First Western Financial Earnings 2019-09-30

MYFW 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
LMST	113	1,127	1,025	0	0	11	26	66	0%	2.5	1%
AUBN	111	839	745	0	0	9	17	111	0%	6.5	1%
SVBI	111	862	759	0	0	10	23	34		1.5	1%
EBMT	108	1,008	892	0	0	8	18	120		6.7	1%
TRCB	108	1,154	1,032	1	0	12	27	59	0%	2.2	1%
MYFW	107	1,190	1,068	60	0	6	22	14	0%	0.6	1%
GFED	106	977	894	2	0	11	28	53	0%	1.9	1%
BKSC	104	442	393	0	0	7	10	59		6.1	2%
LARK	102	1,002	899	0	0	10	18	88		4.9	1%
CART	101	617	548	0	0	3	10	71	0%	7.4	0%

10-Q 1 myfw-20190930x10q.htm 10-Q fwfi_Current Folio_10Q

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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, 2019

☐ 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 November 6, 2019
Common Stock, no par value	7,986,128

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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, 2019 (Unaudited) and December 31, 2018	6

	Condensed Consolidated Statements of Income (Unaudited) for the Three Months and Nine Months Ended September 30, 2019 and September 30, 2018	7

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months and Nine Months Ended September 30, 2019 and September 30, 2018	8

	Condensed Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) for the Three Months and Nine Months Ended September 30, 2019 and September 30, 2018	9

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2019 and September 30, 2018	10

	Notes to Condensed Consolidated Financial Statements (Unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	61

Item 4.	Controls and Procedures	62

PART II. OTHER INFORMATION		62

Item 1.	Legal Proceedings	62

Item 1A.	Risk Factors	62

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62

Item 3.	Defaults upon Senior Securities	63

Item 4.	Mine Safety Disclosures	63

Item 5.	Other Information	63

Item 6.	Exhibits	64

SIGNATURES		65

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. 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:

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 credit 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;

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

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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;

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.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 21, 2019. 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

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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 statement.

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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,
	2019		2018

ASSETS
Cash and cash equivalents:
Cash and due from banks	$	3,828	$	1,574
Interest-bearing deposits in other financial institutions		142,348		71,783
Total cash and cash equivalents		146,176		73,357

Available-for-sale securities		61,491		43,695
Correspondent bank stock, at cost		582		2,488
Mortgage loans held for sale		69,231		14,832
Loans, net of allowance of $7,675 and $7,451		918,911		886,515
Premises and equipment, net		5,483		6,100
Accrued interest receivable		2,968		2,844
Accounts receivable		4,978		4,492
Other receivables		865		1,391
Other real estate owned, net		658		658
Goodwill		19,686		24,811
Other intangible assets, net		36		402
Deferred tax assets, net		4,765		4,306
Company-owned life insurance		14,993		14,709
Other assets		17,549		3,724
Assets held for sale		3,553		—
Total assets	$	1,271,925	$	1,084,324

LIABILITIES
Deposits:
Noninterest-bearing	$	231,535	$	202,856
Interest-bearing		877,369		734,902
Total deposits		1,108,904		937,758
Borrowings:
Federal Home Loan Bank Topeka borrowings		10,000		15,000
Subordinated notes		6,560		6,560
Accrued interest payable		356		231
Other liabilities		20,262		7,900
Liabilities held for sale		111		—
Total liabilities		1,146,193		967,449

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Preferred stock - no par value; 1,000,000 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; 10,000,000 shares authorized; 7,983,284 and 7,968,420 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		—		—
Additional paid-in capital		143,026		141,359
Accumulated deficit		(17,527)		(23,199)
Accumulated other comprehensive income (loss)		233		(1,285)
Total shareholders’ equity		125,732		116,875
Total liabilities and shareholders’ equity	$	1,271,925	$	1,084,324

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,
	2019		2018		2019		2018
Interest and dividend income:
Loans, including fees	$	10,672	$	9,468	$	31,490	$	27,144
Investment securities		312		266		954		824
Federal funds sold and other		489		206		1,254		483
Total interest and dividend income		11,473		9,940		33,698		28,451

Interest expense:
Deposits		3,363		1,761		9,268		4,332
Other borrowed funds		170		391		559		1,394
Total interest expense		3,533		2,152		9,827		5,726
Net interest income		7,940		7,788		23,871		22,725
Less: provision for (recovery of) credit losses		100		18		216		(169)
Net interest income, after provision for (recovery of) credit losses		7,840		7,770		23,655		22,894

Non-interest income:
Trust and investment management fees		4,824		4,770		14,186		14,413
Net gain on mortgage loans sold		3,291		1,159		8,009		3,769
Bank fees		283		361		912		1,426
Risk management and insurance fees		176		249		838		916
Net gain on sale of securities		119		—		119		—
Income on company-owned life insurance		95		99		284		298
Total non-interest income		8,788		6,638		24,348		20,822
Total income before non-interest expense		16,628		14,408		48,003		43,716

