First Western Financial Inc [MYFW] Filings

10-Q 1 myfw-20240930.htm 10-Q myfw-20240930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q

_________________________________________

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

For the quarterly period ended September 30, 2024

o 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. x Yes o 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). x Yes o 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 o	Accelerated filer	x

Non-accelerated filer o	Smaller reporting company	x

	Emerging growth company	o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x 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 October 30, 2024
			Common Stock, no par value			9,664,101

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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 September 30, 2024 (Unaudited) and December 31, 2023	6

	Condensed Consolidated Statements of Income (Unaudited) for the Three and Nine Months Ended September 30, 2024 and September 30, 2023	7

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2024 and September 30, 2023	8

	Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2024 and September 30, 2023	9

	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2024 and September 30, 2023	10

	Notes to Condensed Consolidated Financial Statements (Unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	84

Item 4.	Controls and Procedures	85

PART II. OTHER INFORMATION		86

Item 1.	Legal Proceedings	86

Item 1A.	Risk Factors	86

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86

Item 3.	Defaults upon Senior Securities	86

Item 4.	Mine Safety Disclosures	86

Item 5.	Other Information	86

Item 6.	Exhibits	87

SIGNATURES		88

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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 soundness of other financial institutions. 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:

•geographic concentration in Colorado, Arizona, Wyoming, Montana, and California;

•the soundness of other financial institutions;

•changes in the economy affecting real estate values and liquidity;

•risks associated with higher inflation;

•changes in interest rates;

•weak economic conditions and global trade;

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

•risks specific to commercial loans and borrowers;

•risks related to non-performing assets, borrowers' solvency and ability to repay and the value of loan collateral;

•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;

•legislative changes or the adoption of tax reform policies;

•external business disruptors in the financial services industry;

•the adequacy of our allowance for credit losses;

•liquidity risks;

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

•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;

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•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, including the use of artificial intelligence as a commonly used resource and its effects;

•our ability to attract and retain clients;

•unforeseen or catastrophic events, including pandemics, wars, 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;

•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;

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

•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.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the section titled Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission ("SEC") on March 15, 2024. 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)


	September 30, 2024		December 31, 2023
Assets
Cash and cash equivalents:
Cash and due from banks	$	18,979	$	7,284

Interest-bearing deposits in other financial institutions	257,243		247,158
Total cash and cash equivalents	276,222		254,442

Held-to-maturity debt securities, net of allowance for credit losses of $71 and $71, (fair value of $70,826 and $66,617), respectively	76,745		74,102
Correspondent bank stock, at cost	5,746		7,155
Mortgage loans held for sale, at fair value	12,324		7,254
Loans held for sale, at fair value	473		—
Loans (includes $8,646 and $13,726 measured at fair value, respectively)	2,383,199		2,530,915
Allowance for credit losses	(18,796)		(23,931)
Loans, net	2,364,403		2,506,984
Premises and equipment, net	24,350		25,256
Accrued interest receivable	10,455		11,428
Accounts receivable	4,864		5,095
Other receivables	10,397		4,467
Other real estate owned, net	37,036		—
Goodwill and other intangible assets, net	31,684		31,854
Deferred tax assets, net	4,075		6,407
Company-owned life insurance	16,849		16,530
Other assets	36,325		24,488

Total assets	$	2,911,948	$	2,975,462

Liabilities
Deposits:
Noninterest-bearing	$	473,576	$	482,579
Interest-bearing	2,029,478		2,046,460
Total deposits	2,503,054		2,529,039
Borrowings:
Federal Home Loan Bank and Federal Reserve borrowings	62,373		125,711
Subordinated notes	52,508		52,340
Accrued interest payable	3,339		3,793
Other liabilities	41,843		21,841
Total liabilities	2,663,117		2,732,724

Shareholders' Equity
Preferred stock - no par value; 10,000,000 shares authorized; 0 issued and outstanding	—		—
Common stock - no par value; 90,000,000 shares authorized; 9,664,101 and 9,581,183 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	—		—
Additional paid-in capital	193,274		192,894
Retained earnings	56,767		51,042
Accumulated other comprehensive loss	(1,210)		(1,198)
Total shareholders’ equity	248,831		242,738
Total liabilities and shareholders’ equity	$	2,911,948	$	2,975,462

See accompanying notes to condensed consolidated financial statements (unaudited).

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FIRST WESTERN FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Interest and dividend income:
Loans, including fees	$	35,353	$	34,141	$	105,767	$	99,804
Loans accounted for under the fair value option	141		300		518		1,078
Investment securities	708		607		1,962		1,863
Interest-bearing deposits in other financial institutions	1,754		1,292		5,961		4,361
Dividends, restricted stock	134		141		334		459
Total interest and dividend income	38,090		36,481		114,542		107,565

Interest expense:
Deposits	21,150		17,467		62,620		46,423
Other borrowed funds	1,372		2,248		4,506		6,368
Total interest expense	22,522		19,715		67,126		52,791
Net interest income	15,568		16,766		47,416		54,774
Less: Provision for credit losses	501		329		2,907		1,862
Net interest income, after provision for credit losses	15,067		16,437		44,509		52,912

Non-interest income:
Trust and investment management fees	4,728		4,846		14,533		14,083
Net gain on mortgage loans	1,451		654		4,535		2,447
Net gain (loss) on loans held for sale	—		—		117		(178)
Bank fees	392		427		1,610		1,610
Risk management and insurance fees	367		145		525		375

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