MYFW - Earnings call transcript Q2 2019 | First Western Financial, Inc.

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Operator

Good day ladies and gentlemen, and welcome to the First Western Financial Second Quarter 2019 Earnings Conference 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 is being recorded.

I would now like to introduce your host for today's conference, Mr. Profiles. Financial from Rossi Tony Sr, you begin. may

Tony Rossi

Thank joining us Dwell. XXXX Call. Good Financial morning for you Earnings thank and today Quarter everyone, Second you, for Western First

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

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

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

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

on reconciliation the non-GAAP may to well as contains Additionally, website information for GAAP GAAP today, non-GAAP of directly as most as other release the the to substitute measures, and refer not comparable available to This supplement, discussed management which are the the measures. but intended be quantitative measures. financial press

Scott? turn the like I'd over call that, to to with Scott. And

Scott Wylie

X of quarter. with everybody. the I'll Thanks, right. good Tony an overview All Slide and second begin and morning

embedded management the business very the that attract which the continued strongest our under platform drivers we banking performance ability XXXX, we've wealth and new grow IPO From reflects management. and in results the We're execution past to that quarter, along clients, in on an the developed to generate we've strength over growth our the of operating private which with year. about with second deposits pleased was continue since loans talked our perspective, attributed our to in assets

payoff This the despite of XXXX. weakness business commitment reflect the mortgage the saw to that also quarter's our cyclical in results we

shareholders second goodwill in the highest earnings of In $X.XX a This based our per resulting ever of in record includes team, sales. generated in GAAP Los resulted in Angeles the gain about talk quarter production income sale from call. more on our reported level we growth. share. mortgage a and was our later of business, strong On This net mortgage income or basis, earnings driver $X.X to operating our cents which fixed of profitability common critical I'll diluted a loan we available impairment which charge the

Excluding from cents. previous XX% represents of a quarter increase this XXXX. in second increase adjusted XXX% the the recorded charge, we from and This a EPS quarter of EPS $X.XX

the second -- loans sheet in XX.X% and X.X% generate quarter as growth goodwill balance generate our to annualized gross continue We we're increased year-over-year. to higher rate good

production and off have high in increase almost they twice pay significant quarter. downs, growth in were was a as but by in loan a quarter We were continue to the strong pay prior the overall which impacted loan as

see to continue we side, deposit good the inflows. On

higher saw rate metrics. we the annualized the during year-over-year. with board, positive and key Our deposits total rose XX.X% trends operating in our Across quarter were at XX.X%

assets. we've quarters. We reduction in strong strong drive past driven ratio deposit redeployed rated nice revenue in continues quality improvement the saw over our the scale And interest saw significant growth. business the the liquidity efficiency and to had by we net few improve we Our credit margin growth a expansion as in as we substandard from

driving is the performance value of operating significant strong franchise. improvement in Our

Over couple of a designed Outside recently strategic our book past performance, to took actions operating tangible share, the we XX%. per of nearly value increased enhance has year, shareholder value.

repurchase The common repurchase authorization up XXX,XXX stock. to to first, that of program shares was allows of our us a stock

sale took Another which more income our Los we later. team, recently of action was Angeles fixed the about talk based I'll

an of the us with we company future. believe opportunities and Accordingly, we the will Given we the price these continued catalyst the attractive since the and our stock is another and for earnings our decline in is the as investment that valuing revenue company grow at repurchasing shares to not shareholder in continue value. IPO, the levels market believe accurately we've strong provide that long-term creating

Moving provide Slide second X; earnings. quarter we our to additional on detail

grew strong quarter prior efficiency continued in goodwill was were well XXX% excluding share previous and more year. quarter earnings relatively per from improvement up in prior our charge, ratio. our than core adjusted the the an flat, controlled in by and earnings up basis, improvement Revenue expenses. On from the impairment the XX% from while revenue resulting XX% expenses driven Our were higher

Turning our to X; look Slide at In portfolio. trends we loan

$XX.X Our business quarter loan QX platform. we strong the be million increasing the have last year, was of loan our up development with could originations Compared need during second in new production to the XX%, to traction in in speaks loan to which our production second quarter.

