Q2 2023 First Western Financial Inc Earnings Call
Participants
Julie A. Courkamp; CFO, COO, Treasurer & Director; First Western Financial, Inc.
Scott C. Wylie; Chairman, CEO & President; First Western Financial, Inc.
Brady Matthew Gailey; MD; Keefe, Bruyette, & Woods, Inc., Research Division
Brett D. Rabatin; Head of Research; Hovde Group, LLC, Research Division
Matthew Timothy Clark; MD & Senior Research Analyst; Piper Sandler & Co., Research Division
William J. Dezellem; President, CIO & Chief Compliance Officer; Tieton Capital Management, LLC
Tony Rossi; MD; Financial Profiles, Inc.
Presentation
Operator
Good day, and thank you for standing by. Welcome to the First Western Financial Second Quarter 2023 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to turn the call over to your speaker for today. Tony Rossi, please go ahead.
Tony Rossi
Thank you, Lisa. Good morning, everyone, and thank you for joining us today for First Western Financial second quarter 2023 earnings call. Joining us from First Western's management team are Scott Wylie, Chairman and Chief Executive Officer, and Julie Courkamp, Chief Financial and Chief Operating Officer.
We'll use the slide presentation as part of our discussion this morning. If you've not done so already, please visit the Events & 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. 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?
Scott C. Wylie
Thanks, Tony, and good morning, everybody. Our second quarter performance reflects the strength of the franchise we've built as we continue to see good stability in our deposit base and healthy asset quality despite the challenging operating environment.
As we indicated, we would do on our last earnings call, we continue to prioritize prudent risk management. From a core earnings perspective, we continue to deliver solid financial performance and generate $3.9 million in pre-tax, pre-provision income. However, we had 3 items that significantly impacted our reported results this quarter.
The first was a $1.2 million pre-tax impairment to the carrying value of contingent consideration assets, which relates to the sale of our Los Angeles Fixed Income Portfolio Management Team that we completed in 2020. The second was a $1.1 million pre-tax loss on loans accounted for under the fair value option. And third, we recorded a $2 million allowance on an individually analyzed loan, which we expect to be non-recurring. Collectively, these items reduced our diluted earnings by about $0.32 after tax this quarter.
Our balance sheet trends reflect the strength and stability of our franchise and client base, as well as the conservative approach that we've taken in operating the company. In general, we continue to see a trend of declining balances among existing client accounts as the Fed tightening continues to pull deposits out of the system. In particular, our clients are using excess liquidity to invest in higher yielding options. This is also typical of Q2 due to tax client payments.
However, our total deposits were essentially unchanged from the end of the prior quarter. And during the month of June, we started to see DDAs increase. This is largely due to new client relationships that we're adding through our business development efforts. While economic conditions remain healthy in our markets, we continue to see a lower level of loan demand due to higher rates and a concern about the potential recession.
We also continue to remain conservative in our underwriting criteria and disciplined in our pricing. Despite these factors, our loan portfolio is still increased at a 4% annualized rate during the second quarter. Given the healthy economic conditions that we continue to see in our markets and our conservatively underwritten loan portfolio, our asset quality continues to remain strong.
During the second quarter, our non-performing assets declined, and we once again had immaterial levels of charge-offs. While asset quality remains strong, we increased our allowance coverage given our prudent approach to risk management.
Moving to Slide 4, we generated net income of $1.5 million, or $0.16 per diluted share in the second quarter. On an adjusted basis, excluding the impact of the continued consideration asset adjustment, we had $0.25 in diluted earnings per share. Excluding the impact of all 3 non-recurring items, we had $0.48 in diluted earnings per share.
And over the past year, due to our strong financial performance and the prudent balance sheet management, we've seen increases in both book value and tangible book value since the impact capital resulting from our adoption of CECL at the beginning of the year.
