First Western Financial Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 001-38595

FIRST WESTERN FINANCIAL, INC.

(Exact name of registrant as specified in its charter)


Colorado		37-1442266
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1900 16th Street, Suite 1200 Denver, CO		80202
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 303.531.8100

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ⌧ Yes ◻ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧ Yes ◻ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ◻	Accelerated filer ⌧

Non-accelerated filer ◻	Smaller reporting company ☒

	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. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ⌧ No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.


	Shares outstanding as of October 30, 2020
Common Stock, no par value	7,951,749

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FIRST WESTERN FINANCIAL, INC.

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		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	6

	Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019	6

	Condensed Consolidated Statements of Income (Unaudited) for the Three Months and Nine Months Ended September 30, 2020 and September 30, 2019	7

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months and Nine Months Ended September 30, 2020 and September 30, 2019	8

	Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the Three Months and Nine Months Ended September 30, 2020 and September 30, 2019	9

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2020 and September 30, 2019	10

	Notes to Condensed Consolidated Financial Statements (Unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	72

Item 4.	Controls and Procedures	73

PART II. OTHER INFORMATION		73

Item 1.	Legal Proceedings	73

Item 1A.	Risk Factors	74

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76

Item 3.	Defaults upon Senior Securities	76

Item 4.	Mine Safety Disclosures	76

Item 5.	Other Information	76

Item 6.	Exhibits	77

SIGNATURES		78

Important Notice about Information in this Quarterly Report

Unless we state otherwise or the context otherwise requires, references in this Quarterly Report to “we,” “our,” “us,” “the Company” and “First Western” refer to First Western Financial, Inc. and its consolidated subsidiaries, including First Western Trust Bank, which we sometimes refer to as “the Bank” or “our Bank.”

The information contained in this Quarterly Report is accurate only as of the date of this Quarterly Report on Form 10-Q and as of the dates specified herein.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. 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,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control, particularly with regard to developments related to COVID-19. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are 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.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

●

The impact of the COVID-19 pandemic and actions taken by governmental authorities in response to the pandemic;

●

geographic concentration in Colorado, Arizona, Wyoming and California;

●

changes in the economy affecting real estate values and liquidity;

●

our ability to continue to originate residential real estate loans and sell such loans;

●

risks specific to commercial loans and borrowers;

●

claims and litigation pertaining to our fiduciary responsibilities;

●

competition for investment managers and professionals and our ability to retain our associates;

●

fluctuation in the value of our investment securities;

●

the terminable nature of our investment management contracts;

●

changes to the level or type of investment activity by our clients;

●

investment performance, in either relative or absolute terms;

●

changes in interest rates;

●

the adequacy of our allowance for loan losses;

●

weak economic conditions and global trade;

●

legislative changes or the adoption of tax reform policies;

●

external business disruptors in the financial services industry;

●

liquidity risks;

●

our ability to maintain a strong core deposit base or other low-cost funding sources;

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●

continued positive interaction with and financial health of our referral sources;

●

retaining our largest trust clients;

●

our ability to achieve our strategic objectives;

●

competition from other banks, financial institutions and wealth and investment management firms;

●

our ability to implement our internal growth strategy and manage the risks associated with our anticipated growth;

●

the acquisition of other banks and financial services companies and integration risks and other unknown risks associated with acquisitions;

●

the accuracy of estimates and assumptions;

●

our ability to protect against and manage fraudulent activity, breaches of our information security, and cybersecurity attacks;

●

our reliance on communications, information, operating and financial control systems technology and related services from third-party service providers;

●

technological change;

●

our ability to attract and retain clients;

●

unforeseen or catastrophic events, including pandemics, terrorist attacks, extreme weather events or other natural disasters;

●

new lines of business or new products and services;

●

regulation of the financial services industry;

●

legal and regulatory proceedings, investigations and inquiries, fines and sanctions;

●

limited trading volume and liquidity in the market for our common stock;

●

fluctuations in the market price of our common stock;

●

potential impairment of goodwill recorded on our balance sheet and possible requirements to recognize significant charges to earnings due to impairment of intangible assets;

●

actual or anticipated issuances or sales of our common stock or preferred stock in the future;

●

the initiation and continuation of securities analysts coverage of the Company;

●

future issuances of debt securities;

●

our ability to manage our existing and future indebtedness;

●

available cash flows from the Bank; and

●

other factors that are discussed in “Item 1A - Risk Factors” in our Annual Report on Form 10-K.

