First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — Investor Presentation (March 2021)
53 slides from First Western Financial's investor presentation, Mar 1, 2021
Slide 1: Investor Presentation March 2021
Investor Presentation March 2021
Slide 2: Forward-looking statements
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, Inc.’s (“Fir
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 ▪ Continued scale expected to drive further leve
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 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 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 MYFW TBV/Share 6 Improving Earnings Driving Outperformance and Creatin
Slide 7: Franchise Overview
Franchise Overview 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 – 2021 (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: Highly Accretive Branch Purchase and Assumption Expands Denver Presence
▪ Expected to be highly accretive to earnings ▪ 7-8% accretive in 2020, excluding pre-tax transaction charges(1) ▪ 15-16% accretive in 2021(1) ▪ Acquisition of all of the Denver locations of Simmons Bank (three branches and one loan production office) ▪ Three of the locations will be consolidated in
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: Non-Mortgage Segment Earnings Growth
20 Non-Mortgage Segment Earnings Growth (1) See Non-GAAP reconciliation $0.78 $1.52 $0.00 $0.50 $1.00 $1.50 $2.00 FY 2019 FY 2020 ▪ Strong balance sheet growth and improving operating leverage creating sustainable path to higher earnings and profitability over long-term ▪ Non-mortgage segment earnin
Slide 21: Recent Financial Trends
Recent Financial Trends “ W Firstwestern
Slide 22: Overview of 4Q20
22 Overview of 4Q20 Continued Strong Mortgage Activity Strong Year-Over-Year Revenue and Earnings Growth Balance Sheet Growth Driving Higher Spread Income ▪ Commercial banking initiative resulting in strong growth in commercial relationships, loans and deposits ▪ Total loans held-for-investment (HFI
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 $4.9 million, or $0.61 diluted earnings per share, in 4Q20 ▪ Balance sheet growth and increasing operating leverage continue to build sustainable path to improving profitability and returns ▪ Sale of LA fixed incom
Slide 24: Loan Portfolio
24 Loan Portfolio ▪ Total loans HFI increased $26.7 million, or 1.8% from prior quarter ▪ Excluding PPP loans, total loans HFI increased $89.9 million, or 6.0% from prior quarter ▪ Construction lending expertise added in 2020 providing another catalyst for loan growth ▪ Gross loan production of $201
Slide 25: Loan Portfolio Composition
Cash, Securities and Other (1) 23% 1 - 4 Family Residential 30% Non-Owner Occupied CRE 18% Construction and Development 9% Owner Occupied CRE 11% Commercial and Industrial 9% 25 Loan Portfolio Composition $1.5 Billion (as of 12/31/20) Commercial vs. Consumer Commercial 68% Consumer 32% (1) PPP loans
Slide 26: 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 $2.2 million in SBA fee income less $0.9 million of deferred loan origination
Slide 27: Total Deposits
27 Total Deposits ▪ Total deposits increased $56.2 million, or 3.6%, from end of prior quarter ▪ Growth attributable to increases in commercial DDA relationships accounts for 65.7% of all growth from 4Q19 ▪ Noninterest-bearing deposits more than doubled over the past year and increased to 29.7% of t
Slide 28: Trust and Investment Management
28 Trust and Investment Management ▪ Total assets under management increased $124.2 million from September 30, 2020 to $6.26 billion at December 31, 2020 ▪ Excluding the impact of sale of LA fixed income team (which reduced agency holdings by $330.6 million), AUM increased $454.8 million, or 7.4% fr
Slide 29: Gross Revenue
(1) See Non-GAAP reconciliation (2) Gross Revenue for the 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 Managemen
Slide 30: Net Interest Income and Net Interest Margin
30 Net Interest Income and Net Interest Margin ▪ Net interest income increased 4.2% from 3Q20, primarily due to PPP income and higher average loan balances ▪ Net interest margin, including PPP and purchase accretion, remained stable at 3.07% ▪ Net interest margin, excluding PPP and purchase accretio
Slide 31: Non-Interest Income
31 Non-Interest Income ▪ Non-interest income increased 21.0% from 4Q19 ▪ Increase primarily due to higher net gain on mortgage loans ▪ Trust & Investment Management fees increased from 3Q20 despite sale of LA fixed income team during 4Q20 ▪ Participated and funded six Main Street Lending Program loa
Slide 32: Mortgage Operations
