First Western Financial (MYFW) Q2 Earnings call transcript Jul 24, 2024

In the latest earnings call for the second quarter of 2024, First Western Financial presented a picture of resilience and strategic focus amidst economic uncertainty. The call, led by CEO Scott Wylie, COO Julie Courkamp, and CFO David Weber, highlighted the company's disciplined approach to risk management, strategic priorities, and financial performance.

Financial Performance and Strategic Initiatives

The company reported a net income of $1.1 million, or about $0.11 per diluted share, with a pre-tax, pre-provision net income of $3.7 million. This performance, consistent with both the prior quarter and the same period last year, reflects the company's prudent balance sheet management and strategic focus. Notably, First Western Financial's tangible book value per share saw an increase during the quarter, underscoring the company's financial health.

Loan Portfolio and Deposit Trends

The company's loan portfolio saw a decline in the second quarter, but this was primarily due to a higher level of loan production in areas such as commercial loans and residential mortgages. The average rate on new production was 8.35%, demonstrating the company's ability to secure higher yields on new loans. On the deposit side, total deposits decreased due to seasonal tax payments and strategic investments, but average deposits showed an increase of $39 million compared to the second period of 2023. The company's success in new business development and the largest growth in time deposits is a positive sign for future revenue growth.

Asset Quality and Expense Management

Asset quality remains a focus for First Western Financial, with a decline in past due loans and net recoveries in the quarter. The company's non-performing assets increased slightly due to the foreclosure on two properties held as collateral, but the resulting decrease in non-performing loans was offset by a participated balance. The company's disciplined expense control, particularly in the area of professional service fees, contributed to a decrease in non-interest expense.

Looking Ahead

First Western Financial's outlook for the rest of 2024 remains cautiously optimistic. The company continues to prioritize prudent risk management, expense control, and strategic initiatives in areas such as loan production, deposit relationships, and mortgage banking. The reorganization of the investment management business is expected to improve performance and business development capabilities. The company's positive trends, including the expansion of net interest margin and the addition of new talent, bode well for a higher level of profitability in the second half of the year.

Investor Interactions and Key Insights

The earnings call also provided insights into the concerns and priorities of key shareholders and investors. Wood Lay, an analyst from KBW, questioned the potential loss content in relation to the company's largest non-performing asset. The company's response highlighted the cautious approach to resolving this issue and the impact on asset quality. Another analyst, Adam Kroll from Piper Sandler, asked about the company's expense run rate going forward and the impact of talent and technology investments. The company's response underscored its focus on controlling expenses while adding production capability.

Conclusion

First Western Financial's second quarter 2024 earnings call presented a mixed picture of challenges and opportunities. The company's disciplined approach to risk management and strategic focus on key areas such as loan production, deposit relationships, and asset quality are promising signs for future growth. However, the company's financial performance, particularly in areas such as EPS and efficiency ratio, remains a concern. As First Western Financial navigates the economic uncertainty, its strategic initiatives and financial health will continue to be closely watched by investors and stakeholders.