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First Western Reports Third Quarter 2022 Financial Results

First Western Financial, Inc.
First Western Financial, Inc.

Third Quarter 2022 Summary

  • Net income available to common shareholders of $6.2 million in Q3 2022, compared to $4.5 million in Q2 2022 and $6.4 million in Q3 2021

  • Diluted EPS of $0.64 in Q3 2022, compared to $0.46 in Q2 2022 and $0.78 in Q3 2021

  • Pre-tax, pre-provision net income(1) of $10.0 million in Q3 2022, compared to $6.5 million in Q2 2022 and $8.9 million in Q3 2021

  • Total income before non-interest expense of $27.5 million in Q3 2022, compared to $26.6 million in Q2 2022 and $24.9 million in Q3 2021

  • Total loans held for investment increased at annualized rate of 38.1% in Q3 2022

  • Book value per common share increased to $24.74, or 2.8%, from $24.06 as of Q2 2022, and was up 13.1% from $21.88 as of Q3 2021

DENVER, Oct. 20, 2022 (GLOBE NEWSWIRE) -- First Western Financial, Inc., (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the third quarter ended September 30, 2022.

Net income available to common shareholders was $6.2 million, or $0.64 per diluted share, for the third quarter of 2022. This compares to $4.5 million, or $0.46 per diluted share, for the second quarter of 2022, and $6.4 million, or $0.78 per diluted share, for the third quarter of 2021.

Scott C. Wylie, CEO of First Western, commented, “We continue to see healthy economic conditions and loan demand throughout our markets, resulting in another quarter of strong, well balanced loan growth. We had increases in most of our major portfolios and total annualized loan growth of 38% in the quarter. With the strong growth we are generating in net interest income through the increase in our loan portfolio and the higher net interest margin we are now producing, we delivered a significant increase in earnings and our level of returns compared to the prior quarter, as well as further growth in book value and tangible book value per share.

“Although we have not yet seen a material slowdown in economic activity in our markets, given our conservative approach, we are making adjustments in our underwriting and loan pricing to reflect the potential for weakening economic conditions. As a result, it is likely that our loan growth moderates from the high level we experienced through the first nine months of the year. Even with this more cautious approach, we believe we are well positioned to still generate significant loan growth and continue delivering strong financial results for our shareholders, while maintaining exceptional asset quality and high levels of capital,” said Mr. Wylie.

(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

 

For the Three Months Ended

 

September 30,

 

June 30,

 

September 30,

(Dollars in thousands, except per share data)

2022

 

2022

 

2021

Earnings Summary

 

 

 

 

 

 

 

 

 

 

 

Net interest income

$

22,797

 

 

$

20,138

 

 

$

14,846

 

Provision for loan losses

 

1,756

 

 

 

519

 

 

 

406

 

Total non-interest income

 

6,454

 

 

 

6,940

 

 

 

10,492

 

Total non-interest expense

 

19,260

 

 

 

20,583

 

 

 

16,466

 

Income before income taxes

 

8,235

 

 

 

5,976

 

 

 

8,466

 

Income tax expense

 

2,014

 

 

 

1,494

 

 

 

2,049

 

Net income available to common shareholders

 

6,221

 

 

 

4,482

 

 

 

6,417

 

Adjusted net income available to common shareholders(1)

 

6,337

 

 

 

4,742

 

 

 

6,669

 

Basic earnings per common share

 

0.66

 

 

 

0.47

 

 

 

0.80

 

Adjusted basic earnings per common share(1)

 

0.67

 

 

 

0.50

 

 

 

0.84

 

Diluted earnings per common share

 

0.64

 

 

 

0.46

 

 

 

0.78

 

Adjusted diluted earnings per common share(1)

 

0.66

 

 

 

0.49

 

 

 

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (annualized)

 

0.97

%

 

 

0.71

%

 

 

1.27

%

Adjusted return on average assets (annualized)(1)

 

0.99

 

 

 

0.75

 

 

 

1.32

 

Return on average shareholders' equity (annualized)

 

10.70

 

 

 

7.89

 

 

 

14.88

 

Adjusted return on average shareholders' equity (annualized)(1)

 

10.90

 

 

 

8.35

 

 

 

15.46

 

Return on tangible common equity (annualized)(1)

 

12.28

 

 

 

9.16

 

 

 

17.01

 

Adjusted return on tangible common equity (annualized)(1)

 

12.51

 

 

 

9.69

 

 

 

17.68

 

Net interest margin

 

3.75

 

 

 

3.35

 

 

 

3.14

 

Efficiency ratio(1)

 

64.94

 

 

 

74.85

 

 

 

63.65

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

Operating Results for the Third Quarter 2022

Revenue

Gross revenue (1) was $29.3 million for the third quarter of 2022, an increase of 8.8% from $26.9 million for the second quarter of 2022, primarily driven by an increase in average loan balances and an increase in net interest margin. Relative to the third quarter of 2021, gross revenue increased 15.6% from $25.3 million for the third quarter of 2021, primarily driven by growth in interest-earning assets and an increase in net interest margin.

