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What changed in First Western Financial Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of First Western Financial Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+492 added−438 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-15)

Top changes in First Western Financial Inc's 2023 10-K

492 paragraphs added · 438 removed · 336 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

121 edited+25 added−20 removed225 unchanged
Biggest changeIn reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities generally consider, among other things, 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 the combined organization), the applicant’s performance record under the Community Reinvestment Act, (see the section captioned "Community Reinvestment Act" included below in this item), fair housing laws and the effectiveness of the subject organizations in combating money laundering activities.
Biggest changeIn reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities generally consider, among other things, 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 the combined organization), the applicant’s performance record under the Community Reinvestment Act, (see the section captioned "Community Reinvestment Act" included below in this item), fair housing laws and the effectiveness of the subject organizations in combating money laundering activities. 21 Table of Content s The Company is also subject to the Change in Bank Control Act of 1978 ("Control Act") and related Federal Reserve regulations, which provide that any person who proposes to acquire at least 10% (but less than 25%) of any class of a bank holding company’s voting securities is presumed to control the company (unless the company is not publicly held or some other shareholder owns a greater percentage of voting stock).
We have sales and service specialists in our product groups, such as Retirement Services and Mortgage Services, who are able to build relationships within their area of expertise and provide expertise and high quality service that creates an opportunity for a broader relationship across our suite of products and services. • Expanding to New Markets .
We have sales and service specialists in our product groups, such as Retirement Services and Mortgage Services, who are able to build relationships within their area of expertise and provide high quality service that creates an opportunity for a broader relationship across our suite of products and services. • Expanding to New Markets .
Under FDIA, the aggregate liability of all companies controlling a particular institution is limited to the lesser of five percent of the depository institution’s total assets at the time it became undercapitalized or the amount necessary to bring the institution into compliance with applicable capital standards.
Under the FDIA, the aggregate liability of all companies controlling a particular institution is limited to the lesser of five percent of the depository institution’s total assets at the time it became undercapitalized or the amount necessary to bring the institution into compliance with applicable capital standards.
Concentration in Commercial Real Estate Lending As a part of their regulatory oversight, the federal regulators have issued guidelines on sound risk management practices with respect to a financial institution’s CRE lending activities. The guidelines identify certain concentration levels that, if exceeded, will expose the institution to additional supervisory analysis surrounding the institution’s CRE concentration risk.
Concentration in Commercial Real Estate Lending ("CRE") As a part of their regulatory oversight, the federal regulators have issued guidelines on sound risk management practices with respect to a financial institution’s CRE lending activities. The guidelines identify certain concentration levels that, if exceeded, will expose the institution to additional supervisory analysis surrounding the institution’s CRE concentration risk.
In this letter, the Federal Reserve stated that when a holding company’s 21 Table of Contents board of directors is deciding on the level of dividends to declare, it should consider, among other factors: (i) overall asset quality, potential need to increase reserves and write down assets, and concentrations of credit; (ii) potential for unanticipated losses and declines in asset values; (iii) implicit and explicit liquidity and credit commitments, including off-balance sheet and contingent liabilities; (iv) quality and level of current and prospective earnings, including earnings capacity under a number of plausible economic scenarios; (v) current and prospective cash flow and liquidity; (vi) ability to serve as an ongoing source 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 holding company’s financial condition and are not fully captured in regulatory capital calculations; (viii) level, composition, and quality of capital; and (ix) ability to raise additional equity capital in prevailing market and economic conditions (the "Dividend Factors").
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, potential need to increase reserves and write down assets, and concentrations of credit; (ii) potential for unanticipated losses and declines in asset values; (iii) implicit and explicit liquidity and credit commitments, including off-balance sheet and contingent liabilities; (iv) quality and level of current and prospective earnings, including earnings capacity under a number of plausible economic scenarios; (v) current and prospective cash flow and liquidity; (vi) ability to serve as an ongoing source 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 holding company’s financial condition and are not fully captured in regulatory capital calculations; (viii) level, composition, and quality of capital; and (ix) ability to raise additional equity capital in prevailing market and economic conditions (the "Dividend Factors").
The geographic concentration subjects the loan portfolio to the general economic conditions within Colorado, Arizona, Wyoming, California, and Montana. The risks created by such concentrations have been considered by management in the determination of the adequacy of the allowance for loan losses.
