First Western Financial, Inc. (MYFW) Q3 2021 Earnings Report, Transcript and Summary

00:03 Good afternoon ladies and gentlemen, thank you for standing by. And welcome to the First Western Financial Q3 Twenty Twenty One Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instruction we will follow at the time. [Operator Instructions] As a reminder, this conference call maybe recorded. 00:33 I would now like to hand the conference over to your speaker today, Mr. Tony Rossi of Financial Profiles. Please go ahead, sir.

00:42 Thank you, (Amy) [ph]. Good morning everyone and thank you for joining us today for First Western Financial's second quarter 2021 earnings call. Joining us from First Western's management team are Scott Wylie, Chairman and Chief Executive Officer; and Julie Courkamp, Chief Financial Officer. 00:56 We'll use a slide presentation as part of our discussion this morning. If you have 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 including the impact of the COVID-19 pandemic. 01:20 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. 01:33 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. 01:43 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. 01:59 And with that, I'd like to turn the call over to Scott. Scott?

2:03 Thanks, Tony. Good morning, everybody. Our third quarter results represent a continuation of the positive trends we've seen this year with growth in our private commercial banking operations generating higher levels of revenue or operating leverage and increased profitability. In the third quarter, we generated net income of six point four million dollars earnings per share of zero point seven eight dollars and ROA of one point two seven percent all of which are an improvement over our second quarter results On an adjusted basis, excluding an acquisition related expenses, our earnings per share were up to zero point eight one dollars from zero point seventy seven dollars in the prior quarter. 02:48 We continue have good momentum in business development, which is driving higher levels of loans, deposits and assets under management, excluding PPP loans, excluding PPP loans. Our total loans held for investment increased at a nineteen percent annualized rate in the third quarter. We also continue to see strong deposit flows total deposits were up six point one percent from the end of the prior quarter with all the growth coming in our lower cost categories. 03:19 We're also seeing steady growth in our assets under management and higher trust and investment management fees. Our private and commercial banking model is working exceptionally well. We're seeing high quality well diversified loan growth funding these loans with low cost deposits and effectively cross selling additional products of services increased the overall profitability of these plant relationships. 03:43 As a result, we're seeing improvement across most of our key financial metrics. Compared to the prior quarter, our gross revenue was up nearly seven percent. Our net interest margin increased thirteen basis points and our efficiency ratio improved forty-four basis points. More importantly, as we continue, the proper good growing company were prudently managing our growth, which is reflected in our continued strong asset quality and exceptionally low level of losses in the portfolio. 04:17 Moving to slide four, our improved financial performance is not only driving earnings growth, but also strong increases in our book value and tangible book value. During the third quarter, our book value increased four point one percent while our tangible book value per share increased four point eight percent profitable growth we're generating is a reflection of our strong execution across all of our growth strategies. 04:42 Our more mature profit centers continue to add new clients can generate organic growth, the new offices we've opened up over the last couple of years continue to scale and are making large contributions. And we're accelerating our growth through accretive acquisitions like the branch assumption transaction last year and the pending acquisition of Teton Financial Services in (Jackson) [ph]. 05:07 Turning to slide five, we'll look at the performance of our private banking and commercial banking and trust and investment management businesses This is represented by a pre-tax earnings of our non-mortgage segment. On a year-over-year basis, our pre-tax earnings more than doubled in this segment after the outsized earnings that we generated in the mortgage business last year, we're seeing other businesses clearly in that earnings scale, GAAP so to speak with a more sustainable source of earnings growth, while our mortgage business returns to its intended role as a complementary source of the income. 05:43 Turning to slide six. We'll look at the trends in our loan portfolio. We had another good order of loan production with total production coming in one hundred and thirty three point four million dollars relatively similar to the prior quarter, while loan payoffs were down a bit. On a period basis, our total loans held for investment increased thirty point four million dollars from the end of the prior quarter or seventy point nine million dollars when PPP loans are excluded. 06:12 Most areas of portfolio increased from the end of the prior quarter with the strongest growth coming from commercial real estate while a high level of payoffs resulted in small decline in C&I portfolio. It's notable that cash securities and other portfolio was able to contribute to our total loan growth despite the continued run off of PPP loans that are held in that category. We saw more demand this quarter among our private banking compliance for the type of investment management, secured lines of credit that comprise the bulk of this portfolio. 06:48 Moving to slide seven, we'll take a closer look at our deposit trends. Our total deposits increased one hundred and three point two million dollars from the end of the prior quarter. All of the growth was in lower cost deposit categories. This continues to drive improvement in our deposit mix. Over the past year, our non-interest bearing accounts have increased to thirty three point five percent of total deposits from thirty point two percent while time deposits have declined to seven point seven percent of total deposits from eleven point three percent. We had one large deposit coming towards the end of the quarter as that client had a liquidity event, it temporarily placed about sixty million dollars in the money market account, which we expect to be withdrawn during the fourth quarter as proceeds from the liquidity of event are distributor to partners of this real estate investment fund. 07:40 Moving to slide eight. We'll look at our progress in building our commercial banking portfolio – commercial banking platform, which is providing more low diversification and improving our deposit base by adding low cost transaction deposits. Commercial loans increased fifty-one million dollars from the prior quarter and one hundred and ninety-six million dollars from the prior year. 08:04 Commercial deposits increased one hundred and thirty million dollars from the prior quarter and two twenty-seven million dollars from the prior year. In each case, this represents twenty four percent growth over the prior year and is reflective of the strong momentum we have in growing the commercial. 08:22 Moving to slide nine, we've added a new slide to the presentation to show the increasing contribution we're getting from our new offices. This slide shows the aggregate contribution of the offices as we've opened since mid twenty nineteen to our total loans, deposits and assets under their management. As you can see, we're getting a larger contribution as the offices gained more traction and build new business pipelines that produce on a consistent basis. We've done a good job of identifying areas for the new offices that have a large amount of the type of clients that we target and then attract improvement banking talent with established relationships to build these offices. These new bankers have been successful in marketing first western the First Western value proposition, bringing in new clients and then expanding those relationships over time. Opening new offices has been a key part of our growth strategy throughout our history and we plan to continue opening one or two new offices each year, with the primary focus on expanding Colorado, Arizona, Wyoming and Montana. 09:27 Turning to Trust and Investment management on slide ten. Our total assets under management increased by one hundred and forty three point eight million dollars from the end of the quarter. The increase was due to a combination of contributions to existing accounts and new accounts as well as improving market conditions resulting in the increase in the value of assets under management. During the third quarter, new clients accounted for approximately thirty million dollars of our growth in assets under management. 09:57 Now I'll turn the call over to Julie for further discussion of our financial results. Julie?

