MYFW - Earnings call 3 2020 | First Western Financial, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the First Western Financial Q3 2020 earnings conference call. [Operator Instructions] Please be advised, today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your speaker, Tony Rossi, please go ahead.

Tony Rossi

Thank you, Sydney. Good morning everyone, and thank you for joining us today for First Western Financial's Third Quarter 2020 Earnings Call.

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

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

done so of copy page Investor of If you presentation. Western's have already, visit and First download the to website please Relations the Presentations Events a not

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

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

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

Scott Wylie

And Okay. morning, good Thanks, everybody. Tony.

of COVID-XX record this We're very impact despite we earnings with the quarter continue as ongoing deliver performance our pleased pandemic. to

a banking both made our growth wealth in in consistent at we strong are net the and of vision interest that capital the both And realize organic on on income. and talent that positive private manager said acquisition. addition XXXX. having Investments emerging noninterest bank expected time the execute we constraint. clients grew drive We're on time impact that resulting in we we sheet We growth new from would unique that the both through we at development, leverage balance and continue was we we a in operating period platform built as a as and communicated IPO of share of our we've technology business income market take new to

quarter quarter, quarter, third but a had the $X.X revenue outside for seeing We In or gross our activity, in that record profitability of across strong company. in XX% resulting both net rest million prior mortgage increased contributions earnings per the operations. the from of our area, $X.XX share, of we're income levels very another in the positive

to up ramping bringing Our and Broomfield. gain as quickly in improved Vail established such Valley scale new offices and in profitability continue clients markets new for and

Western has year which and clearly supported this entering goals we the build our paying of sales First investment, increased with have One brand, it's to been marketing dividends. and

efforts in deal And we more leads are into relationships. client converting marketing that the proposition new great those value compelling Our a having generating we with of are offer, success leads.

about banking estate from talked portfolio loan shift quarters, branch loans, the in our of the after our positive more on and but bit, add emergence the results down low-cost was slowed over of our really transaction in this May. a implementation initiative we've and towards we COVID-XX us particularly January, seen Another which commercial deposits. initiative, of C&I commercial X base, the our earnings The grow goal pandemic to this acquisition year, client commercial last designed real call our that completion was

opportunity commercial experienced president excited in Colorado including One who's our And relationships growth for We're heading far. about a number was we're addition in was of so that new largely results transaction to fourth getting of we of commercial market quarter in now sheet we the Simmons, the balance the that up of the particularly where due deposits. aspects seeing this saw very bankers, the third both commercial -- the the encouraging are banking former and loans initiative.

offensive conservatively favorable to current the environment the From portfolio. from managing well has very standpoint, have been taking continue standpoint, project the and exposure client growing and for an positioned to trends little to our our industries terms impacted quality. of in content through asset from and business loss a low us a very be most the defensive of very impact been in away by competitors. pandemic, see in we we pandemic, good continue At larger roster underwritten of in With time terms same that portfolio the

quarter, third the loans at declined total loan of from by September loans. of just and nonperforming COVID the our represented XX XX% quarter. modifications our total declined prior XX% end During X% our active by the And

we We portfolio understanding reviews are by our being borrowers pandemic. have to a enhanced and of good the that continue implement how to ensure impacted monitoring

make For positive part, the been adapt well. the clients we're current getting able most have continue to to very indicates performing adjustments to our the is information and environment and

profitability. move to show X, year Slide let's where this over seen a in terms our we we've of that level that, significant With jump of

This success that replace profitability we're focused mortgage its to inevitably growth we've course. bump clearly more when the leverage boom our our activity, sustainable from able the getting sheet on improving operating creating and in activity we're this been underscores refinancing will generated and path mortgage returns generate. a While balance the from enable earnings runs this to a us improving that to year

the the at look We'll loan portfolio. X. Slide trends in to Turning

Our a annualized payoffs which prior million of million in million due We to portfolio in traction trend year-over-year had the total banking is $XXX from or quarter. the $XX we're relationships added loans getting program, XX% was the of Compared away loan in commercial loans our PPP year loans a the portfolio investment our loan -- to in branch of shift from total of result the related the the from the to held ago, business XX% XX.X% and by offset Most initiative. making the towards The the quarter, end production mortgage and our $XX increased paydowns. with growth have mortgage the partially commercial loans. loan for acquisition, loans in of total residential banking residential declined through progress loans we're shows of initiative. as

deposit Slide closer on X. Moving We'll take look our at a trends.

