model Strong Earnings Momentum ▪ Significant revenue growth driving improved operating leverage and higher profitability ▪ TBV/share(1) increased 25% in 2020, 21% in 2021, and 11% in 2022 ▪ Continued scale
Slide 5: Strong Operational and Financial Momentum
$4,556 $5,795 $7,602 $10,854 $38,429 $32,611 $33,733 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 2016 2017 2018 2019 2020 2021 2022 2016-2020 Pre-Tax, Pre-Provision Income(1) ($000s) 5 Strong Operational and Financial Momentum ▪ Robust organic balance sheet growth ▪ Accretive a
Slide 6: Consistent Value Creation
$9.19 $11.14 $11.50 $11.88 $12.38 $12.83 $13.15 $13.39 $14.13 $15.38 $16.44 $17.24 $17.98 $18.85 $19.87 $20.25 $20.65 $21.35 $21.99 $22.41 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 $22.00 $24.00 MYFW TBV/Share 6 Consistent Value Creation (1) See Non-GAAP reconciliation (2) Excludes a $0.56 dec
Slide 7: Franchise Overview
Franchise Overview W FirSTwestern
Slide 8: Great Markets, Scarce Investment Opportunity
8 Great Markets, Scarce Investment Opportunity ▪ Ranked among states with highest GDP growth ▪ Strong job and population growth ▪ Experiencing significant in-migration ▪ Attractive demographics with large amount of high net worth individuals that utilize private banking and investment management ser
Slide 9: MYFW: Our Five Core Strengths
9 MYFW: Our Five Core Strengths Differentiated, Proven in the Marketplace Built-in Operating Leverage Highly Desirable Recurring Fee Income Experienced, Tested Team Unique Opportunity for Investors ▪ Niche-focused franchise headquartered in Denver, Colorado ▪ Well-positioned in many attractive marke
Slide 10: Cross-Selling a Diverse Set of Products and Services
▪ Corporate loans to match specific needs ▪ Well-versed in working with complex cash flows and business models ▪ Customized treasury management products and services 10 Cross-Selling a Diverse Set of Products and Services Commercial Banking ▪ Fiduciary wealth management with expert review of client
Slide 11: High Quality Revenues with Predictable Sources of Recurring Income
$54.3 $55.2 $57.8 $64.3 $97.3 $96.2 $112.2 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Net Interest Income Non-Interest Income, excluding net gain/(loss) on sale of securities and assets 11 High Quality Revenues with Predictable Sources of Recur
Slide 12: Private Bank Model Generates Strong Fee Income
12 Private Bank Model Generates Strong Fee Income 5-Year Average: More than 40% of Operating Revenue Generated by Fee Income 59.4% 43.3% 37.4% 35.1% 30.9% 28.5% 27.8% 27.7% 26.3% 25.7% 19.5% 17.5% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% ALRS MYFW UMBF WASH PGC UVSP CATC SYBT CFR TMP FFWM FRC
Slide 13: Driving Profitable Growth
Driving Profitable Growth 13
Slide 14: Success in Expansion and Acquisition Growth
14 Success in Expansion and Acquisition Growth 2006 – 2010 (3) ▪ Boulder, CO ▪ Century City, CA ▪ Scottsdale, AZ 2011 – 2015 (6) ▪ Aspen, CO ▪ DTC/Cherry Hills, CO ▪ Fort Collins, CO ▪ Jackson Hole, WY ▪ Laramie, WY(4) ▪ Phoenix, AZ 2016 – 2020 (4) ▪ Broomfield, CO (2021) ▪ Greenwood Village, CO ▪ L
Slide 15: Revenue Growth Strategies
15 Revenue Growth Strategies Expand commercial loan production platform ▪ Building expertise in specific vertical markets, e.g. medical and dental practices ▪ Capitalize on growing reputation to attract additional experienced commercial banking talent Expand into new markets with attractive demograp
Slide 16: Recent M&A Transactions
16 Recent M&A Transactions Branch Purchase and Assumption Whole Bank Acquisition ▪ Closed on May 18, 2020 ▪ Acquisition of all of the Denver locations of Simmons Bank (three branches and one loan production office) ▪ Assumed $63 million in deposits and $120 million in loans related to the acquired l
Slide 17: Strong Execution on Revenue Growth Strategies
17 Strong Execution on Revenue Growth Strategies ▪ Accelerating business development, office expansion and accretive acquisitions all contributing to the balance sheet growth driving improved operating leverage and higher profitability ▪ M&A strategy continued with acquisition of Teton Financial Ser
Slide 18: Accelerating Business Development Trends
18 Accelerating Business Development Trends Capital raised in July 2018 IPO has allowed for increased business development activities $227.9 $268.2 $225.6 $317.9 $691.7 $561.2 $918.7 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 $900.0 $1,000.0 2016 2017 2018 2019 2020 2021 2022 $44.0
Slide 19: Increased Scale and Back-Office Streamlining Driving Improved Efficiencies
19 Increased Scale and Back-Office Streamlining Driving Improved Efficiencies 88.2% 85.4% 80.6% 59.8% 66.6% 69.2% 50.0% 60.0% 70.0% 80.0% 90.0% 2017 2018 2019 2020 2021 2022 (1) See Non-GAAP reconciliation Efficiency Ratio(1)