10:01 Thank you, Scott. On slide eleven, we have provided an update on our participation in the PPP program. And how it impacted various metrics in the third quarter. As of September thirty, we had a sixty one point nine million dollars in PPP loans remaining on our balance sheet which is a decline of forty one point two million dollars from the end of the prior quarter. We recognized approximately nine hundred thousand and fees during the quarter, and had one point two million dollars in fees remaining to be recognized at September thirty. PPP income had a nine basis point positive impact on our net interest margin in the quarter. As the PPP loans are forgiven, our borrowings from the PPP liquidity facility that were used to fund the loan originations also decline. On September thirty, our borrowings from that facility were down to forty three point six million dollars. 10:54 Turning to slide twelve, we look at our gross revenue. Our total gross revenue increased six point eight percent from the prior quarter. The growth was well balanced across the banks with an increase in net interest income as well as all of our non-interest income generating areas. 11:11 Turning to slide thirteen, we look at the look at the trends and the net interest income and the margin. Our net interest income increased four-point four percent from the prior quarter, despite a four hundred thousand decline in PPP fees recognized in the third quarter. The increase is due to higher average balances of non-PPP loans and an increase in our net interest margins. 11:36 On a reported basis, our net interest margin increased thirteen basis points from the prior quarter to three-point one four percent when the impact of PPP loans and purchase accounting adjustments are excluded, our net interest margin increased eighteen basis points from the prior quarter. The increase in our net interest margin was primarily due to a favorable shift in the mix of earning assets, as we were able to reinvest more of our cash into the loan portfolio, as well as increase in average loan yields. 12:08 We also had a slight drop in our cost of interest bearing deposits resulting from the full quarter impact of the higher cost non relationship deposits that we ran off during the second quarter. Looking ahead, we expect our net interest margin to trend slightly down in the fourth quarter, due primarily to the increased trend in excess liquidity from the temporary deposit that Scott mentioned earlier, which we are keeping in cash balances. 12:36 Longer term, looking at the potential for higher interest rates, we continue to run the bank to be neutral in terms of interest rates in [Indiscernible] any the addition of Teton won't have a material impact on our sensitivity. Coverage due to the improvement we have made in our deposit mix over the past few years, a higher percentage of non-interest bearing deposits, we have become more assets sensitive, which should enable us to benefit to a larger degree from higher interest rates than we did in the last pricing interest rate cycle. 13:08 Turning to slide fourteen. Our non-interest income increased ten point five percent from the prior quarter as we thought an increase in all income areas. Trust and investment management fees were up three-point two percent from the prior quarter and seven percent higher than a year ago despite the sale of our LA fixed income team during the fourth quarter of twenty twenty. We also had a fourteen point five percent increase in net gain on mortgage loans due to increases in volume for both purchased and refinancing as well as a reduction in variable costs. 13:43 On slide fifteen, we have provided some additional detail on our mortgage operations. Total originations were down from the prior quarter, although mortgage locks, which is when revenues recognized were higher in the prior quarter – than in the prior quarter. The mix of production continues to move towards our higher historical range with purchase accounting for sixty one percent of production in the third quarter. As we indicated on our last call, we reduced our fixed expense in the mortgage group to reflect the lower-level volume that we are now seeing relative to twenty twenty. As a result, a lower level of expense combined with a higher volume in the third quarter, increased our profit margin in this business to fifty percent from thirty one percent in the prior quarter. 14:31 Turning to slide sixteen. Our non-interest expense increased by six point one percent from the prior quarter. This included approximately three hundred thousand dollars of acquisition related expense The remainder of the increase was primarily attributed to higher salaries and benefits expense, resulting from bonus accruals relating to our strong loan and deposit production as well as higher insurance benefit costs. 14:56 With our revenue growth exceeding our expense growth, our efficiency ratio improved to sixty five percent – from sixty five point four percent in the prior quarter. Looking ahead to the fourth quarter, we expect our non-interest expense excluding any acquisition related expenses to increase slightly over the third quarter level. 15:16 Turning to slide seventeen, we'll look at our asset quality. We continue to see generally positive trends across the portfolio. We have one commercial loan that was placed on non-accrual during the quarter, which resulted in an increase in our nonperforming assets of one point two million dollars. This loan is well secured and we do not expect incur any loss at this time. We continue to see minimal losses in the portfolio and had a small amount of net recoveries in the quarter. We recorded a provision for loan loss of approximately four hundred thousand dollars which was related to the growth in total loans. This Broader adjusted (ALLL) [ph] with which excludes PPP and acquired loans to ninety one basis points of total loans at the end of the prior quarter. 16:01 Now, I'll turn this call back over to Scott. Scott?