PPP-related of Our of offset the almost funds. DDA total in those million end as attributable deployed clients was relationships. deposits or runoff growth the growth commercial increased in increase that we prior The annualized quarter. XX.X% growth some has $XXX to in entirely helped The from relationships DDA the deposits saw

XX, million on PPP-related $XX As just had deposits sheet. September of we remaining in our balance

deposit we've mix, noninterest-bearing With transaction of commercial the in deposits in deposits improvement success had total significant to from seen XX% just we've with adding XX% a ago. accounts, increasing year our

and Slide Turning X. investment management on to trust

increased contributions the The conditions total client improved primarily under above Our to made a accounts. billion $XXX and combination this returned management increase and of was quarter million $X assets market existing additional mark. due to

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

Julie Courkamp

Scott. morning. Thanks, Good

a our be have to recognized. We've how in in third PPP update We metrics $XXX,XXX million net and relating Turning had impact impacted this program quarter remaining it on an the the provided the of in various program to $X.X to and quarter. Slide in X. participation fees

XX, applying forgiveness. for started had our million clients and loans And assisting October million. of submitted now in -- SBA to process the have we approval on of to for We as $X.X of the forgiveness $XX.X the received

forgiven under been that will that We in the million have under not also yet announced SBA. loans have a $XX,XXX total simplified process of the $X.X apply by

our look We'll X. Turning to gross Slide at revenue.

mentioned, revenue both interest increases a Scott growth, had income we strong quarter noninterest net very and As income. of coming with in

income margin. at XX, net in interest Slide On and trends look we the

organic interest net prior the loan an balances was million from resulting in loan $X.X growth from income increased Our growth. increase The average quarter. due XX.X% to or our

basis points in due Our net margin a cost in yield deposits. offset our of to primarily X.XX% declining point by This basis XX declined interest decline earning primarily assets. an was to X

X our prior point However, margin PPP adjustments purchase basis when the the excluded, from and of are interest quarter. impact increased loans net by accounting

deposit than by in inflow a quarter with resulted cash our of average the significant million. The more in and liquidity, increasing equivalents we $XXX had buildup cash

should income liquidity higher-yielding excess of this assets. the interest into from net Our redeployment benefit

expect to remain term. margin near in interest net we the flat our However,

to to drive excess help forgiveness, deploy liquidity in improvement the along with ability further should longer in Our PPP decreased term. the deposit NIM costs

Turning to Slide XX.

that Our we of increase had. noninterest record income sold The was on prior increased quarter. primarily XX.X% the the from loans net mortgage gain to due quarter

bank increase branch earlier acquisition Aside year in in from clients impact, are growth to the general fees. the contributing the from of economic addition and that this our activity

million originated quarter $XXX increased another XX% had on production own demand originations, from On with million our another quarter. XX% portfolio. mortgage of Slide approximately provided quarter, stronger additional and and originations We XX, detail total in $XX our we've the during up of record level last was for sale the some operations. to Purchase for of

net With million mortgage quarter. our generated margins, in operation. sale million We improved a the of revenue mortgage spike increased on we $XX.X to profitability second continue and of income the volume see $XX.X in significant in the

to Turning expenses. and our XX Slide

from second to primarily to increase acquisition, in quarter added in related reduced XX.X% growth our loans and incentive increase impact the quarter. increase. noninterest personnel sheet, the PPP levels full contributed the that costs in along in due of Our deferred prior The compensation also was were quarter. the to The the expense increased vendor loan branches expense the origination due and expense the that to branch with balance the

activity generating range In the have ratio our in to improvement relative quarter, sheet With efficiency continue growth prior that significant see XX% our revenue, the and third the from increase efficiency down the we we in during XX.X%, had balance was mortgage ratio XXXX. a year. to

