MYFW First Western Finanical Inc

First Western Financial, Inc. (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the third quarter ended September 30, 2023.

Net income available to common shareholders was $3.1 million, or $0.32 per diluted share, for the third quarter of 2023. This compares to $1.5 million, or $0.16 per diluted share, for the second quarter of 2023, and $6.2 million, or $0.64 per diluted share, for the third quarter of 2022.

Scott C. Wylie, CEO of First Western, commented, "We delivered another quarter of strong financial performance and generated $4.6 million in pre-tax, pre-provision income, an increase of 17% from the prior quarter, while continuing to operate with a conservative approach, prioritizing prudent risk management, and maintaining high levels of liquidity, capital and reserves. While remaining disciplined in our underwriting and pricing criteria, we had our largest quarter of new loan production so far this year, which reflects the strength of the clients that we work with and the attractive lending opportunities that we are seeing throughout our markets. Importantly, we continue to see good results from our focus on deposit gathering, and our deposit growth outpaced our loan growth during the third quarter.

"We believe that our success in executing well on those areas that we can control, such as balance sheet management, attracting new clients, providing exceptional service to existing clients, and tightly managing expenses, will help us to continue to offset the impact from the challenging macro environment and deliver strong financial results for our shareholders in the near term. Over the long term, we believe we are very well positioned to consistently add new clients, realize more operating leverage as we increase our scale, generate profitable growth, and create additional value for shareholders," said Mr. Wylie.

	For the Three Months Ended
	September 30,				June 30,				September 30,
(Dollars in thousands, except per share data)		2023				2023				2022
Earnings Summary
Net interest income	$	16,766			$	18,435			$	23,062
Provision for credit losses(1)		329				1,843				1,756
Total non-interest income		6,099				3,962				6,189
Total non-interest expense		18,314				18,519				19,260
Income before income taxes		4,222				2,035				8,235
Income tax expense		1,104				529				2,014
Net income available to common shareholders		3,118				1,506				6,221
Adjusted net income available to common shareholders(2)		3,140				2,440				6,337
Basic earnings per common share		0.33				0.16				0.66
Adjusted basic earnings per common share(2)		0.33				0.25				0.67
Diluted earnings per common share		0.32				0.16				0.64
Adjusted diluted earnings per common share(2)		0.32				0.25				0.66
Return on average assets (annualized)		0.44	%			0.21	%			0.97	%
Adjusted return on average assets (annualized)(2)		0.45				0.35				0.99
Return on average shareholders' equity (annualized)		5.08				2.49				10.70
Adjusted return on average shareholders' equity (annualized)(2)		5.12				4.04				10.90
Return on tangible common equity (annualized)(2)		5.82				2.86				12.28
Adjusted return on tangible common equity (annualized)(2)		5.86				4.64				12.51
Net interest margin		2.46				2.73				3.74
Efficiency ratio(2)		78.76				74.42				64.94

____________________

(1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP. (2) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

Operating Results for the Third Quarter 2023

Revenue

Total income before non-interest expense was $22.5 million for the third quarter of 2023, an increase of 9.6%, compared to $20.6 million for the second quarter of 2023. Gross revenue(1) was $23.1 million for the third quarter of 2023, a decrease of 6.6%, from $24.8 million for the second quarter of 2023. The decrease was primarily driven by a decrease in net interest income as a result of higher interest expense primarily due to higher deposit costs, offset partially by higher interest income. Relative to the third quarter of 2022, Total income before non-interest expense decreased 18.0% from $27.5 million. Relative to the third quarter of 2022, gross revenue decreased 21.0% from $29.3 million. The decrease was driven by a decrease in net interest income as a result of higher interest expense due to higher deposit costs, offset partially by higher interest income.

(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

Net Interest Income

Net interest income for the third quarter of 2023 was $16.8 million, a decrease of 9.1% from $18.4 million in the second quarter of 2023. Relative to the third quarter of 2022, net interest income decreased 27.3% from $23.1 million. The decreases were due to higher interest expense driven primarily by higher deposit costs, offset partially by higher interest income.

Net Interest Margin

Net interest margin for the third quarter of 2023 decreased 27 basis points to 2.46% from 2.73% reported in the second quarter of 2023. During the third quarter of 2023, net interest margin was negatively impacted by the addition of $45.9 million of non-performing assets, resulting in a 20 basis point decrease. Average cost of deposits increased 26 basis points in the third quarter of 2023 compared to the second quarter of 2023 driven by a rising rate environment and a highly competitive deposit market.

