-
First Western Reports Second Quarter 2023 Financial Results
Источник: Nasdaq GlobeNewswire / 27 июл 2023 16:15:01 America/New_York
Second Quarter 2023 Summary
- Total assets of $3.0 billion and assets under management of $6.5 billion
- Net income available to common shareholders of $1.5 million in Q2 2023, compared to $3.8 million in Q1 2023 and $4.5 million in Q2 2022
- Diluted EPS of $0.16 in Q2 2023, compared to $0.39 in Q1 2023 and $0.46 in Q2 2022
- Second quarter 2023 included net of tax impacts of $1.5 million related to an allowance recorded on individually analyzed loans, $0.9 million of impairment to the carrying value of contingent consideration assets, and $0.8 million of losses on loans accounted for under the fair value option, with diluted EPS impacts, net of tax, of $0.15, $0.09, and $0.08, respectively
- Book value per common share increased to $25.38, or 0.6%, from $25.22 as of Q1 2023, and was up 5.5% from $24.06 as of Q2 2022
- Total deposits decreased slightly to $2.38 billion, or 0.7%, from $2.39 billion as of Q1 2023, and were up 9.5% from $2.17 billion as of Q2 2022
DENVER, July 27, 2023 (GLOBE NEWSWIRE) -- First Western Financial, Inc. (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the second quarter ended June 30, 2023.
Net income available to common shareholders was $1.5 million, or $0.16 per diluted share, for the second quarter of 2023. This compares to $3.8 million, or $0.39 per diluted share, for the first quarter of 2023, and $4.5 million, or $0.46 per diluted share, for the second quarter of 2022. Net income for the second quarter of 2023 was negatively impacted by net of tax impacts of $1.5 million related to an allowance recorded on individually analyzed loans, $0.9 million of impairment to the carrying value of contingent consideration assets, and $0.8 million of losses on loans accounted for under the fair value option.
Scott C. Wylie, CEO of First Western, commented, “Our second quarter performance reflects the strength of the franchise we have built as we continued to see good stability in our deposit base and healthy asset quality despite the challenging operating environment. While remaining conservative and disciplined in our underwriting and pricing criteria, our total loans increased at an annualized rate of 4% despite a lower level of loan demand that we are seeing due to higher interest rates and concerns about a slowing economy. While we experienced some non-recurring expenses in the second quarter, our solid financial performance and prudent balance sheet management resulted in an increase in our capital ratios and further growth in tangible book value per share during the second quarter.
“While economic conditions remain uncertain, we will continue to prioritize prudent risk management and maintain high levels of liquidity, capital, and reserves. However, we remain committed to acting in the best long-term interests of our shareholders, and we will continue to evaluate opportunities for capital utilization that can create additional value for shareholders,” said Mr. Wylie.
For the Three Months Ended June 30, March 31, June 30, (Dollars in thousands, except per share data) 2023 2023 2022 Earnings Summary Net interest income $ 18,435 $ 19,560 $ 20,380 Provision (release) for credit losses(1) 1,843 (310) 519 Total non-interest income 3,962 5,819 6,698 Total non-interest expense 18,519 20,528 20,583 Income before income taxes 2,035 5,161 5,976 Income tax expense 529 1,341 1,494 Net income available to common shareholders 1,506 3,820 4,482 Adjusted net income available to common shareholders(2) 2,440 3,847 4,742 Basic earnings per common share 0.16 0.40 0.47 Adjusted basic earnings per common share(2) 0.25 0.40 0.50 Diluted earnings per common share 0.16 0.39 0.46 Adjusted diluted earnings per common share(2) 0.25 0.39 0.49 Return on average assets (annualized) 0.21% 0.54% 0.71% Adjusted return on average assets (annualized)(2) 0.35 0.55 0.75 Return on average shareholders' equity (annualized) 2.49 6.40 7.89 Adjusted return on average shareholders' equity (annualized)(2) 4.04 6.45 8.35 Return on tangible common equity (annualized)(2) 2.86 7.35 9.16 Adjusted return on tangible common equity (annualized)(2) 4.64 7.41 9.69 Net interest margin 2.73 2.93 3.38 Efficiency ratio(2) 74.42% 78.29% 74.85% (1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
(2) 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 Second Quarter 2023
Revenue
Gross revenue (1) was $24.8 million for the second quarter of 2023, a decrease of 5.0% from $26.1 million for the first quarter of 2023. The decrease was primarily driven by a decrease in net interest income as a result of higher interest expense driven by higher deposit costs, offset partially by higher interest income. Relative to the second quarter of 2022, gross revenue decreased 8.0% from $26.9 million. The decrease was driven by a decrease in net interest income as a result of higher interest expense driven by higher deposit costs, offset partially by higher interest income.
