Item 5. Market for Registrant’s Common Equity
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information for Common Stock
Shares of our common stock, no par value, are traded on the NASDAQ Global Select Market under the symbol "MYFW".
Holders of Record
As of March 8, 2021, there were approximately 133 holders of record of our common stock.
Dividend Policy
We have not declared or paid any dividends on our common stock and we do not currently anticipate paying any cash dividends on our common stock in the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be retained to support our operations and finance the growth and development of our business or be used for stock buybacks. Any future determination to pay dividends on our common stock will be made by our board of directors and will depend upon our results of operations, financial condition, capital requirements, general economic conditions, regulatory and contractual restrictions, our business strategy, our ability to service any equity or debt obligations senior to our common stock and other factors that our board of directors deems relevant. We are not obligated to pay dividends on our common stock and are subject to restrictions on paying dividends on our common stock.
As a bank holding company, our ability to pay dividends is affected by the policies and enforcement powers of the Federal Reserve. See "Supervision and Regulation—Regulation of the Company—Dividends." In addition, because we are a holding company, we are dependent upon the payment of dividends by the Bank to us as our principal source of funds to pay dividends in the future, if any, and to make other payments. The Bank is also subject to various legal, regulatory and other restrictions on its ability to pay dividends and make other distributions and payments to us. See "Supervision and Regulation—Regulation of the Bank—Dividends." The present and future dividend policy of the Bank is subject to the discretion of the board of directors. The Bank is not obligated to pay us dividends.
As a Colorado corporation, we are subject to certain restrictions on distributions under the Colorado Business Corporation Act. Generally, a Colorado corporation may not make a distribution to its shareholders if, after giving the distribution effect: (i) the corporation would not be able to pay its debts as they become due in the usual course of business;
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or (ii) the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
Securities Authorized for Issuance under Equity Compensation Plans
The information concerning the ownership of shares of our common stock by certain beneficial owners and management required by this item is incorporated herein by reference from our definitive proxy statement for our 2020 Annual Meeting of Shareholders, a copy of which will be filed with the SEC no later than 120 days after the end of our fiscal year.
The following table sets forth information as of December 31, 2020, regarding our equity compensation plans that provide for the award of equity securities or the grant of options to purchase equity securities of the Company to employees and directors of First Western and its subsidiaries:
(A)
(B)
(C)
Number of securities to be
Number of securities
issued upon exercise of
remaining available for future
outstanding options or
issuance under equity
vesting of outstanding
Weighted average exercise
compensation plans (excluding
Plan Category
restricted stock grants
price of outstanding options
securities reflected in column (A)
Equity compensation plans approved by shareholders
871,541
$
29.02
458,947
Equity compensation plans not approved by shareholders
—
—
—
Total
871,541
458,947
Issuer Purchases of Equity Securities
Maximum number (or
Total number of
approximate dollar
shares purchased
value) of shares
Total number
Average
as part of publicly
that may yet be
of shares
price paid
announced plans
purchased under the
purchased
per share
or programs
plans or programs
October 1, 2020 through October 31, 2020
—
$
—
—
—
November 1, 2020 through November 30, 2020
—
—
—
400,000
December 1, 2020 through December 31, 2020
426
$
17.30
426
399,574
ITEM 6: SELECTED FINANCIAL DATA
You should read the following selected historical consolidated financial and other data in conjunction with our consolidated financial statements and related notes and the sections entitled "Management’s Discussion and Analysis of Financial Condition and Results of Operations."
