First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — Investor Presentation (November 2021)
57 slides from First Western Financial's investor presentation, Nov 2, 2021
Slide 1: Investor Presentation November 2021
INVESTOR PRESENTATION November 2021
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
Office Locations 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 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 and 15% through first nine months of 2021 ▪ Cont
Slide 5: Strong Operational and Financial Momentum
$4,556 $5,795 $7,602 $10,854 $37,745 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 2016 2017 2018 2019 2020 2016-2020 Pre-Tax, Pre-Provision Income(1) ($000s) 5 Strong Operational and Financial Momentum ▪ Robust balance sheet growth ▪ Higher fee income driven by strengthened mort
Slide 6: Improving Earnings Driving Outperformance and Creating Shareholder Value
$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 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 6/30/2018 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 MYFW TBV/Sha
Slide 7: Franchise Overview
Franchise Overview z W Firstwestern
Slide 8: Great Markets, Scarce Investment Opportunity
8 Great Markets, Scarce Investment Opportunity ▪ Colorado (2020) ▪ #1 state for growth in personal income in 2019 ▪ #3 best state for business (24/7 Wall Street) ▪ #3 best state for entrepreneurs and start-ups (Motley Fool) ▪ Denver, Colorado (2020) ▪ #3 hottest job market (Wall Street Journal) ▪ #5
Slide 9: 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
$49.7 $54.3 $55.2 $57.8 $64.3 $97.3 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 $100.0 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Net Interest Income Non-Interest Income, excluding net gain/(loss) on sale of securities and assets 11 High Quality Revenues with Predictable Sources
Slide 12: Private Bank Model Generates Strong Fee Income
12 Private Bank Model Generates Strong Fee Income Half of Operating Revenue Generated by Fee Income 63.7% 52.6% 43.4% 43.1% 35.6% 32.5% 30.8% 28.5% 27.9% 27.6% 26.8% 24.7% 24.6% 21.8% 16.6% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% ALRS MYFW WASH UMBF BMTC PGC UVSP BPFH TSC SYBT CFR CATC TMP FF
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 ▪ Phoenix, AZ 2016 – 2020 (4) ▪ Broomfield, CO (2021) ▪ Greenwood Village, CO ▪ Lone
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 experience commercial banking talent Expand into new markets with attractive demograph
Slide 16: Strong Execution on Revenue Growth Strategies
16 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 continuing with pending acquisition of Teton Fina
Slide 17: Accelerating Business Development Trends
17 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 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 2016 2017 2018 2019 2020 $44.0 $62.2 $121.6 $149.0 $467.9 $0.0 $100.0 $200.0
Slide 18: Increased Scale and Back-Office Streamlining Driving Improved Efficiencies
18 Increased Scale and Back-Office Streamlining Driving Improved Efficiencies 90.4% 88.2% 85.4% 80.6% 60.5% 50.0% 60.0% 70.0% 80.0% 90.0% 2016 2017 2018 2019 2020 (1) See Non-GAAP reconciliation Efficiency Ratio(1)
Slide 19: Commercial Banking Driving Growth
▪ During 2020, expanded commercial banking team and added construction lending expertise ▪ Increase in commercial banking clients contributing to growth in total loans and low-cost deposits while improving overall diversification ▪ Stronger commercial banking platform complements private banking and
Slide 20: New Offices Ramping Up and Contributing to Organic Growth
20 New Offices Ramping Up and Contributing to Organic Growth ▪ New markets identified with large population of target clients ▪ Successfully recruiting experienced talent with deep relationships in new markets ▪ Effectively marketing First Western’s value proposition and cross-selling to expand rela
Slide 21: Non-Mortgage Segment Earnings
21 Non-Mortgage Segment Earnings (1) See Non-GAAP reconciliation $0.32 $0.67 $0.73 $0.85 $0.75 $1.61 $0.89 $0.99 $1.00 $1.03 $0.00 $0.50 $1.00 $1.50 $2.00 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Non-Mortgage Segment Consolidated ▪ Non-mortgage segment earnings reflects contribution of private bankin
Slide 22: Recent Financial Trends
Recent Financial Trends ae W Firstwestern
Slide 23: Overview of 3Q21
