First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — Stephens Bank Forum 2020
67 slides from First Western Financial's conference presentation, Sep 21, 2020
Slide 1: The First, Western-Based Private Trust Bank Investor Presentation
First Western Financial, Inc. The First, Western-Based Private Trust Bank Investor Presentation Stephens Bank Forum 2020
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: A Wealth Manager on Private Trust Bank Platform
A Wealth Manager on Private Trust Bank Platform 3 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 ..
Slide 4: Great Markets, Scarce Investment Opportunity
MSA State Market Share Projected % Change in HHI of $200M + (2019-2024)(3) Denver-Aurora-Lakewood CO 0.64 35.49 Fort Collins CO 2.10 44.99 Phoenix-Mesa-Scottsdale AZ 0.12 41.62 Boulder CO 0.94 28.76 Jackson WY/ID 1.49 21.42 Glenwood Springs CO 0.93 24.61 National Average 31.93 4 (1) Source: 2019 Dow
Slide 5: Strong Operational and Financial Momentum
Strong Operational and Financial Momentum 5 (1) See Non-GAAP reconciliation $4,774 $4,556 $5,795 $7,602 $10,854 December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 2015-2019 Pre-Tax, Pre-Provision Income(1) ($000s) Earnings Per Share Drivers of Improved Performa
Slide 6: Strong Performance Creating Shareholder Value
Strong Performance Creating Shareholder Value 6 $11.50 $11.88 $12.38 $12.83 $13.15 $13.39 $14.13 $11.00 $12.00 $13.00 $14.00 $15.00 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 MYFW TBV/Share
Slide 7: Improving Earnings Driving Outperformance
Improving Earnings Driving Outperformance 7 Source: S&P Global Market Intelligence (as of September 15, 2020)
Slide 8: Franchise Overview
Ww Figstwestern Franchise Overview
Slide 9: MYFW: Our Five Core Strengths
First Western’s core strengths provide the foundation for driving shareholder value MYFW: Our Five Core Strengths Experienced and Tested Team .. Niche-focused franchise headquartered in Denver, Colorado .. Well-positioned in many attractive markets in Arizona, California, Colorado and Wyoming .. Spe
Slide 10: Cross-Selling a Diverse Set of Products and Services
Cross-Selling a Diverse Set of Products and Services 10 Wealth Planning Commercial Banking Investment Management Residential Mortgage Lending Retirement / 401(k) Plan Consulting Trust .. Wealth planning with specialized services (e.g. philanthropic) .. Proprietary ConnectView® approach, with access
Slide 11: Private Bank Model Generates Strong Fee Income
61.7% 52.8% 38.7% 38.0% 35.0% 31.3% 29.4% 28.8% 28.6% 28.2% 28.1% 26.9% 25.2% 19.5% 16.7% ALRS MYFW WASH UMBF BMTC PGC BPFH CATC TSC UVSP SYBT CFR TMP FFWM FRC Noninterest Income/Operating Revenue Peer Average Private Bank Model Generates Strong Fee Income 11 Half of Operating Revenue Generated by F
Slide 12: Driving Profitable Growth
Ww Figstwestern Driving Profitable Growth
Slide 13: Success in Expansion and Acquisition Growth
Success in Expansion and Acquisition Growth January 2004 Acquired Westcor Insurance Group, Inc. January 2004 Acquired James Sprout & Associates, Inc. January 2004 Acquired Poudre River Valley Trust Company February 2005 Acquired Sterling Partners/ Silversmith Financial Corp September 2006 Acquired R
Slide 14: Emerging From a Cycle of Capital Constraint
$110 $159 $327 $433 $478 $525 $509 $485 $533 $610 $673 $814 $894 $998 $1,422 $102 $147 $270 $407 $472 $530 $596 $561 $589 $710 $754 $816 $938 $1,087 $1,406 $1,256 $1,378 $2,133 $3,057 $4,119 $4,042 $3,952 $4,523 $4,842 $4,744 $4,926 $5,374 $5,235 $6,188 $5,752 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $
Slide 15: Accelerating Business Development Trends
Accelerating Business Development Trends 15 New Loan Production Net Deposit Growth Capital raised in July 2018 IPO has allowed for increased business development activities… $227.9 $268.2 $225.6 $317.9 2016 2017 2018 2019 $44.0 $62.2 $121.6 $149.0 2016 2017 2018 2019
