MYFW - Earnings call transcript Q4 2018 | First Western Financial, Inc.

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Operator

Good day, ladies and gentlemen, and thank you for standing by. We welcome you to the First Western Financial Fourth Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call may be recorded. to Western conference Financial, like Relations to now First for Tony would turn over the Investor I Rossi. Please go ahead, sir.

Tony Rossi

Good for fourth Thank joining George. morning, thank and you, you us today XXXX First quarter Financial’s Western earnings call. everyone for

team Western's Chief and Chief from Courkamp, Wylie, Officer. Officer; Scott management us Chairman are Joining Julie Financial First and Executive

will morning. use discussion our this a We slide of presentation as part

to Events download not quarter done open copy discuss Investor so and the Presentations questions. for have visit Western’s will page the you up presentation. If Relations results the please website a of team we'll The First of already, call and management then fourth the

These in the Before The that cause actual call financial disclaimers website. any uncertainties. performance earnings such from we that could and you statements direct update involve disclaims read I Various results to like of factors factors Company's be to statements to by the and this during forward-looking any investor remind or First Western future future risks contains expressed condition begin, and Financial conference you made with release are different materially I'd any to would results forward-looking the respect obligation SEC statements. the to filings, in call. are on discussed Company forward-looking also available which the presentation. Company's our implied

Scott. call non-GAAP which measures. intended like that, the discussed contains as comparable supplement to as to of website information Scott? are to over reconciliation the measures I'd be but for non-GAAP on quantitative GAAP with to to to today The measures. GAAP other turn the and And directly refer press well the financial substitute may most management release Additionally, the the no available

Scott Wylie

three good All morning, going slide start Tony, the right. and this overview of fourth off on everyone. with quarter. to Thanks, I'm

up a strong and the earnings reported quarter, with heading quarter we that XXXX. available did momentum $X.X fourth Our execute believe provides $X.XX net at million, share, which increase of last prior growth quarter the business in strong the IPO development summer, during traction quarter, to diluted we'd team sheet fourth and our we time from from with shareholders finished produced income of a excellent growth the identified as common of continued quarter gain than XX.X% into drivers more the XXXX on the earnings In that and efforts to previous per well. balance the XX%

while grew Our XX.X% gross loans rate, increased annualized annualized XX.X% at total loans at rate.

leverage. cost structure We also continue operating more and carefully manage our generate to

helped the the expense non-interesting X.X% for quarter. to down from improve quarter, income Our quarter, prior ratio XX% previous XX.X% declined in the which our in efficiency fourth

saw the number Continuing were deposit We XXXX. over quality. detail earnings of our also quarters the operating in to performance. three on also The despite slide of improvement positive on saw of continuation stable and trends, a credit we on notably last growth net led profitability interest drivers significant rising costs, our we embedded strong our four, margin, most more execution provide

our of lower shareholders, costs. the increase drove we to quarter. the preferred income which payment quarter, relative bottom-line fourth the dividend capital prior the this realized common benefit more in our with quarter, full from we for And During earnings the no had

in of $XX from total we was we had in million the Moving QX, loan portfolio. look on we'll very particularly in to With slide in a quarter. increased production fourth our our loan closer production in substantial office, the million prior trends Denver produced the quarter quarter, five, at take loan strong which $XXX

and C&I well-diversified our Importantly, increases our CRE growth in was with mortgage, residential portfolios.

were on commercial particularly focused lending. efforts Our business development

of up trends, double-digit from in portfolio in the in CRE our quarter. -- loan by loan high with occupied books payoffs during Despite than broader still sold paydowns runoffs C&I fourth the in $XX with annualized industry levels still deposits gross and growth the million both able the million, Shifting loans the Consistent $XX fourth pleased quarter. had period-end of six. represents the were We saw to $XX to owner prior payout million generated we're net quarter, So, percentage more and able in quarter. relatively produce to levels, the we on slide increase growth. high which XX% we