The yield on interest-earning assets decreased 3 basis points to 5.35% in the third quarter of 2023 from 5.38% in the second quarter of 2023 and the cost of interest-bearing deposits increased 31 basis points to 3.75% in the third quarter of 2023 from 3.44% in the second quarter of 2023.

Relative to the third quarter of 2022, net interest margin decreased from 3.74%, primarily due to a 244 basis point increase in average cost of deposits, offset partially by a 94 basis point increase in loan yields.

Non-interest Income

Non-interest income for the third quarter of 2023 was $6.1 million, an increase of 53.9%, from $4.0 million in the second quarter of 2023. The increase was partially driven by growth in Trust and advisory fees during the third quarter of 2023, as well as a $1.2 million impairment to the carrying value of contingent consideration assets recorded in the second quarter of 2023, not recurring in the third quarter of 2023. The increase in non-interest income was further driven by losses of $1.1 million recorded on loans accounted for under the fair value option during the second quarter of 2023, compared to $0.3 million of losses recorded during the third quarter of 2023.

Relative to the third quarter of 2022, non-interest income decreased 1.5% from $6.2 million. The decrease was primarily due to a decrease in bank fees and losses on loans accounted for under the fair value option, partially offset by an increase in Trust and investment management fees.

Non-interest Expense

Non-interest expense for the third quarter of 2023 decreased 1.1% to $18.3 million, from $18.5 million in the second quarter of 2023, driven primarily by lower salaries and employee benefits related to staffing reductions to better align with lower revenue. Relative to the third quarter of 2022, non-interest expense decreased 4.9% from $19.3 million, driven primarily by lower salaries and employee benefits related to staffing reductions to better align with lower revenue, as well as a decrease in Professional services.

The Company’s efficiency ratio(1) was 78.8% in the third quarter of 2023, compared with 74.4% in the second quarter of 2023 and 64.9% in the third quarter of 2022.

(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

Income Taxes

The Company recorded income tax expense of $1.1 million for the third quarter of 2023, representing an effective tax rate of 26.1%, compared to 26.0% for the second quarter of 2023 and 24.5% for the third quarter of 2022.

Loans

Total loans held for investment were $2.54 billion as of September 30, 2023, an increase of 1.4% from $2.50 billion as of June 30, 2023, due to loan growth primarily in our construction and development, residential mortgage, and commercial and industrial portfolios. Relative to the third quarter of 2022, total loans held for investment increased 7.7% from $2.35 billion as of September 30, 2022, attributable to loan growth primarily in our construction and development and residential mortgage portfolios. The growth in our construction and development portfolio was driven by draws on existing commitments, partially offset by payoffs.

Deposits

Total deposits were $2.42 billion as of September 30, 2023, an increase of 1.9% from $2.38 billion as of June 30, 2023, as a result of new and expanded deposit relationships. Relative to the third quarter of 2022, total deposits increased 11.7% from $2.17 billion as of September 30, 2022, driven primarily by new and expanded deposit relationships.

Borrowings

Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $259.9 million as of September 30, 2023, a decrease of $52.7 million from $312.6 million as of June 30, 2023, driven primarily by a net pay down on the Company's FHLB line of credit during the third quarter of 2023. Relative to the third quarter of 2022, borrowings decreased $13.3 million from $273.2 million as of September 30, 2022, driven by a year-over-year net pay down on the Company's FHLB line of credit, partially offset by an increase in term advances.

Subordinated notes were $52.3 million as of September 30, 2023, an increase of $0.1 million from $52.2 million as of June 30, 2023. Subordinated notes increased $19.7 million from $32.6 million as of September 30, 2022.

Assets Under Management

Assets Under Management ("AUM") decreased by $108.2 million during the third quarter to $6.40 billion as of September 30, 2023, compared to $6.50 billion as of June 30, 2023. This decrease was primarily attributable to a decrease in market values throughout the third quarter 2023, resulting in a decrease in the value of AUM balances. Total AUM increased by $477.4 million compared to September 30, 2022 from $5.92 billion, which was primarily attributable to improving market conditions year-over-year resulting in an increase in the value of AUM.

