Q3 2025 First Western Financial Inc Earnings Call

Speaker #2: Thank you for standing by, and welcome to First Western Financial Inc.'s third quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Speaker #2: After the speaker presentation , there will be a question and answer session . To ask a question during the session , you will need to press star one one on your telephone .

Speaker #2: To remove yourself from the queue , you may press star one . One . Again , I would now like to hand the call over to Tony .

Speaker #2: Please go ahead .

Speaker #3: Thank you, Latif. Good morning, everyone, and thank you for joining us today for the First Western Q3 2025 Earnings Call.

Speaker #3: Joining us from First Western's management team are Scott Wylie, Chairman and Chief Executive Officer; Julie Courkamp, Chief Operating Officer; and David Duncan, Chief Financial Officer.

Speaker #3: We will use a slide presentation as part of our discussion this morning. If you have not done so already, please visit the Events and Presentations page of First Western's Investor Relations website.

Speaker #3: 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 that involve risks and uncertainties.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures.

Speaker #3: 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.

Speaker #3: And with that, I'd like to turn the call over to Scott. Scott.

Speaker #4: Thanks , Tony . And good morning , everybody . Starting on slide three , we executed well in the third quarter and saw positive trends in many areas of loan deposit growth .

Speaker #4: Growth in our net interest income, well-managed expenses, and generally stable asset quality. This resulted in an increase in our level of profitability and positive operating leverage.

Speaker #4: The market remains very competitive in terms of pricing on loans and deposits. We continue to successfully generate new loans and deposits by offering a superior level of service, expertise, and responsiveness, rather than winning business by offering the highest rates on deposits or the lowest rates on loans.

Speaker #4: As other banks are doing, we continued to maintain a conservative approach to new loan production with our disciplined underwriting and pricing criteria.

Speaker #4: However , as a result of the additions we made to our banking team over the past few years , as well as generally healthy economic conditions in our markets , we had a solid level of loan production , which was well diversified across our markets and industries , and loan types .

Speaker #4: As a result of our financial performance and the balance sheet management strategies, we had a further increase in both book value and tangible book value per share.

Speaker #4: And we used our strong capital position to repurchase some of our shares during the third quarter, which was critical to our tangible book value per share.

Speaker #4: Moving to slide four, we generated net income of $3.2 million, or $0.32 per diluted share, in the third quarter, which was higher than the prior quarter and represents a 45% increase from our EPS in the third quarter of last year.

Speaker #4: With our prudent balance sheet management, our tangible book value per share increased by 1.2% this quarter. I'll turn over the call to Julie for some additional discussion of our balance sheet and trust investment management trends.

Speaker #4: Julie .

Speaker #5: Thanks, Scott. Turning to slide five, we'll look at the trends in our loan portfolio. Our loans held for investment increased by $50 million from the end of the prior quarter.

Speaker #5: We continue to be conservative and highly selective in our new loan production. However, with the higher level of productivity we are seeing from the additions to our banking team that we have made over the last several quarters, we are observing a solid level of new loan production.

Speaker #5: While we are also seeing an increase in CRE loan demand that meets our underwriting and pricing criteria, new loan production was $146 million in the third quarter.

Speaker #5: The new loan production was well diversified, with the largest increases coming in our residential and commercial real estate portfolios. We are also getting deposit relationships with most of these new clients.

Speaker #5: We continue to be disciplined and are maintaining our pricing criteria, which resulted in the average rate on new loan production being 6.38% in the quarter.

Speaker #5: Moving to slide six, we can take a closer look at our deposit trends. Our total deposits increased $320 million from the end of the prior quarter.

Speaker #5: This was due both to both new accounts and a build up among existing client balances . We had an increase in non-interest bearing deposits due to inflows we saw from title companies , driven by mortgage industry volume .

Speaker #5: Additionally , we had an increase in interest bearing deposits as a result of the successful execution of our deposit gathering strategy . Now , turning to trust and investment management on slide seven .

Speaker #5: We had a $64 million decrease in our assets under management in the third quarter, primarily attributed to net withdrawals on low-fee product categories, partially offset by improved marketing conditions on investment agency accounts.

Speaker #5: This resulted in an increase of $443 million, or 2.7%, during the quarter. Trust and investment management fees increased by $100,000 from the prior quarter, primarily driven by the increase in investment agency AUM.

