First Western Financial : 2024 Annual Report

Published: 2025-04-29 13:33:06 ET MYFW

Cumulus and Cottonwoods by Jeff Aeling , First Western Art Collection

To Our Shareholders:

While economic conditions and interest rates created a cha|Ienging operating environment in 2024, we continued to execute well on our strategic priorities and achieved many of aur key objectives for the year. These included increasing our liquidity by reducing our loan-to-deposit ratio, increasing our net interest margin, improving our asset quality by reducing our level of non-performing loans, and keeping our expense levels relatively stable while continuing to invest in talent and technology that will contribute to our long-term profitable growth.

Due to our financial performance and prudent balance sheet management, we increased our tangible book value per share by 3.7% during ZD24 and increased all of our capital ratios compared to the end of the prior year.

With the banking talent we have added, along with changes we have made throughout the organization to increase our focus on adding new clients, we had a successful year of business development. This resulted in many new deposit accounts during 2024, a strang year of loan production while maintaining our disciplined underwriting and pricing criteria with most of the new loan production also being clients that bring deposits to the bank, and strong growth in our assets under management in our wealth management business.

While we are pleased that we were able to improve our financial performance as we moved through 2024, we are still not at the level of performance that we target, but we expect to make continued improvement in our financial performance in 2025. Overall, economic activity continues to be healthy in our markets. And with the strength of our balance sheet and the franchise we have built, we see good opportunities to capitalize on market disruption and challenges being faced by competing banks to add new clients and banking talent. We will continue to prioritize prudent risk management and conservative underwriting criteria, but we are seeing some increase in our loan pipelines as the new bankers we have added in the past several quarters increased their level of productivity.

Deposit gathering will remain a top priority throughout the organization, as we work to further reduce our loan-to-deposit ratio. With the successful repositioning of our balance sheet and the increased liquidity that we have in our loan-to-deposit ratio, we believe we are well positioned to generate a higher level of loan growth in 2025 as loan demand increases, while maintaining our disciplined pricing and underwriting Criteria.

We see a number of catalysts that we expect to contribute to our improved financial performance in 2025. These include a higher level of loan growth, continued expansion in our net interest margin, the redeployment of cash generated from the sale of our OREO properties into interest-earning assets, more robust business development activities in our Wealth Management business as a result of changes we made in this business during 2024, and more operating leverage as we increase revenues while maintaining disciplined expense control. And should the environment become more favorable for mortgage demand in 2025, we should benefit from the MLOs we added during 2024 and generate a higher level of gain on sale of mortgage loans.

The positive trends we are seeing in a number of key areas are expected to continue, which we believe should result in steady improvement in our financial performance and further value being created for our shareholders in 2025 as well as in the coming years.

Sincerely, Scott C. Wylie

Chairman, President & CEO

[This j›age intentionally 1eR blank]

FORM 10-K

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

First Western Financial, Inc.

(Smote or orher )urtadlefilon of

19110 létt Street, Suite 12110

Denver, CO

(Address of printipai executive offices)

37-14422é6

89202

(Zip Code}

Nsme of each exchange or which

Common Stock, no par value

Trading Symbnl

MYFW

registered

The Nasdaq Stock Market LLC

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

1ndicate by check mark if the registrant i5 a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes O No iRi Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or I 5(d) of the Act. Yes O No &

during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) hns been subject to such filing requirements for the past 90 &tys. Yes & No O

1ndicatc by chcc k mark u-hcilicr the registrant has submitted electronically every Interacts ve Data Fit c wquircd t‹› he suh-millet pursuant to Rulc 405 tit

Regulation S-T (§232.405 of this chapter} during the preceding 12 months (or for such shorter period lhai the registrant was reqtlired to submit such fi les},

Yes No D

ln4icale by cfieck mark whgthur Ihe egistzant is a laryc acce1erale4 liter. an accelerated flier. a nun-accelerated Idler. a smaller sporting company, or an emerging gtowtk company. See the definitions of "large accelerated flier," "accelerated liter." "smaller reporting company." and "emerging growth company" in Rule 1 2b-2 of the Exchange Act.

Large accelerated filer

Non-accelerated flier 0

Accelerated fi let'

Smaller reporting company Emerging growth company

1I an emery ng g'ruwth company, indicate b)' check mark if the ruginfant has c lectc€ nut to use tone extended tran$itii›n pcriud for c‹›mplyirig with any new

or revised financial accounting slandards provided pursuant to Section l3(o) of the Exchange Act. O

1ndicate by chNk mark whether the registrant has fi loil a rcporl ‹›n and attestation to i tS managemH t'fi ass smsnf of the uffccfivcnc ss of in internal

control over financial reporting under Section 404(b} of the Sarbanes-Oxley Acl ( 15 U.S.C. 7262(b)) by the registered public accounting firm thal

I f securities are rcgiñtu d pursuant to Section 12(h) uf llic Act, indicate by uhcck mark w cihw the finazici»l siatsmcn u£ the rcgistrsztt included in the

filing reflect the correction of an error co previously issued financial statements.0

lndicrtte by check mark whether any of those error corrections are restotglTteftis that reqiired a recovery analysis of incentive-based compensation received

by any u£ the r gistrant'8 ex utive offi;cr$ during the rel cvant reC‹›vcry twriod pursuant to §240. t0o- (bJ 0

Indicate by cffck mark whether the regixtrarlt is a shell cpMpany (as defined in Rule 12b•2 of the Exchange Act). Yc O iNo Hi

As of Jane 3O, 2024, the lasi day of the regislrant'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 tire NASDAQ Global Select Market, u•as approximately

$131.2 million.

The number of shares of the registrant's common stock outsianding as or Mazch 5, 2g23 vas 9,704,421.

DOCUM4ENW lNCORPOtL4TED BY REFERENCE

Portions oflhe registrant's Definitive Proxy Statement relating to its 2025 Annual fleeting of Stockholders Bre incorporated by reference into Part UJ of thts Fnrm I 0•K to the extent ñtBt4 herein. Such Definitive Proxy Statement will be fi Ie›lJ with the Securities and Exchange Commits ion u•ithin 120 days after the end of£he registranl's fiscal year ended December 3 I, 2024.

FIRST WESTERN FINANCIAL, INC.

PART I

Item 1.

Business

Item lA.

Risk Factors

Item lB.

Unresolved Staff Comments

Item lC.

Cybersecurity

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safely Disclosures

PART II

Item 5.

Market for Registrant's Common Equity, Related Shareholder M8tterB and Issuer PurchasCS of

Equiry Securities

Item 6.

[Reserved]

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Opemtions

Item 7A.

Quantitative and Qualitative Disclosure About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Item 9A.

Controls and Pmcedwes

Item 9B.

Other Information

Item 9C,

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Item 11.

Exgcutivg Compensation

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item l3.

Certain Relationships and Related Transactions, and Director Independence

Item l4.

Principal Accounting Fees and Services

PART IY

Item 15.

Exhibits, Financial Statement Schedules

Item l6.

Form 10-K Summary

Signature

ImpoMotModsex#eufoormxdoxin bsAnnuzlRepsfl

UnlesB we state otherwise or the context otherwise requires, references in thiB Annual Report on Form 10-K to "we," "our," "us," "the Company* and "First Western" refer to Fint 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 Annual Repori on Conn 10-K is accurate only as of ltte date of this Annual Report on Form 10-K and as of the datea specified herein.

This Annual Repnrt on Fnrm 10-K cnntnins fnrwsrd-touting statements. These forward-looking statements reflect our current views with respect tu. among other things, fuiure t vents and our financial performance. These statements arr ofien, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely rcsult," "expect," "cnntinue," "will," "anticipate," "seek " "estimate," "intend," "plan," "projection," "would" and "outlwuk," or the negative versiun of those words or uther comparable words or phrases of a future or forward-looking nature. These forward-rooting statements ate nor historical facts, and are based on current expeciarions, estimates and projcctions about our industry, management's belicfs Rfld CCrtRin assumptions made by management. many of which by their nature, are inherently uncertain and bcyund our control, particularly with regard to developments related tu soundness of other financial insiituiions. Accordingly, we caution you ihai any such forward-looking siatemenH are not gunrantccs of future performance and arc subjcct to risks, assumptions and unccrtaintics that arc difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable ss of the date made, actual results may prove to be materially different from the resulis expressed or impl ied by the forward-looking statements. When considcring forward-lnoking statcmcnts, you shnuld keep in mind the risk factors and nthcr cautionary statements described in "Item 1A - Risk Factors" of this Annual Repori on Form 10-K.

There are or will be important factnrs that could cause nur actual results to differ materially frnin those indicated in these forward-looking statements, including, bui not limited to, the following:

geographic concentration in Colorado, Arizona, Wyoming, Montana, and Cali fornia; the soundness of oiher 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, including the imposition of tariffs; our ability tu continue to originate residetitial real estate loans and sell such loans; risks specific to commercial louns and borrowers;

risk related to non-performing assets, borrowers' solvency and ability to repay and the value uf 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 a‹Jequacy of our allowance for credit losses;

liquidity risks;

our ability to maintain a strong core deposit base or other luw-cc›st 1'unding sources; continued positive interaction with anti financial health ct'our referral sources; retaining our largest trust clients;

our ability to achieve uur strategic objectives:

competition front nther banks, financial institutions, and wealth and investment management firms;

our ability to implement our internal growth strate$'y and milnRge 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 cybersecuriry attacks;

our reliance on cninmunications, information, operating and financial cnntrol systems tcchnnlogy and related services from third-party service prowlers;

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 cfttastrophic events, including pandemics, weirs, terrorist attacks, extreme weather events or other natural disasters;

new iines of"business or new products and Services;

regulation of ihe financial services industry:

legal and regulatory proceedings, investigations and inquiries, fines and sanctions; limiied tending volume and liquidity in the market for our common stock; fluciuaiions in the market price of our common stock;

actual or anticipated issuances or sales or'our common stock or preferred stock in the future; the initiation and continuation of securities analysts covernge of the Company.

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

futurr issuances of debt .securities;

our ability to manage our existing and future indebtedness; available cash flows ftom lhe Rank; and

oiher factors thai are discussed in "Part 1 - Item 1 A - Risk Factors".

The foregoing factors should not be construed as exhaustive. If one or more events related to ihese or other risks or uncertainties matcrinlizc, or if our undcrlying assumptions prove tn bc incorrect, ncttial results may differ matcrinlly from what we anticipate. Accordingly, you should not place undue reliance un any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not underlake any obligation io publicly update or review any forward-lnoking statement, whether as a result of ncw infnrination, fiiturc developments or otherwise. New factnrs emerge from time to time, and it is not pnssible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extenl to which any facior. or combination of factors, may cause actual results to differ matcrially frnm those contained in any forward-looking statcmcnts.

Our Company

First Western Financial, lnc. is a financial holding company headquartered in Oenver, Colorado. We provide a fully integrated suite nf weRlth management services nn our private trust bank platform, which includes a comprehensive selection of' dGpusit, loan, trust, wealth planning und investment management products and services. We believe our integrated business model distinguishes us from other banks and non-bank financial services companies in the markets in which we operate. As of December 51 2024, we provided fiduciary and advisory services rim 57.32 billinn of trust and invesfirent management assets ("AUM"), and we had total assets of $2.52 billion, total loans excluding mortgage losns held for sale and loans held for sale of $?.43 billion, toial deposits of S2.5 I billion, and total shareholders' equity of 5252.3 million.