$XX were million Our end of prior quarter, quarter. of increase the at million the total from $XXX.X deposits fourth an the nearly

market time strongest growth money to this increased investment trust of portfolios, in in carries from is and client growth attributable the deposits. our deposit cash the Some accounts our the within

Turning management trust and investment to on seven. slide

decreased under due partially market in relationship to was QX equity $XXX primarily It declines added to management billion. offset Our by was during considerable million December. new $XXX quarter. in by $X.XX million assets assets the in This

a investment our our clients. expect to bring We efforts new in role vital platform to continue play in to

business, the management for equity recent volatile, markets to While the creates advice. value weakness, we and need clients opportunity to show in the minimize wealth demonstrate embedded it in market the don't to when potential an professional are want concerns

our is risk-adjusted for valuable which is build benchmarks and overall investment rate rating. in received First ability And fun, market Morningstar managemtn be risk a Fixed experienced is attract A demonstrated to a various test employing recognition five-star recently to returns. business. have ability Our our cycles. new professionals Western great this example superior to efforts our while our to it’ll outperform five-star deliver their clients wealth Income Mutual of having This less Fund,

like financial I'd Courkamp Now, discussion turn the call our Julie? over Julie to to for further results. over

Julie Courkamp

trends. eight, revenue I'll Scott. our slide I’ll and you, begin at look Thank with

net The the winter weather, refinancing in prior of loans significant fourth due and revenues production. our industry lower XXXX. generated offset loans income in with demand seasonally broader mortgage The soft which million the relatively rose quarter production lower quarter, rates interest the helped given was a Our interest a X.X%. where to $XX.X home of residential loan with stable for gross easing This The quarter, increase the are consistent quarter. growth in decline non-interest of compared also generated. the was was Colorado by in to was as steadily we primarily in portion trends mortgage new income revenue by

nine, our look net income Moving margins. at slide to we'll interest and

the quarter interest X.X% income average our due to net loan increased prior from higher Our balances.

We continue to see partially we is attributable deposit higher trust had growth costs, deposit a our the higher which to in which had beta. have deposits,

funds a we from result, a in cost XXX had basis As points. XX our of basis increase to points basis-point XX

full-year earning in to quarter. X.XX% drove increase on basis-point This resulted an offset in as from in net repricing However, climb. this increasing This at be expect yields. our we our X.XX%. continued We -- interest anticipate deposits to net lower continue in loan was assets XXXX margin all continue to cost to remaining offset X.X% loan the our will with as replace XX and average by for unchanged the higher or yield costs interest flat margin deposit rates upward interest portfolio our interest

income. Turning XX, look at non-interest now slide to we'll

Our the flat the declined calculated to drop in on lower X.X%, due quarter, markets accounts relatively primarily majority investment on equity based of a portfolios decline the our fee sold. the trust average or most the in fees balance income total gain and pronounced were on are fixed in are basis. AUM, was management and the daily late of as non-interest mortgage our Despite the

sold be to we as in move quarter first XXXX, mortgage seasonality to ahead expect the our gain support on to lower we the housing loans into quarters for trending Looking the due higher stronger market.

to quarter. the This our business prior production. Total cost lower our levels XX with our to pushed non-interest ratio to X.X% the Turning better efficiency expense the was incentive with expenses. to to due mortgage level demand. for revenue, from declined and quarter. a in continued primarily third align slide lower related a stable our combined We’ve adjustments The make current decrease in compensation, largely of down to staffing consecutive costs

We full in of impact the expect to the first quarter. those see adjustments

likely, fourth a be we quarter. expense expected in bonus of by our XXXX. move it's growth rate normalization that anticipate tracking will However, little And our higher will run offset operating in the with accruals, a

at XXXX. capital additional to from in year, growth Beginning to segment management expense. in and in amortization we per above generate decline improvements a benefit We expense our end. year in to our expect pace also we $XXX,XXX that a to Later an June, expect drive in our the revenues will in ratio related will continue rate expense efficiency amortization