The geographic concentration subjects the loan portfolio to the general economic conditions within Colorado, Arizona, Wyoming, Montana, and California. The risks created by such concentrations have been considered by management in the determination of the adequacy of the allowance for credit losses.
Some of the key requirements of the AML Act requires FinCEN to: (1) establish standards for the reporting of information on beneficial ownership, build an IT system to collect 28 Table of Contents and secure the data, and create access protocols; (2) establish national anti-money laundering and countering the financing of terrorism priorities; (3) Enhancement of whistleblower provisions to provide for a robust whistleblower program and new anti-retaliation protections; (4) Review, and revise as appropriate, Currency Transaction Report (CTR) and Suspicious Activity Report (SAR) reporting requirements, and other existing Bank Secrecy Act (BSA) regulations and guidance; and (6) require law enforcement reporting to FinCEN on the use of BSA data, and establish procedures for additional feedback between FinCEN and financial institutions on the usefulness of SARs, and semi-annual publication of review of SAR activity and other BSA reports, including threat patterns, trends, and typologies.
Some of the key requirements of the AML Act requires FinCEN to: (1) establish standards for the reporting of information on beneficial ownership, build an IT system to collect and secure the data, and create access protocols; (2) establish national anti-money laundering and countering the financing of terrorism priorities; (3) Enhancement of whistleblower provisions to provide for a robust whistleblower program and new anti-retaliation protections; (4) Review, and revise as appropriate, Currency Transaction Report (CTR) and Suspicious Activity Report (SAR) reporting requirements, and other existing Bank Secrecy Act (BSA) regulations and guidance; and (6) require law enforcement reporting to FinCEN on the use of BSA data, and establish procedures for additional feedback between FinCEN and financial institutions on the usefulness of SARs, and semi-annual publication of review of SAR activity and other BSA reports, including threat patterns, trends, and typologies.
Borrower demand for adjustable-rate compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loans fees offered for fixed-rate mortgage loans as compared to the interest-rates and loans fees for adjustable rate loans.
Borrower demand for adjustable-rate compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to the interest-rates and loan fees for adjustable rate loans.
FDIA grants greater powers to bank regulators in situations where an institution becomes "significantly" or "critically" undercapitalized or fails to submit a capital restoration plan.
The FDIA grants greater powers to bank regulators in situations where an institution becomes "significantly" or "critically" undercapitalized or fails to submit a capital restoration plan.
"Critically undercapitalized" institutions are subject to the appointment of a receiver or conservator. As of December 31, 2022 , the Bank qualified as "well capitalized" under the prompt corrective action rules. Deposit Insurance Assessments. All of a depositor’s accounts at an insured bank, including all noninterest-bearing transaction accounts, are insured by the FDIC up to $250,000.
"Critically undercapitalized" institutions are subject to the appointment of a receiver or conservator. As of December 31, 2023 and 2022, the Bank qualified as "well capitalized" under the prompt corrective action rules. Deposit Insurance Assessments. All of a depositor’s accounts at an insured bank, including all noninterest-bearing transaction accounts, are insured by the FDIC up to $250,000.
In order to carry out the ERM program, we have developed the following objectives to: • Integrate ERM practices with our strategy setting process and performance management practices to realize benefits related to value; • Improve the Company’s ability to identify risks and establish appropriate responses to reduce costs and limit losses; • Identify operational gaps to reduce performance variability; 15 Table of Contents • Include business resiliency in strategy setting; • Identify interrelated risks within First Western and establish an integrated response; and • Assess the positive and negative aspects of risk to address challenges and opportunities within our internal and external environment.
In order to carry out the ERM program, we have developed the following objectives to: • Integrate ERM practices with our strategy setting process and performance management practices to realize benefits related to value; • Improve the Company’s ability to identify risks and establish appropriate responses to reduce costs and limit losses; • Identify operational gaps to reduce performance variability; • Include business resiliency in strategy setting; • Identify interrelated risks within First Western and establish an integrated response; and • Assess the positive and negative aspects of risk to address challenges and opportunities within our internal and external environment.
We deliver our services though our nineteen local boutique private 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 set of needs.
We deliver our services though our eighteen local boutique private 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 set of needs.
