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Item 8. Financial Statements and Supplementary Data

2026-02-27 compared with 2025-03-07 · 403 added, 389 removed, 1515 unchanged (34% of the section changed)

19 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 7, 2025 expressed an unqualified opinion.

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 27, 2026 expressed an unqualified opinion.

Basis for Opinion

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Denver, Colorado

March 7, 2025

February 27, 2026

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

7 unchanged sentences

(2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements") and our report dated March 7, 2025 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements") and our report dated February 27, 2026 expressed an unqualified opinion.

Basis for Opinion

17 unchanged sentences

Denver, Colorado

March 7, 2025

February 27, 2026

FIRST WESTERN FINANCIAL, INC.

5 unchanged sentences

Total cash and cash equivalents 200,281 237,941

Available-for-sale debt securities, at fair value (amortized cost of $ 45,623 and $ 0 , respectively)

Held-to-maturity debt securities, net of allowance for credit losses of $ 74 and $ 71 (fair value of $ 90,635 and $ 68,161 ), respectively

59 unchanged sentences

Net gain on mortgage loans 4,443 4,912

Net loss on loans held for sale ( 105 ) ( 178 )

Net gain (loss) on loans held for sale 222 ( 105 )

Bank fees 1,345 2,036

1 unchanged sentence

Income on company-owned life insurance 455 431

Net loss on loans accounted for under the fair value option ( 999 ) ( 2,010 )

Unrealized loss recognized on equity securities ( 33 ) ( 22 )

Net gain (loss) on loans accounted for under the fair value option 6 ( 999 )

Net gain on other real estate owned 459 —

Unrealized gain (loss) recognized on equity securities 14 ( 33 )

Other 624 581

23 unchanged sentences

Net income $ 13,188 $ 8,473

Other comprehensive income:

Other comprehensive (loss) income items:

Unrealized loss on available-for-sale securities ( 16 ) —

Income tax effect 4 —

Amortization of net unrealized loss for the reclassification of available-for-sale securities transferred to held-to-maturity included in interest income 237 501

Income tax effect ( 56 ) ( 120 )

Unrealized gain on cash flow hedge 52 77

Unrealized (loss) gain on cash flow hedge ( 906 ) 52

Income tax effect 206 ( 13 )

Total other comprehensive income 420 319

Total other comprehensive (loss) income ( 531 ) 420

Comprehensive income $ 12,657 $ 8,893

7 unchanged sentences

Balance, January 1, 2024 9,581,183 $ 192,894 $ 51,042 $ ( 1,198 ) $ 242,738

Cumulative change in accounting principle (1)

— — ( 5,319 ) — ( 5,319 )

Balance at January 1, 2023 (as adjusted for change in accounting principle) 9,495,440 190,494 46,568 ( 1,517 ) 235,545

Net income — — 8,473 — 8,473

Other comprehensive income, net of tax and reclassifications — — — 420 420

Dissolution of RSI entity — 751 ( 751 ) — —

Settlement of share awards 73,483 ( 439 ) — — ( 439 )

Options exercised 12,260 245 — — 245

Repurchase of common stock ( 5,501 ) ( 89 ) — — ( 89 )

Net settlement of share awards 91,460 ( 706 ) — — ( 706 )

Stock-based compensation — 1,486 — — 1,486

1 unchanged sentence

Net income — — 13,188 — 13,188

Other comprehensive income, net of tax and reclassifications — — — 420 420

Other comprehensive loss, net of tax and reclassifications — — — ( 531 ) ( 531 )

Repurchase of common stock ( 40,333 ) ( 784 ) — — ( 784 )

Settlement of share awards 91,460 ( 706 ) — — ( 706 )

Net settlement of share awards 98,265 ( 802 ) — — ( 802 )

Net settlement of stock options 657 ( 6 ) — — ( 6 )

Stock-based compensation — 2,173 — — 2,173

Balance as of December 31, 2025 9,725,731 $ 194,166 $ 72,703 $ ( 1,309 ) $ 265,560

_____________________________

(1) Refer to Note 1 – Organization and Summary of Significant Accounting Policies for further information.