(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

Net Interest Income

Net interest income for the third quarter of 2022 was $22.8 million, an increase of 13.2% from $20.1 million in the second quarter of 2022. The increase was due to higher average loan balances and an increase in net interest margin.

Relative to the third quarter of 2021, net interest income increased 53.6% from $14.8 million. The year-over-year increase in net interest income was due to an increase in net interest margin attributable to the higher rate environment and increased average interest-earning assets. The increase in average interest-earning assets was driven by growth in average loans of $648.5 million compared to September 30, 2021, resulting from organic loan growth and the Teton Financial Services, Inc. (“Teton”) acquisition.

Net Interest Margin

Net interest margin for the third quarter of 2022 increased 40 bps to 3.75% from 3.35% reported in the second quarter of 2022, primarily due to higher yields on interest-earning assets and a more favorable mix of earning assets.

The yield on interest-earning assets increased to 4.37% in the third quarter of 2022 from 3.60% in the second quarter of 2022 and the cost of interest-bearing deposits increased to 0.73% in the third quarter of 2022, from 0.29% in the second quarter of 2022.

Relative to the third quarter of 2021, net interest margin increased from 3.14%, primarily due to increased yields attributable to the rising rate environment and higher average loan balances, as a result of strong organic loan growth and the Teton acquisition.

Non-interest Income

Non-interest income for the third quarter of 2022 was $6.5 million, a decrease of 7.0% from $6.9 million in the second quarter of 2022. This was primarily due to a $0.3 million decrease in net gain on mortgage loans due to a reduction in the amount of mortgage loans originated for sale, a $0.2 million decrease in unrealized gain recognized on equity securities, and a $0.1 million decrease in trust and investment management fees, which were negatively impacted by lower equity and fixed income market valuations.

Relative to the third quarter of 2021, non-interest income decreased 38.5% from $10.5 million. The decrease was primarily due to lower mortgage segment activity as higher interest rates drove declines in both refinance and purchase volume.

Non-interest Expense

Non-interest expense for the third quarter of 2022 was $19.3 million, a decrease of 6.4% from $20.6 million in the second quarter of 2022. The decrease was primarily due to a decline in salaries and employment benefits driven by higher deferred loan costs, lower incentive compensation, and a decline in health insurance and payroll taxes.

Relative to the third quarter of 2021, non-interest expense increased 17.0% from $16.5 million. The increase is primarily due to the addition of Teton’s operations at the end of 2021 which increased salary and benefits as well as occupancy expenses.

The impact of the mergers and acquisition activity is as follows (in thousands):

 

As of or for the Three Months Ended

 

September 30, 

 

June 30, 

 

September 30, 

 

2022

 

2022

 

2021

Adjusted Net Income Available to Common Shareholders(1)

 

 

 

 

 

 

 

 

 

Net income available to common shareholders

$

6,221

 

 

$

4,482

 

 

$

6,417

 

Plus: acquisition related expenses

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

98

 

 

 

152

 

 

 

 

Professional services

 

90

 

 

 

274

 

 

 

332

 

Data processing(2)

 

(96

)

 

 

(93

)

 

 

 

Technology and information systems

 

1

 

 

 

4

 

 

 

 

Marketing

 

7

 

 

 

5

 

 

 

 

Other

 

54

 

 

 

5

 

 

 

 

Less: income tax impact

 

38

 

 

 

87

 

 

 

80

 

Adjusted net income available to shareholders(1)

$

6,337

 

 

$

4,742

 

 

$

6,669

 

 

 

 

 

 

 

 

 

 

 

Adjusted Diluted Earnings Per Share(1)

 

 

 

 

 

 

 

 

 

Diluted earnings per share

$

0.64

 

 

$

0.46

 

 

$

0.78

 

Plus: acquisition related expenses net of income tax impact

 

0.02

 

 

 

0.03

 

 

 

0.03

 

Adjusted diluted earnings per share(1)

$

0.66

 

 

$

0.49

 

 

$

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________
(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
(2) Represents reduced contract termination fees from the system conversion.

The Company’s efficiency ratio(1) was 64.9% in the third quarter of 2022, compared with 74.9% in the second quarter of 2022 and 63.7% in the third quarter of 2021.

(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

Income Taxes

The Company recorded income tax expense of $2.0 million for the third quarter of 2022, representing an effective tax rate of 24.5%, compared to 25.0% for the second quarter of 2022.