16:04 Thanks, Julie. Turning to slide eighteen, I'll wrap up with some comments about our outlook. We expect the continuation of the positive trends we're seeing in the business and continued strong growth in our core commercial private banking operations. We expected the growth in these areas for the business to continue replacing the earnings that were generated by our mortgage operations in twenty twenty. 16:28 Our loan pipeline is consistently strong and should continue to drive organic loan growth across most areas of the portfolio. We continue to win business based on our expertise, responsiveness, quality service and overall value propositions. This has enabled us to generate loan growth without compromising on structure or underwriting criteria as many competing banks have been forced to do. 16:53 We expect continued growth in our Trust and Investment Management Fees as we're consistently adding new clients and increase our assets under management. In the near term, this will help offset lower mortgage activity as we enter the seasonally slower periods of the year. As I mentioned earlier, we're successfully adding new banking talent and expanding to new markets. Most recently, we made investments in the Montana and Arizona markets and we believe both markets will be nice sources of additional organic growth for us. 17:24 We continue to supplement our strong organic growth with accretive of acquisitions. Our pending acquisition of Teton Financial services is expected to close late this quarter early in twenty twenty two. Since announcing the transaction we made good progress on our integration planning. We've made all the personnel decisions and informed everyone in the organization of our plans. Our teams are collaborating well together and determining the best ways to leverage to collect the strength of each organization, so that we're not only realizing the expense synergies that be projected, but also fully capitalizing the revenue synergies. 18:03 In closing, we believe we're executing at a very high level and should continue to deliver a strong finish to the year. With the combination of our continued strong organic growth and the accretive benefit of the Teton acquisition, we believe we're well positioned to deliver another strong year profitable growth in twenty twenty two. 18:23 With that, we're happy to take your questions. Amy, please open up the call.

