- Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and thank you for standing by. Welcome to First Western Financial’s Third Quarter 2022 Earnings Conference Call. At this time, all participants 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. to Rossi conference with like speaker to now Tony today, Financial would hand over the your I Profiles. Please go ahead, sir.

Tony Rossi

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

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

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

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

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

like well release Additionally, turn discussed as And be information as reconciliation to press substitute available to I'd to other on and non-GAAP to over for the Scott. the GAAP to today measures. of management the intended website quantitative GAAP non-GAAP not with The may the that, refer call Scott? the to supplement, the comparable but measures, are which measures. most financial directly contains

Scott Wylie

growth. pursue our time. across degrees performance quarter driven our demand as loan strong of see delivered become grown that at reputation Teton larger in economic in a market and talent to rates loan that major general balanced capabilities leading our resulted that with development strong though, we the Tony, various impacting following everybody. continued by good growth, has This continue and in size platform which and growth the to having We increases many strong, our most attractive of third loan has of to platform, opportunities our across environment most in Thanks, recently, for are we've demand loan including any quarter positively had bank point impact across growth. our and asset particularly in lending effectively valuable Wyoming annualized business moving portfolios, we're built loan lending There markets, classes. and us in banking is financial on needs, healthy higher the to given improved which we another in added quarter. clients both the new production up borrowing enables acquisition. well stronger with More the our loan banking was very working XX% In the conditions the commercial morning, and catalysts diverse We current are loan

XX% average return return equity than prior average importantly, our as on pre generating profitable million. to pretax unfavorable interest net quarter. level increase equity, loan net our And we're business. provision growth third than average we increased in income a earnings our assets, $XX largest from quarter the generating to the With despite quarter in our expansion all Most able increase significantly interest income, substantial tangible and higher higher a and to margin share, the prior were were and income return strong generate the in that efficiencies, per in driving net continues impact the fee by more on on growth of environment

immaterial of net declining, assets exceptional continue We non-performing another both have as asset loans non-performing with quarter and charge of to amount well offs. quality also as

slide per diluted $X.XX related per quarter when share generated to the costs or acquisition in we of Moving third $X.XX income share or net million are $X.X four, excluded.

to Our value strong the book profitability, per along X.X%. and with in us from has increased value continue enabled third X.X% tangible prior investment share. quarter tangible book share book the both per increases driving management effective our value quarter, of In book portfolio the share increased and value per

have past Over we're the for than metrics shareholders. creating strong XX%, reflecting more value year, both increased that by the

portfolio. slide at strong We loans. five, million in production loan originating of to had Turning quarter look trends the another in loan we'll our $XXX

on down compromising than into strong was on this increased so more We're new points, from also held payoffs translating we're start basis our loan million is investment loans from While bit and by a end growth still quarter, pricing. rate prior XXX production average net generating without the prior of production of the total to production the quarter. seeing moderate, for the increased loan more $XXX so

major our constructions production C&I, to portfolio all well loan CRE, between We quarter. Our residential increases family X-X million categories across up $XX had million was and $XXX most is the with of in diversified.

we're drive risk prior X-X yields. adjusted portfolio provide of our family -- residential adding the jumbo attractive what with most As quarter, to ARMs does

loans production consistent of $XXX during the than million was our quarter higher loan loans our throughout Our end the quarter. period and were average

fourth going net in So interest into of we tailwind higher quarter terms have income. a nice driving the

look Moving at six, closer our trends. a deposit to take we'll slide

the deposits total impacting competition each bearing is of of the increased and essentially deposits, interest for seen prior cost with in quarter fluctuations unchanged from were general, gathering deposit In which end deposits. Our we've the category. minor

decreased the the continued market to $XXX Turning to due the new accounts. more of under slide trust quarter, prior which than seven, management offset from declines, investment inflow on from we're seeing assets end our total million management

