First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — Investor Presentation (August 2023)
50 slides from First Western Financial's investor presentation, Aug 4, 2023
Slide 1: Investor Presentation August 2023
INVESTOR PRESENTATION August 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
6 Consistent Value Creation TBV/Share(1) Up 140% Since July 2018 IPO Consistent increases in tangible book value per share driven by: • Organic growth that has increased operating leverage • Accretive acquisitions that have been well priced and smoothly integrated to realize all projected cost savin
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: 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 2Q23
22 Overview of 2Q23 1. See Non-GAAP reconciliation Prudent Risk Management 2Q23 Earnings Stable Balance Sheet • Total deposits relatively unchanged from end of prior quarter • Noninterest-bearing deposits increased during the month of June • 4% annualized loan growth while maintaining conservative u
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 $1.5 million, or $0.16 diluted earnings per share, in 2Q23 • Including the impact of impairment to contingent consideration assets, adjusted net income(1) of $2.4 million in 2Q23 • Profitability and prudent balance
Slide 24: Loan Portfolio
24 Loan Portfolio • Total loans held for investment increased $26.8 million from prior quarter • Growth driven by CRE loans and draws on existing construction lines • Average rate on new loan production increased 23 bps to 7.41% compared to prior quarter, and was 7.79% in June 2Q 2022 1Q 2023 2Q 202
Slide 25: Total Deposits
25 Total Deposits • Noninterest-bearing deposits increased during the month of June • Success in new business development, with $37.4 million in new deposit relationships added in 2Q23, lessened the typical seasonal impact of outflows from tax payments • Continued but slower migration of noninterest
Slide 26: Trust and Investment Management
26 Trust and Investment Management • Total assets under management increased $121.9 million from March 31, 2023 to $6.50 billion as of June 30, 2023 • Client accounts benefited from improved market conditions in the second quarter • Excluding custody, all product categories increased quarter-over-qu
Slide 27: Gross Revenue
1. See Non-GAAP reconciliation Gross Revenue • Gross revenue(1) declined 5.0% from prior quarter • Decrease primarily driven by a decrease in net interest income as a result of higher interest expense driven by higher deposit costs, offset partially by higher interest income • Net interest income de
Slide 28: Net Interest Income and Net Interest Margin
28 Net Interest Income and Net Interest Margin • Net interest income decreased to $18.4 million, or 5.8%, from $19.6 million in 1Q23 • Net interest income decreased from 1Q23 due to higher interest expense resulting from increase in average cost of deposits • Net interest margin decreased 20 bps to
Slide 29: Non-Interest Income
29 Non-Interest Income • Non-interest income decreased to $4.0 million, or 31.9%, from $5.8 million in 1Q23, primarily due to a $1.2 million impairment to carrying value of contingent consideration assets related to the sale of First Western Capital Management in 2020. The decrease to Non-interest i
Slide 30: Non-Interest Expense and Efficiency Ratio
30 Non-Interest Expense and Efficiency Ratio • Non-interest expense decreased 9.8% from 1Q23 • Decrease in expense levels resulted from intentional delays in new initiatives and staffing reductions implemented in the first quarter and in April to better align with current revenue • Disciplined expen
Slide 31: Asset Quality
31 Asset Quality • NPAs declined 18% from prior quarter due to full payoffs on two non-performing loans • $1.8 million provision for credit losses driven primarily by an allowance recorded on individually analyzed loan previously identified as non-performing loan • ACL/Adjusted Total Loans(1) increa
Slide 32: Capital and Liquidity Overview
32 Capital and Liquidity Overview Liquidity Funding Sources (as of 6/30/23) 1. See Non-GAAP reconciliation 2. Based on internal policy guidelines Consolidated Capital Ratios (as of 6/30/23) Tangible Common Equity / TBV per Share(1) (in thousands) Liquidity Reserves: Total Available Cash $295,909 Unp
Slide 33: Creating Additional Shareholder Value
Creating Additional Shareholder Value 33
Slide 34: Near-Term Outlook
34 Near-Term Outlook • Prudent risk management will remain top priority while economic uncertainty remains, which will impact level of profitability in short term • Loan growth expected to remain at lower level in near future, although unfunded commitments provides potential catalyst for higher leve
Slide 35: Long-Term Goals to Drive Shareholder Value
35 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 36: MYFW's core strengths provide the foundation for driving shareholder value
MYFW’s core strengths provide the foundation for driving shareholder value 36 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 37: Appendix
Appendix 37 W FirSTwestern
Slide 38: Organizational Overview
Organizational Overview 38 W FirSTwestern
Slide 39: 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 40: 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 41: Integrated Team Approach in Boutique Offices
Working as a team to grow relationships 41 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 42: Organizational Structure Built for Scale
42 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 43: Non-GAAP Reconciliations
Non-GAAP Reconciliations 43
Slide 44: Non-GAAP Reconciliation: Gross Revenue and Pre-Tax, Pre-Provision Income
44 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 45: Non-GAAP Reconciliation: Efficiency Ratio
45 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 46: Non-GAAP Reconciliation: Diluted Pre-Tax Earnings Per Share
Non-GAAP Reconciliation Diluted Pre-Tax Earnings Per Share (Dollars in thousands) June 30,2022 September 30,2023 December 31,2022 March31,2023 June 30, 2023 Non-Mortgage income before income tax $6,926 $9,034 $8,168 $5,971 $2,429 Plus: Acquisition-related expenses 347 154 195 37 14 Plus: Impairment
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 June 30, 2022 Dec. 31, 2022 June 30, 2023 Total shareholders' equity $116,875 $127,678 $154,962 $219,041 $228,024 $240,864 $242,242 Less:
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) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Total income before non-interest expense $25,281 $26,555 $26,623 $24,543 $19,529 Less: unrealized gains/(losse
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) June 30, 2022 September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 Net income available to common shareholders $4,482 $6,221 $5,471 $
Slide 50: Non-GAAP Reconciliation: Adjusted Net Interest Margin
50 Non-GAAP Reconciliation Adjusted net interest margin 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 For the Three Months Ended June 30, 2023 (Dollars in thousands) Averag
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