Turning to Slide 5, we'll look at the trends in our loan portfolio. Our total loans increased $27 million from the end of the prior quarter. This increase was driven by our growth in the CRE portfolio and draws on existing construction lines, which offset slight declines in our other portfolios. The construction projects being funded are primarily multifamily properties to a very strong -- experienced developers in areas with limited housing supply. We had $55 million in new loan production in the quarter, which reflects both the lower level of loan demand we're seeing and our discipline in underwriting criteria and pricing.
Given the lower level of loan demand, we're seeing some banks and insurance companies being very aggressive on pricing to win deals, which has caused us to pass on a number of opportunities where the pricing just doesn't make sense.
With our discipline on loan pricing, we continue to see higher rates on new loan production with the average rate of new loan production increasing by 23 basis points from the prior quarter.
And it's notable that we had $38 million in loan production in June, which represents the largest amount in any month so far this year. So we're starting to see some positive trends more recently.
Moving to Slide 6, we'll take a closer look at our deposit trends. Our total deposits were relatively unchanged for the prior quarter. We continue to have success in new business development and added $37 million in new deposit relationships during the second quarter.
The inflows on these new relationships helped us lessen the typical seasonal impact that we see in the second quarter from outflows related to tax payments. The mix of deposits continues to reflect the trend of clients moving money out of non-interest bearing accounts into interest bearing accounts in order to get a higher yield on their excess liquidity. Our average deposits are up almost 12% annualized from Q2 of, excuse me, fourth quarter of 2022.
Turning to trust and investment management on Slide 7, we had $122 million increase in assets under management in the second quarter, primarily due to market performance with nearly all of our product categories increasing quarter-over-quarter. The growth we're seeing in AUM is being partially offset by some outflows as clients continue to take advantage of higher yield investment opportunities.
With that, I'll turn to call over to Julie for further discussion of our financial results. Julie?
Julie A. Courkamp
Thanks, Scott. Turning to Slide 8, we'll look at our gross revenue. Our gross revenue declined 5% from the prior quarter due to lower levels of both net interest income and non-interest income.
On Slide 9, we'll look at the trends in net interest income and margin. Our net interest income decreased 5.8% from the prior quarter due to an increase in interest expense resulting from higher average cost of deposits. Our net interest margin decreased 20 basis points to 2.73% driven by the increase in interest bearing deposit costs offset partially by the increase in yields on average earning assets.
However, we saw average loan yields increase 15 basis points in the month of June, while average deposit costs were flat in the month. We continue to maintain a higher level of borrowings as they continue to represent a lower cost of funds than other sources in the highly competitive deposit environment that we are seeing. These continue to be short-term borrowings that provide us the flexibility to quickly make adjustments on our liability mix, based on trends in deposit flows, and loan production that we see.
Turning to Slide 10, our non-interest income decreased 32% from the prior quarter due to the non-core items that Scott mentioned earlier. Among our larger recurring sources of non-interest income, our trust and investment management fees were consistent with the prior quarter, while we had a decline in net gain on mortgage loans.
Net gain on mortgage loans decreased to $800,000 as higher rates continue to impact loan demand. Approximately 90% of the mortgage originations were for purchase loans in the second quarter.
Turning now to Slide 11 and a look at our expenses. Our non-interest expense decreased 10% from the prior quarter due to the staffing realignment and reduction in headcount that we implemented in the first quarter, and again in April. As a result of these expense reductions and our disciplined expense control, our non-interest expense came in below our targeted range.
We continue to manage expenses to better align with current revenues and have further reduced our expense guidance within a range of $18 million to $19 million for the remaining quarters in the year.
Turning to Slide 12, we'll take a look at our asset quality. On a broad basis, the loan portfolio continues to perform very well, as we had another quarter of minimal losses and our non-performing assets declined 18% due to the full repayment of 2 private loans. We recorded a provision for credit losses of $1.8 million, which was driven by an allowance established for a commercial loan that we put on non-performing status during the fourth quarter of 2022.
We are working to collect on the sources of repayment on this loan, including a personal guarantee. However, at this point, we felt it was prudent to establish an allowance.