Our missinn is to bc ihc best private bank for the Western wealth management cl icnt. Wc bclicvc that the "Western weslth management client" shares our entrepreneurial spirit and x-ulues nur sophisticated, high-touch integrated financial services that are tailored to meet their specilic needs. Our larger clients include succ•ess1ñ1 entrepreneurs, professionals and other high nst w'orth individuals or familics, along with their businesses and philanthropic orgnnizations. We offer our services through a branded netw'ork of boutique private trust bsnk offices, loan prnductinn offices, and trust oflices, which we believe are strategically located in affluent and high-growth markets in twenty locations across Colorado, Arizona, Wyoming, Montana, and California.

We generate a significant portion ot our revenues from non-interest income, whith wc produce trom our trust, ins'estment management, and other advisory services as well ns through the origination and sale of mortgage mans. The balance of our revenue is generated from net interest income, which we derive from our traditional banking products and services. For the year ended December 31, 2024, non-interest income was $27.7 million or 30.7% of total income before non-interest expense and net interest income, before the provision for credit losses, was $64.3 millinn, or 71.4*Zo nf tntal income before non-interest expense.

We believe that we have developed a unique approach to prfvate banking to best serve our Western wealth management clients primarily as a result of the combination of the following factors:

Offering sophisticated w'ealth management products and services, including traditional banking as well as trust, wealth planning, invcstincnt innnagement and other related services often provided by largcr financial institutions with the high-tuuch and personalized experience that is typically associated with community und trusi banks;

Delivering services through our sirategically located private trust banl offices, which we refer to internally as "prnfit centers"; and

Using our relationship-based team approach to hecoinc a "trusted advisor" to our clients by understanding their investment management, ultimate goals and banking needs and tailoring our prnducts and services to meei ihose needs.

We were founded in 2002 by our Chaimian, Chief Executive Officer and President, Scott C. Wylie, and a group of local business leaders with the vision of building the best private bank for the Wesietn wealih management client. Since opening our first office in Denver, Colorado in 2004, we hav'e grown organically primarily by establishing boutique private trust bank offices, attracting new clients Rnd expanding our relationships with existing clients, as well as through a series of strategic acquisitions of various trust, registered investment advisory, bank brnnch and full bank institutions, and other financial services firms. Since we completed an initial public offering of our common stock on July 23, 2018, our common stock has been 1isted nn the Nasdaq Glnbai Select Market under the symbol "MYFW."

We believe we have built a pretnier private trust bank in the Western United States that focuses on providing the best financial solutions to our clients. We are service-driven, solution-oriented and relationship-based. We accomplish this by continuing to execute on the following strategies:

Bu lI*!*!8 Ut Exis'ting Markets. Once we hnve established a presence in a pnrticular geographic market that contains attractivt high net worth household demugraphics, we then louk to establish additional locations that are closely dimmed to sub-concentrations of affluent households and/or commerciai activity (a "Sub and spnkc" mnrkct build-nut, as we liavc commenccd in Dcnvcr. P hocnix, and Jackson Hole). Wc continue to

seek out talent to hire as part of our strategy of building out existing markets and continue to be successful in hiring reams thai heip us accomplish ihis goal. We also seek to employ highly capable associates wflh local market cxpcricncc and rclationships.

Keepeiii'ng Ext.fling Ghent telation.ships. Wc deliver our services though our twenty local boutique prix'atc trust bank offices, loan production offices, and trust offices. This allows us to use multi-discipline sales and client service teams, in-market, to ensure we are meeting each client's comprehensive sei of needs. These teams take the time to understand the complexities nf our clients' financial world through wealth planning solutinns and create the financial plan that helps theiri reach their goals. This profit center-based service mudel is a critical component ot our future growth as we continue to develop our understanding of our Cl IDfltS' £•VO1ViH nCCds, allowing us to deepen, broaden and grow our existing relationships.

Cienerating Referral.$ for New' Client Reh•!••› !'I*-* We be1ies'e we have demonstrated a successful sales and marketing capability, built around the personal and professional networks and centers of influence of nur local profit cenier leadership. Our existing client base has historically provided a significant amount of new

clients through referrals, In surveys, our clients generally rate us very favorably overall in areas pt prnfessionalism, reliability, service-orientation, and trust.

Developing Client Relationships through our Product Group.1. Each profit center is designed tn feel like a boutique private trust bank office and is standed with business development and client service personnel. The profit centers work closely with our central product gtoups to customize our services to each client's specific situation, without sacrificing the fiexibility, expertise and authority to quickly meet complex client needs. Our central product groups are designed te support a si$»r«miI y larger client Ond AUM base, providing an opportunity for significant operating leverage as we open additional profit centers, We have skies and service specialists in our product groups, such as Retircmcnt Scrviccs and Morigsge Services, who arc able to build relationships within their ures of expertise and provide high quality service that creates un opportunity for a broader relationship acrrss our suite of products and service.«.

F.xpunding to New Markets. We believe that our profit centers are profitable and stnble businesses when maturc. We also bclicvc that our prr›duct gmup and support center teams have a high degree of operating leverage {i,e" we believe that increasing the number of profit centers would not require a proportionate increase in our product group or suppon cenier expenses). Therefore, a key strategy of ours is to add incremental prnfit centers and grnw them to maturity. We continue to seek out talcni as parl of our strategy of building out existing markets and continue tn be successful in hiring teams that help us accomplish this goal. The trends in the financial services industry lhai make our business model successful in our existing geographic inarkcts also cxst in other locatir›ns in the W tsiem United States. Our analysis indicates that ihcrc are hundreds of markets end subniarkets in the Western United StRtes that cnuld support our profit centers and fit our target demographics. As such, we intend to continue to explore new Western United States markets with favorable high net worth demographics and competitive landscapes.

two• ing our C'ore Deposit Frnn‹-h tee. The strength of our deposit franchise is derived from the long-standing relationships we have with our clients and the strong ties we have to the markets we serve. Our deposit footprint has provided, and we believe will continue to provide, primary support for our loan growth. A key part of our strategy is to continue to enhance oUr funding sources by continuing to build our private and commercial banking capabilities to keep building nur bnse of attractively priced core deposits.

Attracting Talent. Our team nf scasonGd associates has been, and will continue to be, an important driver of our organic growth by further developing relationships with current and potential clients. We have a record of hiring experienced associates to enhance our organic growth, and sourcing and hiring talent w'iil continue io be a corc focus for us. Wc bclievc that our client service model. financial strength growth strategy and public company status will further enhance our ability to attract and retain this tulent.

Developing N‹•iv Produc-ts. We seek to be the primary source of financial products and services for our clients. By continuing to expand our product offerings-either by internal product development or establishing third-party relationships-we work to meet expanding client needs while further diversifying nur revenue streams. This includes our recent efforts to focus on our product management disciplines as wtll us upgrading our commercial banking capabilities, adding market expertise in certain business verticals.

Our Service hfodel and Products

Wt deliver a broad array of wealth management products and services through our profit centers using uur proprietary ConnectView approach, which looks holisiically across a clitnt's current and projected financial siivtion. We believe prnviding financial solutions in one area (such as cstatc, retirement planning nr lending) ofien impacts other areas of our clients' w•ea1th planning (such as risk or balance sheet management). which provi‹jes us oppurlunities to evaluate proposed solutions across multiple business lines and offer additional services to our clieots.

We have designed our business around having each profit center staffed with seasoned management. Typically, cach profit ccntcr team is led by a prcsidcnt, whn is a senior investment advisor or bankcr with strong clicnt rclationships and sales and leadership skills. The incas team includes deposit, loan, trust, wealth planning, and related professionals, creating a strong interdisciplinary sales and service team.

We provide a broad array ol" prcducls and seances through our boutique private trust bank oPices, IargeJy comprised of the products and services described below.

General. Through our relaiionship-oriented private bank lending approach, our strategy is to offer a broad range of customized consumer and commercial lending products for the personal investment and business needs of our clients. Our clients are typically well diversified and the purpose for their IORH 8ftd liquidity needs often does not correlate tn the collaterul used to secure the man.

Our commercial lending products inc1u‹Jc commercial loans, business term loans and lines ui' credit to a diversified mix of Small and midsized businesse.s. We offer both owner occupied and non-owner occupied commercial real estate ("CRE") loans, as w'ell as construction loans.

Our cnnstimcr lending prnducts include residential first mnrigagc loans, originated loans for our own portfolio, as well as thuse for which we conduct mortgage banking activities whereby we originate and sell, servicing-released, whole loans in the secondary marker. Our mortgage banking Joan sales activities are primarily directed or originating single family mnrtgagcs, w'hich gcncmlly conform to Fannie Mac and Frcddic Mac guidelincs and arc delivered to thc investor shortly after funding, Additionally, we nffer installment loans and lines of credit, which nre typically to facilitate investment opportuniGes for consumer cient z'hose fnancial characiedstics support be request We also provide client loans

collatcralizcd by cnsh and marketable sccuritics.

We employ experienced banking and bti.sincss development teams who provide superior client service, value-add lending solutions and competitive pricing to market our lending products and services.

As of December 31, 2024, our loan portfolio contained a balanced and diverse mix of loans, as shown below:

Consumer & Other

wni

CRE

C&D 13.0%

Non-ownar o« i»d cRE 25.3%

(J ) F r‹›gn Ic›an* oxcluJ0s $7.3 mill i‹›n in consumer and othur !uans accounted f‹›r undor thu fair value ‹›ytic›n.

Our loan portfolio includes commePGlBl illld Illdustrial lOftIls, residential real estate loans, commercial real estate loans, and other consumer loans. The principal risk associated with each category of loans we make is the creditworthiness of the borrower. Borrower crcditworthiness is affected by general economic conditions, ths attributes of the borrower and the bnrrower's market or industry. We underwrite for strong cash flow, multiple sources of repayment, adequate collateml, borrower experience and backup guarnntors. Attributes of the relevant business market or industry include the competitive environment, client and supplier availability, the threat of substitutes and barriers to entry and exit.

1-4 Fa»tilyr Residential. Our 1-4 family residential loan portfolio consists of loans and home equity lines of credit secured by 1-4 family residentii2l properties. These loans typically enable borrowers to purchase or refinance existing homes, most of which serve as the primary residence of the owner. In addition, some borrowers sec ure a commercial purpose loan with 1-4 family residential properties, As of December 31, 2024, 1 -4 family re3identia1 loans were S962.9 million, or 39.8% of our total loan pnrtfolin, consisting of $135.6 million and $829.5 million nf fixed-rate and adjustable-rate loans, respectively. While we typically originate loans with adjustable rates and maturities up to 30 years, as of December 31, 2024, the average term on our I -4 family portfolio was 20.8 years with an average remaining term of Id.3 years. Such loans typically remain outstanding for substantially shnrter periods because bnrrnwers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan.