We the Simmons in branch from consolidations the August. transaction also completed

expect to team. sale million, Following of reductions rate be run or range these relating the $XX.X the to noninterest the to LA million income expenses we fixed our excluding in of consolidations, expense for quarterly $XX.X

trends Now to XX, portfolio to asset third the We turning the quality. we'll stable generally quarter. at improving across in Slide our saw look

nonperforming the end XX points by minimal continue losses see of quarter. the to and assets to last portfolio Our very at in low and XX charge-offs had decreased total from again, points dropped assets we the basis quarter. basis $X.X this million level Once of of a

the when as expense our growth which the COVID-XX are to and Slide had to reflects quarter, X% Turning recorded pandemic. as total we the in million in presented allowance acquired uncertainty portfolio loans by third provision excluded. XX. the loans This well primarily to adjusted PPP ongoing the of We increased $X.X loans

to Turning XX. Slide

We loan modified prior $XXX,XXX, only Of quarter. had an have this XX% loans September modification. At totaling on made third we from during for loan, decline quarter. We modification million, of only a our new amount, which $XX.X XX, the the a modifications. requests X of update represents had end provided XX second the represents XX-day one

Given modification to lack the to period, to deferral of new the almost regular being the continue of total expiration schedules of the of the trend payment return all their requests modification remainder over would following our expect year. declining we able borrowers and

XX. Slide to Turning

additional modifications. on some our have information loan We

We who basis. continue contact regular modification to and financial remain a loan in received borrowers on a received have close data with updated

At loans. commercial point, of all this almost our modifications are remaining

very the industries exposure properties portfolio. commercial have in to have of modified in our that largest with continue pandemic, most We by been estate loans the impacted to being concentration real the little office

this turn Scott. I to over will Now call back

Scott Wylie

Okay. Thanks, Julie.

outlook. Slide about our want comments some near-term I XX. to to provide Turning

earnings our strong We to drive in book positive increases and further we're expect the and trends tangible seeing value. continue

far So increase year, of $X.XX which added XX%. per our an share, represents tangible value to book we've this

Outside book positively tangible our going items have will forward. value we a of that other of performance, operating impact our couple

collective PPP it will of fixed before through to we fees closing impact the PPP and to First, team of of on significant a we'll The new tangible The fixed of income continue to as closing, we've common sale will agreement place. prevented impact the we our but end month, of the time resolved million expect LA last earned have a the of positive boost the $X.X second, in that which at million our the year the announced equity not the And $X be team we've of the the tangible book earnings, sale another impact income on should sale program. last a recognize fees have and LA have year. value. issues

we're The strong to value. share per commitment creating significant generating book tangible illustrates increase value shareholder our in

been from we've doing of During position our perspective. our unprecedented been strengthen anything a period stress capital that's economy, a on diluted an shareholder or tangible to able value, to earnings value book without either

aligned highly value you can high a interests shareholders, all with decisions of our As long-term what that preserve the insider grow be will the ownership, of our with assured and from and company are franchise. evaluate we perspective

in close we're through point, to the quality. this contact very other meaningful with the asset we At seeing staying pandemic. diligent trends, would at point duration anything deterioration borrowers remaining in Looking that our any in of aren't

the Starting in locations. QX following the start to the consolidation full synergies of also fourth impact the from of recognize quarter, we'll QX those branch the acquisition

income We higher-yielding excess assets. the from to also net liquidity benefit expect of into our interest this redeployment

net expect remain to we a commercial standpoint, in margin areas. and And However, interest the short-term we mortgage strong both continue development banking over from have business our to flat. residential pipeline

growth. we'd initiative to anticipate balance our forward, Going driver additional be banking primary of sheet commercial a

to our acquisition, bank. working In that on addition to of a commercial we're clients the ability the to commercial increase added initiatives the from branch number other bankers will attract that we