The provision recorded this quarter combined with a modest level of loan growth increased our level of allowance to adjust the total loans by 8 basis points to 0.89% at June 30th.
Now I'll turn this call back to Scott. Scott?
Scott C. Wylie
Thanks, Julie. Turning to Slide 13, I want to take a moment to review our strong track record of value creation for our shareholders. This slide shows our trend in tangible book value creation since our IPO in 2018.
Our consistent ability to drive growth in tangible book value is attributable to a number of factors. We've executed well on a plan that we communicated at the time of our IPO, and generated strong organic growth as we've deepened our presence in Colorado and expanded our presence into attractive markets in other states, which has increased our scale and improved our operating leverage.
We've been disciplined in our acquisition strategy, making sure the pricing made sense from an economic standpoint and that we've executed well on the integration, capturing all of the cost savings that we projected, which has made them nicely accretive to our names and to our tangible book value.
Our conservative underwriting criteria and the strength of our clients has resulted in extremely low levels of credit losses throughout our history, including the challenging economic conditions presented over the past few years by the pandemic and the ensuing period of high inflation and interest rates.
And finally, our prudent asset liability management has served our shareholders well, most notably when we decided not to invest our excess liquidity that we built up during the pandemic into low yielding bonds, which enabled us to avoid the significant losses in investment portfolios and the resulting hits to capital that many banks have experienced as interest rates have risen. We're very proud of this track record of value creation and believe that we're well positioned to continue to create additional value for our shareholders in the future.
Turning to Slide 14, I wanted to wrap up with some comments about our near term outlook. While there's a high degree of economic uncertainty, we're going to continue to prioritize prudent risk management and maintain high levels of liquidity, capital and reserves, even if that impacts our level of profitability in the short-term.
We believe it's likely that loan growth will remain at a low level in the near future, although, we've maintained a high level of unfunded commitments throughout the year. This provides a potential catalyst for higher level of loan growth as borrowers increase utilization of existing credit lines. As we've mentioned in our past few earnings call, deposit gathering will continue to be a focus throughout the organization.
Given the current economic environment, we continue to see good opportunities to add new clients who are looking to move to a stronger finance institution. We will continue to prioritize prudent risk management, and will also remain committed to acting in the best long-term interest of our shareholders.
Accordingly, as market conditions stabilize, we'll continue to evaluate opportunities for capital utilization that can create additional value for shareholders.
With that, we're happy to take your questions. Lisa, please open up the call.
Question and Answer Session
Operator
(Operator Instructions) The first question for today will come from Brady Gailey of KBW.
Brady Matthew Gailey
So the margin took another step down here, linked quarter, which you're not alone that's the industry has seen that. But from this 274 base, have we hit the bottom and an inflection point? Or do you think there could be some more NIMs slippage
in the back half of this year?
Scott C. Wylie
Well, we previously said that we thought our margin would trough in the second quarter, and we still think that will be the case. But as you know, it's a little bit difficult to predict the economic and competitive and financial outlook from where we are today.
I think, we talked about in our prepared comments, positive trends with our DDAs in June and margin also increasing in June. So those seem like really positive indicators for the rest of the year. So our hope is that there's a improvement in the margin. I think prudently, we could say flat to slight improvement Q3, and then we're expecting continued improvement in Q4.
We're also assuming in our numbers that we won't see a whole lot of increased short-term rate increases from the Fed, but assuming that we're in a relatively stable environment from the Fed going forward here, we're hopeful that Q2 is going to be our trough.
Brady Matthew Gailey
And then I heard your comment about a low level of loan growth kind of in the near term. And historically, First Western has been a pretty solid organic grower. But do you think that a more normalized level of growth will come next year in 2024? Or do you think even next year it will remain at a pretty depressed level?
Scott C. Wylie
Yes, I think that that really depends on the competitive environment and the economic outlook. We're seeing loan demand, but we're seeing some of the loans that we would like to do, the relationships we'd like to build being taken away from us by hundreds of basis points. They're not beating us by 5 or 10 or 20 basis points. These are priced 200 basis points or 300 basis points under where we're lending.