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As of and for the Years Ended December 31,
(Dollars in thousands, except share and per share data)
2020
2019
2018
2017
2016
Selected Period End Balance Sheet Data:
Cash and cash equivalents
$
155,989
$
78,638
$
73,357
$
9,502
$
62,685
Available-for-sale securities
36,666
58,903
43,695
53,650
97,655
Mortgage loans held for sale
161,843
48,312
14,832
22,940
8,053
Gross loans (1)
1,532,833
998,007
893,966
813,689
672,815
Allowance for loan losses
12,539
7,875
7,451
7,287
6,478
Promissory notes from related parties
—
—
—
5,792
10,384
Goodwill
24,191
19,686
24,811
24,811
24,811
Other intangible assets, net
67
28
402
1,233
1,452
Company owned life insurance
15,449
15,086
14,709
14,316
13,898
Other real estate owned, net
194
658
658
658
2,836
Total assets
1,973,655
1,251,682
1,084,324
969,659
915,998
Noninterest-bearing deposits
481,457
240,068
202,856
198,685
195,460
Interest-bearing deposits
1,138,453
846,716
734,902
617,432
558,440
FHLB and FRB borrowings
149,563
10,000
15,000
28,563
37,000
Convertible subordinated debentures
—
—
—
—
4,749
Subordinated notes
24,291
6,560
6,560
13,435
13,150
Credit note payable
—
—
—
—
2,736
Preferred stock (liquidation preference)
—
—
—
24,968
25,468
Total shareholders’ equity
154,962
127,678
116,875
101,846
95,928
Selected Income Statement Data:
Interest income
53,334
45,051
38,796
33,337
29,520
Interest expense
7,232
12,990
8,172
5,761
5,063
Net interest income
46,102
32,061
30,624
27,576
24,457
Provision for loan losses
4,682
662
180
788
985
Net interest income after provision for loan losses
41,420
31,399
30,444
26,788
23,472
Trust and investment management fees
19,022
18,935
19,165
19,455
20,167
Net mortgage gain
29,276
10,585
4,560
3,469
6,702
Net realized gain on sale of securities
—
119
—
81
114
Other
2,882
2,755
3,448
4,708
2,939
Non-interest income
51,180
32,577
27,173
27,713
29,922
Non-interest expense
59,537
53,784
50,195
49,494
49,823
Income before income tax
33,063
10,192
7,422
5,007
3,571
Income tax expense
8,529
2,183
1,775
2,984
1,269
Net income
24,534
8,009
5,647
2,023
2,302
Preferred dividends paid to preferred shareholders
—
—
1,378
2,291
2,840
Net income (loss) available to common shareholders
24,534
8,009
4,269
(268)
(538)
Per Share Data:
Earnings (loss) per share, basic
3.11
1.02
0.64
(0.05)
(0.11)
Earnings (loss) per share, diluted
3.08
1.01
0.63
(0.05)
(0.11)
Book value per share (2)
19.49
16.08
14.67
13.18
12.74
Preferred dividends per share
$
—
$
—
$
22.27
$
37.03
$
42.47
Weighted average outstanding shares, basic
7,899,278
7,890,266
6,712,754
5,586,620
5,120,507
Weighted average outstanding shares, diluted
7,961,904
7,914,961
6,754,258
5,586,620
5,120,507
Common shares outstanding, end of period
7,951,773
7,940,168
7,968,420
5,833,456
5,529,542
Convertible preferred shares outstanding, end of period
—
—
—
41,000
46,000
Preferred shares outstanding, end of period
—
—
—
20,868
20,868
Summary Performance Ratios:
Return on average assets
1.48
%
0.68
%
0.55
%
0.21
%
0.26
%
Return on average equity
17.29
6.51
5.18
2.02
2.55
Net interest margin
3.09
2.99
3.27
3.15
3.06
Efficiency ratio (3)
60.50
80.57
85.41
88.23
90.44
Loans to deposits ratio
94.62
91.83
95.33
99.70
89.24
Net interest rate spread
2.92
2.62
2.97
2.91
2.89
Non-interest income to average assets
3.08
2.76
2.66
2.90
3.34
Non-interest expense to average assets
3.59
4.55
4.92
5.18
5.57
Non-interest income to total income before non‑interest expense
55.27
50.92
47.16
50.85
56.04
Summary Credit Quality Ratios:
Nonperforming loans to total loans
0.26
1.23
2.13
0.52
0.54
Nonperforming assets to total assets
0.22
1.03
1.82
0.50
0.70
Allowance for loan losses to nonperforming loans