(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 second quarter of 2023 was $18.4 million, a decrease of 5.8% from $19.6 million in the first quarter of 2023. Relative to the second quarter of 2022, net interest income decreased 9.5% from $20.4 million. The decreases were due to higher interest expense driven primarily by higher deposit costs, offset partially by higher interest income.
Net Interest Margin
Net interest margin for the second quarter of 2023 decreased 20 basis points to 2.73% from 2.93% reported in the first quarter of 2023, primarily due to a 42 basis point increase in average cost of deposits, driven by a rising rate environment and a highly competitive deposit market.
The yield on interest-earning assets increased 18 basis points to 5.38% in the second quarter of 2023 from 5.20% in the first quarter of 2023 and the cost of interest-bearing deposits increased 50 basis points to 3.44% in the second quarter of 2023 from 2.94% in the first quarter of 2023.
Relative to the second quarter of 2022, net interest margin decreased from 3.38%, primarily due to a 248 basis point increase in average cost of deposits, offset partially by a 135 basis point increase in loan yields.
Non-interest Income
Non-interest income for the second quarter of 2023 was $4.0 million, a decrease of 31.9%, from $5.8 million in the first quarter of 2023. This was primarily due to a $1.2 million impairment to the carrying value of contingent consideration assets related to the sale of First Western Capital Management in 2020. The value was established using asset growth assumptions provided by the buyer, which had not materialized. The decrease in Non-interest income was further driven by losses of $1.1 million recorded on loans accounted for under the fair value option during the second quarter of 2023.
Relative to the second quarter of 2022, non-interest income decreased 40.8% from $6.7 million. The decrease was primarily due to a $1.2 million impairment to the fair value of contingent consideration assets, and losses of $1.1 million recorded on loans accounted for under the fair value option.
Non-interest Expense
Non-interest expense for the second quarter of 2023 was $18.5 million, a decrease of 9.8%, from $20.5 million in the first quarter of 2023. Relative to the second quarter of 2022, non-interest expense decreased 10.0% from $20.6 million. The decreases were primarily driven by lower salaries and employee benefits related to staffing reductions to better align with lower revenue. Headcount decreased 10.5% as of June 30, 2023 compared to March 31, 2023 as a result of the staffing reductions.
The Company’s efficiency ratio(1) was 74.4% in the second quarter of 2023, compared with 78.3% in the first quarter of 2023 and 74.9% in the second quarter of 2022.
(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 $0.5 million for the second quarter of 2023, representing an effective tax rate of 26.0%, compared to 26.0% for the first quarter of 2023 and 25.0% for the second quarter of 2022.
Loans
Total loans held for investment were $2.50 billion as of June 30, 2023, an increase of 1.1% from $2.48 billion as of March 31, 2023. Relative to the second quarter of 2022, total loans held for investment increased 16.4% from $2.15 billion as of June 30, 2022. The increase in total loans held for investment from June 30, 2022 was attributable to loan growth primarily in our commercial real estate and residential mortgage portfolios.
Deposits
Total deposits were $2.38 billion as of June 30, 2023, a decrease of 0.7% from $2.39 billion as of March 31, 2023, as a result of seasonal factors and a highly competitive deposit market. Relative to the second quarter of 2022, total deposits increased 9.5% from $2.17 billion as of June 30, 2022, driven primarily by organic growth through new and expanded client relationships.
