8-K
First Western Financial Inc (MYFW)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 21, 2021
FIRST WESTERN FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
| Colorado | 001-38595 | 37-1442266 |
|---|---|---|
| (State or other jurisdiction of | (Commission | (I.R.S. Employer |
| incorporation or organization) | File Number) | Identification No.) |
| | | |
| 1900 16th Street , Suite 1200 | | |
| Denver , Colorado | | 80202 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: 303 . 531.8100
Former name or former address, if changed since last report: Not Applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☒ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| ☒ | Emerging growth company |
|---|---|
| | |
| ☒ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | |
|---|---|---|---|---|
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common Stock, no par value | | MYFW | | The Nasdaq Stock Market LLC |
Item 2.02 Results of Operations and Financial Condition.
On October 21, 2021, First Western Financial, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter ended September 30, 2021. A copy of the press release is furnished as Exhibit 99.1 and is incorporated by reference herein.
The information in this Item 2.02, including Exhibit 99.1, is being furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, unless specifically identified therein as being incorporated therein by reference.
Item 7.01 Regulation FD Disclosure.
The Company intends to hold an investor call and webcast to discuss its financial results for the third quarter ended September 30, 2021 on Friday, October 22, 2021, at 10:00 a.m. Mountain Time. The Company’s presentation to analysts and investors contains additional information about the Company’s financial results for the third quarter ended September 30, 2021 and is furnished as Exhibit 99.2 and is incorporated by reference herein.
The information in this Item 7.01, including Exhibit 99.2, is being furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, unless specifically identified therein as being incorporated therein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| <br><br> | | |
|---|---|---|
| Exhibit<br>Number | | Description |
| | ||
| 99.1 | Press Release issued by First Western Financial, Inc. dated October 21, 2021 | |
| 99.2 | | First Western Financial, Inc. Earnings Presentation |
| 104 | | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | |
|---|---|---|---|
| | | | FIRST WESTERN FINANCIAL, INC. |
| | | | |
| | | | |
| | Date: October 21, 2021 | | By: /s/ Scott C. Wylie |
| | | | Scott C. Wylie |
| | | | |
| | | | Chairman, Chief Executive Officer and President |
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Exhibit 99.1
First Western Reports Third Quarter 2021 Financial Results
Third Quarter 2021 Summary
| ● | Net income available to common shareholders of $6.4 million in Q3 2021, compared to $6.3 million in Q2 2021 and $9.6 million in Q3 2020 |
|---|---|
| ● | Diluted EPS of $0.78 in Q3 2021, compared to $0.76 in Q2 2021 and $1.20 in Q3 2020 |
| --- | --- |
| ● | Gross revenue^(1)^ of $25.3 million in Q3 2021, compared to $23.7 million in Q2 2021 and $31.0 million in Q3 2020 |
| --- | --- |
| ● | Total assets of $2.08 billion in Q3 2021, up 3.3% from Q2 2021 and up 5.2% from Q3 2020 |
| --- | --- |
| ● | Return on average assets of 1.27% in Q3 2021, compared to 1.22% in Q2 2021 |
| --- | --- |
| ● | Return on average shareholders’ equity of 14.88% in Q3 2021, compared to 15.17% in Q2 2021 |
| --- | --- |
| ● | Return on tangible common equity^(1)^ of 17.01% in Q3 2021, compared to 17.47% in Q2 2021 |
| --- | --- |
^(1)^ Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Denver, Colo., October 21, 2021 – First Western Financial, Inc., (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the third quarter ended September 30, 2021.
Net income available to common shareholders was $6.4 million, or $0.78 per diluted share, for the third quarter of 2021. This compares to $6.3 million, or $0.76 per diluted share, for the second quarter of 2021, and $9.6 million, or $1.20 per diluted share, for the third quarter of 2020.
Scott C. Wylie, CEO of First Western, commented, “Our strong business development momentum continued in the third quarter, resulting in quality balance sheet growth, more operating leverage, and a higher level of earnings compared to the prior quarter. The productivity of our existing offices and the expansion of our private and commercial banking operations through the opening of new offices and adding proven banking talent has enabled us to better capitalize on the healthy economic activity in our markets and consistently generate growth in loans, deposits, and assets under management.
“Excluding PPP loans, our total loans held for investment increased at an annualized rate of 19.3% during the third quarter with growth across most areas of the portfolio. We also continue to see strong deposit inflows, with total deposits increasing 6.1% from the end of the prior quarter, with growth primarily coming in our lower-cost categories and further improving our deposit mix.
“Our loan and deposit pipelines remain consistent, which should result in another strong quarter to finish 2021. We are making good progress on our integration planning for the acquisition of Teton Financial Services, which we expect to close late in the fourth quarter of 2021 or early in the first quarter of 2022, and
our teams are collaborating well to leverage the collective strengths of each organization. Combined with our continued organic growth, we believe that the accretive benefits of the Teton acquisition position us well to deliver strong earnings growth in 2022, while further increasing our geographic and revenue diversification,” said Mr. Wylie.
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | For the Three Months Ended | ||||||||
| | | September 30, | | June 30, | | September 30, | **** | |||
| (Dollars in thousands, except per share data) | **** | 2021 | **** | 2021 | **** | 2020 | **** | |||
| Earnings Summary | | | | | ||||||
| Net interest income | | $ | 14,846 | | $ | 14,223 | | $ | 12,918 | |
| Less: provision for loan losses | | 406 | | 12 | | 1,496 | | |||
| Total non-interest income | | 10,495 | | 9,498 | | 18,032 | | |||
| Total non-interest expense | | 16,469 | | 15,521 | | 16,632 | | |||
| Income before income taxes | | 8,466 | | 8,188 | | 12,822 | | |||
| Income tax expense | | 2,049 | | 1,911 | | 3,192 | | |||
| Net income available to common shareholders | | | 6,417 | | | 6,277 | | | 9,630 | |
| Adjusted net income available to common shareholders^(1)^ | | | 6,669 | | | 6,277 | | | 9,630 | |
| Basic earnings per common share | | | 0.80 | | | 0.79 | | | 1.22 | |
| Adjusted basic earnings per common share^(1)^ | | | 0.84 | | | 0.79 | | | 1.22 | |
| Diluted earnings per common share | | | 0.78 | | | 0.76 | | | 1.20 | |
| Adjusted diluted earnings per common share^(1)^ | | | 0.81 | | | 0.76 | | | 1.20 | |
| | | | | | | | | | | |
| Return on average assets (annualized) | | 1.27 | % | 1.22 | % | 2.06 | % | |||
| Adjusted return on average assets (annualized)^(1)^ | | | 1.32 | | | 1.22 | | | 2.06 | |
| Return on average shareholders' equity (annualized) | | 14.88 | | 15.17 | | 26.43 | | |||
| Adjusted return on average shareholders' equity (annualized)^(1)^ | | | 15.46 | | | 15.17 | | | 26.43 | |
| Return on tangible common equity (annualized)^(1)^ | | 17.01 | | 17.47 | | 31.49 | | |||
| Adjusted return on tangible common equity (annualized)^(1)^ | | | 17.68 | | | 17.47 | | | 31.49 | |
| Net interest margin | | 3.14 | | 3.01 | | 3.07 | | |||
| Efficiency ratio^(1)^ | | 64.97 | | 65.41 | | 53.40 | |
^(1)^Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Operating Results for the Third Quarter 2021
Revenue
Gross revenue^(1)^ was $25.3 million for the third quarter of 2021, an increase from $23.7 million for the second quarter of 2021, due to higher net interest income and increases in all non-interest income generating areas. Relative to the third quarter of 2020, gross revenue decreased $5.7 million from $31.0 million, or 18.1%. The decrease in revenue from the prior year period was primarily due to a decrease in net gain on mortgage loans correlating with the decline in mortgage loans originated, offset by an increase in net interest income derived primarily from organic balance sheet growth and an increase in loan fees driven by an increase in Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loan forgiveness.
^(1)^ Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Net Interest Income
Net interest income for the third quarter of 2021 was $14.8 million, an increase of 4.4% from $14.2 million in the second quarter of 2021. The increase in net interest income was driven by a $0.6 million increase in 2
interest income from loans, including fees, primarily due to organic balance sheet growth and an increase in net interest margin.
Relative to the third quarter of 2020, net interest income increased 14.9% from $12.9 million. The year-over-year increase in net interest income was due primarily to the increase in average interest-earning assets primarily driven by a $129.9 million increase in loans and a $87.9 million increase in interest-bearing deposits in other financial institutions. The increase in net interest income was also impacted by the cost of interest-bearing deposits decreasing 12 basis points (“bps”) from the third quarter of 2020.
Net Interest Margin
Net interest margin for the third quarter of 2021 increased to 3.14% from 3.01% in the second quarter of 2021, primarily due to an improved mix of earning assets and an interest recovery of a non-performing loan in our Commercial and Industrial portfolio. On a net basis, the PPP program positively impacted net interest margin by 9 bps in the third quarter of 2021. This was driven by accelerating revenue recognition of net loan fees associated with forgiven PPP loans of $0.9 million and interest income from PPP loans of $0.2 million.
The cost of interest-bearing deposits decreased slightly to 0.29% in the third quarter of 2021, from 0.30% in the second quarter of 2021, while the yield on interest-earning assets increased to 3.42% in the third quarter of 2021, from 3.29% in the second quarter of 2021. The increase during the period was primarily due to an improved mix of earning assets.