Speaker #5: Now, I'll turn the call over to David for further discussion of our financials. David.

Speaker #6: Thank you . Julie . Turning to slide eight . We'll look at our gross revenue . Our gross revenue increased 8.7% from the prior quarter due to increases in both net interest income and noninterest income year over year .

Speaker #6: Our gross revenue increased 15.5%. Now, turning to slide nine, we'll look at the trends in net interest income and margin.

Speaker #6: Our net interest income increased for the fourth consecutive quarter and rose 8.9% from the prior quarter, primarily due to an increase in our average interest-earning assets.

Speaker #6: With the strong deposit growth , we had contributing to our higher level of cash on the balance sheet , our net interest income increased 25% relative to the third quarter of 2020 .

Speaker #6: For our NIM decreased 13 basis points from the prior 1:45 to 0.54 percent. This was due to unfavorable mix shifts in both interest-earning assets and deposits.

Speaker #6: As our deposit growth during the quarter was in higher cost money market accounts . The strong deposit growth during the quarter contributed to higher cash held on the balance sheet .

Speaker #6: As this liquidity is deployed into the loan portfolio during the fourth quarter, we expect to see NIM expansion. Now turning to slide ten.

Speaker #6: Our noninterest income increased by more than 500,000 or 8.5% , which is 34% annualized from the prior quarter . This was primarily due to increases in all major fee categories , including Trusted Investment Management fees , insurance fees , and gain on sale of mortgage loans .

Speaker #6: The increase in gain on the sale of mortgage loans was driven by a higher level of mortgage production, and the increase in trust and investment management fees was driven by an increase in investment agency AUM.

Speaker #6: As a result of improving market conditions . Now , turning to slide 11 , and our expenses . Our noninterest expense increased by less than 1 million from the prior quarter .

Speaker #6: Most areas of non-interest expense were relatively consistent with the prior quarter. As we continue to tightly manage expenses while also making investments in the business that we believe will positively impact our long-term performance.

Speaker #6: Turning to slide 12, we'll look at our asset quality. As Scott indicated earlier, we saw generally stable trends in the loan portfolio in the third quarter, with slight increases in MPLs and NPAs.

Speaker #6: This was primarily due to one loan that was downgraded during the quarter, and we had a minimal level of net charge-offs.

Speaker #6: Again, this quarter, we had a slight increase in our allowance coverage from 75 basis points in the prior quarter to 81 basis points in the third quarter.

Speaker #6: Now, I'll turn it back to Scott. Scott.

Speaker #4: Thanks , David . Turning slide 13 , I'll wrap up with some comments about our outlook . Overall , we continue to see relatively healthy economic conditions in our markets , and we're seeing good opportunities to add both new clients and banking talent to the ongoing disruption from M&A activity here in the Colorado market .

Speaker #4: Our loan deposit pipelines remain strong and should continue to result in solid balance sheet growth in the fourth quarter . In addition to the balance sheet growth , we also expect to see positive trends in net interest margin , fee income , and more operating leverage resulting from our disciplined expense control .

Speaker #4: Based on trends we're seeing in the portfolio and the feedback we're getting from our clients, we're not seeing anything to indicate that we'll experience any meaningful deterioration in asset quality.

Speaker #4: The positive trends we're seeing in a number of key areas are expected to continue, which we believe should result in steady improvement in our financial performance and further value being created for our shareholders.

Speaker #4: Going forward . So with that , we're happy to take your questions . Latif , if you could please open up the call .

Speaker #2: Yes , sir . As a reminder to ask a question , you will need to press star one one on your telephone to remove yourself from the queue .

Speaker #2: You may press *1 once again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brett Rabatin of Holding Group.

Speaker #2: Please go ahead, Brett.

Speaker #7: Hey , good morning everyone . I wanted to start with , hey , why don't you start with the deposits and the strong NMDA growth ?

Speaker #7: And if I heard you correct , it sounds like that's a mix of internal efforts as well as maybe the mortgage department . It just .

Speaker #7: Can you maybe go into a little more detail there? And then, are those levels sticky? The growth and the level. Thanks.

