• Net Income: $2.1 million or $0.22 per diluted share in Q3 2024.
• Noninterest Bearing Deposits: Increased 19% from the prior quarter.
• Loan to Deposit Ratio: Achieved target of 95% at the end of Q3 2024.
• New Loan Production: $83 million in Q3 2024, up from $50 million in the prior quarter.
• Average Rate on New Loan Production: 7.49% in Q3 2024.
• Total Deposits: Increased by $92 million from the prior quarter.
• Assets Under Management (AUM): Increased by $454 million in Q3 2024, nearly 17% increase over the past year.
• Gross Revenue: Decreased 1.7% from the prior quarter.
• Net Interest Margin (NIM): Decreased 3 basis points to 2.32% from the prior quarter.
• Non-Interest Income: Unchanged from the prior quarter.
• Non-Interest Expense: Slight increase due to higher salaries and marketing expenses.
• Non-Performing Assets: Increased to $52.1 million.
• Allowance for Credit Losses: Reduced to 79 basis points of total loans at September 30, 2024.

• Warning! GuruFocus has detected 8 Warning Signs with MYFW.

Release Date: October 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• First Western Financial Inc (NASDAQ:MYFW) achieved a higher level of profitability in Q3 2024, doubling its EPS from the prior quarter.
• The company successfully increased non-interest bearing deposits by 19% from the previous quarter, indicating strong deposit gathering efforts.
• First Western Financial Inc (NASDAQ:MYFW) improved its loan-to-deposit ratio to 95%, aligning with its strategic goal.
• The company reported positive trends in asset quality, with declines in non-performing and classified loans.
• Assets under management increased by $454 million, reflecting a 17% growth over the past year due to improving market conditions.

Negative Points

• Gross revenue decreased by 1.7% from the prior quarter, impacted by a problem credit moving to non-accrual status.
• Net interest income and margin both decreased, with the net interest margin dropping by 3 basis points to 2.32%.
• Non-performing assets increased to $52.1 million due to a new non-performing loan and foreclosed property.
• The company experienced a higher level of charge-offs, primarily related to the migration of a large relationship into OREO.
• Non-interest expenses rose slightly, driven by higher salaries and marketing expenses, despite efforts to control costs.

Q & A Highlights

Q: Can you provide more details on the new credit moved to non-accrual and the charge-offs related to the large credit? A: Scott Wylie, CEO, explained that the new non-accrual loan involves a borrower facing a liquidity crunch, but they expect a full recovery due to good collateral. The charge-offs were primarily related to a large credit that moved from non-performing loans to OREO, with the collateral now being marketed for sale. The transition involved writing off specific reserves, but the value of the OREO is higher than the loan balance, indicating a positive outcome.

Q: What are the current figures for classified and criticized loans? A: Julie Courkamp, COO, stated that classified loans decreased to $14.4 million from $37.6 million in the prior quarter, and non-accrual classified loans are at $11 million compared to $17 million previously. This reflects positive progress in asset quality.

Q: Can you elaborate on the growth in DDA (Demand Deposit Accounts) and its sustainability? A: Scott Wylie, CEO, noted that the growth in DDA was broad-based and not driven by a few large accounts. The increase is attributed to ongoing efforts to improve the loan-to-deposit ratio and deposit growth, with a significant shift from interest-bearing to non-interest-bearing deposits. The deposit pipeline was up 12% at quarter-end, indicating continued positive trends.

Q: How have deposit costs trended following the recent rate cut, and are deposit betas aligning with expectations? A: David Weber, CFO, reported that the spot cost of deposits decreased to 3.16% by the end of Q3. They achieved an 85% beta on money market accounts without significant outflows, indicating effective management of deposit costs in line with expectations.

Q: What is the outlook for the mortgage business, and how has the expansion of the MLO team impacted performance? A: Scott Wylie, CEO, highlighted that despite a seasonal slowdown, the addition of seven new Mortgage Loan Officers (MLOs) has increased capacity and contributed to a strong September performance. They plan to onboard more MLOs, which should enhance productivity and gain on sale, supporting continued growth in the mortgage segment.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.