First Western(MYFW) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated net income of $2.1 million, or$ 0.22 per diluted share in Q3 2024, which was double the EPS from the prior quarter [7] - The tangible book value per share increased by about 1% this quarter [7] - The loan to deposit ratio improved to 95% at the end of Q3, achieving the company's goal of reducing it to the mid-90% range [5] Business Line Data and Key Metrics Changes - Loans held for investment decreased by $73 million from the end of the prior quarter, with new loan production of$ 83 million compared to $50 million in the prior quarter [7][8] - Non-interest bearing deposits increased by 19% from the end of the prior quarter, contributing to a total deposit increase of$ 92 million [5][8] - Assets under management (AUM) increased by $454 million in Q3, reflecting nearly a 17% increase over the past year [8] Market Data and Key Metrics Changes - The company experienced a decrease in gross revenue by 1.7% from the prior quarter, attributed to a problem credit migrating to non-accrual status and increased interest expenses [9] - Net interest income decreased by 1.3% from the prior quarter, with a net interest margin (NIM) of 2.32%, down 3 basis points from the previous quarter [10][11] Company Strategy and Development Direction - The company continues to prioritize prudent risk management and conservative underwriting criteria while focusing on deposit gathering and maintaining disciplined expense control [5][14] - There is an expectation of solid operating leverage in the near term due to modest growth in the balance sheet, improved net interest margin, and higher fee income [14][15] - The company aims to capitalize on market disruptions faced by competing banks to add new clients and banking talent [14] Management's Comments on Operating Environment and Future Outlook - Management noted that overall economic activity remains healthy in their markets, with positive trends in asset quality and a reduction in non-performing loans [14][16] - The company expects to see continued improvement in financial performance and value creation for shareholders, driven by positive trends in key areas [16] Other Important Information - The company reported a higher level of non-interest bearing deposits, which will positively impact the cost of funds [11] - The company is seeing a positive trend in mortgage production, with September being the highest month in 2.5 years [12][34] Q&A Session Summary Question: Inquiry about credit and charge-offs - Management explained that a$ 10 million loan was moved to non-accrual status due to a liquidity issue with the borrower, but they expect a full recovery [18] - Charge-offs were primarily related to the conversion of a large credit into OREO, with the value of OREO being higher than the loan balance [18] Question: Classified loans and asset quality - Classified loans decreased significantly, with non-accrual classified at $14.4 million compared to$ 37.6 million in the prior quarter [19] Question: Deposit growth and sustainability - The growth in non-interest bearing deposits was broad-based among customers, indicating a positive trend in core relationships [20][22] Question: Deposit costs and NIM - The company reported a spot NIM of 2.40% at quarter-end, with expectations for positive trends in the future [22][24] Question: Mortgage business outlook - Management noted that while mortgage revenues were down in Q3, there is pent-up demand and a strong pipeline due to new MLO hires [34][36] Question: Future expansion plans - The company is looking to grow its presence in Arizona and Montana, with plans to add more personnel and branches in these markets [46][48]