MYFW - Earnings call transcript Q3 2019 | First Western Financial, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the First Western Financial Third Quarter 2019 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

to conference like speaker to now Mr. today, would hand over the your I Financial Profiles. from Rossi Tony Please sir. go ahead

Tony Rossi

Thank you, third Katharine. for call. joining Good morning, everyone, today First and for Western Financial's quarter earnings us XXXX thank you

us of and Executive Officer. our morning. Chairman We'll discussion Joining Scott a slide Chief Julie Chief First this team Officer; Western's are from presentation Wylie, Courkamp, use and Financial management as part

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

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

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

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

Scott Wylie

good Thanks, everybody. Tony, morning, and

operating company We've into progress I in introductory proud more this year. make the the demonstrated really of first model. good for jump couple reporting than in our been now wanted our we made leverage team business of to a year a I'm some today, publicly before and Just comments. We've a deck has

adding we new loan team the deposit, In growth, solid growth, the fee office clients, strong progress a of earnings even mortgage in up addition, in Valley. production Vail opened our really made and we've long-term drivers integrating

year-over-year a while was in EPS XX%. up increased income QX, net XX% basis, On our

book year-over-year. XX.X% total loans, XX.X% Deposits sale, value is for tangible mortgages up Our held up up XX.X%. and are including are

company. So, overall, public it's been year a a first as quite solid

So and slide turn X, summarizes the let's to deck quarter. third the which now

Our million net third drive in on quarter we or performance and $X.X put the to represents business income per execution place of $X.XX diluted of generated We growth. strong model another share. quarter strategy profitable

before, noted I share. As on this and a in per XX% XX% represents an net income of earnings basis year-over-year increase in

of for Our third business related quarter announced our and process fall our results residential for compensation purchased lending XXXX equity in EMC, we the last expenses to income sales quarter. an the Angeles Los included we fixed some that earn-out that mortgage team

These share about noncore items the in impacted our per quarter. by $X.XX earnings

value share. per disposition annualized profitability, adjusted quarter. the expenses driving strong QX, increased book our XX.X% in we're or those would a growth also our share, during and acquisition $X.XX be higher So for EPS tangible With which X.X% in third

XX% our We assets Western. quarter continue First very management. This to resulted in business strong attract third high deposit worth strong increases in net development and to have and momentum growth, in in clients under annualized the

assets for in billion surpassed growth our under & business, the $X As Trust a result our management time. first Investment Management of the

strong to history. make a at another We production, highest increase profitability. to was very loan the XX% our continue strong pay-downs. the portfolio, portfolio we in in level continues from look the last and by Taking a also increased growth overall production, our which contribution in mortgage but quarter and trends a significant our of hit in payoffs had Net the we've quarter impacted have good to loan loan seen overall runoff

somewhere our proved quality in substandard a to team. July, loans based close our an we increases $X.X agreement closing, to Angeles in see to we continue sale the hoped fourth reached of We to positive $X.X million million and be transaction common now We'd with related announced expecting time range. but to in impact stable sales had expect quarter. charge-offs. slight complete third to that trends standpoint, incurred line the And about during the a little to zero we net too sell to to we that professional in have upon credit this tight. fixed And third Los We're quarter, continue From tangible another income in quarter. to equity quarter $XXX,XXX fees the

So deal terms those see some closed, expense of relief levels. when that we'll is in

Moving strong last our well-controlled X, in slide we additional detail we to to quarter see improvements to third driven Relative continue provide on year, by higher and earnings. expenses. revenue earnings,

look portfolio. we X, the loan in trends Turning at to slide

held mortgage loans $XX.X from the representing Our prior of rate growth total loans X.X%. sale including of for gross end annualized increased quarter, the million an

our to show XX.X% trends quarterly in the On slide a year-over-year. loan production this total loans added were net to an up basis, and We've average new runoff. chart

X.X% points from to We quarter increased yields X.XX% $XX.X from loan prior third basis X.XX% million. two loan quarter-over-quarter. continue to originations production strong the with have Average quarter our to increasing

in rate average X.XX% compared to an of had X.XX% production in QX. QX, loan New

quarterly However, up $XX.X growth our XXXX, in last impacted our Since has increased third $XX net to of which loans averaged prior the million $XX.X total million. quarter in beginning XXX% quarter investment. held from net of year, that's runoff our and about runoff from for the the million

seen was the in what over quarter seven quarters. typically experience third the we've prior double our So

in of The contributor and liquidity to A the paydowns. to large very fourth as an good which chance the factor non-owner to in won't there of of accelerated a this pricing the increase seeing kind but refinancings higher where was to mortgages identify of and aggressive primary CRE hard related payoffs since payoffs we're these events an to refinancings. interest residential in rate in done drivers we're going of when has We've predict cutting they Fed client to It's analysis are is client liquidity increase factor began related occur, that be events. levels is quarter. loans, competitors smaller the seeing is rate payoffs occupied being and a

Okay.

