MYFW - Earnings call transcript Q2 2024 | First Western Financial, Inc.

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Operator

Good day everyone and thank you for standing by. Welcome to First Western Financial Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I will hand the call over to Tony Rossi of Financial Profiles.

Tony Rossi

Thank you, Carmen. Good morning everyone and thank you for joining us today for First Western Financial's second quarter 2024 earnings call.

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

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

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

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

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

Scott Wylie

morning, Thanks, Tony, and everybody. good

balance relatively during the we in risk areas. loan priorities, execute which approach continued new our At quarter, number key second production, remaining same had management prioritize trends we flat our and in to of the positive continued in conservative quarter. and time, well prudent a During to strategic the resulted to sheet

disciplined maintain resulted in to which expense quarter. expense declining the from control, prior continued non-interest We

make strong in quarter, deposit grew both we banking relationships. our revenue. Notably, to contributions largest had and performance add margin. net In through and we and increases mortgage to non-interest our stronger deposits, to and increase saw in continued the wealth perform June, businesses, We we in management our an well our interest and continued as new income-generating loans moved

make asset assets largest our quality, and while of we in foreclosed X In resolving collateral quarter. a continued recoveries we the quarter. have to past terms We loans progress decline on on the in of X non-performing during the having net experienced as properties

results the loss loan and we particular in the As including indicated of past, a non-performing see to also from status guarantees. personal borrower, we it do in move rarely due with meaningful typically we strong a multiple repayment level forms a specific require, issues collateral of to when due

generated was both book the this increase the with balance and period sheet income we pre-tax, further first prudent our in Moving performance value last year. in million. net of financial consistent quarter. our same With of and a tangible to $X.X diluted basis, Slide income net X, quarter, or $X.X per pre-provision the share $X.XX a On pre-tax, about share we income million, management, per had prior pre-provision net quarter

to Julie Julie? trends. discussion turn investment and the for over sheet Now management additional I'll balance our call on some

Julie Courkamp

Thank you, Scott.

look X, loan at trends in portfolio. the we'll Slide to our Turning

during our June. million held of from quarter, loans the investment mentioned, as loans but of prior for Scott for $XX month held Our decreased the end increased the investment

where production the areas we total and of $XX new deposit loan conservative from residential up higher getting coming in highly million be in prior also production. But new loans our quarter. mortgages, second the is quarter, a are increasing production production relationships. loan Most million, of our commercial in did with selective and loan continue see of $XX to in the to loan We level we

higher and payoffs of our in of level level quarter the decline than the prior total loan consistent in Our were loans. which relatively resulted origination, with

the resulted the turnover to This average We our on we payoffs, pricing which to rate in on average of our being average the our than disciplined be resulted maintaining being criteria. are and continue new in loan rate the which higher yield in portfolio production loans. quarter, our in is X.XX% accretive

we'll Moving to Slide deposit closer trends. our X, take look a at

Our their primarily fluctuations, liquidity total seasonal saw strategic quarter, operating as outflows investments. using by payments, account deposits declined for clients we during the and driven tax

million period average the to second over However, of deposits due on compared year. to an gathering efforts XXXX, $XX are our basis, our past up deposit the

yielding relationships We We continue deposits second deposit which $XX the in the added to have primarily into lower during deposit growth to due time for advantage accounts, longer million new money in and rate related largest quarter, time quarter. we was development had moving the business during new environment of desire success their to in are that the from to interest higher in. deposits take clients

decrease million fees. management Turning assets that and driven asset investment trust under and on trust to quarter, X, second the minimal in we withdrawals custody Slide accounts and management in investment have had by on our $XXX impact management

in we the of However, increase over an AUM X% seen have past year.

the Now financials. to of David over further for David? discussion our call I'll turn

David Weber

Thanks, Julie.

