• First Western Reports First Quarter 2023 Financial Results

    Source: Nasdaq GlobeNewswire / 27 Apr 2023 15:15:01   America/Chicago

    First Quarter 2023 Summary

    • Net income available to common shareholders of $3.8 million in Q1 2023, compared to $5.5 million in Q4 2022 and $5.5 million in Q1 2022
    • Diluted EPS of $0.39 in Q1 2023, compared to $0.56 in Q4 2022 and $0.57 in Q1 2022
    • Book value per common share decreased slightly to $25.22, or 0.6%, from $25.37 as of Q4 2022, which included a $0.56 per share decrease as a result of the adoption of CECL on January 1, 2023. Book value per commons share was up 6.5% from $23.68 as of Q1 2022
    • $1.5 billion of readily available liquidity funding sources as of Q1 2023
    • Total deposits decreased slightly to $2.39 billion, or 0.6%, from $2.41 billion as of Q4 2022, and were up 5.3% from $2.27 billion as of Q1 2022

    DENVER, April 27, 2023 (GLOBE NEWSWIRE) -- First Western Financial, Inc. (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the first quarter ended March 31, 2023.

    Net income available to common shareholders was $3.8 million, or $0.39 per diluted share, for the first quarter of 2023. This compares to $5.5 million, or $0.56 per diluted share, for the fourth quarter of 2022, and $5.5 million, or $0.57 per diluted share, for the first quarter of 2022.

    Scott C. Wylie, CEO of First Western, commented, “First Western continues to be a source of stability and strength for our clients, as we have throughout our history. As part of our prudent approach to risk management, we have built a highly diversified client base with no meaningful concentrations in any particular industry or asset class. Our diversified and granular deposit base has helped us to avoid the concentration risk that has led to the recent troubles seen at other banks, and during the month of March, we had an increase in total deposits.

    “The fundamentals of our franchise remain very strong with high levels of capital and liquidity, a stable deposit base, exceptional asset quality, and an extremely low level of unrealized losses in our securities portfolio. While prudent risk management will remain our top priority during this period of economic uncertainty, we believe the strength of the balance sheet and franchise we have built will provide us with opportunities to add new clients who are looking to move to a stronger financial institution, which will contribute to our continued long-term profitable growth and additional value creation for our shareholders,” said Mr. Wylie.

    (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.

     For the Three Months Ended
     March 31, December 31, March 31,
    (Dollars in thousands, except per share data)2023 2022 2022
    Earnings Summary     
    Net interest income$19,560  $21,842  $18,495 
    (Release) provision for credit losses(1) (310)  1,197   210 
    Total non-interest income 5,819   6,561   8,389 
    Total non-interest expense 20,528   19,905   19,358 
    Income before income taxes 5,161   7,301   7,316 
    Income tax expense 1,341   1,830   1,792 
    Net income available to common shareholders 3,820   5,471   5,524 
    Adjusted net income available to common shareholders(2) 3,847   5,617   5,922 
    Basic earnings per common share 0.40   0.58   0.59 
    Adjusted basic earnings per common share(2) 0.40   0.59   0.63 
    Diluted earnings per common share 0.39   0.56   0.57 
    Adjusted diluted earnings per common share(2) 0.39   0.58   0.61 
          
    Return on average assets (annualized) 0.54%  0.79%  0.85%
    Adjusted return on average assets (annualized)(2) 0.55   0.82   0.92 
    Return on average shareholders’ equity (annualized) 6.40   9.17   9.98 
    Adjusted return on average shareholders’ equity (annualized)(2) 6.45   9.41   10.70 
    Return on tangible common equity (annualized)(2) 7.35   10.48   11.57 
    Adjusted return on tangible common equity (annualized)(2) 7.41   10.76   12.41 
    Net interest margin 2.93   3.30   3.03 
    Efficiency ratio(2) 78.29%  67.66%  69.68%

    ____________________

    (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 First Quarter 2023

    Revenue

    Gross revenue(1) was $26.1 million for the first quarter of 2023, a decrease of 10.1% from $29.0 million for the fourth quarter of 2022. Relative to the first quarter of 2022, gross revenue decreased 3.1% from $26.9 million for the first quarter of 2022. The decreases were primarily driven by an increase in the cost of interest-bearing liabilities, partially offset by growth in interest-earning assets.