Slide 16: Increased Scale and Back-Office Streamlining Driving Improved Efficiencies
Increased Scale and Back-Office Streamlining Driving Improved Efficiencies 16 90.4% 88.2% 85.4% 80.6% 2016 2017 2018 2019 Efficiency Ratio(1) 54.5% 55.2% 57.8% 56.6% 2016 2017 2018 2019 Percentage of Revenue Generating FTEs (1) See Non-GAAP reconciliation
Slide 17: Revenue Growth Strategies
17 Revenue Growth Strategies • Building expertise in specific vertical markets • Launched medical and dental practice group in 1Q20 • Replicate same model in additional vertical markets Expand commercial loan production platform • Vail Valley office opened in 2019 • Building team to focus on Broomfi
Slide 18: Highly Accretive Branch Purchase and Assumption Expands Denver Presence
Highly Accretive Branch Purchase and Assumption Expands Denver Presence 18 .. Acquisition of all of the Denver locations of Simmons Bank (three branches and one loan production office) Three of the locations will be consolidated into an existing First Western branch .. Assumed $65.2 million in dep
Slide 19: Recent Financial Trends
Ww Figstwestern Recent Financial Trends
Slide 20: Overview of 2Q20
Overview of 2Q20 Record Quarter of Mortgage Production Record Financial Performance Strong Balance Sheet Growth and Stable Asset Quality .. Strong Balance Sheet growth with a combination of PPP, branch acquisition and organic growth .. Gross loans increased 36.3% from 1Q20 .. Total deposits increase
Slide 21: Net Income Available to Common Shareholders and Earnings per Share
Net Income Available to Common Shareholders and Earnings per Share 21 Net Income Available to Common Shareholders .. Record financial performance despite impact of COVID-19 pandemic .. Financial results impacted by $0.2 million (or $0.03 per diluted share)(1) in tax effected acquisition-related expe
Slide 22: Loan Portfolio
$966 $990 $1,018 $1,054 $1,337 $1,107 $1,494 2Q19 3Q19 4Q19 1Q20 2Q20 1Q20 2Q20 HFI Acquired Loans HFS Average Period End Loan Portfolio 22 Loan Portfolio Composition(2) .. Total loans held-for-investment (HFI) increased $381.7 million, or 36.6% from prior quarter PPP contributed $191.7 million
Slide 23: Deposit Portfolio
$967 $1,042 $1,092.4 $1,085 $1,309 $1,178 $1,407 2Q19 3Q19 4Q19 1Q20 2Q20 1Q20 2Q20 Total Deposits Aquired Deposits Average Period End Total Deposits 23 Deposit Portfolio Composition .. Total deposits increased $228.5 million, or 19.4%, from end of prior quarter .. Branch acquisition contributed $65
Slide 24: Trust and Investment Management
Trust and Investment Management .. Total assets under management increased $115.9 million from March 31, 2020 to $5.75 billion at June 30, 2020 .. Increase was primarily attributable to improving market conditions $5,968 $6,116 $6,188 $5,636 $5,752 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Investment
Slide 25: 2Q20 Gross Revenue
Non-interest Income $15,427 Net Interest Income $10,796 41.2% 58.8% Gross Revenue 25 (1) See Non-GAAP reconciliation 2Q20 Gross Revenue(1) .. Gross revenue(1) increased 57.0% from 1Q20 .. Strong year-over-year growth in both net interest income and non-interest income Gross Revenue(1) ($millions) $1
Slide 26: Net Interest Income & Net Interest Margin
Net Interest Income & Net Interest Margin 26 Net Interest Income .. Net interest income increased 20.9% from 1Q20, due to three primary factors: $0.7 million from branch acquisition, $0.6 million from PPP loans and $0.6 million from higher average loan balances attributed to organic growth .. Net in
Slide 27: Non-Interest Income
$4,693 $4,824 $4,748 $4,731 $4,609 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Non-Interest Income 27 Total Non-Interest Income .. Non-interest income increased 98.6% from 1Q20 .. Increase primarily due to record quarter of net gain on mortgage loans .. Increase in risk management and insurance fees off
Slide 28: Mortgage Operations
