First Western Financial, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the first Western Financial Q3 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 instructions will follow at the time. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. As a reminder, this conference call may be recorded. I would now like to turn the conference over to your speaker today, Mr. Tony Rossi of Financial Profiles. Go ahead, sir.

Thank you, Manny. Good morning, everyone, and thank you for joining us today for First Western Financial's third 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 this 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?

Thanks, Tony. Good morning, everybody. Our third quarter results represent a continuation of the positive trends we've seen this year, with growth in our private commercial banking operations generating higher levels of revenue, more operating leverage, and increased profitability. In the third quarter, we generated net income of $6.4 million, earnings per share of 78 cents, and a ROA of 1.27%, all of which are an improvement over our second quarter results. On an adjusted basis, excluding acquisition-related expenses, our earnings per share were up to 81 cents from 77 cents in the prior quarter. We continue to have good momentum in business development, which is driving higher levels of loans, deposits, and assets under management. Excluding PPP loans, our total loans held for investment increased at a 19% annualized rate in the third quarter. We also continue to see strong deposit flows as total deposits were up 6.1% from the end of the prior quarter, with all the growth coming in our lower cost categories. We're also seeing steady growth in our assets under management and higher trusted investment management fees. Our private and commercial banking model is working exceptionally well. We're seeing high-quality, well-diversified loan growth, funding these loans with low-cost deposits, and effectively cross-selling additional products and services to increase the overall profitability of these client relationships. As a result, we're seeing improvement across most of our key financial metrics. Compared to the prior quarter, our gross revenue was up nearly 7%, our net interest margin increased 13 basis points, and our efficiency ratio improved 44 basis points. More importantly, as we continue to profitably grow the company, we're prudently managing our growth, which is reflected in our continued strong asset quality and exceptionally low level of losses in the portfolio. Moving to slide four, our improved financial performance is not only driving earnings growth, but also strong increases in our book value and tangible book value. During the third quarter, our book value increased 4.1%, while our tangible book value per share increased 4.8%. The profitable growth we're generating is a reflection of our strong execution across all of our growth strategies. Our more mature profit centers continue to add new clients and generate organic growth, The new offices we've opened up over the last couple of years continue to scale and are making large contributions. And we're accelerating our growth through accretive acquisitions, like the branch assumption transaction last year and the pending acquisition of Teton Financial Services in Jackson. Turning to slide five, we'll look at the performance of our private banking, commercial banking, and trust investment management businesses. This is represented by our pre-tax earnings of our non-mortgage segments On a year-over-year basis, our pre-tax earnings more than doubled in this segment. After the outsized earnings that we generated in the mortgage business last year, we're seeing other businesses fill in that earnings gap, so to speak, with a more sustainable source of earnings growth, while our mortgage business returns to its intended role as a complementary source of fee income. Turning to slide six, we'll look at the trends in our loan portfolio. We had another good quarter of loan production, with total production coming in at $133.4 million, relatively similar to the prior quarter, while loan payoffs were down a bit. On a period-end basis, our total loans held for investment increased $30.4 million from the end of the prior quarter, or $70.9 million when PPP loans are excluded. Most areas of the portfolio increased from the end of the prior quarter, with the strongest growth coming from commercial real estate while a high level of payoffs resulted in a small decline in CNI portfolio. It's notable that cash securities and other portfolio was able to contribute to our total loan growth despite the continued runoff of PPP loans that are held in that category. We saw more demand this quarter among our private banking clients for the type of investment management secured lines of credit that comprise the bulk of this portfolio. Moving to slide seven, we'll take a closer look at our deposit trends. Our total deposits increased 103.2 million from the end of the prior quarter. All of the growth was in lower-cost deposit categories. This continues to drive improvement in our deposit mix. Over the past year, our non-interest-bearing accounts have increased to 33.5% of total deposits from 30.2%, while time deposits have declined to 7.7% of total deposits from from 11.3%. We had one large deposit come in towards the end of the quarter as that client had a liquidity event. They temporarily placed about $60 million in their money market account, which we expect to be withdrawn during the fourth quarter as proceeds from the liquidity event are distributed to partners of this real estate investment fund. Moving to slide eight, we'll look at our progress in building our commercial banking portfolio, commercial banking platform, which is providing more loan diversification and improving our deposit base by adding low-cost transaction deposits. Commercial loans increased 51 million from the prior quarter and 196 million from the prior year. Commercial deposits increased 130 million from the prior quarter and 227 million from the prior year. In each case, this represents 24% growth over the prior year and is reflective of the strong momentum we have in growing the commercial bank. Moving to slide nine, we've added a new slide to the presentation to show the increasing contribution we're getting from our new offices. This slide shows the aggregate contribution of the offices we've opened since mid-2019 to our total loans, deposits, and assets under management. As you can see, we're getting a larger contribution as the offices gain more traction and build new business pipelines that produce on a consistent basis. We've done a good job of identifying areas for the new offices that have a large amount of the type of clients that we target, and then attracting proven banking talent with established relationships to build these offices. These new bankers have been successful in marketing the First Western value proposition, bringing in new clients, and then expanding those relationships over time. Opening new offices has been a key part of our growth strategy throughout our history, and we plan to continue opening one or two new offices each year with a primary focus on expanding in Colorado, Arizona, Wyoming, and Montana. Turning to trust investment management on slide 10, our total assets under management increased by $143.8 million from the end of the quarter. The increase was due to a combination of contributions to existing accounts and new accounts, as well as improving market conditions, resulting in the increase in the value of assets under management. During the third quarter, new clients accounted for approximately $30 million of our growth in assets under management. Now I'll turn the call over to Julie for further discussion of our financial results. Julie?