    (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 first quarter of 2023 was $19.6 million, a decrease of 10.4% from $21.8 million in the fourth quarter of 2022. The decrease was due to higher interest expense driven primarily by higher deposit costs, offset partially by higher interest income.

    Relative to the first quarter of 2022, net interest income increased 5.8% from $18.5 million. The year-over-year increase in net interest income was due to an increase in Interest and fees on loans resulting from year over year loan growth and higher loan yields, offset partially by higher balances and rates on deposits and borrowings. The increase in average interest-earning assets was driven by growth in average loans of $556.9 million compared to March 31, 2022, resulting from organic loan growth.

    Net Interest Margin

    Net interest margin for the first quarter of 2023 decreased 37 basis points to 2.93% from 3.30% reported in the fourth quarter of 2022, primarily due to an 80 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 30 basis points to 5.20% in the first quarter of 2023 from 4.90% in the fourth quarter of 2022 and the cost of interest-bearing deposits increased 87 basis points to 2.94% in the first quarter of 2023 from 2.07% in the fourth quarter of 2022.

    Relative to the first quarter of 2022, net interest margin decreased from 3.03%, primarily due to a 209 basis point increase in average cost of deposits, offset partially by a 127 basis point increase in loan yields.

    Non-interest Income

    Non-interest income for the first quarter of 2023 was $5.8 million, a decrease of 11.3%, from $6.6 million in the fourth quarter of 2022. This was primarily due to an $0.8 million decrease in Risk management and insurance fees, which tend to be seasonally higher in the fourth quarter.

    Relative to the first quarter of 2022, non-interest income decreased 30.6% from $8.4 million. The decrease was primarily due to lower mortgage segment activity as higher interest rates drove declines in both refinance and purchase volume, losses on loans accounted for under the fair value option and lower Trust and investment management fees derived from reduced assets under management (“AUM”) balances, which were negatively impacted by lower equity and fixed income market valuations.

    Non-interest Expense

    Non-interest expense for the first quarter of 2023 was $20.5 million, an increase of 3.1%, from $19.9 million in the fourth quarter of 2022. The increase was primarily driven by higher wages and payroll taxes (due to seasonality), partially offset by the impact of reduction in headcount of 22 from Q4-22 to Q1-23. Non-interest expense for the three months ended March 31, 2023 included $0.1 million of severance charges related to staffing alignment.

    Relative to the first quarter of 2022, non-interest expense increased 6.0% from $19.4 million. The increase was primarily due to an increase in Salaries and employee benefits, driven by higher wages, higher health insurance costs, and lower deferred compensation due to fewer loan originations. Additionally, FDIC insurance increased due to the FDIC’s two basis point uniform increase in assessment rates and the Company’s increase in total assets year over year.

    The Company’s efficiency ratio(1) was 78.3% in the first quarter of 2023, compared with 67.7% in the fourth quarter of 2022 and 69.7% in the first 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 $1.3 million for the first quarter of 2023, representing an effective tax rate of 26.0%, compared to 25.1% for the fourth quarter of 2022.

    Loans

    Total loans held for investment remained flat at $2.48 billion as of March 31, 2023, compared to total loans held for investment as of December 31, 2022. Portfolio growth during the quarter was offset by the transfer and sale of $39.0 million of non-relationship loans. Relative to the first quarter of 2022, total loans held for investment increased 28.2% from $1.93 billion as of March 31, 2022. The increase in total loans held for investment from March 31, 2022 was attributable to loan growth primarily in our commercial real estate and residential mortgage portfolios.

    Deposits

    Total deposits were $2.39 billion as of March 31, 2023, a decrease of 0.6% from $2.41 billion as of December 31, 2022. Total deposits declined $71.1 million in January primarily due to client liquidity events, followed by net deposit inflows of $28.6 million in February and $29.3 million in March. Relative to the first quarter of 2022, total deposits increased 5.3% from $2.27 billion as of March 31, 2022, driven primarily by organic growth through new and expanded client relationships.