Loans

Total loans held for investment were $2.35 billion as of September 30, 2022, an increase of 9.5% from $2.15 billion as of June 30, 2022, and an increase of 46.9% from $1.60 billion as of September 30, 2021. The increase in total loans held for investment from June 30, 2022 was attributable to loan growth distributed amongst our residential mortgage, construction and development, commercial and industrial, and commercial real estate portfolios. The increase in total loans held for investment from September 30, 2021 was attributable to loan growth distributed amongst our residential mortgage, construction and development, commercial and industrial, and commercial real estate portfolios and loans added through the Teton acquisition.

Deposits

Total deposits remained flat for the third quarter of 2022, at $2.17 billion, compared to June 30, 2022. Relative to the third quarter of 2021, total deposits increased 21.6% from $1.78 billion as of September 30, 2021, driven primarily by deposits added through the Teton acquisition.

Borrowings

Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $273.2 million as of September 30, 2022, an increase of $186.0 million from $87.2 million as of June 30, 2022, and an increase of $214.7 million from $58.6 million as of September 30, 2021. The increase from both prior periods was primarily driven by additional FHLB borrowings to support the strong loan growth in the third quarter of 2022.

Assets Under Management

Total assets under management (“AUM”) decreased by $359.2 million during the third quarter to $5.92 billion as of September 30, 2022, compared to $6.28 billion as of June 30, 2022. This decrease was primarily attributable to unfavorable market conditions resulting in a decrease in the value of AUM balances. Total AUM decreased by $987.5 million compared to September 30, 2021 from $6.91 billion, which was primarily attributable to unfavorable market conditions throughout 2022 resulting in a decrease in the value of AUM balances.

Credit Quality

Non-performing assets totaled $3.9 million, or 0.14% of total assets, as of September 30, 2022, compared to $4.3 million, or 0.17% of total assets, as of June 30, 2022 and $4.4 million, or 0.21% of total assets, as of September 30, 2021. The reduction in non-performing assets from the end of the prior quarter is due to the sale of an other real estate owned property of $0.2 million and a net reduction in impaired loans of $0.2 million.

The Company recorded a provision of $1.8 million in the third quarter of 2022, compared to a provision of $0.5 million in the second quarter of 2022 and $0.4 million in the third quarter of 2021. The provision recorded in the third quarter of 2022 represented general provisioning consistent with growth of the bank originated loan portfolio, and changes in the portfolio mix.

Capital

As of September 30, 2022, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of September 30, 2022, the Bank was classified as “well capitalized,” as summarized in the following table:

 

September 30,  

 

2022 

Consolidated Capital

  

 

Tier 1 capital to risk-weighted assets

9.54

%

Common Equity Tier 1 ("CET1") to risk-weighted assets

9.54

 

Total capital to risk-weighted assets

11.84

 

Tier 1 capital to average assets

8.18

 

 

 

 

Bank Capital

 

 

Tier 1 capital to risk-weighted assets

10.32

 

CET1 to risk-weighted assets

10.32

 

Total capital to risk-weighted assets

11.09

 

Tier 1 capital to average assets

8.84

 

 

 

 

Book value per common share increased 2.8% from $24.06 as of June 30, 2022 to $24.74 as of September 30, 2022, and was up 13.1% from $21.88 as of September 30, 2021.

Tangible book value per common share (1) increased 3.4% from $20.65 as of June 30, 2022 to $21.35 as of September 30, 2022, and was up 13.3% from $18.85 as of September 30, 2021.

(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 10:00 a.m. MT/ 12:00 p.m. ET on Friday, October 21, 2022. Telephone access: https://register.vevent.com/register/BI8dd29036914947f9a28fcabff9f4af72

A slide presentation relating to the third quarter 2022 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Events and Presentations page of the Company’s investor relations website at https://myfw.gcs-web.com.

About First Western

First Western is a financial services holding company headquartered in Denver, Colorado, with operations in Colorado, Arizona, Wyoming, California, and Montana. First Western and its subsidiaries provide a fully integrated suite of wealth management services on a private trust bank platform, which includes a comprehensive selection of deposit, loan, trust, wealth planning and investment management products and services. First Western’s common stock is traded on the Nasdaq Global Select Market under the symbol “MYFW.” For more information, please visit www.myfw.com.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include “Tangible Common Equity,” “Tangible Common Book Value per Share,” “Return on Tangible Common Equity,” “Efficiency Ratio,” “Gross Revenue,” “Allowance for Loan Losses to Bank Originated Loans Excluding PPP,” “Adjusted Net Income Available to Common Shareholders,” “Adjusted Basic Earnings Per Share,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” and “Adjusted Return on Tangible Common Equity”. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies. Reconciliation of non-GAAP financial measures, to GAAP financial measures are provided at the end of this press release.