23 Overview of 3Q21 Improvement in Key Metrics Earnings Growth and Higher Returns Continued Growth in Private and Commercial Banking Operations ▪ Total loans held for investment, excluding PPP loans, increased 19% annualized from prior quarter ▪ Total deposits increased 6.1% from end of prior quarte
Slide 24: Net Income Available to Common Shareholders and Earnings per Share
24 Net Income Available to Common Shareholders and Earnings per Share ▪ Net income of $6.4 million, or $0.78 diluted earnings per share, in 3Q21 ▪ Excluding acquisition-related expenses, adjusted diluted earnings per share(1) of $0.81 in 3Q21, up from $0.77 in 2Q21 ▪ Strong profitability results in
Slide 25: Loan Portfolio
25 Loan Portfolio ▪ Total loans HFI increased $30.4 million, or 1.9% from prior quarter ▪ Excluding PPP loans, total loans HFI increased $70.9 million, or 19% annualized from prior quarter ▪ Continued strong loan production across multiple areas offsetting payoffs and PPP forgiveness ▪ Cash, Securit
Slide 26: Total Deposits
26 Total Deposits ▪ Total deposits increased $103.2 million from end of prior quarter ▪ Continued strong deposit inflows from new and existing clients ▪ Further improvement in deposit mix with noninterest-bearing deposits increasing to 33.5% of total deposits at 3Q21 from 30.2% at 3Q20 3Q 2020 2Q 20
Slide 27: Trust and Investment Management
27 Trust and Investment Management ▪ Total assets under management increased $143.8 million from June 30, 2021 to $6.91 billion at September 30, 2021 ▪ The increase in asset balances were driven by both account additions and new account growth as well as the continued improvement in market valuation
Slide 28: Paycheck Protection Program Overview
(1) All numbers represented do not include the impact of taxes (2) The deferred loan origination expenses are recorded in non-interest expenses (Salaries and Benefits) and amortized through net interest income (3) Includes $1.6 million in SBA fee income less $0.4 million of deferred loan origination
Slide 29: Gross Revenue
(1) See Non-GAAP reconciliation (2) Gross Revenue for Capital Management includes amounts for the fourth quarter of 2020 through the completion of the sale of the LA Fixed Income Team on November 16, 2020. Financial results after that date for the unsold portion are presented in Wealth Management. 2
Slide 30: Net Interest Income and Net Interest Margin
30 Net Interest Income and Net Interest Margin ▪ Net interest income increased 4.4% from 2Q21, primarily due to an increase in average loan balances and a higher net interest margin, partially offset by lower PPP fees ▪ Net interest margin, including PPP and purchase accretion, increased 13 bps to 3
Slide 31: Non-Interest Income
31 Non-Interest Income ▪ Non-interest income increased 10.5% from 2Q21 ▪ Trust and investment management fees up 3.2% from 2Q21, and up 7% over 3Q20, despite loss of approximately $0.4 million in fees per quarter related to LA Fixed Income Team sold in 4Q20 ▪ Increase in net gain on mortgage loans p
Slide 32: Mortgage Operations
32 Mortgage Operations ▪ Mortgage locks up 4% from prior quarter primarily reflects increase in seasonal purchases ▪ Refi/Purchase mix of 39/61% in 3Q21 compared to 49/51% in 2Q21 and 67/33% in 4Q20 ▪ Profit margin improved due to increased volume and expense reductions in mortgage operations $376.3
Slide 33: Non-Interest Expense and Efficiency Ratio
33 Non-Interest Expense and Efficiency Ratio ▪ Non-interest expense increased 6.1% from 2Q21 ▪ 3Q21 included approximately $0.3 million of acquisition-related expense ▪ Higher salaries and employee benefits expense due to increased bonus accruals resulting from strong loan and deposit production and
Slide 34: Asset Quality
34 Asset Quality ▪ Stable asset quality across the portfolio ▪ Immaterial net charge-offs again in the quarter ▪ $0.4 million provision for loan losses related to growth in total loans ▪ Non-performing assets increased by $1.2 million due to one commercial loan placed on non-accrual during the quart
Slide 35: Capital and Liquidity Overview
35 Capital and Liquidity Overview 10.66% 10.66% 14.37% 7.86% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% Tier 1 Capital to Risk-Weighted Assets CET1 to Risk- Weighted Assets Total Capital to Risk-Weighted Assets Tier 1 Capital to Average Assets Liquidity Funding Sources (as of 9/30/21)
Slide 36: Acquisition of Teton Financial Services, Inc.