Non-interest expense:
Salaries and employee benefits		8,504		7,221		23,821		23,061
Occupancy and equipment		1,388		1,427		4,193		4,439
Professional services		745		805		2,557		2,637
Technology and information systems		961		965		3,046		3,028
Data processing		854		697		2,282		2,024
Marketing		272		274		991		875
Amortization of other intangible assets		52		208		366		668
Goodwill impairment		—		—		1,572		—
Other		666		579		1,873		1,814
Total non-interest expense		13,442		12,176		40,701		38,546
Income before income taxes		3,186		2,232		7,302		5,170
Income tax expense		780		543		1,865		1,247
Net income		2,406		1,689		5,437		3,923
Preferred stock dividends		—		(255)		—		(1,378)
Net income available to common shareholders	$	2,406	$	1,434	$	5,437	$	2,545
Earnings per common share:
Basic	$	0.30	$	0.19	$	0.69	$	0.40
Diluted	$	0.30	$	0.19	$	0.69	$	0.40

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,
	2019		2018		2019		2018
Net income	$	2,406	$	1,689	$	5,437	$	3,923
Other comprehensive income (loss) items:
Net change in unrealized gains (losses) on available-for-sale securities		321		(373)		2,364		(1,219)
Income tax effects		(83)		136		(611)		309
Total other comprehensive income (loss)		238		(237)		1,753		(910)
Comprehensive income	$	2,644	$	1,452	$	7,190	$	3,013

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							Accumulated
		Convertible		Additional				Other
	Preferred	Preferred	Common	Paid-In		Accumulated		Comprehensive
	Stock	Stock	Stock	Capital		Deficit		Income (Loss)		Total

Balance at July 1, 2018	20,868	41,000	5,917,667	$	132,785	$	(26,226)	$	(1,601)	$	104,958

Net income	—	—	—		—		1,689		—		1,689
Issuance of common stock, net of issuance costs	—	—	1,921,775		32,541		—		—		32,541
Make whole share issuance	—	—	128,978		—		—		—		—
Preferred stock Series A-C redemption	(20,868)	—	—		(20,783)		(85)		—		(20,868)
Preferred stock Series D redemption	—	(41,000)	—		(4,054)		(46)		—		(4,100)
Other comprehensive loss, net of tax	—	—	—		—		—		(237)		(237)
Stock-based compensation	—	—	—		436		—		—		436
Preferred stock dividends	—	—	—		—		(255)		—		(255)

Balance at September 30, 2018	—	—	7,968,420	$	140,925	$	(24,923)	$	(1,838)	$	114,164

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 January 1, 2018	20,868	41,000	5,833,456	$	130,070	$	(27,296)	$	(928)	$	101,846

Net income	—	—	—		—		3,923		—		3,923
Issuance of common stock, net of issuance costs of $4,411	—	—	1,989,017		34,450		—		—		34,450
Make whole share issuance	—	—	128,978		—		—		—		—
Preferred stock Series A-C redemption	(20,868)	—	—		(20,783)		(85)		—		(20,868)
Preferred stock Series D redemption	—	(41,000)	—		(4,054)		(46)		—		(4,100)
Other comprehensive loss, net of tax	—	—	—		—		—		(951)		(951)
Settlement of share awards	—	—	16,969		(181)		—		—		(181)
Reclassification on unrealized loss on equity securities	—	—	—		—		(41)		41		—
Stock-based compensation	—	—	—		1,423		—		—		1,423
Preferred stock dividends	—	—	—		—		(1,378)		—		(1,378)

Balance at September 30, 2018	—	—	7,968,420	$	140,925	$	(24,923)	$	(1,838)	$	114,164

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

Net income	—	—	—		—		5,437		—		5,437

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	8	$107

10-Q	2019-11-07	Quarter: 2019-09-30
10-Q	2019-08-08	Quarter: 2019-06-30
10-Q	2019-05-10	Quarter: 2019-03-31
10-K	2019-03-21	Annual: 2018-12-31
10-Q	2018-11-08	Quarter: 2018-09-30
10-Q	2018-08-30	Quarter: 2018-06-30
S-1	2018-06-19	Public Filing

8-K	2019-11-01	Regulation FD, Exhibits
8-K	2019-11-01	Regulation FD, Exhibits
8-K	2019-10-24	Earnings, Regulation FD, Exhibits
8-K	2019-07-29	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-07-29	Regulation FD, Exhibits
8-K	2019-07-25	Earnings, Regulation FD, Exhibits
8-K	2019-07-19	Regulation FD, Exhibits
8-K	2019-06-14	Other Events, Exhibits
8-K	2019-06-05	Regulation FD, Exhibits
8-K	2019-06-05	Shareholder Vote
8-K	2019-05-06	Regulation FD, Exhibits
8-K	2019-05-02	Control, Exhibits
8-K	2019-04-25	Earnings, Regulation FD, Exhibits
8-K	2019-03-18	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2019-02-04	Regulation FD, Exhibits
8-K	2019-01-24	Earnings, Regulation FD, Exhibits
8-K	2018-10-30	Regulation FD, Exhibits
8-K	2018-10-25	Earnings, Regulation FD, Exhibits
8-K	2018-09-24	Regulation FD, Exhibits
8-K	2018-09-10	Sale of Shares, Exhibits
8-K	2018-08-30	Earnings, Exhibits
8-K	2018-08-02	Regulation FD, Exhibits
8-K	2018-07-27	Officers

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EX-31.2	myfw-20190930ex3129ee30c.htm
EX-32.1	myfw-20190930ex321cc23a2.htm
EX-32.2	myfw-20190930ex3220be034.htm