Forward-Looking Statements

Statements in this news release regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “position,” “outlook,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “opportunity,” “could,” or “may.” The forward-looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, without limitation, the COVID-19 pandemic and its effects; integration risks and projected cost savings in connection with acquisitions; the risk of geographic concentration in Colorado, Arizona, Wyoming, California, and Montana; the risk of changes in the economy affecting real estate values and liquidity; the risk in our ability to continue to originate residential real estate loans and sell such loans; risks specific to commercial loans and borrowers; the risk of claims and litigation pertaining to our fiduciary responsibilities; the risk of competition for investment managers and professionals; the risk of fluctuation in the value of our investment securities; the risk of changes in interest rates; and the risk of the adequacy of our allowance for loan losses and the risk in our ability to maintain a strong core deposit base or other low-cost funding sources. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 15, 2022 (“Form 10-K”), and other documents we file with the SEC from time to time. We urge readers of this news release to review the “Risk Factors” section our Form 10-K and any updates to those risk factors set forth in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our other filings with the SEC. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today’s date, or to make predictions based solely on historical financial performance. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Contacts:
Financial Profiles, Inc.
Tony Rossi
310-622-8221
MYFW@finprofiles.com
IR@myfw.com

First Western Financial, Inc.
Consolidated Financial Summary (unaudited)

 

Three Months Ended

 

September 30, 

 

June 30, 

 

September 30, 

(Dollars in thousands, except per share amounts)

2022

 

2022

 

2021

Interest and dividend income:

 

 

 

 

 

 

 

 

Loans, including fees

$

24,831

 

 

$

20,318

 

 

$

15,861

 

Loans accounted for under the fair value option

 

513

 

 

 

346

 

 

 

 

Investment securities

 

653

 

 

 

418

 

 

 

180

 

Interest-bearing deposits in other financial institutions

 

533

 

 

 

549

 

 

 

105

 

Total interest and dividend income

 

26,530

 

 

 

21,631

 

 

 

16,146

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

Deposits

 

2,706

 

 

 

1,103

 

 

 

829

 

Other borrowed funds

 

1,027

 

 

 

390

 

 

 

471

 

Total interest expense

 

3,733

 

 

 

1,493

 

 

 

1,300

 

Net interest income

 

22,797

 

 

 

20,138

 

 

 

14,846

 

Less: provision for loan losses

 

1,756

 

 

 

519

 

 

 

406

 

Net interest income, after provision for loan losses

 

21,041

 

 

 

19,619

 

 

 

14,440

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

Trust and investment management fees

 

4,664

 

 

 

4,784

 

 

 

5,167

 

Net gain on mortgage loans

 

885

 

 

 

1,152

 

 

 

4,480

 

Bank fees

 

670

 

 

 

601

 

 

 

458

 

Risk management and insurance fees

 

115

 

 

 

83

 

 

 

301

 

Income on company-owned life insurance

 

88

 

 

 

87

 

 

 

89

 

Net (loss)/gain on loans accounted for under the fair value option

 

(134

)

 

 

(155

)

 

 

 

Unrealized gain/(loss) recognized on equity securities

 

75

 

 

 

299

 

 

 

(3

)

Net gain/(loss) on equity interests

 

6

 

 

 

 

 

 

 

Other

 

85

 

 

 

89

 

 

 

 

Total non-interest income

 

6,454

 

 

 

6,940

 

 

 

10,492

 

Total income before non-interest expense

 

27,495

 

 

 

26,559

 

 

 

24,932

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

11,566

 

 

 

12,945

 

 

 

10,229

 

Occupancy and equipment

 

1,836

 

 

 

1,892

 

 

 

1,550

 

Professional services

 

2,316

 

 

 

2,027

 

 

 

1,660

 

Technology and information systems

 

1,172

 

 

 

1,076

 

 

 

945

 

Data processing

 

888

 

 

 

987

 

 

 

912

 

Marketing

 

403

 

 

 

428

 

 

 

397

 

Amortization of other intangible assets

 

77

 

 

 

77

 

 

 

5

 

Net (gain)/loss on assets held for sale

 

(1

)

 

 

(2

)

 

 

 

Net (gain)/loss on sale of other real estate owned

 

(41

)

 

 

 

 

 

 

Other

 

1,044

 

 

 

1,153

 

 

 

768

 

Total non-interest expense

 

19,260

 

 

 

20,583

 

 

 

16,466

 

Income before income taxes

 

8,235

 

 

 

5,976

 

 

 

8,466

 

Income tax expense

 

2,014

 

 

 

1,494

 

 

 

2,049

 