Commercial loans secured by 1-4 family residential real estate are dependent on the strength of the local economy and local residential and commercial real eslate markets. Borrower demand for adjustable-rate compared to fixed-rate loans is a function of the lsvcl nf intcrcst rates, the expectations of changcs in the lcvel of interest rates, and the difference between the interest rates and loan fees offered fur fixed-rate mortgage loans as compared to the interest-rates and man fees for adjustable rate loans.

The loan fees, interest rates, and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditinns. The loans am secured by the real estate, and appmisals arc nbtained to support the loan amount at origination. Loans collatemlized by 1-4 family residential real estate genemlly are originated in amounts of no more the go% of appraised value. Generally, our loans conform to Fannie Mae and Freddie Mac underwriting guidelines and conform to internal policies for debt-to-income or free cash flow levels. We retain a valid lien on real estate, obtain a title insurance pnlicy that insures that the property is free from encumbrances and require hazard

Our loc us for mortgage lending is to originate high-quality loans to drive growth in our mortgage loan portfolio. Our morigage strategy includes attracting new loan clients with our mortgage loan products and services. which we believe will prnvide an oppnrtunity for our profit centers to bring in well-qualified prospects, and to cross-sell other products and services to clients. We belit›'e that cross-selling enables us to generate a‹Jditiona1 revenues, increase tlient retention, and provide products thai benefit our clients. We have developed a scalable platform, including loan processing, underwriting and closings for both sccnndary sales and nrigination of 1-4 family residential morlgagcs maintained in our porlfnlio and believe we have significant Opportunities to gruw this business.

Cash, Securities and Other. Our cash, securities and other man portfolio consists of consumer and cummercial purpose loans, which ate primarily secured by securities managed and under custody with us, cash on deposit with us or life insurance policies. As of December 31, 2024. lnans secured with cnsh, marketable securities and othcr werr SI 19.8 million, or 5.0% of our tutai loun portfolio. This segment of our portfolio is affected by a variety of local and national economic factors affecting borrow'ers' employment prospects, income levels, and overall economic sentiment. PPP loans thai arc fully guaranteed by the SBA arc clnssificd within this line item.

Con.Hunter nnd Ctther. Our consumcr and oihcr loan portfnlio consists of unsecured consumer loans. Loans held for investment accounted for under the fsir value option are also classified within this line item and had an unpaid principal balance of $7.5 million as of December 31, 2024. Consumer and other loans were $17.5 million, or 0.7% of our loan portfolio, excluding $7.3 million in con.sumsr and other loans accounted for under the fair value option. This segment of our portfolio is affected by a variety of local and national economic factors affecting borrowers' employment prospects, income levels, and overall economic sentiment.

Camnieizial and Industrial. We originate commercial and industrial loans, including working capital lines oi' crcdit, pennaneni working capital term loans, business asset loans, acquisition, expansion and development loans, 8nd other man products. primarily in our target markets. These lonns are underwritten on the basis of the borrower's ability to service the debt from income, with maturities tied to the underlying life o1' the collateral. We generally take a lien on all business assets, including, among other things, accounts receivable, inventory, equipment, available real estate, and generally obtain a personal guarany of the principal(s). Our commercial and industrial loans generally have variable interest rates and terms that typically range from unc to five years. Fixed-rate comiiiercial and industrial man maturities arc generally short-term, with three to five-year maturities, including periodic interest rate teset.s. As of December 31, 2024, commercial and industrial loans were $220.3 million, or 9.1 % nf our total loan portfolio. The average maturity nn our coirimercial and industrial portfolio was 3.7 years with an ttvcrdgc remaining term of' 1.7 yeafs. Thi5 portfoliu primarily consists of ttrm loans and lines of credit w'hich are mostly dependent on ihe slrtngth ot' the industries of ihe related borrowcrs and the success of their businesses.

Commercial Reul E.slain, tn nor n«p d and Nun-n ›'ner Ctccupied. Wc orig'inatc commercial lonns collateralized by reiil estate. These loans may be collateralized by owner occupied or non-owner occupied rebl estate. as well as multi-family residential real estaie. Commercial real estaie lending typically involves higher loan principal amounts and the repayment is dcpcndcnt, in large part, on sufficicnt income frnm thc propcrtics securing the loans to cover operating expenses Bud debt service, We require nur commercial real estate loans to be secured by well-managed property with adequate margins and generally obtnin a guaraniy from responsible parties who have outside cash flows, experience and/or other assets. Our commercial real estaie loans arc generally sccurcd by properties used for business purposes such as office buildings, industrial facilities end retail facilities. Loan amounts generally do not exceed go•% « 75% «f the propeny's appraised val ue for owner occupied and non-owner occupied respectively. In addition, aggregate debt service ratios, including the guarantor's cash fiow and the 1›orrower's other projects, are required by policy to have a minimum annual cRsh flow to debt service rstio of 2.0x. We require independent appraisfll s or evaluations from a list of approved apprnisers on all loans secured by commercial real estate. As of December 31. 2024, owner occupied commercial real estate loans were $172.0 million, or 7. Iwhoof our total loan porifol io, and non-owner occupied commercial real estate loans were $611.2 million or 25.3°Zo of our iotal loan portfolio. These loans are primarily dependent on the strength of the industries uf the related borrowers und the success of lheir businesses.

Construction and De elopmerl t. We originate loans to Finance the construction of residential and non-residential properties. Construction and development loans are generally collaieralized by first Iiens on tell estate a.s well as financial guamntees from the borrower and usually have floating interest rates. Our construction and development loans typically have maturities of up to two years depending on factors such as the type and size of the development and the finanei'a1 strength of tht t›orrower/guarantor. and are typically structured w ith an interest only construction period. These loans are undcrwrinen to either mature at the completion of construction, or transition to a traditional amortizing commercial real estate fi‹icility with the terms and cliitructeristics in line with other commercial real estate loans we hold in our portfolio. As ot December 31, 2t)24, construction and development loans were 5314.5 million, or I3.0% of our total loan portfolio.

Cancentrations. Most o1' our lending acti›'ity and credil exposure, including real estate collateral for many of our loans, are concentrated in Cr›lorado, Arizona, Wyoming, Montana, and California, as approximately 81 .2% of the loans in our loan portfolin us nd December 31, 2024 were made to borrowers whn live in or conduct business in those states. Our commercial real estate loans art generally secured by first liens on real property. Tht remaining commercial and industrial loans are typically secured by general business assets, accounts receivable, invenioty and/or the corporate guaranty of the borrower and personal q«»ty nf its principals. The geographic concentration subjects the loan porlfnlio to thc geneml economic conditions within Colorado, Arizona, Wyoming, Montana, and California. The risks created by such concenlrations have been considered by management in the determination of the adequacy of the allow'ance for credit losses. As of Dcccmber 31, 2024, management bclievcs thc allowancc for credit losses is ndequate to nbsorb tosses in our loan porifulio.

Sound risk management practices and appropriate levels of capital are essential elements of the commercial real estaie lending program. Concentrations of commercial real estate exposures add a dimension ol risk that compounds the risk inherent in individual loans. Interagency guidance nn coinmcrcial rcal estate cnnccntrations describe .sound risk management practices which include bourd and management oversight, portfolio management, management infomiation systems, market analysis, portfolio stress testing and sensqivity analysis, credit underwriting standards, and credit risk review functions. Management believes it has implemented these practiccs in ordcr to monitor concentrations in commercial real estate in our loan portfolio.

Credit f'oficies and Procedures

General. Asset quality and robust underwriting arc integral to our strategy and credit culmrt. We plate a considerable emphasis on effective risk innnagement and preserving sound credit underwriting standards as we grow nur loan portfolio. Underwriting considerntions include adherence to credit policy, collateral, defined sources o1' repayment, strength of guarantoifs) and opporiunities to broaden the re1atir›nship with tht client, Our credit policy requires key risks be ideiitificd and measured, documented and mitigated, to the extent possible, to seek to ensure the soundness of our loan

QOft IOlfO.

Loss L'nderwriting and Approval. Historically, we believe we have make sound, high quality loans while recognizing that tending money ink otves a degree of business ri.sk. We have credit policies designed to assist us in managing this business risk. These policies prnvidc a general framework for our loan origination, monitoring and funding activities, while recognizing that not all risks can be anticipated. Our Board of Directors delegates limited lending ituthority to individuals and internal loan committees. When the total relationship exceeds an individml".s loan authority, a higher authority or credit cominittcc approval is required. The nbjcctivc of our approval prnccss is to prnvidc a disciplined, collaborative approach to larger credits while maintaining responsiveness to client needs. Loan decisions arc ciocunaented as to the borrower's business, purpose of ihe loan, evaluation of the repayment source and the associated risks, evaluation of collateral, covenants and monitoring requirements, and the risk rating rationale.

Managing crcdit risk is an enterprise-wide proccss. Our strategy for credit risk management includcs well-defined central credit policies, uniform underwriting criteri B and ongoing FiSk mnnitoring and review processes. Our processes emphasize early stage review of loans, regular credii evaluations and management reviews of loans, which supplement the ongoing and pmactivc credit innnitoring and loan servicing providcd by our bankers. Our Chief Risk Officer, tngcthcr with our central undemziting, credit administration and lnan operations teams, provides credit oversight. We periedicnlly review all credit risk portfolios to ensure that ihe risk identification processes are functioning properly and that our credit standards art followed. In addition, a third-party loan review is performed to assist in the idtntifit;ition of problem assets and to confirm our internal risk rating of loans.

Our credit policies include oiher underwriting b'uidelines for IORHS GOllateraiized by real estate. These underwriting standarils are designed to determine the maximum loan amount that a borrower has the capacity to repay based upon the type of collateral securing the Joan and the t›orrower's income. Such credit policies include maximum amortization schedules and man terms for each category of lonns collaterRlized by liens on real estate. In addition, nur creilit policies provide guidelines for personal guarantees, an environmental rtview, loans to employees, executive officers end directors, problem loan identification, maintenance of an adequate allowance for credit losses, and other matters relating to lending practices.

We believe thai an important part or'our assessment of client risk is the ongoing corripletion or'periodic risk rating reviews. As pan of these reviews. we stek to review the risk rating ot each facility within a tlient relationship and may recommend an upgrade or downgrade to the risk rating. We categorize loans into risk categories based nn relevant information about the ability of' the borrowers te seo-ice their debt such as: current financial information. historical payment experience, credit documentation, public information, and current economic trends, among other factors, We analyze loans indie idually by classifying the loans as to credit risk on a quartcrly basis. We attempt to identify potential problem loans early in an effort to seek aggressive resolution of these situatiuns before the loans become a luss, record any necessary charge-offs promptly and management believes the allowance for ctedii losses is adequate to absorb losses in our portfolio.

Lending Limits. Our lending activities arc subject to a variety of lending limits imposed by state and fcdcral

^*b liftlOiJS. Thtf Bank is subject to a legal lending limit un loans to related borrowers based on the Bank's capital level. The dollar amounts of the 9ank's lending limit increases or decreases as ltte Bank's capital increases or decreases. The Bank is able to sell participations in its larger loans to other financial institutions, which allows ii to manage the risk involved in these loans and to meet the lending needs of its clients requiring extensions of credit in excess of these limits.