Mortgage Operations 28 Mortgage Originations .. Record mortgage originations in 2Q20 .. Refi/Purchase mix of 73%/27% in 2Q20, compared to 63%/37% in 1Q20 and 30%/70% in 2Q19 .. Mortgage sale margins have increased by 27.8% from 2Q19 to 2Q20 to 81.5% Mortgage Loan Locks Profit Margin $204.98 $221.02
Slide 29: Non-Interest Expense and Efficiency Ratio
Non-Interest Expense and Efficiency Ratio 29 Total Non-Interest Expense .. Non-interest expense decreased 13.7% from 1Q20 .. Decrease was attributable to the capitalization of $2.9 million in PPP loan origination expense that will be amortized over the expected 24-month life of the loans, or earlier
Slide 30: Asset Quality
Asset Quality 30 Non-Performing Assets/Total Assets .. Non-performing assets increased by $1.0 million, but declined as a percentage of total assets to 0.67% from 0.82% in 1Q20 .. Minimal charge-offs in the quarter .. $1.1 million discount based on fair value of loans added through branch acquisitio
Slide 31: Asset Quality
Asset Quality 31 .. $2.1 million provision expense resulting from an increase based on the additional variability surrounding the COVID modifications made during the quarter and increased economic uncertainty. .. Increased loan level reviews and portfolio monitoring .. Past due loans as a % of total
Slide 32: COVID-19 Impact Overview
Ww Figstwestern COVID-19 Impact Overview
Slide 33: Improving Economic Trends in Colorado
Improving Economic Trends in Colorado 33 Source: Trackthercovery.com
Slide 34: Paycheck Protection Program Overview
Paycheck Protection Program Overview 34 ($ in Millions) At or for the three months ended 6/30/20 Total Loans $204.6 Average Loan Size $0.3 Total Deposits $62.4 PPPLF Advances $204.3 Net Interest Margin Impact -12 bps .. $204.6 million in total PPP loans originated, including $12.9 million purchased
Slide 35: Loan Modification Overview
Loan Modification Overview 35 .. Modified 98 loans totaling $176.9 million during 2Q20, including $30.8 million acquired with branch acquisition .. New deferral requests have slowed considerably, offering on exception basis only as of June 30 One new loan modification made in July and one expected
Slide 36: Loan Modification Overview
Loan Modification Overview 36 Portfolio Loan Level Reviews • Borrowers providing current financials and cash flow forecasts • Increased monitoring and oversight • Identify emerging issues early $0.3 $0.5 $1.5 $2.1 $2.5 Food Services and Drinking Establishments Accommodation Professional, Scientific,
Slide 37: Loan Portfolio Composition
Loan Portfolio Composition 37 Cash, Securities and Other ⁽¹⁾ 26% 1 - 4 Family Residential 30% Non-Owner Occupied CRE 16% Construction and Development 5% Owner Occupied CRE 8% Commercial and Industrial 15% Commercial 61% Consumer 39% $1.4 Billion (as of 6/30/20) Commercial vs. Consumer (1) PPP loans
Slide 38: Commercial Loans by Industry
Commercial Loans by Industry(2) 38 40.36% 12.57% 9.83% 6.86% 6.80% 4.56% 3.80% 3.64% 3.53% 3.31% 2.24% 1.13% 1.08% 0.30% Real Estate / Rental and Leasing Retail Trade Construction Other Miscellaneous⁽¹⁾ Educational Services Arts, Entertainment and Recreation Health Care and Social Assistance Profess
Slide 39: CRE Loans By Property Type
CRE(1) Loans By Property Type 39 1-4 Family Construction 2% Other Construction & Land Development 16% 1st or 2nd DOT 5+ SFR Units 14% 1st & 2nd DOT- 1-4 Family Dwelling 1% Office/Office Condo 13% Commercial Office Building 9% Other Commercial 12% Hotel / Motel 3% Restaurant 1% Retail 12% Strip Cente
Slide 40: CRE Portfolio Characteristics and Underwriting
. We require our CRE loans to be secured by seasoned and well-managed properties with adequate margins .. We generally obtain a guaranty from experienced owners and managers with outside cash flows and/or other assets .. Loan amounts generally do not exceed 80% or 75% of the property’s appraised val
Slide 41: Exposure to Stressed Industries
