First Western Financial, Inc. (MYFW) Bundle
Understanding First Western Financial, Inc. (MYFW) Revenue Streams
Understanding First Western Financial, Inc.’s Revenue Streams
First Western Financial, Inc. generates revenue through various sources, primarily categorized into net interest income and non-interest income. As of September 30, 2024, the company's total revenues amounted to $65.7 million, down from $73.0 million in the same period of the previous year, reflecting a 10.4% decrease year-over-year.
Breakdown of Primary Revenue Sources
The primary revenue sources for First Western Financial include:
- Net Interest Income: For the nine months ended September 30, 2024, net interest income was $43.8 million, compared to $52.4 million for the same period in 2023, marking a 16.4% decrease.
- Non-Interest Income: Non-interest income for the nine months ended September 30, 2024, totaled $21.2 million, a 33.7% increase from $15.9 million in the prior year.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate indicates a trend in the company's financial health:
- 2023 Total Revenue: $73.0 million
- 2024 Total Revenue: $65.7 million
- Percentage Change: -10.4%
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments for the nine months ended September 30, 2024, is as follows:
| Business Segment | Revenue ($ millions) | Percentage of Total Revenue |
|---|---|---|
| Wealth Management | $14.5 million | 22.1% |
| Mortgage | 5.3 million | 8.1% |
| Banking Services | 46.0 million | 69.8% |
Analysis of Significant Changes in Revenue Streams
Several significant changes in revenue streams have been noted:
- The decrease in net interest income by $8.6 million was primarily due to increased interest expenses driven by higher rates on deposits.
- Non-interest income saw a growth of $5.4 million, driven largely by an increase in trust and investment management fees, which rose to $14.5 million, a 3.2% increase from the prior year.
- Net gain on mortgage loans increased significantly, contributing $4.5 million, up 85.3% year-over-year due to higher origination volumes.
A Deep Dive into First Western Financial, Inc. (MYFW) Profitability
A Deep Dive into First Western Financial, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was reported at 47.7%, a decrease from 56.5% in the same period of 2023.
Operating Profit Margin: The operating profit margin for the nine months ended September 30, 2024, was 11.7%, down from 16.6% in 2023.
Net Profit Margin: The net profit margin decreased to 5.7% for the nine months ended September 30, 2024, compared to 9.3% for the same period in 2023.
Trends in Profitability Over Time
Net income available to common shareholders for the nine months ended September 30, 2024, was $5.7 million, down from $8.4 million in 2023, reflecting a decrease of 32.2%.
Income before income taxes for the same period was $7.7 million, a decline of 32.9% from $11.5 million in 2023.
Comparison of Profitability Ratios with Industry Averages
The following table provides a comparison of profitability ratios with industry averages:
| Metric | MYFW (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 47.7% | 50.5% |
| Operating Profit Margin | 11.7% | 15.3% |
| Net Profit Margin | 5.7% | 8.2% |
Analysis of Operational Efficiency
For the three months ended September 30, 2024, non-interest expenses increased to $19.4 million, compared to $18.3 million in 2023, reflecting a rise of 5.8%.
Net interest income for the three months ended September 30, 2024, was $15.6 million, down 7.1% from $16.8 million in 2023.
The net interest margin decreased to 2.32% in Q3 2024 from 2.46% in Q3 2023, indicating a 14 basis points decline.
Key Financial Highlights
- Income before income taxes for the three months ended September 30, 2024: $2.7 million
- Net income for the three months ended September 30, 2024: $2.1 million
- Non-interest income increased by 33.7% to $21.2 million for the nine months ended September 30, 2024.
Debt vs. Equity: How First Western Financial, Inc. (MYFW) Finances Its Growth
Debt vs. Equity: How First Western Financial, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, First Western Financial, Inc. reported total borrowings of $114.9 million, a decrease of 35.5% from $178.1 million as of December 31, 2023. This includes $50 million in FHLB borrowings and $12.4 million in Federal Reserve borrowings. The company has also issued subordinated notes totaling $52.5 million.
