First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — D.A. Davidson Financial Institutions Conference May 2021
51 slides from First Western Financial's conference presentation, May 4, 2021
Slide 1: D.A. Davidson Financial Institutions Conference May 2021
D.A. Davidson Financial Institutions Conference May 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 ▪ 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 $17.24 $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 3/31/2021 MYFW TBV/Share 6 Improving Earnings Driving Outperfor
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: 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
$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
▪ 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 were consolidated into an existing Fir
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 1Q21
22 Overview of 1Q21 Continued High Level of Mortgage Activity Continuation of Improved Profitability New Business Development Driving Balance Sheet Growth ▪ Total assets of $2.21 billion, up 48.2% annualized in 1Q21 ▪ New wealth management and commercial client acquisitions driving strong inflows of
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 $6.0 million, or $0.74 diluted earnings per share, in 1Q21 ▪ Strong profitability results in 4.1% and 4.9% increase in book value per share and tangible book value per share(1), respectively, from 4Q20 $438 $245 $1
Slide 24: Loan Portfolio
24 Loan Portfolio ▪ Total loans HFI increased $12.6 million, or 0.8% from prior quarter ▪ Average loans increased $87.4 million, or 5.3% from prior quarter ▪ Growth in non-owner occupied CRE offset by payoffs in construction portfolio due to project completions ▪ Payoffs included a low-yielding $50
Slide 25: Total Deposits
25 Total Deposits ▪ Total deposits increased $187.9 million, or 11.6%, from end of prior quarter ▪ Growth primarily attributable to new client relationships ▪ Noninterest-bearing deposits more than doubled over the past year and increased to 32.8% of total deposits at 1Q21 from 23.0% at 1Q20 1Q 2020
Slide 26: Trust and Investment Management
26 Trust and Investment Management ▪ Total assets under management increased $230.3 million from December 31, 2020 to $6.49 billion at March 31, 2021 ▪ The increase was primarily attributable to contributions to existing accounts and new accounts, as well as improving market conditions $5,636 $5,752
Slide 27: 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 $4.4 million in SBA fee income less $1.3 million of deferred loan origination
Slide 28: 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 29: Net Interest Income and Net Interest Margin
29 Net Interest Income and Net Interest Margin ▪ Net interest income decreased 3.0% from 4Q20, primarily due to lower PPP-related fees and two fewer days of interest accrual ▪ Net interest margin, including PPP and purchase accretion, declined to 2.90% due to excess liquidity and lower average loan
Slide 30: Non-Interest Income
30 Non-Interest Income ▪ Non-interest income increased 6.6% from 4Q20 and 36.7% from 1Q20 ▪ Increase from 4Q20 due to higher net gain on mortgage loans ▪ Excluding $0.1 million in fees generated by LA fixed income team (sold during 4Q20), Trust & Investment Management fees increased from prior quart
Slide 31: Mortgage Operations
31 Mortgage Operations ▪ Operational constraints resolved during 1Q21 ▪ Record mortgage originations in 1Q21 ▪ Mortgage locks down slightly from 4Q20 and 1Q20 ▪ Refi/Purchase mix of 77%/23% in 1Q21, compared to 67%/33% in 4Q20 $196.9 $344.3 $376.3 $414.5 $490.8 $31.2 $37.2 $41.9 $32.4 $33.9 $0 $100
Slide 32: Non-Interest Expense and Efficiency Ratio
32 Non-Interest Expense and Efficiency Ratio ▪ Non-interest expense unchanged from 4Q20 ▪ Salaries and employee benefits expense in 1Q21 reduced by $1.0 million in deferred loan origination expenses related to second round of PPP loans $553 $323 $14,094 $12,321 $16,632 $15,614 $15,629 $0 $2,000 $4,0
Slide 33: Asset Quality
33 Asset Quality ▪ Positive asset quality trends across the portfolio ▪ Non-performing assets decreased by $0.2 million, and declined as a percentage of total assets to 0.18% from 0.22% in 4Q20 and 0.82% in 1Q20 ▪ No remaining loan modifications ▪ Immaterial net charge-offs again in the quarter ▪ St
Slide 34: Capital and Liquidity Overview
34 Capital and Liquidity Overview 10.31% 10.31% 13.11% 7.35% 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 3/31/21) Liquid
Slide 35: Creating Additional Shareholder Value
Creating Additional Shareholder Value 35
Slide 36: Near-Term Outlook
36 Near-Term Outlook ▪ Growing pipeline and increased confidence in economic recovery should lead to higher loan production and loan growth as the year progresses ▪ Excess liquidity will be redeployed into higher yielding earning assets or transferred into investment management accounts where it wil
Slide 37: Long-Term Goals to Drive Shareholder Value
37 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 38: A Unique and Attractive Investment
MYFW’s core strengths provide the foundation for driving shareholder value 38 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 39: Appendix
Appendix 39
Slide 40: Organizational Overview
Organizational Overview oY W Firstwestern
Slide 41: Executive 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 42: 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 43: Integrated Team Approach in Boutique Offices
Working as a team to grow relationships 43 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 44: Organizational Structure Built for Scale
44 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 45: Non-GAAP Reconciliations
Non-GAAP Reconciliations 45
Slide 46: Consolidated Tangible Common Book Value Per Share
46 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 47: Gross Revenue by Segment
47 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 March 31, 2021 Total income before non-interest expense $13,023 $13,114 $16,232 $17,973 $18,471 Plus: Provision for loan los
Slide 48: Adjusted Net Income and Earnings Per Share
48 Non-GAAP Reconciliation Adjusted net income available to common shareholders For the Three Months Ended, (Dollars in thousands, except per share data) March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 March 31, 2021 Net income available to common shareholders $1,334 $8,696 $9,630
Slide 49: Adjusted Net Interest Margin
49 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 For the Three Months Ended March 31, 2021 (Dollars in thousands) Average Balance Interest Earned/Paid Average Yi
Slide 50: Consolidated Gross Revenue and Efficiency Ratio
50 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 51: Non-Mortgage Segment Diluted Pre-Tax Earnings Per Share
51 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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