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

trends average positive We decreased quarter. income fee the was gross X% NIM of prior Our saw mortgage our revenue quarter, quarters. up from prior in the the and but in from X

Slide at and X, income in trends we'll the interest to Now net turning margin. look

Our interest-bearing net prior decreased interest quarter, to the income cash. lower of primarily X.X% levels due from

the see NIM, X.XX%. from to increased We which continue point stability our more basis to X prior quarter in

expansion to As we of during in see an we the our year. interest earlier, NIM net second our Scott indicated over increase half saw in the June, margin continued and expect

build primarily paying our at increase again. overnight during balances deposit new books on borrowings loans the due to to on outflows average up coming that to in that occurred We the We an plan back the loans interest rates borrowings are these the off. earning yield some than added seeing higher We assets, as deposit quarter. offset reduce are

prior XX.X% from was up quarter, from of our the Now Slide non-interest the turning decreased XXXX. average of X XX, quarters to but last income X.X% the

contributions, mortgage net bank continue to Our loans, and make investment of were fees. sources in on fees largest by income, strong but decrease non-interest offset management they a trust gains and

gain net addition the resulting quarter, of prior higher mortgage Our of year, increased increase as earlier a on to in production buying activity MLOs we as seeing the in are markets. from our in due level the home from loans well an that,

turning Slide XX our and Now expenses. to

of to million, professional the decreased due lower resolution expense continue $XX fees, loans. of non-interest make service to progress Our to non-performing a we as our level primarily on

back direction. is right in Our the efficiency ratio trending

main of incentive compensation, consistent, the non-interest will level we For financial variable being quarters, be the be few next the expect relatively upon which our expense dependent to with performance.

Slide Now turning we'll at asset XX, to our look quality.

the due to in was collateral, Our non-performing balance. non-performing slightly to assets held as due million. offset foreclosure OREO The the properties X are loans, on resulting than $XX.X increased more now held a which decrease increase to that in participated

continue progress workout We relationship, previously large make on to had our as we discussed.

had we and decline amount quarter. addition, small in due past a of the recoveries a had loans, net in In

X.XX% quarter, With we to the increased decline loans provision level and points the basis the adjusted XX had recorded June XX. at to our in allowance of loans in

it turn Scott. to Scott? Now back I'll

Scott Wylie

Thanks, David.

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

and conservative prudent continue risk While to prioritize management new economic approach remain conditions to a uncertain, production. loan we'll

continued business, on execution also our our our all its pipelines generate deposits, margin, and we second seeing, management. we were in X quarters. Notably, of few the that to continue over and improve decline open disciplined have are status our resolving development organization placed, the we entire franchise the half expense We're expansion the our in on addition, the past positions level new on due banking, of non-performing we've net in of as business, of organization, In including seeing talent. These trends benefiting expect banking over higher quarters. deposit to We'll to along business to continue the the including new investment credits business a loans our year. development the maintaining of strength interest additions, control make initiatives, process built, positively the positive developing past good also we're focus we're investment across and to the consecutive We're mortgage and with progress new to capabilities. Based on areas management loans, performance the on upgrade of reorganizing profitability relationships. strong from past opportunities the in impacting

We very sheet. strong also continue balance maintain to a

repurchase to in call, quarter, we're open your of seeing in we're second consider have agreement the additional not authorization we the place up increases repurchasing improvement the in happy the our we but We in quality, that we in use. any capital June. We of the in call. interest during plan ratios to now. a that, XXbX-X asset Carmen, questions. shareholders. With repurchase do our announced stock ability open the the shares to our capital This will led With did and the be options to believe best have please shares take for

Operator

[Operator Instructions] Lay it KBW. of from And line with comes the Woody

Wood Lay

I credit. wanted to with start

was movement on larger thoughts to where resolution? stands any timing that expected, X And Could exposure As potential NPA some just remind NPL to from there OREO. you updated us relationship? around

Scott Wylie

Yes.