Debt-to-Equity Ratio and Comparison to Industry Standards
First Western Financial's debt-to-equity ratio stands at approximately 0.46, calculated from total liabilities of $2.66 billion and total shareholders' equity of $248.8 million. In comparison, the average debt-to-equity ratio in the financial services industry is around 1.0, indicating that the company is less leveraged than its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
On March 27, 2024, the company repaid $31 million of BTFP borrowings. As of September 30, 2024, it pledged a par value of $10.3 million in securities under the BTFP and borrowed $10 million with a maturity date of January 10, 2025. The company’s subordinated notes have varying interest rates, with the most recent issuance at 7.00% due in 2032.
How the Company Balances Between Debt Financing and Equity Funding
First Western Financial maintains a balanced approach to financing, utilizing both debt and equity to fund growth. The company's total shareholders' equity increased to $248.8 million as of September 30, 2024, reflecting a 2.5% growth from the previous year. This growth in equity, alongside its reduced reliance on debt, indicates a strategic shift towards strengthening its capital base while managing leverage effectively.
| Type of Debt | Amount ($ millions) | Interest Rate (%) | Maturity Date |
|---|---|---|---|
| FHLB Borrowings | 50.0 | Variable | October 1, 2024 |
| Federal Reserve Borrowings | 12.4 | Variable | January 10, 2025 |
| Subordinated Notes | 52.5 | 3.25 - 7.00 | 2030 - 2032 |
In summary, First Western Financial, Inc. demonstrates a prudent financial strategy, balancing its debt levels while focusing on equity growth to sustain its operations and support future expansion initiatives.
Assessing First Western Financial, Inc. (MYFW) Liquidity
Liquidity and Solvency
Assessing Company Liquidity
The liquidity position of a financial institution is crucial for its ongoing operations and stability. The current ratio and quick ratio are two primary indicators of liquidity.
Current and Quick Ratios
As of September 30, 2024, the current ratio stands at 1.09, calculated from total current assets of $276.2 million and total current liabilities of approximately $253.3 million. The quick ratio, which excludes inventory from current assets, is calculated at 0.92.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, reflects a positive trend, with a working capital of $22.9 million as of September 30, 2024, compared to $18.2 million at December 31, 2023. This indicates an increase of $4.7 million or 25.8%.
Cash Flow Statements Overview
The cash flow statements provide insights into the operating, investing, and financing activities:
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) |
|---|---|---|---|
| Operating Cash Flow | $3,868 | $10,066 | $(6,198) |
| Investing Cash Flow | $(106,458) | $(101,180) | $(5,278) |
| Financing Cash Flow | $(31,000) | $0 | $(31,000) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents increased by $21.8 million, or 8.6%, to $276.2 million compared to December 31, 2023. This increase is attributed to reduced loan balances and a decrease in borrowings. However, the borrowings decreased by $63.2 million, or 35.5%, to $114.9 million, indicating a lower reliance on external funding sources.
Deposits experienced a slight decrease of $26.0 million, or 1.0%, to $2.50 billion as of September 30, 2024, primarily influenced by seasonal tax payments and strategic liquidity use by clients.
Overall, while the liquidity position appears stable with sufficient cash reserves, the reliance on decreasing borrowings and fluctuating deposit levels may present potential concerns for future liquidity management.
Is First Western Financial, Inc. (MYFW) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company focuses on key financial ratios and market performance indicators to determine if the stock is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the trailing twelve months (TTM) P/E ratio is 18.4. The industry average for similar financial institutions is approximately 15.2.
Price-to-Book (P/B) Ratio
The current P/B ratio stands at 1.6, while the average P/B ratio in the financial sector is around 1.3.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 11.5, compared to an industry average of 10.0.
Stock Price Trends
Over the past 12 months, the stock price has shown the following trends:
| Date | Stock Price | % Change |
|---|---|---|
| October 2023 | $22.50 | - |
| January 2024 | $20.00 | -11.11% |
| April 2024 | $21.75 | 8.75% |
| July 2024 | $19.50 | -10.34% |
| September 2024 | $22.00 | 12.82% |
Dividend Yield and Payout Ratios
The company currently offers a dividend yield of 2.5%. The payout ratio is 30%, indicating a healthy balance between returning value to shareholders and reinvesting in the business.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating is Hold, with a price target of $23.00 over the next 12 months.
In summary, the valuation metrics suggest that the company is currently trading at a premium compared to its peers in the financial sector, with strong P/E and P/B ratios indicating potential overvaluation. However, the stock price trends and analyst consensus suggest a cautious approach for investors.
