First Western Financial Earnings 2020-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

10-Q 1 myfw-20200331x10q.htm 10-Q fwfi_Current Folio_10Q_Taxonomy2019

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 001-38595

FIRST WESTERN FINANCIAL, INC.

(Exact name of registrant as specified in its charter)


Colorado		37-1442266
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1900 16th Street, Suite 1200 Denver, CO		80202
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 303.531.8100

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, no par value	MYFW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☒

Non-accelerated filer ☐	Smaller reporting company ☒

	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.


	Shares outstanding as of April 27, 2020
Common Stock, no par value	7,917,489

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FIRST WESTERN FINANCIAL, INC.

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		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	6

	Condensed Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019	6

	Condensed Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2020 and March 31, 2019	7

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, 2020 and March 31, 2019	8

	Condensed Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) for the Three Months Ended March 31, 2020 and March 31, 2019	9

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2020 and March 31, 2019	10

	Notes to Condensed Consolidated Financial Statements (Unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56

Item 4.	Controls and Procedures	57

PART II. OTHER INFORMATION		57

Item 1.	Legal Proceedings	57

Item 1A.	Risk Factors	57

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

Item 3.	Defaults upon Senior Securities	60

Item 4.	Mine Safety Disclosures	60

Item 5.	Other Information	60

Item 6.	Exhibits	61

SIGNATURES		62

Important Notice about Information in this Quarterly Report

Unless we state otherwise or the context otherwise requires, references in this Quarterly Report to “we,” “our,” “us,” “the Company” and “First Western” refer to First Western Financial, Inc. and its consolidated subsidiaries, including First Western Trust Bank, which we sometimes refer to as “the Bank” or “our Bank.”

The information contained in this Quarterly Report is accurate only as of the date of this Quarterly Report on Form 10-Q and as of the dates specified herein.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control, particularly with regard to developments related to COVID-19. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

The impact of the COVID-19 pandemic and actions taken by governmental authorities in response to the pandemic;

geographic concentration in Colorado, Arizona, Wyoming and California;

changes in the economy affecting real estate values and liquidity;

our ability to continue to originate residential real estate loans and sell such loans;

risks specific to commercial loans and borrowers;

claims and litigation pertaining to our fiduciary responsibilities;

competition for investment managers and professionals and our ability to retain our associates;

fluctuation in the value of our investment securities;

the terminable nature of our investment management contracts;

changes to the level or type of investment activity by our clients;

investment performance, in either relative or absolute terms;

changes in interest rates;

the adequacy of our allowance for loan losses;

weak economic conditions and global trade;

legislative changes or the adoption of tax reform policies;

external business disruptors in the financial services industry;

liquidity risks;

our ability to maintain a strong core deposit base or other low-cost funding sources;

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continued positive interaction with and financial health of our referral sources;

retaining our largest trust clients;

our ability to achieve our strategic objectives;

competition from other banks, financial institutions and wealth and investment management firms;

our ability to implement our internal growth strategy and manage the risks associated with our anticipated growth;

the acquisition of other banks and financial services companies and integration risks and other unknown risks associated with acquisitions;

the accuracy of estimates and assumptions;

our ability to protect against and manage fraudulent activity, breaches of our information security, and cybersecurity attacks;

our reliance on communications, information, operating and financial control systems technology and related services from third-party service providers;

technological change;

our ability to attract and retain clients;

unforeseen or catastrophic events, including the pandemics, terrorist attacks, extreme weather events or other natural disasters;

new lines of business or new products and services;

regulation of the financial services industry;

legal and regulatory proceedings, investigations and inquiries, fines and sanctions;

limited trading volume and liquidity in the market for our common stock;

fluctuations in the market price of our common stock;

potential impairment of goodwill recorded on our balance sheet and possible requirements to recognize significant charges to earnings due to impairment of intangible assets;

actual or anticipated issuances or sales of our common stock or preferred stock in the future;

the initiation and continuation of securities analysts coverage of the Company;

future issuances of debt securities;

our ability to manage our existing and future indebtedness;

available cash flows from the Bank; and

other factors that are discussed in “Item 1A - Risk Factors” in our Annual Report on Form 10-K.