it of under X of the this going million just of that respect had specific over play was the is. QX. in sales, which $X.X have we of out was timing We $X.X said the of million $XX credit, property that which With XXXX, other million, on on plus to put a course of reserve NPL that to

something a are about. them X auctioned the how on along. the underway, started You with not uncertain X know, first that's listed out. of going have we've here all right well full another OREO, making play There's now. of the and the hope. out property track. year, property It's is being whole the timing that sausage and of we've but We're properties I We then the and sure be last now is half half sale sold there's in sausage of that's to of during August, remaining. X process off second anticipated And in making. We of are nevertheless, to talked that's that's scheduled

Wood Lay

Got it.

the just content or of of abundance on -- caution? the increased all, out thoughts provision, out sort a of this changed loss at potential of move given your have So was

Scott Wylie

litigation. And that. don't is Well, to will we value that of the not property, risk book a had a issue a us property. want popped of led X and from we with QX further a take X title have that properties and that on that that, And new X expectation clouded our recovery to for in X up the

was increase on So specific drove reserve that what really that relationship. the

Wood Lay

over shifting margin. Maybe right. All the net to interest

saw Sounds for of a through the the half improvement the expectations on it back like little talk year? quarter. just your throughout Could you of the bit NIM

Scott Wylie

and try. ahead. go a please it give color, extra add you David, I'll to And Julie want if Sure. guys

seeing a the and of amount on deposits, of You cut possibility year. know, with think on still there's I in of sides the we're competition on fair we loans And second X that rate drive NIM mean, pricing. half start a loans. loan a the of the

improve. So currently think I take in normal that with margin net But NIM appears interest that before. some is, more time, we're our to will talked which a thinking our we've again, slowly going to about line what return is it

did David? right number, rate loans at in on average QX books Is we of Our that do the an X.X%. came our that

David Weber

X.XX%.

Scott Wylie

X.XX%.

So on getting yield new the nice that we booking. loans we're are a

doing a Although, we're commercial range. X% start about, people there start with front X%, the real from with X-year that a in estate hearing loans line fixed stories rate our number out

we're So that be things I to certainly going side. loan on mean, doing not definitely the there's

quarter the side, deposits was cost rate the cost June XX was for deposit the XXX. was of Spot technically XXX, funds for XXX. On of

very David, So quarters, big line several now an trend which slowing, in with is NIM there, it a terms nice you then line compression important it if see, guided David I Julie? improvement. in slowing, it's but look quarter, we you in is this not had and in NIM kind to obviously, QX. think a what improvement, again or and of back is improving, anything really now of And improving

Julie Courkamp

No.

David Weber

All No. fair.

Operator

It's from the line Sandler. with of Piper Matthew Clark

Adam Kroll

June? I for to is question, was NIM if my rate the I Matthew guess Kroll Clark. you first This on happened spot wondering have for Adam

Scott Wylie

go to want you through that? do David,

David Weber

slight quarter. in XXX June, improvement the we versus for saw NIM Yes, a XXX in

Adam Kroll

expenses, to switching then down technology. I And this investments guys talent are focused And on know those came quarter. continued you in and

how wondering the about just rate run forward? was think I expense should going So we

Scott Wylie

this each We we I year. in landed in talked the our million $XX being And range about that's QX. quarter about have where think expenses

teams replacing in We've X quite We of half deficiencies production first that hires. year, year. office also MLOs in far largely to this success But adding open on into the so XX and Boulder back putting by on hired particular. additional bringing front got that, Collins side Jackson, office, bit have office a producers middle and the had people in of new here new new are and added our positions the Fort production. We've that's that we've

really know, that's the I adding going I other you think, in feel job controlling a the the out, of, on hand nice of So we've and like really done on production expense to hand, X capability second year. half pay

Adam Kroll

Got base? deposit update going wondering it. I remix if last was in bearing, deposit looks helpful. you're ongoing non-interest if like you're there on and flows is, guess of some That's your was and question any on sort deposit the was just there super and within my stabilization an seeing this quarter seeing expectations side, forward, particularly it

Scott Wylie

several increase deposits, stable question. deposit in leaders the QX, in and the should your outflow production and with you some to see Yes, did which we we've expect as company non-interest improving the of operating we these in But, had in over the help still out QX, markets previewed, pointed added of we some that see of an half year. in we're outflows of deposits deposit to course offset see now, of new bearing second the base as we declines expecting, usually

Operator

line from Capital Bill the Tieton with Management. And Dezellem of it's

William Dezellem

recent I'd all more and some a What's like to net around comment you Would XX producers, you those bit the to detail number are the those? this your new producers? or circle year. of about XX go please hired new into support of producers back here,

Scott Wylie

year, last XX% versus up year-to-date that at look last you we producers, number production had, our total we're If year. people of our

are these net So new producers.