model as mentioned initiative. build other products but First, see specifically we and to forward this down getting We of dental this to we're hired we develop leader encouraging initiative, and slowed have results. area this same vertical earlier I commercial the banking replicate continuing for services, ramp-up for intend year opened practices. The industries. that as pandemic a this back markets to niche in medical traction things on and in move up, more we're expertise

we the the SBA planning for addressable PPP program, banking in to will processes team. commercial for remain our we're in developed active following lending, market And the which expand participating

clients. believe The long program, actively this the to over will lead consistently we're created main commercial And banking much roster progress a on commercial year generating participating mix which the business the should term. our making we're of street finally, initiative more has add diversified strong further in we returns lending to that

as we scale our the our gain and through for that continue Western model and institution financial create as value a solidify And First shareholders will additional high-performing we organic growth believe future. acquisitions, significant to in strategic

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

Operator

question Our Gailey from first Instructions] [Operator of Brady line KBW. the comes with

Brady Gailey

done loan next but not to what So the you Maybe think or year you've going a at rate to lot, was you appropriate so? I'm forward? in just expectations talk robust an probably you mean the loan it's growth guessing do very about growth growth know I commercial I going over rate, loan would be run this run for banking as to be add team. guys quarter. the said, for

Scott Wylie

growth sides you know, strong, Western. of growth, seen see we've net and then One after the at we as of gross loan growth is First X Well, kind comes loan payoff. loan the been which that has the

So we've million the X seen in payoffs range. over $XX the quarters last

the more average X over million the quarters quarters really production X range. Our $XXX or than last

about in think I to have we the expect So place, we that at continue with could that that rate. infrastructure

Brady Gailey

excluding is from looking what or margin PPP then say margin? And all the when base about maybe the right. Okay, you're flat from net talk you're about at yield? that What's reported that you at? you base Or talk that just flat here? accretable Is when guys interest a looking here, excluding

Julie Courkamp

Sure.

from so remain excluding So our it is level, to flat expectation that our accretion. kind PPP level. I We and would think at base of expect

Scott Wylie

rolls as an going increase net interest off, So we're see PPP margin... in to

Julie Courkamp

Yes, net interest margin.

Scott Wylie

the That's reported, yes.

Brady Gailey

at at the down that All you earnings. and made TCE such lot great you've okay. But of TCE. year, to last X.X% you've about a look had from year-end right. from Yes, we've growth And X.X% if moved year, then money this ratio,

us upcoming if capital if your it? capital So how strategy? related And plans maybe thinking you're -- base, just on there's update give an any you're your about to

Scott Wylie

small would at we look sub additional first the Well, Sure. quarter you debt debt. a certainly sub amount of some and in know, raised as

are something that where think today, I rates Given could attractive. be that,

year goodwill The that Simmons TCE booked. that were we gains we somewhat booked this offset by the

we projections indicate that to in pace that refi then a And balance need we will earnings. I at to growth. in the common I the well so mortgages extent see now happens in we'll think whole TCE X the grow think, But at fact in core can spite have strong of our to I that ratios bodes this And a book increased this X/X continue to earned can what the that, for and future, that have our we've year-to-date a that of sheet tangible seen. our think we're not for And TCE right we've boom anticipating raise continue support point. terms

Brady Gailey

that the as a level Okay. forward? from said, commercial And banking growth decline to XX% further, continue then success mean see finally the to on from more expect from loans XX%. to I happen with loans will as going perspective, to you're you continue so mortgage Should loans mortgage about of have mix down moved we having side shift me, XX%

Scott Wylie

think so. don't I

I the that's that little feeling like think I range mix that outsized. the at comfortable -- for at us. a that, now, it we the more were was XX%, getting we're And a now is range that at think in

trend I wouldn't further a like that. expect So

Operator

Haberman next from with [Operator question Instructions] Ross Investments. RLH Our comes

Ross Haberman

nice give bottom things a activity? You've and of -- the guess, us beginning economic or in to How got a Could marginal? quarter net do the of you're And sense Vail a there'll sort of again. talking X unfold, the general you you be at think other are you they were would sort when which new I branches one, line? -- this and say contributor quarter, to about, the a

Scott Wylie

Okay. that question, you Well, X-in-X for Ross. thank

Ross Haberman

Sorry.