Moving over at slide a deposits. take closer we'll look to X,

initial Our typically period a Boulder. market in management strongest increased attributable million, funds high portion new in in particularly the $XXX represents largely and we net see the add then deposit annualized a which on and those money bump end be deposits, accounts, moved saw XX% over accounts rate which of relationships, an total When into growth high client basis. deposits Denver XX% will We to net of growth year-over-year was worth new to months. clients, worth we coming investment an

Turning now to on slide trust and X. Investment management

million to contributed in management $X.XX performance the billion. in quarter market under U.S. $XXX assets new $XX third the -- $XX the Positive assets of million had of and increased third accounted accounts. equity new contributions into the in existing some while in accounts into for quarter Our improvement, million we

to Through from and under will initially outflows ultimately investment year, some indicated, in in exceeded year As I added of from held further and this assets, over departures contributed management overall just inflow management. $XXX months AUM. this our has in move we nine to the the but client client million new new is our deposits, first growth the clients increase of assets which far

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

Julie Courkamp

Thanks Scott.

new quarter, performance. can the performance solid and few Deposit financial production our be pleased prior loan already seen we to quarter details As in we report growth by fee are Scott trust next although slides. strong, of another quarter discussed, residential great management earnings increased has with consistent and from and was business. another mortgage outsized investment income on The offset paydowns had of is

Western's First I'll was the activity relatively million slide quarter. increased begin of consistent prior XX% In from third Gross XXXX. the last revenue $XX.X with quarter, quarter flat was So of fairly and third revenue trend. mortgage X with quarter the from and

that to nice and increase quarter. We also non-interest trust management prior from the in income fees contributed in a the saw investment growth

With diversity we third in that of of be to for the than mix provide quarter to strength continues accounted income, revenues a more total are economic conditions non-interest services That business see generate of the income changing us, as for strong our revenue source for fee in able a quarter. diversified XX% our we bank.

Moving at margin. to slide look net a closer interest X. take the We'll and income

year consistent Our and net ago. is X% interest prior a from income was up with quarter

from net interest X.XX% margin declined X.XX% last to Our quarter.

deposit we a that have experience typically large we on some margin. growth, whenever As our quarter liquidity we excess weighs of have

our that into higher-yielding positive redeployed we a liquidity on see we expect As to margins. impact assets,

in decline in We earning balances. also in a mix primarily unfavorable margin. was to asset decrease contributing the an due our shift yield This asset earning to saw

basis loan X.XX% to points third of in increased cost and points in have basis decline rate three costs. our we been represents the increase yield seeing the quarter. a Our two that funding in This funds of increased

while the We rate board the not Fed to did through rate in the third of cuts full after cuts, rates the each took so impact pass it deposits, have reduced we to deposit across our however, get a that quarter. index

December Our at rate was for to XX. spot rate XX, X.XX% compared at deposit costs spot June X.XX%

our on point should are quarter, the impact So positive lower at income interest we fourth margins. and which in a a starting have net our

slide Moving XX. to

will We at a income. take non-interest look

the from X.X% quarter, up to and in securities investment prior sale and it's year-over-year. XX% and an increased trust of a income due non-interest total than on management gain Our increase fees more

inconsistent or purchases in refinancings. income-related XX% and XX% of of First NIM new Mortgage quarter-over-quarter was This to other risks growing mitigate continues remained and third from revenues and over production now mortgage Western spread mix base quarter concerns. fee of revenues XX% our the large

XX. Turning to at our expenses. slide We'll look

charge, X.X% primarily equity prior earnout to resulting is higher payments. Excluding last expense increase impairment from of we and due $X,XXX expense quarter expenses relating non-interest the the our quarter. to total from goodwill benefits compensation increased The salaries recorded the

milestones that being a met. acquisition higher the mortgage Now of that our profitability, has and earnout from productivity level business are reached

two compared volume over expense results that the to an of using September August and remain mortgage expect additional quarters $XXX,XXX We XX, the price. income earnout the flat and MYFW be assuming XXXX stock to recognized XX next

our allow non-interest total flat expense earnout Outside discipline expect we to expense future. remain to would foreseeable for the of ongoing expense, relatively this

related fees fixed $XXX,XXX LA Scott professional recognized to quarter. had team non-recurring the As in earlier, we income the of third in sale the that indicated we also

of expense nonrecurring us professional also this excluding sense efficiency our was favorably the in a better give quarter, ratio fees the trending track ratio to We and third efficiency the In core trends earnout at XX.X%. business.