XX the up million during which delays quarter. slightly performing I’ll the totaled credits primarily still Moving nonperforming at close increase to in addition in assets that quality. partially million TDR of The slide total or total and of a quarter, the XXth. now assets is related assets assets look our $XX of administrative to of Nonperforming following at accruing, asset the fourth from X.XX% offset September renewing by credits two or X.XX% the at are was $XX.X previous

extremely amount recorded low we Our an in charge-off loss experience as to continues immaterial of quarter. the net be

We in turn portfolio Scott. With call which also you, $XXX,XXX that a said, quarter. provision to our loan fourth primarily loan the to recorded quarter, of is for the growth loss the of in that I'll related back

Scott Wylie

talked the All quick drivers we want IPO. update about that I at time right. Thanks, a on the Julie. On our earnings of to XX, provide slide

evidenced effort eliminate balance quarter. dividend, quarter stock. sheet. providing we and to our growing of our redeeming know, staffing Throughout IPO and as Fourth book and that winning $XX.X now lower loan our constraints line. the sub we million new summer in With level by used more debt you by made our additional during adjustments grow fourth boost costs no structure. to marked preferred sustained transitioned production streamline loan particularly strong to preferred bottom $X.X our in had a our cost we've to business our removed, successfully As first capital stock proceeds to redundancies We're capital million XXXX, our quarter

and As a our ratio. our in seen steady in result, reduction levels improvement expense we've noninterest efficiency a

Scottsdale, client generate deposits, catalyst client base. to forward. access of to provide for more entire drive influential growth they exclusive throughout value half second our $XX.X quarter-end, earnings over growth our become us $XXX,XXX profitable relationships. going Denver, they a to Cherry provide gains also note this in and this use Hole improvements is continue access the business Jackson capabilities. we produced importantly, profitable commitments, million and this impact the new by clients we win office. more centers, on XX% XXXX, do XX% XX% without in Aspen, One gain client demonstrates XX% revenue which more and scale. In we’re Creek, in as in evidenced seeing the revenue how This of profitable More particular to able wealthy is quarter should of these year, and been became -- in and strong The business XX% At impacting and their with platform in profit in -- in in collective our development strong quarter our drove we've

made Turning California, Wyoming, few spend rates Each of healthy, XX, operate, that states I activity our Arizona, outlook. and very economic to to about unemployment to are should and is low, slide want a minutes continue Colorado, talking we development platform lots business to new increase provide for investments over to we to grow years, the of win our and and continue to business. significant expect opportunities ability our us two in productivity revenue. We've past

last a we we've to in the our year development and Following which continuity and BDOs business We a of have officer ‘XX consistently. now, this teams. hired full ‘XX. leadership XXXX on new made service found year, about place their all the to business our course officers over executive the speed produce development impact up team year. generally officers should it with We've and entered for get XX these positively full additions takes And

better our perform results. in productivity continue which we we from working Similarly, that of more they existing offices, into centers business our belt, didn't we mortgage operations, So excellent cross-selling where well. overall have their key to as of development profit opportunities. with that takeaway last to level originators under have have offices XXXX. Those a expect into and produced going is didn't mortgage are business produce being also a loan now place, the staff, our One officers see a where is time and full full-year we within higher the and year should leadership integrated

well-positioned the see in should a the Arizona We are also Now, expect mortgage activity continued being with filled and centers we improvement staffing own of of expense expect as well standpoint. Arizona year. during we presence its as about efficiencies. a be We're we to -- seasonally these diligent in increases going operating terms Colorado, believe little profit our cycle think We're talent can continue in we’ve in to further on revenue, vacancies, different we to in management. market. seasonality the in our offset And some experience our the that slowing all excited expanding from

us taking the unique potential of we our prominent banking think bank Colorado market In we well Finally, of strong year out the fourth in model market expect position. half in the held with launched highlighting advertising some to one dislocation aspect on our the some now a is the the starting likely beneficiary first the half of We're First as We're this to banks just these place Western the in to emphasizing the momentum remaining positions with First selling to than experienced the year. from local stronger We're the second anticipate Colorado. and opportunities that clients optimistic state publicly We banks and of emerge hired campaign, coordinative year opportunities a gains be about of see being acquirers. marketing will capitalize local to deliver attract wake quarter, talent. a Western's trend the integration two of be of for only shareholders banks occur, and we our acquired to disruption. those that

enhance strategy We our build to and infrastructure to in continue the the client base, earnings our franchise. team, have the our grow value and of place power

open your ahead we're that, George, you and call, with to up questions. go So, take happy the please? can

