First Western Financial, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the first Western Financial first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and if you would like to ask questions during the session, you will need to press star 1 on your telephone keypad. If anyone should require assistance during the conference, please press star 0. I would now like to turn the conference over to your host, Mr. Tony Rossi with Financial Profiles. Please go ahead, sir.

Thank you, Alexander. Good morning, everyone, and thank you for joining us today for First Western Financial's first quarter 2021 earnings call. Joining us from First Western's management team are Scott Wiley, Chairman and Chief Executive Officer, and Julie Korkamp, Chief Financial Officer. We will use a slide presentation as part of our discussion this morning. If you have not done so already, please visit the events and presentations page of First Western's Investor Relations website to download a copy of the presentation. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of First Western Financial that involve risks and uncertainties, including the impact of the COVID-19 pandemic. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. I would also direct you to read the disclaimers in our earnings release and investor presentation. The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the gap to non-gap measures. And with that, I'd like to turn the call over to Scott. Scott?

All right. Thanks, Tony. And good morning, everybody. Our first quarter results reflect the continuation of the significant increase in profitability that we began generating last year. Our net income of $6 million and earnings per share of 74 cents are both more than 300% increases over our financial results in the first quarter of 2020. We're also seeing substantial improvement in our level of returns, with our ROA coming in at 1.16% for the quarter, our ROE at just about 15%, and our ROTCE coming in at 17.5%. While still operating far from a normalized environment, we continue to make exceptional progress on our path to becoming a high-performing institution. Our new client acquisition activity remains very strong, which is resulting in strong inflows of low-cost deposits and further improvement in our deposit mix. Given our business model and the types of clients we target, we often get large deposit accounts that sit on our balance sheet temporarily until some of the funds are placed in investment management accounts, and we saw quite a bit of that activity in the first quarter. Well, this creates excess liquidity that's negatively impacting our net interest margin in the short term. We believe the addition of these clients and the low-cost deposits they provide and fee income they generate significantly enhance long-term value of the franchise. In the fourth quarter of last year, we had the highest level of loan production in our history, which left our loan pipeline relatively small to start the year. So we spent the first quarter rebuilding the pipeline as well as focusing on helping our clients access the second round of PPP funding. Over the last few quarters, We made some adjustments in our loan pricing to try and improve our average yield on new production. However, as the first quarter progressed, we realized that other banks were continuing to be very aggressive in their pricing in order to put their excess liquidity to work. This also ended up impacting our loan production in the first quarter. While we're going to continue to be disciplined in our underwriting, we have made some adjustments in our pricing requirements to be more competitive. We aren't going to win deals by being the lowest priced offer but we're now in a range where our pricing is more in line with the market and this should help enable our loan production to get back on track. In our last earnings call, we talked about some processing constraints in our mortgage business that limited our loan production in the fourth quarter. We were able to resolve those constraints and our processing times have now returned to normal. As a result, we were able to capitalize on the continued strong demand we're seeing for residential mortgages and this business continue to make a significant contribution to our profitability. Our net gain on mortgage loans in the quarter was $5.2 million, which was up 20% from the prior quarter and up 109% from the first quarter of last year. From an asset quality perspective, we also continue to see very good trends. All the COVID-19 loan mods we made last year have now returned to regularly scheduled payments and our non-performing assets have continued to decline. And once again, we had zero net charge-offs, which continues our long history of exceptionally low credit losses. Moving to slide four, our improved financial performance is not only driving significant earnings growth, but also strong increases in our book value and our tangible book value. During the first quarter, our book value per share increased 4.1%, while our tangible book value per share increased 4.9%. Turning to slide five, we've recently added a new slide to our deck that shows our pre-tax earnings per share excluding the mortgage segment. This reflects the performance of our private banking, commercial banking, trust, and investment management businesses. Obviously, last year was an extraordinary year for the mortgage business, but we don't want that to overshadow the progress we've been making in the other areas. So this slide provides a better sense for the foundation that we've built that's producing the sustainable path to higher earnings and profitability. In the first quarter, our pre-tax earnings per share in the non-mortgage segment increased 9 percent from the prior quarter and was the highest level in our history. Turning to slide six, we'll look at the trends in our loan portfolio. On a period-end basis, the total loans held for investment increased 12.6 million from the end of the prior quarter and up 504 million or 48% year-over-year. On an average basis, including mortgage loans held for sale, our loans were up 87.4 million or 5.3% from the prior quarter. Including PPP loans, we had loan production of 144.6 million which was the third highest quarter ever, but down from a very high level that we had in the fourth quarter. Payoffs remained higher than we've historically seen and totaled 122.6 million in the quarter. The payoffs included one $50 million payoff of a low yielding cash secured loan that occurred right at the end of the quarter and brought down our period end balances. During the quarter, we saw the strongest growth in our non-owner occupied commercial real estate lending portfolio, while our construction loan balances were down following the payoff of projects that were recently completed. Moving to slide seven, we'll take a closer look at our deposit trends. Our total deposits increased 187.9 million, or 11.6% from the end of the prior quarter. As I mentioned earlier, the primary driver of deposit growth was new client relationships. We continue to see significant improvement in our deposit mix with non-interest-bearing deposits increasing to 32.8% of total deposits from 23% a year ago. Moving to slide eight, we'll look at our progress in building our commercial banking platform, which is providing more loan diversification and improving our deposit base by adding low-cost transaction deposits. Due to the payoffs and paydowns we saw in the quarter, commercial loans were down a bit from the end of the prior quarter, but up 45 percent from a year ago. Commercial deposit inflows continue to be very strong, partially related to PPP funding, and increased 236 million, or 24 percent, from the end of the prior quarter. Turning to trust and investment management on slide nine, our total assets under management increased 230.3 million from the end of the prior quarter, The increase was due to a combination of improved market conditions, new client accounts, and additional contributions made to existing client accounts. Now I'll turn the call over to Julie for further discussion of our financial results. Julie?