First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — Investor Presentation (November 2020)
67 slides from First Western Financial's investor presentation, Nov 10, 2020
Slide 1: First Western Financial, Inc. Investor Presentation November 2020
First Western Financial, Inc. The First, Western-Based Private Trust Bank Investor Presentation November 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 ▪ Hig
Slide 4: Great Markets, Scarce Investment Opportunity
MSA State Market Share Projected % Change in HHI (2021-2026)(3) Denver-Aurora-Lakewood CO 0.73 11.00 Fort Collins CO 2.03 13.45 Phoenix-Mesa-Scottsdale AZ 0.15 13.18 Boulder CO 1.40 11.41 Jackson WY/ID 1.12 8.50 Glenwood Springs CO 0.80 8.82 National Average 9.01 4 (1) Source: 2019 Downtown Denver P
Slide 5: Performance Through COVID-19 Pandemic
Performance Through COVID-19 Pandemic Growing Sources of Fee Income Strong Asset Quality Exceptional Organic Balance Sheet Growth ▪ Non-PPP loan production has exceeded payoffs/paydowns by 36.7% ▪ Total loan growth of 19.4% YTD (excluding PPP and acquired loans) ▪ Total deposit growth of 35.4% YTD (
Slide 6: Strong Operational and Financial Momentum
Strong Operational and Financial Momentum 6 (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 7: Strong Performance Creating Shareholder Value
Strong Performance Creating Shareholder Value 7 $11.88 $12.38 $12.83 $13.15 $13.39 $14.13 $15.38 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 9/30/2020 MYFW TBV/Share (1) See Non-GAAP reconciliation (1)
Slide 8: Improving Earnings Driving Outperformance
Improving Earnings Driving Outperformance 8 Source: S&P Global Market Intelligence (as of November 6, 2020)
Slide 9: Franchise Overview
Ww FIRsTwestern, Franchise Overview
Slide 10: 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 ▪ Specia
Slide 11: Cross-Selling a Diverse Set of Products and Services
Cross-Selling a Diverse Set of Products and Services 11 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 to
Slide 12: Private Bank Model Generates Strong Fee Income
63.5% 54.8% 40.9% 38.1% 35.8% 33.1% 29.9% 28.6% 28.1% 27.9% 26.8% 26.4% 24.7% 22.1% 16.8% ALRS MYFW WASH UMBF BMTC PGC UVSP BPFH TSC SYBT CFR CATC TMP FFWM FRC Noninterest Income/Operating Revenue Peer Average Private Bank Model Generates Strong Fee Income 12 Half of Operating Revenue Generated by F
Slide 13: Driving Profitable Growth
Ww FIRsTwestern, Driving Profitable Growth
Slide 14: 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 15: Emerging From a Cycle of Capital Constraint
$110 $159 $327 $433 $478 $525 $509 $485 $533 $610 $673 $814 $894 $998 $1,506 $102 $147 $270 $407 $472 $530 $596 $561 $589 $710 $754 $816 $938 $1,087 $1,564 $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 $6,131 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $
Slide 16: Accelerating Business Development Trends
Accelerating Business Development Trends 16 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 17: Increased Scale and Back-Office Streamlining Driving Improved Efficiencies
Increased Scale and Back-Office Streamlining Driving Improved Efficiencies 17 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 18: Revenue Growth Strategies
18 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 19: Highly Accretive Branch Purchase and Assumption Expands Denver Presence