We offer our services through a branded network of boutique private trust bank offices, loan production offices, and trust offices, which we believe are strategically located in affluent and high-growth markets in nineteen locations across Colorado, Arizona, Wyoming, California, and Montana.
We offer our services through a branded network of boutique private trust bank offices, loan production offices, and trust offices, which we believe are strategically located in affluent and high-growth markets in eighteen locations across Colorado, Arizona, Wyoming, Montana, and California.
Since we completed an initial public offering of our common stock on July 23, 2018, our common stock has been listed on the NASDAQ Global Select Market under the symbol "MYFW." 5 Table of Contents Our Business Strategy We believe we have built a premier private trust bank in the Western United States that focuses on providing the best financial solutions to our clients.
Since we completed an initial public offering of our common stock on July 23, 2018, our common stock has been listed on the NASDAQ Global Select Market under the symbol "MYFW." 5 Table of Content s Our Business Strategy We believe we have built a premier private trust bank in the Western United States that focuses on providing the best financial solutions to our clients.
Despite the challenges noted by the OCCIP, the Treasury Department intends to be guided by its Strategic Vision for Supporting the Resilience of the Financial Sector’s Use of Cloud Services and will address issues that could impact operational resilience of the financial institution sector.
Despite the challenges noted by the Treasury Department, it intends to be guided by its Strategic Vision for Supporting the Resilience of the Financial Sector’s Use of Cloud Services and will address issues that could impact operational resilience of the financial institution sector.
Regulatory agencies have promulgated regulations to increase the capital requirements for bank holding companies to a level that matches those of banking institutions. Anti-Tying Restrictions. Bank holding companies and affiliates are prohibited from tying the provision of services, such as extensions of credit, to other services offered by a holding company or its affiliates. 20 Table of Contents Acquisitions.
Regulatory agencies have promulgated regulations to increase the capital requirements for bank holding companies to a level that matches those of banking institutions. Anti-Tying Restrictions. Bank holding companies and affiliates are prohibited from tying the provision of services, such as extensions of credit, to other services offered by a holding company or its affiliates. Acquisitions.
If a depository institution fails to submit an acceptable 23 Table of Contents plan, it is treated as if it is "significantly 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, and cessation of receipt of deposits from correspondent banks.
If a depository institution fails to submit an acceptable plan, it is treated as if it is "significantly 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, and cessation of receipt of deposits from correspondent banks.
We retain a valid lien on real estate, obtain a title insurance policy that insures that the property is free from encumbrances and require hazard insurance. 8 Table of Contents Our focus for mortgage lending is to originate high-quality loans to drive growth in our mortgage loan portfolio.
We retain a valid lien 8 Table of Content s on real estate, obtain a title insurance policy that insures that the property is free from encumbrances and require hazard insurance. Our focus for mortgage lending is to originate high-quality loans to drive growth in our mortgage loan portfolio.
We participate in the Mortgage Partnership Finance Program ("MPF") and are required to maintain an investment in Federal Home Loan Bank of Topeka ("FHLB") stock, which investment is based on the level of our FHLB borrowings. Our board of directors has the overall responsibility for the investment portfolio, including approval of our investment policy.
We participate in the Mortgage Partnership Finance Program ("MPF") and are required to maintain an investment in Federal Home Loan Bank of Topeka ("FHLB") stock, for which the investment is based on the level of our FHLB credit obligations. Our board of directors has the overall responsibility for the investment portfolio, including approval of our investment policy.
The Company is currently exploring adoption of a Zero Trust Network Architecture and related cloud security infrastructure to support its migration to the cloud. Despite extensive due diligence with our technology and security advisors and the known benefits of cloud adoption, unforeseen risks and threats in cyberspace continue to evolve to challenge our cybersecurity controls.
The Company is in the process of adoption of a Zero Trust Network Architecture and related cloud security infrastructure to support its migration to the cloud. Despite extensive due diligence with our technology and security advisors and the known benefits of cloud adoption, unforeseen risks and threats in cyberspace continue to evolve to challenge our cybersecurity controls .
The FDIC may also direct state nonmember banks that are poorly rated or subject to written supervisory actions not to pay dividends in order to ensure adequate capital exists to support their risk profile. In 2009, the Federal Reserve issued a supervisory letter providing greater clarity to its policy statement on the payment of dividends by bank holding companies.