Operator

Brady the [Operator our Instructions] you. question Thank with line And comes KBW. first from of Gailey

open. lines now Your

Brady Gailey

a been probably seasonally little XQ just your loss I there Good weak of mortgage. know was had can business down fees I kind morning, that breakeven, is with a than mortgage we were running guys. And I Maybe more that of XQ, Julie your but strong and just quarter, fees you start about expect a But, expecting. in expectations know talk XQ, say mortgage be maybe business? heard XQ again. the down an we seasonally XQ. the quarters maybe as mortgage the into update get I on mortgage. But, for XXXX, in just to was

Scott Wylie

think I the XXXX. of to volume landscape ‘XX We’ve in pressures transactions. margins, the or there's in factors Okay. generally sales home themselves in seen here seen terms and We've continue trends mortgage that and saw Well, a have then last two. month here new coming rate the to in and in reversed competitive in and rates, purchase seem fourth we or factors slowed certainly which pressures of we slowdown expect from over quarter we’ve the that had couple be upward

the So, those they're against of working the that things and Talking not it's kind January. said, us activity in in all quarter, the of seeing saying in they're fourth to just, like good now you producers, industry.

And typically lower what some changed. There earlier is long continue we year, hasn't know certainly spring. be wait see so, to as benefits and last rates to seasonality going were that you that until of reason we're see, than trending environment than they competitive hopefully, as no

a market I do from what from about can it's is, think standpoint. optimistic get going we're where worse we it

we're think believe think things and I also our turn before crossing is the I around. strong that fingers being this see cyclical hoping cycle a players and this and Western. the seen business First mean, and passive industry, I survive. it's is know we seeing shakeout over we’ve Also, important not this to a years. we strategically going we're we're for important believe And the to

improve, with we have seeing proactive extent to integrating we we're volumes this about advantage could To been. that deliver. pretty at better, that. we opportunity proactive. in be think managing we're and that sure the to the So, comfortable terms We've going as of talked don't, And we've feel we it that call of managing in the been are taking business, we strategic last making margins extent that the

Brady Gailey

And the might additional roughly expansion. All guessing hikes, assumes guessing additional did outlook if upward flat about for right. I'm maybe margin is And net some for I'm hikes, hikes. to just margin sensitivity or two no your one interest XXXX, rate we talk that the -- like see see that rate

Scott Wylie

a margin couple were done we then can And originally up October that flat now think for planning tell look business interest hikes, XXXX, were all own in XXXX. we with some net ways, a as right, in absolutely because models. think started models we we assuming and X, internally and I at you zero when hikes, that three we for we we've to chance we've helps down short-term back internal I for Well, rate you're our improve we're of saw our our rate then to end we to if margins; no with down if rate had us XXXX, the hikes operate

bears kind longer that in when seeing we there grow expensive, they QX in it of view the if you deposits, new grow this sometimes see growth to able take sheet financial when saw if Julie bring are think deposit be balance and deposits. not of to also, I our on we're portion this, we XX% about going significant. in you you can't in of But, factors were on clients, her talked are couple a more

have We higher deposits mutual our pretty like to tied that money much fund trust are beta rates. deposits some market

our stabilize, going half shoot moderate. in in So, have as you see for of being those funds more clients when up bring expensive; XXXX, bases and the impact those costs those us. when have on world, Also, you latter cost as to the frequently, new of that's clients, an it's in they

nicely some CRE and the that You effort occupied guide side. business turned on an also to C&I loan saw more out showing in and progress in try owner XXXX QX,

has deposit also that course impact. Of a

a that look accounts typically operating year turn and up at again, cost new But in a a local a there's on cash bunch in account lower out. things here of management transition commercial in the later the I until have these margin that as We later expensive because January in the going as And won’t be to is some win from deposits accounts pressure competitor. of whole short-term large will big those cost year the think bringing time. better the that play all of as