production. to continue diversification across good loan our see We

and refinancings. we assets. loan strongest other purchases mortgage and and portfolio our cash, pickup to both new respect a secured for This saw demand quarter With in securities residential by growth the residential occurred in mortgages,

increase Colorado on seasonal that strength, in in housing to and we officers the here the had additional Given we've mortgage over market capitalize year, well-positioned demand. past strong this were

where up up quarter were annualized. were year-end loans loans X.X% period the the second -- to into average our XX% Our annualized

pay We was by total payoffs much $XX.X increase in million up downs impacted a significant last the in quarter and the the loan downs, in from which payoffs And late and had of in occurred million period growth quarter. $XX.X in pay quarter.

substandard was a quite pay of loans. growth activity quarter, payoffs While and this a in a represented for bit the down headwind higher production to pay downs loan related

improvement portfolio. saw of our the in quality overall nice So we a also

Continuing on we'll at X; closer to look deposits. take a Slide

market. was Our quarter. lower growth Unlike which to our trust a period was for this of which million accounts, a new in increase in much topped the have We relationships, to two particularly ever, network about been in our time development growth deposit strongest prior an which Denver of cost of $X deposits deposits, high positive deposit first new prior efforts the driver manage terms funds. are $XX.X of saw attributable was -- high client so the total the in accounts our deposits billion of from quarters, cost new the

investor million assets quarter this of our million by improvement $XXX under as performance development under management new months billion in management $X accounts accounted second first far just new The first year. U.S. of this We which higher in has year cash. as assets Turning This has brought needs added some $XX the months existing Positive to success in to match our the The headwind the of new outflows compared variable year, Slide six quarter. increase in as to accounts. equity their X; trust million for this seen increased AUM efforts from a departures client Through million through six closed the our market had we've contributed clients will the this year's new client being in acquisitions. $XXX assets in of withdrawals $X.XX exceeded business factor last largely period year. while in on the than is to accounts. billion. $XXX some seen that the the a due quite have been is year, in from invariably as growth served for million a lost the one $XXX business the to But withdrawals withdrawals same we've uncontrollable bit we

Julie turn Julie? our call to over further for discussion of financial the Now, I'll results.

Julie Courkamp

activity that begin was nearly previous Gross and at I'll quarter mix fee Scott. Slide by split the Thanks, and quarter, our Scott total non-interest With spread resulting given income the Western's revenue strong was part X between income. income, XX-XX increase large the revenue of a income. the in First discussed at robust and in million XX.X% with $XX.X market revenue trends. from

to take closer the Slide and the look interest margins. a Moving at income X; we'll net

our increase funds more interest consistent in NM seven primarily quarter our shift average a in some by interest income as was favorable loan from we quarter, of to a inflows improved basis net Our portfolio. to prior quarter mix net earning reinvested points X.XX%. yields, seven These of X.XX% to in higher our the to was into Increase points with during process last and due point than while basis offset our basis the assets which margin that deposit seven X.XX%. loan increased factors

point. this terms Looking asset-liability balance is neutral at ahead, our in of sheet fairly sensitivity

stable. relatively rate As scenario, such our expect NM be in declining we interest to a

should we opportunities impact improve our assets, However, earning have continue positive have mix on margins. to our the a to in which

we'll Moving to Slide take XX; income. look non-interest a at

increased quarter. new while of compared volume of the purchase in quarter. non-interest from gain $X.X doubled second sold total million approximately XX.X% to refinancing of a income is quarter in for prior million This prior of the an loans gain to Relative loans in origination $XXX.X in quarter. our $XX.X XX%. We on million million XXXX, sold. $X.X Our mortgage sold increased mortgage increase Due the gain for a primarily the to first

were last of new and from slightly up quarter. production to the $X.X XX% quarter our total a fees XX% of As to mix and mortgage result, of went management up from million. compared nearly Trust prior investment purchases

from XX Turning that the expense $X.X primarily total due impairment earlier. our million XX.X% and the non-interest goodwill expenses; increased loss to quarter, Scott discussed to Slide prior

implementation to in proxy marketing to as cell team year. the corresponding increased non-interest LA due slightly, XXXX of related higher oddities filing our seasonal staffing Excluding of controls the and higher first spend internal well the that related fixed on with and expense to charged legal full team primarily the marketing activities, additional income fees the of half as our

last ratio operating our This leverage resulted continue second our grow. revenues to efficiency realize as improving XX.X% quarter We good XX.X% to from in the quarter. in

already bulk the legal to decline of of income see expense expenses Island year. the relating the practice With of some the we completed over second of expect the sale the legal fixed the half to and team incurred,

to business However, to drive growth. in invest and we continue marketing revenue development further activities personnel

reduction in expenses slightly third quarter the to relative segment to we and flat quarter expenses. be result, the our expect a operating to in management reduced fourth higher As and capital then the the