Borrowings
Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $312.6 million as of June 30, 2023, an increase of $51.2 million from $261.4 million as of March 31, 2023, and an increase of $225.4 million from $87.2 million as of June 30, 2022. Relative to the first quarter of 2023 and second quarter of 2022, total borrowings increased to support balance sheet growth and liquidity.
Subordinated notes remained consistent at $52.2 million as of June 30, 2023, compared to March 31, 2023. Subordinated notes increased $19.7 million from $32.6 million as of June 30, 2022.
Assets Under Management
AUM increased by $121.9 million during the second quarter to $6.50 billion as of June 30, 2023, compared to $6.38 billion as of March 31, 2023. This increase was attributable to an increase in market values at the end of the second quarter 2023. Total AUM increased by $226.4 million compared to June 30, 2022 from $6.28 billion, which was primarily attributable to improving market conditions year-over-year resulting in an increase in the value of assets under management balances.
Credit Quality
Non-performing assets totaled $10.3 million, or 0.36% of total assets, as of June 30, 2023, compared to $12.5 million, or 0.42% of total assets, as of March 31, 2023. The decrease was attributable to the two non-accrual loans being paid off during the quarter. Total classified loans decreased 46.8%, to $10.1 million as of June 30, 2023, compared to $19.0 million as of March 31, 2023, driven primarily by four classified loans being paid off during the second quarter of 2023. As of June 30, 2022, non-performing assets totaled $4.3 million, or 0.17% of total assets. Relative to the second quarter of 2022, the increase in non-performing assets was driven by the addition of $8.9 million in loans at the end of the fourth quarter of 2022, partially offset by two non-accrual loans being paid off during the quarter.
During the second quarter of 2023, the Company recorded a provision expense of $1.8 million, compared to a provision release of $0.3 million in the first quarter of 2023 and a $0.5 million provision expense in the second quarter of 2022. The provision recorded in the second quarter of 2023 reflects a $2.0 million allowance on individually analyzed loans, partially offset by the impact of improved economic forecasts which decreased probability of default rates and loss given default rates, which in turn reduced our quantitative model loss rates.
Capital
As of June 30, 2023, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of June 30, 2023, the Bank was classified as “well capitalized,” as summarized in the following table:
June 30, 2023 Consolidated Capital Tier 1 capital to risk-weighted assets 9.26% Common Equity Tier 1 ("CET1") to risk-weighted assets 9.26 Total capital to risk-weighted assets 12.41 Tier 1 capital to average assets 7.80 Bank Capital Tier 1 capital to risk-weighted assets 10.34 CET1 to risk-weighted assets 10.34 Total capital to risk-weighted assets 11.23 Tier 1 capital to average assets 8.70 Book value per common share increased 0.6% from $25.22 as of March 31, 2023 to $25.38 as of June 30, 2023. Book value per common share was up 5.5% from $24.06 as of June 30, 2022. The adoption of CECL on January 1, 2023 resulted in a $0.56 reduction of book value per common share.
Tangible book value per common share (1) increased 0.8% from $21.85 as of March 31, 2023, to $22.03 as of June 30, 2023. Tangible book value per common share was up 6.7% from $20.65 as of June 30, 2022. The adoption of CECL on January 1, 2023 resulted in a $0.56 reduction of tangible book value per common share.
(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, July 28, 2023. Telephone access: https://register.vevent.com/register/BI8ae2876802dc4a1d986948ac4226140e
A slide presentation relating to the second quarter 2023 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, California, and Montana. 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.
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 for Credit Losses to Adjusted Loans,” “Adjusted Net Income Available to Common Shareholders,” “Adjusted Basic 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,” “position,” “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 lack of soundness of other financial institutions or financial market utilities may adversely affect the Company; the Company’s ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions; financial institutions are interrelated because of trading, clearing, counterparty or other relationships; defaults by, or even rumors or questions about, one or more financial institutions or financial market utilities, or the financial services industry generally, may lead to market-wide liquidity problems and losses of client, creditor and counterparty confidence and could lead to losses or defaults by other financial institutions, or the Company; integration risks and projected cost savings in connection with acquisitions; the risk of geographic concentration in Colorado, Arizona, Wyoming, California, and Montana; 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 credit 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 15, 2023 (“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 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.