Exposure to Stressed Industries (as of 6/30/20) 41 Industry Exposure Outstanding Balances ($ in millions) % of Total Loans Unused Commitments ($ in Millions) Portfolio Characteristics Energy Related $8.4 0.6% $16.3 .. Indirect business or personal exposure to energy industry .. Collateral type: 54%
Slide 42: Capital and Liquidity Overview
Capital and Liquidity Overview 42 Liquidity Funding Sources (as of 6/30/20) Liquidity Reserves: Total Available Cash $190,159,663 Unpledged Investment Securities $ 42,123,068 Borrowed Funds: Unsecured: Credit Lines $ 54,000,000 Secured: FHLB Available $402,470,791 FRB Available $ 1,174,905 Brokered
Slide 43: Creating Additional Shareholder Value
Creating Additional Shareholder Value
Slide 44: Near-Term Outlook and Expectations
Near-Term Outlook and Expectations 44 .. Healthy loan pipeline should continue to drive organic loan growth in second half of 2020 .. Strong mortgage originations continuing in 3Q20 .. Net interest margin expected to expand as earning asset yields stabilize and deposit costs continue to decline .. P
Slide 45: Long-Term Goals to Drive Shareholder Value
45 Long-Term Goals to Drive Shareholder Value Our mission is to be the BPBFWWMC – Best Private Bank for the Western Wealth Management Client We believe First Western can be a unique, niche focused regional powerhouse with high fee income and consistent strong earnings from our scalable wealth manage
Slide 46: A Unique and Attractive Investment
Experienced, Tested Team Built-in Operating Leverage Highly Desirable Recurring Fee Income Differentiated, Proven in the Marketplace Unique Opportunity for Investors MYFW’s core strengths provide the foundation for driving shareholder value A Unique and Attractive Investment 46
Slide 47: Appendix
Ww Figstwestern Appendix
Slide 48: Organizational Overview
Ww Figstwestern Organizational Overview
Slide 49: Team: Ready to Take MYFW to the Next Level
49 Team: Ready to Take MYFW to the Next Level Name Title Years at FW Years in Industry Prior Experience Scott C. Wylie Chairman, CEO & President 18 33 . Chairman & CEO, Northern Trust Bank of Colorado .. Chairman & CEO, Trust Bank of Colorado .. CEO, Equitable Bancshares of Colorado and Women’s Bank
Slide 50: Board of Directors
Name Title Primary Business Scott C. Wylie Chairman, CEO & President . First Western Financial, Inc. Julie A. Caponi, CPA Board Director / Trustee . Former Finance Executive at Arconic, Inc. (fka Alcoa Inc.) .. Former audit partner at Deloitte .. Board member & Audit Committee chair for FCF (NYSE) D
Slide 51: Integrated Team Approach in Boutique Offices
Integrated Team Approach in Boutique Offices President Private Bankers Wealth Advisor Trust Officer 51 Lenders Portfolio Managers Team-based incentives Relationship-based wealth management Many relationship managers to one client Product group specialists Holistic view of the client – ConnectView® T
Slide 52: Teamwork Drives Client Satisfaction, Retention
(1) Investment Policy Committee (IPC), Investment Management (IM), Business Development Officers (BDO). Teamwork Drives Client Satisfaction, Retention 52 Example of investment management teamwork shows how MYFW, not relationship managers, owns our clients Profit Centers Product Groups Support Center
Slide 53: Organizational Structure Built for Scale
. Finance & Accounting .. Risk & Compliance .. Enterprise Technology .. Human Capital .. Credit Analysis .. Bank & Trust/Investment Operations .. Marketing/Branding Our local, boutique private trust bank offices compete with the biggest wealth managers in the country… First Western Product Groups (P
Slide 54: Holistic, Integrated Risk Management
Holistic, Integrated Risk Management 54 Purpose .. Holistic approach for the oversight, control, and discipline to drive continuous improvement .. Everyone’s responsibility and non-compliance is not an option .. Governance framework for the process of anticipating, identifying, assessing, managing a