Speaker #4: Well, I think we've talked about our efforts to grow deposits, and the fact that that would happen a little bit in a lumpy fashion wouldn't be a big surprise, given our history here.

Speaker #4: You know , we do see large deposits coming in and out . And in this case , I think the things that we saw that happened in Q3 are deposits that are going to stay here and give us a higher deposit base to grow from into Q4 .

Speaker #7: Okay . That's helpful . And then the NPA that you added during the quarter , you know , any color on that credit and then just it was there part of the provision related to a specific reserve for that , for that MTA .

Speaker #4: Yeah , I think , you know , we have a number of credits that have performance issues over time . And this is one that is a CNI loan .

Speaker #4: We have been paying attention to it . We downgraded it in Q3 , and we do have a specific provision for it . We expect it to be worked out and and worked through over time .

Speaker #4: The provision is more than adequate.

Speaker #7: Okay . And then just maybe lastly , if I could ask on the margin , Julie , you indicated the margin would be up from here .

Speaker #7: Any magnitude that you could share in terms of what you think Q might look like, presuming we get a rate cut or two?

Speaker #6: Yeah , I think we do have opportunity to see Nim expansion . If you look at the the amount of liquidity that's sitting on the balance sheet , if we redeploy that into the loan portfolio at something like plus 200 , I think that that should drive Nim expansion .

Speaker #6: There . We also , you know , certainly have the ability to continue to improve earning asset yields and lower our deposit costs .

Speaker #6: So I think we've got a pretty nice path for Nim expansion in the fourth quarter.

Speaker #7: Okay, David. Any magnitude that you're thinking about in terms of basis points?

Speaker #6: Yeah , I'm I'm thinking we can achieve , you know , something like five basis points of Nim expansion .

Speaker #7: Okay. Okay. Great. Appreciate all the color.

Speaker #2: Thank you. Our next question comes from the line of Matthew Clark from Piper Sandler. Your line is open, Matthew.

Speaker #8: Thanks. I wanted to start on the spot rate on deposits at the end of the quarter.

Speaker #6: Yeah, Matthew, it was 3.04%.

Speaker #8: Okay . And then any updated thoughts on the beta ? You're looking to achieve with additional fed rate cuts through the through the cycle ?

Speaker #8: And whether or not that starts to decline over time.

Speaker #6: Yeah, it has been declining, and it will certainly continue. We achieved somewhere around a 63% beta on money market accounts in the third quarter.

Speaker #6: And I think that's reasonable for the fourth quarter expectations as well.

Speaker #8: Okay. And then the expense run rate going forward, I think some of the increase this quarter was really the incentive compensation.

Speaker #8: But what's your thoughts on the run rate here in the fourth quarter?

Speaker #6: Yeah, the incentive comp can certainly vary with the financial performance. But I think something similar to the third quarter, as far as expenses, is probably a reasonable estimate for the fourth quarter.

Speaker #8: Okay, great. And then last one from me just on the wealth management business. AUM down a little bit. It looked like it was in the lower fee products.

Speaker #8: So, it may have been deliberate. Not sure, but any update on the kind of renewed growth and profitability improvement strategy there?

Speaker #4: Yeah, we've definitely been working on getting that going again, and we've replaced the team on the trust and in the planning side. We've got a new leader that joined us at the beginning of the second quarter for our planning team, and we're definitely seeing some nice progress from them.

Speaker #4: As David noted , you know , we saw AUM go down , which is not really something we manage for . We're really more concerned about the fee income .

Speaker #4: And we saw fee income grow in the agency accounts in Q3, which is, you know, what we want to see.

Speaker #4: So, definitely nice progress from that new team, with, I think, a lot more to come.

Speaker #8: Great . Thank you .

Speaker #4: And Matt, just a little bit more color on deposit pricing. You know, with the increase in deposits, you're always going to see it relatively expensive at first.

Speaker #4: And then it's going to moderate over time . Typically with these new relationships . And additional deposits , you bring in , you know , our average deposit costs last quarter peaked at 322 in August .

Speaker #4: And then we're down about 315 in September . And as David said , ended the quarter at 304 . So you see , in a nice trend just within the quarter , there .

Speaker #4: So hopefully , you know , we can see that continue into into Q4 .

Speaker #8: Yep. Okay. Thanks again.