32 Mortgage Operations ▪ Continued strong origination production ▪ Mortgage locks down from record level in 3Q20, 225.8% Q419 lock volume ▪ Operational constraints and margin compression limited profitability during 4Q20 ▪ Refi/Purchase mix of 67%/33% in 4Q20, compared to 59%/41% in 3Q20 and 64%/36%
Slide 33: Non-Interest Expense and Efficiency Ratio
33 Non-Interest Expense and Efficiency Ratio ▪ Non-interest expense decreased 6.1% from 3Q20 ▪ Decrease primarily due to lower salaries and employee benefits expense resulting from decrease in incentive compensation consistent with lower mortgage activity ▪ Occupancy and equipment cost decreased fol
Slide 34: Asset Quality
34 Asset Quality ▪ Positive asset quality trends across the portfolio ▪ Non-performing assets decreased by $6.2 million, and declined as a percentage of total assets to 0.22% from 0.53% in 3Q20 and 1.03% in 4Q20 ▪ Decline in NPAs primarily due to payoff of one large TDR that was refinanced by anothe
Slide 35: Asset Quality
35 Asset Quality ▪ $0.7 million provision expense reflects the growth in the loan portfolio ▪ Increased loan level reviews and portfolio monitoring continue through the duration of the pandemic ▪ Past due loans as a percentage of total loans declined from Q3 2020 0.6% 0.4% 0.5% 0.4% 0.2% 0.3% 0.0% 0
Slide 36: Capital and Liquidity Overview
36 Capital and Liquidity Overview 9.96% 9.96% 12.80% 7.45% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 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 12/31/20) Liquidi
Slide 37: Creating Additional Shareholder Value
Creating Additional Shareholder Value 37
Slide 38: 2021 Outlook and Priorities
38 2021 Outlook and Priorities ▪ Strong capital generation in 2020 provides support for continued organic and acquisition-related growth ▪ Progress made in strengthening commercial banking capabilities in 2020 creates strong foundation for 2021 growth ▪ Continue expanding commercial banking platform
Slide 39: Long-Term Goals to Drive Shareholder Value
39 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 40: Core strengths provide the foundation for driving shareholder value
MYFW’s core strengths provide the foundation for driving shareholder value 40 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 41: Appendix
Appendix 41
Slide 42: Organizational Overview
Organizational Overview x W Firstwestern
Slide 43: Management Team
Name Title Joined FW Years in Industry Prior Experience Scott C. Wylie Chairman, CEO & President 2002 33 ▪ 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 44: 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 45: Integrated Team Approach in Boutique Offices
Working as a team to grow relationships 45 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 46: Organizational Structure Built for Scale
46 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 Loan Production Offices: ▪ Ft. Collins, CO ▪
Slide 47: Non-GAAP Reconciliations
Non-GAAP Reconciliations 47
Slide 48: Consolidated Tangible Common Book Value Per Share
48 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 Total sharehol
Slide 49: Gross Revenue by Segment
49 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) December 31, 2019 March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 Total income before non-interest expense $12,534 $13,023 $13,114 $16,232 $17,973 Less: Net gain on sale of
Slide 50: Adjusted Net Income Available to Common Shareholders
50 Non-GAAP Reconciliation Adjusted net income available to common shareholders For the Three Months Ended, (Dollars in thousands, except per share data) December 31, 2019 March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 Net income available to common shareholders $2,572 $1,334 $8,6
Slide 51: Adjusted Net Interest Margin
51 Non-GAAP Reconciliation Adjusted net interest margin For the Three Months Ended June 30, 2020 For the Three Months Ended September 30, 2020 For the Three Months Ended December 31, 2020 (Dollars in thousands) Average Balance Interest Earned/Paid Average Yield/Rate Average Balance Interest Earned/P
Slide 52: Consolidated Gross Revenue and Efficiency Ratio
52 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
Slide 53: Non-Mortgage Segment Diluted Pre-Tax Earnings Per Share
53 Non-GAAP Reconciliation Non-Mortgage Segment Diluted Pre-Tax Earnings Per Share For The Years Ended December 31, (Dollars in thousands) 2019 2020 Non-Mortgage income before income tax $6,152 $12,086 Mortgage income before income tax 4,040 20,977 Less: Income tax expense 2,183 8,529 Less: Preferre
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