Credit Quality

Non-performing assets totaled $56.1 million, or 1.87% of total assets, as of September 30, 2023, compared to $10.3 million, or 0.36% of total assets, as of June 30, 2023. The increase was primarily attributable to four additional loans, under one relationship, moving to non-accrual during the third quarter of 2023, totaling $42.2 million. As of September 30, 2022, non-performing assets totaled $3.9 million, or 0.14% of total assets. Relative to the third quarter of 2022, the increase in non-performing assets was driven primarily by the addition of $42.2 million in loans, under one relationship, during the third quarter of 2023, and $8.9 million in loans at the end of the fourth quarter of 2022.

During the third quarter of 2023, the Company recorded a provision expense of $0.3 million, compared to a provision expense of $1.8 million in the second quarter of 2023 and a $1.8 million provision expense in the third quarter of 2022. The provision recorded in the third quarter of 2023 reflects a $2.0 million allowance on individually analyzed loans, partially offset by the impact of improved economic forecasts and a favorable change in loan mix.

Capital

As of September 30, 2023, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of September 30, 2023, the Bank was classified as “well capitalized,” as summarized in the following table:

	September 30,
	2023
Consolidated Capital
Tier 1 capital to risk-weighted assets	9.32	%
Common Equity Tier 1 ("CET1") to risk-weighted assets	9.32
Total capital to risk-weighted assets	12.45
Tier 1 capital to average assets	7.96
Bank Capital
Tier 1 capital to risk-weighted assets	10.42
CET1 to risk-weighted assets	10.42
Total capital to risk-weighted assets	11.31
Tier 1 capital to average assets	8.88

Book value per common share increased 1.5% from $25.38 as of June 30, 2023 to $25.76 as of September 30, 2023. Book value per common share was up 4.1% from $24.74 as of September 30, 2022. The adoption of CECL on January 1, 2023 resulted in a $0.56 reduction of book value per common share.

Tangible book value per common share(1) increased 1.8% from $22.03 as of June 30, 2023, to $22.42 as of September 30, 2023. Tangible book value per common share was up 5.0% from $21.35 as of September 30, 2022. The adoption of CECL on January 1, 2023 resulted in a $0.56 reduction of tangible book value per common share.

(1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 10:00 a.m. MT/ 12:00 p.m. ET on Friday, October 20, 2023. Telephone access: https://register.vevent.com/register/BI2dd97974afa54016910a3d47035cf03b 

A slide presentation relating to the third quarter 2023 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Events and Presentations page of the Company’s investor relations website at https://myfw.gcs-web.com. 

About First Western

First Western is a financial services holding company headquartered in Denver, Colorado, with operations in Colorado, Arizona, Wyoming, California, and Montana. First Western and its subsidiaries provide a fully integrated suite of wealth management services on a private trust bank platform, which includes a comprehensive selection of deposit, loan, trust, wealth planning and investment management products and services. First Western’s common stock is traded on the Nasdaq Global Select Market under the symbol “MYFW.” For more information, please visit www.myfw.com.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include “Tangible Common Equity,” “Tangible Common Book Value per Share,” “Return on Tangible Common Equity,” “Efficiency Ratio,” “Gross Revenue,” “Allowance for Credit Losses to Adjusted Loans,” “Adjusted Net Income Available to Common Shareholders,” “Adjusted Basic Earnings Per Share,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” and “Adjusted Return on Tangible Common Equity”. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies. Reconciliation of non-GAAP financial measures, to GAAP financial measures are provided at the end of this press release.