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

Julie Courkamp

Scott. Thanks,

our slide eight, Turning gross revenue. to we'll look at

are private or net in loan entirely Our we is operations. from higher income trend seeing the the from commercial by X.X% continues strong total growth gross and growth. million resulting quarter, our prior revenue $X.X driven increased interest our which strong This banking

an our at XX% the increased mortgages, of quarter. from sale on annualized revenue gross prior gain rate net Excluding of

Turning at the trends we'll to slide nine, income net interest and look in margin.

average prior increase margin. the in income primarily loan Our increased interest higher an to quarter, due from net our and net XX% balances interest

net our the acquired excluding increased third margin basis interest fees basis on X.XX%, PPP net loans, in quarter and X.XX%. to accretion impact the Our margin interest points XX to of increased points XX

quarter, Our our the benefited an the increased from increase On to assets from basis, in net total in XX.X% total interest margin the loans loan balances. prior third in quarter. XX.X% of average up earning

driven basis also new higher originations pricing XX We the loan on Scott mentioned. point increase had our a partially yields, average by loan in that

the cost on the balances cash other with This the yield our securities we more portfolio. point as offset financial and held basis deposits. institutions had well in XX of our As increases in increase investment significant than

also We fund help our at loan borrowings balances our strong production. FHLB increased to

us production. near-term funding interest costs to All more current It in we our of manage and costs And become gives the likely We our of funding margin. in earning the in environment is which increase and attractive we’re in source although flexibility quickly forward. was going the expect seeing yield net on level assets. adjust believe a peak overnight loan challenging our to the borrowings, deposit more based will borrowings on continued increases

quarter. for our we the we to level near from result decrease the expect margin had the future, a third As in

gain prior loans given for are as were bank and on very the primarily purchased loans in quarter, our refinancing sale mortgage to insurance slide volume partially was slight decline The due fees income rates. XX, quarter, demand prior on by net loans. and the X% of seeing from loans we approximately originated declined decreased mortgage from increases now the on XX% risk lower for non-interest XX% gain little management mortgage to Turning The offset in mortgage originations locks the of rise fees. in net

Turning to slide our and XX expenses.

salaries higher loan insurance due decrease and X% [Technical and non-interest Our benefits, by production. health quarter, a strong incentive a our primarily payroll taxes. fees Difficulty] loan expense in decreased the and to employee from compensation deferred resulting driven decline Lower from in

that of the mid-May decline acquisition. and was full contributor occurred to overall to impact related Another the quarter conversion Teton expenses branch in system consolidation the

We have the million to quarter non-interest fourth in the range we from to expect that all this expense transaction cost projected and ‘XX. of now $XX.X million savings $XX.X for fully of realized now were our

XX, our at quality. look we'll slide asset to Turning

trends the We portfolio. continue see positive to across

while Our declined loans non-performing non-performing assets XX basis loans, X points our basis declined basis basis X points to total of points total to XX assets. of points

strong in losses of the a had portfolio. also which mix quarter recorded the was of put we credit was end adjusted million, provision loans at and the our low basis in minimal total the reflective This portfolio. driven consistent $X.X of and and experienced We our of in growth [ALLL] minimal loan of by prior to the We for another loan losses relatively quarter the the quarter with of of points, (ph) portfolio. quality changes that a -- losses have level which the XX

turn I'll back to Scott. call Now, Scott? this

Scott Wylie

Thanks, Julie.

up slide to I'll Turning comments some with XX, outlook. about our wrap

with uncertainty believe While slowdown, pricing re-moderation to lead of in economic some this reflect And the given prudent level economic will the adjustments of and in we conservative We underwriting to our in economic markets, our bank for loan always it's outlook. a conditions we've potential run healthy loan an to approach. the remain make the likely our believe some growth.