So, I mean, that's a difficult factor for us. And we're just not going to do loans like that in this environment, doesn't make any sense to us.
I think also we have a situation here where our clients don't need to do things. They don't need to borrow the money to do things. They can wait. And I think a lot of them are doing that. They're saying things that made sense at 3%, 4%, 5%, that don't make that sense at 7%, 8%, 9%, we can wait. And so I think we're seeing demand down because of that.
On the other hand, on the positive side, you know, we're in economies that are doing well. Our markets are doing well and they're growing. So I think, we'll still see some benefit from that. And I think we'll see some benefit from the unused credit lines that we have on the books that people are drawing down, the construction loans that we have on the books that people are drawing down.
So I think we're going to still see loan growth, probably in the mid single digits, as we've said before for 2023. And then if the economy continues to be strong, maybe rates abate a little bit, maybe competition abates a little bit, we could see stronger growth in 2024. Certainly the machine that has traditionally produced nice loan growth here is still in place. And I think we're just hearing on the side of caution as an organization here.
Brady Matthew Gailey
And then finally for me, the loan to deposit ratio took a modest step up. It's now 106%. Is there a goal that you would like to get that down to? And any thoughts on how you could reduce that ratio?
Scott C. Wylie
Yes. Our view on that hasn't changed. We've said that we've historically operated in kind of the mid 90s and that we'd like to get that down to a 100 by the end of this year. And then back in the mid 90s after that.
Again, the quarter-to-quarter or month-to-month changes are hard to predict. And we don't really manage to loan deposit ratio this month of X or Y or, but it's clear in the organization that we're focused on deposit gathering. We talked about some of the successes we've had there, some of the positive trends we saw in June in particular.
We went back and looked at our historic Q2 deposit growth, and we typically lose about 2% of our deposits in Q2 over the past several years. And we were down 1% in Q2 of this year. So, I think that we did well given the tightening monetary policy and the pressure --competitive pressure that we're seeing and all that.
So, I feel like we're doing relatively well. Obviously, it doesn't feel great to go backwards from Q1, but I don't think there's some underlying concern there or any reason to change what we said we were going to do and what we've been doing. I would expect that to pan out here over the remaining half of the year and get us back in line with our historic loan to deposit ratio.
Operator
And our next question will be coming from Matthew Clark of Piper Sandler.
Matthew Timothy Clark
First question's just -- or a couple of questions around the margin, just trying to drill into the drivers and more specifically the numbers. But can you give us the average margin in the month of June and what the spot rate was at the end of June on deposits, either interest-bearing or total?
Julie A. Courkamp
Sure. So the spot rate for deposits at the end of June was 2.81%. So you'll see a little bit of a increase over what our spot rate was in March. Actually, our spot rate on loans ended quite a bit higher than March as well at 5.38%. So that's moving nicely up as well. And we're seeing new loans getting booked at just under 8%, so 7.8%.
So I think the trend line there is pretty good, which gives you some indication of where our NIM might head. For June, spot NIM was right about 2.8%.
Matthew Timothy Clark
2.8%, that's the month of June, I assume?
Julie A. Courkamp
Yes, the month of.
Matthew Timothy Clark
And then you mentioned the additional cost saves, I think in the earnings release in the back half of the year, and supporting kind of that lower run rate. I guess, where those additional savings coming from and have you -- have those decisions been made yet? Have you pulled the trigger, I guess?
Scott C. Wylie
Yes. We're not planning any further cost cuts here, just to be clear. What we have seen is our cost saves that we put in place in Q1 and in April are panning out as we had expected. And so that's just producing results for the second half of the year that are in line with the guidance that Julie provided, which is we expect to operate in kind of the $18 million to $19 million operating expense range.
There's some volatility in all this stuff. And so I don't know exactly where it will land, but you know to us within a $0.5 million of $18.5 million seems like the right range from the cuts we've already made.