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The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2020. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share amounts)


	March 31,		December 31,
	2020		2019
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	4,076	$	4,180
Interest-bearing deposits in other financial institutions		114,438		74,458
Total cash and cash equivalents		118,514		78,638

Available-for-sale securities, at fair value		52,500		58,903
Correspondent bank stock, at cost		1,158		585
Mortgage loans held for sale		64,120		48,312
Loans, net of allowance of $8,242 and $7,875		1,035,709		990,132
Premises and equipment, net		5,148		5,218
Accrued interest receivable		3,107		3,048
Accounts receivable		4,669		5,238
Other receivables		1,058		1,006
Other real estate owned, net		658		658
Goodwill		19,686		19,686
Other intangible assets, net		26		28
Deferred tax assets, net		5,036		5,047
Company-owned life insurance		15,177		15,086
Other assets		24,297		16,544
Intangibles held for sale		3,000		3,553
Total assets	$	1,353,863	$	1,251,682

LIABILITIES
Deposits:
Noninterest-bearing	$	270,604	$	240,068
Interest-bearing		907,846		846,716
Total deposits		1,178,450		1,086,784
Borrowings:
Federal Home Loan Bank Topeka borrowings		10,000		10,000
Subordinated notes		14,459		6,560
Accrued interest payable		417		299
Other liabilities		21,708		20,244
Liabilities held for sale		126		117
Total liabilities		1,225,160		1,124,004

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Preferred stock - no par value; 10,000,000 shares authorized; 0 issued and outstanding		—		—
Convertible preferred stock - no par value; 150,000 shares authorized; 0 shares issued and outstanding		—		—
Common stock - no par value; 90,000,000 shares authorized; 7,917,489 and 7,940,168 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively		—		—
Additional paid-in capital		143,081		142,797
Accumulated deficit		(13,621)		(14,955)
Accumulated other comprehensive loss		(757)		(164)
Total shareholders’ equity		128,703		127,678
Total liabilities and shareholders’ equity	$	1,353,863	$	1,251,682

See accompanying notes to condensed consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts)


	Three Months Ended March 31,
	2020		2019
Interest and dividend income:
Loans, including fees	$	11,002	$	10,218
Investment securities		295		310
Federal funds sold and other		215		522
Total interest and dividend income		11,512		11,050

Interest expense:
Deposits		2,393		2,909
Other borrowed funds		188		170
Total interest expense		2,581		3,079
Net interest income		8,931		7,971
Less: provision for loan losses		367		194
Net interest income, after provision for loan losses		8,564		7,777

Non-interest income:
Trust and investment management fees		4,731		4,670
Net gain on mortgage loans		2,481		1,456
Bank fees		368		289
Risk management and insurance fees		96		468
Income on company-owned life insurance		91		93
Total non-interest income		7,767		6,976
Total income before non-interest expense		16,331		14,753

Non-interest expense:
Salaries and employee benefits		8,482		7,618
Occupancy and equipment		1,440		1,407
Professional services		1,023		777
Technology and information systems		969		1,069
Data processing		847		687
Marketing		415		278
Amortization of other intangible assets		2		173
Net loss on intangibles held for sale		553		—
Other		916		593
Total non-interest expense		14,647		12,602
Income before income taxes		1,684		2,151
Income tax expense		350		524
Net income available to common shareholders	$	1,334	$	1,627
Earnings per common share:
Basic	$	0.17	$	0.21
Diluted	$	0.17	$	0.21

See accompanying notes to condensed consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2020		2019
Net income	$	1,334	$	1,627
Other comprehensive (loss) income items:
Net change in unrealized (losses) gains on available-for-sale securities		(597)		1,062
Income tax effect		4		(275)
Total other comprehensive (loss) income		(593)		787
Comprehensive income	$	741	$	2,414

See accompanying notes to condensed consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except share amounts)


	Shares							Accumulated
		Convertible		Additional				Other
	Preferred	Preferred	Common	Paid-In		Accumulated		Comprehensive
	Stock	Stock	Stock	Capital		Deficit		Income (loss)		Total

Balance at January 1, 2019	—	—	7,968,420	$	141,359	$	(23,199)	$	(1,285)	$	116,875

Net income	—	—	—		—		1,627		—		1,627
Other comprehensive income, net of tax	—	—	—		—		—		787		787
Adoption of ASU 2018-02	—	—	—		—		235		(235)		—
Stock-based compensation	—	—	—		379		—		—		379

Balance at March 31, 2019	—	—	7,968,420	$	141,738	$	(21,337)	$	(733)	$	119,668

Balance at January 1, 2020	—	—	7,940,168	$	142,797	$	(14,955)	$	(164)	$	127,678

Net income	—	—	—		—		1,334		—		1,334
Other comprehensive loss, net of tax	—	—	—		—		—		(593)		(593)
Stock repurchases	—	—	(22,679)		(370)		—		—		(370)
Stock-based compensation	—	—	—		654		—		—		654