Speaker #2: Thank you. Our next question comes from the line of Wil Jones of KBW. Please go ahead, Will.

Speaker #9: Yeah . Hey guys . Thanks for the questions . I wanted to circle back to the deposit growth . You know , obviously a fairly banner quarter there for deposits .

Speaker #9: And it sounds like you expect maybe to see a little bit more balance sheet growth in the fourth quarter here . But should we in any way view you know , this this large influx of deposits as a way to pre-fund your expected growth for 2026 and maybe 26 , then becomes more about just remixing the balance sheet and just I guess , pairing within that .

Speaker #9: You obviously have a fair amount of liquidity from the deposit growth. How should we think about you guys being a little more opportunistic with securities purchases at this point?

Speaker #4: Well, I think that was a three-part question. So, let me see if I can get them all here.

Speaker #9: Yeah. Well, sorry about that. Threw a bunch at you.

Speaker #4: That's good . Well , we appreciate the question . So so I think you're right on with the the idea that we were opportunistic in bringing deposits on .

Speaker #4: We have done a number of things over the last 12 months to get the team here focused on deposit growth . We know we can grow loans , and we wanted to see the loan to deposit ratio come more in line .

Speaker #4: And so the way you describe that is reasonable . Although I would say , you know , it's not like a one off thing that pre funds 2026 or something like that .

Speaker #4: I mean, I think this is an ongoing effort that goes throughout the product group, throughout our PTM world planning trust, investment management world, and it goes through each one of our 19 locations.

Speaker #4: You know, we require relationships with each loan, and that includes deposits. And so, very much a focus of the company.

Speaker #4: You know , I think that , you know , we're seeing a lot of market disruption out there . So , you know , on one hand , you've got , you know , this competitive environment for deposits , but you've also got people that don't want to be with , you know , really large out-of-state banks and that , that disruption is continuing .

Speaker #4: I would say increasing. And that creates opportunity for talent, for people that we can bring centrally to support our teams. We can bring new people into our teams, and then we're bringing in new clients.

Speaker #4: And so I think that's going to continue . I don't really see any reason to think that's going to abate . And , you know , at the same time , we've got this tiny little market share in most of our markets .

Speaker #4: You know , we're kind of 1 or 2% in our bigger markets and less than the newer markets . So in , you know , strong and growing economies .

Speaker #4: So I think , you know , all those things set up for some nice continued asset growth into the fourth quarter . And next year .

Speaker #9: Yeah . Okay . Thanks for that thoughtful response . And as I kind of prepare some of those comments , just just into how , you know , the margin looks for 2026 , as I kind of look back , how you've , you know , transformed the margin this year about 20 to 25 basis points of year over year expansion .

Speaker #9: Do you think that magnitude is repeatable again in 2026? Is the opportunity there from both the deposit pricing standpoint and loan growth standpoint to see that kind of magnitude again in 2026?

Speaker #4: Well , what I've been seeing is that we really got heavily impacted by that rapid run up in short term rates . And the inverted yield curve , and that we thought that that would turn around and we'd see nice deposit betas as rates declined , which we have in the fact that we've seen 22 basis point improvement from Q3 of last year to 20 to Q3 of this year .

Speaker #4: I think it's a nice start in that , you know , we've moved out of the two 30s into the two 50s and , you know , I continue to think that , you know , in normal environments , my banks , including this one , have produced , you know , 315 , three 23.25 .

Speaker #4: Nim for the way we do business. And that's where I think we're going. I don't think we're going to get there next quarter.

Speaker #4: I don't know if we can get there next year , but that , I think is going to continue . And the fact that we've seen that amount of improvement here over the last 12 months , in spite of the growth that we've seen on the balance sheet , I think is really promising and bodes well for continued operating leverage into 20 2020 , 2026 .

Speaker #9: Yeah , okay . Very helpful there . And then lastly , for me , you touched a little bit on in some of your comments .

Speaker #9: Just the organic opportunity that's arisen from some of the M&A disruption. But there has been a lot of deal announcements.

Speaker #9: There's been a lot of price discovery. So just out of curiosity, how do you think about your own scarcity value within that? And then maybe how you view yourself as a downstream buyer, potentially, of banks.