Moving non-performing on total X.XX% X.XX% non-performing previous primary total in decline second the assets end our assets driver million, $XX.X Slide $XX.X from the quarter. Down assets paid of the the down by quarter. was at The quality; loans. has the or the XX client million for for or of asset of

approximately received loans. on we quarter, million second the $X.X non-performing pay downs During in

other in further $X approximately million receive which downs the portfolio. also quality pay We our improves on substandard of loans,

credit losses, net recoveries in of of levels to $XXXX. low continue and fact, We second quarter experience very for the had

result the of in of quarter. the a recovery, net loan provision recorded $XX,XXX our and we the second a in As recoveries decline problem losses loans, for

Scott I'll call turn back to the now. over

Scott Wylie

Thanks, management Julie. for It sell operate seller on cost which team, and option on meet platform. Okay. want its XX; capital our optimize Continuing a based to is standalone our to impact attractive Angeles identified to segment. related We provide capital on XX acquired our a look component we invest basis. our advisors a some didn't more and is the performance, structure income this legal Slide expectations pretty information opportunities years a at This agreement strong we a operate of ago team investment so Los profit we and companies. from management to but business on fixed reached to very relative to continue standpoint team I allowed to

up free and about We'll expect be sale, we to resources advisors. capital the sub-advisory billion our through to will we to assets to client see The legacy assets can team will management million don't be impact core, that can management bank $XXX banking with they'll strengthen our clients and no relationships we private management selling a under wealth to and reached team provide and legal transition $XXX still on management advisory full agreement clients in so there but ongoing related resulted business. and there under access By will from approximately the be third million used goodwill their a in of meaningful one. The $X.X impact the Once impact to $X.X on recognize reported goodwill in a positive good in reduction. any the be any revenue sales resulted be If and to quarter. expect equity sale impairment for impact slightly as to second in tangible the ranging we common charge from earnings, positive the million. line X.X sale earning it complete with the the in revaluation is decrease expense a should expected quarter, million decline

the year discuss attract in platform Moving with for portion on pretty a strong the line to we Slide expectations XXXX. Investors good our year. tracked XX; far. of the the should in and producing to our continue are fee development we outlook income much results lead This and expect so resulting meet in is growth This bank. bouncy new remaining business to second I'll our continually half of growth, clients

very Our pipeline to the in business so portion continue and to make expect over mortgage business we healthy, remaining strong earnings remains revenue the contributions of the this our year. to

leverage within for deliver model continued that expectation. and our As on opportunity we've previously we earnings communicated, continue provides the operating growth to

investments continued our is to capabilities. growth and Our to revenue even growth, development we make expect enhance further continue if see operating we improvement to expense efficiencies, of business exceeding our and

Market. about focus interest market our Valley. we excited it to and the most hired particularly growth We the is demographics Valley our to continued recently contributor president Vail successful our we're initiative has be on This markets a a in years. into number a coming expect of Vail market significant the One similar to will

offices Market the XX Valley worth of our in largest Vail has of the two the he's he'll believe be Valley net banking and new past very successful network we broad led Vail president marketing propositions with clients over in years. our Glass, in Michael value worked the community high unique of

serve shareholders. performance, as a we believe catalyst purchase share active for and for we new value that price to create in strong be positive our programs Finally, operating stock program. a repurchase Combined that intend the with we

please With happy to now Gerald that, your After calls. the we're take questions. open up

Operator

Instructions] comes [Operator Gordon Our from question with Zink. first McGuire Stephen

open. now is line Your

Gordon McGuire

little the the your past maybe name the Can just I flattish start through liabilities and just that about bit impact? kind flattish in us morning. commentary given of guess deposit reprise I if data be of the you was coming fed more you've maybe you expect seen that of walk being would assets the moves any more you surprised liability quarters. Good a bit get a Julie, sensitive we kind few to target quarters. how neutral, of wouldn't kind to little to kind the some