I think there's a broader point here, I would just make quickly if I could, Matt, which is, we've really tried hard not to impact the valuation capability of the businesses here, we've postponed some things that we wanted to do sooner, and we've tried to drive efficiency into the things that we are doing. And frankly, that's making some investments that we think will provide more efficiency in the future as well.
So, we're continuing to spend money on things that are important drivers for the current company and for the future in driving value for shareholders. But I think, one of the things that we've talked about internally is, are there more cuts that can be made that aren't cutting into the future of the organization? And we don't want to do that, and we haven't done that, and we don't intend to do that.
Matthew Timothy Clark
And then just last one for me on the non-performer that required some specific reserves. Can you just remind us of the situation there, the type of credit, I guess,
the basis for the $2 million as well, and kind of the timing of the resolution there?
Scott C. Wylie
Yes. Well, this is a C&I credit that we did 18 months or 24 months ago that ran into trouble. They were in a COVID-related situation, that have kind of dried up on them. And as usual, we look for 3 sources of repayment and personal guarantees. We had the business. We had $19 million in inventory, and we had real estate collateral.
The business is struggling. The collateral, we're having valuation issues with that we kind of uncovered once we got a receiver in place, and the real estate actually has turned out fine there. The personal guarantees, we're now trying to collect on, but just looking at the whole picture, we felt like putting a small specific reserve on that at this point made sense, and we did that.
Hopefully, that will continue through the workout process and not have any further loss. Hopefully, we'll have a full recovery on it. We'll see how that all plays out. Just takes time to get through these things, as you're probably well aware.
Operator
And the next question will be coming from Brett Rabatin of Hovde.
Brett D. Rabatin
I joined a little late. I was having some technical problems with the dial-in. Scott, I think in the past, you've been interested in doing M&A, and I think it's still a little bit ways off for some folks, but starting to hear maybe some chatter and some people talking. Obviously, there's going to be a desire to bulk up given the regulatory environment that's expected. Are you hearing anything out there in terms of your contacts? And what would be your plans if things, quote, normalize, so to speak, from the Mark's perspective or something can get done? Do you think you'll be active?
Scott C. Wylie
I do. My experience in my 35 years or so of running my own little banks here is that when we see a big financial crisis of one sort or another, then we see kind of the big blow-ups first like we saw in March. And then we see some smaller problems like we've seen since then.
And then there's a lot of regulatory pressure that's brought to bear on weaker institutions, and then that creates lots of opportunity for stronger institutions. And so I think that -- that's going to play out in our favor here over the course of the next 12 or 24 months.
I can't tell you that we have people that we're interested in knocking on our door today, but they sure are still talking to us and they have interest. And I think that people understand that having critical mass here is going to be beneficial. I think all that ties into the need to continue to protect our capital and make sure that we have good, strong capital ratios and they're generating nice tangible book value creation like we showed on Slide 13. And I expect that at some point that that will really come back into play as a nice area of opportunity for us.
Brett D. Rabatin
And then I heard your response on the expenses, but I wasn't quite entirely clear on the outlook and just if there are things that you're having to spend money on, either inflationary or that you want to get accomplished from either a technology perspective or operational that might change the expense level in 2Q either in the back half of this year or next year. Any color there?
Scott C. Wylie
Well, I'll take a quick stab at it. Julie, and then if you want to add more, feel free. We had been thinking that we were going to spend about $21 million a quarter this year, including all those things you just listed. And we decided in, I don't remember exactly, December, January, something like that, that we wanted to be more cautious than that. And that we wanted to be mindful of expenses. And if we had a vacancy, maybe not fill it too fast. If we had a project we were working on that we could stretch out, or if we had contracts that we could review and get some cost saves on, we would do that.
And so we worked hard on that in. Well, we started working on it in Q1, and I think we were down 22 or 23 FTEs, I don't remember the exact number now, in Q1. And then in April, we said, okay, if we can get our expense run rate down to $19 million, what would that take? And then we did a kind of a formal process internally, and by the end of April, had completed that project, was fully implemented, and we came out with $18.5 million in expenses in Q2.