Market that Boulder been of may our double another as and years. in very Boulder leader efforts X rabbit just hole, them strong he's for be President, be as move a XX, of some those who too duty been for President great him. But us of that President this but President. Bill, market attract and a vacancies We is very doing a longtime bank's beating were Boulder he's the to been that Market them, for down We in That's going and had, Now far the the Market was able example, there. an Regional some to who's effective are a frankly, promoted job. we've

where think, new bringing President. I I just can now, move And really these so, about including in added really. good I have other people, and of we for that, Boulder, We as the really senior said before, feel mean, us. people our we're help these Market some we've places dial

William Dezellem

those easier filling there making market these, coincidence a And, or Scott, you'd time. mentioned it that with some move? of the or being these being positions have a culmination of that's for And competitors positions been positions open hire, a to time on a to is in long Is in worked just loosening long interested it it being these leading open these of for number filled? now prospective having more a that longtime candidates is something are a

Scott Wylie

a kind question. markets creating great of you I that think, not here And the there's those semi-annual there And XX that's of opportunity stories, with of positive to seen out. in that that we the today over can would last managers you that I'm front bring the the ones agree is this summit in. that. when I office if talent, years, seems with not of company I be, people good to long turmoil sure. any that market, and our at had with anecdotally get new I think our tell that. believe upgrading to do a really all over say pushback turmoil on time And a to the I particular. bear I lot our day very answer. of there's the in people I'm haven't look each of seem in the and didn't tone a half. And folks, is our Yes, couple day in that's and we a XXX% sure last

to more, growth rest I But the in how months than attract year. X from to question, So it be, to story XXXX. about able to former. think our of the I'd build, I we'll it's have additional see love that now in do we've been the talent organic mean, latter the goes talking your

Julie Courkamp

on I on name of too. a equation client both Western story the the prospects, tell, add, First talent, has our think going place was side. and the associate and there is I has getting differentiated just that clients, with And to that's and relationships to more also Bill, more as a out high-quality sides but that,

that little in to So a a place well. market work as comment, as known that more getting to an great bit think I the add-on we're as

William Dezellem

to what relative but amount are And national just the is normal there. a fair I leading in uptick the in your being marketplace, this the that's of stagnant uptick for country, surface skewed specifically commentary something rebound you then you've mortgage you? am And which the in, Is of with the numbers for your looks you seen seasonality? kind that terms the across the bit seeing recognize on are of Or entire Great. business And nice seeing and that a market is of the to maybe by, that with numbers. I market. the you've not mortgage, different like in disappointment national pretty a MLOs seen, a or

Scott Wylie

or where of rebound. -- I earnings, really I I the more now. out or over last $XXX,XXX had think X year we've nice in more we really mortgages coming $XXX,XXX last months lost months X us Again, contribution. say a would we it's lot nice been of bit had flipped a rebound Yes, a little from, a it's more It's than and think

in I'm is but or trends our how happening So market. our national of it's whatever, trends or in definitely, market that I sure mean, much certainly not again,

when just, at that's though, X in not the our is, us, which added our heaven going the reasons support from build And manna are look think half last opened X, have officers, production year, a the in mortgage second MLOs, in new them now. in X part or additional it's production. X concerted why, little we've X going you helpful also building those the effort think Wyoming MLO very to Right bringing by more that to And new and Southeast time. And of mortgage of I to just team. a it team new, loan in the I folks their here. then of officers' they're week loan in are This mortgage the first year. production. we half Colorado, northern takes to accelerate be If