The strength of our deposit franchise is derived from the long-handing relationships we havc with our clients and the strung ties w•e have to the markets we serve. Our deposit footprint has provided, Blld we believe will continue to provide, the primary support for our loan growth. A key part of our strategy is to continue to enhance our funding sources by continuing to build our private and commercial banking capabilities to keep building our base of attracrivcly priced core deposits.

We prnvide demand deposits. interest-bearing transaction accounts, money market accounts. time and savings deposits, ICSP, certificates oi' deposit and C DARSB reciprocal products. We also offer a range of treasury management products including cash manager and commcrciai analysis accounts, electronic receivables management, remote deposit capture, cash vault services, merchant services and nther cash management services. Deposit flows are significantly influence by general and lucal economic conditions, changes in prevailing interest rates, internal pricing decisions and competition, Our deposit s are primarily obtained from depositors located in our geographic footprint, and we believe that w'e have attractive oppnrtunitics to capture additional deposits in our markets. In nrder to attract and retRlR deposits, we rely on providing quality service, offering a suite of retail und corrlmGrcial products and services and introducing new products and services that meei our clients' needs a.«they evolvt.

For liquidity purposes, ihe Bank occasionally uses brokered deposits. As of December 31. 2024 and 2023, w'e had brnkcrcd dcpnsits of S I 34.5 million and SI 65.4 million, rcspectivcly.

We have experienced banking and business development tcams whn we believe provide superior client scrvicc, creative cash management solutions and competitive pricing to market nur depository products and services. As of December 31, 2024, total deposits were $2.5 I billion, an decrease of $14.5 million, or 0.b•ñ, compared to 52.53 billion as of Dcccmbcr 31, 2025.

As or' December 3 1, 2024, our deposit portfolio contained a diverse mix of ‹Jeposiu, as shown below:

Nonlntaraat-baaring

accounts

14.9°A

Truct card Investment Menoyement, Advisory

We offer sopliisticRted wealth advisory and planning services including investment mdnRgement, trusts and estate services, philanthropic services, insurance planning and retirement consulting. Our client relationships liecjuently include in-depth financial plans whith art based on our pmprietary ConnectVieu' approach, and sophisticated, institutional quality investment management that is driven by comprehensive investment policy statements end access to industry-leading money managers. Thtse customized documents-wealth plans and investment policy statement torn the roadmap for how we serve each client and monitor our progress in achieving their goals.

Wt have experienced trust officer.s in several profit centers, pl us expert trust and estate attorneys on our central prnduct group team, to provide fiduciary serv-ices through our profit centers. These include tmditional fiduciary. directed trusts, special needs trusts, and custody services. Most or' our investment management business is con‹Jucted thFt3°h* * tiusi department in agency accounts where we are not serving as trustee.

We also have experienced portfolio managers and business development teams in our profit centers who provide high-touch, tailored solutions that we bclicvc further exemplifies our superior client service. These locsl teams have pel'sonal rind professional networks end relutiunships with centers of influence to market our wealth advisory prnducts and services. As of December 31, 2024, iotal AUM was $7.32 billion, an increase ot $56S.IN million, or b.4%, compared io S6.75 billion as of Dcccmbcr 31, 2023.

As of December 31, 2024, we provided fiduciary and advisory services on $7.32 billion ot' trust and investment management assets, as shown below:

_ Trust and Investment Management Assets "t

ZR4W

Our investment management platform combines a broad range of asset and sub asset classes meeting the needs of both taxable and tax-free private client accounts as well as trust investment services. We deliver most of our discretionary money management by allocating client portfolios across a centrnlly controlled platform of select third-party managers in each asset and sub asset class, including separately managed and coiningled options, and with active and passive management strategies. We also have a limited number of proprietary products that we believe further differentiates us from many of our competitors.

We believe acting as an investment manager, and not just a manager of managers, has a number of critical benefits for our clients, These include the abilqy to have our money managers available to meet with clients and prospects, to tailor prnducts and separately managed accounts for nur clients, to better educate and inform our client-facing ponLo Ito managers, and tn develop new solutions as market conditions and client needs change. By combining internal research and a dedicated team of accredited specialized advisors like Chartered Financial Analysts and Certified financial Planners with our pairing of proprietary and third-party investment options, we create unique snlutions tailnred to the spccific need9 of each of our clients.

Other Products

In addition to the traditional loan, deposit and trust and investment managcmcnt products and servicss, our profit centers are supported by s central team of specialized product experts in our "product groups," which include experienced professionals in commercial banking, investment management, wealth planning, risk management/insurance, personal trust, retirement planning and tax-advantaged products, and mortgage lending. We believe that the sophistication of our product grnups rivals the offerings Bud expertise typically provided by larger firiancial institutions. Our product groups are led and staffed with highly accredited arid well known professionals, each with significant experience in their fields. Beyond traditional banking, trust and wealth management activities, at eath profit center we provide other services including:

Mortgage Lending. Although our primary objective is to originate ioans for our own portfolio, we also conduct montage banking activities in which we originate and sell, servicing-released, whole mans in the secondary market. Typically, loans with a fixed interest rate of greater than 10 years are available-for-sale and sold on the secondary musket, Our mortgage banking ioan sales activities are primarily directed at originating single family mnrtgages that are priced and underwritien to conform to previously agreed criteria before man funding 8nd are delivered to the investor shortly after funding. The level of future loan originations, loan sales and loan repayments depends on overall credit availability, the interest rste environment, the strength of the general ecnnomy, local real estate markets and the housing industry, and conditions in the secondary loan sale market. The amount of gain or loss on the sale of loans is primarily driven by marktt conditions and changes in interest iates, as well as our pricing and asset liability management stiategies.

Treasure Management. We o1'fer a broad rnnge of'customized treasury management products arid services for commercial accounts, including disbursement and payables management, liquidiy management and online business banking services. Our profit center sales and service teams are supported by a central team of treasury management specialists and deposit operations professionals.

Risk Manageinent/lnsurance. Through the wealth planning process, our proiit center teams are supported by a central team of insurance planning experts, specializing in risk management services, estate tax law, trusts and tax planning. We offer custninizcd solutions in ihe form of, among others, charitable gis ing tax strategies, deferred-compensation plans, irrevocablc lits insurance trusts, long-tcriti care insurance, and executive key person insurance.

Rvtiremvni Services, inr/odiiip 4Hl Lk) Plvn C‹›nsulting. We have a ieain of retirement plan consulUnts who parlncr with businesses to sponsnr retirement plans. Wc offer crcativc corporate rctircmcnt plan design and analysis solutions end fiduciary liability management, providing tools such as corporate retirement plans, and ERISA regulation compliance, education and expefiise.

Our profit centers and product groups are also supported centrally by teams providing management services such as npcrations, risk management. credit administration, technology support, marketing, human capltRl and accotinting/ finance services, which we refer to as "support centers." Our associates in our support centers have significant experience in wealth management, investment advisory, and commercial banking, including areas such as lending, underwriting, credit administration. risk management accounting/finance, operations and informatinn icchnolngy. We have structured our teams, services Rnd product offerings to use techno1ob'y to efficiently prnvide our clients with a high-touch, solution-oriented experience that we believe is scalable and provides operating leverage tier future growth.

To demonstrate how these three groups-profit centers, product groups and support centers-work together to deliver a highly competitive product offering through a team of local professionais, our investment management offering is an example:

In each profit center, there are one or more portfolio managers that work as part of that local ream's sales and service delivery. These portfolio managers are typically Certified Financial Planners, and occasionally Chartered Financial Analysts, with experience in wealth planning and portfolio construction. They meet with clients and develnp an overall wealth manRgement strategy, specific gnals and objectives, an investment policy statement, and an impleiiientntion plan. They use our guided architecture, a diverse array Of select third-party and proprietary investment products covering a broad range of asset classe.s a.« their source for portfolio construction options, asset allncation and prnducts. Sales and marketing suppnrt is prnvidcd centrally but delivered locally.

Our investment platfonn is controlled by our central investment research broup, which has a strong research focus and includes many associates who have Chartered Financial Analyst designations, with oversight by our Chief Investment Officcr and our Investment Policy Committee.

Operational support for thcsc pmfit center and product group tcams is provided by our central trust and investment management support center team.

Tht primary objectives of our Bank portfolio investment policy arc to provide a source of liquidity, to prfivide an appropriate return on funds invested. to mannge interest rate risk, to meet pledging requirements and tn meet regulatnry capital requircmenis. As or' December 31, 2024, the carrying value o1' our investment portfolio totaled 575.7 million with an average yield of 3,5%.

Our inv'estment policy outlines investment type limitations, security mix parameters, authorization guidelines and risk management guidelines. The pohcy authorizes us to invest in a variety of invesnnent securities, subject to s'arious limitations. Our current investment portfolio consists ot obligations of the U.S. Treasury and other U.S. government agencie.s, corporate or sponsored entities, including mortgage-backed securities, collateralized mortgage obligauons, subordinntcd debi bonds, and mutual fiinds. We participate in the Mortgagc Partnership Finance Program ("MPF") end are required to maintain ari investmcnt in Fedcral Home Loan Bank of Topeka ("FHL8") stuck, for which the investment is based on the level of our FHLH credit obligations. Our Roard of Directors has tht overail responsibility for the investment portfolio, including appros al of nur investment poltcy. Our Asset and Liability Cominittcc ("ALCO") and management nrc responsible for implementation of the investment polity and monitoring of our investment perfomiance. Our ALCO and management review the status of our investment portfolio at least ten times per year.

Our Markets

Our strntegie market area is defined by metropolitan arras in the Western United States having strong long-t‹mn economic groz'th prospects, a significant wealth demographic measured by growth in high net worth households, a dynamic commercial business landscape and the ability to sustain one nr inure nf our profit centers. We target househnlds with more than $1.0 million in liquid net worth and their related businesses and philanthropic interests. We believe that the complex and diverse financial needs of this market segment presents an opportunity to serve a broad array of client needs efficiently and cost effectively.

Our current opemting markcts have a high cnncentration of our targeted cliGnt ssgmcnt and are cxpccted to experience high growth, providing opportunity for continued future urganit growth throu@ demographic and market shure growth.

We seek to expand our presence in our existing markets as weil as other Western markets with similar demographic prohI cs. With improved access to capital as a result nf our initial public offering in 2018, wc expect to proactively evBluute opportunities to accelerate nur organic grnwtli and acquire banks, investment management firms and related businesses, while also seeking to hire talented personnel. We belief e consolidation in the financial services industry along with the industry's movcmcnt towards automated and impersonal client scw'icc further presents the Company with a unique and significant opportunity. Our business model differentiates us from the industry, which we expect will enable us to increase our marker share in existing markets and, on a strategic and opportunistic basis, expand our geographic footprint into ncw' markets in the Western United States that .shaft similar characteristics to our current markets.

We continue to make investments in our information technology systems as we adapt to ihe changing security, technology, rpm inc and mobile, and other platform delivery needs and wants of our clients. We believe that this investment is essential to our ability to offer new products and optimize ov'em1l client experience provide opportunities for future growth and acquisitions, and pr;3vido ;i secure infrastructure that supports our operations. We leverage tht experience of a third-part managed service provider tor information technology services, to augment security, and to deliver the technica1 expertise around network architecture required tn operate securely with optimal efficiency. The majority of our systems are hosted by third-party service providers. The scalability of this infrastructure suppuris our growth strateg'y. In addition, business resiliency testmg and planning ensures the capability of crflical vendors to fail over to fully-hot replicated systems thnt providc complctc redundancy in the event of a disaster.

