Release Date: April 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you provide details on the asset quality, specifically regarding the sale of the construction loan and the paydown of the largest non-performing loan (NPL)?
A: Scott Wylie, CEO of First Western Financial, explained that the process of resolving loans in workout is complex and time-consuming, especially when multiple loans and pieces of collateral are involved. The sale of one property in Q1 and another in Q2 has been positive, with five properties remaining in different stages of collection. The company foreclosed on two of these properties recently, expecting consistent progress throughout the year. The outstanding balance on the relationship is $38.5 million, with $5.8 million in specific reserves.
Q: What is the current status and future outlook for the loan portfolio's repricing and net interest margin?
A: David Weber, CFO, mentioned that about 25% of the loan portfolio is set to reprice in the next 30 days. The net interest margin for March was slightly lower due to amortized loan fees, but normalized expectations are around 2.31%. The margin is expected to remain stable in the second quarter, with future quarters depending on the stabilization of DDAs and loan production rates.
Q: How is the mortgage banking segment performing, especially with the addition of new mortgage loan originators (MLOs)?
A: Scott Wylie highlighted that the mortgage banking segment saw improved earnings due to both increased volume and better gain on sale margins. The addition of new MLOs has already started contributing positively. The company is optimistic about the potential for increased loan production as the year progresses, especially if interest rates stabilize.
Q: What are the expectations for deposit trends, particularly the shift from non-interest-bearing to interest-bearing accounts?
A: Scott Wylie noted a disappointing trend in Q1 with a $48 million decline in non-interest-bearing deposits, largely due to operational fluctuations and shifts to interest-bearing accounts. The company anticipates this might stabilize throughout the year, although historical patterns suggest possible declines in Q2 due to tax payments.
Q: Can you discuss the impact of legal and workout fees on financial performance and their expected trend?
A: Scott Wylie and David Weber acknowledged that Q1 included higher legal and workout fees totaling $700,000, primarily associated with non-performing loans. These are expected to decrease as resolutions progress. Additionally, there were unusual operating losses from wire fraud, which are not expected to recur at the same level.
Q: What is the progress and outlook for new branches, particularly in new markets like Arizona and Montana?
A: Scott Wylie described the process of establishing new branches as challenging but promising. The Bozeman, Montana branch has transitioned to a full-service branch and is showing positive signs. Efforts are ongoing to rebuild teams and enhance performance in Arizona, with other new locations also gaining traction.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