Julie Courkamp

I can. Yes,

it and we there. we'll know, little pass of You we do a test how think that we on much of some the successfully have depends along think bit success level federate can

we XXX% $XXX about have data. think about We million in that are deposits

we So to expect move. those

in or deposits you rates. XXX% we there's million are that to $XXX another move but we data much have We not and subject may know, already discretion those whether how and move

which they at degree will that dependent that they discretionary cut, some feel those but So little move. just the able we through be much of we successful time. the to deposit to of definitely accounts, with we how drop how that rate on see in we'll know much think will say difficult this is don't pass exactly in we'll can like to costs it be level the We'll reduction bit be just it's a

house, a of XX% like we've loan is rate; we're loan variable, side. it the pretty there got our we loan book at from fixed so about side the of a is feel good but the XX% On position in

Gordon McGuire

might people quarter, when and see some trying to get than within there's just margin just stabilization into pretty of helpful. focused kind to wondering -- with AUM. on in you're a continuing of last getting traction think I more that. sight little on that any organization more with fees how mentioned, you That's the your line and to Scott, focused much AUM about rather compress think if quarter trying to the the had this we get I'm bit

Scott Wylie

that all and towards incentive in plans oriented in we dollars AUM They're revenue have you place. tell can not I dollars. Well,

more fees, growth don't there's be fees I if that any of So you looks about the we've of declining not is them organization I business would focused in shift before area, think a any a our you're in you're on margin in know seeing actually plenty focus declining. the But lower we're business. lines got business. like trick the I the think seeing see that compression in margin around of it talked and our in seeing We've place.

a we're show business in a We a so business. talked largely a continue can So small our pressure side. the to of we've little full bit see about larger change quarterly gaining this, not a presentation fee did up and and talk way. the momentum management new business We're think about relatively that fee small that not good I'm numbers year. wealth investment also concerned going we're about the in before the and I in second in that's business in the seeing on that like half today trust to

Gordon McGuire

just mortgage. Okay. the And on then

pipeline I'm healthy. there that wondering I given I'd run if of a think characterize little activity I of it's you on size skeptical think just I guess can is still outside that like pretty seasonality. is quarter, this you Just to and any hear the good way of color you is rate whether was the kind there strong any up? a but the kind any repeatable

Scott Wylie

stronger -- benefiting across it the second the you level Well, a last quarter spent tell from can demand produce year industry I produced that's and that. there evidence a a than we're in things effort and to good they've this higher I demand at think saw that that us And building can historically. and know, seeing you we of of relatively lot certainly a we and low impacted -- are going what saw that time team we year we're

real of lot immigration, I housing continue markets. There's we're a in seeing to markets we're that have strong active a very think estate market. the very

a that saw continues, level the our we've in it'll it's little or in a not to or lower, to whether as QX. about cycle if continue not Arizona So QX but we try slowdown same season. in should the this QX, little we We'll a going or initiatives in expecting change and long higher we're that continue dramatic talked QX as offset at to be think

Gordon McGuire

Got it, good.

guess the like Maybe repeatable. unusual second in good. maybe Sounds wasn't thing anything me. there I that last for wasn't quarter That's

you it the and team model. think impacts would the how Los Just to trying expense Angeles about have be? do for what my fits in Just sale fee

Scott Wylie

answer like that? to you Would

Julie Courkamp

Yes. The selling that be off. revenues on business will that we

tricky. So a little bit

AUM of bank that more that We that level serviced have relationship. the reported at is L.A. but being there's there's will decline that by sub million because XXX is team AUM a advisory

but the XXX,XXX are that So as well. XXX,XXX expenses total about with revenues there's go about recurring it

that's an So have neutral the why that. for we're calls to talking earn the in deal impact out out included to us earnings

So the that baked do will all deal. that into to expect entries be of closing closing we the final upon

Gordon McGuire

All on a I right, It's and had you. congrats good thank quarter. all

Scott Wylie

Thanks, Gordon.

Operator

you. Thank [Operator Instructions].

Our comes Investments. RLH from with next question our Haberman Ross

Your line open. is now

Ross Haberman

Quick been? Good on Scott. XX%. how've you morning, question efficiency the The Scott, ratio.