I So bit little a of little is lower mortgages. combination, think better bit a it activity a rates, in Bill,

nice think hiring MLOs. some these Julie's I the also, then and team work mortgage by leadership here under new

Julie Courkamp

Which office for [indiscernible] we're of to one MLOs. reasons attracting That do. more continuing the the was

William Dezellem

equal And second number relative being hire to anticipate more of half, pipeline do to or MLOs, an or so you more? in your X new able the

Julie Courkamp

tell, forecast plans. It's hard have to we and but

same Our goals are that, the hires of second in half to do year. of amount new the the

plays how So that we'll see out.

William Dezellem

pipeline humans, the Since new non-mortgage in producers side second of think on the XX we're let's can the the Great. half? about to you that the jump talking Do of business. repeat you

Scott Wylie

I don't that. answer to know the

all know And the said, market, have town in them we're open half day leaders our this I we've the top as I and for think people. meeting and here let senior business. of to that, last tasked I had definitely the for look senior a

think now. I banks there's a of turmoil I lot our And are markets. think cautious in right a being lot of

next to over And creates months And want focused some something clients approved, X are our new and that. be their have have or that to like more brings opportunity, unsettled. have that. some with that to that come going deals terrific. would the new I that We a that think, just top acquirers to of talent if I on be here, people people be lot town And

Operator

Haberman next Our the question with of comes Investments. from Ross line RLH

Ross Haberman

collateral The sorry you're quick against secured if couple you late. say to a of those? back, of got you a your took well that on mentioned did additions I X pretty this. Just you bit think non-performers, I'm pieces these you questions.

Scott Wylie

can answer. of for X same because we've the The The long a X talking stuff as year collateral is been. of collateral the control collateral, pieces however them having piece yes, now it or short And you about sell it. is and can we plus, a been is it's

And so sell to We're we going control them. it.

Ross Haberman

or these got sleep or that losing delinquent I that items in are you you're we you're today it. else about did, concerned basically Anything out laid the what about which the criticalized main here?

Scott Wylie

great question. use, driven are line the a our number the that me think that bit little remarks We I top so it Yes, headlines to a you prepared on talked been the number been the X of credits we're about. talking to deck. or written in and for of in But quarters. And is one whichever it really want that's about X by was about is about. happy a we've credit last NPL off. But now NPA, not the X these We've X that talking

So on be it's if news positive, to to because that any is news. going further going a there's one be recovery

of the we so, of bit that said numbers And OREO about, we be that And a in of that that NPA project. X end would declining is backwards spills year. workout the little the to next now trend. if the more into QX, than X. that less loan was like with be a to a it or workout the by I it's where is higher project. thought. that And And not, for a we'll on I maybe And a showing the brought year. But And proceeding in the balance. That think say value we out we went luck generally going little with talked down up was reason it we're

All showing trends. NPLs sort we But and down positive NPAs. continue will And Excuse follow that the loan. and will that as NPAs more metrics down the increasing we'll Ross, problem we of good come other the out in that's So the way. me, are that that had sell point. credit to a a work effect X of come

half your that other question. I of think So the was

Ross Haberman

non-performing expense as was incurred tell the of all terms assets for the non-interest me expense Could these in with quarter? of how dealing number part much you

Scott Wylie

the non-X but that, second the total it I of of and quarter, as expense. on know we come did number And that through or that don't do. It's takes down. David think I frankly, a maybe effort went time Julie

I It's come more As you think interesting, will look we're I'll on down. that well to year, if give at continue and the we trends. data go through criticized where, -- the you positive looking

look you about and total the If the second classified about quarter, criticized $XX and and quarter million were ends at X million below prior they in XXX during was XXX. trending down. $XX total It in

think that, So of said, couple I talked the underlying being significantly dues our about in are prepared trends I the over last years. as down strong. We past comments

Ross Haberman

I was getting I'm ongoing what That's that sort is at? material. expense of just sort wondering if of

David Weber

efforts, legal other Yes, and fees for costs quarter. that $XXX,XXX with it was the between those workout our about come

Scott Wylie

It was down from QX, David.