Forward-Looking Statements

Statements in this news release regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “position,” “outlook,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “opportunity,” “could,” or “may.” The forward-looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, without limitation, the lack of soundness of other financial institutions or financial market utilities may adversely affect the Company; the Company’s ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions; financial institutions are interrelated because of trading, clearing, counterparty or other relationships; defaults by, or even rumors or questions about, one or more financial institutions or financial market utilities, or the financial services industry generally, may lead to market-wide liquidity problems and losses of client, creditor and counterparty confidence and could lead to losses or defaults by other financial institutions, or the Company; integration risks and projected cost savings in connection with acquisitions; the risk of geographic concentration in Colorado, Arizona, Wyoming, California, and Montana; the risk of changes in the economy affecting real estate values and liquidity; the risk in our ability to continue to originate residential real estate loans and sell such loans; risks specific to commercial loans and borrowers; the risk of claims and litigation pertaining to our fiduciary responsibilities; the risk of competition for investment managers and professionals; the risk of fluctuation in the value of our investment securities; the risk of changes in interest rates; and the risk of the adequacy of our allowance for credit losses and the risk in our ability to maintain a strong core deposit base or other low-cost funding sources. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 15, 2023 (“Form 10-K”), and other documents we file with the SEC from time to time. We urge readers of this news release to review the “Risk Factors” section our Form 10-K and any updates to those risk factors set forth in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our other filings with the SEC. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today’s date, or to make predictions based solely on historical financial performance. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Contacts:Financial Profiles, Inc.Tony Rossi310-622-8221MYFW@finprofiles.com IR@myfw.com 

First Western Financial, Inc.Consolidated Financial Summary (unaudited)
	Three Months Ended
	September 30,				June 30,				September 30,
(Dollars in thousands, except per share amounts)		2023				2023				2022
Interest and dividend income:
Loans, including fees	$	34,141			$	33,583			$	24,988
Loans accounted for under the fair value option		300				351				513
Investment securities		607				627				653
Interest-bearing deposits in other financial institutions		1,292				1,666				533
Dividends, restricted stock		141				145				108
Total interest and dividend income		36,481				36,372				26,795
Interest expense:
Deposits		17,467				15,864				2,706
Other borrowed funds		2,248				2,073				1,027
Total interest expense		19,715				17,937				3,733
Net interest income		16,766				18,435				23,062
Less: provision for credit losses(1)		329				1,843				1,756
Net interest income, after provision for credit losses(1)		16,437				16,592				21,306
Non-interest income:
Trust and investment management fees		4,846				4,602				4,639
Net gain on mortgage loans		654				774				728
Bank fees		427				591				587
Risk management and insurance fees		145				103				115
Income on company-owned life insurance		96				91				88
Net loss on loans accounted for under the fair value option		(252	)			(1,124	)			(134	)
Unrealized (loss)/gain recognized on equity securities		(19	)			(11	)			75
Net gain on equity interests		—				—				6
Other		202				(1,064	)			85
Total non-interest income		6,099				3,962				6,189
Total income before non-interest expense		22,536				20,554				27,495
Non-interest expense:
Salaries and employee benefits		10,968				11,148				11,566
Occupancy and equipment		1,807				1,939				1,836
Professional services		1,867				1,858				2,316
Technology and information systems		906				831				1,172
Data processing		1,159				1,052				888
Marketing		355				379				403
Amortization of other intangible assets		62				62				77
Net gain on assets held for sale		—				—				(1	)
Net gain on sale of other real estate owned		—				—				(41	)
Other		1,190				1,250				1,044
Total non-interest expense		18,314				18,519				19,260
Income before income taxes		4,222				2,035				8,235
Income tax expense		1,104				529				2,014
Net income available to common shareholders	$	3,118			$	1,506			$	6,221
Earnings per common share:
Basic	$	0.33			$	0.16			$	0.66
Diluted		0.32				0.16				0.64

(1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.