Balance at March 31, 2020	—	—	7,917,489	$	143,081	$	(13,621)	$	(757)	$	128,703

See accompanying notes to condensed consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2020		2019
Cash flows from operating activities
Net income	$	1,334	$	1,627
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		276		544
Deferred income tax expense		347		173
Stock-based compensation		654		379
Provision for loan losses		367		194
Net amortization of investment securities		107		34
Stock dividends received on correspondent bank stock		(5)		(6)
Increase in cash surrender value of company-owned life insurance		(91)		(94)
Net gain on mortgage loans		(2,481)		(1,456)
Origination of mortgage loans held for sale		(196,873)		(72,819)
Proceeds from mortgage loans sold		179,207		69,694
Loss on intangibles held for sale		553		—
Net changes in operating assets and liabilities:
Accounts receivable		646		(61)
Accrued interest receivable and other assets		(376)		(2,447)
Accrued interest payable and other liabilities		(2,065)		(1,403)
Net cash used in operating activities		(18,400)		(5,641)
Cash flows from investing activities
Activity in available-for-sale securities:
Maturities, prepayments, and calls		5,703		2,528
Purchases		—		(10,390)
Purchases of correspondent bank stock		(568)		(362)
Redemption of correspondent bank stock		—		1,863
Purchases of premises and equipment		(204)		(86)
Loan and note receivable originations and principal collections, net		(45,850)		(37,207)
Net cash used in investing activities		(40,919)		(43,654)
Cash flows from financing activities
Net change in deposits		91,666		40,343
Proceeds from subordinated notes		8,000		—
Payments on subordinated notes		(101)		—
Repurchase of common stock		(370)		—
Payments to Federal Home Loan Bank Topeka borrowings		(17,000)		(5,000)
Proceeds from Federal Home Loan Bank Topeka borrowings		17,000		10,361
Net cash provided by financing activities		99,195		45,704

Net change in cash and cash equivalents		39,876		(3,591)
Cash and cash equivalents, beginning of year		78,638		73,357
Cash and cash equivalents, end of period	$	118,514	$	69,766
Supplemental cash flow information:
Interest paid on deposits and borrowed funds	$	2,463	$	2,981
Income tax refunds received		—		(70)
Cash paid for amounts included in the measurement of lease liabilities		1,475		1,299
Supplemental noncash disclosures:
Available-for-sale reclass of equity securities		—		(1,300)
Adoption of ASU 2018-02 - Reclassification of stranded tax effects		—		235
Change in unrealized (loss)/gain		(597)		1,062
Lease right-of-use-asset obtained in exchange for lease liabilities		—		16,580

See accompanying notes to condensed consolidated financial statements.

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FIRST WESTERN FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Basis of Presentation: The condensed consolidated financial statements include the accounts of First Western Financial, Inc. (“FWFI”), incorporated in Colorado on July 18, 2002, and its direct and indirect wholly‑owned subsidiaries listed below (collectively referred to as the “Company”).

FWFI is a bank holding company with financial holding company status registered with the Board of Governors of the Federal Reserve System. FWFI wholly owns the following subsidiaries: First Western Trust Bank (the “Bank”), First Western Capital Management Company (“FWCM”), and Ryder, Stilwell Inc. (“RSI”). The Bank wholly owns the following subsidiaries, which are therefore indirectly wholly‑owned by FWFI: First Western Merger Corporation (“Merger Corp.”), and RRI, LLC (“RRI”). RSI and RRI are not active operating entities.

The Company provides a fully‑integrated suite of wealth management services including, private banking, personal trust, investment management, mortgage loans, and institutional asset management services to individual and corporate clients principally in Colorado (metro Denver, Aspen, Boulder, Fort Collins and Vail Valley), Arizona (Phoenix and Scottsdale), California (Century City, Los Angeles) and Wyoming (Jackson Hole and Laramie). The Company’s revenues are generated from its full range of product offerings as noted above, but principally from net interest income (the interest income earned on the Bank’s assets net of funding costs), fee‑based wealth advisory, investment management, asset management and personal trust services, and net gains earned on selling mortgage loans.

The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. The December 31, 2019 condensed consolidated balance sheet has been derived from the audited financial statements for the year ended December 31, 2019.

In the opinion of management, all adjustments that were recurring in nature and considered necessary have been included for fair presentation of the Company’s financial position and results of operations. Operating results for the three months ended March 31, 2020 are not necessarily indicative of results that may be expected for the full year ending December 31, 2020. In preparing the condensed consolidated financial statements, the Company is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could be significantly different from those estimates.