We place significant emphasis on our holistic approach io integrated risk management thai provides oversight, control, and discipline to support stratcgic initiative and business objectives and to promote a risk-aware culture. We utilize the COSO 2017 CRM Framework to govern the process of anticipating, identifying, assessing, managing, optimizing, and monitoring risks within the organization. Our Enterprise Risk Management ("ERM") Committee oversees our ERM program. J'his group contains key mcmbcrs of management including thc C hicf Executive Offlcci, the C hicf Operating Officer, the Chief Financial Officer, and the Chief Risk Officer. In order tn early out the ERM program, we have developed the following objectives io:

Integrate ERM practices with our siralegy setting process and performance management pfnctices to realize benefits related to va!uc;

Improve the Company's ability to identify risks and establish appropriate responses to reduce costs and Iimii losses;

Identify operational gaps tn reduce performance variability; lnclude business resiliency in strategy setting;

Identify intcrrelatcd risks within First Western and establish an integrated response; and

Assess the positive and negative nspects of risk to address challenges and opportunities within our internal and external ed vironnient.

We routinely monitor and measure risk throughout the organization to optimize the allocation uf resources, preserve capital, and to ensure the atlainnaent and'or proieciion or strategic goals and business objectives.

Competifion

The financial services industry is highly competitive and we compete in a number of areas, including commercial and consumer banking, residential mortgages, wealth advisory, investment management, trust, and insurance, among others. We compete with other bank and non-bank institutions located within our market area, alnng with competitors situated regionally, nationally or with only an online presence. These include large banks and other financial intermediaries, such as consumer finance companies, brokerage firms, mortgage banking companies, business leasing and finance companies and insurnnce agencies, as well as majnr retailers, all actively engaged in prnviding various types of louns and other financial services. We also face growing competition from online businesses with léw or no physical locations, incl nding online banks, lenders and consumer and commercial lending platforms as well as automated retirement and invcstmcnt services providers. Coinpctition involves efforts to retain current client.s, obtain ncw loan, deposit and advisory services clients, increase the scupe and type or services offered, and offer competitive interest rates paid on deposits, charged on loans. or charged for advisory sen'ices. We believe our integrated and high-touch service offering, airing with our snphisticatcd rclatinnship-oriented apprnach sets tie apart from our cnmpciitors.

As of December 31, 2024, we had 321 associates. We sirive to recruit and retain team-oriented, respectful, prnblcin solvers. We serve our internal team with the same approach we serve our clients, with an adaptive, entrepreneurial spirit. We take advsntsge of new opportunities, and encnurage our team to explnre new prncesses, products, and services to improve First Western. Associates are our trusted partners both within their teams and with our clients as we build a parinership for generations to come.

We strivt to be a high performing financial institution pmduting consistent, strong financial results, coming from a well-executed strategy. It is our belief that this can nnly be accomplished by a well-run organization nf outstanding, motivat‹xi, engaged and supported associates. Internally, we call this a "People First" mind-set and over the last several yeats have focused on building upon the foundational elements of this strategy. Those elements include an internally develnped manager training program designed io train our innnagers to be great bosses in support of n culture of learning, co11at›urution, growth and development. We provide meaningful work t'or our associates by connecting their role to the Company's mission and vision as well as simplifying and streamlining repetitive tasks io make work more interesting and value added. We are building career paths, development opportunities Rnd accountabilities intn each role sn that throughout the associates lifecycle there is oppc›rtunity to master skills rind pursue professional and personal growth. People First is also about building connection and community with tht Company, We believe the benefits of being part of our Company means you arc appreciated and valued. you can build meaningful rclatinnships, and have a sense of mutual accountability.

Nonc of our associatcs arc represented by nny cnllcctivc bargaining unit or are partics to a coilcctivc bargaining agreeirient. We believe that our strong relutiunships with our associates are central to establishing the corporate culture we need to serve our clients, shareholders, and our communities welL

We are committed to implementing diverse, equitable, and inclusive policies and practices across the Company. Our corporate values speak directly to the spirit of inclusion as well as the importance of embracing diversity and equitable practices. We believe in a corpomte culture where all p-eople are empowered to reach their Bill potential through autonnrny, mastery, and purpose. The Company's Board of Directors fosters this beliei' by ensuring that strategies are adopted that result in the Company understanding both associate performance and engagement at every level.

Tht Company has invested in developing the necessary formal infrastrutturc to ensure fair pay 8crnss job classes and nur geographic fnotprint. It has also adopted and enforces codes of cnnduct that establish principles of integrity, respect, and excellence at all levels of the Company.

Learning an‹f Development

We prnvide extensive training to our associates in an effori to ensure that our clients receive superior service and that our risks are well managed. Learning and development tippurtunities consist of leadership development programs, communication courses, and technical development training (to name a few) as part of our goal to proc ide associates meaningful work with career advancement nnd opportunity fur growth and developrrient. Our stmtegic commitment to learning and development ensures the Company's leadership and management tcains continue tu grow 8t a pace consistent with our financial growth goals.

Compensation and Benefits

We otTer a total rewards program to attract and retain team-oriented, respectlul, problem solvers. Our compensation program incl udes competitive salary/hourly pay and incentive pay in the form of an annual bonus and stock awards to officers and certain members of the management team. We have significant insider ownership and the Board of Directors has approved stock ownership guidelines applicable to our executive officm and other key position holders to further align management find shareholder interests, 1n addition, the Company offers a 401(k) Plan with an employer mntching contribution. Ftiriher. we offer a number nf healthcare and insurance options, health savings accounts, paid time off, and paid faintly leave time ter all associates.

Core Valuec and Culture

Developing and maintaining a strong, healthy culture is a key strategic focus as we contintic to grow bnth organically and through acquisition. Our core values reflect our continuetl fOCHS to HidltJiRlIt It highly-engaged teem.

Prnblern solver - Being a Problem solver at First Western means that when we see a problem, we see opportunity.

We pick il up and we address it, and if appropriate, work to create or improve the "FW Way" for that type of issue.

Team oriented - Team oriented ai Firsi Wesiem means using our teammates io deliver the best possible results for our stakeholders. Our structure. wlih local teams and central cxpcrls, is designed io serve clients ihat have assets, liabilities, families, businesses, and lung term goals that each 9•ire different types nf expertise.

Respectful - For First Westerners, Respectful means valuing the unique knnwledge and experiences each stakeholder brings to a discussion. We appreciate the different value that each of us brings to First Western and treasure that expertise,

Adaptive - First Westerners have an Adaptive, entrepreneurial spirit. When our world changes, we change to take advantage of new opportunities. We are always lonking for ways to imprnve processes, products, and services.

Client focused - Firsi Western's highly ethicnl DNA guides us tn act in the client's interest while protecting the Bank. Our clients know that as their trusted partner, FW has the strength and sophistication to help them for generations.

The Company filcs reports, proxy stntements and other infoITflation wIth the Securities and £ixchangc Commission ("SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Electronic copies uf' our SEC filings are avaiiable io the public at the SEC's website at hitps://https://www.sec.gov. You may also obtain copies of our annual, quarterly and spccial reports proxy stntcnicnts and certain other information filcd by the Company with thc SEC, as well as amendments theretu, free nf charge from the Ct›mpany's website, https://myfw.qcs-web,com/investor-relations. These documents are posted to our website a fler we have filed them with the SEC. Our corporaie governance guidelines, including our cndc of business conduct and ethics applicablc to all of our assncintcs, offic crs and dircctors, as wcll as the charters of our audit cninmittee, cnmpensation committee and corporate governance and nominating committee Bre available at https://myfw.gcs-web.com/investor-relations. The foregoing information is also available in print to any shareholder who requests it from the Company. E xccpt as explicitly provided. information furnished by the Company and information on, or accessible through, the SEC's nr the Company's z'ebsite is not incorporated into this Annual Report on Form 10-K or our other securities filings and is nor a part of them.

The U.S. banking industry is highly regulated under federal and St8tC lRW. Banking laws, regulations, and pnlicies aft'ect the operations of the Company and its subsidiaries. Investors should understand that the primaty objective or' the

U. 5. bank regulatory regime is the protection of depositors, the Deposit 1nsurance Fund (" DI F"), and the banking system as a whole, not the protection nf the Company's shareholders.

As a bank holding compnny, we are subject to inspection, examination, supervision, and regulRtion by the Doard of' Governors of the Federal Reserve System (the "Federal Reserve"). The Bank, which is uur subsidiary, is a Colorado-chattered commetctal bank and is not a member of the Federal Reserve System (a "stare nonmember bant"). As such, the Bank is subject to regulation, supervision, and examination by both the Colorado Division of Banking (the "C DB") and the Federal Deposit Insurance Corpt›ration ("FD IC"). In addition. we expect that uny additional businesses that we nifty invest in or acquire will be regulated by various state and/or federal banking regulators.

Banking statutes and regulations are subject to continual review and revision by Congress, state legislatures and federal and state regulatory agencies. A change in such statutes or regulations, including changes in how they Ore interpreted or implemented could have a material effect nn our business. In addition to laws and regulations, state and federal bank regulatory agencies may issut policy statements, interpreti›'e letters and similar written guidance pursuant to such laws and regulations, which are binding on us and our subsidiaries.

Banking statutes, regulations and policies could restrict our ability to diversify into other areas of financial services, ncquire depositnry institutions, and make distributions nr pay dividends rim nur equiry securities. They may also require us to provide linanci'al support to any bank that we contml, maintain citpital balanccs in excess of thuse desired by management, and pay higher deposit insurance premiums as a result of a general deterioration in the financial condition of the Bank or othcr depnsitory institutions xc control.

The dcscription bclnw summarizes ccrtain c cmcnts nf the applicablc bank regulatory framework. This description is not intended to describe all laws and regulations applicable to us and our subsidiaries. The descriptiun is qualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that arc describcd.

Regulatory Capital

The Company and the Bank are each required to comply with applicable capital adequacy standards established by tic Federal Rcscn e and the E DoC. The current risk-based capital iandards appl icablc to the Company and the Bank the bRsed on the December 2010 final capital framework for strengthening international capital standards, known as Basel Ill. of the Basel Committee on Banking Supervision, or Basel Committee. The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks ("Basel Ill Rules") have been fully phased in. The dasel I Al Rules require banks and bank holding companies. including the Company and the Bank, to maintain minimum capital amounts and ratios. These ratios are common equity Tier I capital ("CET 1"), Tier 1 capital and total capital (as defined in the regulations) to risk-wei ghted assets (as defined in thc regulations), and Tier l capital (as defined in the regulations) to avemge assets (as defined in the regulatinns).