Relative to the third quarter of 2020, the net interest margin increased from 3.07%, primarily due to an increase in the yield on loans and the cost of interest-bearing deposits decreasing 12 bps.
Non-interest Income
Non-interest income for the third quarter of 2021 was $10.5 million, an increase of 10.5% from $9.5 million in the second quarter of 2021. This was primarily due to a $0.6 million increase in gain on mortgage loans held for sale, a $0.2 million increase in trust and invesment management fees, and a $0.2 million increase in risk management and insurance fees. Mortgage lock volume increased $55.8 million in the third quarter of 2021 compared to the second quarter of 2021, which impacted the increase of net gain on mortgage loans held for sale.
Relative to the third quarter of 2020, non-interest income decreased 41.8% from $18.0 million. The decrease was primarily due to lower mortgage segment activity, partially offset by higher trust and investment management fees.
Non-interest Expense
Non-interest expense for the third quarter of 2021 was $16.5 million, an increase of 6.1% from the second quarter of 2021 at $15.5 million. This was primarily due to a $0.6 million increase in salaries and employee benefits as a result of increased bonus expense and insurance benefits. Professional services increased $0.3 million due to expenses related to mergers and acquisition activity. 3
The impact of the mergers and acqusition activity is as follows:
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | **** | As of or for the Three Months Ended | |||||||
| | | September 30, | | June 30, | | September 30, | |||
| (Dollars in thousands, except share and per share data) | | 2021 | | 2021 | | 2020 | |||
| Adjusted Net Income Available to Common Shareholders^(1)^ | | | | | | | | | |
| Net income available to common shareholders | | $ | 6,417 | | $ | 6,277 | | $ | 9,630 |
| Plus: acquisition related expenses | | | 332 | | | 70 | | | — |
| Less: income tax impact | | | 80 | | | 16 | | | — |
| Adjusted net income available to shareholders^(1)^ | | $ | 6,669 | | $ | 6,331 | | $ | 9,630 |
| | | | | | | | | | |
| Adjusted Diluted Earnings Per Share^(1)^ | | | | | | | | | |
| Diluted earnings per share | | $ | 0.78 | | $ | 0.76 | | $ | 1.20 |
| Plus: acquisition related expenses net of income tax impact | | | 0.03 | | | 0.01 | | | — |
| Adjusted diluted earnings per share^(1)^ | | $ | 0.81 | | $ | 0.77 | | $ | 1.20 |
^(1)^Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Relative to the third quarter of 2020, non-interest expense decreased by 1.0% from $16.6 million.
The Company’s efficiency ratio^(1)^ was 65.0% in the third quarter of 2021, compared with 65.4% in the second quarter of 2021 and 53.4% in the third quarter of 2020.
^(1)^ Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Income Taxes
The Company recorded income tax expense of $2.0 million for the third quarter of 2021, representing an effective tax rate of 24.2%, compared to 23.3% for the second quarter of 2021. The increase in effective tax rate in the third quarter of 2021 was primarily attributable to a tax benefit related to stock-based compensation recognized in the second quarter of 2021.
Loans
Total loans held for investment, were $1.60 billion as of September 30, 2021, an increase of 1.9% from $1.57 billion as of June 30, 2021, and an increase of 6.4% from $1.51 billion as of September 30, 2020. The increase in total loans held for investment from June 30, 2021 was primarily attributable to a $33.9 million increase in the non-owner occupied CRE portfolio. In addition, our Cash, Securities, and Other portfolio increased $2.9 million or $44.1 million, excluding PPP forgiveness and borrower payments/adjustments of $41.2 million. Excluding PPP loans, total loans held for investment were $1.54 billion as of September 30, 2021, an increase of $70.9 million, or 4.8%, from the end of the prior quarter and an increase of $227.3 million, or 17.3%, from September 30, 2020.
PPP loans were $61.9 million as of September 30, 2021, a decrease of 40.0% from $103.1 million as of June 30, 2021. As of September 30, 2021, the Company has submitted loan forgiveness applications to the SBA on behalf of clients for $241.5 million and received forgiveness and funds remitted in the amount of $214.8 million from the SBA. As of September 30, 2021, there was $1.2 million remaining in net fees to be recognized upon forgiveness or repayment of PPP loans. 4
Deposits
Total deposits were $1.78 billion as of September 30, 2021, compared to $1.68 billion as of June 30, 2021, and $1.56 billion as of September 30, 2020. The increase in total deposits from June 30, 2021 was primarily in non-interest bearing deposits. In addition to average balance increases, total deposits as of September 30, 2021 were impacted by a significant relationship contributing an additional $60.0 million into their money market account in the third quarter of 2021, following a liquidity event in their business.
Average total deposits for the third quarter of 2021 increased $17.7 million, or 4.1% annualized, from the second quarter of 2021 and increased $260.2 million, or 17.8%, from the third quarter of 2020. The year-over-year increase was primarily attributable to an increase in non-interest bearing and money market deposits resulting from inflows from large commercial depositors and higher deposit balances across the Company’s clientele due to the improving economic and business environment.
Borrowings
Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $58.6 million as of September 30, 2021, a decrease of $62.2 million from $120.8 million as of June 30, 2021, and a decrease of $163.5 million from $222.1 million as of September 30, 2020. The decrease from September 30, 2020 and from June 30, 2021 is attributable to the participation in the Paycheck Protection Program Loan Facility (“PPPLF”) from the Federal Reserve. Borrowing from this facility is expected to trend in the same direction as the balances of the PPP loans and the resulting net decrease in PPP loans drove the decrease to the PPPLF balance. As of September 30, 2021, the PPPLF had advances of $43.6 million compared to PPP loan balance of $61.9 million.
Assets Under Management
Total assets under management (“AUM”) increased by $143.8 million during the third quarter to $6.91 billion as of September 30, 2021, compared to $6.76 billion as of June 30, 2021, and $6.13 billion as of September 30, 2020. The increase was primarily attributable to improving market conditions resulting in an increase in the value of assets under management balances, as well as contributions to existing accounts and new accounts.
Credit Quality
Non-performing assets totaled $4.4 million, or 0.21% of total assets, as of September 30, 2021, compared with $3.1 million, or 0.16% of total assets, as of June 30, 2021 and $10.4 million, or 0.53% of total assets, as of September 30, 2020. The increase in non-performing assets from the prior quarter was primarily due to one relationship being downgraded into non-accrual status, offset by continued pay downs on outstanding balances.
The Company recorded a provision of $0.4 million in the third quarter of 2021, compared to a provision of $1.5 million in the third quarter of 2020. The Company recorded an immaterial provision for loan losses in the second quarter of 2021. The provision recorded in the third quarter represented general provisioning consistent with growth of the loan portfolio and the resulting allowance for loan loss is representative of continued strong credit quality in the portfolio.
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Capital
As of September 30, 2021, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of September 30, 2021, the Bank was classified as “well capitalized,” as summarized in the following table:
| | | | |
|---|---|---|---|
| | **** | September 30, | **** |
| | | 2021 | **** |
| Consolidated Capital | | ||
| Tier 1 capital to risk-weighted assets | 10.66 | % | |
| Common Equity Tier 1 ("CET1") to risk-weighted assets | 10.66 | | |
| Total capital to risk-weighted assets | 14.37 | | |
| Tier 1 capital to average assets | 7.86 | | |
| | | | |
| Bank Capital | | | |
| Tier 1 capital to risk-weighted assets | 11.02 | % | |
| CET1 to risk-weighted assets | 11.02 | | |
| Total capital to risk-weighted assets | 11.96 | | |
| Tier 1 capital to average assets | 8.11 | |
Book value per common share^^increased 4.1% from $21.01 as of June 30, 2021 to $21.88 as of September 30, 2021, and was up 16.3% from $18.81 as of September 30, 2020.
Tangible book value per common share^(1)^ increased 4.8% from $17.98 as of June 30, 2021 to $18.85 as of September 30, 2021, and was up 22.6% from $15.38 as of September 30, 2020.
The Company did not repurchase any shares of its common stock during the third quarter of 2021 under its stock repurchase program, which authorized the repurchase of up to 400,000 shares of its common stock. As of September 30, 2021, the Company had up to 399,574 shares remaining under the current stock repurchase authorization.
^(1)^ Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call and webcast at 10:00 a.m. MT/ 12:00 p.m. ET on Friday, October 22, 2021. The call can be accessed via telephone at 877-405-1628. A recorded replay will be accessible through October 29, 2021 by dialing 855-859-2056; passcode 8581279.
A slide presentation relating to the third quarter 2021 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Events and Presentations page of the Company’s investor relations website at https://myfw.gcs-web.com.
About First Western
First Western is a financial services holding company headquartered in Denver, Colorado, with operations in Colorado, Arizona, Wyoming and California. First Western and its subsidiaries provide a fully integrated suite of wealth management services on a private trust bank platform, which includes a comprehensive selection of deposit, loan, trust, wealth planning and investment management products and services. First Western’s common stock is traded on the Nasdaq Global Select Market under the symbol “MYFW.” For more information, please visit www.myfw.com. 6
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include “Tangible Common Equity,” “Tangible Common Book Value per Share,” “Return on Tangible Common Equity,” “Efficiency Ratio,” “Gross Revenue,” “Allowance to Bank Originated Loans Excluding PPP,” “Adjusted Net Income Available to Common Shareholders,” “Adjusted Earnings Per Share,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” and “Adjusted Return on Tangible Common Equity”. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies. Reconciliation of non-GAAP financial measures, to GAAP financial measures are provided at the end of this press release.