Contacts:
Financial Profiles, Inc.
Tony Rossi
310-622-8221
MYFW@finprofiles.com
IR@myfw.comFirst Western Financial, Inc.
Consolidated Financial Summary (unaudited)Three Months Ended June 30, March 31, June 30, (Dollars in thousands, except per share amounts) 2023 2023 2022 Interest and dividend income: Loans, including fees $ 33,583 $ 32,080 $ 20,546 Loans accounted for under the fair value option 351 427 346 Investment securities 627 629 418 Interest-bearing deposits in other financial institutions 1,666 1,403 549 Dividends, restricted stock 145 173 14 Total interest and dividend income 36,372 34,712 21,873 Interest expense: Deposits 15,864 13,092 1,103 Other borrowed funds 2,073 2,060 390 Total interest expense 17,937 15,152 1,493 Net interest income 18,435 19,560 20,380 Less: provision (release) for credit losses(1) 1,843 (310) 519 Net interest income, after provision (release) for credit losses(1) 16,592 19,870 19,861 Non-interest income: Trust and investment management fees 4,602 4,635 4,781 Net gain on mortgage loans 774 1,019 924 Net loss on loans held for sale — (178) — Bank fees 591 592 590 Risk management and insurance fees 103 127 83 Income on company-owned life insurance 91 90 87 Net loss on loans accounted for under the fair value option (1,124) (543) (155) Unrealized (loss)/gain recognized on equity securities (11) 10 299 Other (1,064) 67 89 Total non-interest income 3,962 5,819 6,698 Total income before non-interest expense 20,554 25,689 26,559 Non-interest expense: Salaries and employee benefits 11,148 13,098 12,945 Occupancy and equipment 1,939 1,914 1,892 Professional services 1,858 1,923 2,027 Technology and information systems 831 832 1,076 Data processing 1,052 1,139 987 Marketing 379 391 428 Amortization of other intangible assets 62 64 77 Net (gain)/loss on assets held for sale — — (2) Other 1,250 1,167 1,153 Total non-interest expense 18,519 20,528 20,583 Income before income taxes 2,035 5,161 5,976 Income tax expense 529 1,341 1,494 Net income available to common shareholders $ 1,506 $ 3,820 $ 4,482 Earnings per common share: Basic $ 0.16 $ 0.40 $ 0.47 Diluted 0.16 0.39 0.46 (1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)June 30, March 31, June 30, (Dollars in thousands) 2023 2023 2022 Assets Cash and cash equivalents: Cash and due from banks $ 6,285 $ 6,920 $ 11,790 Federal funds sold — — 385 Interest-bearing deposits in other financial institutions 291,283 288,147 159,431 Total cash and cash equivalents 297,568 295,067 171,606 Held-to-maturity securities, at amortized cost (fair value of $69,551, $73,570 and $84,742, respectively), net of allowance for credit losses 77,469 79,565 87,029 Correspondent bank stock, at cost 13,518 13,222 4,352 Mortgage loans held for sale, at fair value 19,746 9,873 26,202 Loans (includes $17,523, $20,807, and $21,477 measured at fair value, respectively) 2,495,582 2,469,038 2,146,394 Allowance for credit losses(1) (22,044) (19,843) (14,357) Loans, net 2,473,538 2,449,195 2,132,037 Premises and equipment, net 25,473 25,383 24,236 Accrued interest receivable 11,135 10,976 7,884 Accounts receivable 5,116 4,713 5,192 Other receivables 3,331 2,396 4,575 Other real estate owned, net — — 378 Goodwill and other intangible assets, net 31,977 32,040 32,258 Deferred tax assets, net 7,202 6,792 7,662 Company-owned life insurance 16,333 16,242 15,976 Other assets 23,240 23,043 21,960 Assets held for sale — — 146 Total assets $ 3,005,646 $ 2,968,507 $ 2,541,493 Liabilities Deposits: Noninterest-bearing $ 514,241 $ 545,064 $ 668,342 Interest-bearing 1,861,153 1,846,863 1,501,656 Total deposits 2,375,394 2,391,927 2,169,998 Borrowings: Federal Home Loan Bank and Federal Reserve borrowings 312,600 261,385 87,223 Subordinated notes 52,223 52,167 32,553 Accrued interest payable 1,788 1,786 304 Other liabilities 21,399 21,420 23,391 Total liabilities 2,763,404 2,728,685 2,313,469 Shareholders’ Equity Total shareholders’ equity 242,242 239,822 228,024 Total liabilities and shareholders’ equity $ 3,005,646 $ 2,968,507 $ 2,541,493 (1) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
First Western Financial, Inc.