The FDIC may also direct state nonmember banks that are poorly rated or subject to written supervisory actions not to pay dividends in order to ensure adequate capital exists to support their risk profile. 22 Table of Content s In 2009, the Federal Reserve issued a supervisory letter providing greater clarity to its policy statement on the payment of dividends by bank holding companies.
If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including the parent bank holding company, with respect to any extensions of credit they have made to such insured depository institution. Consumer Financial Protection.
If an insured depository institution fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including the parent bank holding company, with respect to any extensions of credit they have made to such insured depository institution.
A violation of these restrictions may result in the assessment of substantial civil monetary penalties on the affected bank or any officer, director, employee, agent, or other person participating in the conduct of the affairs of that bank, the imposition of a cease and desist order, and other regulatory sanctions. Safety and Soundness Standards.
A violation of these restrictions may result in the assessment of substantial civil monetary penalties on the affected bank or any officer, director, employee, agent, or other person participating in the conduct of the affairs of that bank, the imposition of a cease and desist order, and other regulatory sanctions.
In addition, our loan policies provide guidelines for personal guarantees; an environmental review; loans to employees, executive officers and directors; problem loan identification; maintenance of an adequate allowance for loan losses; and other matters relating to lending practices. 10 Table of Contents We believe that an important part of our assessment of client risk is the ongoing completion of periodic risk rating reviews.
In addition, our loan policies provide guidelines for personal guarantees; an environmental review; loans to employees; executive officers and directors; problem loan identification; maintenance of an adequate allowance for credit losses; and other matters relating to lending practices. We believe that an important part of our assessment of client risk is the ongoing completion of periodic risk rating reviews.
Well capitalized institutions are not subject to limitations on brokered deposits, while an adequately capitalized institution is able to accept, renew or roll over brokered deposits only with a waiver from the FDIC and is subject to certain restrictions on the yield paid on such deposits. Undercapitalized institutions are generally not permitted to accept, renew, or roll over brokered deposits.
Well capitalized institutions are not subject to limitations on brokered deposits, while an adequately capitalized institution is able to accept, renew or roll over brokered deposits only with a waiver from the FDIC and is subject to certain restrictions on the yield paid on such deposits.
The Company’s CRE concentrations are discussed in the "Risk Factors" section below. 26 Table of Contents Interstate Banking and Branching Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1999 (the "Riegle-Neal Act"), a bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and to certain deposit market-share limitations.
The Company’s CRE concentrations are discussed in the "Risk Factors" section below. 28 Table of Content s Interstate Banking and Branching Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1999 (the "Riegle-Neal Act"), a bank holding company may acquire banks in states other than its home state, subject to any state requirement that the bank has been organized and operating for a minimum period of time, not to exceed five years, and to certain deposit market-share limitations.
Among the most important changes are stricter eligibility criteria for regulatory capital instruments that disallow the inclusion of certain instruments, such as trust preferred securities (other than grandfathered trust preferred securities such as those issued by the Company), in Tier 1 capital going forward and new constraints on the inclusion of minority interests, mortgage-servicing assets, deferred tax assets and certain investments in the capital of unconsolidated financial institutions.
Among the most important changes are stricter eligibility criteria for regulatory capital instruments that disallow the inclusion of certain instruments, such as trust preferred securities (other than grandfathered trust preferred securities), in Tier 1 capital going forward and new constraints on the inclusion of minority interests, mortgage-servicing assets, deferred tax assets and certain investments in the capital of unconsolidated financial institutions.
The Federal Reserve, the Office of the Comptroller of the Currency and FDIC jointly issued a final rule in 1997 that adopted uniform regulations implementing Section 109 of the Riegle-Neal Act. Section 109 which prohibits any bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production.
The Federal Reserve, the OCC and FDIC jointly issued a final rule in 1997 that adopted uniform regulations implementing Section 109 of the Riegle-Neal Act. Section 109 which prohibits any bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production.
The level of future loan originations, loan sales and loan repayments depends on overall credit availability, the interest rate environment, the strength of the general economy, local real estate markets and the housing industry, and conditions in the secondary loan sale 13 Table of Contents market.