Forward-Looking Statements
Statements in this news release regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “outlook,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “opportunity,” “could,” or “may.” The forward-looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, without limitation, the COVID-19 pandemic and its effects; integration risks in connection with acquisitions; the risk of geographic concentration in Colorado, Arizona, Wyoming and California; the risk of changes in the economy affecting real estate values and liquidity; the risk in our ability to continue to originate residential real estate loans and sell such loans; risks specific to commercial loans and borrowers; the risk of claims and litigation pertaining to our fiduciary responsibilities; the risk of competition for investment managers and professionals; the risk of fluctuation in the value of our investment securities; the risk of changes in interest rates; and the risk of the adequacy of our allowance for loan losses and the risk in our ability to maintain a strong core deposit base or other low-cost funding sources. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2021 (“Form 10-K”), and other documents we file with the SEC from time to time. We urge readers of this news release to review the “Risk Factors” section our Form 10-K and any updates to those risk factors set forth in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our other filings with the SEC. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today’s date, or to make predictions based solely on historical financial performance. Any forward-looking statement speaks only as of the date on which it is made, and we do not 7
undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Additional Information about the Acquisition and Where to Find It
In connection with the proposed acquisition, First Western filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (Registration No. 333-260078) to register the shares of First Western common stock to be issued to the shareholders of Teton Financial Services. The registration statement includes a proxy statement/prospectus which will be sent to the shareholders of Teton Financial Services seeking their approval of the acquisition and related matters. In addition, First Western may file other relevant documents concerning the proposed acquisition with the SEC.
SHAREHOLDERS OF TETON FINANCIAL SERVICES. ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 AND THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED ACQUISITION BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT FIRST WESTERN, TETON FINANCIAL SERVICES. AND THE PROPOSED TRANSACTION.
Investors and shareholders may obtain free copies of these documents through the website maintained by the SEC at www.sec.gov. Free copies of the proxy statement/prospectus also may be obtained by directing a request by telephone or mail to First Western Financial, Inc., 1900 16^th^ Street, Suite 1200, Denver CO, 80202, Attention: Investor Relations (telephone: (877) 505-1281), or by accessing First Western’s website at www.myfw.com under “Investor Relations.” The information on First Western’s website is not, and shall not be deemed to be, a part of this release or incorporated into other filings it makes with the SEC.
Participants in the Solicitation
First Western, Teton Financial Services, Inc. and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Teton Financial Services in connection with the acquisition. Information about the directors and executive officers of First Western is set forth in the proxy statement for First Western’s 2021 annual meeting of shareholders filed with the SEC on April 29, 2021. Additional information regarding the interests of these participants and other persons who may be deemed participants in the acquisition may be obtained by reading the proxy statement/prospectus regarding the acquisition when it becomes available.
Contacts:
Financial Profiles, Inc.
Tony Rossi
310-622-8221
MYFW@finprofiles.com
IR@myfw.com
8
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | Three Months Ended | |||||||
| | | September 30, | | June 30, | | September 30, | |||
| (Dollars in thousands, except per share amounts) | **** | 2021 | | 2021 | | 2020 | |||
| Interest and dividend income: | | | | ||||||
| Loans, including fees | | $ | 15,861 | | $ | 15,287 | | $ | 14,138 |
| Investment securities | | 180 | | 169 | | 173 | |||
| Interest-bearing deposits in other financial institutions | | 105 | | 92 | | 99 | |||
| Total interest and dividend income | | 16,146 | | 15,548 | | 14,410 | |||
| | | | | | | | | | |
| Interest expense: | | | | | | ||||
| Deposits | | 829 | | 866 | | 1,067 | |||
| Other borrowed funds | | 471 | | 459 | | 425 | |||
| Total interest expense | | 1,300 | | 1,325 | | 1,492 | |||
| Net interest income | | 14,846 | | 14,223 | | 12,918 | |||
| Less: provision for loan losses | | 406 | | 12 | | 1,496 | |||
| Net interest income, after provision for loan losses | | 14,440 | | 14,211 | | 11,422 | |||
| | | | | | | | | | |
| Non-interest income: | | | | | | ||||
| Trust and investment management fees | | 5,167 | | 5,009 | | 4,814 | |||
| Net gain on mortgage loans | | 4,480 | | 3,914 | | 12,304 | |||
| Bank fees | | 458 | | 394 | | 340 | |||
| Risk management and insurance fees | | 300 | | 92 | | 483 | |||
| Income on company-owned life insurance | | 90 | | 89 | | 91 | |||
| Other | | | — | | | — | | | — |
| Total non-interest income | | 10,495 | | 9,498 | | 18,032 | |||
| Total income before non-interest expense | | 24,935 | | 23,709 | | 29,454 | |||
| | | | | | | | | | |
| Non-interest expense: | | | | | | ||||
| Salaries and employee benefits | | 10,229 | | 9,643 | | 10,212 | |||
| Occupancy and equipment | | 1,550 | | 1,443 | | 1,619 | |||
| Professional services | | 1,660 | | 1,370 | | 1,288 | |||
| Technology and information systems | | 945 | | 904 | | 1,032 | |||
| Data processing | | 912 | | 1,093 | | 1,038 | |||
| Marketing | | 397 | | 398 | | 395 | |||
| Amortization of other intangible assets | | 5 | | 4 | | 4 | |||
| Provision on other real estate owned | | | — | | | — | | | 100 |
| Other | | 771 | | 666 | | 944 | |||
| Total non-interest expense | | 16,469 | | 15,521 | | 16,632 | |||
| Income before income taxes | | 8,466 | | 8,188 | | 12,822 | |||
| Income tax expense | | 2,049 | | 1,911 | | 3,192 | |||
| Net income available to common shareholders | | $ | 6,417 | | $ | 6,277 | | $ | 9,630 |
| Earnings per common share: | | | | | | | | ||
| Basic | | $ | 0.80 | | $ | 0.79 | | $ | 1.22 |
| Diluted | | $ | 0.78 | | $ | 0.76 | | $ | 1.20 |
9
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | September 30, | | June 30, | | September 30, | |||
| (Dollars in thousands) | | 2021 | | 2021 | | 2020 | |||
| Assets | | | | ||||||
| Cash and cash equivalents: | | | | ||||||
| Cash and due from banks | | $ | 2,829 | | $ | 2,921 | | $ | 2,867 |
| Interest-bearing deposits in other financial institutions | | 307,406 | | 286,168 | | 247,491 | |||
| Total cash and cash equivalents | | 310,235 | | 289,089 | | 250,358 | |||
| | | | | | | | | | |
| Available-for-sale securities, at fair value | | 32,233 | | 25,532 | | 40,654 | |||
| Correspondent bank stock, at cost | | 1,772 | | 2,053 | | 1,295 | |||
| Mortgage loans held for sale | | 51,309 | | 48,563 | | 89,872 | |||
| Loans, net of allowance of $12,964, $12,552 and $11,845 | | 1,590,086 | | 1,558,508 | | 1,494,231 | |||
| Premises and equipment, net | | 6,344 | | 5,885 | | 5,116 | |||
| Accrued interest receivable | | 6,306 | | 5,986 | | 6,730 | |||
| Accounts receivable | | 5,500 | | 4,923 | | 4,821 | |||
| Other receivables | | 1,553 | | 1,056 | | 1,497 | |||
| Other real estate owned, net | | — | | — | | 558 | |||
| Goodwill and other intangible assets, net | | 24,246 | | 24,250 | | 24,263 | |||
| Deferred tax assets, net | | 5,926 | | 5,742 | | 6,405 | |||
| Company-owned life insurance | | 15,715 | | 15,626 | | 15,359 | |||