Consolidated Financial Summary (unaudited)June 30, March 31, June 30, (Dollars in thousands) 2023 2023 2022 Loan Portfolio Cash, Securities, and Other(1) $ 150,679 $ 157,308 $ 180,738 Consumer and Other 21,866 22,183 26,706 Construction and Development 313,227 283,999 162,426 1-4 Family Residential 878,670 889,782 732,725 Non-Owner Occupied CRE 561,880 536,679 489,111 Owner Occupied CRE 218,651 223,449 224,597 Commercial and Industrial 338,679 340,632 312,696 Total 2,483,652 2,454,032 2,128,999 Loans accounted for under the fair value option 18,274 21,052 21,149 Total loans held for investment 2,501,926 2,475,084 2,150,148 Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net(2) (6,344) (6,046) (3,754) Loans (includes $17,523, $20,807, and $21,477 measured at fair value, respectively) $ 2,495,582 $ 2,469,038 $ 2,146,394 Mortgage loans held for sale 19,746 9,873 26,202 Deposit Portfolio Money market deposit accounts $ 1,297,732 $ 1,277,988 $ 1,033,739 Time deposits 376,147 354,545 147,623 Negotiable order of withdrawal accounts 168,537 192,011 287,195 Savings accounts 18,737 22,319 33,099 Total interest-bearing deposits 1,861,153 1,846,863 1,501,656 Noninterest-bearing accounts 514,241 545,064 668,342 Total deposits $ 2,375,394 $ 2,391,927 $ 2,169,998 (1) Includes PPP loans of $5.6 million as of June 30, 2023, $6.1 million as of March 31, 2023, and $10.7 million as of June 30, 2022.
(2) Includes fair value adjustments on loans held for investment accounted for under the fair value option.First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)As of or for the Three Months Ended June 30, March 31, June 30, (Dollars in thousands) 2023 2023 2022 Average Balance Sheets Assets Interest-earning assets: Interest-bearing deposits in other financial institutions $ 135,757 $ 127,608 $ 320,656 Federal funds sold — — 1,017 Investment securities 80,106 82,106 69,320 Correspondent bank stock 8,844 9,592 1,555 Loans 2,471,587 2,479,644 2,010,024 Interest-earning assets 2,696,294 2,698,950 2,402,572 Mortgage loans held for sale 15,841 7,521 19,452 Total interest-earning assets, plus mortgage loans held for sale 2,712,135 2,706,471 2,422,024 Allowance for credit losses(1) (20,077) (20,325) (13,257) Noninterest-earning assets 124,561 125,201 118,302 Total assets $ 2,816,619 $ 2,811,347 $ 2,527,069 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 1,847,788 $ 1,805,994 $ 1,547,901 FHLB and Federal Reserve borrowings 123,578 142,642 20,815 Subordinated notes 52,186 52,135 32,533 Total interest-bearing liabilities 2,023,552 2,000,771 1,601,249 Noninterest-bearing liabilities: Noninterest-bearing deposits 527,562 545,670 679,531 Other liabilities 23,850 26,206 19,194 Total noninterest-bearing liabilities 551,412 571,876 698,725 Total shareholders’ equity 241,655 238,700 227,095 Total liabilities and shareholders’ equity $ 2,816,619 $ 2,811,347 $ 2,527,069 Yields/Cost of funds (annualized) Interest-bearing deposits in other financial institutions 4.92% 4.46% 0.68% Investment securities 3.14 3.11 2.42 Correspondent bank stock 6.58 7.31 3.61 Loans 5.47 5.30 4.12 Mortgage loans held for sale 5.82 6.04 4.72 Total interest-earning assets 5.38 5.20 3.62 Interest-bearing deposits 3.44 2.94 0.29 Cost of deposits 2.68 2.26 0.20 FHLB and Federal Reserve borrowings 4.42 3.89 0.54 Subordinated notes 5.47 5.38 4.46 Total interest-bearing liabilities 3.56 3.07 0.37 Net interest margin 2.73 2.93 3.38 Net interest rate spread 1.82 2.13 3.25 (1) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)As of or for the Three Months Ended June 30, March 31, June 30, (Dollars in thousands, except share and per share amounts) 2023 2023 2022 Asset Quality Non-performing