The level of future loan originations, loan sales and loan repayments depends on overall credit availability, the interest rate environment, the strength of the general economy, local real estate markets and the housing industry, and conditions in the secondary loan sale market.
The average maturity on our commercial and industrial portfolio was 3.1 years with an average remaining term of 2.0 years. This portfolio primarily consists of term loans and lines of credit which are mostly dependent on the strength of the industries of the related borrowers and the success of their businesses. Commercial Real Estate, Owner Occupied and Non-Owner Occupied .
The average maturity on our commercial and industrial portfolio was 3.5 years with an average remaining term of 1.8 years. This portfolio primarily consists of term loans and lines of credit which are mostly dependent on the strength of the industries of the related borrowers and the success of their businesses. Commercial Real Estate, Owner Occupied and Non-Owner Occupied .
In addition, these rules include greater recognition of collateral and guarantees, and revised capital treatment for derivatives and repo-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 the future.
In addition, these rules include greater recognition of collateral and guarantees, and revised capital treatment for derivatives and repo-style transactions. 19 Table of Content s 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 the future.
The BCM procedures describe principles and practices for information technology ("IT") and operations designed to achieve safety and soundness, consumer financial protection, and compliance with applicable 27 Table of Contents laws, regulations, and rules. Continued testing, training, and program updates ensure appropriate response to cyber and non-cyber, human and non-human disaster events.
The BCM procedures describe principles and practices for information technology ("IT") and operations designed to achieve safety and soundness, consumer financial protection, and compliance with applicable laws, regulations, and rules. Continued testing, training, and program updates ensure appropriate response to cyber and non-cyber, human and non-human disaster events.
Our current investment portfolio consists of obligations of the U.S. Treasury and other U.S. government agencies, corporate or sponsored entities, including mortgage-backed securities, collateralized mortgage obligations, 14 Table of Contents subordinated debt bonds, and mutual funds.
Our current investment portfolio consists of obligations of the U.S. Treasury and other U.S. government agencies, corporate or sponsored entities, including mortgage-backed securities, collateralized mortgage obligations, subordinated debt bonds, and mutual funds.
Sales and marketing support is provided centrally but delivered locally. • Our investment platform is controlled by our central investment research group, which has a strong research focus and includes many associates who have Chartered Financial Analyst designations, with oversight by our Chief Investment Officer and our Investment Policy Committee. • Operational support for these profit center and product group teams is provided by our central trust and investment management support center team.
Sales and marketing support is provided centrally but delivered locally. 14 Table of Content s • Our investment platform is controlled by our central investment research group, which has a strong research focus and includes many associates who have Chartered Financial Analyst designations, with oversight by our Chief Investment Officer and our Investment Policy Committee. • Operational support for these profit center and product group teams is provided by our central trust and investment management support center team.
Providing meaningful work for our associates by connecting their role to the Company’s mission and vision as well as simplifying and streamlining repetitive tasks to make work more interesting and value added.
We provide meaningful work for our associates by connecting their role to the Company’s mission and vision as well as simplifying and streamlining repetitive tasks to make work more interesting and value added.
Most of our lending activity and credit exposure, including real estate collateral for many of our loans, are concentrated in Colorado, Arizona, Wyoming, California, and Montana, as approximately 83.6% of the loans in our loan portfolio as of December 31, 2022 were made to borrowers who live in or conduct business in those states.
Concentrations . Most of our lending activity and credit exposure, including real estate collateral for many of our loans, are concentrated in Colorado, Arizona, Wyoming, Montana, and California, as approximately 83.2% of the loans in our loan portfolio as of December 31, 2023 were made to borrowers who live in or conduct business in those states.
These rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. 25 Table of Contents Anti-Money Laundering.
These rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third party. The privacy provisions of the GLB Act affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. 27 Table of Content s Anti-Money Laundering.
In addition, a third-party loan review is performed to assist in the identification of problem assets and to confirm our internal risk rating of loans. Our loan policies include other underwriting guidelines for loans collateralized by real estate.
In addition, a third-party loan review is performed to assist in the identification of problem assets and to confirm our internal risk rating of loans. 10 Table of Content s Our loan policies include other underwriting guidelines for loans collateralized by real estate.