Highly Accretive Branch Purchase and Assumption Expands Denver Presence 19 ▪ 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 depos
Slide 20: Recent Financial Trends
Ww FIRsTwestern, Recent Financial Trends
Slide 21: Overview of 3Q20
Overview of 3Q20 Record Quarter of Mortgage Production Record Financial Performance Investments in Talent and Platform Driving Expected Growth ▪ Strong organic balance sheet growth as established offices continue to achieve scale and new offices increase their contributions ▪ Gross loans increased 5
Slide 22: Net Income Available to Common Shareholders and Earnings per Share
Net Income Available to Common Shareholders and Earnings per Share 22 Net Income Available to Common Shareholders ▪ Record financial performance despite ongoing impact of COVID-19 pandemic ▪ Net income of $9.6 million, or $1.20 diluted earnings per share, in 3Q20 ▪ Mortgage activity providing signif
Slide 23: Loan Portfolio
$990 $1,018 $1,054 $1,337 $1,463 $1,494 $1,597 3Q19 4Q19 1Q20 2Q20 3Q20 2Q20 3Q20 HFI HFS Average Period End Loan Portfolio 23 Loan Portfolio Composition(2) ▪ Total loans held-for-investment (HFI) increased $83.3 million, or 5.8% from prior quarter ▪ Balanced growth across most areas of the portfoli
Slide 24: Total Deposits
$1,042 $1,092 $1,085 $1,309 $1,463 $1,407 $1,564 3Q19 4Q19 1Q20 2Q20 3Q20 2Q20 3Q20 Average Period End Total Deposits 24 Deposit Portfolio Composition ▪ Total deposits increased $156.7 million, or 11.1%, from end of prior quarter ▪ PPP-related deposits accounted for $29.0 million of quarter end tota
Slide 25: Trust and Investment Management
Trust and Investment Management ▪ Total assets under management increased $378.8 million from June 30, 2020 to $6.13 billion at September 30, 2020 ▪ Increase was primarily attributable to client contributions to existing accounts and improving market conditions $6,116 $6,188 $5,636 $5,752 $6,131 Q3
Slide 26: Gross Revenue
Non-interest Income $18,032 Net Interest Income $12,918 41.7% 58.3% Gross Revenue 26 (1) See Non-GAAP reconciliation 3Q20 Gross Revenue(1) ▪ Gross revenue(1) increased 18.0% from 2Q20 ▪ Strong year-over-year growth in both net interest income and non-interest income ▪ Relative to 2Q20, net interest
Slide 27: Net Interest Income & Net Interest Margin
Net Interest Income & Net Interest Margin 27 Net Interest Income ▪ Net interest income increased 19.7% from 2Q20, primarily due to an increase in average loan balances ▪ Net interest margin, including impact of PPP loans, remained relatively stable at 3.07% ▪ Net interest margin, excluding impact of
Slide 28: Non-Interest Income
$4,824 $4,748 $4,731 $4,609 $4,814 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Non-Interest Income 28 Total Non-Interest Income ▪ Non-interest income increased 16.9% from 2Q20 ▪ Increase primarily due to record quarter of net gain on mortgage loans ▪ Increasing economic activity and clients added throug
Slide 29: Mortgage Operations
Mortgage Operations 29 ▪ Record mortgage originations in 3Q20 ▪ Refi/Purchase mix of 59%/41% in 3Q20, compared to 73%/27% in 2Q20 and 54%/46% in 3Q19 ▪ Mortgage profit margins have increased from 39% in 3Q19 to 83% in 3Q20 (in millions) $215.4 $197.0 $196.9 $344.3 $376.3 $16.9 $66.3 $31.2 $37.2 $41.