    Borrowings

    Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $261.4 million as of March 31, 2023, an increase of $114.5 million from $146.9 million as of December 31, 2022, and an increase of $233.8 million from $27.6 million as of March 31, 2022. The increase in borrowings from December 31, 2022 was driven by a desire to have increased cash levels on our balance sheet through the end of the quarter as the financial industry was experiencing heightened deposit balance volatility. The Company’s deposit balances were stable through the end of the quarter and the increased borrowings were reduced subsequent to quarter-end. Relative to the first quarter of 2022, total borrowings increased to support the strong loan growth throughout 2022.

    Subordinated notes remained consistent at $52.2 million as of March 31, 2023, compared to $52.1 million as of December 31, 2022. Subordinated notes increased $19.6 million from $32.5 million as of March 31, 2022.

    As of March 31, 2023 the Company had $1.5 billion in available liquidity funding sources primarily comprised of total available cash ($295.1 million) and remaining borrowing capacity on secured lines of credit ($717.0 million).

    Assets Under Management

    AUM increased by $275.1 million during the first quarter to $6.38 billion as of March 31, 2023, compared to $6.11 billion as of December 31, 2022. This increase was attributable to an increase in market values at the end of the first quarter 2023. Total AUM decreased by $817.3 million compared to March 31, 2022 from $7.20 billion, which was primarily attributable to a decline in market values throughout 2022 resulting in a decrease in the value of AUM balances.

    Credit Quality

    Non-performing assets totaled $12.5 million, or 0.42% of total assets, as of March 31, 2023, compared to $12.3 million, or 0.43% of total assets, as of December 31, 2022, and $4.3 million, or 0.17% of total assets, as of March 31, 2022. Relative to the first quarter of 2022, the increase in non-performing assets was driven by the addition of $8.9 million in problem loans at the end of the fourth quarter of 2022.

    The Company adopted the new current expected credit losses (“CECL”) standard effective January 1, 2023, in which the allowance for credit losses (“ACL”) reflects expected credit losses over the life of financial assets measured at amortized cost. The ACL incorporates macroeconomic forecasts as well as historical loss rates. The Company’s ACL/Total Loans upon adoption was 84 basis points with an additional 47 basis point coverage on off-balance sheet commitments. The Company recorded a decrease to retained earnings of $5.3 million, net of tax, for the cumulative effect of adopting ASC 326 on January 1, 2023. The total transition adjustment prior to the tax impact included $3.5 million related to allowance for credit losses on loans, $3.5 million related to off-balance sheet commitments, and $0.1 related to held-to-maturity securities.

    During the first quarter of 2023, the Company recorded a $0.3 million release to its provision, compared to a provision expense of $1.2 million in the fourth quarter of 2022 and a $0.2 million provision expense in the first quarter of 2022. The provision released in the first quarter of 2023 was primarily driven by changes in the volume and composition of our loan portfolio which drove a lower provision requirement on total outstanding loans. This was partially offset by an increased provision on off-balance sheet commitments corresponding with their increased balances compared to the fourth quarter of 2022.

    Capital

    As of March 31, 2023, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of March 31, 2023, the Bank was classified as “well capitalized,” as summarized in the following table:

     March 31,
     2023
    Consolidated Capital 
    Tier 1 capital to risk-weighted assets9.28%
    Common Equity Tier 1 (“CET1”) to risk-weighted assets9.28 
    Total capital to risk-weighted assets12.39 
    Tier 1 capital to average assets7.75 
      
    Bank Capital 
    Tier 1 capital to risk-weighted assets10.29 
    CET1 to risk-weighted assets10.29 
    Total capital to risk-weighted assets11.12 
    Tier 1 capital to average assets8.59 
       

    Book value per common share decreased 0.6% from $25.37 as of December 31, 2022 to $25.22 as of March 31, 2023, which included a $0.56 decrease as a result of the adoption of CECL on January 1, 2023, offset primarily by Net income which added a $0.40 increase. Book value per common share was up 6.5% from $23.68 as of March 31, 2022.

