First Western Financial : 2022 Annual Report

2022 Annual Report

Cover Artwork: Wes Hempel, Wrong Turn, 2002, Oil on Canvas, First Western Art Collection

To Our Shareholders:

Despite a challenging operating environment created by inflationary pressures and rising interest rates, our performance in 2022 reflects another year of executing well on the vision that we communicated for the First Western franchise at the time of our IPO in 2018 and creating significant value for our shareholders in the process. The combination of organic growth and accretive acquisitions helped us to generate a 3.4% increase from the prior year in our Adjusted Pre-Tax,Pre-Provision Income, which we consider to be a good representation of our core earnings. As a result of our strong financial performance and effective balance sheet management, we generated an 11% increase in our tangible book value per share during a year when many banks saw declines. This brought the total increase in our tangible book value per share since our IPO to nearly 140%.

One of our top priorities for 2022 was smoothly integrating our acquisition of Teton Financial Services, which closed at the end of 2021. We completed the integration on time and as planned, while realizing all of the cost savings that we projected for this transaction. After ensuring that our new clients experienced minimal disruption to service during the integration, we then began to pursue the revenue enhancement opportunities available to us in Wyoming as a result of being a larger financial institution with the ability to serve clients with larger financing needs. By the end of the year, we were seeing increasing contributions to both loan production and deposit gathering from our teams in Wyoming.

At the same time, we continued to execute well on our organic growth strategies as the stronger commercial banking team we have built continued to effectively communicate our value proposition and attract new clients to the bank, while the investments we made to build or expand our presence in Arizona, Wyoming and Montana started to make larger contributions to our business development efforts. With our larger commercial banking team, our expanded presence in attractive markets, and our increasing size and reputation that has enabled us to move up market and work with clients with larger borrowing needs, we saw a substantial increase in new loan production during 2022. This helped us to offset an elevated level of loan payoffs and still generate 27% loan growth, all of which was organic.

During the second half of 2022, our strong loan growth resulted in our loan-to-deposit ratio exceeding our normalized level. In response, we directed our teams to focus more of their efforts on deposit gathering. With this increased focus, in the fourth quarter, our deposit growth rate was more than twice as large as our loan growth rate, which reduced our loan-to-deposit ratio. Going forward, we will continue to focus on developing full banking relationships with both loans and deposits, which we believe will result in better alignment between our loan and deposit growth in the future.

While the macroeconomic environment has continued to be challenging to start 2023 and we have seen some high profile bank failures, First Western continues to be a source of stability and strength for our clients, as we have throughout our history. Due to our prudent approach to risk management, we have built a stable, diversified, and granular deposit base and the increase in interest rates has not resulted in a meaningful change in our accumulated other comprehensive income, which has helped us to avoid the concentration and interest rate risk that has led to the recent troubles seen at other banks. While we will be conservative and highly selective in our new loan production until economic conditions improve, we expect to be able to continue generating solid loan growth as the new teams that we have added in Arizona, Wyoming and Montana continue to gain traction and increase our market share. With the strong team that we have built, the attractive markets that we operate in, and the highly productive business development capabilities that we have developed, we expect to deliver another strong year in 2023 and create additional value for our shareholders.

I'll conclude with a big thanks to our associates in each of our banking locations, our support teams and our product teams that have worked hard through a series of recent headwinds to deliver on our vision of becoming "the Best Private Bank for the Western Wealth Management Client." In addition, a very special thanks to our clients who have placed their trust now and for future generations in First Western. We believe we all should "Trust Where You Bank", and we greatly appreciate our growing base of clients and the trust they place in First Western.

Sincerely,

Scott C. Wylie

Chairman, President & CEO

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

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

For the fiscal year ended December 31, 2022

OR

• 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

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First Western Financial, Inc.

(Exact name of Registrant as specified in its Charter)

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Colorado	37-1442266
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	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

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

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NO x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ¨ NO x

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 x 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 x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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	x
Non-accelerated filer	¨	Smaller reporting company	x
		Emerging growth company	x

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. x

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

As of June 30, 2022, the last day of the registrant's most recently completed second quarter, the aggregate market value of the common stock held by non- affiliates of the Registrant, based on the closing price of the Registrant's common stock on the NASDAQ Global Select Market, was approximately $214.4 million.

The number of shares of the registrant's common stock outstanding as of March 10, 2023 was 9,507,565.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Definitive Proxy Statement relating to its 2022 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K to the extent stated herein. Such Definitive Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant's fiscal year ended December 31, 2022.

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