First Western Financial, Inc.Consolidated Financial Summary (unaudited)
	September 30,				June 30,				September 30,
(Dollars in thousands)		2023				2023				2022
Assets
Cash and cash equivalents:
Cash and due from banks	$	6,439			$	6,285			$	8,308
Interest-bearing deposits in other financial institutions		265,045				291,283				156,940
Total cash and cash equivalents		271,484				297,568				165,248
Held-to-maturity securities, at amortized cost (fair value of $66,487, $69,551 and $78,624, respectively), net of allowance for credit losses		75,539				77,469				84,257
Correspondent bank stock, at cost		11,305				13,518				12,783
Mortgage loans held for sale, at fair value		12,105				19,746				12,743
Loans (includes $15,464, $17,523, and $22,871 measured at fair value, respectively)		2,530,459				2,495,582				2,351,322
Allowance for credit losses(1)		(23,175	)			(22,044	)			(16,081	)
Loans, net		2,507,284				2,473,538				2,335,241
Premises and equipment, net		25,410				25,473				24,668
Accrued interest receivable		11,633				11,135				8,451
Accounts receivable		5,292				5,116				5,947
Other receivables		3,052				3,331				2,868
Other real estate owned, net		—				—				187
Goodwill and other intangible assets, net		31,916				31,977				32,181
Deferred tax assets, net		6,624				7,202				6,849
Company-owned life insurance		16,429				16,333				16,064
Other assets		24,680				23,240				21,212
Total assets	$	3,002,753			$	3,005,646			$	2,728,699
Liabilities
Deposits:
Noninterest-bearing	$	476,308			$	514,241			$	662,055
Interest-bearing		1,943,688				1,861,153				1,505,392
Total deposits		2,419,996				2,375,394				2,167,447
Borrowings:
Federal Home Loan Bank and Federal Reserve borrowings		259,930				312,600				273,225
Subordinated notes		52,279				52,223				32,584
Accrued interest payable		3,203				1,788				664
Other liabilities		21,089				21,399				19,917
Total liabilities		2,756,497				2,763,404				2,493,837
Shareholders’ Equity
Total shareholders’ equity		246,256				242,242				234,862
Total liabilities and shareholders’ equity	$	3,002,753			$	3,005,646			$	2,728,699

(1) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.

First Western Financial, Inc.Consolidated Financial Summary (unaudited)
	September 30,				June 30,				September 30,
(Dollars in thousands)		2023				2023				2022
Loan Portfolio
Cash, Securities, and Other(1)	$	148,669			$	150,679			$	154,748
Consumer and Other		23,975				21,866				27,781
Construction and Development		349,436				313,227				228,060
1-4 Family Residential		913,085				878,670				822,796
Non-Owner Occupied CRE		527,377				561,880				527,836
Owner Occupied CRE		208,341				218,651				220,075
Commercial and Industrial		349,515				338,679				350,954
Total		2,520,398				2,483,652				2,332,250
Loans accounted for under the fair value option		16,105				18,274				22,648
Total loans held for investment		2,536,503				2,501,926				2,354,898
Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net(2)		(6,044	)			(6,344	)			(3,576	)
Loans (includes $15,464, $17,523, and $22,871 measured at fair value, respectively)	$	2,530,459			$	2,495,582			$	2,351,322
Mortgage loans held for sale		12,105				19,746				12,743
Deposit Portfolio
Money market deposit accounts	$	1,388,726			$	1,297,732			$	1,010,846
Time deposits		373,459				376,147				186,680
Negotiable order of withdrawal accounts		164,000				168,537				277,225
Savings accounts		17,503				18,737				30,641
Total interest-bearing deposits		1,943,688				1,861,153				1,505,392
Noninterest-bearing accounts		476,308				514,241				662,055
Total deposits	$	2,419,996			$	2,375,394			$	2,167,447

____________________(1) Includes PPP loans of $4.9 million as of September 30, 2023, $5.6 million as of June 30, 2023, and $7.7 million as of September 30, 2022.(2) Includes fair value adjustments on loans held for investment accounted for under the fair value option.

First Western Financial, Inc.Consolidated Financial Summary (unaudited) (continued)
	As of or for the Three Months Ended
	September 30,				June 30,				September 30,
(Dollars in thousands)		2023				2023				2022
Average Balance Sheets
Assets
Interest-earning assets:
Interest-bearing deposits in other financial institutions	$	102,510			$	135,757			$	101,564
Federal funds sold		—				—				260
Investment securities		78,057				80,106				87,340
Correspondent bank stock		7,162				8,844				4,924
Loans		2,502,419				2,471,587				2,241,343
Interest-earning assets		2,690,148				2,696,294				2,435,431
Mortgage loans held for sale		12,680				15,841				11,535
Total interest-earning assets, plus mortgage loans held for sale		2,702,828				2,712,135				2,446,966
Allowance for credit losses(1)		(22,122	)			(20,077	)			(14,981	)
Noninterest-earning assets		125,774				124,561				126,457
Total assets	$	2,806,480			$	2,816,619			$	2,558,442
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,846,318			$	1,847,788			$	1,480,288
FHLB and Federal Reserve borrowings		125,250				123,578				119,025
Subordinated notes		52,242				52,186				32,564
Total interest-bearing liabilities		2,023,810				2,023,552				1,631,877
Noninterest-bearing liabilities:
Noninterest-bearing deposits		512,956				527,562				673,949
Other liabilities		24,228				23,850				20,103
Total noninterest-bearing liabilities		537,184				551,412				694,052
Total shareholders’ equity		245,486				241,655				232,513
Total liabilities and shareholders’ equity	$	2,806,480			$	2,816,619			$	2,558,442
Yields/Cost of funds (annualized)
Interest-bearing deposits in other financial institutions		5.00	%			4.92	%			2.06	%
Investment securities		3.09				3.14				2.97
Correspondent bank stock		7.81				6.58				8.70
Loans		5.43				5.47				4.49
Mortgage loans held for sale		6.70				5.82				5.40
Total interest-earning assets		5.35				5.38				4.34
Interest-bearing deposits		3.75				3.44				0.73
Cost of deposits		2.94				2.68				0.50
FHLB and Federal Reserve borrowings		4.58				4.42				2.22
Subordinated notes		6.08				5.47				4.41
Total interest-bearing liabilities		3.86				3.56				0.91
Net interest margin		2.46				2.73				3.74
Net interest rate spread		1.49				1.82				3.44