    Tangible book value per common share (1) decreased 0.6% from $21.99 as of December 31, 2022 to $21.85 as of March 31, 2023, which included a $0.56 decrease as a result of the adoption of CECL on January 1, 2023, offset primarily by Net income which added a $0.40 increase. Tangible book value per common share was up 7.9% from $20.25 as of March 31, 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.

    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, April 28, 2023. Telephone access: https://register.vevent.com/register/BId5f13166e1304aaf9e92b70d6762b2ae

    A slide presentation relating to the first 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; the COVID-19 pandemic and its effects; 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.com


    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited)
     
     Three Months Ended
     March 31, December 31, March 31,
    (Dollars in thousands, except per share amounts) 2023   2022   2022 
    Interest and dividend income:     
    Loans, including fees$32,080  $30,203  $19,287 
    Loans accounted for under the fair value option 427   488    
    Investment securities 629   645   337 
    Interest-bearing deposits in other financial institutions 1,403   931   232 
    Dividends, restricted stock 173   238   20 
    Total interest and dividend income 34,712   32,505   19,876 
          
    Interest expense:     
    Deposits 13,092   8,260   943 
    Other borrowed funds 2,060   2,403   438 
    Total interest expense 15,152   10,663   1,381 
    Net interest income 19,560   21,842   18,495 
    Less: (release) provision for credit losses(1) (310)  1,197   210 
    Net interest income, after (release) provision for credit losses(1) 19,870   20,645   18,285 
          
    Non-interest income:     
    Trust and investment management fees 4,635   4,358   5,166 
    Net gain on mortgage loans 1,019   775   2,303 
    Net loss on loans held for sale (178)  (12)   
    Bank fees 592   812   671 
    Risk management and insurance fees 127   924   109 
    Income on company-owned life insurance 90   88   86 
    Net (loss)/gain on loans accounted for under the fair value option (543)  (602)   
    Unrealized gain/(loss) recognized on equity securities 10      (32)
    Net gain/(loss) on equity interests       1 
    Other 67   218   85 
    Total non-interest income 5,819   6,561   8,389 
    Total income before non-interest expense 25,689   27,206   26,674 
          
    Non-interest expense:     
    Salaries and employee benefits 13,098   11,679   12,058 
    Occupancy and equipment 1,914   1,910   1,882 
    Professional services 1,923   2,027   1,526 
    Technology and information systems 832   1,168   1,046 
    Data processing 1,139   1,223   1,187 
    Marketing 391   500   557 
    Amortization of other intangible assets 64   77   77 
    Net (gain)/loss on assets held for sale       (1)
    Net (gain)/loss on sale of other real estate owned    (3)   
    Other 1,167   1,324   1,026 
    Total non-interest expense 20,528   19,905   19,358 
    Income before income taxes 5,161   7,301   7,316 
    Income tax expense 1,341   1,830   1,792 
    Net income available to common shareholders$3,820  $5,471  $5,524 
    Earnings per common share:     
    Basic$0.40  $0.58  $0.59 
    Diluted 0.39   0.56   0.57 

    (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)
     
     March 31, December 31, March 31,
    (Dollars in thousands) 2023   2022   2022 
    Assets     
    Cash and cash equivalents:     
    Cash and due from banks$6,920  $4,926  $5,961 
    Federal funds sold       1,273 
    Interest-bearing deposits in other financial institutions 288,147   191,586   446,865 
    Total cash and cash equivalents 295,067   196,512   454,099 
          