Net income available to common shareholders

$

6,221

 

 

$

4,482

 

 

$

6,417

 

Earnings per common share:

 

 

 

 

 

 

 

 

Basic

$

0.66

 

 

$

0.47

 

 

$

0.80

 

Diluted

 

0.64

 

 

 

0.46

 

 

 

0.78

 

 

 

 

 

 

 

 

 

 

 

 

 


 

September 30, 

 

June 30, 

 

September 30, 

(Dollars in thousands)

2022

 

2022

 

2021

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Cash and due from banks

$

8,308

 

 

$

11,790

 

 

$

2,829

 

Federal funds sold

 

 

 

 

385

 

 

 

 

Interest-bearing deposits in other financial institutions

 

156,940

 

 

 

159,431

 

 

 

307,406

 

Total cash and cash equivalents

 

165,248

 

 

 

171,606

 

 

 

310,235

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities, at fair value

 

 

 

 

 

 

 

32,233

 

Held-to-maturity securities, at amortized cost (fair value of $78,624 and $84,742 as of September 30, 2022 and June 30, 2022, respectively)

 

84,257

 

 

 

87,029

 

 

 

 

Correspondent bank stock, at cost

 

12,783

 

 

 

4,352

 

 

 

1,772

 

Mortgage loans held for sale

 

12,743

 

 

 

26,202

 

 

 

51,309

 

Loans (includes $22,871, $21,477, and $0 measured at fair value, respectively)

 

2,351,322

 

 

 

2,146,394

 

 

 

1,603,050

 

Allowance for loan losses

 

(16,081

)

 

 

(14,357

)

 

 

(12,964

)

Loans, net

 

2,335,241

 

 

 

2,132,037

 

 

 

1,590,086

 

Premises and equipment, net

 

24,668

 

 

 

24,236

 

 

 

6,344

 

Accrued interest receivable

 

8,451

 

 

 

7,884

 

 

 

6,306

 

Accounts receivable

 

5,947

 

 

 

5,192

 

 

 

5,500

 

Other receivables

 

2,868

 

 

 

4,575

 

 

 

1,553

 

Other real estate owned, net

 

187

 

 

 

378

 

 

 

 

Goodwill and other intangible assets, net

 

32,181

 

 

 

32,258

 

 

 

24,246

 

Deferred tax assets, net

 

6,849

 

 

 

7,662

 

 

 

5,926

 

Company-owned life insurance

 

16,064

 

 

 

15,976

 

 

 

15,715

 

Other assets

 

21,212

 

 

 

21,960

 

 

 

25,047

 

Assets held for sale

 

 

 

 

146

 

 

 

 

Total assets

$

2,728,699

 

 

$

2,541,493

 

 

$

2,076,272

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing

$

662,055

 

 

$

668,342

 

 

$

596,635

 

Interest-bearing

 

1,505,392

 

 

 

1,501,656

 

 

 

1,185,664

 

Total deposits

 

2,167,447

 

 

 

2,169,998

 

 

 

1,782,299

 

Borrowings:

 

 

 

 

 

 

 

 

FHLB and Federal Reserve borrowings

 

273,225

 

 

 

87,223

 

 

 

58,564

 

Subordinated notes

 

32,584

 

 

 

32,553

 

 

 

39,010

 

Accrued interest payable

 

664

 

 

 

304

 

 

 

357

 

Other liabilities

 

19,917

 

 

 

23,391

 

 

 

20,913

 

Total liabilities

 

2,493,837

 

 

 

2,313,469

 

 

 

1,901,143

 

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

Total shareholders’ equity

 

234,862

 

 

 

228,024

 

 

 

175,129

 

Total liabilities and shareholders’ equity

$

2,728,699

 

 

$

2,541,493

 

 

$

2,076,272

 

 

 

 

 

 

 

 

 

 

 

 

 


 

September 30, 

 

June 30, 

 

September 30, 

(Dollars in thousands)

2022

 

2022

 

2021

Loan Portfolio

 

 

 

 

 

 

 

 

Cash, Securities, and Other(1)

$

154,748

 

 

$

180,738

 

 

$

257,594

 

Consumer and Other(2)

 

50,429

 

 

 

47,855

 

 

 

36,243

 

Construction and Development

 

228,060

 

 

 

162,426

 

 

 

132,141

 

1-4 Family Residential

 

822,796

 

 

 

732,725

 

 

 

502,439

 

Non-Owner Occupied CRE

 

527,836

 

 

 

489,111

 

 

 

358,369

 

Owner Occupied CRE

 

220,075

 

 

 

224,597

 

 

 

167,638

 

Commercial and Industrial

 

350,954

 

 

 

312,696

 

 

 

148,959

 