| Other assets | | 25,047 | | 22,091 | | 28,738 | |||
| Assets held for sale | | — | | — | | 3,000 | |||
| Total assets | | $ | 2,076,272 | | $ | 2,009,304 | | $ | 1,972,897 |
| | | | | | | | | | |
| Liabilities | | | | | | | | ||
| Deposits: | | | | | |||||
| Noninterest-bearing | | $ | 596,635 | | $ | 555,106 | | $ | 472,963 |
| Interest-bearing | | 1,185,664 | | 1,123,947 | | 1,090,709 | |||
| Total deposits | | 1,782,299 | | 1,679,053 | | 1,563,672 | |||
| Borrowings: | | | | | |||||
| FHLB and Federal Reserve borrowings | | 58,564 | | 120,762 | | 222,075 | |||
| Subordinated notes | | 39,010 | | 24,261 | | 14,447 | |||
| Accrued interest payable | | 357 | | 312 | | 347 | |||
| Other liabilities | | | 20,913 | | | 16,930 | | | 22,639 |
| Liabilities held for sale | | — | | — | | 141 | |||
| Total liabilities | | 1,901,143 | | 1,841,318 | | 1,823,321 | |||
| | | | | | | | | | |
| Shareholders’ Equity | | | | ||||||
| Total shareholders’ equity | | 175,129 | | 167,986 | | 149,576 | |||
| Total liabilities and shareholders’ equity | | $ | 2,076,272 | | $ | 2,009,304 | | $ | 1,972,897 |
10
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | | September 30, | | June 30, | | September 30, | |||
| (Dollars in thousands) | **** | 2021 | | 2021 | | 2020 | |||
| Loan Portfolio | | | | ||||||
| Cash, Securities and Other^(1)^ | | $ | 293,837 | | $ | 290,907 | | $ | 371,481 |
| Construction and Development | | 132,141 | | 127,141 | | 105,717 | |||
| 1-4 Family Residential | | 502,439 | | 496,101 | | 446,959 | |||
| Non-Owner Occupied CRE | | 358,369 | | 324,493 | | 243,564 | |||
| Owner Occupied CRE | | 167,638 | | 178,847 | | 154,138 | |||
| Commercial and Industrial | | 148,959 | | 155,526 | | 185,625 | |||
| Total loans held for investment | | | 1,603,383 | | | 1,573,015 | | | 1,507,484 |
| Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net | | (333) | | (1,955) | | (1,408) | |||
| Gross loans | | $ | 1,603,050 | | $ | 1,571,060 | | $ | 1,506,076 |
| Mortgage loans held for sale | | $ | 51,309 | | $ | 48,563 | | $ | 89,872 |
| | | | | | | | | | |
| Deposit Portfolio | | | | | | | | | |
| Money market deposit accounts | | $ | 905,196 | | $ | 840,073 | | $ | 805,634 |
| Time deposits | | 137,015 | | 137,499 | | 177,391 | |||
| Negotiable order of withdrawal accounts | | 137,833 | | 141,076 | | 101,708 | |||
| Savings accounts | | 5,620 | | 5,299 | | 5,976 | |||
| Total interest-bearing deposits | | | 1,185,664 | | | 1,123,947 | | | 1,090,709 |
| Noninterest-bearing accounts | | | 596,635 | | | 555,106 | | | 472,963 |
| Total deposits | | $ | 1,782,299 | | $ | 1,679,053 | | $ | 1,563,672 |
^(1)^ Includes PPP loans. 11
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | As of or for the Three Months Ended | ||||||||
| | | September 30, | | June 30, | | September 30, | **** | |||
| (Dollars in thousands) | **** | 2021 | | 2021 | | 2020 | **** | |||
| Average Balance Sheets | | | | | ||||||
| Assets | | | | | ||||||
| Interest-earning assets: | | | | | ||||||
| Interest-bearing deposits in other financial institutions | | $ | 266,614 | | $ | 292,615 | | $ | 178,756 | |
| Available-for-sale securities | | 29,130 | | 26,474 | | 40,528 | | |||
| Loans | | 1,592,800 | | 1,573,553 | | 1,462,872 | | |||
| Interest-earning assets | | 1,888,544 | | 1,892,642 | | 1,682,156 | | |||
| Mortgage loans held for sale | | 54,717 | | 86,760 | | 94,714 | | |||
| Total interest-earning assets, plus mortgage loans held for sale | | 1,943,261 | | 1,979,402 | | 1,776,870 | | |||
| Allowance for loan losses | | (12,740) | | (12,540) | | (10,965) | | |||
| Noninterest-earning assets | | 92,901 | | 93,629 | | 101,874 | | |||
| Total assets | | $ | 2,023,422 | | $ | 2,060,491 | | $ | 1,867,779 | |
| | | | | | | | | | | |
| Liabilities and Shareholders’ Equity | | | | | ||||||
| Interest-bearing liabilities: | | | | | ||||||
| Interest-bearing deposits | | $ | 1,160,433 | | $ | 1,165,734 | | $ | 1,045,321 | |
| FHLB and Federal Reserve borrowings | | 81,307 | | 148,869 | | 222,225 | | |||
| Subordinated notes | | 29,236 | | 24,252 | | 14,445 | | |||
| Total interest-bearing liabilities | | | 1,270,976 | | | 1,338,855 | | | 1,281,991 | |
| Noninterest-bearing liabilities: | | | | | ||||||
| Noninterest-bearing deposits | | 562,569 | | 539,613 | | 417,502 | | |||
| Other liabilities | | 17,359 | | 16,558 | | 22,564 | | |||
| Total noninterest-bearing liabilities | | | 579,928 | | | 556,171 | | | 440,066 | |
| Total shareholders’ equity | | | 172,518 | | | 165,465 | | | 145,722 | |
| Total liabilities and shareholders’ equity | | $ | 2,023,422 | | $ | 2,060,491 | | $ | 1,867,779 | |
| | | | | | | | | | | |
| Yields/Cost of funds (annualized) | | | | | ||||||
| Interest-bearing deposits in other financial institutions | | 0.16 | % | 0.13 | % | 0.22 | % | |||
| Available-for-sale securities | | 2.47 | | 2.55 | | 1.71 | | |||
| Loans | | 3.98 | | 3.89 | | 3.87 | | |||
| Interest-earning assets | | 3.42 | | 3.29 | | 3.43 | | |||
| Mortgage loans held for sale | | 2.97 | | 2.88 | | 2.72 | | |||
| Total interest-earning assets, plus mortgage loans held for sale | | 3.41 | | 3.27 | | 3.39 | | |||
| Interest-bearing deposits | | 0.29 | | 0.30 | | 0.41 | | |||
| FHLB and Federal Reserve borrowings | | 0.40 | | 0.31 | | 0.37 | | |||
| Subordinated notes | | 5.32 | | 5.64 | | 6.12 | | |||
| Total interest-bearing liabilities | | 0.41 | | 0.40 | | 0.47 | | |||
| Net interest margin | | 3.14 | | 3.01 | | 3.07 | | |||
| Net interest rate spread | | 3.01 | 2.89 | 2.96 | |
12
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | As of or for the Three Months Ended | ||||||||
| | | September 30, | | June 30, | | September 30, | **** | |||
| (Dollars in thousands, except share and per share amounts) | **** | 2021 | | 2021 | | 2020 | **** | |||
| Asset Quality | | | | | | |||||
| Non-performing loans | | $ | 4,358 | | $ | 3,120 | | $ | 9,881 | |
| Non-performing assets | | 4,358 | | 3,120 | | 10,439 | | |||
| Net charge-offs/(recoveries) | | | (6) | | | (1) | | | 5 | |
| Non-performing loans to total loans | | 0.27 | % | 0.20 | % | 0.66 | % | |||
| Non-performing assets to total assets | | 0.21 | | 0.16 | | 0.53 | | |||
| Allowance for loan losses to non-performing loans | | 297.48 | | 402.31 | | 119.88 | | |||
| Allowance for loan losses to total loans | | 0.81 | | 0.80 | | 0.79 | | |||
| Allowance for loan losses to bank originated loans excluding PPP^(1)^ | | | 0.91 | | | 0.93 | | | 1.00 | |
| Net charge-offs/(recoveries) to average loans^(2)^ | | 0.00 | | 0.00 | | 0.00 | | |||
| | | | | | | | | | | |
| Assets Under Management | | $ | 6,905,935 | | $ | 6,762,179 | | $ | 6,131,179 | |
| | | | | | | | | | | |
| Market Data | | | | | | | | | | |
| Book value per share at period end | | $ | 21.88 | | $ | 21.01 | | $ | 18.81 | |
| Tangible book value per common share^(1)^ | | | 18.85 | | | 17.98 | | | 15.38 | |
| Weighted average outstanding shares, basic | | | 7,979,869 | | | 7,961,785 | | | 7,911,871 | |
| Weighted average outstanding shares, diluted | | | 8,246,353 | | | 8,213,900 | | | 8,019,007 | |
| Shares outstanding at period end | | 8,002,874 | | 7,994,832 | | 7,951,749 | | |||
| | | | | | | | | | | |
| Consolidated Capital | | | | | | | | | | |
| Tier 1 capital to risk-weighted assets | | 10.66 | % | 10.68 | % | | 9.88 | % | ||
| CET1 to risk-weighted assets | | 10.66 | | 10.68 | | | 9.88 | | ||
| Total capital to risk-weighted assets | | 14.37 | | 13.45 | | | 12.03 | | ||
| Tier 1 capital to average assets | | 7.86 | | 7.75 | | | 7.52 | | ||
| | | | | | | | | | | |
| Bank Capital | | | | | | | | | | |
| Tier 1 capital to risk-weighted assets | | 11.02 | % | 11.03 | % | | 10.28 | % | ||
| CET1 to risk-weighted assets | | 11.02 | | 11.03 | | | 10.28 | | ||
| Total capital to risk-weighted assets | | 11.96 | | 11.99 | | | 11.26 | | ||
| Tier 1 capital to average assets | | 8.11 | | 7.98 | | | 7.81 | |
^(1)^ Represents a Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
^(2)^ Value results in an immaterial amount.