And then the guidance we've given today for the rest of the year is that same number of $18.5 million, with a $0.5 million swing up or down. So the number we talked about was $18 million to $19 million, just because of the fact it's a relatively small number, and you just don't know from 1 quarter to the next.
But we don't anticipate some big expense that we have to make, and we do not anticipate any other big expense cuts that we want to make. We look at that as some changes we wanted to make for the outlook that we had for 2023. Those are done, and they're working, frankly, a little better than we had expected.
Brett D. Rabatin
So the guidance on Slide 11, would be inclusive of anything else, technology, other stuff?
Scott C. Wylie
Correct.
Brett D. Rabatin
Okay. And then just lastly, Scott or Julie, is there a level of capital that you want to get to, or have the regulators given you any input onto, hey, CET1, we want this level? Any thoughts on the capital levels?
Scott C. Wylie
We have not heard anything from regulators on capital. I think they're happy with where we are, as far as we know, and our own internal feeling is that we would love to be buying stock back at some of the prices we've seen over the last 30 or 60 days. But it just seems wise for us and prudent for us to protect that capital for now, and continue to build our tangible book value, continue to build our capital ratios, and be ready to take advantage of the opportunities that we think are down the road, both in terms of organic growth, in terms of expansion, and in terms of acquisition.
Operator
And our next question will be coming from Bill Dezellem of Tieton.
William J. Dezellem
You had referenced some favorable developments on both the deposit front and on the loan front in the month of June, and I'm hoping that you will talk maybe to the dynamics that you saw specifically in June in a bit more detail, and carry that into July for us. And if you want to go beyond loans and deposits, that's fine. If you want to isolate your comments to those 2 items, that's also fine.
Scott C. Wylie
Sure. I think they're similar things, but different. So maybe we could take it in pieces. For me, what we saw in deposits in Q2 is our usual Q2 runoff where people are paying taxes. And so we see, because we have larger depositors here, we do see larger withdrawals for tax payments in Q2.
And as I said, we had about half of the impact in Q2 of this year than what we've seen historically. So we thought that was a nice positive for us. I have a theory, Bill, and it seems to be playing out. I talked about this, I think, in the last 2 calls that because of our type of client base, that we experienced the deposit beta that others are going to experience more quickly than others did. And so we had a go last September, October, and really kind of catch up our deposit rates for our clients to what the Fed had done more quickly than a lot of our regional paying peers had to do that have larger retail deposit bases with a lot smaller depositor, average depositors and whatnot.
So I think that the expectation for me 6 months ago was that that curve was going to level off for us and accelerate for the other guys. And I think that's exactly what we've seen. And I think that that played out a little bit in Q2, and I think it played out a lot in June. So I'm hopeful that, this is just another indication that we're going to be able to manage our liability cost increases, at least as well as our peers do, if not better, because we've had those hits earlier to our cost of funds.
So that would be kind of my answer on the deposit side. Julie, is there anything you want to add to that?
Julie A. Courkamp
We also thought, I think this has been said, but just to put a finer point on this point, our DDAs increased in June, which was a nice indicator. And then our average deposit costs were flat in June compared to the prior month, May. So I think that there's a couple of just indicators there that things might be flattening out and starting to hopefully trend in a more positive direction on the deposit side.
Scott C. Wylie
Yes.
William J. Dezellem
And then if I may interrupt before we go to loans, have you seen those same trends continue here in the first 28 days of July, either if you know the numbers quantitatively fine or even qualitatively?\
Scott C. Wylie
So our Director of Finance is in the room here with us and we're looking at him, he's going, well, yes, a little bit.
Julie A. Courkamp
We think the deposit costs are flat. As we've been kind of seeing that trend continue through July. And I don't think we've seen an increase in DDAs, but it's not really declining either. So I think flat would be a good way to describe what we're seeing in July.
William J. Dezellem
Great, thank you both for that. Okay, onto the loan side.