starting we platform new more that our run in we have the we talent Montana to typically mid-XXs. the Colorado, mentioned typically conservative problem with Arizona, contributions. even continue in in the However, diverse I to growth make to pricing. production significant and low loan ratio larger underwriting the loan generating with any bank built of believe with not We history and can and added banking bank, and the a we've attracting loan we deposits deposit the throughout past

redeployment liquidity we key can our few positively returns higher the generating. this earnings regard and very excess talent impact banking that production. growth a Over the successful past assets and of been earning years, has we're of level of We've been on the driver loan now focused yielding in higher into adding

to deposits and priorities benefit back give to a development deposit more profit bringing better of bankers our the more have deposits. forward to focus making growth. opportunities This organization includes comp and from we and incentive adjustments so core centers of is between some of our shift that can some business to loan One balance core going to

expansion of market in as near-term levels are efficiencies continued to higher As to level improved Julie largely deliver With Montana mentioned, expense we stable realize we Arizona, a our completed. should Colorado, growth, loan efforts revenue relatively with economic and open financial be performance questions. continue up while for our we've asset our an levels happy the of capital if consistently even maintaining see your economic we're please as previous And stress. Norma, we slowdown done call. periods during to strong that, our shareholders, and quality take expect

Operator

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

now is line open. Your

Brady Gailey

morning, Good Thanks. guys.

Scott Wylie

morning, Good Brady.

Brady Gailey

XQ So inflation. All the are I think talking million heard of next banks especially about minus. growth wage the plus expense as How we do we look rate or about $XX year? around guidance expense to the

So we about do creep the how be think in XXXX? what could expense

Scott Wylie

that's that well to -- to pressure this put pressure. Yes, able in areas to us lot at there's can pressure the with on going too. And headline But inflation We've terms markets year, wage think we we looking that continues we're -- be I an that to pretty wage numbers into out on competitive I I where in. certainly are think built look us issue at of there, see just been going expenses in XXXX. the to top manage And be going manage expenses competition for think. there's then that our of of you a

this think people here. focus ahead We've where XX-months get our of to on that pressure our to year. in somewhat of last increasing going so engagement year, the have was We ago, plan continued one business first. theme next wage you're we're launched right, initiative this tried I number associate some by middle year

see tried hopefully sense And done and bunch belonging and more from in lower just some whole that wage of to done we're things income efficient XXXX think overall, folks with here right, to and some little build to career a to of activities of you're work some and help But pressures more with tracking training pressure, the a experiencing I going inflates wage them here year. and also managing that. so that inflation of try they're We've for non-wage in pressure on a next things like benefits adjustments engagement we've some the pressure. bit associate drive and cost we've and

Brady Gailey

now had I good up think here. that's to look couple a Alright, loan when has then growth, especially move do It's quarters. big color. I those deposit how to guiding outpaced or ratios ratio, at XXX growth, in are loan think the back how to And to a you the deposit XXX, mean, the growth the of dynamics. of about that to get last Are or loan XXX lower? you you're have loan you kind about how but fine moderation work you actively to number it XXX? know do I deposit at going to so

Scott Wylie

short-term, the we'd that to to for Well, XXX. see back like

think the the I we've in But below. mid-term, on I mid-XXs number focused there. and we're you tell For already historically would low operated we're and to to XXX back hopefully comfortable getting that very

Brady Gailey

expand it and Alright, decelerating just interest another a margin far will theme quarter at we've one rate. then that through me, net like season is that so from of nice finally expansion, earnings NIM heard really the feels

hits a the amount the first some of from how by you do max year? think level much in about, goes NIM? think half next Do smaller So you it kind of, up the at of and point the outlook kind

Scott Wylie

in I the clients No. is we really difficult years. haven't here we the have to kind talking we that when stuff by to want, what's group difficult just that response would And are the competitive we're haven’t like us -- kind predict very going in pace going today. saying do were the have attract of strange attract to that happen. really deposits, retain a rate telling retain as before to of you that along the we Xs room still have banks the start borrowers it's example, me career going the the on, conference in borrowers NIM to for to that But to, year are deposits, seen it's too, that success of we've really of moving competitive time so And mortgages started XX-some that think just environment of this just predict want, think I seen with hard in national feels had among that. set doing lot a my having big to growth said right being day-to-day, we I that, then The lot rates, of and predict. we it we've a fed kind extraordinarily a this call it's