See accompanying notes to consolidated financial statements.

9 unchanged sentences

Provision for credit losses 5,025 1,933

Net loss on loans held for sale 105 178

Net (gain) loss on loans held for sale ( 222 ) 105

Net gain on mortgage loans ( 4,443 ) ( 4,912 )

4 unchanged sentences

Net amortization of purchase accounting adjustments 621 138

Deferred income tax expense

Deferred income tax (benefit) expense ( 770 ) 3,123

Purchase of solar tax credits ( 1,165 ) —

Income on company-owned life insurance ( 455 ) ( 431 )

1 unchanged sentence

Provision for other real estate owned 1,349 1,107

Unrealized loss recognized on equity securities 33 22

Net loss on loans accounted for under the fair value option 999 2,010

Net gain on other real estate owned ( 459 ) —

Unrealized (gain) loss recognized on equity securities ( 14 ) 33

Net (gain) loss on loans accounted for under the fair value option ( 6 ) 999

Net changes in operating assets and liabilities:

4 unchanged sentences

Cash flows from investing activities

Activity in available-for-sale debt securities:

Maturities, prepayments, and calls 4,376 —

Purchases ( 49,947 ) —

Activity in held-to-maturity debt securities:

6 unchanged sentences

Purchases of premises and equipment ( 3,970 ) ( 1,213 )

Proceeds from loans held for sale previously classified as loans held for investment 5,582 40,602

Proceeds from sale of loans — 5,582

Purchase of loans ( 7,838 ) ( 23,259 )

Net cash provided by (used in) investing activities 66,441 ( 66,391 )

Proceeds from sale of other real estate owned 31,999 —

Net cash (used in) provided by investing activities ( 264,438 ) 66,441

Cash flows from financing activities

4 unchanged sentences

Proceeds from Federal Reserve borrowings — 10,000

Payments to subordinated note holders ( 8,000 ) —

Repurchase of common stock ( 784 ) ( 89 )

Proceeds from the exercise of stock options — 245

Cash paid for withholding taxes on exercised stock options ( 6 ) —

Cash paid for withholding taxes on share-based awards ( 802 ) ( 706 )

Net cash (used in) provided by financing activities ( 84,298 ) 102,441

Net cash provided by (used in) financing activities 228,577 ( 84,298 )

Net change in cash and cash equivalents ( 37,660 ) ( 17,251 )

10 unchanged sentences

Supplemental noncash disclosures:

Transfer of loans held for investment to loans held for sale 5,834 39,221

Adoption of ASU 2016-13, net of tax — 5,319

Dissolution of RSI entity — 751

Transfer (to) from loans held for investment (from) to loans held for sale ( 594 ) 5,834

Lease right-of-use-asset obtained in exchange for lease liabilities 4,160 12,619

9 unchanged sentences

FWFI wholly owns the following subsidiary:

First Western Trust Bank (the "Bank").

First Western Trust Bank (Bank).

The Bank wholly owns First Western Merger Corporation (Merger Corp.), which is therefore indirectly wholly-owned by FWFI.

RRI, LLC ("RRI"), which was wholly owned by the Bank, was dissolved on February 3, 2023.

Ryder, Stilwell Inc.

("RSI"), which was wholly owned by FWFI, was dissolved on March 21, 2023.

The Company provides a fully-integrated suite of wealth management services including private banking, personal trust, investment management, mortgage loans, and institutional asset management services to individual and corporate clients principally in Colorado (metro Denver, Aspen, Boulder, Fort Collins, Loveland, and Vail Valley), Arizona (Phoenix and Scottsdale), California (Century City), Montana (Bozeman), and Wyoming (Jackson Hole, Pinedale, Rock Springs, and Cheyenne).

12 unchanged sentences

Use of Estimates :

To prepare financial statements in conformity with GAAP, manageme nt makes estimates and assumptions based on available information.

To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information.

These estimates and assumptions affect the amounts reported in the consolidated financial statements and the disclosures provided, and actual results could differ.

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and Jackson, Cheyenne, Pinedale, and Rock Springs, Wyoming.