The final rules of Basel IIf also established a "capital conservation buffer" of 2.5% above new regtilatnry minimum capital ratios. The minimum capital ratios inclusive of the ciipital conservation buffer are as tñllows: (i) a CET 1 ratio of 7.0%; (ii) a Tier 1 capital tatio of 5.5%: and (iii) a total capital ratio of 10.5%. Hanks are subject io limitations on paying dividends, engaging in shsre rcpurchascs, and paying discretionary bonuses if thcir capital level falls bclnw the bufl'er amount. These limitations establish a maximum percentage of eligible retained income that can be utilized for such

The Basel 11 I Capital Rules also attempt to improve the quality of capital by implementing changes to the definition of capital. Among the most importnnt changes arc stricter cligibility criteria for rcqulatory capital instnimcnis that disallow the inclusion of c0rtiqlC instruments, such as trust preferred securities (uther than grandfathered trust preferred securities), in Tier I capital going forward and new constraints on ihe inclusion of minority interests, mortgage-servicing asscis, deferred tax assets and certain investments in the capital of uncnnsolidaicd financial institutions. In addition, the Basel 111 Capital Rules require that most regulatnry capital deductions be made from C,ET1 capital.

The Federal Reserve and the FDIC. may also set higher capitBl Requirements fur individual institutions whose circumstances warrant it. For example, institutions experiencing internal growth or making acquisitions are expected io maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. At this time, the bank regulatory ngencies sre more inclined tn impose higher capital requirements to meet well capitalized standards and future regulatory change could impose higher capital standards as a routine matter. The Company's regulatory capital ralios and those of the Bank are in excess of the levels established for "well capitalized" institutions under the rules.

The Basel III Capital Rules also set fnrth certain changes in the methods of calculating certain risk-weighted assets, which in turn a1?ects the calculation of risk-based capital ratios. Under ihe Basel III Capital Rules, higher or more sensitive risk weight.s have been assigned to various categories of asstts, including certain ctedii facilities that finance the acquisitinn. development or construction nf real property, certain exposures or credits that are 90 days past due or on nonaccrual status, foreign exposures arid certain corporute exposures. In addition, these rules inclucle greater recognition of collateral and guarantees, and Revised capital treatment for derivatives and tepo-style transactions.

The federal bank regulators have modified certain aspects of the Basel III Capital Rules since the rules were initially published, and additional modifications may be made in ihe future. In December 2017, the Basel Comminee published standards that it described ss the finalization of the Basel lII post-crisis regulatory refomis (commonly referred to as Basel IV). Among other things, these standards revjse the Basel Committee's standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain "unconditionally cancellable commitments," such as unused credit card lines of credit) and provides a new standardized approach for operational risk capital. Under tht Basel framework, these standards were generally effective on January 1, 2023, with an aggregate output fno‹pfiasingin hn›ugfi1snu y I,2U28.lSeptember1,2022,theU.S. federzlbankingmgul or»xnounced(heirintent

to revise rcgulatnry CR Ita1 requirements to nlign them with the regulatory capital standards thst werc finnlizcd by thc Ba«d

Cumniittee in December 2017, however u proposed rule has nut yet been issued. In addition, the U.S. federal banking regulators siated that Communtty barking organizations would not be impacted by the proposal. Under the current U.S. capital rules, opcrational risk capital rcquircments and a capital floor apply nnly to advanccd apprnachcs institutinns, and not to the Coixipany or the Bank. The impact of Basel IV on us will depend un the manner in which it is implemented by the Federal bank regulators.

In accordance with the Economic Growth, Regulatory Relief, and Consumer Protection Act (the "Regulatory Relief Act"), discussed hclow, the federal banking agencies publishcd final rules implementing thc community bank leverage ratio in November 2019. Under the final rules, which went into effect on January 1, 2020, depositnry institutions and depository institution holding companies that have less than $10 billion in toial consolidated assets and meet other qualifying criteria, including a leverage capital ratio of gmatcr than 9%. off-halancc-sheet exposures of 25% or less of total consolidated assets and trading assets plus trading liabilities nf 5"/o or less of total consolidated assets, are deemed "qualifying community banking organizations" and are eligible to opt into the community bank leverage raiio tiamework. A qtialtfying community banking organization that eletts to use the community back leverage ratio framcwoik 8nd that maintains a leverage capital ratio of greater than 9% is considered to have satisfied the generally applicable risk-based and leverage capital requirements under the Basel III Capital Rules and, i1' applicable, is considered to have met the "weI1 capitalized" ratio requirements for purposes of its primary federal regulators prompt corrective action rules, discussed below. The Company and the Bank have not made an election to use the community bank leverRge ratio framcwnrk but may make such an election in the future ii'determined to be possible and advantageous.

Regulation of the Company

The Bank Holding Company Act of 1956, as amended ("BHC Act"), and other federal lnws subject bank holding companies to particular rcsmctiuns on the types or' activities in which they may engabe, tind tu a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.

pvrtrtittvd Actiwties. Generally, bank holding companies are prohibited under the BHC Act from engaging in, or acquiring direct or indirect control nf more than 5% of the voting sharcs of any company cngagcd in nny actix'ity other than

(i) banking or managing or controlling banks or (ii) an activity that the Federal Reserve determines to be so closely related io banking as io be a proper incident to the business of banking. The Federal Reserve has ihe authority to require a bank holding company to terminate an activity nr terminate control of or liquidate nr divest certain subsidiaries or affiliates when the Federal Reserve believes the activity or the control of the subsidiary or affiliate constitutes n significant risk to the financial safety, soundness or liability ol'any ol'iH banking subsidiaries.

Status as a Ninonc ia/ Afofdiog Company. Under the BHC Act, a bank holding company may file an election with the Federal Reserve to be treated as a financial holding company and engage in an ex(handed list of financial activities. The election must be accompanied by a certification that all of the company's insured depository institution subsidiaries are "welt capitalized" and "welt managed." Additionally, the Community Reinvestment Act or' 1977 ("CRA") rating of each subsidiary bank musi be satisfactory or betier. 1f, after becoming a financial holding company and undertaking activities not permissible for a bRnk lâOlding company. the company fails tn cnntinue io meet any of the prerequisites for financial holding company status, the company must enter into an agreement with the Federal Reserve to comply with all applicable capital and manogemeni requitemenls, If the company does not return to compliance within 180 days, the Federal Reserve msy order the company to divest its subsidiary banks nr the company may discontinue or divest investments in companies engaged in activities permissible only for a bank holding company that has elected tu be treated as a financial holding company. The Company fi led an election and became a financial holding company tn 2006.

Sound Banking Prac-tices. Bank holding companies and iheir non-banking subsidiaries are prohibited trom engaging in activities thai represent unsafe or unsound banking practices, For example, under terrain circumstances the Federal Reserve's Regulation Y requires a hoIding company tn give the Fedeml Reserve prinr notice of any redemption or repurthusc ct' its own equity stcuritits if the consideration to be paid, together with the consideration paid ior any repurchases in the preceding year, is equal to IO% or more of the company's consolidated net worih. The Federal Reserve may oppnse the tmnsactinn if it believes that the tmnsactinii would constitute an unsafe or unsound practice or would viutate a regulation. As another example, a holding company is prohibited from impairing its subsidiary bank's soundness by causing the bank to make funds available to non-banking subsidiaries or their clients if the Federal Reserve believes it not prudent to do so. The Fcdcral Rcserve has the power to nssess civil money penaltics for knowing or reckless s•iolatinns if the activities leading to a violation caused a substantial loss to a depository institution. Potential penalties are as high as S1.0 million for each day ihe activity continues.

sc›urte o] Sirvngih. fn accordance wiih the Dodd-Frank Act and long-standing Federal Reserve policy, the Company must sct as a source of financial and managerial strength to the Bank. Under this poticy, the Company must commit resources to support the Biql3k, including It times when the Company may not be in a financial position to provide

ii. As discussed below, the Company could be required to guarantee the capital plan ot the Bank if it becomes undercapitalizcd for purposo•s of hanking regulations. Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits rind to certain other indebtedness of such subsidiary bank. The BHC Act provides that, in the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal back regulatory agency to maintain the capital of a hank subsidiary wil I be assumed by the bankruptcy trustee and entitled to priority of payment.

Regulatory agencies have prnmulgated regulations tn increase the capital requirements for bank holding companies to a level that matches those ot'banking institutions.

AittI-Tfift1fi Restrictians. Bank holding companies and affiliates are prohibited from lying the provision o1'services. such as extensions of credit, to other services offered by a holding company or its affiliates.

Avqiiisiiioiis. The BHC Att, Section I 8lc) of the Federal Oeposit Insurance Act, as amended ("FOl A"), the Colorado Banking Code and other federal and state statutes regulate acquisitions nf cninmcrcial banks and their holding companies. The BHC Act generally liitiits acquisitions by bank holding companies to commercial banks and companies engaged in aclivities ihai the Federal Reserve has determined io be so closely related to banking as to be a proper incident thereto. The BHC Act requires cx-ery bank holding company to obtain the prior approval of thc Fcdeml Reserve before: (i) acquiring more ihitn 5% of the voting stock of any bunk or other bank holding company: (ii) acquiring elf or substantially all of the asseis of any bank or bank holding company: or (iii) merging or consolidating wiih any other bank holding company.

In reviewing applications seeking approval of merger and acquisition tiansaciions, the bank regulatory authorities generBlly consider, among other think's, the competitive effect and public benefits of the transactions, the financial and managerial resources and future prospects of the combined organization (including the capital position of ihe combined organization), the applicant's performance record under the Community Reinvestment Act, (sec the scctinn captioncd "Community Reinvestment Act" included below in this item), fair housing laws and the eKectiveness of the subject organizations in combating money laundering actin ities.

The Company is also subject to the Change in Bank Control Act of 1975 ("Control Act") and relaied Federnl Reserve rcgulations, which provide that any person who proposes to acquire at least I fI% (but less than 25%l of any tlass of a bank holding company's voting securities is presumed to control the cninpany (unIess the company is not publicly held or some other shareholder owns a greater percentage of voting stock). Any person who would be presumed to acquire control or who proposes to acquire control of 25% or more of any tlass of a bank holding company's voting securities, or who propnses to acquire actual control, must prnvide the Federal Reserve with at least 60 days' prior written nntice of the acquisition. The Federal Reserve tnay disapprov t a proposed acquisition if: (i) it would result in adverse competitive effects; (ii) the financial condition of the acquiring person might jeopardize the target institution's financial stability or prejudice the interests of depositors; (ii i) the competence, experience or integrity of nny acquiring person indicates that the proposed acquisition would not be in the best intercsis of the depositors or the public; ur (iv) the acquiring persun fails to provide at1 of the information required by lhe Federal Reserve. Any proposed acquisflion of the voling securities of a bank holding company that is subject to approx-a1 tinder the BHC Act is nut subject to the Control Act noticc requirements. Any company that proposes to acquire "control," as those tems are defined in the BHC Act und Federal Reserve regulations, of a bank holding company or to acquire 25% or more of any class of voiing securities of a bank holding company would be rcquircd tn scsk the Federal Rcserve's prior approval undcr thc BHC Act to become a bank holding company.

