First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — Investor Presentation (October 2023)
50 slides from First Western Financial's investor presentation, Oct 31, 2023
Slide 1: Investor Presentation November 2023
INVESTOR PRESENTATION November 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 144% 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: 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 3Q23
Overview of 3Q23 3Q23 Earnings • Net revenue increased $2.0 million, or 9.6%, to $22.5 million in Q3 2023, compared to $20.6 million in Q2 2023 • Net income available to common shareholders of $3.1 million, or $0.32 per diluted share • Pre-tax, pre-provision net income of $4.6 million(1), an increas
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 $3.1 million, or $0.32 diluted earnings per share, in 3Q23 • Profitability and prudent balance sheet management resulted in book value and tangible book value per share(1) increasing by 4.1% and 5.0%, respectively,
Slide 24: Loan Portfolio
24 Loan Portfolio • Total loans held for investment increased $34.6 million from prior quarter • Growth driven by commercial and industrial loans, residential mortgage loans, and draws on existing construction lines, partially offset by a decrease in CRE loans due to an increase in payoffs • New loa
Slide 25: Total Deposits
25 Total Deposits • Total deposits increased by $44.6 million in 3Q23 • Success in new business development, with $26 million in new deposit relationships added in 3Q23 • Continued migration of noninterest-bearing deposits into interest-bearing categories as clients seek higher rates for their exces
Slide 26: Trust and Investment Management
26 Trust and Investment Management • Total assets under management decreased $108.2 million from June 30, 2023 to $6.40 billion as of September 30, 2023 • Primarily attributable to a decrease in market values throughout the quarter resulting in a decrease in the value of assets under management bala
Slide 27: Gross Revenue
1. See Non-GAAP reconciliation Gross Revenue 3Q23 Gross Revenue(1) Gross Revenue(1) 27 • Gross revenue(1) declined 6.6% from prior quarter • Decline in net interest income, partially offset by an increase in noninterest income • Non-interest income mix increased to 26.7% from 17.7% in prior quarter
Slide 28: Net Interest Income and Net Interest Margin
28 Net Interest Income and Net Interest Margin • Net interest income decreased to $16.8 million, or 9.1%, from $18.4 million in 2Q23 • Net interest income decreased from 2Q23 due to an increase in average cost of deposits • Net interest margin decreased 27 bps to 2.46%, driven by the increase in int
Slide 29: Non-Interest Income
29 Non-Interest Income • Non-interest income increased 54% from prior quarter, primarily due to impacts in 2Q23: ◦ $1.2 million impairment to carrying value of contingent consideration assets in 2Q23 ◦ $1.1 million of losses on loans accounted for under fair value option in 2Q23 vs. $0.3 million of
Slide 30: Non-Interest Expense and Efficiency Ratio
30 Non-Interest Expense and Efficiency Ratio • Non-interest expense decreased 1.1% from 2Q23 • Disciplined expense management resulted in non-interest expense coming in at low end of targeted range • Non-interest expense expected within the range of $18.5 million to $19.0 million for the remainder o
Slide 31: Asset Quality
31 Asset Quality • NPAs increased $45.9 million primarily due to four additional loans, under one relationship, moving to non-accrual during 3Q23 • Collateral values in excess of 120% of total loan balances based on recent valuations • $0.3 million provision for credit losses • ACL/Adjusted Total Lo
Slide 32: Capital and Liquidity Overview
32 Capital and Liquidity Overview Liquidity Funding Sources (as of 9/30/23) 1. See Non-GAAP reconciliation 2. Based on internal policy guidelines Consolidated Capital Ratios (as of 9/30/23) Tangible Common Equity / TBV per Share(1) (in thousands) Liquidity Reserves: Total Available Cash $269,805 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 • Continued focus on executing well on the areas that we can control • Balance sheet management • Attracting new clients with particular
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 ▪ Bozeman
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) September 30,2023 December 31,2022 March31,2023 June 30,2023 September 30, 2023) Non-Mortgage income before income tax $9,034 $8,168 $5,971 $2,429 $5,102 Plus: Acquisition-related expenses 154 195 37 14 30 Plus: Impair
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 Sept. 30, 2022 Dec. 31, 2022 Sept. 30, 2023 Total shareholders' equity $116,875 $127,678 $154,962 $219,041 $234,862 $240,864 $246,256 Les
Slide 48: Non-GAAP Reconciliation: Wealth Management and Mortgage Gross Revenue
48 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 Total income before non-interest expense $26,482 $26,623 $24,543 $19,529 $21,647 Less: unrealized gains/(
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) September 30, 2022 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 Net income available to common shareholders $6,221 $5,471 $3,
Slide 50: Non-GAAP Reconciliation: Adjusted Net Interest Margin
50 Non-GAAP Reconciliation Adjusted net interest margin 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 For the Three Months Ended September 30, 2023 (Dollars in thousands) A
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