(1) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.

First Western Financial, Inc.Consolidated Financial Summary (unaudited) (continued)
	As of or for the Three Months Ended
	September 30,				June 30,				September 30,
(Dollars in thousands, except share and per share amounts)		2023				2023				2022
Asset Quality
Non-performing loans	$	56,146			$	10,273			$	3,744
Non-performing assets		56,146				10,273				3,931
Net charge-offs		190				8				32
Non-performing loans to total loans		2.21	%			0.41	%			0.16	%
Non-performing assets to total assets		1.87				0.36				0.14
Allowance for credit losses to non-performing loans(3)		41.28				214.58				429.51
Allowance for credit losses to total loans(3)		0.92				0.89				0.69
Allowance for credit losses to adjusted loans(1)(3)		0.92				0.89				0.77
Net charge-offs to average loans(2)		0.01			*				*
Assets Under Management	$	6,395,786			$	6,503,964			$	5,918,403
Market Data
Book value per share at period end		25.76				25.38				24.74
Tangible book value per common share(1)		22.42				22.03				21.35
Weighted average outstanding shares, basic		9,553,331				9,532,397				9,481,311
Weighted average outstanding shares, diluted		9,743,270				9,686,401				9,673,078
Shares outstanding at period end		9,560,209				9,545,071				9,492,006
Consolidated Capital
Tier 1 capital to risk-weighted assets		9.32	%			9.26	%			9.54	%
CET1 to risk-weighted assets		9.32				9.26				9.54
Total capital to risk-weighted assets		12.45				12.41				11.84
Tier 1 capital to average assets		7.96				7.80				8.18
Bank Capital
Tier 1 capital to risk-weighted assets		10.42				10.34				10.32
CET1 to risk-weighted assets		10.42				10.34				10.32
Total capital to risk-weighted assets		11.31				11.23				11.09
Tier 1 capital to average assets		8.88				8.70				8.84

____________________(1) Represents a Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.(2) Value results in an immaterial amount. (3) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP. Total loans does not include loans accounted for under the fair value option.

First Western Financial, Inc.Consolidated Financial Summary (unaudited) (continued)

Reconciliations of Non-GAAP Financial Measures

	As of or for the Three Months Ended
	September 30,				June 30,				September 30,
(Dollars in thousands, except share and per share amounts)		2023				2023				2022
Tangible Common
Total shareholders' equity	$	246,256			$	242,242			$	234,862
Less: goodwill and other intangibles, net		31,916				31,977				32,181
Tangible common equity	$	214,340			$	210,265			$	202,681
Common shares outstanding, end of period		9,560,209				9,545,071				9,492,006
Tangible common book value per share	$	22.42			$	22.03			$	21.35
Net income available to common shareholders		3,118				1,506				6,221
Return on tangible common equity (annualized)		5.82	%			2.86	%			12.28	%
Efficiency
Non-interest expense	$	18,314			$	18,519			$	19,260
Less: amortization		62				62				77
Less: acquisition related expenses		30				14				154
Adjusted non-interest expense	$	18,222			$	18,443			$	19,029
Total income before non-interest expense	$	22,536			$	20,554			$	27,495
Less: unrealized (loss)/gain recognized on equity securities		(19	)			(11	)			75
Less: net loss on loans accounted for under the fair value option		(252	)			(1,124	)			(134	)
Less: net gain on equity interests		—				—				6
Less: impairment of contingent consideration assets		—				(1,249	)			—
Plus: provision for credit losses(1)		329				1,843				1,756
Gross revenue	$	23,136			$	24,781			$	29,304
Efficiency ratio		78.76	%			74.42	%			64.94	%
Allowance for Credit Loss to Adjusted Loans
Total loans held for investment		2,536,503				2,501,926				2,354,898
Less: loans acquired(2)		—				—				248,573
Less: PPP loans(3)		4,876				5,558				6,905
Less: loans accounted for under fair value		16,105				18,274				22,648
Adjusted loans	$	2,515,522			$	2,478,094			$	2,076,772
Allowance for credit losses(1)	$	23,175			$	22,044			$	16,081
Allowance for credit losses to adjusted loans(1)		0.92	%			0.89	%			0.77	%