Total loans held for investment

 

2,354,898

 

 

 

2,150,148

 

 

 

1,603,383

 

Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net(3)

 

(3,576

)

 

 

(3,754

)

 

 

(333

)

Gross loans

$

2,351,322

 

 

$

2,146,394

 

 

$

1,603,050

 

Mortgage loans held for sale

$

12,743

 

 

$

26,202

 

 

$

51,309

 

 

 

 

 

 

 

 

 

 

Deposit Portfolio

 

 

 

 

 

 

 

 

Money market deposit accounts

$

1,010,846

 

 

$

1,033,739

 

 

$

905,196

 

Time deposits

 

186,680

 

 

 

147,623

 

 

 

137,015

 

Negotiable order of withdrawal accounts

 

277,225

 

 

 

287,195

 

 

 

137,833

 

Savings accounts

 

30,641

 

 

 

33,099

 

 

 

5,620

 

Total interest-bearing deposits

 

1,505,392

 

 

 

1,501,656

 

 

 

1,185,664

 

Noninterest-bearing accounts

 

662,055

 

 

 

668,342

 

 

 

596,635

 

Total deposits

$

2,167,447

 

 

$

2,169,998

 

 

$

1,782,299

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________
(1) Includes PPP loans of $7.7 million as of September 30, 2022, $10.7 million as of June 30, 2022, and $61.9 million as of September 30, 2021.
(2) Includes loans held for investment accounted for under fair value option of $22.6 million and $21.1 million as of September 30, 2022 and June 30, 2022, respectively.
(3) Includes fair value adjustments on loans held for investment accounted for under the fair value option.

 

As of or for the Three Months Ended

 

September 30, 

 

June 30, 

 

September 30, 

(Dollars in thousands)

2022

 

2022

 

2021

Average Balance Sheets

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

Interest-bearing deposits in other financial institutions

$

101,564

 

 

$

320,656

 

 

$

266,614

 

Federal funds sold

 

260

 

 

 

1,017

 

 

 

 

Investment securities

 

87,340

 

 

 

69,320

 

 

 

29,130

 

Loans

 

2,241,343

 

 

 

2,010,024

 

 

 

1,592,800

 

Interest-earning assets

 

2,430,507

 

 

 

2,401,017

 

 

 

1,888,544

 

Mortgage loans held for sale

 

11,535

 

 

 

19,452

 

 

 

54,717

 

Total interest-earning assets, plus mortgage loans held for sale

 

2,442,042

 

 

 

2,420,469

 

 

 

1,943,261

 

Allowance for loan losses

 

(14,981

)

 

 

(13,257

)

 

 

(12,740

)

Noninterest-earning assets

 

131,381

 

 

 

119,857

 

 

 

92,901

 

Total assets

$

2,558,442

 

 

$

2,527,069

 

 

$

2,023,422

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

Interest-bearing deposits

$

1,480,288

 

 

$

1,547,901

 

 

$

1,160,433

 

FHLB and Federal Reserve borrowings

 

119,025

 

 

 

20,815

 

 

 

81,307

 

Subordinated notes

 

32,564

 

 

 

32,533

 

 

 

29,236

 

Total interest-bearing liabilities

 

1,631,877

 

 

 

1,601,249

 

 

 

1,270,976

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

673,949

 

 

 

679,531

 

 

 

562,569

 

Other liabilities

 

20,103

 

 

 

19,194

 

 

 

17,359

 

Total noninterest-bearing liabilities

 

694,052

 

 

 

698,725

 

 

 

579,928

 

Total shareholders’ equity

 

232,513

 

 

 

227,095

 

 

 

172,518

 

Total liabilities and shareholders’ equity

$

2,558,442

 

 

$

2,527,069

 

 

$

2,023,422

 

 

 

 

 

 

 

 

 

 

Yields/Cost of funds (annualized)

 

 

 

 

 

 

 

 

Interest-bearing deposits in other financial institutions

 

2.08

%

 

 

0.68

%

 

 

0.16

%

Investment securities

 

2.99

 

 

 

2.41

 

 

 

2.47

 

Loans

 

4.52

 

 

 

4.11

 

 

 

3.98

 

Interest-earning assets

 

4.37

 

 

 

3.60

 

 

 

3.42

 

Mortgage loans held for sale

 

5.44

 

 

 

4.71

 

 

 

2.97

 

Total interest-earning assets, plus mortgage loans held for sale

 

4.37

 

 

 

3.61

 

 

 

3.41

 

Interest-bearing deposits

 

0.73

 

 

 

0.29

 

 

 

0.29

 

FHLB and Federal Reserve borrowings

 

2.23

 

 

 

0.54

 

 

 

0.40

 

Subordinated notes

 

4.45

 

