First Western Financial (NASDAQ:MYFW) Inc. reported robust financial performance for the third quarter of 2023, with a net income of $3.1 million or $0.32 per diluted share. Despite a muted loan demand due to higher interest rates, the company managed to achieve a 5.6% annualized loan growth and a 7.5% increase in total deposits. The company's disciplined expense management and Trust and Investment Management efforts helped offset margin pressure, and it expects the pressure on the net interest margin to moderate in the fourth quarter.
InvestingPro data shows that the company has a market cap of 146.95M USD and a P/E ratio of 10.2, which is relatively low, indicating that the stock could be undervalued. The company's revenue for the last twelve months was reported at 96.03M USD, with a decline of -7.52% indicating a challenging business environment. The firm's stock has taken a hit over the last week, month, and three months with price total returns of -14.97%, -16.9%, and -27.47% respectively.
Key takeaways from the earnings call include:
- First Western Financial's total deposits increased by 7.5% due to a focus on core deposit gathering.
- A 5.6% annualized loan growth was achieved despite higher interest rates.
- Gross revenue saw a 6.6% decline from the previous quarter, largely due to increased interest expenses.
- Non-interest income rose by 54% from the previous quarter, driven by Trust and Investment Management fees.
- The net interest margin decreased to 2.46%, attributed to higher interest-bearing deposit costs and slightly lower yields on average earning assets.
- The company recently opened a full-service office in Bozeman, Montana, to accelerate business development activities.
- First Western Financial's tangible book value per share has increased by 144% since its IPO in 2018, even after a $0.56 decrease due to the adoption of CECL at the beginning of 2023.
InvestingPro Tips indicates a declining trend in earnings per share and revenue that has been declining at an accelerating rate. The company's net income is expected to drop this year, but analysts predict the company will be profitable this year. These insights should be considered while making investment decisions. For more such tips, consider subscribing to InvestingPro here.
In the earnings call, Scott Wylie, CEO of First Western Financial, discussed the company's concentration on construction and commercial real estate loans. He mentioned that the company has halted issuing new construction loans due to slower payoffs and is working to bring the construction loan portfolio back under 100%. The company has been successful in reducing expenses and is working on a project to raise trust fees by 10%.
Wylie also addressed the 3 basis point decline in interest-earning asset yields, attributing it to the impact of non-accrual loans and lower yields in consumer, commercial real estate, and C&I loan categories. Despite the stock trading below book value, the company is focused on maintaining a strong capital base for potential earnings, credit, and acquisition opportunities.
The company also discussed the performance of its mortgage business, which experienced a loss for the quarter and is expected to continue performing negatively in the short term. Despite this, the company expressed optimism about expanding in the Rocky Mountain West and mentioned the positive performance of their Wyoming offices, which have provided stable core deposits.
First Western Financial (NASDAQ: MYFW) addressed concerns about non-performing assets and expressed confidence in their ability to collect on problem relationships, citing current appraisals that support their position. The company remains focused on improving earnings and maintaining careful risk management.
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