13
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
Reconciliations of Non-GAAP Financial Measures
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | **** | As of or for the Three Months Ended | ||||||||
| | | September 30, | | June 30, | | September 30, | **** | |||
| (Dollars in thousands, except share and per share amounts) | | 2021 | | 2021 | | 2020 | **** | |||
| Tangible Common Equity | | | | | ||||||
| Total shareholders' equity | | $ | 175,129 | | $ | 167,986 | | $ | 149,576 | |
| Less: goodwill and other intangibles, net | | 24,246 | | 24,250 | | 24,263 | | |||
| Less: intangibles held for sale^(1)^ | | — | | — | | 3,000 | | |||
| Tangible common equity | | $ | 150,883 | | $ | 143,736 | | $ | 122,313 | |
| | | | | | | | | | | |
| Common shares outstanding, end of period | | 8,002,874 | | 7,994,832 | | 7,951,749 | | |||
| Tangible common book value per share | | $ | 18.85 | | $ | 17.98 | | $ | 15.38 | |
| | | | | | | | | | | |
| Net income available to common shareholders | | $ | 6,417 | | $ | 6,277 | | $ | 9,630 | |
| Return on tangible common equity (annualized) | | 17.01 | % | 17.47 | % | 31.49 | % | |||
| | | | | | | | | | | |
| Efficiency | | | | | ||||||
| Non-interest expense | | $ | 16,469 | | $ | 15,521 | | $ | 16,632 | |
| Less: amortization | | 5 | | 4 | | 4 | | |||
| Less: provision on other real estate owned | | — | | — | | 100 | | |||
| Adjusted non-interest expense | | $ | 16,464 | | $ | 15,517 | | $ | 16,528 | |
| | | | | | | | | | | |
| Net interest income | | $ | 14,846 | | $ | 14,223 | | $ | 12,918 | |
| Non-interest income | | 10,495 | | 9,498 | | 18,032 | | |||
| Total income | | $ | 25,341 | | $ | 23,721 | | $ | 30,950 | |
| Efficiency ratio | | 64.97 | % | 65.41 | % | 53.40 | % | |||
| | | | | | | | | | | |
| Gross Revenue | | | | | | | | | | |
| Total income before non-interest expense | | $ | 24,935 | | $ | 23,709 | | $ | 29,454 | |
| Plus: provision for loan losses | | 406 | | 12 | | 1,496 | | |||
| Gross revenue | | $ | 25,341 | | $ | 23,721 | | $ | 30,950 | |
| | | | | | | | | | | |
| Allowance to Bank Originated Loans Excluding PPP | | | | | | | | | | |
| Total loans held for investment | | $ | 1,603,383 | | $ | 1,573,015 | | $ | 1,507,484 | |
| Less: loans acquired | | | 117,465 | | | 116,052 | | | 124,689 | |
| Less: bank originated PPP loans | | 61,838 | | 102,359 | | 193,213 | | |||
| Bank originated loans excluding PPP | | $ | 1,424,080 | | $ | 1,354,604 | | $ | 1,189,582 | |
| | | | | | | | | | | |
| Allowance for loan losses | | $ | 12,964 | | $ | 12,552 | | $ | 11,845 | |
| Allowance for loan losses to bank originated loans excluding PPP | | | 0.91 | % | | 0.93 | % | | 1.00 | % |
| (1) | Represents only the intangible portion of Assets held for sale. |
|---|
14
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | **** | As of or for the Three Months Ended | ||||||||
| | | September 30, | | June 30, | | September 30, | **** | |||
| (Dollars in thousands, except share and per share data) | | 2021 | | 2021 | | 2020 | **** | |||
| Adjusted Net Income Available to Common Shareholders | | | | | | | | | | |
| Net income available to common shareholders | | $ | 6,417 | | $ | 6,277 | | $ | 9,630 | |
| Plus: acquisition related expenses | | | 332 | | | 70 | | | — | |
| Less: income tax impact | | | 80 | | | 16 | | | — | |
| Adjusted net income available to shareholders | | $ | 6,669 | | $ | 6,331 | | $ | 9,630 | |
| | | | | | | | | | | |
| Adjusted Basic Earnings Per Share | | | | | | | | | | |
| Basic earnings per share | | $ | 0.80 | | $ | 0.79 | | $ | 1.22 | |
| Plus: acquisition related expenses net of income tax impact | | | 0.04 | | | 0.01 | | | — | |
| Adjusted basic earnings per share | | $ | 0.84 | | $ | 0.80 | | $ | 1.22 | |
| | | | | | | | | | | |
| Adjusted Diluted Earnings Per Share | | | | | | | | | | |
| Diluted earnings per share | | $ | 0.78 | | $ | 0.76 | | $ | 1.20 | |
| Plus: acquisition related expenses net of income tax impact | | | 0.03 | | | 0.01 | | | — | |
| Adjusted diluted earnings per share | | $ | 0.81 | | $ | 0.77 | | $ | 1.20 | |
| | | | | | | | | | | |
| Adjusted Return on Average Assets (annualized) | | | | | | | | | | |
| Return on average assets | | | 1.27 | % | | 1.22 | % | | 2.06 | % |
| Plus: acquisition related expenses net of income tax impact | | | 0.05 | | | 0.01 | | | — | |
| Adjusted return on average assets | | | 1.32 | % | | 1.23 | % | | 2.06 | % |
| | | | | | | | | | | |
| Adjusted Return on Average Shareholders' Equity (annualized) | | | | | | | | | | |
| Return on average shareholders' equity | | | 14.88 | % | | 15.17 | % | | 26.43 | % |
| Plus: acquisition related expenses net of income tax impact | | | 0.58 | | | 0.13 | | | — | |
| Adjusted return on average shareholders' equity | | | 15.46 | % | | 15.30 | % | | 26.43 | % |
| | | | | | | | | | | |
| Adjusted Return on Tangible Common Equity (annualized) | | | | | | | | | | |
| Return on tangible common equity | | | 17.01 | % | | 17.47 | % | | 31.49 | % |
| Plus: acquisition related expenses net of income tax impact | | | 0.67 | | | 0.15 | | | — | |
| Adjusted return on tangible common equity | | | 17.68 | % | | 17.62 | % | | 31.49 | % |
15
Exhibit 99.2
| Third Quarter 2021<br>Conference Call |
|---|
| Safe Harbor<br>2<br>This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These<br>forward-looking statements reflect the current views of First Western Financial, Inc.’s (“First Western”) management with respect to, among other things, future events and First Western’s financial performance.<br>These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,”<br>“seek,” “estimate,” “intend,” “plan,” “project,” “future” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature.<br>These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about First Western’s industry, management’s beliefs and certain assumptions made by<br>management, many of which, by their nature, are inherently uncertain and beyond First Western’s control. Accordingly, First Western cautions you that any such forward-looking statements are not guarantees of<br>future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although First Western believes that the expectations reflected in these forward-looking statements are<br>reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Those following risks and uncertainties, among others,<br>could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: the COVID-19 pandemic and its effects; the occurrence of any event, change<br>or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between First Western and Teton Financial Services, the outcome of any legal<br>proceedings that may be instituted against First Western or Teton Financial Services, delays in completing the transaction, the failure to obtain necessary regulatory approvals (and the risk that such approvals may<br>result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction) and shareholder approval or to satisfy any of the other conditions to the<br>transaction on a timely basis or at all, the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the<br>integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where First Western and Teton Financial Services do business, the possibility that the transaction<br>may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management’s attention from ongoing business operations and opportunities, potential<br>adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction, First Western’s ability to complete the acquisition and<br>integration of Teton Financial Services successfully, and the dilution caused by First Western’s issuance of additional shares of its common stock in connection with the transaction. Additional information regarding<br>these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission<br>(“SEC”) on March 12, 2021 and other documents we file with the SEC from time to time. All subsequent written and oral forward-looking statements attributable to First Western or persons acting on First Western’s<br>behalf are expressly qualified in their entirety by this paragraph. Forward-looking statements speak only as of the date of this presentation. First Western undertakes no obligation to publicly update or otherwise<br>revise any forward-looking statements, whether as a result of new information, future events or otherwise (except as required by law).<br>Certain of the information contained herein may be derived from information provided by industry sources. The Company believes that such information is accurate and the sources from which it has been obtained<br>are reliable; however, the Company cannot guaranty the accuracy of such information and has not independently verified such information.<br>This presentation contains certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures<br>are provided at the end of this presentation. Numbers in the presentation may not sum due to rounding.<br>Our common stock is not a deposit or savings account. Our common stock is not insured by the Federal Deposit Insurance Corporation or any governmental agency or instrumentality.