Scott Wylie

apologize. that need Let's start with to -- no, no

economic of workforce in remotely markets whole of high this and Let's of financial we economic manage pandemic the I personal our relatively a in without because lives. think their situation. with percentage work seeing disruption very lot and combination overall We're a fortunate can start that a have

continued metric to little credit every addition the factor in think I a basically we've seen that's in big all we that we've in in a that comments that for the us And improvements so look we've bit the that seen, deck, that, Western. talked we at First improvements And about been made.

I think from with the economic benefiting markets to strong we're in range and model, markets, Arizona, in only in very that the the front that's the the impact, factor in-migration not but we're seeing is seeing our business a and our the particularly respect second really situation too. markets, urban coast, this into resort

And the our takeaways interesting in operation of in I is think one mortgage QX.

we of where lot pretty business saw shift a seeing extraordinary a You mix our in were refis.

so And does? almost back away, what think mix And than is always higher Xx really that still yet I in all volumes our happens the it mean goes what interesting I it's you QX they had ago. wonder when goes as that -- an almost example. a we are QX XXXX, of were and to year

to we've to the made in we've and the of really team I that So the going produce infrastructure, our mix like and and in of in purchase as side investment ability move something is think mortgage, XX/XX, a Western MLOs First the in benefit traditional additional that. efforts more productivity we on just to in made mortgage back

the I overall, benefiting our and in are markets seeing we're that our So business economic complementary think trends model.

I than for With respect off us there up benefited that's seen thought really this or we We've Vail. interesting about that think would development seen and to I something We in traction years quite this to like demand I Frankly, the know, very time in don't XX a residential a locations, for that that's longer your really new that all from seen Vail take housing nicely. taken activity in, that. migration we've haven't a It's question has. mean get the it year. been

been out. up really with our of out being team in years shows that so leading financial part institutions Valley Vail that's business the just in plays XX for there, nicely model and And front how been being and of that, a

nice in which nice location, we Interesting try tenant an and really essentially and Boulder, is, existing space in be business to years Boulder. to which this that's us in between haven't has that a that's which our out in Denver even Broomfield a this decided that and finished because was is yet. a X.X incubate really is about in we've location success improvement that we market market, a had turned Broomfield, for our something halfway opening targeted suburban the Broomfield, built And team in and case in Denver new in we ago Broomfield

revenue moved The shop the So working running. their team's haven't them, nicely. building for permanent even and base space up is and nice they into We're yet. a

interesting locations, that really X success build with hopefully new on So we'll stories XXXX. to able be into

Ross Haberman

The a from question. or technical post-tax sale $X final gain asset number? a one that is million LA $X.X the sorry, transaction, to that this just management million, pretax the on And quarter

Scott Wylie

Yes.

the So address Julie, you to mechanics of want that?

Julie Courkamp

Sure.

in So out come that's our which going held-for-sale asset, to is balances. goodwill our just effectively of

million when So occur on in comes we by down $X close fourth that million. TCE just to And quarter that $X.X the will transaction.

Scott Wylie

through It run doesn't benefit Ross. sheet. balance there income the the it And big TCE. statement, through the is runs So additional

Ross Haberman

additional an added $X.X million million it's to $X any without So to saying? equity you're implications, tax shareholders' the

Scott Wylie

Correct.

Operator

questions back gentlemen, to not closing any conference remarks. the further this turn showing I'm and for any now Ladies management I would at to time. like

Scott Wylie

Sydney. Sure. you, Thank

just I everybody, We us you again joining like thank the today. to appreciate quarter, for call sure safe. And speaking look all stay to before. next with if the Thanks, not forward everybody support. on would

Operator

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

day. You good a may disconnect. have Everybody, now

First Western Financial (MYFW) 23 Oct 202020 Q3 Earnings call transcript