Speaker #4: Well , we we believe that our path to , you know , we believe our job is to drive shareholder value . And we believe our path to creating shareholder value is creating , operating leverage in our business here by growing revenues a lot faster than expenses .

Speaker #4: And, you know, that turns into improved efficiency ratios and improved bottom lines. And, you know, we're not happy with where the profitability is.

Speaker #4: We're not happy with the efficiency ratio. However, we've made a bunch of investments here over the last couple of years and changes that are now paying off.

Speaker #4: And we're seeing the green shoots of that. And that's going to drive us continued organic growth and operating leverage for us.

Speaker #4: And you know , now talked a couple times about why we think that continues into 26 . And beyond . So specifically in terms of scarcity value , you know , clearly , you know , first , Western is is a unique franchise that both is becoming more unique in Colorado .

Speaker #4: But I would say also more unique as a successful wealth management business on a national basis . I mean , I think the bank , in a lot of ways , most similar to us in terms of their , you know , balance sheet and AUM was fine .

Speaker #4: Mark , in Florida . And the fact that they sold for six and a half times revenue and 92 times trailing earnings to a really good buyer , I think is an interesting data point for us .

Speaker #4: And , you know , I know others use other metrics on that . But I mean , I think that's what the data is .

Speaker #4: So, so yeah, I think there's good scarcity value here. I think our clients, frankly, see that. And they find us to be a desirable place to do business.

Speaker #4: I think , you know , other bankers around the country are seeing that too , in terms of acquisitions . You know , we would love to be buyers .

Speaker #4: We've done that over the years . A lot . 13 times . And , you know , we just have to get our stock price back to something reasonable and you know , definitely there's a lot of activity out there that we could benefit from if we can get our stock price back in line or when we get our stock price back in line .

Speaker #10: Yeah .

Speaker #9: Okay. Thanks. I appreciate that. I appreciate that response. That's all for me.

Speaker #2: Thank you. My next question comes from the line of Bill Zelem of Titan Capital Management. Please go ahead, Bill.

Speaker #11: Hi . Thank you . First of all , Scott , it sounded like you may have had some additional comments that you were going to share to the last question , I'll let you do that .

Speaker #11: If there's something more you want to add.

Speaker #4: No, I'll add a few comments at the end. Thank you. Bill.

Speaker #11: All right . So continuing down the the consolidation route , would you talk about what what transactions have been most disruptive and possibly favorably impactful for for first Western .

Speaker #4: Yeah . You know I , I , I don't entirely understand it Bill . So I can't really give you you know , a really solid prediction of what's going to happen with all this .

Speaker #4: But I would tell you that when Guaranteed Bank and Cobra were sold, I thought that was going to create a lot of opportunity because our type of clients definitely were at those two banks.

Speaker #4: And I thought that with them being acquired by out-of-state banks, that was going to create a lot of opportunity for us. As it turned out, it didn't.

Speaker #4: And I think a lot of the reason for that is the bankers stayed in place for a while. And then when they did move, they were really bid up by other players.

Speaker #4: And so it got to be really expensive to bring those folks over . Now , with the second tier acquisitions that we're seeing , for example , with citywide , which was a really great local family owned and family run bank , they sold to heartland .

Speaker #4: I don't know when 5 or 7 years ago , something like that . And and then I think heartland really had a strategy of trying to run these local banks , as you know , the way they had run historically buys .

Speaker #4: Heartland is going to drive a culture into what used to be citywide. And so, you know, we're seeing some good people and good opportunities come out of that.

Speaker #4: And so I think interestingly , it's sort of the second tier acquisitions that that really create more opportunities in some way . And then and then the first bank one in this market is is really interesting .

Speaker #4: Like first Bank is a great retail bank and just really loved by Coloradans . There's this emotional tie that I don't entirely understand , but definitely , you know , local people here , local business leaders , local entrepreneurs have strong relationships with that company .

Speaker #4: And it's just going to be a challenge for a big national player to keep that passion, and, you know, we'll see.

Speaker #4: I mean , we've had lots of calls . We have we have clients . That bank here , bank there and and you know , you can be pretty sure that those folks are calling us to say , you know , what additional capacity you guys have for us to stay with , with you guys .

Speaker #4: So , so I , I don't know how all that plays out . Bill . I do feel like we're seeing more benefits of the disruption in today's market than what we saw .