    Available-for-sale securities, at fair value       58,727 
    Held-to-maturity securities, at amortized cost (fair value of $73,570 and $74,718 as of March 31, 2023 and December 31, 2022, respectively), net of ACL 79,565   81,056    
    Correspondent bank stock, at cost 13,222   7,110   1,617 
    Mortgage loans held for sale, at fair value 9,873   8,839   33,663 
    Loans held for sale, at fair value    1,965    
    Loans (includes $20,807, $23,321, and $6,380 measured at fair value, respectively) 2,469,038   2,469,413   1,923,825 
    Allowance for credit losses(1) (19,843)  (17,183)  (13,885)
    Loans, net 2,449,195   2,452,230   1,909,940 
    Premises and equipment, net 25,383   25,118   23,539 
    Accrued interest receivable 10,976   10,445   6,969 
    Accounts receivable 4,713   4,873   6,445 
    Other receivables 2,396   1,973   2,841 
    Goodwill and other intangible assets, net 32,040   32,104   32,335 
    Deferred tax assets, net 6,792   6,914   7,540 
    Company-owned life insurance 16,242   16,152   15,889 
    Other assets 23,043   21,457   22,940 
    Assets held for sale       117 
    Total assets$2,968,507  $2,866,748  $2,576,661 
          
    Liabilities     
    Deposits:     
    Noninterest-bearing$545,064  $583,092  $654,401 
    Interest-bearing 1,846,863   1,822,137   1,617,711 
    Total deposits 2,391,927   2,405,229   2,272,112 
    Borrowings:     
    Federal Home Loan Bank and Federal Reserve borrowings 261,385   146,886   27,576 
    Subordinated notes 52,167   52,132   32,523 
    Accrued interest payable 1,786   1,125   312 
    Other liabilities 21,420   20,512   20,872 
    Total liabilities 2,728,685   2,625,884   2,353,395 
          
    Shareholders’ Equity     
    Total shareholders’ equity 239,822   240,864   223,266 
    Total liabilities and shareholders’ equity$2,968,507  $2,866,748  $2,576,661 

    (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)
          
     March 31, December 31, March 31,
    (Dollars in thousands) 2023   2022   2022 
    Loan Portfolio     
    Cash, Securities, and Other(1)$157,308  $165,670  $235,221 
    Consumer and Other(2) 43,235   49,954   36,590 
    Construction and Development 283,999   288,497   151,651 
    1-4 Family Residential 889,782   898,154   602,412 
    Non-Owner Occupied CRE 536,679   496,776   455,715 
    Owner Occupied CRE 223,449   216,056   212,401 
    Commercial and Industrial 340,632   361,028   237,144 
    Total loans held for investment 2,475,084   2,476,135   1,931,134 
    Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net(3) (6,046)  (6,722)  (7,309)
    Gross loans$2,469,038  $2,469,413  $1,923,825 
    Mortgage loans held for sale$9,873  $8,839  $33,663 
    Loans held for sale    1,965    
          
    Deposit Portfolio     
    Money market deposit accounts$1,277,988  $1,336,092  $1,108,315 
    Time deposits 354,545   224,090   156,678 
    Negotiable order of withdrawal accounts 192,011   234,778   319,648 
    Savings accounts 22,319   27,177   33,070 
    Total interest-bearing deposits 1,846,863   1,822,137   1,617,711 
    Noninterest-bearing accounts 545,064   583,092   654,401 
    Total deposits$2,391,927  $2,405,229  $2,272,112 

    ____________________
    (1) Includes PPP loans of $6.1 million as of March 31, 2023, $7.1 million as of December 31, 2022, and $16.7 million as of March 31, 2022.
    (2) Includes loans held for investment accounted for under fair value option with an unpaid principal balance of $21.1 million, $23.4 million and $6.4 million as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
    (3) 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
     March 31, December 31,  March 31,
    (Dollars in thousands)2023 2022 2022
    Average Balance Sheets     
    Assets     
    Interest-earning assets:     
    Interest-bearing deposits in other financial institutions$127,608  $103,190  $474,593 
    Federal funds sold       1,349 
    Investment securities 82,106   84,017   55,739 
    Correspondent bank stock 9,592   11,880   1,663 
    Loans 2,479,644   2,436,273   1,922,770 
    Interest-earning assets 2,698,950   2,635,360   2,456,114 
    Mortgage loans held for sale 7,521   9,065   22,699 
    Total interest-earning assets, plus mortgage loans held for sale 2,706,471   2,644,425   2,478,813 
    Allowance for credit losses(1) (20,325)  (16,724)  (13,715)
    Noninterest-earning assets 125,201   125,355   119,987 
    Total assets$2,811,347  $2,753,056  $2,585,085 
          