Key Risks Facing First Western Financial, Inc. (MYFW)
Key Risks Facing First Western Financial, Inc.
The financial health of First Western Financial, Inc. is influenced by various internal and external risk factors. Understanding these risks is crucial for investors assessing the company's future performance.
Industry Competition
In the competitive financial services industry, pricing pressures are significant. The average interest-bearing deposit rates increased by 78 basis points as of September 30, 2024, impacting net interest income, which decreased by 13.4% for the nine months ended September 30, 2024, compared to the same period in 2023.
Regulatory Changes
Compliance with evolving regulations can present challenges. The company has adopted the Basel III regulatory capital framework, maintaining capital ratios that exceeded well-capitalized requirements as of September 30, 2024.
Market Conditions
Market volatility and economic conditions significantly impact operations. The net interest margin decreased by 37 basis points to 2.34% for the nine months ended September 30, 2024, primarily due to higher rates on deposits.
Operational Risks
Operational risks include challenges in managing loan portfolios and credit quality. As of September 30, 2024, non-performing loans decreased to $14.4 million from $50.8 million at year-end 2023, indicating improvements in credit management but highlighting ongoing vigilance.
Financial Risks
Financial risks are evident through fluctuations in interest income and expenses. Total interest income for the nine months ended September 30, 2024, was $113.8 million, up from $107.0 million in 2023, while total interest expense increased significantly by 27.2% to $67.1 million.
Strategic Risks
Strategic risks involve decisions related to growth and market positioning. The company reported a 32.2% decrease in net income available to common shareholders, dropping to $5.7 million for the nine months ended September 30, 2024.
Mitigation Strategies
The company has implemented several strategies to mitigate risks:
- Cost Control Measures: A focus on reducing non-interest expenses by 9.2% to $17.4 million in Q3 2024 compared to Q3 2023.
- Diversification of Income Sources: Non-interest income increased by 33.7% to $21.2 million for the nine months ended September 30, 2024.
- Enhanced Credit Risk Management: Maintaining an allowance for credit losses at 130.4% of non-accrual loans as of September 30, 2024.
| Risk Factor | Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Pricing pressure on deposits | Cost control measures |
| Regulatory Changes | Compliance costs | Adoption of Basel III |
| Market Conditions | Fluctuating interest margins | Diversification of income sources |
| Operational Risks | Loan portfolio management | Enhanced credit risk management |
| Financial Risks | Interest income volatility | Strategic growth initiatives |
Future Growth Prospects for First Western Financial, Inc. (MYFW)
Future Growth Prospects for First Western Financial, Inc.
Analysis of Key Growth Drivers
The company has expanded its footprint into fourteen full-service profit centers, five loan production offices, and one trust office across five states. As of September 30, 2024, the company reported total assets of $2.91 billion and a total revenue of $65.7 million.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the company generated a net interest income of $43.8 million, a decrease of 16.4% compared to $52.4 million for the same period in 2023. Non-interest income increased by 24.6% to $16.6 million from $13.4 million in the previous year.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company has been focusing on enhancing its information technology infrastructure, which has led to an increase in non-interest income. They have also seen an increase in risk management and insurance fees, which rose by 153.1% in Q3 2024 compared to Q3 2023.
Competitive Advantages that Position the Company for Growth
The company maintains a diversified client base with no single industry concentration, which mitigates risk. As of September 30, 2024, uninsured deposits amounted to $929.4 million, representing 37.1% of total deposits. This stability is crucial for attracting further investments and partnerships.
| Financial Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Interest Income | $15.6 million | $16.8 million | -7.1% |
| Non-Interest Income | $7.0 million | $6.1 million | 14.3% |
| Total Assets | $2.91 billion | $2.99 billion | -3.1% |
| Total Revenues | $65.7 million | $72.0 million | -8.1% |
| Net Income | $5.7 million | $8.4 million | -32.2% |
Conclusion of Key Insights
As of September 30, 2024, the company has seen a strategic push towards growth through technology enhancements and diversification of income streams. The financial metrics indicate a solid foundation despite recent challenges.
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Article updated on 8 Nov 2024
Resources:
- First Western Financial, Inc. (MYFW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of First Western Financial, Inc. (MYFW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View First Western Financial, Inc. (MYFW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.