308.99
64.18
39.11
172.55
179.60
Allowance for loan losses to total loans
0.82
0.79
0.83
0.90
0.96
Net charge-offs to average loans outstanding
—
0.03
—
—
0.07
Other Selected Ratios and Data:
Total noninterest‑bearing deposits to total deposits
29.72
22.09
21.63
24.35
25.93
Interest bearing deposits to total deposits
70.28
77.91
78.37
75.65
74.07
Cost of funds
0.48
1.25
0.90
0.67
0.63
Loan yield
3.94
%
4.49
%
4.36
%
4.11
%
4.10
%
Total assets under management
$
6,255,336
$
6,187,707
$
5,235,177
$
5,374,471
$
4,925,939
Total assets under management yield
0.30
%
0.31
%
0.37
%
0.36
%
0.41
%
Summary Capital Ratios:
Average equity to average assets ratio
8.55
%
10.41
%
10.68
%
10.47
%
10.10
%
Non ‑ GAAP Ratios:
Tangible common equity (4)
$
130,704
$
104,411
$
91,662
$
50,834
$
44,197
Tangible common equity ratio (5)
6.70
%
8.50
%
8.65
%
5.39
%
4.97
%
Tangible book value per common share (6)
$
16.44
$
13.15
$
11.50
$
8.71
$
7.99
Return on tangible common equity (7)
18.77
%
7.67
%
4.66
%
(0.53)
%
(1.22)
%
Consolidated:
Tier 1 capital ratio
9.96
11.31
11.35
8.79
8.43
CET 1 capital ratio
9.96
11.31
11.35
6.56
6.28
Total risk based capital ratio
12.80
12.87
13.06
11.70
12.07
Leverage ratio
7.45
8.58
9.28
7.41
7.00
Bank:
Tier 1 capital ratio
10.22
10.67
10.55
9.81
9.20
CET 1 capital ratio
10.22
10.67
10.55
9.81
9.20
Total risk based capital ratio
11.20
11.53
11.47
10.75
10.16
Leverage ratio
7.62
%
8.09
%
8.63
%
8.27
%
7.63
%
(1) Total loans net of loan fees, costs, premiums, and discounts do not include mortgage loans held for sale of $161.8 million, $48.3 million, $14.8 million, $22.9 million, and $8.1 million as of December 31, 2020, 2019, 2018, 2017 and 2016, respectively.
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(2) We calculate book value per share as total shareholders’ equity less preferred stock (liquidation preference), at the end of the relevant period divided by the outstanding number of shares of our common stock at the end of the relevant period.
(3) Efficiency ratio is a non-GAAP financial measure. Efficiency ratio is non-interest expense, less intangible amortization, loss on intangible assets held for sale, provision for other real estate owned ( " OREO " ) and goodwill impairment, divided by net interest income (which is pre-provision), plus non-interest income after adjustments for gains on the sale of securities and assets. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures."
(4) Tangible common equity is a non-GAAP financial measure. We calculate tangible common equity as total shareholders’ equity, less preferred stock (liquidation preference), goodwill, intangibles held for sale and other intangible assets, net of accumulated amortization. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures."
(5) Tangible common equity ratio is a non-GAAP financial measure. We calculate the tangible common equity ratio as tangible common equity divided by total assets less goodwill and other intangible assets, net. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures."
(6) Tangible book value per common share is a non-GAAP financial measure. We calculate tangible book value per common share as tangible common equity divided by common shares outstanding. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures."
(7) Return on tangible common equity is a non-GAAP financial measure. We calculate return on tangible common equity as net income (loss) available to common shareholders (net income (loss) less dividends paid on preferred stock) divided by tangible common equity. See our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption "GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures."
GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional financial measures discussed in this Form 10-K as being non-GAAP financial measures. We classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are not included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our Statements of Income, Balance Sheets or Statements of Cash Flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively financial measures calculated in accordance with GAAP.
The non-GAAP financial measures that we discuss in this Form 10-K should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this Form 10-K may differ from that of other companies, reporting measures with similar names. It is important to understand how other banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this Form 10-K when comparing such non-GAAP financial measures.
Efficiency Ratio. We calculate our efficiency ratio as non-interest expense, less intangible amortization, loss on intangible assets held for sale, provision for OREO and goodwill impairment, plus gain on sale of LA fixed income team, divided by net interest income (which is pre-provision), plus non-interest income after adjustments for gains on the sale of securities and assets.
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The following table reconciles, as of the dates set forth below, non-interest expense to adjusted non-interest expense, and net interest income and non-interest income to adjusted non-interest income and adjusted total income, and presents the calculation of our efficiency ratios:
For the Year Ended December 31,
(Dollars in thousands)
2020
2019
2018
2017
2016
Non‑interest expense
$
59,537
$
53,784
$
50,195
$
49,494
$
49,823
Less:
Amortization
14
374
831
784
747
Goodwill impairment
—
1,572
—
—
—
Provision on other real estate owned
176
—
—
—
—
Loss on assets held for sale
553
—
—
—
—
Plus: Gain on sale of LA fixed income team
(62)
—
—
—
—
Adjusted non‑interest expense
$
58,856
$
51,838
$
49,364
$
48,710
$
49,076
Net interest income
$
46,102
$
32,061
$
30,624
$
27,576
$
24,457
Non‑interest income
51,180
32,577
27,173
27,713
29,922
Less:
Net gain on sale of securities
—
119
—
81
114
Net gain on sale of assets
—
183
—
—
—
Adjusted non‑interest income
$
51,180
$
32,275
$
27,173
$
27,632
$
29,808
Adjusted total income
$
97,282
$
64,336
$
57,797
$
55,208
$
54,265
Efficiency ratio
60.50
%
80.57
%
85.41
%
88.23
%
90.44
%
Tangible Common Equity and Tangible Common Equity Ratio. We calculate tangible common equity as total shareholders’ equity, less preferred stock (liquidation preference), goodwill and other intangible assets, net of accumulated amortization. We calculate tangible assets as total assets less goodwill and other intangible assets, net of accumulated amortization. We calculate the tangible common equity ratio as tangible common equity divided by tangible assets. The most directly comparable GAAP financial measure for tangible common equity is total shareholders’ equity and the most directly comparable GAAP financial measure for tangible assets is total assets.
We believe the use of tangible common book value has less relevance for high-fee banks and investment management firms than for most banks, as a large portion of our goodwill is associated with highly desirable fee business. We recognize that the tangible common book value per common share measure is important to many investors in the marketplace who are interested in changes from period to period in book value per share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing our tangible book value.
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The following table reconciles and presents, as of the dates set forth below, total shareholders’ equity to tangible common equity, total assets to tangible assets and presents the calculation of the tangible common equity ratio:
As of December 31,
(Dollars in thousands)
2020
2019
2018
2017
2016
Total shareholders’ equity
$
154,962
$
127,678
$
116,875
$
101,846
$
95,928
Less:
Preferred stock
—
—
—
24,968
25,468
Goodwill and other intangibles, net
24,258
19,714
25,213
26,044
26,263
Intangibles held for sale (1)
—
3,553
—
—
—
Tangible common equity
$
130,704
$
104,411
$
91,662
$
50,834
$
44,197
Total assets
$
1,973,655
$
1,251,682
$
1,084,324
$
969,659
$
915,998
Less:
Goodwill and other intangibles, net
24,258
19,714
25,213
26,044
26,263
Intangibles held for sale (1)
—
3,553
—
—
—
Tangible assets
$
1,949,397
$
1,228,415
$
1,059,111
$
943,615
$
889,735
Tangible common equity ratio
6.70
%
8.50
%
8.65
%
5.39
%
4.97
%
(1) Represents only the intangible portion of Assets held for sale.