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The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the section titled Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2020, in the section titled Risk Factors in Part II, Item 1A of our Form 10-Q filed with the SEC on April 30, 2020 and in the section titled Risk Factors in Part II, Item 1A of our Form 10-Q filed with the SEC on August 6, 2020. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share amounts)


	September 30,		December 31,
	2020		2019
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	2,867	$	4,180
Interest-bearing deposits in other financial institutions		247,491		74,458
Total cash and cash equivalents		250,358		78,638

Available-for-sale securities, at fair value		40,654		58,903
Correspondent bank stock, at cost		1,295		585
Mortgage loans held for sale		89,872		48,312
Loans, net of allowance of $11,845 and $7,875		1,494,231		990,132
Premises and equipment, net		5,116		5,218
Accrued interest receivable		6,730		3,048
Accounts receivable		4,821		5,238
Other receivables		1,497		1,006
Other real estate owned, net		558		658
Goodwill		24,191		19,686
Other intangible assets, net		72		28
Deferred tax assets, net		6,405		5,047
Company-owned life insurance		15,359		15,086
Other assets		28,738		16,544
Assets held for sale		3,000		3,553
Total assets	$	1,972,897	$	1,251,682

LIABILITIES
Deposits:
Noninterest-bearing	$	472,963	$	240,068
Interest-bearing		1,090,709		846,716
Total deposits		1,563,672		1,086,784
Borrowings:
Federal Home Loan Bank Topeka and Federal Reserve borrowings		222,075		10,000
Subordinated notes		14,447		6,560
Accrued interest payable		347		299
Other liabilities		22,639		20,244
Liabilities held for sale		141		117
Total liabilities		1,823,321		1,124,004

SHAREHOLDERS’ EQUITY
Preferred stock - no par value; 10,000,000 shares authorized; 0 issued and outstanding		—		—
Convertible preferred stock - no par value; 150,000 shares authorized; 0 shares issued and outstanding		—		—
Common stock - no par value; 90,000,000 shares authorized; 7,951,749 and 7,940,168 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		—		—
Additional paid-in capital		144,048		142,797
Retained earnings (accumulated deficit)		4,705		(14,955)
Accumulated other comprehensive income (loss)		823		(164)
Total shareholders’ equity		149,576		127,678
Total liabilities and shareholders’ equity	$	1,972,897	$	1,251,682

See accompanying notes to condensed consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Interest and dividend income:
Loans, including fees	$	14,138	$	10,672	$	37,342	$	31,490
Investment securities		173		312		692		954
Federal funds sold and other		99		489		358		1,254
Total interest and dividend income		14,410		11,473		38,392		33,698

Interest expense:
Deposits		1,067		3,363		4,779		9,268
Other borrowed funds		425		170		968		559
Total interest expense		1,492		3,533		5,747		9,827
Net interest income		12,918		7,940		32,645		23,871
Less: provision for loan losses		1,496		100		3,987		216
Net interest income, after provision for loan losses		11,422		7,840		28,658		23,655

Non-interest income:
Trust and investment management fees		4,814		4,824		14,154		14,186
Net gain on mortgage loans		12,304		3,291		24,958		8,009
Bank fees		340		283		929		912
Risk management and insurance fees		483		176		912		838
Income on company-owned life insurance		91		95		273		284
Net gain on sale of securities		—		119		—		119
Total non-interest income		18,032		8,788		41,226		24,348
Total income before non-interest expense		29,454		16,628		69,884		48,003

Non-interest expense:
Salaries and employee benefits		10,212		8,504		25,384		23,821
Occupancy and equipment		1,619		1,388		4,574		4,193
Professional services		1,288		745		3,542		2,557
Technology and information systems		1,032		961		2,994		3,046
Data processing		1,038		854		2,922		2,282
Marketing		395		272		1,063		991
Amortization of other intangible assets		4		52		44		366
Goodwill impairment		—		—		—		1,572
Net loss on assets held for sale		—		—		553		—
Provision for other real estate owned		100		—		100		—
Other		944		666		2,747		1,873
Total non-interest expense		16,632		13,442		43,923		40,701
Income before income taxes		12,822		3,186		25,961		7,302
Income tax expense		3,192		780		6,301		1,865
Net income available to common shareholders	$	9,630	$	2,406	$	19,660	$	5,437
Earnings per common share:
Basic	$	1.22	$	0.30	$	2.49	$	0.69
Diluted	$	1.20	$	0.30	$	2.47	$	0.69