The condensed consolidated financial statements and notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC.

Consolidation: The Company’s policy is to consolidate all majority‑owned subsidiaries in which it has a controlling financial interest and variable‑interest entities where the Company is deemed to be the primary beneficiary. All material intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates: To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual results could differ. Information available which could affect these judgments include, but are not limited to, changes in interest rates, changes in the performance of the economy, including COVID-19-related changes, and changes in the financial condition of borrowers.

The Company could experience a material adverse effect on its business as a result of the impact of the COVID-19 pandemic, and the resulting governmental actions to curtail its spread. It is at least reasonably possible that information which was available at the date of the financial statements will change in the near term due to the COVID-19 pandemic and that the effect of the change would be material to the financial statements. The extent to which the COVID-19 pandemic will impact our estimates and assumptions is highly uncertain and we are unable to make an estimate, at this time.

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Concentration of Risk: Most of the Company’s lending activity is to clients located in and around Denver, Colorado; Phoenix and Scottsdale, Arizona; and Jackson Hole, Wyoming. The Company does not believe it has significant concentrations in any one industry or client. At March 31, 2020 and December 31, 2019, 71.5%, and 71.7%, respectively, of the Company’s loan portfolio was secured by real estate collateral. Declines in real estate values in the primary markets the Company operates in could negatively impact the Company.

Revenue Recognition: In accordance with the Financial Accounting Standards Board (“FASB”), Revenue Contracts with Customers (“Topic 606”), trust and investment management fees are earned by providing trust and investment services to clients. The Company’s performance obligation under these contracts is satisfied over time as the services are provided. Fees are recognized monthly based on the average monthly value of the assets under management and the corresponding fee rate based on the terms of the contract. Performance based incentive fees are earned with respect to investment management contracts for the three months ended March 31, 2020 and the year ended December 31, 2019 were immaterial. Receivables are recorded on the condensed consolidated balance sheet in the accounts receivable line item. Income related to trust and investment management fees, bank fees, and risk management and insurance fees on the condensed consolidated statement of operations for the three months ended March 31, 2020 are considered in scope of Topic 606.

Transition of LIBOR to an Alternative Reference Rate: In July 2017, the United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate (“LIBOR”), announced that after 2021 it will no longer persuade or compel banks to submit rates for the calculation of LIBOR. In response, the Federal Reserve Board and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee to identify a set of alternative reference interest rates for possible use as market benchmarks. This committee has proposed the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to U.S. dollar LIBOR, and the Federal Reserve Bank of New York began publishing SOFR rates in the second quarter of 2018. SOFR is based on a broad segment of the overnight Treasury repurchase market and is intended to be a measure of the cost of borrowing cash overnight collateralized by Treasury securities.

Certain of the Company’s assets and liabilities are indexed to LIBOR, with exposure extending past December 31, 2021. The Company is currently evaluating and planning for the eventual replacement of the LIBOR benchmark interest rate, including the possibility of SOFR as the dominant replacement. In general, the transition away from LIBOR may result in increased market risk, credit risk, operational risk and business risk for the Company. The Company has developed a LIBOR transition plan, which addresses governance, risk management, legal, operational, systems and operations, fallback language, and other aspects of planning.

COVID-19 and CARES Act: On March 11, 2020 the World Health Organization declared the outbreak of COVID-19 a global pandemic, which continues to spread throughout the United States and the around the world. In response to the COVID-19 pandemic, the President signed the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) into law on March 27, 2020. The objective of the CARES Act is to prevent a severe economic downturn using various measures, including economic stimulus to significantly impacted industry sectors. We continue to monitor the impact of COVID-19 closely, as well as any effects that may result from the CARES Act and other government actions. However, the extent to which the COVID-19 pandemic will impact our operations and financial results is highly uncertain.

Reclassifications: Certain items in prior year financial statements were reclassified to conform to the current presentation. Such reclassifications had no impact on net income or total shareholders’ equity.

Recently adopted accounting pronouncements: There were no recent accounting pronouncements that were adopted by the Company since the end of the Company’s fiscal year ended December 31, 2019.

Recently issued accounting pronouncements, not yet adopted: The following reflects pending pronouncements with an update to the expected impact since the end of the Company’s fiscal year ended December 31, 2019.