<br>This presentation is not an offer to sell any securities and it is not soliciting an offer to buy any securities in any state or jurisdiction where the offer or sale is not permitted. Neither the SEC nor any state securities<br>commission has approved or disapproved of the securities of the Company or passed upon the accuracy or adequacy of this presentation. Any representation to the contrary is a criminal offense. Except as otherwise<br>indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of the Company after<br>the date hereof.<br>Additional Information about the Acquisition and Where to Find It<br>In connection with the proposed acquisition, First Western filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (Registration No. 333-260078) to register the shares of<br>First Western common stock to be issued to the shareholders of Teton Financial Services. The registration statement includes a proxy statement/prospectus which will be sent to the shareholders of Teton Financial<br>Services seeking their approval of the acquisition and related matters. In addition, First Western may file other relevant documents concerning the proposed acquisition with the SEC.<br>SHAREHOLDERS OF TETON FINANCIAL SERVICES ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 AND THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE<br>REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED ACQUISITION BECAUSE THEY WILL CONTAIN IMPORTANT<br>INFORMATION ABOUT FIRST WESTERN, TETON FINANCIAL SERVICES AND THE PROPOSED TRANSACTION.<br>Investors and shareholders may obtain free copies of these documents through the website maintained by the SEC at www.sec.gov. Free copies of the proxy statement/prospectus also may be obtained by directing<br>a request by telephone or mail to First Western Financial, Inc., 1900 16th Street, Suite 1200, Denver CO, 80202 , Attention: Investor Relations (telephone:(877) 505-1281), or by accessing First Western’s website at<br>www.myfw.com under “Investor Relations.” The information on First Western’s website is not, and shall not be deemed to be, a part of this release or incorporated into other filings it makes with the SEC.<br>Participants in the Solicitation<br>First Western, Teton Financial Services, Inc. and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Teton Financial Services in<br>connection with the acquisition. Information about the directors and executive officers of First Western is set forth in the proxy statement for First Western’s 2021 annual meeting of shareholders filed with the SEC<br>on April 29, 2021. Additional information regarding the interests of these participants and other persons who may be deemed participants in the acquisition may be obtained by reading the proxy<br>statement/prospectus regarding the acquisition when it becomes available. |
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| 3<br>Overview of 3Q21<br>Improvement in<br>Key Metrics<br>Earnings Growth<br>and<br>Higher Returns<br>Continued Growth<br>in Private and<br>Commercial<br>Banking<br>Operations<br>▪ Total loans held for investment, excluding PPP loans, increased 19% annualized from prior quarter<br>▪ Total deposits increased 6.1% from end of prior quarter, with all of the growth coming in lower-cost<br>categories<br>▪ Consistent growth in AUM and trust and investment management fees<br>▪ Non-performing assets represent 0.21% of total assets<br>▪ History of exceptionally low charge-offs continues<br>Asset Quality<br>Remains<br>Exceptional<br>▪ Gross revenue(1) up 6.8% from prior quarter<br>▪ Balance sheet growth driving increased operating leverage with efficiency ratio improving to 65.0% in<br>3Q21 from 65.4% in 2Q21<br>▪ Net interest margin increased to 3.14% in 3Q21 from 3.01% in 2Q21<br>▪ Net income available to common shareholders of $6.4 million, up from $6.3 million in 2Q21<br>▪ Diluted EPS of $0.78, up from $0.76 in 2Q21<br>▪ Return on average assets of 1.27%, up from 1.22% in 2Q21<br>(1) See Non-GAAP reconciliation |
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| 4<br>Net Income Available to Common Shareholders<br>and Earnings per Share<br>▪ Net income of $6.4 million, or $0.78 diluted earnings per share, in 3Q21<br>▪ Excluding acquisition-related expenses, adjusted diluted earnings per share(1) of $0.81 in 3Q21, up from<br>$0.77 in 2Q21<br>▪ Strong profitability results in 4.1% and 4.8% increase in book value per share and tangible book value per<br>share(1), respectively, from 2Q21<br>▪ Earnings growth coming from combination of continued organic growth of more mature profit centers,<br>contribution of newer profit centers ramping up, and accretive acquisitions<br>$6,277 $6,417<br>$9,630<br>$4,874<br>$5,999 $6,331 $6,669<br>$0<br>$2,000<br>$4,000<br>$6,000<br>$8,000<br>$10,000<br>$12,000<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Net Income Adjustments to Net Income<br>(1)<br>$0.76 $0.78<br>$1.21<br>$0.61<br>$0.74 $0.77 $0.81<br>$0.00<br>$0.20<br>$0.40<br>$0.60<br>$0.80<br>$1.00<br>$1.20<br>$1.40<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Net Income Adjustments to Net Income<br>(1)<br>Net Income Available to Common Shareholders Diluted Earnings per Share<br>(1) See Non-GAAP reconciliation<br>(1)<br>(1) |
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| 5<br>Non-Mortgage Segment Earnings<br>(1) See Non-GAAP reconciliation<br>$0.32<br>$0.67 $0.73<br>$0.85<br>$0.75<br>$1.61<br>$0.89<br>$0.99 $1.00 $1.03<br>$0.00<br>$0.50<br>$1.00<br>$1.50<br>$2.00<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Non-Mortgage Segment Consolidated<br>▪ Non-mortgage segment earnings reflects contribution of private banking, commercial banking, and<br>trust and investment management business lines<br>▪ Growth in private banking, commercial banking, and TIM businesses replacing earnings generated<br>by mortgage segment in 2020 and creating sustainable path to higher profitability over long-term<br>▪ Decline in non-mortgage segment earnings from 2Q21 primarily due to higher non-interest<br>expense including acquisition-related expenses<br>Non-Mortgage Segment Diluted Pre-Tax Earnings Per Share(1) |
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| 6<br>Loan Portfolio<br>▪ Total loans HFI increased $30.4 million, or 1.9% from<br>prior quarter<br>▪ Excluding PPP loans, total loans HFI increased $70.9<br>million, or 19% annualized from prior quarter<br>▪ Continued strong loan production across multiple areas<br>offsetting payoffs and PPP forgiveness<br>▪ Cash, Securities and Other portfolio returned to growth<br>as new loan production exceeded PPP forgiveness<br>3Q 2020 2Q 2021 3Q 2021<br>Cash, Securities and Other $371,481 $290,907 $293,837<br>Construction and Development 105,717 127,141 132,141<br>1-4 Family Residential 446,959 496,101 502,439<br>Non-Owner Occupied CRE 243,564 324,493 358,369<br>Owner Occupied CRE 154,138 178,847 167,638<br>Commercial and Industrial 185,625 155,526 148,959<br>Total Loans HFI $1,507,484 $1,573,015 $1,603,383<br>Mortgage loans held-for-sale (HFS) 89,872 48,563 51,309<br>Total Loans $1,597,356 $1,621,578 $1,654,692<br>$1.8<br>$78.9<br>$5.0 $0.0<br>$142.1<br>$201.1<br>$65.7<br>$137.5 $133.4<br>$83.2<br>$128.1 $122.6<br>$91.5 $84.4<br>$48.7 $30.5<br>$91.4<br>$40.6<br>$0<br>$50<br>$100<br>$150<br>$200<br>$250<br>3Q20 4Q20 1Q21 2Q21 3Q21<br>PPP Production⁽¹⁾ Production Loan Payoffs PPP Forgiveness<br>(in millions)<br>$1,558<br>$1,644<br>$1,731 $1,660 $1,648 $1,622 $1,654<br>$0<br>$200<br>$400<br>$600<br>$800<br>$1,000<br>$1,200<br>$1,400<br>$1,600<br>$1,800<br>$2,000<br>3Q20 4Q20 1Q21 2Q21 3Q21 2Q21 3Q21<br>HFI HFS<br>(1) Bank originated<br>(2) Excludes deferred (fees) costs, and amortized premium/(unaccreted discount), net<br>($ in thousands, as of quarter end)<br>Loan Portfolio Composition(2)<br>Loan Portfolio Details Loan Production & Loan Payoffs<br>Total Loans(2)<br>Average Period End |
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| 7<br>Total Deposits<br>▪ Total deposits increased $103.2 million from end of prior quarter<br>▪ Continued strong deposit inflows from new and existing clients<br>▪ Further improvement in deposit mix with noninterest-bearing deposits increasing to 33.5% of total<br>deposits at 3Q21 from 30.2% at 3Q20<br>3Q 2020 2Q 2021 3Q 2021<br>Money market deposit accounts $805,634 $840,073 $905,196<br>Time deposits 177,391 137,499 137,015<br>NOW 101,708 141,076 137,833<br>Savings accounts 5,976 5,299 5,620<br>Noninterest-bearing accounts 472,963 555,106 596,635<br>Total Deposits $1,563,672 $1,679,053 $1,782,299<br>$1,463<br>$1,577<br>$1,721 $1,705 $1,723 $1,679<br>$1,782<br>$0<br>$200<br>$400<br>$600<br>$800<br>$1,000<br>$1,200<br>$1,400<br>$1,600<br>$1,800<br>$2,000<br>3Q20 4Q20 1Q21 2Q21 3Q21 2Q21 3Q21<br>Average Period End<br>($ in millions)<br>Deposit Portfolio Composition Total Deposits |
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| ▪ During 2020, expanded commercial banking team and added construction lending expertise<br>▪ Increase in commercial banking clients contributing to growth in total loans and low-cost deposits while<br>improving overall diversification<br>▪ Stronger commercial banking platform complements private banking and expanded mortgage capabilities<br>to create a more valuable franchise with additional catalysts for future growth<br>8<br>Commercial Banking Driving Growth<br>$958 $977<br>$1,213<br>$1,055<br>$1,185<br>$400<br>$600<br>$800<br>$1,000<br>$1,200<br>$1,400<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>$830<br>$908<br>$871<br>$975<br>$1,026<br>$400<br>$600<br>$800<br>$1,000<br>$1,200<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>(1) Reflects loans to commercial borrowers across all loan categories excludes SBA PPP loan balances due<br>to their short-term nature.<br>(in millions) (in millions)<br>Up 24% Year-Over-Year<br>Up 24% Year-Over-Year<br>Total Commercial Loans(1) Total Commercial Deposits |