18:31 Thank you sir. ladies and gentlemen [Operator Instructions] have first question from the line of [Indiscernible] Your line is open. You may ask your question.

18:53 Hey, good morning.

18:55 Good morning, Brad. A –Julie Courkamp: 18:55 Good morning.

18:57 Maybe Julie, can you give, if you gave it on asset, but the dollar amount of a loan recovery in the quarter, how much was that?

19:07 It was in the material under one hundred thousand, a little bit of recoveries, but not anything material that shows up been even in the chart on the deck.

19:22 Okay. And then with the prepared commentary, you mentioned that you think the margin would be a little bit softer in the fourth quarter, following the improvement in 3Q. I think you've got one point two million dollars loss of PPP related fees is the linked quarter decline a function of expecting that one point two million dollars to drag out into next year. Maybe any color you could provide on how you're thinking about the margin in the fourth quarter in terms of on the yield side?

20:01 I think generally, we're expecting a favorable trend in our Nim in Q3. We had a couple of one time things that increase the Nim, PPP like you mentioned and then there were additional payments on a non-accrual loan that was the principal paid for. So the remaining payments from the client come in his interest, all those slightly inflated Nim in Q3 as well. So, I think the concern that we won't see that increase in Nim in Q4 is really just smoothing out the trend that we're seeing. I think generally, we're seeing better rates on loans, better rates on deposits and overall improving Nim going into twenty twenty two. You guess anything there, Julie?

20:53 Yeah. Direct agree at twenty twenty two, I think we're looking to continue the improvement in our earning asset mix as we're using up this liquidity. So Nim should follow that trans.

21:05 Okay. That's helpful. And then was just curious I know mortgages is tough to predict, but any thoughts on the fourth quarter and then maybe twenty two, what expectations for revenue to be lower than twenty one or do you think you can change share relative to the MBA forecast?

21:32 We have the trends in there on slide fifteen. It seems like we can't produce something like four million dollars or five million dollars in revenues and couple of million dollars in earnings out of mortgages and I think that's going to continue. We've talked about our desire to hire more [Indiscernible] and the extent that we can find people that are a good fit for our strategy and that term – that doing the business the way we want to do it then we're attracting and. We've added a couple this year and continuing to focus on building our MLL base. I think the really important trend here is the way that the business has picked up. The core wealth and some business has picked up from the earnings benefit we had from Mortgages last year and I think if we can see twenty twenty two in line with where we were in twenty twenty one and that's a nice complement, but it's really not driving the story the way it did in twenty twenty.

22:45 Okay. And then Scott, just lastly from you Scott if I heard you correctly, it sounds like you're anticipating some additional potential movement of lenders, maybe some looked outs of some other folks did I hear that correctly and any sense of the magnitude in terms of the number that you might see in the first or in the next couple of quarters?

23:11 Well, we do we have started building a team in both when we've talked about that and we're going to build that off out. We've got some, I think really great opportunities there. Actually the preliminary work that that team is doing, we're seeing a nice spilled to the pipeline. And I hope to have some good news to report here in the next couple of quarters from the expansion into Montana here. Arizona, we've been looking at adding people there. We brought in a new state president there. I think there's a tonne of opportunity for us in Arizona. We've always thought that that market had as good or better, well demographics than Colorado, an attractive competitive environment and just a matter of getting the right team in place. Seen that business grow and we think we can accelerate the pace of growth there over time. So, I think these are things that are going to play out over coming quarters, you're not going to see a big jump in expense in Q4 or anything like that. We're building these teams in the way we have in the past and kind of a steady process that ensures that our revenue growth matches the expense growth or exceeded it.