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In February 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 replaces the incurred loss model with an expected loss model, which is referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses on the financial assets measured at amortized cost, including loan receivables, held-to-maturity debt securities, and reinsurance receivables. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. For all other assets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings and the allowance for loan losses as of the beginning of the first reporting period in which the guidance is effective. ASU 2016-13 was set to be effective for most public companies on January 1, 2020. However, at the October 16, 2019 FASB meeting, the FASB voted unanimously to delay the effective date of CECL adoption for smaller reporting companies (“SRCs”) to January 1, 2023.

During the three months ended March 31, 2020, the CECL committee of the Company continued to work through its implementation plan. The Company has integrated historical and current loan level data as required by CECL and is working with its third-party vendor solution to begin evaluating the methodologies available under the CECL model on its loan portfolios. The Company also continues to evaluate documentation requirements, internal control structure, relevant data sources, and system configurations. The Company has completed a successful integration of the required fields and historical data for key loan, client and collateral data within the third-party solution and has been able to run parallels of our current ALLL calculation in the software to compare to our internal calculation and reconcile known differences. The Company has started the process of selecting the methodologies to be used for each segment of its loan portfolio and started preliminarily testing to determine the impact of each methodology. Currently, we are unable to estimate the impact the adoption of this update will have on the consolidated financial statements and disclosures. However, the Company expects the impact of the adoption will be significantly influenced by the composition and characteristics of its loan portfolios along with economic conditions prevalent as of the date of adoption. The Company expects to implement the new standard beginning January 1, 2023.

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which amended existing guidance to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments require an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizing an impairment charge of the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will be effective for the Company on January 1, 2021, with earlier adoption permitted and is not expected to have a significant impact on the financial statements and disclosures.

NOTE 2 - INVESTMENT SECURITIES

The following presents the amortized cost and fair value of securities available‑for‑sale, with gross unrealized gains and losses recognized in accumulated other comprehensive income as of March 31, 2020 and December 31, 2019 (in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
March 31, 2020	Cost		Gains		Losses		Value
Investment securities available-for-sale:
U.S. Treasury debt	$	250	$	8	$	—	$	258
Government National Mortgage Association ("GNMA") mortgage-backed securities – residential		41,173		87		(389)		40,871
Federal National Mortgage Association ("FNMA") mortgage-backed securities – residential		2,666		69		—		2,735
Corporate collateralized mortgage obligations ("CMO") and mortgage-backed securities ("MBS")		9,205		—		(569)		8,636
Total securities available-for-sale	$	53,294	$	164	$	(958)	$	52,500

Table of Contents


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2019	Cost		Gains		Losses		Value
Investment securities available-for-sale:
U.S. Treasury debt	$	250	$	4	$	—	$	254
GNMA mortgage-backed securities – residential		45,490		157		(335)		45,312

Price	13.40	EPS	1
Shares	8	P/E	20
MCap	107	P/FCF	-2
Net Debt	-146	EBIT	17
TEV	-39	TEV/EBIT	-2
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-03-31	Filed 2020-04-30
10-K	2019-12-31	Filed 2020-03-12
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-08
10-Q	2019-03-31	Filed 2019-05-10
10-K	2018-12-31	Filed 2019-03-21
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-30
S-1	2018-06-19	Public Filing

8-K	2020-07-27	Regulation FD, Exhibits
8-K	2020-07-23	Earnings, Regulation FD, Exhibits
8-K	2020-07-16	Regulation FD, Exhibits
8-K	2020-06-10
8-K	2020-06-08
8-K	2020-05-18
8-K	2020-05-06
8-K	2020-04-30
8-K	2020-04-08
8-K	2020-03-17
8-K	2020-02-10
8-K	2020-01-30
8-K	2020-01-23
8-K	2019-11-01
8-K	2019-11-01
8-K	2019-10-24
8-K	2019-07-29
8-K	2019-07-29
8-K	2019-07-25
8-K	2019-07-19
8-K	2019-06-14
8-K	2019-06-05
8-K	2019-06-05
8-K	2019-05-06
8-K	2019-05-02
8-K	2019-04-25
8-K	2019-03-18
8-K	2019-02-04
8-K	2019-01-24
8-K	2018-10-30
8-K	2018-10-25
8-K	2018-09-24
8-K	2018-09-10
8-K	2018-08-30
8-K	2018-08-02
8-K	2018-07-27

EX-31.1	myfw-20200331ex31196ae5d.htm
EX-31.2	myfw-20200331ex31229ddb2.htm
EX-32.1	myfw-20200331ex321a9c151.htm
EX-32.2	myfw-20200331ex322b62d66.htm

MYFW 10Q Quarterly Report

First Western Financial Earnings 2020-03-31