Dividends. The Company's earnings and activities are affected by legislation, by regulations and by local legislative and administrative bodies and decisions of courts in the jurisdictions in which we conduct business. These include limitations on the ability of the Bank tn pay dividends to the Company and the Company's ability to pay dis'idends to its shareholders. It is the policy of the Federal Reserve that bank holding companies should pay cash dividends on common stock only out ot income available over the past year and only if prospective earnings retention is consistent with the organization's expected future nceds and financial condition. The policy provides that bank hnlding companics should not maintain a level of cash dividends that undermines the bank holding company's ability to serv t as a suurcc of strength to its banl;ing subsidiary. Consistenl w'ith such policy, a banking organizniion should have comprehensive policies on dividend payments that clsarly articulate thc organization's nbjectivcs and approaches fOF lTtRintaining a strung capital position and achieving the objectives of the policy statement.

As a Colorado state-chartertxi brink, the Bank is subject to limitations under Colorado law on the payment of dividends. The Colorado Banking Code provides ihai a bank may declare dividends from retained earnings and other compnncnts nf capital spccifically approvcd by the Colnrado Stare Banking Board sn long as tic declaration is madc in corripliance with rules established by the Colorado State Banking Buard.

In addition, a state nonineinber bank may not declare a dividend if paying the dividend would result in the bank being undercapitatired under FD IA, discussed above, and must comply with any discretionary distribution restrictions imposed cm it under ihc federal banking agencies' capital buffer rules. The fiDlC has stared that, in gcncral, stare nonmember banks can pay dividends in reasonable amounts only sfter the bank's earnings have first been applied to the elimination o1'losses and the establishment of necessary reserves and prudent capital levels. The FDIC may also direct stare nonmcmber banks that am poorly rated or subject to written supervisory actions not to pay dividends in ordcr to ensure adequate capital exists to suppnrt their risk profile.

In 2009, the Federal Reserve issued a supervisory letter providing greater clarity tn its policy statement on the payment of ‹Jividtmds by bank holding companies. In this letter, the Federal Reserve stated that when a holding company's board of directors is deciding on the level of dividends to declare, it should consider, among other factors; (i) overall asset quality, pntential need to increase reserves and z'rite down assets, and concentrations of credit, (ii) potential for unanticipated losses und declines in asset values; lii imptitit and explicit liquidity and credit commitments, including off-balance sheer and contingent liabilities. (iv) quality and level of current and prospective earnings, including earnings capacity under a number nf plausible economic scenarios; (v) current and prospective cash fiow and liquidity; (x'i) ability to serve in an ongoing sourct of financial and managerial strength to depository institution subsidiaries insured by the FDIC, including the extent of double leverage and the condition of subsidiary depository institutions; (vii) other risks that affect the hnlding company's financial condition and urc not fully captured in regulatory capital calculations; (viii) level, composition, and quality of capital; und (ix) ability to raise additional cquity capital in prevailing market and economic conditions (the "Dividend Factors"). It is particularly important for a bank holding company's board of directors to ensure that the dividend level is prudent relative to the organization's financial posiiinn and is not based on nvcrly optimistic earnings scenarios. In addition, a bank holding company's board of directnrs should strongly consider, afier careful analysis of the Dividend Factors, reducing, deferring or eliminating dividends when the quantity and quality oi the holding company's earnings have declined or the holding company is experiencing other financial problems, or when the rrtacrneconoiric nutlook for the holding company's primary profit centers has deteriorated. The Fedeml Reserve fiirther stated that, as a genernl matter, a bank holding company should eliminate, defer or significantly reduce its distributions if:

(i) its net intome is not sufficient to fully fund thc dividends; (ii) its prospcctive rate of carvings retention is not consistent

wilts its capital needs and overall current end prospective financial condition; or (iii) it will not meet, or is in dnnger of not meeting, its minimum regulatory capital adequacy rntios. Failure io do so could result in a supervisory finding that the bank holding company is opcranng in an unsafe and unsound manner.

Additionally, the Federal Reserve possesses enforcement powers over bank holding companies and their non-bank subsidiaries with which it can prevent or remedy actinns that represent unsafe or unsound practices, or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment o1' dividends by banks and bank holding companies,

Stark Redemptions and Repurchases. It is an esseiitiaI principle oY safely and soundness that a banking organization's redemption and repurchases of regulatory capital instruments, including common stock, from investors be consistent with the urbanization's current and prospective capital needs. In assessing such needs, the bnard of directors and management of a bank holding company should consider the Dividend Factors discussed above under "Dividends." The tisk-based capital rule directs bank holding companies to consult with the Federal Reserve before redeeming any equiry or other capital instrument included in Tier I or Tier 2 capital prior to stared maturity, if such redemption could have a material effect on the level or composition of the organization's capital base. Bank holding companies that are experiencing financial weaknesses, or that are at significant risk of developing financial weaknesses, musi consult with the appropriate Federal Reserve supervisory staff before rcdccining or rcpurcliasing common stock or nther regulntory capitnl instruments tier cush or other valuable consideration. Siiriilarly, any bank holcling company considering expansion, whether through acquisitions or through organic growth and new activities, generally also must consult w'iih the appropriate Federal Reserve supcrvisory staff bcforc redeeming nr rcpurchasing commnn stock or othcr rcgtilatory capital instniincnts for cash or othcr valuable consideration. In evaluating the appropriateness of a brink holding company's prnposed redemption or repurchase of capital instruments, the Federal Reserve will consider the potential losses ihal the holding company may suffer from the prnspcctivc nccd to incrcasc reserves and write down assets from continued asset dctcrinration and the holding cnmpany"s ability tn raise additional common stock and other Tier 1 capital tn replaCC Cd ltfll Instrunients that are redeemed or repurchased. A bank holding company must inform the Federal Reserve of a redemption or repurchase of common stock or perpetual preferred stmk for cash or other value resulting in a net reduction of the bank holding company's outstanding amount of common stock or perpetual preferred stock belnw the amount of such capital instrument outstanding at the beginning of the quarter in stitch the redemption or repurchase occurs. In addition. a bank holding company must advise tht Federal Reserve sufficiently in advance of such redemptions and repurchases to provide reasonable opportunity for supervisnry review and pnssible nbjectinn should the Federal Reserve determine a transaction raises safery and soundness concerns.

Regulation Y requires that a bank holding company that is not well capitalized or well managed, or that is subject to any unresolved supervisory issues, provide prior notice io ihe Federal Reserve for any repurchase or redemption of its equity securities for cash or other value that would reduce by 10% or more the holding company's consolidated net worih agbwgated over ihe preceding 12-month period.

Arrival Reporting, Examinati'ans. The Company is required to file an annual report with the Federal Reserve und to provide such additional information as the Federal Reserve may require. The Federal Resen'e may examine a bank holding company and any of its subsidiaries, and chnrgc thc cninpany for the cost of such an cxninination.

The 8ank is examined frnm time to time by its priinnry fcdcral banking regulator, the FDI C, and the CDB and is charged for the cust of such ari exairiination. Depending on thc rcsults of a given examination, the FDIC and the CDB nity revalue the Bank's asseis and require that ihe Bank establish speciiic reserves to compensate for the difference between the value dctcnnincd by the regulator and the book value nf the asscts. The CotTlpRny is required to prnvidc annual audited financial statements and other information to the FDIC as required under Part 363 of FDIC rules And re$'ulations.

In July 2023, the fedeml bank HU regUIBtOrS propnsed revisinns to the Basel III Capital Rules to implement the Basel IV standards and make other changes to the Basel II t Capital R ules. The proposal introduces revised credit, equity, and opcrational risks, as well as crcdit valuation adjustmcnt risk and market risk requirements, among other changes. linwever, the rex'ised capital requirements of the proposed nile would not spply to the Company or the Bank because they have less lhan $100 billion in toial consolidaied assets and trading assets and liabilities below the threshold for market risk requirements.

lmpo.;iynn of Liohiliz for Undvrcapiia lived Suh.‹tin vie.i. The FDIA requires bank regulators to take "prompt corrective action" to resolve problems associated with insured depositnry institutions. In the event an institution becomes "undercapitaliztxi," it must submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company "having control of" the undercapitalized institution "guarantees" the subsidiary's compliance with the capital restoration plan until it becomes "adequately capitalized." For purposes of this statute, the Company has control of the Bank. Un‹Jer the FDJA, the aggregate liability of all companies controlling a particular institution is limited to the lesser of five percent of the depository institution's toial asset,s at the time ii hecame undercapitalized or the amount necessary tn bring the institution into cnmpliance with applicable capital standards. The FD IA grants greater powers to bank reb'ulators in situations where an institution becomes "signi ficantly" or "critically" undercapitalized or fails to submit a capital restoration plan, For example, a bank holding company contnrlling such an institution can be required to obtain prior Fedeml Reserve approval of prnposcd distributions, or might be required to consent to a merger or to divest the troubled institution or uther affiliates.

State Lait' Restrictians. As a Colorado corporation, the Company is subject to certain limitations and restrictions under applicable Colorado corporate law. For example, state law restrictions in Colorado include limitations 8nd restrictions relating to indemnification of directors; distributinns and dividends to shareholders; transactions involx'ing directors, officers ur interested shareholders, maintenance of books, reccirds, and minutes; and observance of certain corporate formalities.

Capital AHequacy. Undcr the Basel III Capital Rulcs, discussed abnvc, the FDIC mnriitors the c npital adequacy of the Bank b Using a combination of risk-based guidelines rind leverage ratios. The FDIC considers the Bank's capital levels when acting on venous types of applications and when conducting supervisory activities related io the sareiy and sotindncss of thc Bank and the banking systcm. Higher capit i levels may be required if warranted by the circumstances or risk profiles of individual institutions, or if required by the banking reb'ulutors due to the economic conditions impacting our markets. For example, FDIC regulations provide that higher capital may be required to take adequate account of, among other things, intcrcst rate risk and the risks poscd by conccntrations of credit, nontraditional activitics or sccuritics trading activities.

As of December 31, 2024 and 2023, the Bank exceeded all °*b latory minimum capital requirements.

Prompt Corrrcti 'e Rrfful‹itory Artion. Under applicable federal statutes, the federal bank regulatnry agencies src required to take "prompt corrective action" with respect to institutions that do not meet specified minimum capital requirements. For these purposes, thc law establishes file capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under the FDIC's prompt cnrrective action regulations, an insiitutions capitalization is deemed to be as follows:

"Well capitalized" il' it has a iotal risk-based capital ratio of 10.G•% or greater, a Tier I risk-based capital ratio of R.0% or greater, a SET 1 risk-based capital mtio of 6.5% or greater and a leverage capital ratio nf 5.0% or greater.

"Adequately capitalized" if it has a total risk-based capital rntio of 8.0°/o or greater, a Tier I risk-bnsed capital rntio of G.0% or greater, a CET 1 risk-based capital ratio of 4.5% or greater and a leverage capital ratio of 4.0% car greater.

"Undercapitalized" if it has a total risk-based capital ratio of less than R.0%, a Tier I risk-based capital ratio of less than 6.0•/o, a CETI risk-based capital ratio of less then 4.5°/» or a leverage capital ratio of less than 4.0•/o.

"Slb * cantly undercapitalized" if it has a tutal risk-bused capital ratio uf' less than 6.0%, u Tier I risk-based capital ratio of less ihan 4.0•/», a CET I capital ratio ot'less than 3.tl%« or a leverage capital ratio of Jess ihan 3.0•Z».

