First Western Financial, Inc. · NASDAQ:MYFW
First Western Financial — Q2 2020 Earnings Presentation
30 slides from First Western Financial's earnings presentation, Jul 23, 2020
Slide 1: Second Quarter 2020 Conference Call
First Western Financial, Inc. The First, Western-Based Private Trust Bank Second Quarter 2020 Conference Call
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: 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 4: Net Income Available to Common Shareholders and Earnings per Share
Net Income Available to Common Shareholders and Earnings per Share 4 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 expen
Slide 5: Improving Economic Trends in Colorado
Improving Economic Trends in Colorado 5 Source: Trackthercovery.com
Slide 6: Loan Portfolio Composition
$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 6 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 B
Slide 7: Deposit Portfolio Composition
$967 $1,042 $1,092 $1,085 $1,309 $1,178 $1,407 2Q19 3Q19 4Q19 1Q20 2Q20 1Q20 2Q20 Total Deposits Aquired Deposits Average Period End Total Deposits 7 Deposit Portfolio Composition .. Total deposits increased $228.5 million, or 19.4%, from end of prior quarter .. Branch acquisition contributed $65.2
Slide 8: 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 $5,752 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Investment
Slide 9: Paycheck Protection Program Overview
Paycheck Protection Program Overview 9 ($ 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 P
Slide 10: 2Q20 Gross Revenue
Non-interest Income $15,427 Net Interest Income $10,796 41.2% 58.8% Gross Revenue 10 (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) $16.5 $16.6 $1
Slide 11: Net Interest Income & Net Interest Margin
Net Interest Income & Net Interest Margin 11 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 12: 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 12 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 13: Mortgage Operations
Mortgage Operations 13 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 $155.11 $215.41
Slide 14: Non-Interest Expense and Efficiency Ratio
Non-Interest Expense and Efficiency Ratio 14 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 through net interest income over the expected 24-month l
Slide 15: Asset Quality
Asset Quality 15 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 16: Asset Quality
Asset Quality 16 .. $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 17: Loan Modification Overview
Loan Modification Overview 17 .. Modified ninety-eight 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 .. 90 day loan modifications represent loans ad
Slide 18: Loan Modification Overview
Loan Modification Overview 18 Portfolio Loan Level Reviews • Borrowers providing current financials and cash flow forecasts • Increased monitoring and oversight • Identify emerging issues early $1.83 $1.52 $1.77 $2.31 $2.45 $2.50 $12.40 $20.04 Other Miscellaneous⁽¹⁾ Professional, Scientific, and Tec
Slide 19: Near-Term Outlook and Expectations
Near-Term Outlook and Expectations 19 .. 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 20: Appendix
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Slide 21: Loan Portfolio Composition
Loan Portfolio Composition 21 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% $1.4 Billion (as of 6/30/20) Commercial vs. Consumer (1) PPP loans
Slide 22: Commercial Loans by Industry
Commercial Loans by Industry(2) 22 40.36% 12.57% 9.83% 6.86% 6.80% 4.56% 3.80% 3.64% 3.53% 3.31% 2.24% 1.13% 1.08% 0.30% Real Estate / Rental and Leasing Retail Trade Construction Other Miscellaneous⁽¹⁾ Educational Services Arts, Entertainment and Recreation Health Care and Social Assistance Profess
Slide 23: CRE Loans By Property Type
CRE(1) Loans By Property Type 23 1-4 Family Construction 2% Other Construction & Land Development 16% 1st or 2nd DOT 5+ SFR Units 14% 1st & 2nd DOT- 1-4 Family Dwelling 1% Office/Office Condo 13% Commercial Office Building 9% Other Commercial 12% Hotel / Motel 3% Restaurant 1% Retail 12% Strip Cente
Slide 24: CRE Portfolio Characteristics and Underwriting
. We require our CRE loans to be secured by seasoned and well-managed properties with adequate margins .. We generally obtain a guaranty from experienced owners and managers with outside cash flows and/or other assets .. Loan amounts generally do not exceed 80% or 75% of the property’s appraised val
Slide 25: Exposure to Stressed Industries
Exposure to Stressed Industries (as of 6/30/20) 25 Industry Exposure Outstanding Balances ($ 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 26: Capital and Liquidity Overview
Capital and Liquidity Overview 26 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 27: Non-GAAP Reconciliation
27 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 28: Non-GAAP Reconciliation
28 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 29: Non-GAAP Reconciliation
29 Non-GAAP Reconciliation 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 available to common shareholders $1,404 $2,406 $2,572 $
Slide 30: Non-GAAP Reconciliation
30 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
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