 

 

4.45

 

 

 

5.32

 

Total interest-bearing liabilities

 

0.92

 

 

 

0.37

 

 

 

0.41

 

Net interest margin

 

3.75

 

 

 

3.35

 

 

 

3.14

 

Net interest rate spread

 

3.45

 

 

 

3.23

 

 

 

3.01

 

 

 

 

 

 

 

 

 

 

 

 

 


 

As of or for the Three Months Ended

 

September 30, 

 

June 30, 

 

September 30, 

(Dollars in thousands, except share and per share amounts)

2022

 

2022

 

2021

Asset Quality

 

 

 

 

 

 

 

 

 

 

Non-performing loans

$

3,744

 

 

$

3,931

 

 

$

4,358

 

Non-performing assets

 

3,931

 

 

 

4,309

 

 

 

4,358

 

Net charge-offs/(recoveries)

 

32

 

 

 

47

 

 

 

(6

)

Non-performing loans to total loans

 

0.16

%

 

 

0.18

%

 

 

0.27

%

Non-performing assets to total assets

 

0.14

 

 

 

0.17

 

 

 

0.21

 

Allowance for loan losses to non-performing loans

 

429.51

 

 

 

365.23

 

 

 

297.48

 

Allowance for loan losses to total loans

 

0.68

 

 

 

0.67

 

 

 

0.81

 

Allowance for loan losses to bank originated loans excluding PPP(1)

 

0.77

 

 

 

0.78

 

 

 

0.91

 

Net charge-offs to average loans(2)

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

 

 

Assets Under Management

$

5,918,403

 

 

$

6,277,588

 

 

$

6,905,935

 

 

 

 

 

 

 

 

 

 

 

 

Market Data

 

 

 

 

 

 

 

 

 

 

Book value per share at period end

 

24.74

 

 

 

24.06

 

 

 

21.88

 

Tangible book value per common share(1)

 

21.35

 

 

 

20.65

 

 

 

18.85

 

Weighted average outstanding shares, basic

 

9,481,311

 

 

 

9,450,987

 

 

 

7,979,869

 

Weighted average outstanding shares, diluted

 

9,673,078

 

 

 

9,717,667

 

 

 

8,246,353

 

Shares outstanding at period end

 

9,492,006

 

 

 

9,478,710

 

 

 

8,002,874

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Capital

 

 

 

 

 

 

 

 

 

 

Tier 1 capital to risk-weighted assets

 

9.54

%

 

 

10.15

%

 

 

10.66

%

CET1 to risk-weighted assets

 

9.54

 

 

 

10.15

 

 

 

10.66

 

Total capital to risk-weighted assets

 

11.84

 

 

 

12.58

 

 

 

14.37

 

Tier 1 capital to average assets

 

8.18

 

 

 

8.00

 

 

 

7.86

 

 

 

 

 

 

 

 

 

 

 

 

Bank Capital

 

 

 

 

 

 

 

 

 

 

Tier 1 capital to risk-weighted assets

 

10.32

 

 

 

10.99

 

 

 

11.02

 

CET1 to risk-weighted assets

 

10.32

 

 

 

10.99

 

 

 

11.02

 

Total capital to risk-weighted assets

 

11.09

 

 

 

11.75

 

 

 

11.96

 

Tier 1 capital to average assets

 

8.84

 

 

 

8.65

 

 

 

8.11

 

 

 

 

 

 

 

 

 

 

 

 

 

_______________
(1) Represents a Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
(2) Value results in an immaterial amount.

Reconciliations of Non-GAAP Financial Measures

 

As of or for the Three Months Ended

 

September 30, 

 

June 30, 

 

September 30, 

(Dollars in thousands, except share and per share amounts)

2022

 

2022

 

2021

Tangible Common

 

 

 

 

 

 

 

 

Total shareholders' equity

$

234,862

 

 

$

228,024

 

 

$

175,129

 

Less: goodwill and other intangibles, net

 

32,181

 

 

 

32,258

 

 

 

24,246

 

Tangible common equity

$

202,681

 

 

$

195,766

 

 

$

150,883

 

 

 

 

 

 

 

 

 

 

Common shares outstanding, end of period

 

9,492,006

 

 

 

9,478,710

 

 

 

8,002,874

 

Tangible common book value per share

$

21.35

 

 

$

20.65

 

 

$

18.85

 

Net income available to common shareholders

 

6,221

 

 

 

4,482

 

 

 

6,417

 

Return on tangible common equity (annualized)

 

12.28

%

 

 

9.16

%

 

 

17.01

%

 

 

 

 

 

 

 

 

 

Efficiency

 

 

 

 

 

 

 

 

Non-interest expense

$

19,260

 

 

$

20,583

 