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| 9<br>New Offices Ramping Up and<br>Contributing to Organic Growth<br>▪ New markets identified with large population of target clients<br>▪ Successfully recruiting experienced talent with deep relationships in new markets<br>▪ Effectively marketing First Western’s value proposition and cross-selling to expand relationships<br>▪ Target of 1-2 new offices per year across CO, MT, and WY markets<br>Total Loans (ex. PPP)<br>$48.8<br>$64.0 $64.1<br>$87.3<br>$81.8<br>$0.0<br>$20.0<br>$40.0<br>$60.0<br>$80.0<br>$100.0<br>3Q20 4Q20 1Q21 2Q21 3Q21<br>Total Deposits<br>$10.8<br>$41.5<br>$52.8 $51.2<br>$60.7<br>$0.0<br>$20.0<br>$40.0<br>$60.0<br>$80.0<br>3Q20 4Q20 1Q21 2Q21 3Q21<br>AUM<br>$0.0 $0.0<br>$6.6<br>$7.8<br>$8.8<br>$0.0<br>$5.0<br>$10.0<br>3Q20 4Q20 1Q21 2Q21 3Q21<br>Aggregate Balances of Three Offices Opened Since Mid-2019<br>(Vail Valley, Broomfield and Lone Tree)<br>($ in millions) |
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| 10<br>Trust and Investment Management<br>▪ Total assets under management increased $143.8 million from June 30, 2021 to $6.91 billion at<br>September 30, 2021<br>▪ The increase in asset balances were driven by both account additions and new account growth as well as<br>the continued improvement in market valuations<br>$6,131 $6,255<br>$6,486 $6,762 $6,906<br>$0<br>$1,000<br>$2,000<br>$3,000<br>$4,000<br>$5,000<br>$6,000<br>$7,000<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Investment Agency Managed Trust 401(k)/Retirement Directed Trust Custody<br>(in millions, as of quarter end)<br>Total Assets Under Management |
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| (1) All numbers represented do not include the impact of taxes<br>(2) The deferred loan origination expenses are recorded in non-interest expenses (Salaries and Benefits) and amortized through net interest income<br>(3) Includes $1.6 million in SBA fee income less $0.4 million of deferred loan origination expense<br>Paycheck Protection Program Overview<br>Impact on 3Q21 Financials (1)<br>($ in Millions)<br>Net Interest Income<br>Amortization of SBA fee income and deferred loan origination<br>expense (2) $0.9<br>Interest income from PPP loans, less PPPLF funding cost $0.2<br>Net Interest Income $1.1<br>Net Interest Margin Impact 9 bps<br>($ in Millions) As of 9/30/21<br>Total Loans (existing PPP) $61.9<br>Total Loans Forgiven $217.2<br>PPPLF advances $43.6<br>Remaining Fees to be Recognized<br>Pre-Tax(3) $1.2<br>11 |
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| (1) See Non-GAAP reconciliation<br>(2) Gross Revenue for Capital Management includes amounts for the fourth quarter of 2020 through the completion of the sale of the LA Fixed<br>Income Team on November 16, 2020. Financial results after that date for the unsold portion are presented in Wealth Management. 12<br>Gross Revenue<br>▪ Gross revenue(1) increased 6.8% from 2Q21<br>▪ Increase in net interest income and all non-interest income generating areas compared to 2Q21<br>➢ Net interest income up 4.4%<br>➢ Trust and investment management fees up 3.2%<br>➢ Net gain on mortgage loans up 14.5%<br>➢ Bank fees up 16.2%<br>➢ Risk management and insurance fees up 226%<br>Non-interest<br>Income<br>$10,495<br>Net Interest<br>Income<br>$14,846<br>41.4%<br>58.6%<br>$31.0<br>$23.4 $23.7 $23.7 $25.3<br>$0.0<br>$5.0<br>$10.0<br>$15.0<br>$20.0<br>$25.0<br>$30.0<br>$35.0<br>Q3 2020 Q4 2020⁽²⁾ Q1 2021 Q2 2021 Q3 2021<br>Wealth Management Capital Management Mortgage<br>(in millions)<br>3Q21 Gross Revenue(1) Gross Revenue(1) |
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| 13<br>Net Interest Income and Net Interest Margin<br>▪ Net interest income increased 4.4% from 2Q21, primarily due to an increase in average loan<br>balances and a higher net interest margin, partially offset by lower PPP fees<br>▪ Net interest margin, including PPP and purchase accretion, increased 13 bps to 3.14%<br>▪ Net interest margin, excluding PPP and purchase accretion(1), increased 18 bps to 3.06%, primarily<br>due to a favorable shift in the mix of earning assets<br>▪ Net interest margin expected to decline slightly in 4Q21<br>$12,918 $13,457 $13,053<br>$14,223 $14,846<br>$0<br>$2,000<br>$4,000<br>$6,000<br>$8,000<br>$10,000<br>$12,000<br>$14,000<br>$16,000<br>$18,000<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>3.07% 3.07%<br>2.88% 2.88%<br>3.06%<br>3.23% 3.10%<br>2.90% 3.01% 3.14%<br>0.00%<br>0.50%<br>1.00%<br>1.50%<br>2.00%<br>2.50%<br>3.00%<br>3.50%<br>4.00%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Net Interest Margin Adjusted Net Interest Margin<br>(1)<br>(1)<br>(1)<br>(in thousands)<br>(1) See Non-GAAP reconciliation<br>Net Interest Income Net Interest Margin<br>(1) (1) |
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| 14<br>Non-Interest Income<br>▪ Non-interest income increased 10.5% from 2Q21<br>▪ Trust and investment management fees up 3.2% from 2Q21, and up 7% over 3Q20, despite loss of<br>approximately $0.4 million in fees per quarter related to LA Fixed Income Team sold in 4Q20<br>▪ Increase in net gain on mortgage loans primarily due to higher refinancing volumes<br>$18,032<br>$9,954 $10,615<br>$9,498 $10,495<br>$0<br>$5,000<br>$10,000<br>$15,000<br>$20,000<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Trust and Investment Management Fees Net Gain on Mortgage Loans<br>Bank Fees Risk Management and Insurance Fees<br>Income on Company-Owned Life Insurance Other<br>$4,814 $4,868 $4,847<br>$5,009<br>$5,167<br>$4,000<br>$4,200<br>$4,400<br>$4,600<br>$4,800<br>$5,000<br>$5,200<br>$5,400<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>(in thousands) (in thousands)<br>Total Non-Interest Income Trust and Investment Management Fees |
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| 15<br>Mortgage Operations<br>▪ Mortgage locks up 4% from prior quarter primarily reflects<br>increase in seasonal purchases<br>▪ Refi/Purchase mix of 39/61% in 3Q21 compared to 49/51%<br>in 2Q21 and 67/33% in 4Q20<br>▪ Profit margin improved due to increased volume and<br>expense reductions in mortgage operations<br>$376.3<br>$414.5<br>$490.8<br>$319.7<br>$256.1<br>$41.9 $32.4 $33.9 $41.2 $36.5<br>$0<br>$100<br>$200<br>$300<br>$400<br>$500<br>$600<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Originations for Sale Originations for Porfolio<br>$718.8<br>$376.6 $359.4<br>$268.2 $279.0<br>$0<br>$100<br>$200<br>$300<br>$400<br>$500<br>$600<br>$700<br>$800<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>(in millions)<br>$10.2<br>$1.7 $2.1<br>$1.2<br>$2.3<br>$12.3<br>$4.3<br>$5.2<br>$3.9 $4.5<br>83%<br>40% 41%<br>31%<br>50%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Net Income Revenue Profit Margin<br>(in millions)<br>Mortgage Originations<br>Mortgage Details Net Income, Revenue and Profit Margin<br>Mortgage Loan Locks |
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| 16<br>Non-Interest Expense and Efficiency Ratio<br>▪ Non-interest expense increased 6.1% from 2Q21<br>▪ 3Q21 included approximately $0.3 million of acquisition-related expense<br>▪ Higher salaries and employee benefits expense due to increased bonus accruals resulting from strong loan<br>and deposit production and an increase in insurance benefits costs<br>▪ Revenue growth exceeded expense growth and drove improvement in efficiency ratio(1) to 65.0%<br>$70 $332<br>$16,632 $15,614 $15,629 $15,451 $16,137<br>$0<br>$5,000<br>$10,000<br>$15,000<br>$20,000<br>$25,000<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Non-Interest Expense Adjustments to Non-Interest Expense<br>(1)<br>(1)<br>53.4%<br>66.6% 66.0% 65.4% 65.0%<br>0%<br>20%<br>40%<br>60%<br>80%<br>100%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>(1) See Non-GAAP reconciliation<br>Total Non-Interest Expense Operating Efficiency Ratio(1)<br>(in thousands)<br>(1) |
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| 17<br>Asset Quality<br>▪ Stable asset quality across the portfolio<br>▪ Immaterial net charge-offs again in the quarter<br>▪ $0.4 million provision for loan losses related to growth in total loans<br>▪ Non-performing assets increased by $1.2 million due to one commercial loan placed on non-accrual<br>during the quarter<br>▪ ALL/Adjusted Total Loans(1) decreased to 0.91% in 3Q21 from 0.93% in 2Q21, consistent with strong<br>asset quality and immaterial losses<br>0.53%<br>0.22% 0.18% 0.16%<br>0.21%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>1.00%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>0.00% 0.00% 0.00% 0.00% 0.00%<br>0.00%<br>0.20%<br>0.40%<br>0.60%<br>0.80%<br>1.00%<br>Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021<br>Non-Performing Assets/Total Assets Net Charge-Offs/Average Loans<br>(1) Adjusted Total Loans – Total Loans minus PPP loans and acquired Loans; see non-GAAP reconciliation |