slide and loans. in quality. with increases minor generally substandard to and saw non-performing on portfolio We Moving favorable the trends asset XX in

provision a be another low recorded we quarter, $XXX,XXX to row a zero was third for very loans. in losses continues experience of and loan in attributed charge-offs. the substandard XXth loss net increase small which to had Our in our quarter primarily of We the

Now, Scott. I'll to back turn call the over

Scott Wylie

Thanks, Okay. Julie.

provide few Moving to XX. outlook. comments I'll on our slide a

history most provide we've and in successful For business. acquiring been our focused AUM. that We've our deposits investment deposits as in the on that very of for and growth assets regard clients reflected in company building been management new by

As ratio over loan-to-deposit our I a year, the increased mentioned to reducing ago past XX% have which earlier, total last year our from quarter. deposits XX% XX% resulted in

very in So conditions. to increase to to The on a have continue markets economic need we power, potential loan operate which full our we earnings reach generation. focus healthy

few do demand that more resources production loan We're focusing be over loan quarters. there. is to next we going and out on the to plan So

the but we payoffs growth. remain existing near-term, may for our loan In among officers loan a expect strong, headwind present to development business production

quarter. growth As we loan level deliver we the also in work to we're third to that the experienced payoffs working higher moderate

continue our be of will expect mortgage to a strength. that We business source

area, With we're with mortgage to highly out we've having some continue the building officers team. loan our and able attract success that productive been

mortgage of see contribution fourth we've we the a new in production do in that to we the group. should So mortgage while numbers quarter, from be we expect slight to and typically would a offset impact expect we decline added -- still some decline of do able seasonal

results initial Vail good our We've Valley. into the also seeing expansion from been

to making very we in and talent our market a Market in pace is team up Our be of office this pipeline to with up Valley opportunities there. Presidents We're we're fastest on some nice Vail pleased loan very good progress our history. and with filled the breakeven built the

to optimize to model improve adjustments We also and make our efficiency. continue our business

more core sold expected the also to addition during In enhance team, non-core fourth administration product fixed LA of and Both third-party efficiencies of our sale we focus business income on a resources to these allow of to increase our quarter. activities. and transactions line us small are

operating In in opportunities and growth good clients, drive closing, additional new our the drive additional enjoying further with the momentum This to in to bringing years our should we've in the over long-term. feel revenue in level profitability been about improvements we of come. leverage

happy we're questions. ahead up to Katherine, that, and With go open your the take call.

Operator

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

is open. Your line

Brady Gailey

morning. Good you. Thank

Scott Wylie

Good morning, Brady.

Brady Gailey

Maybe for know target payoffs. we've I hear on we the you with in you could I growth just the do How growth. high-teens you being impact start mid loan talked we think should loan about loan level that but of of to guys, think growth XXXX? about for past

Scott Wylie

tell what pipeline year. the earlier in our with today is can that what seeing Well, we we're you I line saw

strong. Our activity been has

about think million month I so this is month-to-date. up far $XX net loan growth our

two. growth like fact line. talked or Obviously, gives quarter-to-quarter have So this that a I we'll a continue sometimes about the small our that company the year be is and look trend to we've loan would produce before misleading last we seen to expect able

mean that I productivity strength our seeing quarter-over-quarter about continue I to I think happy market loan QX, teams in them mean very the the that still positive. those the it comments from I obviously, don't mean in build client to we're as see I to we're product track economic in ability net our all reflect -- are talked not reflects this down doesn't the really but relationships. that

gauging being to we did a we take attention getting to we're at close and we're payoff to no look say not we paying concern. QX is area an think is go would not going were payoff out if not don't really a because we way that competitive know of I thing we're that. saw and in there we're One reluctant clients be because like see gee, for

dive was a So we payoffs. causing what did into these take deep

for in than said more was my was it of clients to one-off I kind event payoffs. as it related And really comments liquidity

we a So, to than we're than paying definitely other attention growth can at the continue We higher and to in banks higher think that's grow underlying it. the market. rate

market we very geographical to and small good have really continue share, have production We and teams strong locations.

Brady Gailey

invested? were fast if And you this will balances, out the on right. saw of deposit you growth, deposit the think they up period look those and end How $XXX then move at you All deposits do about quarter million. be base

Scott Wylie

as deposits. to what less to move come are that they stay going a that out. going of deck in of in We Well, know half month. them I deposits. are AUM. the than a of significant mentioned some I is. say going I percent takes them some Typically moving of slide of think mean into to are it, as be I into company that would period

next I again fee the that model think business And out expecting be expectation. reasonable sheet XX that a from onto months that over to our in balance moves would move income.

we I see growth. investors it's when for win-win a that of So, think kind

comments. And in prior I our clear was hope it

we worried seeing high see the with and of grow we class rate. really growth, I success grow the teens. it's dealing that the kind can we And we this that of to with rates. about think us. whether a loans And in we've I great was I frankly, here a time in ago restraints mean pretty gee, were year could quarter particularly had to think at if in here one be a deposits that were for falling I back last think that's look think at right? you we problem deposit problem

