First Western Financial, Inc.

Thank you for standing by and welcome to the First Western Financial Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentations, there will be a question and answer session. To ask a question at that time, please put star 11 on your touchtone telephone. As a reminder, today's call is being recorded. I will now turn the conference to your host, Mr. Tony Rossi of Financial Profiles. Sir, you may begin.

Thank you, Valerie. Good morning, everyone, and thank you for joining us today for First Western Financial's fourth quarter 2022 earnings call. Joining us from First Western's management team are Scott Wiley, Chairman and Chief Executive Officer, and Julie Korkamp, Chief Financial and Chief Operating Officer. We will use the 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 Investor Relations website to download a copy of the presentations. 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. 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 GAAP to non-GAAP measures. And with that, I'd like to turn the call over to Scott. Scott?

Thanks, Tony. Good morning, everybody. We had a number of objectives that we wanted to accomplish in the fourth quarter. We wanted to increase our focus on deposit gathering in order to improve our liquidity and reduce our loan to deposit ratio. We wanted to continue to generate solid loan growth while tightening underwriting and pricing criteria given the potential for weakening economic conditions. And we wanted to continue to effectively manage our expense levels. I'm pleased to report that we were able to accomplish all these objectives and continue to generate strong financial performance, although earnings were lower than the prior quarter due to the increase in interest expense that we saw as a result of our strong growth in deposits in the competitive environment, putting pressure on deposit costs. Even with the tighter underwriting and pricing criteria, we still generated 21% annualized loan growth in the quarter, with increases in each of our major portfolios. The strong loan growth that we continue to generate reflects our success in steadily growing our client base in Colorado, as well as the increase in contributions we're getting from the teams that we've built to increase our presence in Arizona, Wyoming, and the Montana markets. With the strong business development capabilities that we've built, we're able to generate a significant volume of high quality lending opportunities, enabling us to continue generating strong loan growth while maintaining our prudent approach to risk management. Importantly, the growth rate we saw in total deposits was more than double our loan growth. We were particularly effective in expanding deposit relationships with a few larger clients, which accounted for a significant portion of the deposit inflows we saw in the fourth quarter. And as with our loan production, our increased presence in some of our newer markets was also a contributor to the strong deposit growth in the fourth quarter. As we mentioned on our last call, Our near-term objective was to get our loan deposit ratio down near 100%, and we were able to achieve that with our strong growth in deposits during the fourth quarter. Along with our improving liquidity by reducing our loan deposit ratio, during the fourth quarter we also increased our total capital ratio by 53 bps, basis points, to 12.37%. Moving to slide four, we generated net income of $5.5 million or $0.56 per diluted share in the fourth quarter, or $0.58 a share with acquisition-related expenses excluded. Our strong profitability, along with effective management of the investment portfolio, has enabled us to continue to drive increases in both book value and tangible book value per share. In the fourth quarter, book value per share increased 2.5% from the prior quarter, while tangible book value increased 3%. During 2022, a year when most banks saw significant declines, both metrics increased by more than 9%, reflecting the strong value we're creating for shareholders. Turning to slide five, we'll look at the trends in the loan portfolio. We had another strong quarter of loan growth, originating $182 million in loans. While this was down from the prior quarter, the average rate on new loan production increased by more than 100 basis points, so we're still generating strong production without compromising on pricing. Payoffs are also continuing to moderate, so more of our loan production is translating into net loan growth, and our total loans held for investment increased $121 million from the end of the prior quarter. The growth was primarily driven by increases in our residential mortgage construction C&I portfolios, which offset a decline in our CRE portfolio which is an area we're limiting new production as part of our overall approach to risk management ahead of a potential recession. As with the prior quarter, most of what we're adding to one to four family residential portfolio are jumbo arms that provide attractive risk-adjusted yields. Moving to slide six, we'll take a closer look at our deposit trends. The success we had in deposit gathering resulted in 44% annualized growth in total deposits during the fourth quarter. We had a decline in non-interest-bearing deposits, which was largely attributable to some clients deciding to move a portion of their excess liquidity into interest-bearing accounts to capitalize on the higher rates now being offered. We also made the decision to add some time deposits in order to lock in longer-term fixed-rate funding that we believe will enable us to more effectively manage our deposit costs going forward. Turning to slide seven, trust and investment management, our total assets under management increased by $189 million from the end of the prior quarter, which was primarily due to an increase in market values during the fourth quarter of 2022. I'll turn the call over to Julie for further discussion of our financial results. Julie?