QX gone XX% to in said, XXX% loan time. record from As we've you in over kind something to deposit of

And quarter if back moderates this we're deposit a to think at that continue it's rates, peak. to so I down that, to, year will that ago we're to be gets going will, NIM reporting if below XXX%. don't we And a on we that think this going what make we sure competitive back I see we're going down were where either. we which

So seeing that's for short-term, to rates we're think definitely, moderate but But continue going think I kind the peak I the stronger bit of, numbers to who seeing, we're from, I a knows. today, think longer going QX. the we're to for term, little benefit in

Julie Courkamp

NIM really making can And if extra, decisions here, manage that add of an voice balance don't sheet. agree our on we particular outcome. bit the rest It's I output a the would all I achieve to we're of the out which holds my little a

about So as really generate pulling we're how account. all returns into of on appropriate risk that we think adjusted to capital,

quarters the So looking higher deposit Even fund longer pass to relationship kind funding mid-term to the and is here. in use new last in initial with and a your have not we're bigger be that you've back clients those the to over the on if relationships our bringing at cost loan approach, time. high some work you've expectation going of to then mentioned we'll to fulfill opportunities question. up kind seen of to client broader near-term of term loan the we relationships, really loans sources able to ratio the And in of, over on the growth two add

current we lot to of But very to think our continue opportunities have clients. overall, I a to bringing that. we good So in just be want profitable improve book long-term

NIM, for at the I negative looking near-term shareholder long-term best on of has what's impact long-term? the we're interest in company in for So that even a our the if think the

Scott Wylie

income. net And growing drives interest

Julie Courkamp

Net interest -- income

Scott Wylie

great I [indiscernible]. [Multiple think Speakers] a that's Yes,

Brady Gailey

Thanks, Got guys. it.

Operator

And for moment one Piper our next from with you, next question Stanley. Clark Matthew comes Thank question. our

now open. line Your is

Clark Matthew

just of the voice that, all try to we Julie. rate bad think Like I I or questions want couple a September? deposits, ones interest bearing quite. I'll feel you because like for at sound either Julie's end to Do that. for of see of asking ask have spot the brief on the total

Julie Courkamp

I'm was that. I of rate okay. for points. basis appreciate end the at think At Yes, end I the But desposits September of and our XX September, doing spot

Clark Matthew

cycle obviously, $XXX your know fluid okay. I of, pretty a any about then competitive take this would you Okay, out? deposit thoughts and when beta lot different million, time shake total? internally you I in on last you commentary around get Fed and cycle, this total kind the but Where in we assuming I but move think have funds? talked about And pretty $XXX could around time. we it's million, it's betas over, assume guess the

Scott Wylie

do have know money less that's beta or at competitive looking because market it we have certain a our advantage deposits that to have our an trust Well, mutual we rate we deposit a on in with that something more betas, pay deposit XXX% amount we funds. portfolio that has like of of

they're bearing is month quarter and seeing are And know accounts, the XXX%. so much their that to of going or a so up, what with deposits, the like And really some going tried it's we've pressure seeing And but so then the Fed We then typically there's past DDAs, quarter we're not and in tightening a higher bit to happy build interest adjust this be ahead and probably a we lag -- lot. a have this then rates. get that. of feeling the market to on and to competitive before clients X.XX% it's rates little still pretty if that catches other money were do

So show and of up in we in QX we adjustments did a that lot about. that pricing board across latter some that made QX of part QX, spot asked and in exception the rate you the

really that the are and bearing, described interest third moderate accounts see that, XXX% deposit So that surprised on is find competitive competitors today, beta but a I I the see I'm going that And kind of, of hopeful some what that not why hard little said, in non-interest are bearing we'll I QX, doing. we're That’s to not the part, it. frankly, pressure the predict important. we're to it

Clark Matthew

that basis points or Okay. bearing? And Julie, total interest sorry. XX was I'm

Julie Courkamp

That was total.