Brady Gailey

buybacks quarter. a Scott. $XX amount then for price very Average here of finally small the share. a in Thanks share And me, was

are like it's $XX buying me, or interested stock you in back to feels less. when So all it

it's the $XX as around stock, level, the long you? buyback the interest not here as, is So hanging of in to with

Scott Wylie

in We had place for a we XXbX-X the disclosed that plan criteria program. and have not

in Your $XX. price It QX statements we shares that relatively was number actually the you made was about back happened of small average what actually correct. that purchased are a and

Brady Gailey

color. the Thanks right. All for

Scott Wylie

you. Thank

Operator

you. have McGuire question Stephens. Thank from And a [Operator Instructions] Gordon with we

is open. line Your

Gordon McGuire

morning. Good

Julie Courkamp

Good morning.

Gordon McGuire

color Can revenue quarter. more at now? announced are some you're how you right if the opportunity wondering provide can what follow markets update discussions up expansion. expansion with on and generating just And looking you to Vail an that last segments? about give your going what Scott, just I'm hiring you team the business some

Scott Wylie

Sure. would've of that should I thought I to way give banks, bank come opportunity going the and out to hasn't the out to. thought pull to admit growing played acquired people guess some year local that I be ago. pretty I there a them was really a strong us a that for of big

when to the we've bonus seen base three for for in haven't fierce upfront that. prices been people cases they very them years we guarantees really market seen for in willing high and We've -- and increases payment have in significant pretty involved those bidding in and guaranteed been with move And that pay.

really I that that or so has And the way not played had out hoped expected.

that's seen had banking and have Colorado is have been so in area, market necessarily Arizona turmoil of great general the opportunities banks. and just we not the just really people, out some the and What both in markets hire the interesting to acquired we

us. So Vail that. going We an and great was I our pleased And breakeven. to reputation my I were as attract be to be, comments following example Valley. in certainly, Glass really has to and think Valley that’s Vail said, able He fastest a in Mike to of

I last couple the about, make earnings leverage core on stuff I think we delivering that of really we talked a we're of think that quarters. want lot answer especially the ago year is progress, been, And be here. and And us have growth a making this on nicely to in operating question, sensitive for your to to important part an because that sure

earnings have spend you we in offices. be careful sort don't that we that to of growth, So

of when we're mindful I would And in success having -- the very Having said say that. we so Vail. success see early that, we're

a we us that the new us. this of interesting them anyone become attract in leaders that for disruption market could And see for I of are talking three Vail to Metro really we can different we next markets, Denver handful hope

our actually a fits are we in our targets, expansion So looking with when do continued earnings opportunities fits it with way and that for can we strategy.

Gordon McGuire

-- would the to from talent And kind the you adds of were guide those that, if in expense over get flattish that included be any would near-term?

Scott Wylie

going relatively that they're well, manage to be we expect those are the to I like forward. well an seems very Vail think people. And pretty can been Well, incremental It to able team. we've going obviously expensive that going expense. with to be manage And

for I long-term mean people solid pretty And quickly. and our three I I think story. focused a mentioned think minute themselves these us that revenue people revenues pay growth are ago to growth additions exciting we're each story do for and of earnings sure. I building on these pretty earnings long-term And that for

Gordon McGuire

flattish the Got Julie of expenses? it and and was was or earn the out $XX.X just that expense, professional on non-recurring off million, the, that that levels excluding

Julie Courkamp

those. Excluding

Gordon McGuire

last this as volumes see lumpy there corresponding Okay. and me. but pricing of in much from up gain fees just didn't for quarter? one the I'm on the what then sale meaningfully, it were there pretty curious saw if Got anything Mortgage, the you a was jump.

Julie Courkamp

lumpy. wasn't So anything there really

pipeline the through. remaining income volume on how It's get you are a consistent little loans that versus statement bit rolls margins volatility versus depending Our of lost pretty just quarter-over-quarter.

going fourth quarter. numbers. earnings consistent an into pretty are pretty the we're But perspective, from lines our then, strong And seeing product

we're feeling that about good pretty progress. So

Gordon McGuire

All right, thank you.

Scott Wylie

Thank you, Gordon.

Operator

questions, closing time. I'm And to this management, you. showing for Thank turn back remarks. call would the like to any at no I further

Scott Wylie

the everybody comments. your All don't dialing appreciate Western. are interest do further you have in. right, time. any And in First closing We well we Thanks taking for

a day. thanks for So in. Have great dialing again

Operator

conference Ladies you this call. and Thank concludes for gentlemen, today's participating.

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

First Western Financial (MYFW) 25 Oct 192019 Q3 Earnings call transcript