loans $ 10,273 $ 12,460 $ 3,931 Non-performing assets 10,273 12,460 4,309 Net charge-offs 8 5 47 Non-performing loans to total loans 0.41% 0.50% 0.18% Non-performing assets to total assets 0.36 0.42 0.17 Allowance for credit losses to non-performing loans(3) 214.58 159.25 365.23 Allowance for credit losses to total loans(3) 0.89 0.80 0.67 Allowance for credit losses to adjusted loans(1)(3) 0.89 0.81 0.78 Net charge-offs to average loans(2) * * * Assets Under Management $ 6,503,964 $ 6,382,036 $ 6,277,588 Market Data Book value per share at period end 25.38 25.22 24.06 Tangible book value per common share(1) 22.03 21.85 20.65 Weighted average outstanding shares, basic 9,532,397 9,503,715 9,450,987 Weighted average outstanding shares, diluted 9,686,401 9,732,674 9,717,667 Shares outstanding at period end 9,545,071 9,507,564 9,478,710 Consolidated Capital Tier 1 capital to risk-weighted assets 9.26% 9.28% 10.15% CET1 to risk-weighted assets 9.26 9.28 10.15 Total capital to risk-weighted assets 12.41 12.39 12.58 Tier 1 capital to average assets 7.80 7.75 8.00 Bank Capital Tier 1 capital to risk-weighted assets 10.34 10.29 10.99 CET1 to risk-weighted assets 10.34 10.29 10.99 Total capital to risk-weighted assets 11.23 11.12 11.75 Tier 1 capital to average assets 8.70 8.59 8.65 (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.
(3) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP. Total loans does not include loans accounted for under the fair value option.First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)Reconciliations of Non-GAAP Financial Measures
As of or for the Three Months Ended June 30, March 31, June 30, (Dollars in thousands, except share and per share amounts) 2023 2023 2022 Tangible Common Total shareholders' equity $ 242,242 $ 239,822 $ 228,024 Less: goodwill and other intangibles, net 31,977 32,040 32,258 Tangible common equity $ 210,265 $ 207,782 $ 195,766 Common shares outstanding, end of period 9,545,071 9,507,564 9,478,710 Tangible common book value per share $ 22.03 $ 21.85 $ 20.65 Net income available to common shareholders 1,506 3,820 4,482 Return on tangible common equity (annualized) 2.86% 7.35% 9.16% Efficiency Non-interest expense $ 18,519 $ 20,528 $ 20,583 Less: amortization 62 64 77 Less: acquisition related expenses 14 37 347 Adjusted non-interest expense $ 18,443 $ 20,427 $ 20,159 Total income before non-interest expense $ 20,554 $ 25,689 $ 26,559 Less: unrealized (loss)/gain recognized on equity securities (11) 10 299 Less: net (loss)/gain on loans accounted for under the fair value option (1,124) (543) (155) Less: impairment of contingent consideration assets (1,249) — — Less: net (loss)/gain on loans held for sale at fair value(1) — (178) — Plus: provision (release) for credit losses(2) 1,843 (310) 519 Gross revenue $ 24,781 $ 26,090 $ 26,934 Efficiency ratio 74.42% 78.29% 74.85% Allowance for Credit Loss to Adjusted Loans Total loans held for investment 2,501,926 2,475,084 2,150,148 Less: loans acquired(3) — — 287,623 Less: PPP loans(4) 5,558 6,100 9,053 Less: loans accounted for under fair value 18,274 21,052 21,149 Adjusted loans $ 2,478,094 $ 2,447,932 $ 1,832,323 Allowance for credit losses(2) $ 22,044 $ 19,843 $ 14,357 Allowance for credit losses to adjusted loans(2) 0.89% 0.81% 0.78% (1) Presented in Other Non-interest income on the Consolidated Financial Summary statements
(2) Provision and allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
(3)As of June 30, 2023 and March 31, 2023, acquired loans totaling $225.4 million and $233.3 million, respectively, are included in the allowance for credit loss calculation and are therefore not removed in calculating adjusted total loans.