Slide 20: Wealth Management Segment Earnings
20 Wealth Management Segment Earnings (1) See Non-GAAP reconciliation ▪ Wealth Management segment earnings reflects contribution of private banking, commercial banking, and trust and investment management business lines ▪ Growth in private banking, commercial banking, and TIM businesses replacing ea
Slide 21: Recent Financial Trends
Recent Financial Trends 21 W FirSTwestern
Slide 22: Overview of 1Q23
22 Overview of 1Q23 1Q23 Earnings Stable Balance Sheet • Strong relationship deposits with below peer level of uninsured deposits $891.5 million(2) or 37.3% in 1Q23 • $1.5 billion of readily available liquidity funding sources as of 1Q23 • Low amount of held-to-maturity securities at 2.7% of total a
Slide 23: Net Income Available to Common Shareholders and Earnings per Share
23 Net Income Available to Common Shareholders and Earnings per Share • Net income of $3.8 million, or $0.39 diluted earnings per share, in 1Q23 • Continued profitability and prudent balance sheet management resulted in book value and tangible book value per share(1) increasing by 6.5% and 7.9%, res
Slide 24: Loan Portfolio
24 Loan Portfolio • Total loans held for investment decreased $1.1 million from prior quarter • Total loans impacted by disposition of $40.9 million of non- relationship loans • Average rate on new loan production increased by 125 bps from prior quarter 1Q 2022 4Q 2022 1Q 2023 Cash, Securities and O
Slide 25: CRE Loan Portfolio Characteristics
CRE Loan Portfolio Characteristics • Conservatively underwritten, well diversified CRE loan portfolio • Multi Family comprise the largest percentage at 16.3% of total CRE loans ($123.7 million) and 5.0% of total loan portfolio • Office CRE loans represent just 11.1% of total CRE loans and 3.4% of to
Slide 26: Total Deposits
26 Total Deposits • Average Interest-bearing deposits up 14% from 4Q22 and average total deposit balances up 5% in 1Q23 • Total deposits declined $71 million in January primarily due to client liquidity events, followed by net deposit inflows of $29 million in February and $29 million in March • Lim
Slide 27: Trust and Investment Management
27 Trust and Investment Management • Total assets under management increased $275.1 million from December 31, 2022 to $6.38 billion as of March 31, 2023 • Client accounts benefited from improved market conditions in the first quarter • All five product categories increased quarter-over-quarter (in m
Slide 28: Gross Revenue
1. See Non-GAAP reconciliation Gross Revenue • Gross revenue(1) declined 10.1% from prior quarter, primarily driven by an increase in the cost of interest- bearing liabilities, partially offset by growth in interest-earning assets • Net interest income up $1.1 million or 5.8% from 1Q22 • Non-interes
Slide 29: Net Interest Income and Net Interest Margin
29 Net Interest Income and Net Interest Margin • Net interest income decreased to $19.6 million, or 10.4%, from $21.8 million in 4Q22, but increased 5.8% from $18.5 million in 1Q22 • Interest income up $14.8 million or 74.6% compared to 1Q22. Interest expense increased $13.8 million or 997% • Net in
Slide 30: Non-Interest Income
30 Non-Interest Income • Non-interest income decreased 11.3% from 4Q22, primarily due to seasonally lower risk management and insurance fees • Trust and Investment Management fees increased 6.4% from 4Q22 • Net gain on mortgage loans decreased from 1Q22 but increased from 4Q22 as the impact of loan
Slide 31: Non-Interest Expense and Efficiency Ratio
31 Non-Interest Expense and Efficiency Ratio • Non-interest expense increased 3.1% from 4Q22 • Increase primarily due to an increase in Salary and employee benefits, driven by the seasonality of payroll taxes in addition to lower deferred compensation due to fewer loan originations, partially offset
Slide 32: Asset Quality
32 Asset Quality • CECL accounting standard adopted on January 1, 2023 with ACL/Total Loans of 84 bps and 47 bps coverage on off-balance sheet commitments. Total decrease to retained earnings of $5.3 million, net of tax impact ◦ Provision related to purchased loans upon adoption totaled $2.5 million
Slide 33: Capital and Liquidity Overview
33 Capital and Liquidity Overview Liquidity Funding Sources (as of 3/31/23) 1. See Non-GAAP reconciliation 2. Based on internal policy guidelines Consolidated Capital Ratios (as of 3/31/23) Tangible Common Equity / TBV per Share(1) (in thousands) Liquidity Reserves: Total Available Cash $293,570 Unp
Slide 34: Creating Additional Shareholder Value
Creating Additional Shareholder Value 34
Slide 35: Near-Term Outlook
35 Near-Term Outlook • Prudent risk management will remain top priority while economic uncertainty remains, which will impact level of profitability in short term • We expect strength of balance sheet will enable First Western to capitalize on current turmoil in banking industry to add new clients a