Speaker #4: 5 or 7 years ago . And and again , I'm not sure all the reasons why , but it's been really good for us so far .

Speaker #11: So let me take that one step further . Do you do you sense that you have the opportunity to become the new bank , that that Colorado's love , that others look at you and go , we don't even know why , but they're they sit on this pedestal .

Speaker #4: Well , I do know our clients love us . You know , we're never going to be a retail bank . The way first Bank was , like first Bank , one of their one of their strengths was they did one thing and and over the years , you know , I've talked to people like John Eichert and the other CEOs over there and they're like , well , what do you think about the trust investment management business ?

Speaker #4: And I would tell them and they would say , well , that's fine . But you know , we're never going to do that at first Bank .

Speaker #4: So, I mean, they're just very focused on being a retail bank. And I think they did that better than anybody. And we're not ever going to do that.

Speaker #4: We're not going to open branches on every corner like they did and stuff like that. So I think, you know, we'll continue to be in First Western.

Speaker #4: I know that our folks are very committed to their markets and their , their , their , their communities . You know , we talk here about taking care of our four key stakeholders , which are shareholders , associates , clients and communities .

Speaker #4: And so , you know , we try and do those things that are right for our our people . And , and create that emotional connection that you're talking about .

Speaker #4: And certainly with our niche, you know, that's something we would hope to expand and build on.

Speaker #11: That's helpful . Thank you . And then relative to Arizona specifically , are you seeing anything from a transaction standpoint that you see as benefiting your opportunity for for bringing on new people there ?

Speaker #4: Well, I don't think we've announced it yet. Oh, we have. Julie's telling me, so I was thinking I was going to make some news here.

Speaker #4: Julie, but you're ahead of me. We actually recruited one of the top folks out of First Republic to build our franchise in Arizona for us.

Speaker #4: And he had a garden leave period and all that stuff. But he's now joined us, and we are really optimistic about what we think the team there can do in the years to come.

Speaker #4: I think that that Arizona market for us , if we had the same tiny market share that we had in Arizona , that we have in Colorado , we would be what's the number ?

Speaker #4: Julie ? 4 billion , 6 billion bigger , something like that . And and so that's what we've charged the team there to come up with .

Speaker #4: I think we've got a leader in place that can do it.

Speaker #11: Great . Congratulations on that . One additional question please . The excess cash that that you have on the balance sheet , how long are you thinking that it will take to to redeploy that cash ?

Speaker #4: Yeah , actually , that was one of the three part question that I missed on David . And do you want to talk about what we've done already with , with investments .

Speaker #4: And then, you know, what our thoughts are on?

Speaker #6: Yeah , I mean , Bill , if you kind of look back at the history of our balance sheet , we certainly , you know , have our , our liquidity and capital really more earmarked towards the loan portfolio .

Speaker #6: And I think that that continues . Now , that being said , when there are opportunities from a bond perspective that we like , you know , we will take advantage of them .

Speaker #6: So we did add about $50 million in the third quarter to the bond portfolio . And those were primarily floaters that got us a nice spread over interest bearing cash , which still really remains , you know , highly liquid assets .

Speaker #6: Government guaranteed bonds , you know , agency GSEs , things like that . So I think the focus is still to deploy that liquidity into the loan portfolio .

Speaker #6: But, you know, as we see opportunities in the bond portfolio, we'll certainly assess those as they come up.

Speaker #11: So two , follow on questions to that . Number one is that the the 49 million available for sale that's now on the balance sheet that you're referring to okay .

Speaker #11: Thank you. Yeah. And then that redeploying of that—I mean, is this something that is a two to three quarter phenomenon? Given what you see with economic activity, is it something you think will happen by the end of Q4? Or is it more like full year next year?

Speaker #11: I guess I'm looking for a bit more solid view of of of how you see loan demand relating to that , that excess cash or excess liquidity , I should say .

Speaker #6: Yeah . Good question , Bill . We expect , you know , our loan demand trends to continue . You know , we had a really strong second quarter and loan growth .

Speaker #6: We had a good quarter . Again in the third quarter . As far as loan growth . And you know we given our loan pipelines and what we're seeing in our markets , we we do expect those trends to continue .