Scott C. Wylie
Yes, and actually to that point, Bill, to the extent that our liability costs are more or less flat, our loan yields improve by themselves, right? Because we've got floating rate loans and we got whatever it turns out to be, $50 or a $100 million a quarter that roll off and get repaid. And then we originate new loans that are 300, 400 basis points higher. And that'll pull up our asset yield on average by 10, 15, 20 basis points, whatever the numbers turn out to be. So that having nice control over those liability costs really benefits us in the NIM, because we see improvements just by the passage of time on the asset side.
In terms of like the loan growth and loan pricing, when we talked a little bit about loan volume and trying to guess what that might be for 2024, I actually think, that there's an interesting kind of a psychological thing going on with our type of a client, which is, I think there was a lot of sticker shock here over the last 6 months where they would come in and think that we're going to renew their loan for 4%. And then we explained to them that rates have gone up 525 basis points so far. And so the new rate's going to be 8% or whatever. And they're fine, they can do that. And we haven't really seen any issues with that.
But in terms of doing new things, they're saying, well, I can wait, I don't need to do that now. And so I think that that sticker shock has now passed and people are now understanding that that's where rates are. If they want to do things, that that's the rate that they have to build in their models. And so I do think that, we're going to see more loan demand. We actually saw a bigger pipeline on June 30th on the loan side than we had on March 31st.
So I think that's promising for the second half of the year. I think that's a sign that people that are figuring out what this rate environment means, they can still do things. I think that's symptomatic of the fact that I believe we're in good economies with good, strong economic growth and entrepreneurs that still want to do things. So I think that all that bodes well and frankly kind of rewards us for making the conscious decision not to cave on structure or price here over the last 9 or 12 months when a lot of our competitors have been doing things that just didn't make sense to us.
William J. Dezellem
And so do you have a sense that your customers that paused activities or opportunities that they may have been considering but kind of using your phrase, they really didn't have to do it, that the sticker shock has now gone away, they've mentally adjusted and adjusted their financial model, it still works and now they're moving forward? Or are you sensing something different than that?
Scott C. Wylie
Well, I think some are going to say, I'm going to wait until rates come down and some are saying I can re-price the rents I'm going to charge or the costs of the prices I want to sell things at or whatever it is that make the economic model work. I just think that the economy and the consumer and the whole sort of pricing infrastructure that goes around a decision to do something or not do something has to reset.
You have to go back to the fact, we haven't had a 525 basis point increase in short-term rates in, I don't know if it's forever or if it's just my career, but certainly people in our markets that are doing things have never experienced this. And I think there's just a lot of sticker shock to that. And I think what we've seen in our financial results is reflective of that. And I don't think it's going to last forever. I think if rates are going to settle in here where they are today and my feeling from the way Jay Powell was talking this week, that wouldn't be a bad way to have a base case. Then people are going to come back, they're going to be doing things and that's going to create opportunities for us to grow and prosper in the markets that we're in.
Operator
At this time, I'm not showing any further questions in the queue. And I would like to turn the call back over to management for closing remarks. Please go ahead.
Scott C. Wylie
Okay. Well, thank you, Lisa. As of mid-July, it's been 5 years since our IPO. And despite the short-term noise here, the fundamentals of our company are very sound and we continue to deliver on long-term value creation for our shareholders. You know, over these 5 years, our balance sheet has tripled to just over $3 billion in total assets. Revenues have almost doubled, growing from $57.8 million in 2018 to $112.2 million in 2022. Our core earnings are way up. Our free cash flow to common shareholders were actually negative in 2017 and our core earnings have really shown nice growth over these years. And as noted in our deck, our tangible book value is up almost 2.5x since the IPO.
So really appreciate the support of our stakeholders that have made this happen, our associates here, our clients, our shareholders, and our communities that we operate in that have gotten us to this big 5-year anniversary of a public company so successfully. So thanks everybody for dialing in. Thank you for your support of First Western. We really appreciate it. And I hope you have a great weekend.
^Operator^ This concludes today's conference. Thank you all for joining. You may now disconnect. Everyone enjoy the rest of your day.