(4)As of June 30, 2023 and March 31, 2023, the adjustment for PPP loans includes acquired PPP loans as acquired loans are included in total loans held for investment as a result of the adoption of ASC 326. As of June 30, 2022, the adjustment for PPP loans did not include acquired PPP loans, as those were already included in the loans acquired adjustment.First Western Financial, Inc.
Consolidated Financial Summary (unaudited) (continued)As of or for the Three Months Ended June 30, March 31, June 30, (Dollars in thousands, except share and per share data) 2023 2023 2022 Adjusted Net Income Available to Common Shareholders Net income available to common shareholders $ 1,506 $ 3,820 $ 4,482 Plus: impairment of contingent consideration assets 1,249 — — Plus: acquisition related expenses 14 37 347 Less: income tax impact from impairment of contingent consideration assets 325 — — Less: income tax impact from acquisition related expenses 4 10 87 Adjusted net income available to shareholders $ 2,440 $ 3,847 $ 4,742 Pre-Tax, Pre-Provision Net Income Income before income taxes $ 2,035 $ 5,161 $ 5,976 Plus: provision (release) for credit losses 1,843 (310 ) 519 Pre-tax, pre-provision net income $ 3,878 $ 4,851 $ 6,495 Adjusted Basic Earnings Per Share Basic earnings per share $ 0.16 $ 0.40 $ 0.47 Plus: impairment of contingent consideration assets net of income tax impact 0.09 — — Plus: acquisition related expenses net of income tax impact * * 0.03 Adjusted basic earnings per share $ 0.25 $ 0.40 $ 0.50 Adjusted Diluted Earnings Per Share Diluted earnings per share $ 0.16 $ 0.39 $ 0.46 Plus: impairment of contingent consideration assets net of income tax impact 0.09 — — Plus: acquisition related expenses net of income tax impact * * 0.03 Adjusted diluted earnings per share $ 0.25 $ 0.39 $ 0.49 Adjusted Return on Average Assets (annualized) Return on average assets 0.21% 0.54% 0.71% Plus: impairment of contingent consideration assets net of income tax impact 0.13 — — Plus: acquisition related expenses net of income tax impact 0.01 0.01 0.04 Adjusted return on average assets 0.35% 0.55% 0.75% Adjusted Return on Average Shareholders' Equity (annualized) Return on average shareholders' equity 2.49% 6.40% 7.89% Plus: impairment of contingent consideration assets net of income tax impact 1.53 — — Plus: acquisition related expenses net of income tax impact 0.02 0.05 0.46 Adjusted return on average shareholders' equity 4.04% 6.45% 8.35% Adjusted Return on Tangible Common Equity (annualized) Return on tangible common equity 2.86% 7.35% 9.16% Plus: impairment of contingent consideration assets net of income tax impact 1.76 — — Plus: acquisition related expenses net of income tax impact 0.02 0.06 0.53 Adjusted return on tangible common equity 4.64% 7.41% 9.69% * Represents an immaterial impact to adjusted earnings per share.