Speaker #6: So, I don't think it's, you know, a year down the road type of thing. With those trends continuing as far as redeploying that liquidity.

Speaker #11: Great. Thank you both.

Speaker #4: I would just add , Bill , that we have seen a modest growth rate in a balance sheet , right . Like I think that our expectation is that we can grow single digits in single digits .

Speaker #4: Maybe low double digits . We're not interested , particularly in growing faster than that . And and I think that I think that you're going to see this growth continue at a modest , moderate pace here into 2026 .

Speaker #4: From everything we know, not expecting to go out. Lend all this money out next week; that is not in our game plan.

Speaker #11: Great. Thank you again.

Speaker #2: Thank you. I would now like to turn the conference back to Scott Wylie for closing remarks. Sir.

Speaker #4: Great . Thank you . Well , you know , we said for several quarters that we had success playing defense and that we were going to shift back onto offense in 2025 .

Speaker #4: And , you know , we had some pretty stiff headwinds there for a while with short the rapid run up 525 basis points in short term rates .

Speaker #4: We had that inverted yield curve for an extended period. We had three of the four largest bank failures in U.S. history, including First Republic, which was very much seen as a successful player in our niche.

Speaker #4: But we said, you know, we got through the defense. Let's shift over to offense and really leverage the investments that we've made over the past couple of years.

Speaker #4: In five key areas . You know , we've replaced our technology infrastructure . We've moved to a completely cloud based environment . We've installed middleware .

Speaker #4: We've rolled out a new digital platform. We're adding all kinds of new services and tools onto that tech platform that really, I think, help us be a leader from the tech standpoint.

Speaker #4: We've reorganized number two , our product teams , our loan deposit investment management , planning trust , mortgage teams have all been strengthened in reorganized .

Speaker #4: We've expanded our PC local office teams. We've given them a new proprietary toolbox for growth and rolled that out here in the last quarter. We reset and standardized our internal control processes for more efficiency and value add, so that we're competing on value and not on price.

Speaker #4: And number five, we've rebuilt our credit, risk, support, and marketing teams to support the First Western that we envision for the future.

Speaker #4: And that's all paid for in our current expense structure. So we were hoping to see some green shoots of progress in that this year.

Speaker #4: And that showed up in Q3 . You know , our net interest income was up 35% . Q over Q you know , quarter over quarter annualized .

Speaker #4: Our fees were up 31.6% quarter over quarter, annualized in each of our key areas. David pointed that out, which I thought was a really great point.

Speaker #4: And in PTM , in insurance , in banking , in mortgages , we saw a nice growth hour Pre-provision net revenues were up almost 35% quarter over quarter annualized .

Speaker #4: And our efficiency ratios are trending down with operating leverage up. So, thinking about 2026, you know, we do our business planning in the fourth quarter.

Speaker #4: And so, that's a big project that we're doing now with each department head and each office. We'll see how all that plays out.

Speaker #4: But if you just look at Q3 year over year trend lines . Then you know , our net interest income is up 25% year over year .

Speaker #4: And that was done with modest growth in the balance sheet. Plus, NIM improvement, which drives nice operating leverage, which we saw.

Speaker #4: Our fees were up 21% from September of last year to September of this year, and our operating expenses were only up 4%.

Speaker #4: And that was mainly due to incentive comp . That is driven off of revenue growth . So if we had a , you know , higher expenses in Q4 because we're paying incentive growth , because we're seeing good incentive comp , we're seeing good growth , that's a good problem to have .

Speaker #4: So looking past this quarter , you know , our intention is to get back to be a high performance . Like we were earlier in this decade .

Speaker #4: And , you know , we have a clear path to 1% ROA and plenty of room beyond that . You know , we were honored to be named one of just 16 KB Bank Honor Roll members in 2025 for our performance over last year .

Speaker #4: We were just I think , made as as of Q3 . Now , Piper Sandler's list of the top 200 US listed banks in size .

Speaker #4: And then we just saw our schedule for the conference down in Florida in a couple of weeks, and the organizers there asked us to add some time slots because of high demand.

Speaker #4: So I think, I think, you know, there's good momentum here. We're really optimistic about how we can finish the year and continue to deliver shareholder value into 2026.

Speaker #4: Thanks, everybody, for your support, and thanks for dialing in today. We really appreciate it.