"Critically undercapitalized" if it has a ratio of tangible equiry to total assets that is equal to or less than 2.0%.

Undercapitalized institutions are subject to growth limitations and are required to submit a capital restoration plan to the FDIC. The federal bank regulatnry agencies may not accept such a plan without determining, among other things that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. In addition, for a capital restoration yIan to be acceptable, the depositor institution*s parent ho1ding company must guarantee that thc institution will comply with stich capital restnration ptan. If a depository institution fails to submit an acceptable

plan, i‹ is treated as if it is "*ib ioca»iiy undercapitalized." "Significantly undercapitalized" depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become "adequately capitalized," requirements to reduce total assets, nnd cessation nf receipt of deposits from correspondent banks. "Critically

undcrctipitalized" institutions are subject to the appointment of a receiver or conservator.

As of December 31, 2024 and 2023, the Bank qualified as "well capitalized" under the prompt cormstive action

rules.

Pepys it faiuroocr Ai4eSsmrn/a'. Ail ora depositor's accounts at an insured bank, including all noninterest-bearing

transaction accounts, arc insured by the PDlC up io 5250,000. PCiIC-insured banks arc required to pay deposit insumncc premiums to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured depository institutions pay insurnnce premiums at rates based on their risk classification. An institution's risk classification is assigned based on current financial ratios and supervisory ratings of the institution's financial condition and operations, Asscssmcnts are based on an institution's average consolidRted tntal assets less average tangible equity, subject to adjustments for certain types ot instituuons, including custodial banks.

The FDIC may terminate a depository institution's deposit insurance upon a finding that the institution's financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order, or condition enacted nr imposed by the institution's regulatory agency. If deposit insurance ior a banking business thai we invest in or acquire were to bt terminated, that would have a material adverse effect on that banking business and potentially on the Company as a whole,

Elepv› itor Pi-e)'er«ii oe. EDI A provides that, in ihe event of the "liquidation or other re.so1utioo" of an insured depository institution, the claims of depositnrs of the institution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrutive expenses of' the FDIC as a recei›'er, will have priority over other general unsecured claims against the institution. If an insured depository institution fai is, insured and Reinsured depositors, along with the FDIC. will have prinrity in payment ahead of unsecured, non-deposit creditors, including the parent bank holding corripsny, with respect to any extensions of credit they have made to such insured depository institution.

In November 2023, the FDIC issued a final rule to implement u special assessment to recover losses tu the DIF incurred as a result or 2023 bank failures and the FDlC's use of the systemic risk exception to cover certain deposits that were otherw isc uninspired. The spccia «sessmcnt was based on cstimatcd uninjured deposits as of December 31, 2022 (excluding the first $5.0 billion) and will be assessed at a quarterly rate of 3.36 basis pnints, over eight quarterly assessment periods, beginning in ihe firsi quarter of 2024. As a resell of the exclusion for the first $5.0 billion in the final rule, we are not rcquircd to pay an assessmcnt. Under the final rule, the csiimatcd loss pursuant to the systemic risk determination will be periodically adjusted, and the FDIC has retained the ability to cease collection early, extend the special assessment collection period and impose a final shortfall special assessment on a one-time basis. The extent to which any such additional future assessments will impact our fumre deposit insurance expense is currently uncertain.

C'ori.suztirr' Fizioitc'i6/ Protection. Tht Bank is subject to a number of federal and state consumer prntettion laws thnt extensively govern its relatinnship with its clients. These laws include the Equal Credit Opportunity Act, the Fair Crtdit Reporting Act, the Truth in Lending Act, the Tnith in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Home Mortgage Disclosure Aci, the Fair Housing Act, the Reai Estate Settlement Procedures Act, the Fair Debt Collection Pmctices Act, the Right to Financial Prlvacy Act, the Service Members Civil Relief Act and these laws' respective state law counterparts, as w'eIl as state usury laws and laws regarding unfair and deceptive acts and practices, Tljese and other federal laws, among other ttlings, require disclosures of the cost of credit and term.s of deposit accounts, provide substantive consumer rights, prohibit discrimination in credit tmnsactions, rcgulRte the use of credit report intonation, provide financial privacy protections, prohibit unfttir, deceptive, and abusive practices, restrict the Bank's ability to raise interest rates and subject the Company and the Rank to substantial regulatory oversight. Violations of applicable consumer protection laws can rcsult in significant potential liability frnm litigntion brought by clicnts, including actual damages, restitution, and attnmeys' fees. Federal bdnk rcgulators, the U.S. Deptirtment of Justice. state attorneys general and state and local consumer perfection agencies may also seek to enforce consumer protection requirements and obtain thcsc and other rcmcdics, including rcgulatnry sanctions, customer rescission rights, action by the

U.S. Department nf Justice, the state and local attorneys geneml in each jurisdiction in which we operate and civil money penalties. Failure to comply with consumer protection requirements may also resuli in our failure to obtain any required bank regulatory appinval for merger or acquisition transactions the Company may want to pursue or our prohihition from engaging in such trnnsactinns even if approval is not re9uired.

The Consumer Financial Protection Bureeu ("CFPB") has broBd rulemaking authnriry for a wide range of consumer financial laws ihat apply to all banks. The CFPB is authorixed to issue rules for both bank and non-bank companies that offer consumer financial products and services, suhjcct to consultation with the prudential banking b lators. In general, how'ever, banks with assets of S10 billion or less, such as the Bank, will cnntinue tn be examined for

consumer compliance by their primary federnl bank regulator.

Much of the CFPB's rulemaking has focused o:n mortgage lending and servicing, including an important rule requiring lenders to ensure that ptt›spective buyers have the ability to repay their mortgages. Other areas of current CFPB focus include consumer protectinns for prepaid cards, payday lending, debt collection, nverdraft services and privacy notices. The CFPB has been particularly active in issuing rules and guidelines concerning residential iiic›rtgagc len‹Jing and servicing, issuing numerous rule.s and guidance related to re.sideotial mortgages. Perhaps the most significant of these guidelines is the "Ability-tn-Repay and Qualified Mortgage Standard.s under the Truth in Lending Act" pnHinHs of Regulation Z. Under the Dudd-Frank Act, credituni must make a reasonable and gonfl faith determination, based on verified and documented information, ihat the consumer has a reasonable "ability to repay" a residential mortgage according tn its terms. Thcrc is a statutory presumption nf compliance with this requirement for morigagss that meet the requirements to be deemed "qualified mortgages." The CFPB rule defines the key threshold terms "ability to repay" and "quatified mortgage."

The CFPB has actively issued enforcement actions against both large and small entities and to entities across the entire financial service industry. The CFPH has rel ied upon "unfair, deceptive, or abusive acts" prohibitions as its primary enforcement tool. However, the CFPB nnd Department of Justice ("DOJ") cnntinue to be fncused on fair lending in taking enforcement actions against banks with renewed emphasis on alleged "redlining" practices. Failure to comply with thtse laws and regulations could give rise to regulatory sanctions, client rescission rights. actions by state and local attorneys general and civil or criminal liability.

Bruker ed DeJ›nsit Restriction.1. Well capitalized institutinns are not subject to limitations on brokercd dcpnsits, while an adequately capitalized institution is able to at cept, rtnew or rull over broken deposits only with a waiver from the FnIC and i.s subject to certain reslriciions on the yield paid on such deposits. Undercapitalized institutions are generally not permitted to accept, renew, or roll nvcr brokcrcd deposits.

Comm unit:y Reinvestment Act. The CRA is intended to encourage banks tn help meet the crcdit needs nf thcir entire communities, including low- and moderate-income neighbnrhnods, consistent with safe and sound opertitions. The regulators examine banks and assign each bank a public CRA raiing. The CRA then requires bank regulators io consider the bank's record in mccting the needs of its community when cnnsidcring certain applications by n bank, including applications to establish a banking center or to conduct certain mergers or acquisitions. The Federal Reserve is required tn consider the CRA records of a bank holding company's controlled banks when considering an application by the bank holding company to acquire a bank or to merge with another bank holding company.

When we apply for regulatory approval to make certain investments, thc regulators will consider ihc CRA record of the target institution and our depository institution subsidiary. An unsatisfactory CRA record could substantially delay approval or result in denial oi'an application.

Insider Crc•dif Trunsa‹tions. Banks are subject to certain restrictions imposed by the Federal Reserve Act on extensions of credii to certain executive officers, directors, principal shareholders, and any related interests of suth persons (Regulation O). Extensinns of credit to such persons must (a) be msde on substantially the same terms, including interest rates and collateral, and follow credit underwriting procedures that are not ltss stringent than those prevailing at the time for comparable transactions wiih persons not covered by such resiriciions, and (b) not involve more than the normal risk of repayiiicnt or present other unfavorable features. Banks arc also subject to certain lending limits srid restrictions on ovtrdra9s to such persons. A violation uf' these restrictions may result in the assessment or' substantial civil monetary penalties on the affected bank or any omcer, director, employee, ageni, or other person participating in ihe conduct of the affairs nf thnt bank, the impnsition of a cease and desist nrder, and other rcgulatory sanctions.

In October 2023, the Federal Reserve, thc FDIC and the Office of the Comptroller of the Currcncy ("OCC"), issued a juint final rule to modernize the CRA regulatory frmework. The final rule is intended, umong other thinbs to adapt to changes in the banking industry, including internet and the expanded role of mobile and online banking, and to tailor performance standards to account for differences in bnnk size, and business models. The final rule introduces new tests under which the performance of banks with over $2 billinn in assets will be assessed. The new rule also includes data collection and reporting requirements, some of which are applicable only io banks with over $10 billion in assels. Most prnvisions of the final rule will become effective on January I , 2026, and ihc data rcporiing requirements w'ill become effective on January 1, 2027.

Saf'etv and Soundn rss Standnrds. Under the FDIC lmprnveinent Act ("FDICIA"), each federal banking agency has prescribed, by regulation, non-capital safeiy and soundness standards ior institutions under its authority. These standards cover internal controls. information and internal audit systems. loan documentation, crtdit underwriting, interest rate exposure, asset growth, coinpensatinn, fees and benefits. such other operational mid managerial standards as the agency detennines to be appropriate, and standards for asset quality, earnings, and stock valuation. An institution which flits io meet these standards must develop a plan acceptable to the agency, specifying the .steps that tht institution will take to meet the standards. Failure to submit or implement such a plan may subject the institutinn to regulatnry sanctions.

Financial Privricv. In accordance with the Gramin-Lench-Bliley Act nf 1999 (the "GLB Act"), federal banking regulators adopted rules that limit the ability ot banks and other financial insututions to disclose nonpublic infionnation about consume to nonaffil iated lhird parties. These rules requiw disclosure of priv'acy policies to consumers and, in some circumstances, allnw consumers to prevent disclosure of certRin personal infOFmRtion to a nonaffiliated third party. The privacy provisions of the GLB Act affect how consumer inionnation is transmitted through diversified financial companies and conveyed to outside vendors.

Disclaimer

First Western Financial Inc. published this content on April 29, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 29, 2025 at 17:32 UTC.