    Liabilities and Shareholders’ Equity     
    Interest-bearing liabilities:     
    Interest-bearing deposits$1,805,994  $1,582,587  $1,605,314 
    FHLB and Federal Reserve borrowings 142,642   212,693   33,104 
    Subordinated notes 52,135   38,335   32,939 
    Total interest-bearing liabilities 2,000,771   1,833,615   1,671,357 
    Noninterest-bearing liabilities:     
    Noninterest-bearing deposits 545,670   659,076   668,705 
    Other liabilities 26,206   21,660   23,555 
    Total noninterest-bearing liabilities 571,876   680,736   692,260 
    Total shareholders’ equity 238,700   238,705   221,468 
    Total liabilities and shareholders’ equity$2,811,347  $2,753,056  $2,585,085 
          
    Yields/Cost of funds (annualized)     
    Interest-bearing deposits in other financial institutions 4.46%  3.58%  0.20%
    Investment securities 3.11   3.05   2.45 
    Correspondent bank stock 7.31   7.95   4.88 
    Loans 5.30   5.00   4.03 
    Mortgage loans held for sale 6.04   6.39   3.41 
    Total interest-earning assets 5.20   4.90   3.25 
    Interest-bearing deposits 2.94   2.07   0.24 
    FHLB and Federal Reserve borrowings 3.89   3.58   0.48 
    Subordinated notes 5.38   5.03   4.91 
    Total interest-bearing liabilities 3.07   2.31   0.34 
    Net interest margin 2.93   3.30   3.03 
    Net interest rate spread 2.13   2.59   2.92 

    (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
     March 31, December 31,  March 31,
    (Dollars in thousands, except share and per share amounts)2023 2022 2022
    Asset Quality     
    Non-performing loans$12,460  $12,349  $4,309 
    Non-performing assets 12,460   12,349   4,309 
    Net charge-offs 5   95   57 
    Non-performing loans to total loans 0.50%  0.50%  0.22%
    Non-performing assets to total assets 0.42   0.43   0.17 
    Allowance for credit losses to non-performing loans(3)  159.25   139.14   322.23 
    Allowance for credit losses to total loans(3)  0.80   0.70   0.72 
    Allowance for credit losses to adjusted loans(1)(3)  0.81   0.78   0.87 
    Net charge-offs to average loans(2)* * *
          
    Assets Under Management$6,382,036  $6,106,973  $7,199,328 
          
    Market Data     
    Book value per share at period end 25.22   25.37   23.68 
    Tangible book value per common share(1)  21.85   21.99   20.25 
    Weighted average outstanding shares, basic 9,503,715   9,493,732   9,418,318 
    Weighted average outstanding shares, diluted 9,732,674   9,702,908   9,762,602 
    Shares outstanding at period end 9,507,564   9,495,440   9,430,007 
          
    Consolidated Capital     
    Tier 1 capital to risk-weighted assets 9.28%  9.28%  11.11%
    CET1 to risk-weighted assets 9.28   9.28   11.11 
    Total capital to risk-weighted assets 12.39   12.37   13.81 
    Tier 1 capital to average assets 7.75   7.81   7.67 
          
    Bank Capital     
    Tier 1 capital to risk-weighted assets 10.29   10.29   12.01 
    CET1 to risk-weighted assets 10.29   10.29   12.01 
    Total capital to risk-weighted assets 11.12   11.06   12.82 
    Tier 1 capital to average assets 8.59   8.65   8.27 

    ____________________
    (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.


    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited) (continued)
      
    Reconciliations of Non-GAAP Financial Measures 
     As of or for the Three Months Ended
     March 31, December 31,  March 31,
    (Dollars in thousands, except share and per share amounts)2023 2022 2022
    Tangible Common     
    Total shareholders’ equity$239,822  $240,864  $223,266 
    Less: goodwill and other intangibles, net 32,040   32,104   32,335 
    Tangible common equity$207,782  $208,760  $190,931 
          