Acquisition of Teton Financial Services, Inc. 36
Slide 37: Expansion Into a Growing Wyoming Region
37 Expansion Into a Growing Wyoming Region Strategic Rationale ▪ Acquisition of Teton Financial Services, Inc., holding company for Rocky Mountain Bank, creates a $2.4 billion financial institution with $1.9 billion in gross loans, $2.1 billion in deposits, and $7.2 billion in assets under managemen
Slide 38: Teton Financial Services, Inc. Overview
38 Teton Financial Services, Inc. Overview Company Overview Key Bank Level Financial Highlights ▪ Holding company for Rocky Mountain Bank ▪ Operates out of three branches in Jackson Hole, Pinedale and Rock Springs ▪ Primarily focused on real estate and C&I lending within the Wyoming region ▪ Offers
Slide 39: Pro Forma Loan and Deposit Composition
39 Pro Forma Loan and Deposit Composition Loan Composition Deposit Composition First Western Financial, Inc. Teton Financial Services, Inc. (1) Pro Forma + = + = Total Depos its : $1,807,825 Total Depos its : $384,600 Total Depos its : $2,192,425 Cos t of Depos its : 0.23% Cos t of Depos its : 0.22%
Slide 40: Transaction Structure
40 Transaction Structure Consideration ▪ 0.0466 shares of First Western and $0.39 in cash for each share of Teton Financial Services, Inc. ▪ Results in ~76% stock | ~24% cash mix Transaction Value(1) ▪ $1.62 per share ▪ $47.8 million aggregate transaction value Pro Forma Ownership ▪ Fixed exchange r
Slide 41: Key Transaction Assumptions
41 Key Transaction Assumptions Earnings Cost Savings Fair Market Value Adjustments Core Deposit Intangibles Other Assumptions ▪ Consensus estimates for First Western ▪ Management estimates for Teton Financial Services, Inc. ▪ ~$3.0 million, or 30.0% of Teton Financial Services, Inc.’s 2022e standalo
Slide 42: Creating Additional Shareholder Value
Creating Additional Shareholder Value 42
Slide 43: Near-Term Outlook
43 Near-Term Outlook ▪ Growth in commercial and private banking earnings will continue to replace outsized income generated by mortgage operations in 2020 ▪ Consistent pipeline and healthy demand should continue to drive organic loan growth across most areas of the portfolio ▪ Success in new busines
Slide 44: Long-Term Goals to Drive Shareholder Value
44 Long-Term Goals to Drive Shareholder Value ▪ Drive to $5 billion in total assets, $25 billion TIM assets through both organic growth and acquisitions ▪ ~50 offices ▪ $7-8 million in revenue per office ▪ 60% contribution margin per office ▪ Build footprint, scale and operating leverage with M&A ▪
Slide 45: Core Strengths Provide the Foundation for Driving Shareholder Value
MYFW’s core strengths provide the foundation for driving shareholder value 45 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 46: Appendix
Appendix a W Firstwestern
Slide 47: Organizational Overview
Organizational Overview ie W Firstwestern
Slide 48: Management Team
Name Title Joined FW Years in Industry Prior Experience Scott C. Wylie Chairman, CEO & President 2002 34 ▪ 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 49: 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 50: Integrated Team Approach in Boutique Offices
Working as a team to grow relationships 50 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 51: Organizational Structure Built for Scale
51 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 ▪ Scottsdale, AZ ▪ Broomfield, CO (2021) ▪ Lone Tree, CO ▪ Phoenix, AZ ▪ Vail Valley, Avon, CO Loan Production Offi
Slide 52: Non-GAAP Reconciliations
Non-GAAP Reconciliations 52
Slide 53: Consolidated Tangible Common Book Value Per Share
53 Non-GAAP Reconciliation Consolidated Tangible Common Book Value Per Share As of the Three Months Ended, (Dollars in thousands) June 30, 2018 Sep. 30, 2018 Dec. 31, 2018 March 31, 2019 June 30, 2019 Sep. 30, 2019 Dec. 31, 2019 March 31, 2020 June 30, 2020 Sep. 30, 2020 Dec. 31, 2020 March 31, 2021
Slide 54: Segment Gross Revenue
54 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 Total income before non-interest expense $16,232 $17,973 $18,471 $19,782 $20,438 Plus: Provision for loan
Slide 55: Adjusted Net Income and Earnings per Share
55 Non-GAAP Reconciliation Adjusted net income available to common shareholders For the Three Months Ended, (Dollars in thousands, except per share data) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021 Net income available to common shareholders $9,630 $4,874 $5,
Slide 56: Adjusted Net Interest Margin
56 Non-GAAP Reconciliation Adjusted net interest margin For the Three Months Ended December 31, 2020 For the Three Months Ended March 31, 2021 For the Three Months Ended June 30, 2021 For the Three Months Ended September 30, 2021 (Dollars in thousands) Average Balance Interest Earned/Paid Average Yi
Slide 57: Consolidated Gross Revenue and Efficiency Ratio
57 Non-GAAP Reconciliation Consolidated Gross Revenue For the Years Ended, (Dollars in thousands) 2015 2016 2017 2018 2019 2020 Total income before non-interest expense $49,339 $53,394 $54,501 $57,617 $63,976 $92,600 Less: Net gain on sale of securities 717 114 81 - 119 - Less: Net gain on sale of a
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