Tangible Book Value per Common Share. We calculate tangible book value per common share as tangible common equity divided by common shares outstanding as detailed in the table below:
As of December 31,
(Dollars in thousands, except share and per share data)
2020
2019
2018
2017
2016
Total shareholders’ equity
$
154,962
$
127,678
$
116,875
$
101,846
$
95,928
Less:
Preferred stock
—
—
—
24,968
25,468
Goodwill and other intangibles, net
24,258
19,714
25,213
26,044
26,263
Intangibles held for sale (1)
—
3,553
—
—
—
Tangible common equity
$
130,704
$
104,411
$
91,662
$
50,834
$
44,197
Common shares outstanding, end of period
7,951,773
7,940,168
7,968,420
5,833,456
5,529,542
Tangible common book value per share
$
16.44
$
13.15
$
11.50
$
8.71
$
7.99
(1) Represents only the intangible portion of Assets held for sale.
Return on Tangible Common Equity. We calculate return on tangible common equity as net income (loss) available to common shareholders (net income (loss) less dividends paid on preferred stock) divided by tangible common equity. The most directly comparable GAAP financial measure for tangible common equity is total shareholders’ equity.
The following table reconciles net income to income (loss) available to common shareholders and presents the calculation of return on tangible common equity:
As of and for the Year Ended December 31,
(Dollars in thousands)
2020
2019
2018
2017
2016
Net income, as reported
$
24,534
$
8,009
$
5,647
$
2,023
$
2,302
Less: preferred stock dividends
—
—
1,378
2,291
2,840
Net income (loss) available to common shareholders
$
24,534
$
8,009
$
4,269
$
(268)
$
(538)
Tangible common equity
$
130,704
$
104,411
$
91,662
$
50,834
$
44,197
Return (loss) on tangible common equity
18.77
%
7.67
%
4.66
%
(0.53)
%
(1.22)
%
Pre-tax, Pre-Provision Income. Pre-tax, pre-provision income is income before income tax with provision for loan loss added back. The most directly comparable GAAP financial measure is net income. We believe pre-tax, pre-provision income provides the readers of the financial statements information on our performance trends absent fluctuations in credit trends and loan balance changes which both drive provision, and elimination of taxes which provides readers more insight into our performance without consideration of changes in statutory tax rates.
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The following table reconciles, as of the dates set forth below, net income to pre-tax, pre-provision income:
For the Year Ended December 31,
(Dollars in thousands)
2020
2019
2018
2017
2016
Net income, as reported
$
24,534
$
8,009
$
5,647
$
2,023
$
2,302
Plus: income tax expense
8,529
2,183
1,775
2,984
1,269
Plus: provision for loan losses
4,682
662
180
788
985
Pre‑tax, pre‑provision income
$
37,745
$
10,854
$
7,602
$
5,795
$
4,556
Gross Revenue. Gross revenue is our total income before non-interest expense, less net gains on sale of securities, less net gains on sale of assets, plus provision for loan losses. The most directly comparable GAAP financial measure is total income before non-interest expense. We believe gross revenue provides the readers of the financial statements information on our performance trends absent fluctuations in liquidity and credit trends.
The following table reconciles, as of the dates set forth below, total income before non-interest expense to gross revenue:
For the Year Ended of December 31,
(Dollars in thousands)
2020
2019
2018
2017
2016
Total income before non-interest expense
$
92,600
$
63,976
$
57,617
$
54,501
$
53,394
Less: net gain on sale of securities
—
119
—
81
114
Less: net gain on sale of assets
—
183
—
—
—
Plus: provision for loan losses
4,682
662
180
788
985
Gross revenue
$
97,282
$
64,336
$
57,797
$
55,208
$
54,265
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