The Company does not believe it h as significant concentrations in any one industry or customer.

As of December 31, 2024 and December 31, 2023, 78.9 % a nd 76.1 %, respectively, of the Company’s loan portfolio was secured by real estate collateral.

The Company does not believe it has significant concentrations in any one industry or customer.

As of December 31, 2025 and December 31, 2024, 84.2 % and 78.9 %, respectively, of the Company’s loan portfolio was secured by real estate collateral.

Declines in real estate values in the primary markets the Company operates in could negatively impact the Company.

2 unchanged sentences

Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and federal funds purchased and repurchase agreements.

Investment Securities :

Investments for which we have the intent and ability to hold to their maturity are classified as held-to-maturity debt securities and are recorded at amortized cost.

Debt securities we intend to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale and are recorded at fair value using current market information from a pricing service, with unrealized gains and losses excluded from earnings and reported in other comprehensive income, net of tax.

The carrying values of our debt securities classified as available-for-sale are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in shareholders' equity.

Debt securities for which we have the intent and ability to hold to their maturity are classified as held-to-maturity debt securities and are recorded at amortized cost.

Held-to-maturity debt securities are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity.

Net purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities, without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated.

Net purchase premiums and discounts are recognized in interest income using the interest method over the terms of the debt securities, without anticipating prepayments, except for mortgage-backed debt securities where prepayments are anticipated.

Equity mutual funds are recorded at fair value within the Other assets line of the Consolidated Balance Sheets with changes recorded in the Unrealized loss recognized on equity securities line of the Consolidated Statements of Income.

The Company invests in projects to create affordable housing.

These investments are classified as Other assets on the Consolidated Balance Sheets.

Investments in affordable housing projects that qualify for low-income housing tax credits ("LIHTC") are accounted for using the proportional amortization method.

Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other benefits received and recognized as a component of applicable income tax expense in the Consolidated Statements of Income.

Allowance for Credit Losses (ACL) - loans :

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

The ACL excludes loans held for sale and loans accounted for under the fair value option.

The Company elected to not measure an ACL for accrued interest receivables , as we write off applicable accrued interest receivable balances in a timely manner when a loan is placed on non-accrual status, in which any accrued but uncollected interest is reversed from current income.

Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts.

Actual Company and regional peer historical credit loss experience provides the basis for the estimation of expected credit losses.

The Company identified and grouped portfolio segments based on risk characteristics and underlying collateral.

The call code for each financial asset type was assessed and, expanded for certain call codes into separate segments based on risk characteristics.

The ACL for pooled loans are estimated using a discounted cash flow (DCF) methodology using the amortized cost basis (excluding interest) for all loans modeled within a performing pool of loans.

The DCF analysis pairs loan-level term information, for example, maturity date, payment amount, interest rate, with top-down pool assumptions such as default rates, prepayment speeds, to produce individual expected cash flows for every instrument in the segment.

The results are then aggregated to produce segment level results and reserve requirements for each segment based on similar risk characteristics.

The quantitative DCF model also incorporates forward-looking macroeconomic information over a reasonable and supportable period of four quarters.

Subsequent to the four quarter period, the Company reverts to its historical loss rate and historical prepayment and curtailment speeds on a straight-line basis over a four quarter reversion period.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

The contractual term excludes expected extensions, renewals, and modifications.

Annually the Company performs a rate study which updates the prepayment and curtailment rates used in the DCF model.

Loans that do not share risk characteristics are evaluated on an individual basis.

Loans evaluated individually are not included in the pooled loan evaluation.

When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Qualitative adjustments to historical loss data are made based on management’s assessment of the risks that may lead to a future credit loss or differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, changes in environmental and economic conditions, or other relevant factors.

ACL - Off-balance sheet credit exposures :

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The ACL on off-balance sheet credit exposures is adjusted through the Provision for credit losses and is recorded in Other liabilities.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.

The probability of funding is based on historical utilization statistics for unfunded loan commitments.

The loss rates used are calculated using the same assumptions as the associated funded balance.

ACL - Available-for-sale (AFS) debt securities:

For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more-likely-than-not that it will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value.