24:30 Okay. That's helpful color. Congrats on the quarter.

24:33 Yes Thanks, Brad.

24:36 Thank you, sir. We have the next question from Brady Gailey. Your line is open. You may ask your question.

24:43 Hey, thanks. Good morning, guys.

24:45 Morning, Brady?

24:46 Good morning.

24:47 So over the last couple of years, we have seen some nice operating leverage and we've seen your ROA expand pretty nicely and it was one fifty last year, one point five percent which I know it was popped up by a great mortgage year. And this year, it's running around one hundred and twenty five basis points. I'm just wondering given your business model and take into account you're still growing the company. What do you expect what would be appropriate range for your ROA over the next couple of years. You think it's consistent with the one hundred and twenty five we've seen year-to-date or do you think you could do modestly better than that?

25:34 Well, I don't want to over fleet expectation but we do think that we are doing a nice job of improving the operating leverage that we have settled along we think existing our business model. We continue to see that especially in the organic part of our business, right? I mean, I think that what we're doing with the expansion provides future earnings power and then what we're doing with acquisitions has certainly been additive, but just in the organic business, we know that the next dollar of revenues doesn't take much in costs and so I think we continued to show that especially over the last six or eight quarters.

26:18 I know you guys like to open one to two new offices a year recently investment in Broomfield. But with Teton in the mix, do you take a pause on that organic growth or does that continue even in the midst of the Teton acquisition?

26:40 We've kind of changed our business model for new offices. We used to open a new office and basically spend one million dollars in expense the first year. And then by the end of the first year to the second year, maybe they've got one million dollars in revenues, so maybe a breakeven the second year. And then hopefully you get earned back in the third year. We've been incubating these last few offices in existing offices. So, we're doing that for both in Jackson right now. We did that for Broomfield in the older office, and we've got another Denver office that we're incubating in the downtown Denver location. And so it really changes the numbers there. So you can profitably open these new locations I mean, I hope we get to the point where we're doing it right out of the gate. So, Broomfield just to actually open in their physical location. We told them they had to get to a certain level revenues and then we move into their own office and they just moved in. We had the grand opening here forty-five days or so ago in Q3 in both you we've got some very modest temporary space that will be starting in here shortly and then building that leveraging through our Jackson office with the folks that we have there and the connections between Jackson and Both, which are many and then like I said in Denver, we see really good growth in that new office that we're incubating and so we'll move them into a new location I hope in twenty twenty two. So, yeah, we're going to continue to open new offices.

28:23 All right. And then one question specific to the Teton transaction. I know they coming over with a nice wealth management and trust business as well. And the question is, just Teton have anything on the wealth management side, any products or services were offering that First Western doesn't or vice versa First Western has something that Teton doesn't ,where there's an opportunity to basically cross sell into each other and the question is basically is there an opportunity on the wealth management side to see some nice revenue synergies?

29:02 Yes. Teton wealth management businesses is largely outsourced and so of the four hundred million dollars or so that they have outsourced and so, we're looking at what complementary services that provider might add to what we have, but we have a much broader and deeper range of services that we can sell into the Teton client base. So we're certainly working on how we can do that in twenty twenty two. That numbers that we announced for accretion and tangible book value earn back, didn't include any revenue synergies that was only cost synergies. But what we've seen already is our team in Jackson is working closely with our team – the Teton Team the plans for twenty twenty two for new business and I think we're going to see lots of synergies not only from the products and services, but from the people, complementary to each other with different skill sets and ability to cross sell into our respective planning basis.

30:18 Okay. Got it. Thanks, Scott.

30:24 Thank you sir. We have another question from the line of Ross Haberman. Your line is open. You may ask your question.

30:32 Good morning, Scott, Scott, how are you?

30:33 Good. Good morning, Ross.

30:36 Could you comment? I just want to sort of take a step back and ask you more what have you seen in terms of your markets in the end market migration? Are you still seeing the growth maybe not as much as we saw during COVID or pre-COVID, but what sort of the end market migration into your markets and into the Jackson whole, I guess, space so – to drive the mortgage business or maybe keep it at, but I think it said on slide fifteen, two point three million dollars I guess that's after tax. I'm just trying to get sort of the underlying migration trends that's going to keep that mortgage business at I don't know one million point five million dollars to two point five million dollars a quarterish if as good to guess as journey? Thank you.