Brady Gailey

a then, in just level think lastly of for to for you the loan And you right. of growth. this on for expectation All Do guys topic that is kind high-teens mid me XXXX? loan growth organic good

Scott Wylie

it's XXXX. We quarter produced size, to every in report in the range half in is of growth again saw to the of XXXX. we think is that risks do. We institution volatility We And latter think having do a one in I that of some there interesting. it. our

And so, quarter, you $XXX $XX high also next underlying quarter But really shows us. and then from predictable production that million you when if quarter you but see just the pretty just high range, million payout very you at it that numbers economies quarter end In the true how the for a positive. look aren't here, the trends are term, and one in out are these of it’s here, resorts people the where smooth sort Jackson business in. businesses in in strong, and seem sentiment true is we're Arizona; really people their markets communities numbers the Hole short strong, moving it’s the the moving are

then, about economic help competitive think a in I balance bit factors at XXXX, for continuing banks the us presentation well grow underlying Guaranty state the sheet. also balance think And being I and continue as as new to required very to which year Bank Citywide sheet acquisitions. factors you spoke positive and landscape the in we last Citywide year, by where the are little So, see CoBiz XXXX client this -- I going look are

Brady Gailey

Great. Thanks, guys.

Scott Wylie

you. Thank

Operator

of the [Operator you. Olney Instructions] comes with our question Thank from Stephens. next And line Matt

open. is now line Your

Matt Olney

Good you. guys. morning, Thank

Scott Wylie

Good morning, Matt.

Matt Olney

I in the there the to believe up level. the a the quarter about in I the of want fourth quarter quarter? in why any -- the comment then with move can commentary from start remarks was or in first fourth prepared back expenses XXXX expenses. And moving Did I of correctly? help kind operating first hear back explain the and happened in the would you that up it what quarter,

Julie Courkamp

Sure. with start can I that one.

for between won't QX bonuses a mentioned had first the in just reoccur incentive obviously have to I which decline decline, As the compensation, primarily in QX the and that quarter. accrual

in that third it expect kind of the We return second are quarters. to where levels we to more much consistent and maybe were with

additional will However, able reduce mortgage in the that partially incentives we were offset to business some that.

will is I the expectation the we're, So, our up quarter be think quarter. from that level first fourth expense

Matt Olney

Got it.

then, that, over focus Is deposit you to Okay. for I last had on keep that Thank as will should as front, on Julie. quarters. any guess bearing two -- on or XXXX? you usual we deposits just the considerable of pretty wanted the that some think I -- And pressure non-interest far outflows kind do mind anything anything seasonality there in is that continue in or the

Scott Wylie

opportunity non-interest an believe We deposits. there's to bearing grow our

treasury We have competitive a very management platform.

January, treasury we area new focus commercial background some And in an we that we more and we underlying make good strong that and so, last brought centrally to And [ph] of a year, some pushing profit product group the where can be lead that fees and sure a In starting focus half results. the centers. Director that's think leading going that's to our should on then updated strong of our current, latter has get there. background accounts technology a it's Management management through Treasury sales

on been think grow have where then nice near there that we made area So, a the significant personnel a that's there's addition can working think that an we to and we've We've opportunity. that laying an groundwork impact.

businesses want target clients of that institutions. that business We use that a turmoil again, we local great a there's at market do service acquisitions, the us a opportunity to be looking of financial commercial out state we also the institution. really out And have in think for team the with talking to deal help can to here, our local other data

deposits in in should gains think of that XXXX. non-interest I So, all drive some bearing

Matt Olney

be sounds outlook sure And core margin. the XXXX. -- relatively core then, you expect make margin to the to It I flattish appreciate I want for like the in

year. half little of was the I back of year what recovery hear first the I half the to bit driving think, Did correctly? mentioned And you a and near-term softness that? to that maybe Scott,