For the AFS securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In such assessment, the Company considers the extent to which fair value is less than amortized cost and if there are any adverse conditions that impact the security.

If this assessment indicates a credit loss exists, the present value of the cash flows expected to be collected from the security is compared to the amortized cost basis of the security.

If the present value of the cash flows expected to be collected is less than the amortized cost basis, a potential credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost.

Any estimated credit losses that have not been recorded through an ACL are recognized in OCI.

The Company has elected to exclude accrued interest from the estimate of credit losses for AFS debt securities.

As part of its non-accrual policy, the Company charges-off uncollectable interest at the time it is determined to be uncollectable.

ACL - Held-to-maturity (HTM) debt securities :

On January 1, 2023, the Company adopted FASB ASU 2016-13, Financial Instruments - Credit Losses, which significantly changed the allowance for credit loss accounting policies for debt securities.

The following debt securities and allowance for credit loss accounting policies are presented under Accounting Standards Codification (“ASC”) Topic 326.

The majority of our held-to-maturity investment portfolio consists of securities issued by U.S.

The majority of our HTM investment portfolio consists of securities issued by U.S.

government entities and agencies.

2 unchanged sentences

With respect to these securities, we consider the risk of credit loss to be zero and, therefore, we have elected the practical expedient to not record an ACL for these securities.

The Company's non-government backed securities include private label collateralized mortgage obligations ("CMO") and mortgage-backed securities ("MBS") debt securities and corporate bonds.

The Company's non-government backed securities include private label mortgage-backed securities (MBS) and corporate bonds.

Private label refers to private institutions such as brokerage firms, banks, and home builders, that also securitize mortgages.

Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type.

Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses.

Management measures expected credit losses on HTM debt securities on a collective basis by major security type.

Accrued interest receivable on HTM debt securities is excluded from the estimate of credit losses.

The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Management reviewed the collectability of CMO and MBS debt securities and corporate bonds taking into consideration factors such as the asset quality and delinquencies of the issuers.

Management reviewed the collectability of private label MBS and corporate bonds taking into consideration factors such as the asset quality and delinquencies of the issuers.

The Company has elected to exclude accrued interest from the estimate of credit losses for HTM debt securities.

As part of its non-accrual policy, the Company charges-off uncollectable interest at the time it is determined to be uncollectable.

Correspondent Bank Stock :

25 unchanged sentences

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.

PPP loans that are fully guaranteed by the SBA are classified within this line item and had balances of $ 2.0 million and $ 4.2 million as of December 31, 2024 and 2023, respectively.

• Consumer and other— consists of unsecured consumer loans.

12 unchanged sentences

This portfolio primarily consists of term loans and lines of credit which are dependent on the strength of the industries of the related borrowers and the success of their businesses.

MSLP loans of $ 1.7 million and $ 5.1 million as of December 31, 2024 and 2023, respectively, are included in this category.

Past Due Loans :

6 unchanged sentences

Loans can be returned to accrual status when there is a sustained period of repayment performance (usually six-months or longer) and the collectability of future payments is reasonably assured.

Allowance for Credit Losses (“ACL”) loans :

On January 1, 2023, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses, which significantly changed the loan and allowance for credit loss accounting policies.

The following loan and allowance for credit loss accounting policies are presented under Accounting Standards Codification ("ASC") Topic 326.

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

The ACL excludes loans held for sale and loans accounted for under the fair value option.

The Company elected to not measure an ACL for accrued interest receivables, as we write off applicable accrued interest receivable balances in a timely manner when a loan is placed on non-accrual status, in which any accrued but uncollected interest is reversed from current income.

Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed.

Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Actual Company and regional peer historical credit loss experience provides the basis for the estimation of expected credit losses.

The Company identified and grouped portfolio segments based on risk characteristics and underlying collateral.

The call code for each financial asset type was assessed and, expanded for certain call codes into separate segments based on risk characteristics.

The ACL for pooled loans are estimated using a discounted cash flow (“DCF”) methodology using the amortized cost basis (excluding interest) for all loans modeled within a performing pool of loans.