Clark Matthew

okay. Okay, quarter? then release is Do the And you the basis from loans, new think up rate average that on over XXX rate the weighted for I points. have

Julie Courkamp

so for when the a the to close high Well, our low situation. pipeline in and at quarter, now looking they're that, they're fourth Xs in Xs, loans right float

and close they when higher. when on the happens, rate next they depending So could even go hike

X.XX, so on a just month. some at mentioned NIM doesn't full did standalone deposit Scott in look effect later have it September the that it it of NIM September’s you for pricing alone, was our of we changes If dip -- the but had down in that

Clark Matthew

it. Got Okay.

be in pull and the and wholesale may on slower more you mitigate then or but think like on new feel might might you that you like Is able -- Okay, do there growth, overnight, some you the do loan plus to I feel think you added that? just in I have And you add good. quarter, X.XX like deposits sounds borrowings. borrowings, mentioned the

Julie Courkamp

borrowing it's base overnight. The overnight. Yes, is

focus is about for But dividend right X adjusted. deposits. now bringing X.XX core just our in under whole right You're

borrowings our brokered. the what to sense we loans to that in those manage of we'll are bringing we focus based do just And accordingly added we'll that, makes for kind able able but as just most us, is of down core the pay and/or be in. any that deposits So to on

Clark Matthew

Great. Thank you.

Operator

you. Thank

Scott Wylie

we Unless you Clark calling now. have you, Thank Matt. to start

Operator

our One [Operator Instructions] question. for moment next

Bill Dezellem Tieton Capital with next Our comes Management. from question

Bill Dezellem

had I questions. Thank couple of a you.

secondarily was you all, then that last your behind $XX dynamics of sale, the also and it a up and cut to construction amount the if scenes million development First than the loans more held place? provide Could with fair discuss relative $XX sequentially sequentially just were half, and color quarter. loans mortgage million for in on you that? the versus thoughts And would

Scott Wylie

are less secondary market. or mortgages sort Well, loans held going of the sale of Sure. the the production more of are XX-days that activity to for the of

drops So loans a the going we're sale when cliff, off see held that drop. to for

we're And us seeing that's good all of it in with lot construction that. The interest QX profitable the of playing for product one and and that's a product, offense close a in had that here, So lot of launched interest our construction product lending, is. attracting for a clients a housing we in mortgage with. type is a product shortage and

growth seen have in that. some we So

in showed funding. I are think in now quarter construction was numbers the prior up some made actually of that from in growth that the loans the quarters

growth things the think are I some would credits. showing C&I as the at I the in funded balances approved that don't QX. we but have really probably nice they that up now we seen our have that quarter, credits end know in closed of

Bill Dezellem

Great. you. Thank

Scott Wylie

Thank you, Sure. Bill.

Operator

I'm the any And currently at no I'd conference for you. further questions remarks. hand to this time. management over like showing back closing to Thank

Scott Wylie

that's We've and last core again through for trend, done back team lost core that that a really up brought We've had year job. I'm But of strong your production us and Western operating the and dialing clients. earnings. a in Yes. in internal right for and legacy with for on be We quarter and there. it Julie our capital overall, team flexible the well thanks QX have do in trust with We efficiency converted everybody way and managing for proud positioned and strong Good in board voice and loan income back has anticipated. in and really where them. management I seen nice First powering the non-interest numbers more onto system the revenues QX. core NIM clients We've the new and our powerful we to their do strong had ratio expenses. and earnings shows we're work gains state-of-the-art growth as much team into RMB system converted outlook and leverage it a Well, some work growing this thanks our think should 'XX. getting for good our very deposit of

So thanks your much for really in so We dialing in. interest appreciate Western. First

Operator

concludes call. your for Thank today's This conference participation. you

You may now wonderful Everyone disconnect. a have day.

First Western Financial (MYFW) 21 Oct 222022 Q3 Earnings call transcript