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| 18<br>Near-Term Outlook<br>▪ Growth in commercial and private banking earnings will continue to replace outsized income<br>generated by mortgage operations in 2020<br>▪ Consistent pipeline and healthy demand should continue to drive organic loan growth<br>across most areas of the portfolio<br>▪ Success in new business development should drive continued growth in trust and<br>investment management fees<br>▪ Mortgage activity will likely decline during seasonally slower fourth quarter<br>▪ Continued investment in new banking talent and market expansion should continue to<br>create additional sources of organic growth<br>▪ Acquisition of Teton Financial Services expected to close late in 4Q21 or early in 1Q22;<br>integration planning proceeding well and teams working collaboratively to leverage the<br>collective strengths of each organization<br>▪ First Western well positioned to deliver another strong year of organic and acquisitive<br>growth in 2022 |
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| Appendix<br>19 |
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| 20<br>Capital and Liquidity Overview<br>10.66% 10.66%<br>14.37%<br>7.86%<br>0.00%<br>2.00%<br>4.00%<br>6.00%<br>8.00%<br>10.00%<br>12.00%<br>14.00%<br>16.00%<br>Tier 1 Capital to<br>Risk-Weighted<br>Assets<br>CET1 to Risk-<br>Weighted Assets<br>Total Capital to<br>Risk-Weighted<br>Assets<br>Tier 1 Capital to<br>Average Assets<br>Liquidity Funding Sources (as of 9/30/21)<br>Liquidity Reserves:<br>Total Available Cash $ 309,185<br>Unpledged Investment Securities 21,551<br>Borrowed Funds:<br>Unsecured:<br>Credit Lines 54,000<br>Secured:<br>FHLB Available 504,712<br>FRB Available 552<br>Brokered Remaining Capacity 363,712<br>Total Liquidity Funding Sources $ 1,253,712<br>Loan to Deposit Ratio 89.9%<br>$91,662<br>$104,411<br>$130,704<br>$150,883<br>$11.50<br>$13.15<br>$16.44<br>$18.85<br>$10.00<br>$12.00<br>$14.00<br>$16.00<br>$18.00<br>$20.00<br>$60,000<br>$80,000<br>$100,000<br>$120,000<br>$140,000<br>$160,000<br>4Q18 4Q19 4Q20 3Q21<br>TCE TBV/Share<br>(in thousands)<br>(1) See Non-GAAP reconciliation<br>Consolidated Capital Ratios (as of 9/30/21)<br>Tangible Common Equity / TBV per Share(1)<br>(in thousands) |
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| 21<br>Non-GAAP Reconciliation<br>Consolidated Tangible Common Book Value<br>Per Share<br>As of the Three Months Ended,<br>(Dollars in thousands) Dec. 31, 2018 Dec. 31, 2019 Dec. 31, 2020 Sept. 30, 2021<br>Total shareholders' equity $116,875 $127,678 $154,962 $175,129<br>Less:<br>Preferred stock (liquidation preference) ----<br>Goodwill and other intangibles, net 25,213 19,714 24,258 24,246<br>Intangibles held for sale(1) - 3,553 --<br>Tangible common equity 91,662 104,411 $130,704 150,883<br>Common shares outstanding, end of period 7,968,420 7,940,168 7,951,773 8,002,874<br>Tangible common book value per share $11.50 $13.15 $16.44 $18.85<br>Net income available to common shareholders $6,417<br>Return on tangible common equity (annualized) 17.01%<br>(1) Represents the intangible portion of assets held for sale<br>Consolidated Efficiency Ratio For the Three Months Ended,<br>(Dollars in thousands) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Non-interest expense $16,632 $15,614 $15,629 $15,521 $16,469<br>Less: amortization 4 4 4 4 5<br>Less: provision on other real estate owned 100 76 ---<br>Less: loss on assets held for sale -----<br>Plus: gain on sale of LA fixed income team - 62 ---<br>Adjusted non-interest expense $16,528 $15,596 $15,625 $15,517 $16,464<br>Net interest income $12,918 $13,457 $13,053 $14,223 $14,846<br>Non-interest income 18,032 9,954 10,615 9,498 10,495<br>Less: Net gain on sale of securities -----<br>Less: Net gain on sale of assets -----<br>Total income $30,950 $23,411 $23,668 $23,721 $25,341<br>Efficiency ratio 53.4% 66.6% 66.0% 65.4% 65.0% |
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| 22<br>Non-GAAP Reconciliation<br>Wealth Management Gross Revenue For the Three Months Ended,<br>(Dollars in thousands) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Total income before non-interest expense $16,232 $17,973 $18,471 $19,782 $20,438<br>Plus: Provision for loan loss 1,496 695 - 12 406<br>Gross revenue $17,728 $18,668 $18,471 $19,794 $20,844<br>Capital Management Gross Revenue For the Three Months Ended,<br>(Dollars in thousands) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Total income before non-interest expense $899 $423 $- $ $<br>Plus: Provision for loan loss -----<br>Gross revenue $899 $423 $- $ $<br>Mortgage Gross Revenue For the Three Months Ended,<br>(Dollars in thousands) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Total income before non-interest expense $12,323 $4,320 $5,197 $3,927 $4,497<br>Plus: Provision for loan loss -----<br>Gross revenue $12,323 $4,320 $5,197 $3,927 $4,497<br>Consolidated Gross Revenue For the Three Months Ended,<br>(Dollars in thousands) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Total income before non-interest expense $29,454 $22,716 $23,668 $23,709 $24,935<br>Plus: Provision for loan loss 1,496 695 - 12 406<br>Gross revenue $30,950 $23,411 $23,668 $23,721 $25,341<br>Diluted Pre-Tax Earnings Per Share For The Three Months Ended<br>(Dollars in thousands) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Non-Mortgage income before income tax $2,581 $5,386 $5,917 $6,983 $6,199<br>Mortgage income before income tax 10,241 1,716 2,122 1,205 2,267<br>Less: Income tax expense 3,192 2,228 2,040 1,911 2,049<br>Net income available to common shareholders $9,630 $4,874 $5,999 $6,277 $6,417<br>Diluted weighted average shares 7,963,736 8,015,780 8,098,680 8,213,900 8,246,353<br>Non-Mortgage Segment Diluted Pre-Tax Earnings Per<br>Share $0.32 $0.67 $0.73 $0.85 $0.75<br>Consolidated Diluted Pre-Tax Earnings Per Share $1.61 $0.89 $0.99 $1.00 $1.03 |
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| 23<br>Non-GAAP Reconciliation<br>Adjusted net income available to common shareholders For the Three Months Ended,<br>(Dollars in thousands, except per share data) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Net income available to common shareholders $9,630 $4,874 $5,999 $6,277 $6,417<br>Plus: acquisition related expense including tax impact --- 54 252<br>Plus: loss on intangibles held for sale including tax impact -----<br>Adjusted net income to common shareholders $9,630 $4,874 $5,999 $6,331 $6,669<br>Adjusted earnings per share For the Three Months Ended,<br>(Dollars in thousands, except per share data) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Earnings per share $1.21 $0.61 $0.74 $0.76 $0.78<br>Plus: acquisition related expenses including tax impact --- 0.01 0.03<br>Plus: loss on intangibles held for sale including tax impact -----<br>Adjusted earnings per share $1.21 $0.61 $0.74 $0.77 $0.81<br>Allowance for loan losses to Bank originated loans excluding<br>PPP As of<br>(Dollars in thousands) June 30, 2021 September 30, 2021<br>Gross loans 1,573,015 1,603,383<br>Less: Branch acquisition 116,052 117,465<br>Less: PPP loans 102,359 61,838<br>Loans excluding acquired and PPP 1,354,604 1,424,080<br>Allowance for loan losses 12,552 12,964<br>Allowance for loan losses to Bank originated loans excluding PPP 0.93% 0.91%<br>Total Non-Interest Expense adjusted for Non-Operating<br>items For the Three Months Ended,<br>(Dollars in thousands) September 30, 2020 December 31, 2020 March 31, 2021 June 30, 2021 September 30, 2021<br>Total non-interest expense $16,632 $15,614 $15,629 $15,521 $16,469<br>Less: acquisition related expense --- 70 332<br>Less: loss on intangibles held for sale -----<br>Total Non-Interest Expense adjusted for Non-Operating items $16,632 $15,614 $15,629 $15,451 $16,137 |
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| 24<br>Non-GAAP Reconciliation<br>Adjusted net interest<br>margin<br>For the Three Months Ended<br>December 31, 2020<br>For the Three Months Ended<br>March 31, 2021<br>For the Three Months Ended<br>June 30, 2021<br>For the Three Months Ended<br>September 30, 2021<br>(Dollars in thousands) Average<br>Balance<br>Interest<br>Earned/Paid<br>Average<br>Yield/Rate<br>Average<br>Balance<br>Interest<br>Earned/Paid<br>Average<br>Yield/Rate<br>Average<br>Balance<br>Interest<br>Earned/Paid<br>Average<br>Yield/Rate<br>Average<br>Balance<br>Interest<br>Earned/Paid<br>Average<br>Yield/Rate<br>Interest-bearing deposits in<br>other financial institutions 194,179 100 213,577 91 292,615 92 266,614 105<br>PPP adjustment (20,871) (5) 21,173 5 17,115 4 1,636 -<br>Available-for-sale securities 37,512 186 31,936 196 26,474 169 29,130 180<br>PPP adjustment --------<br>Loans 1,522,947 14,656 1,554,990 14,212 1,573,553 15,287 1,592,800 15,861<br>PPP adjustment (174,046) (1,209) (171,263) (945) (176,396) (1,583) (81,476) (1,081)<br>Purchase Accretion<br>adjustment -(333) -(344) -(260) - 35<br>Adjusted total Interest-<br>earning assets 1,559,721 13,395 1,650,413 13,215 1,773,360 13,709 1,808,704 15,100<br>Interest-bearing deposits 1,015 974 866 829<br>PPP adjustment ----<br>Federal Home Loan Bank<br>Topeka and Federal Reserve<br>borrowings 200 132 117 82<br>PPP adjustment (175) (109) (93) (59)<br>Subordinated notes 270 340 342 389<br>Adjusted total interest-<br>bearing liabilities 1,310 1,337 1,232 1,241<br>Net interest income 12,085 11,878 12,477 13,859<br>Adjusted net interest margin 3.10% 2.88% 2.88% 3.06% |
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