Slide 30: Non-Interest Expense and Efficiency Ratio
Non-Interest Expense and Efficiency Ratio 30 Total Non-Interest Expense ▪ Non-interest expense increased 31.5% from 2Q20 ▪ Increase in non-interest expense primarily due to deferred loan origination expense related to PPP loans that reduced expense levels in 2Q20 ▪ Full quarter impact of personnel a
Slide 31: Asset Quality
Asset Quality 31 Non-Performing Assets/Total Assets ▪ Generally stable to improving trends across the portfolio ▪ Non-performing assets decreased by $1.7 million, and declined as a percentage of total assets to 0.53% from 0.67% in 2Q20 ▪ Minimal charge-offs again in the quarter Net Charge-Offs/Avera
Slide 32: Asset Quality
Asset Quality 32 ▪ $1.5 million provision expense reflects the growth in the loan portfolio, as well as continued economic uncertainty ▪ Increased loan level reviews and portfolio monitoring continue through the duration of the pandemic ▪ Past due loans as a percentage of total loans declined from Q
Slide 33: COVID-19 Impact Overview
Ww FIRsTwestern, COVID-19 Impact Overview
Slide 34: Paycheck Protection Program Overview
Paycheck Protection Program Overview 34 ($ in Millions) At or for the three months ended 9/30/20 Total Loans $206.1 Average Loan Size $0.3 Total Deposits $29.0 PPPLF Advances $204.1 Net Interest Margin Impact -31 bps Remaining Fees to be Recognized Pre-Tax(3) $2.1 (1) All numbers represented do not
Slide 35: Loan Modification Overview
Loan Modification Overview 35 ▪ Modified loan balances declined by 62.3% during 3Q20 ▪ New loan modification requests have slowed considerably, offering on exception basis only as of June 30 ➢ One new loan modification made in July and one in September ▪ Most initial modifications were for 180 days
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 $0.5 $2.1 $2.4 Food Services and Drinking Establishments Health Care and Social Assistance Management of C
Slide 37: Loan Portfolio Composition
Loan Portfolio Composition 37 Cash, Securities and Other ⁽¹⁾ 25% 1 - 4 Family Residential 30% Non-Owner Occupied CRE 16% Construction and Development 7% Owner Occupied CRE 10% Commercial and Industrial 12% Commercial 69% Consumer 31% $1.5 Billion (as of 9/30/20) Commercial vs. Consumer (1) PPP loans
Slide 38: Commercial Loans by Industry
Commercial Loans by Industry(1) 38 42.84% 11.69% 11.36% 6.76% 4.41% 4.37% 3.90% 3.85% 3.38% 3.00% 2.22% 1.14% 0.80% 0.28% Real Estate / Rental and Leasing Construction Retail Trade Educational Services Arts, Entertainment and Recreation Other Miscellaneous⁽²⁾ Accommodation and Food Services Health C
Slide 39: CRE Loans By Property Type
CRE(1) Loans By Property Type 39 Office/Office Condo 15.2% Warehouse 13.5% Other Commercial 12.9% 1st or 2nd DOT 5+ SFR Units 11.7% 1-4 Family Construction 11.4% Other Construction & Land Development 10.6% Retail 8.9% Commercial Office Building 8.0% Strip Center 3.2% Hotel / Motel 2.5% 1st & 2nd DOT
Slide 40: CRE Portfolio Characteristics and Underwriting
▪ We require our CRE loans to be secured by seasoned and well-managed properties with adequate margins ▪ We generally obtain a guaranty from experienced owners and managers with outside cash flows and/or other assets ▪ Loan amounts generally do not exceed 80% or 75% of the property’s appraised value
Slide 41: Exposure to Stressed Industries
Exposure to Stressed Industries (as of 9/30/20) 41 Industry Exposure Outstanding Balances ($ in millions) % of Total Loans Unused Commitments ($ in Millions) Portfolio Characteristics Energy Related $6.7 0.4% $16.8 ▪ Indirect business or personal exposure to energy industry ▪ Collateral type: 47% li
Slide 42: Capital and Liquidity Overview