31:38 Yes. So, I think there are a couple of questions in there, Ross. Maybe I should take apart. I mean I think the first part of the question about the immigration that we're seeing into our markets has been very strong and continues to be very strong. We're seeing that not only in the resort markets, as when Vale Jackson but we're also seeing that in our urban markets here in the front range and in Arizona. I mean it's happening in Montana big time. I mean, we're continuing to see a big influx of folks from especially the coast somewhat from the Midwest, but that is definitely a continuing trend. I think the second part of your question is what's the impact on mortgages? I mean, I think that that's going to continue to provide feel for growth in our mortgage business, but I think it's actually a lot more significant for the other parts of our business. When people move to town, they're looking to connect with the community and a great way to do that is with the leading private bank in the community. 32:51 And so we position ourselves in that way. We look for those people. And I look at the mortgage as important strategic element in that where we can play offense by attracting some of these folks that are moving to town, but we can also play Defense with that and protecting our client base from going elsewhere. So I think the implications for credit, the implication of the economy, implications for private bank and our commercial banking business. I mean, those are all really nice side benefits of all these good companies and people, that are moving into our markets that trend is going to continue and I think for a long time to come, I think that's something COVID may have accelerated, but it was going on before and it's continuing to be a big factor in the economic outlook here.

33:45 Yeah, this is a bold, again, I'm looking at this chart on fifteen looking at the income – net income after facts of the mortgage business, would it be I mean what an eight million dollar average run rate. Be as good to guess if any as an ongoing number or again, it all depends on how could be, they raise rates going forward or even if they do given you migration, seven or eight or eight billion dollars a year is good guess as any?

34:23 Yes, I think there number of factors that going into to the right, its volume, its margins. It's a mix of business. We have seen already the mix from refi back to more perks money. I mean, that happened in Q3. That's going to you in Q4. But I think our expectations are twenty twenty two probably looks a lot like twenty twenty one in terms of mortgage revenues and mortgage earnings. We cut mortgage expenses on June 30th. And so we've seen good profitability in Q3 as a result of that, and we'll continue manage those expenses and support that business as I mentioned before, I mean, we would like to grow that as we grow our footprint. 35:11 And so we're looking to bring on good [Indiscernible] and we got conversations going on and whether it works out or not, you never know, but I think is a baseline thinking in twenty two looks about like twenty one wouldn't be a bad starting point.

35:30 Last question, are you looking for other banks to buy in the Montana over the Arizona? Local, you have currency. If you found the right thing, which is highly accretive and not she dilutive in a two or three year breakeven. Is that a interest enough way to further grow within those markets as opposed to organic branch by branch, lift outs as the other way of growing. Thanks. Thank you again.

36:15 Yeah. So, so great question. We look at our growth as having three elements to organic growth, which we've talked about being in the mid-teens, new offices that create future growth opportunities and then acquisitions and I think we've had quite a bit of success with our recent acquisitions. Specifically your question about are we looking yes, we are and we have an active program. We actually have made two offers on small bank deals here over the last three months or so. And in both cases, we were out bad, I think there are banks out there being very aggressive in their bidding because they can't grow organically and that's not our situation. We can remain disciplined in our pricing. In our criteria and the only think we're going to do have to make economic and strategic sense and there's plenty opportunities out there for us to continue to maintain our discipline and still have the ability to get things done, get deals done with organizations that understand how they're going to benefit from a merger with us.

37:28 Okay. Thanks again, get your booster shot and have a wonderful weekend. Thank you.

37:33 All right. Thank you, Ross.

37:37 Thank you, sir. [Operator Instructions] We have another question from the line of Bill Dezellem. Your line is open. You may ask your question.

37:52 Thank you. I'd like to start with mortgage that's we're spending time with the last question and then a couple others please. What are you seeing with mortgage activity here in October, and your thoughts relative to the fourth quarter versus the normal level of seasonality. I'm just trying to gauge that relative to the supposedly pent up demand that we have in housing.