See accompanying notes to condensed consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income	$	9,630	$	2,406	$	19,660	$	5,437
Other comprehensive income items:
Net change in unrealized gains on available-for-sale securities		(28)		321		1,305		2,364
Income tax effect		7		(83)		(318)		(611)
Total other comprehensive income (loss) items		(21)		238		987		1,753
Comprehensive income	$	9,609	$	2,644	$	20,647	$	7,190

See accompanying notes to condensed consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except share amounts)


	Shares				Retained	Accumulated
		Additional			Earnings	Other
	Common	Paid-In		(Accumulated		Comprehensive
	Stock	Capital		Deficit)		Income (Loss)		Total

Balance at July 1, 2019	7,983,866	$	142,095	$	(19,933)	$	(5)	$	122,157

Net income	—		—		2,406		—		2,406
Share repurchase	(582)		(8)		—		—		(8)
Other comprehensive income, net of tax	—		—		—		238		238
Stock-based compensation	—		939		—		—		939

Balance at September 30, 2019	7,983,284	$	143,026	$	(17,527)	$	233	$	125,732

Balance at July 1, 2020	7,939,024	$	143,498	$	(4,925)	$	844	$	139,417

Net income	—		—		9,630		—		9,630
Settlement of share awards	12,725		(88)		—		—		(88)
Other comprehensive loss, net of tax	—		—		—		(21)		(21)
Stock-based compensation	—		638		—		—		638

Balance at September 30, 2020	7,951,749	$	144,048	$	4,705	$	823	$	149,576

Balance at January 1, 2019	7,968,420	$	141,359	$	(23,199)	$	(1,285)	$	116,875

Net income	—		—		5,437		—		5,437
Settlement of share awards	15,446		(110)		—		—		(110)
Adoption of ASU 2018-02	—		—		235		(235)		—
Stock repurchase	(582)		(8)		—		—		(8)
Other comprehensive income, net of tax	—		—		—		1,753		1,753
Stock-based compensation	—		1,785		—		—		1,785

Balance at September 30, 2019	7,983,284	$	143,026	$	(17,527)	$	233	$	125,732

Balance at January 1, 2020	7,940,168	$	142,797	$	(14,955)	$	(164)	$	127,678

Net income	—		—		19,660		—		19,660
Other comprehensive income, net of tax	—		—		—		987		987
Settlement of share awards	34,260		(258)		—

Price	13.40	EPS	1
Shares	8	P/E	20
MCap	107	P/FCF	-2
Net Debt	-146	EBIT	17
TEV	-39	TEV/EBIT	-2
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-05
10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-04-30
10-K	2019-12-31	Filed 2020-03-12
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-08
10-Q	2019-03-31	Filed 2019-05-10
10-K	2018-12-31	Filed 2019-03-21
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-30
S-1	2018-06-19	Public Filing

8-K	2020-11-25
8-K	2020-11-13
8-K	2020-11-10
8-K	2020-11-03
8-K	2020-10-28
8-K	2020-10-22
8-K	2020-09-21
8-K	2020-09-21
8-K	2020-07-27
8-K	2020-07-23
8-K	2020-07-16
8-K	2020-06-10
8-K	2020-06-08
8-K	2020-05-18
8-K	2020-05-06
8-K	2020-04-30
8-K	2020-04-08
8-K	2020-03-17
8-K	2020-02-10
8-K	2020-01-30
8-K	2020-01-23
8-K	2019-11-01
8-K	2019-11-01
8-K	2019-10-24
8-K	2019-07-29
8-K	2019-07-29
8-K	2019-07-25
8-K	2019-07-19
8-K	2019-06-14
8-K	2019-06-05
8-K	2019-06-05
8-K	2019-05-06
8-K	2019-05-02
8-K	2019-04-25
8-K	2019-03-18
8-K	2019-02-04
8-K	2019-01-24
8-K	2018-10-30
8-K	2018-10-25
8-K	2018-09-24
8-K	2018-09-10
8-K	2018-08-30
8-K	2018-08-02
8-K	2018-07-27

EX-31.1	myfw-20200930ex311dce665.htm
EX-31.2	myfw-20200930ex312c1223b.htm
EX-32.1	myfw-20200930ex321efd963.htm
EX-32.2	myfw-20200930ex322c7bcec.htm

MYFW 10Q Quarterly Report

First Western Financial Earnings 2020-09-30