Slide 55: Key Themes of ERM
Key Themes of ERM– In the Business 55 Ensure Compliance .. Meet regulatory requirements .. Comply with good industry practices including placing a priority on cybersecurity .. Effective, efficient, and smart compliance – a change agent for better business decisions Limit Potential Losses Improve Pro
Slide 56: Historical Financial Trends
Historical Financial Trends
Slide 57: High-Quality, Recurring Revenues
$49.7 $54.3 $55.2 $57.8 $64.3 $31.5 $42.9 December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2018 December 31, 2019 YTD 2019 YTD 2020 Non-Interest Income, excluding net gain/(loss) on sale of securities and assets Net Interest Income High-Quality, Recurring Revenues 57 (1) See Non-GA
Slide 58: Predictable, Growing Sources of Fee Income
Mortgage $12.7 54.7% Bank Fees $0.6 2.6% Insurance $0.4 1.7% Other $0.2 0.9% Trust & Advisory $9.3 40.1% Managed Trust $1.5 26.8% Yield: 0.21% 401(k)/ Retirement $1.0 17.9% Yield: 0.16% Directed Trust $0.9 16.1% Yield: 0.08% Custody $0.4 7.1% Yield: 0.03% Investment Agency $1.9 32.1% Yield: 0.66% Pr
Slide 59: A Balanced, Private Banking Loan Portfolio
$610.4 $672.8 $813.7 $894.0 $988.0 $1,422.0 2015 2016 2017 2018 2019 2Q20 A Balanced, Private Banking Loan Portfolio 59 Historical Gross Loans ($millions) Q2 2020 Loan Portfolio by Collateral Type (1) (1) As of June 30, 2020, excluding deferred costs/(fees) and unamortized discounts/(unaccreated pre
Slide 60: Strong Asset Quality with Low Credit Losses
0.96 0.90 0.83 0.79 0.73 2016 2017 2018 2019 2Q20 0.07 0.00 0.00 0.03 0.00 2016 2017 2018 2019 YTD 2020 0.54 0.52 2.13 1.23 0.81 2016 2017 2018 2019 2Q20 0.70 0.50 1.82 1.03 0.67 2016 2017 2018 2019 2Q20 Strong Asset Quality with Low Credit Losses NPAs / Assets (%) NPLs / Loans (%) Net Charge-off (R
Slide 61: A Balanced, Growing Core Deposit Base
$709.9 $753.9 $816.1 $937.8 $1,086.8 $1,406.9 2015 2016 2017 2018 2019 2Q20 A Balanced, Growing Core Deposit Base 61 Historical Total Deposits ($millions) Q2 2020 Deposit Composition(1) (1) As of June 30, 2020. MMDA 54.0% Time Deposits 10.9% NOW 6.3% Savings accounts 0.5% Noninterest- bearing accoun
Slide 62: Non-GAAP Reconciliations
Ww Figstwestern Non-GAAP Reconciliations
Slide 63: Non-GAAP Reconciliation
63 Non-GAAP Reconciliation Consolidated Efficiency Ratio For the Three Months Ended, (Dollars in thousands) June 30, 2019 September 30, 2019 December 31, 2019 March 31, 2020 June 30, 2020 Non-interest expense $14,659 $13,442 $13,082 $14,647 $12,644 Less: Amortization 142 52 7 2 38 Less: Goodwill imp
Slide 64: Non-GAAP Reconciliation
64 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) June 30, 2019 September 30, 2019 December 31, 2019 March 31, 2020 June 30, 2020 Total income before non-interest expense $12,550 $12,554 $12,534 $13,023 $13,114 Less: Net gain on sale of sec
Slide 65: Non-GAAP Reconciliation
65 Non-GAAP Reconciliation (1) Quarterly information has not been audited. Adjusted net income available to common shareholders For the Three Months Ended, (Dollars in thousands, except per share data) June 30, 2019 September 30, 2019 December 31, 2019 March 31, 2020 June 30, 2020 Net income availab
Slide 66: Non-GAAP Reconciliation
66 Non-GAAP Reconciliation Adjusted net interest margin For the Three Months Ended June 30, (Dollars in thousands) Average Balance Interest Earned/Paid Average Yield/Rate Interest-bearing deposits in other financial institutions 76,463 44 PPP adjustment 20,587 25 Available-for-sale securities 48,614
Slide 67: Non-GAAP Reconciliation
67 Non-GAAP Reconciliation Consolidated Gross Revenue For the Years Ended, (Dollars in thousands) 2015 2016 2017 2018 2019 Total income before non-interest expense $49,339 $53,394 $54,501 $57,617 $63,976 Less: Net gain on sale of securities 717 114 81 - 119 Less: Net gain on sale of assets ---- 183