    Common shares outstanding, end of period 9,507,564   9,495,440   9,430,007 
    Tangible common book value per share$21.85  $21.99  $20.25 
    Net income available to common shareholders 3,820   5,471   5,524 
    Return on tangible common equity (annualized) 7.35%  10.48%  11.57%
          
    Efficiency     
    Non-interest expense$20,528  $19,905  $19,358 
    Less: amortization 64   77   77 
    Less: acquisition related expenses 37   195   527 
    Adjusted non-interest expense$20,427  $19,633  $18,754 
          
    Total income before non-interest expense$25,689  $27,206  $26,674 
    Less: unrealized gain/(loss) recognized on equity securities 10      (32)
    Less: net (loss)/gain on loans accounted for under the fair value option (543)  (602)   
    Less: net gain/(loss) on equity interests       1 
    Less: net (loss)/gain on loans held for sale at fair value(1) (178)  (12)   
    Plus: (release) provision for credit losses(2) (310)  1,197   210 
    Gross revenue$26,090  $29,017  $26,915 
    Efficiency ratio 78.29%  67.66%  69.68%
          
    Allowance for Credit Loss to Adjusted Loans      
    Total loans held for investment$2,475,084  $2,476,135  $1,931,134 
    Less: loans acquired(3)    234,717   323,563 
    Less: PPP loans(4) 5,967   6,378   13,109 
    Less: loans accounted for under fair value 21,052   23,415   6,368 
    Adjusted loans$2,448,065  $2,211,625  $1,588,094 
          
    Allowance for credit losses(2)$19,843  $17,183  $13,885 
    Allowance for credit losses to adjusted loans(2) 0.81%  0.78%  0.87%

    ____________________
    (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 March 31, 2023, acquired loans totaling $233.3 million are included in the ACL calculation and are therefore not removed in calculating adjusted total loans.
    (4) As of March 31, 2023, the adjustment for PPP loans includes acquired PPP loans as acquired loans are no longer removed in calculating adjusted total loans.


    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited) (continued)
      
     As of or for the Three Months Ended
     March 31, December 31,  March 31,
    (Dollars in thousands, except share and per share data)2023 2022 2022
    Adjusted Net Income Available to Common Shareholders     
    Net income available to common shareholders$3,820  $5,471  $5,524 
    Plus: acquisition related expenses 37   195   527 
    Less: income tax impact 10   49   129 
    Adjusted net income available to shareholders$3,847  $5,617  $5,922 
          
    Pre-Tax, Pre-Provision Net Income     
    Income before income taxes$5,161  $7,301  $7,316 
    Plus: (release) provision for credit losses (310)  1,197   210 
    Pre-tax, pre-provision net income$4,851  $8,498  $7,526 
          
    Adjusted Basic Earnings Per Share     
    Basic earnings per share$0.40  $0.58  $0.59 
    Plus: acquisition related expenses net of income tax impact*  0.01   0.04 
    Adjusted basic earnings per share$0.40  $0.59  $0.63 
          
    Adjusted Diluted Earnings Per Share     
    Diluted earnings per share$0.39  $0.56  $0.57 
    Plus: acquisition related expenses net of income tax impact*  0.02   0.04 
    Adjusted diluted earnings per share$0.39  $0.58  $0.61 
          
    Adjusted Return on Average Assets (annualized)     
    Return on average assets 0.54%  0.79%  0.85%
    Plus: acquisition related expenses net of income tax impact 0.01   0.03   0.07 
    Adjusted return on average assets 0.55%  0.82%  0.92%
          
    Adjusted Return on Average Shareholders’ Equity (annualized)     
    Return on average shareholders’ equity 6.40%  9.17%  9.98%
    Plus: acquisition related expenses net of income tax impact 0.05   0.24   0.72 
    Adjusted return on average shareholders’ equity 6.45%  9.41%  10.70%
          
    Adjusted Return on Tangible Common Equity (annualized)     
    Return on tangible common equity 7.35%  10.48%  11.57%
    Plus: acquisition related expenses net of income tax impact 0.06   0.28   0.84 
    Adjusted return on tangible common equity 7.41%  10.76%  12.41%

    * Represents an immaterial impact to adjusted earnings per share.


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