I was can a three I the think years, said have in there a get or what goal Please. next improvement to? do know, room specific? you you don't over there. the for you that little Could final number -- two slide, be more you down And XX%

Scott Wylie

Thank you for that question.

fee have we have typical that efficiency we community we believe a to IPO line since higher and our peers high banks than tend bank. and our We in get financial costs know metrics the with operating ratios that higher that said did

realistic wonderful XX efficiency high XX% at banks would non-interest of compare ratio that fact the we range where like the the fee think in don't And at have the in of Western. fees. top a in it be QX. I almost to, the we in We're is XX% bank or income a are that's bank terms So First that know high ourselves fee you to but

strong efficiency we've fact something to really medium to a there, we're IPO working I the think done I So for achievable, getting our towards. the ever we're think showing going progress get is year we're efficiency but ratio And goal. XX% since talked don't is ago almost Which in think towards is ratio. about XX% term, that and in I that

Ross Haberman

an be up know, guess, or any Could years additional would projection? within? you that open there get Specifically, you branches. optimistic I I don't two if

Scott Wylie

question. short-term. is First our acquisitions do Well, whether it good Yes. I some course. a depends whether XX and the price but we those or creating first, In done on operating a mean, sell history we're line to improved whether the that's focus got Western, that's nice performance able of just all mass things to acquisitions we've and stock to ratio organic, or and we're now really growth expanding continue the support can critical be get in our for to low-efficiency for

Ross Haberman

next about my would clerical that upon numbers quarter, the $X.X just next you book. expect sale, equal roughly the math add, about question. right? I'm things And being that to gain using If just your right, quarter to use for is if book is one that million let's tangible All $X.XX

Julie Courkamp

$X.X a not quarter; sale, reduction on relating books off had million of to we the second which got of wrote million. to it's goodwill our on So on goodwill. a it's books in the gain the we $X.X capital We've management prior point segment, a

Our you estimated of, pretty $X.X deal the the the million the $X.X valuation in is deal. for million the much with of value range about bill to know, of

upon So our would goodwill remains on the that that of out come book. closure

Ross Haberman

book, right would XX somewhat tangible is but that my math cents? again, So raise if your

Julie Courkamp

right. That's

Ross Haberman

luck. of best the guys, Thanks, Correct.

Operator

from Thank you. comes KBW. next with Lay Woody And question our

Your line is open.

Woody Lay

sub-standard on I so were real fast, wanted they of portfolio, but sort they of downs on that? was healthy I on the how wondering were to the touch pay elevated outside portfolio

Scott Wylie

Good Julie, you can to that? morning, speak Woody.

Julie Courkamp

we've loan that sub-standard the and have if noted by reduced about you our talked $XX as million. we, kind here on call will of So you

we've seen the XX where months. But to having So a which range elevated kind the of a quarters over was of over the little of a was over we course of it outside first portfolio the from flow rest were not the XX in what quarter. in last

Woody Lay

your with give are to active hear helpful. That's want Xx? me; of to on it's us Could last And you you buybacks the sort comfortable form you as TCE taking range to all active down just be where it. some Got great then feel you on front. color

Scott Wylie

the What's I question. the for target The of heart couldn't hear Woody? range that the what?

Woody Lay

comfortable range of Sort are the you where to active you all feel TCE down taking XX. with

Scott Wylie

Yes.

XXbX generally ratios. we extent the Julie, on plan the in you want place to speak presents target that terms in we have just ratio? the that, do in to ability to consistently to the itself opportunity to want So target so the have market, TCE do of be

Julie Courkamp

So are I our we XX run have the been how we've what capital and months. program think against at and projections bank in comfortable over is where full pretty what consistent our buyback next still with earnings growth we've and announced as our the

So be our we'll in feel typically TCE ratios they're we this capital with at. likely would I where comfortable efficiently think run that lower pretty on pretty and

Woody Lay

Thank helpful. you. that's right, All

Operator

at Thank for I questions you. this showing turn remarks. further not over now any like management to closing the to I'm call time. back would any

Scott Wylie

I'll quarter. everybody you again Okay. to speaking support. We forward in your sure thank like in taking First time with this to to just appreciate all look the morning. next dial for We and Western interest your

Operator

thus Ladies and and concludes have you today's wonderful for program a day. today's thank you gentlemen, Everyone This participating in conference. disconnect. all may

First Western Financial (MYFW) 26 Jul 192019 Q2 Earnings call transcript