Scott Wylie

summary we're in half anticipating. we I again, with drivers produced that a we've know of in you hear in our for the have see lot market Well, the money That's are in what costs some increase those a kind fair to short-term, And We the cost correctly. the the deposit of fact of that think a the the think high did -- December that that to XXXX, that of the that on growth affect funds when become I seen [ph] you do latter mutual ending point the are XXst that point XXXX. numbers tied factors starting there now are deposits of rates. numbers for the the incremental

stabilizes at look it the where and we the XXXX. the XXXX, overall add in you and for into as of XXXX we a with think latter that that? want range NIM probably as changes mix same up we grows that were to to wind in So, business, of half Julie,

Julie Courkamp

good. on and seen getting some production have our in trust that that on cost so. those the have so it also higher cash, And the is fee income, loan nice deposit with some on revenue, of side, we're been rates we that our loans growth Just helps offset while

Matt Olney

sure kind totally the see in are hit quarter? in during captured. saw fee the and more was or to I month the fees based specifically the built And and those I just appreciate end level, just income on XQ first or fees your the we of accrued just it. make want that how want make those got market it could of then, quarter? to trust that that Okay, -- off sure investment end that fourth in of Are those are of on I period in captured that management, pressure little we or is quarter,

Julie Courkamp

So, on our charged average AUM a daily are primarily of fees the balance balances.

markets our move -- fee So, as as well. what revenues will the move,

then in, QX trend. we in will markets, improvement as fees the that follow continue see to of our is most So, baked the and

Matt Olney

Okay. front. Thank on for Julie. then, credit And that, for me the lastly you

credit that we books resolution Any a hit on about the expect that. last talked some talk you should credit and could I quarter, when for resolutions? that we looking think larger update about on and

Scott Wylie

talked that that quarter, vast on we NPLs talked meet we Last the Sure. up about of three credits the about that majority call.

was non-accrual about fine. a management by there NPL credit for one a today here secured I'm hopeful to until half that cash it period securities We're First talked largely and the consistent investment That continues in that’s XXXX. sometime leaving performs million Western. of So, it doing that of we the comes first perform; time. $XX.X at as that it's out

I that. But I of that looking that know that won't think, that be come say if of that for no that NPLs QX Julie sometime question instead XXXX. won’t you me, she’d of tell today think we'd into reason probably that answered -- midyear we out

about problems talked we completed loans quarter administrative call. two other were last The renewal and were those our actually before

TDR. of on that's of that First credit lead, this over from longstanding was has, performing the came years last at TDR. Julie from was the loan been considerably fourth done they’ve of fine of would be with I time And client that we But, them job business challenges couple say as that renewed and shorter a performed ago. has improved perspective, my on, quarter consistently. What years. the in And Western it And a felt some a XXXX, that. our mentioned, and gone had classified NPL those couple and are a list. that of should So, They on put we

fine NPL a they QX. standpoint. Again, does not concern. trends, are So, from impairment up and even improving as all We've in an an it’s say it tested would new impairment, underlying the I though of show in and area performing these for

in XXXX. those flat improve see expect last NPLs So, numbers from quarter, to and

Matt Olney

last And TDR that Scott, now? on what one that's was the you amount of that mentioned

Scott Wylie

I it's I XX/XX don't number, $X.X million was I Yes. a believe. -- that to think today today. know down

Matt Olney

Sure, okay.

the I all Thank it. guys. appreciate color. you Okay, for

Scott Wylie

All right.

other there I any think us -- George? questions, that brings are

Operator

I see this the would remarks. questions the team for to no I time. turn closing at further like to any back management over call

Scott Wylie

calls individual and dialing need Okay, a appreciate great everybody for as your plan day. We and sure in. interest thanks up great. set support Have Well, be. to

Operator

you does and program. conclude in gentlemen, today's thank Ladies participating conference. This today's for

great Everyone, disconnect. a all may day. You have

First Western Financial (MYFW) 25 Jan 192018 Q4 Earnings call transcript