Capital and Liquidity Overview 42 Liquidity Funding Sources (as of 9/30/20) Liquidity Reserves: Total Available Cash $249,542,451 Unpledged Investment Securities $ 34,412,685 Borrowed Funds: Unsecured: Credit Lines $ 54,000,000 Secured: FHLB Available $401,870,448 FRB Available $ 1,035,353 Brokered
Slide 43: Creating Additional Shareholder Value
Creating Additional Shareholder Value
Slide 44: Near-Term Outlook and Expectations
Near-Term Outlook and Expectations 44 ▪ Significant growth in tangible book value expected to continue ➢ Core earnings and operating leverage improvement expected to continue ➢ PPP fee recognition and pending sale of LA Fixed Income Team ▪ Asset quality showing strength despite continuation of pande
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 FIRsTwestern, Appendix
Slide 48: Organizational Overview
Ww FIRsTwestern, 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) Dav
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 (PG) Sup
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 and
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 Profit
Slide 56: Historical Financial Trends
Historical Financial Trends
Slide 57: High-Quality, Recurring Revenues
$49.7 $54.3 $55.2 $57.8 $64.3 $48.1 $73.8 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 $25.0 60.7% Bank Fees $0.9 2.2% Insurance $0.9 2.2% Other $0.3 0.7% Trust & Advisory $14.1 34.2% ($ in millions) Managed Trust $1.6 27.1% Yield: 0.19% 401(k)/ Retirement $1.1 17.3% Yield: 0.14% Directed Trust $0.9 14.8% Yield: 0.08% Custody $0.5 7.5% Yield: 0.03% Investment Agency $2.0 33.3
Slide 59: A Balanced, Private Banking Loan Portfolio
$610.4 $672.8 $813.7 $894.0 $988.0 $1,506.1 2015 2016 2017 2018 2019 3Q20 ($ in millions) A Balanced, Private Banking Loan Portfolio 59 Historical Gross Loans Q3 2020 Loan Portfolio by Collateral Type (1) (1) As of September 30, 2020, excluding deferred costs/(fees) and unamortized discounts/(unaccr
Slide 60: Strong Asset Quality with Low Credit Losses
0.96 0.90 0.83 0.79 0.79 2016 2017 2018 2019 3Q20 0.07 0.00 0.00 0.03 0.00 2016 2017 2018 2019 YTD 2020 0.54 0.52 2.13 1.23 0.66 2016 2017 2018 2019 3Q20 0.70 0.50 1.82 1.03 0.53 2016 2017 2018 2019 3Q20 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 $1,563.7 2015 2016 2017 2018 2019 3Q20 ($ in millions) A Balanced, Growing Core Deposit Base 61 Historical Total Deposits Q3 2020 Deposit Composition(1) (1) As of September 30, 2020. MMDA 51.5% Time Deposits 11.4% NOW 6.5% Savings accounts 0.4% Noninterest- beari
Slide 62: Non-GAAP Reconciliations
Ww FIRsTwestern, Non-GAAP Reconciliations
Slide 63: Non-GAAP Reconciliation: Efficiency Ratio and Tangible Book Value
63 Non-GAAP Reconciliation Consolidated Efficiency Ratio For the Three Months Ended, (Dollars in thousands) September 30, 2019 December 31, 2019 March 31, 2020 June 30, 2020 September 30, 2020 Non-interest expense $13,442 $13,082 $14,647 $12,644 $16,632 Less: amortization 52 7 2 38 4 Less: provision
Slide 64: Non-GAAP Reconciliation: Gross Revenue
64 Non-GAAP Reconciliation Wealth Management Gross Revenue For the Three Months Ended, (Dollars in thousands) September 30, 2019 December 31, 2019 March 31, 2020 June 30, 2020 September 30, 2020 Total income before non-interest expense $12,554 $12,534 $13,023 $13,114 $16,232 Less: Net gain on sale o
Slide 65: Non-GAAP Reconciliation: Adjusted Net Income
65 Non-GAAP Reconciliation Adjusted net income available to common shareholders For the Three Months Ended, (Dollars in thousands, except per share data) September 30, 2019 December 31, 2019 March 31, 2020 June 30, 2020 September 30, 2020 Net income available to common shareholders $2,406 $2,572 $1,
Slide 66: Non-GAAP Reconciliation: Adjusted Net Interest Margin
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: Consolidated Gross Revenue
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
First Western Financial — Investor Presentation (November 2020) on 6ix