 

$

16,466

 

Less: amortization

 

77

 

 

 

77

 

 

 

5

 

Less: acquisition related expenses

 

154

 

 

 

347

 

 

 

332

 

Adjusted non-interest expense

$

19,029

 

 

$

20,159

 

 

$

16,129

 

 

 

 

 

 

 

 

 

 

Total income before non-interest expense

$

27,495

 

 

$

26,559

 

 

$

24,932

 

Less: unrealized gain/(loss) recognized on equity securities

 

75

 

 

 

299

 

 

 

(3

)

Less: net gain/(loss) on loans accounted for under the fair value option

 

(134

)

 

 

(155

)

 

 

 

Less: net gain/(loss) on equity interests

 

6

 

 

 

 

 

 

 

Plus: provision for loan losses

 

1,756

 

 

 

519

 

 

 

406

 

Gross revenue

$

29,304

 

 

$

26,934

 

 

$

25,341

 

Efficiency ratio

 

64.94

%

 

 

74.85

%

 

 

63.65

%

 

 

 

 

 

 

 

 

 

Allowance to Bank Originated Loans Excluding PPP

 

 

 

 

 

 

 

 

Total loans held for investment

$

2,354,898

 

 

$

2,150,148

 

 

$

1,603,383

 

Less: loans acquired

 

248,573

 

 

 

287,623

 

 

 

117,465

 

Less: bank originated PPP loans

 

6,905

 

 

 

9,053

 

 

 

61,838

 

Less: loans accounted for under fair value

 

22,648

 

 

 

21,149

 

 

 

 

Bank originated loans excluding PPP

$

2,076,772

 

 

$

1,832,323

 

 

$

1,424,080

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

$

16,081

 

 

$

14,357

 

 

$

12,964

 

Allowance for loan losses to bank originated loans excluding PPP

 

0.77

%

 

 

0.78

%

 

 

0.91

%

 

 

 

 

 

 

 

 

 

 

 

 


 

As of or for the Three Months Ended

 

September 30, 

 

June 30, 

 

September 30,  

(Dollars in thousands, except share and per share data)

2022

 

2022

 

2021 

Adjusted Net Income Available to Common Shareholders

 

 

 

 

 

 

 

 

 

 

 

Net income available to common shareholders

$

6,221

 

 

$

4,482

 

 

$

6,417

 

Plus: acquisition related expenses

 

154

 

 

 

347

 

 

 

332

 

Less: income tax impact

 

38

 

 

 

87

 

 

 

80

 

Adjusted net income available to shareholders

$

6,337

 

 

$

4,742

 

 

$

6,669

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-Tax, Pre-Provision Net Income

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

$

8,235

 

 

$

5,976

 

 

$

8,466

 

Plus: provision for loan losses

 

1,756

 

 

 

519

 

 

 

406

 

Pre-tax, pre-provision net income

$

9,991

 

 

$

6,495

 

 

$

8,872

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Basic Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.66

 

 

$

0.47

 

 

$

0.80

 

Plus: acquisition related expenses net of income tax impact

 

0.01

 

 

 

0.03

 

 

 

0.04

 

Adjusted basic earnings per share

$

0.67

 

 

$

0.50

 

 

$

0.84

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Diluted Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

$

0.64

 

 

$

0.46

 

 

$

0.78

 

Plus: acquisition related expenses net of income tax impact

 

0.02

 

 

 

0.03

 

 

 

0.03

 

Adjusted diluted earnings per share

$

0.66

 

 

$

0.49

 

 

$

0.81

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Return on Average Assets (annualized)

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

0.97

%

 

 

0.71

%

 

 

1.27

%

Plus: acquisition related expenses net of income tax impact

 

0.02

 

 

 

0.04

 

 

 

0.05

 

Adjusted return on average assets

 

0.99

%

 

 

0.75

%

 

 

1.32

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Return on Average Shareholders' Equity (annualized)

 

 

 

 

 

 

 

 

 

 

 

Return on average shareholders' equity

 

10.70

%

 

 

7.89

%

 

 

14.88

%

Plus: acquisition related expenses net of income tax impact

 

0.20

 

 

 

0.46

 

 

 

0.58

 

Adjusted return on average shareholders' equity

 

10.90

%

 

 

8.35

%

 

 

15.46

%

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted Return on Tangible Common Equity (annualized)

 

 

 

 

 

 

 

 

 

 

 

Return on tangible common equity

 

12.28

%

 

 

9.16

%

 

 

17.01

%

Plus: acquisition related expenses net of income tax impact

 

0.23

 

 

 

0.53

 

 

 

0.67

 

Adjusted return on tangible common equity

 

12.51

%

 

 

9.69

%

 

 

17.68

%