Slide 36: Long-Term Goals to Drive Shareholder Value
36 Long-Term Goals to Drive Shareholder Value ▪ Since our pre-2018 IPO status as of year end 2017, we have tripled total loans and total deposits, more than doubled TBV per share, had substantial increases in annual revenue, and demonstrated significant operating leverage. Looking forward we can dri
Slide 37: MYFW's core strengths provide the foundation for driving shareholder value
MYFW’s core strengths provide the foundation for driving shareholder value 37 A Unique and Attractive Investment Differentiated, Proven in the Marketplace Built-in Operating Leverage Highly Desirable Recurring Fee Income Experienced, Tested Team Unique Opportunity for Investors
Slide 38: Appendix
Appendix 38 W FirSTwestern
Slide 39: Organizational Overview
Organizational Overview 39 W FirSTwestern
Slide 40: Management Team
Name Title Joined FW Years in Industry Prior Experience Scott C. Wylie Chairman, CEO & President 2002 35 ▪ Chairman & CEO, Northern Trust Bank of Colorado ▪ Chairman & CEO, Trust Bank of Colorado ▪ CEO, Equitable Bancshares of Colorado and Women’s Bank, Chairman, Equitable Bank ▪ Chairman, American
Slide 41: Board of Directors
Name Director Since Primary Business Scott C. Wylie 2002 ▪ First Western Financial, Inc. Julie A. Caponi, CPA 2017 ▪ Former Finance Executive at Arconic, Inc. (fka Alcoa Inc.) ▪ Former audit partner at Deloitte ▪ Board member & Audit Committee chair for FCF (NYSE) Julie A. Courkamp 2021 ▪ First West
Slide 42: Integrated Team Approach in Boutique Offices
Working as a team to grow relationships 42 Integrated Team Approach in Boutique Offices President Private Bankers Lenders Portfolio Managers Wealth Advisor Trust Officer Team-based incentives Relationship-based wealth management Many relationship managers to one client Product group specialists Holi
Slide 43: Organizational Structure Built for Scale
43 Organizational Structure Built for Scale Full Bank and Trust: ▪ Aspen, CO ▪ Boulder, CO ▪ Cherry Creek, CO ▪ Denver, CO ▪ DTC/Cherry Hills, CO ▪ Northern Colorado ▪ Jackson Hole, WY ▪ Rock Springs, WY ▪ Pinedale, WY ▪ Scottsdale, AZ ▪ Broomfield, CO ▪ Phoenix, AZ ▪ Vail Valley, Avon, CO Loan Prod
Slide 44: Non-GAAP Reconciliations
Non-GAAP Reconciliations 44
Slide 45: Non-GAAP Reconciliation: Gross Revenue and Pre-Tax, Pre-Provision Income
45 Non-GAAP Reconciliation Consolidated Gross Revenue For the Years Ended, (Dollars in thousands) 2016 2017 2018 2019 2020 2021 2022 Total income before non-interest expense $53,394 $54,501 $57,602 $63,997 $92,615 $95,408 $107,934 Less: Unrealized gains/(losses) recognized on equity securities - - (
Slide 46: Non-GAAP Reconciliation: Efficiency Ratio
46 Non-GAAP Reconciliation Consolidated Efficiency Ratio For the Years Ended, (Dollars in thousands) 2016 2017 2018 2019 2020 2021 2022 Non-interest expense $49,823 $49,494 $50,182 $53,806 $59,552 $68,128 $79,106 Less: Amortization 747 784 831 374 14 17 308 Less: Acquisition related expenses - - - -
Slide 47: Non-GAAP Reconciliation: Tangible Common Book Value Per Share
47 Non-GAAP Reconciliation Consolidated Tangible Common Book Value Per Share As of, (Dollars in thousands) Dec. 31, 2018 Dec. 31, 2019 Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2022 March 31, 2023 Total shareholders' equity $116,875 $127,678 $154,962 $219,041 $240,864 $239,822 Less: Goodwill and other in
Slide 48: Non-GAAP Reconciliation: Wealth Management Gross Revenue
48 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 Total income before non-interest expense $24,156 $25,282 $26,555 $26,623 $25,092 Less: unrealized gains/(loss
Slide 49: Non-GAAP Reconciliation: Adjusted Net Income
49 Non-GAAP Reconciliation Adjusted net income available to common shareholders For the Three Months Ended, (Dollars in thousands, except per share data) March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 Net income available to common shareholders $5,524 $4,482 $6,221
Slide 50: Non-GAAP Reconciliation
Non-GAAP Reconciliation June 30, 2022, | September 30,2022 | December 31, 2022 ] March 31,2023 Non-Mortgage income before income tax $6,926 $9,034 $8,168 $5,971 Plus: Acquisition-related expenses 347 154 195 37 Plus: Mortgage income before income tax (950) (799) (867) (810) Less: Income tax expense
Slide 51: Non-GAAP Reconciliation: Adjusted Net Interest Margin
51 Non-GAAP Reconciliation Adjusted net interest margin For the Three Months Ended March 31, 2022 For the Three Months Ended June 30, 2022 For the Three Months Ended September 30, 2022 For the Three Months Ended December 31, 2022 For the Three Months Ended March 31, 2023 (Dollars in thousands) Avera
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