38:22 Hi, Bill. It's good to hear from you. I would tell you that we're expecting Q4 to be seasonably slower and I think that the preliminary results so far this quarter are bearing that out. I think we didn't really talk about this with Ross’ question, but just because there's a lot of demand doesn't mean there's any more supply. We're still seeing tight supply and that's limiting the amount of mortgage activity that we're seeing in our markets, but you'll catch up at some point and I think we'll see better volumes and as I say minute, I think twenty twenty two could probably look a lot like twenty one in terms of mortgage revenues and earnings.

39:14 So with that pent up demand, are you expecting the seasonality to be any – to be muted here in the fourth quarter and not as severe as normal? Or are you really seeing a normal level of seasonality?

39:32 It's hard to answer that Bill because last year was such an unusual year and then in twenty nineteen. We were really just ramping up our mortgage business. I mean, I think over the last three or four quarters now we've seen pretty steady revenue levels in the kind of four point five million dollars to five million dollars range and hopefully can produce something like and that in Q4. I think generally, we're expecting it to be a little slower in Q4 and Q1. We've talked before about our desire to expand our mortgage operation in Arizona so that we can offset some of that a bit seasonality. We'd like to do that. We just haven't found the right team and like we're seeing in with respect to the new acquisitions, we were in a position where we don't need to do things that don't work and don’t fit in our price right. So we continue to work on that. Hopefully, we can find a way to smooth out some of the seasonality over time. But I think Q4 is going to be a little softer than Q2 and three and hopefully we'll come back strongly in twenty twenty two.

40:42 It sounds fair. Let me shift to C&I loans. You'd mentioned that the Q3 saw paid out in C&I, what's it going to take to rejuvenate that C&I loan growth?

41:02 We're just well if we talked about this on these calls before, we're slowing enough that if you cut things off once a quarter and you look at what happened in the quarter, there is noise in the numbers and I would tell you there's no reason to think that our C&I progress that we've made over the last couple of years won't continue. I think that what you just saw in Q3 is the normal tenant noise of quarter-to-quarter variances. Actually think we're seeing good progress. Here you look at our pipelines today going into Q4 they were right in line with where we were in prior quarters, and we're going to continue to see, I think strong loan demand across all of our different categories including.

41:59 Thank you. And then one additional question please. The non-interest bearing deposits we're up think forty two million dollars or something like that in Q3 versus versus Q2? What led to that to that growth in non-interest bearing, I do recall the sixty million dollars that came in, but that went in the money market, which I presume does have a rate associated with it?

42:28 Sure does. The growth in DDA is just part of this growth in the commercial focus that we've had and I think if you go back a couple of years, I look at the trends, that very positive where we've shifted from I think I share some numbers in the prepared remarks, but since the end of twenty eighteen we've think more than tripled our DDA’s at the same time that we about doubled our deposits. So we're seeing really nice growth in that area we expect that to continue. I mean I think that your Teton is going to be helpful with that. They've got a nice deposit mix and I think the engine that's produced these results here over the last couple of years is continuing and accelerating. So I think we'll be fine there. The sixty million dollars deposit is an interesting story because it's such a one off thing with a client liquidity event, but these one other things happen to us all the time because that's the business we're in. 43:40 And so those deposits – in that particular their case, those deposits will be largely paid out to the partners, but a lot of times we've had really good success soliciting those partners to become clients when the liquidity event. So these things are actually just very much integral to our business and again, part of that sort of circumstance I was talking about before where you see quarter-to-quarter things that are changes but not really underlying trends. It just part of the volatility of us still being are relatively small.

44:22 Great. Thank you.

44:25 Good. Thank you.

44:29 Thank you, sir. There are no additional questions at this time, I will now turn the call back to the management for closing remarks.

44:37 Okay. Thank you, Amy. Well, I just went some up here. We've had really nice continued progress here growing our business, improving our margins. Demonstrating the operating leverage in our business model and creating shareholder value here in Q3 with our continued organic growth and the ongoing expansion and the addition of the Teton team, like we've got lots of momentum going into twenty twenty two. I really thank everybody for their time and interest today dialling in and for your support for First Western. We really appreciate it and look forward to speaking again next quarter.

45:20 Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for participating.