___________________(1) Provision and allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP. (2)As of September 30, 2023 and June 30, 2023, acquired loans totaling $216.1 million and $225.4 million, respectively, are included in the allowance for credit loss calculation and are therefore not removed in calculating adjusted total loans.(3)As of September 30, 2023 and June 30, 2023, the adjustment for PPP loans includes acquired PPP loans as acquired loans are included in total loans held for investment as a result of the adoption of ASC 326. As of September 30, 2022, the adjustment for PPP loans did not include acquired PPP loans, as those were already included in the loans acquired adjustment.

First Western Financial, Inc.Consolidated Financial Summary (unaudited) (continued)
	As of or for the Three Months Ended
	September 30,				June 30,				September 30,
(Dollars in thousands, except share and per share data)		2023				2023				2022
Adjusted Net Income Available to Common Shareholders
Net income available to common shareholders	$	3,118			$	1,506			$	6,221
Plus: impairment of contingent consideration assets		—				1,249				—
Plus: acquisition related expenses		30				14				154
Less: income tax impact from impairment of contingent consideration assets		—				325				—
Less: income tax impact from acquisition related expenses		8				4				38
Adjusted net income available to shareholders	$	3,140			$	2,440			$	6,337
Pre-Tax, Pre-Provision Net Income
Income before income taxes	$	4,222			$	2,035			$	8,235
Plus: provision for credit losses		329				1,843				1,756
Pre-tax, pre-provision net income	$	4,551			$	3,878			$	9,991
Adjusted Basic Earnings Per Share
Basic earnings per share	$	0.33			$	0.16			$	0.66
Plus: impairment of contingent consideration assets net of income tax impact		—				0.09				—
Plus: acquisition related expenses net of income tax impact	*				*					0.01
Adjusted basic earnings per share	$	0.33			$	0.25			$	0.67
Adjusted Diluted Earnings Per Share
Diluted earnings per share	$	0.32			$	0.16			$	0.64
Plus: impairment of contingent consideration assets net of income tax impact		—				0.09				—
Plus: acquisition related expenses net of income tax impact	*				*					0.02
Adjusted diluted earnings per share	$	0.32			$	0.25			$	0.66
Adjusted Return on Average Assets (annualized)
Return on average assets		0.44	%			0.21	%			0.97	%
Plus: impairment of contingent consideration assets net of income tax impact		—				0.13				—
Plus: acquisition related expenses net of income tax impact		0.01				0.01				0.02
Adjusted return on average assets		0.45	%			0.35	%			0.99	%
Adjusted Return on Average Shareholders' Equity (annualized)
Return on average shareholders' equity		5.08	%			2.49	%			10.70	%
Plus: impairment of contingent consideration assets net of income tax impact		—				1.53				—
Plus: acquisition related expenses net of income tax impact		0.04				0.02				0.20
Adjusted return on average shareholders' equity		5.12	%			4.04	%			10.90	%
Adjusted Return on Tangible Common Equity (annualized)
Return on tangible common equity		5.82	%			2.86	%			12.28	%
Plus: impairment of contingent consideration assets net of income tax impact		—				1.76				—
Plus: acquisition related expenses net of income tax impact		0.04				0.02				0.23
Adjusted return on tangible common equity		5.86	%			4.64	%			12.51	%

* Represents an immaterial impact to adjusted earnings per share.