David Weber

Absolutely.

Julie Courkamp

can That into opportunity those and deploy earning. off interest interest those the assets get earning doesn't books include costs non-earning, the off once you

working not number off heavily inherent we're that's material of get costs them. either. to So the the, a things are These that of because books,

Scott Wylie

something. actually that ago X first a when Julie pointed months surprising It's out or number

turned If you meaningful bearing EPS it's get into -- all interest uptick. those NPAs a assets,

Ross Haberman

office How I are was it Arizona. some think offices or lending faring? and Bozeman in some, had new in You they

Scott Wylie

mean, really be progress. that office they're is So nice I market opportunity. full Bozeman offices. of to full continues making service

a has President the was mentioned, meetings there opportunity up I very Market outlook for on here positive Our yesterday, there. and those that

And what, it's XX Market really Presidents, this staff the fully really talked to last, on Arizona. the our XX going the here months, the local positive Part that. And now they're very well. of internally, the working people. that Julie, something folks retooled think, in in new there on over are the strong President, production staffed that's with is about So we've both there of that the hiring seem I like Regional locations Arizona, producers outlook. that

So a time. Arizona's and it long money making has for

had same MSA, in mean, it I Fort We'd to is if that's market, there in the bigger. actually fine. better. I always like that our market largest be leaders remind share we market to we we'd MSA have billion in So Collins which the lot a like share Phoenix do see that our Arizona, $X

a that lot I team and a us, think there's building we're that like opportunity do I feel can of realize So Arizona that. there in for

Ross Haberman

question. last or expenditures Any workout X quarter the expenses just besides And large I X, in for non-performing next expected guess, the the assets?

Scott Wylie

pitch that start to And, the you slow but jump if free. I better, the in I'll resist is want no, feel and here. Julie, think I can't it and answer to please explain

of that. We tech platform, rebuild. after is can that that have the process, decided the a pretty for in and money probably And big our we save due process doing

and FinTech Julie? So that involves had of something changing using thing way and cloud, -- the the that's platform like And solutions. whole core, that, modernizing use the done, And changing the to our foundation do our XX% tech is and into hosted. the that, we to rebuild

Julie Courkamp

The foundational yes. build,

Scott Wylie

that. it beginning of year, implement build. we're QX to I the be next That'll think now, piece the bells and early after And we'll foundational it that, which part middleware implement will The start. like and of whistles something

efficiency, and in some gains will those be as So associates gains definitely be I actually calls, some efficiency and head, to effectiveness terms of nothing the we're internally talking cost her there, well. the in to clients, add. but and nice saves Shaking to also delivering, overall future think, about of I we'll that think

Operator

questions further in pass comments. the Scott any queue, Q&A for see call I don't I will final session the as and the And back to conclude

Scott Wylie

for joining right, thank everybody you Well, thanks for All today. and Carmen.

indicated numbers, guidance. line are of expected had say, comments, year asset earlier terms I with in and the would of the prior We're ratio, our we the concluding is but not with numbers headline progressing Just challenging happy the largely here. some EPS quality efficiency and as in and

of Certainly some producers for bigger half it we to mean, addition underlying as QX, in trends and so things ratio second very the in far of it talked help saw are there's about, throughout well, of fee a seeing the us saw the in things improving asset the positive it which NAM relationships, talked year. favorable about, improvements, think QX, We in just and we better new to outlook, that seeing income, July trend, expense the June In XXXX. are number pipelines QX. new and we organization. board, I includes in control. This quality efficiency include, ultimately these going And deposit we've on we're

for there your First everybody positive Have is thank great Thanks support your for a going day. today, and Western. I of again. forward. So interest dialing a really for for rest story we And think in your

Operator

in participating And thank all today's for you conference.

You may now disconnect.

First Western Financial (MYFW) 24 Jul 242024 Q2 Earnings call transcript