Human Capital Overview As of December 31, 2022 , we had 365 assoc iates. We strive to recruit and retain team-oriented, respectful, problem solvers. We serve our internal team with the same approach we serve our clients, with an adaptive, entrepreneurial spirit.
Human Capital Overview As of December 31, 2023 , we had 310 assoc iates. We strive to recruit and retain team-oriented, respectful, problem solvers. We serve our internal team with the same approach we serve our clients, with an adaptive, entrepreneurial spirit.
While we typically originate loans with adjustable rates and maturities up to 30 years, as of December 31, 2022, the average term on our 1-4 family portfolio was 20.0 years with an average remaining term of 18.6 years.
While we typically originate loans with adjustable rates and maturities up to 30 years, as of December 31, 2023, the average term on our 1-4 family portfolio was 20.1 years with an average remaining term of 18.1 years.
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 to the 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 worth aggregated over the preceding 12-month period.
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 to the 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 worth aggregated over the preceding 12-month period. 23 Table of Content s Annual Reporting; Examinations.
The Federal Reserve’s monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The nature of future monetary policies and the effects of these policies on the Bank’s business and earnings cannot be predicted. 29 Table of Contents
The Federal Reserve’s monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The nature of future monetary policies and the effects of these policies on the Bank’s business and earnings cannot be predicted. 31 Table of Content s
These loans are primarily dependent on the strength of the industries of the related borrowers and the success of their businesses. Construction and Development . We originate loans to finance the construction of residential and non-residential properties.
These loans are primarily dependent on the strength of the industries of the related borrowers and the success of their businesses. 9 Table of Content s Construction and Development . We originate loans to finance the construction of residential and non-residential properties.
The Company filed an election and became a financial holding company in 2006. Sound Banking Practices. Bank holding companies and their non-banking subsidiaries are prohibited from engaging in activities that represent unsafe or unsound banking practices.
The Company filed an election and became a financial holding company in 2006. 20 Table of Content s Sound Banking Practices. Bank holding companies and their non-banking subsidiaries are prohibited from engaging in activities that represent unsafe or unsound banking practices.
As of December 31, 2022 , the carrying value of our investment portfolio totaled $81.1 million, with an average y ield of 2.8%. Our investment policy outlines investment type limitations, security mix parameters, authorization guidelines and risk management guidelines. The policy authorizes us to invest in a variety of investment securities, subject to various limitations.
As of December 31, 2023 , the carrying value of our investment portfolio totaled $74.1 million, with an average y ield of 3.1%. Our investment policy outlines investment type limitations, security mix parameters, authorization guidelines and risk management guidelines. The policy authorizes us to invest in a variety of investment securities, subject to various limitations.
In the event an institution becomes "undercapitalized," 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.
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.
Our cash, securities and other loan portfolio consists of consumer and commercial purpose loans, which are primarily secured by securities managed and under custody with us, cash on deposit with us or life insurance policies. As of December 31, 2022, loans secured with cash, marketable securities and other were $165.7 million, or 6.6% of our total loan portfolio.
Our cash, securities and other loan portfolio consists of consumer and commercial purpose loans, which are primarily secured by securities managed and under custody with us, cash on deposit with us or life insurance policies. As of December 31, 2023, loans secured with cash, marketable securities and other were $139.9 million, or 5.6% of our total loan portfolio.
The description below summarizes certain elements of the applicable bank regulatory framework. This description is not intended to describe all laws and regulations applicable to us and our subsidiaries. The description is qualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that are described.
This description is not intended to describe all laws and regulations applicable to us and our subsidiaries. The description is qualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that are described.
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 attractively priced core deposits.
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 attractively priced core deposits. 6 Table of Content s • Attracting Talent .
Federal bank regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the state and local attorneys general in each jurisdiction in which we operate and civil money penalties.
Department of Justice, state attorneys general and state and local consumer protection agencies may also seek to enforce consumer protection requirements and obtain these and other remedies, including regulatory sanctions, customer rescission rights, action by the U.S. Department of Justice, the state and local attorneys general in each jurisdiction in which we operate and civil money penalties.
The CRA then requires bank regulators to consider the bank's record in meeting the needs of its community when considering certain applications by a bank, including applications to establish a banking center or to conduct certain mergers or acquisitions.
The regulators examine banks and assign each bank a public CRA rating. The CRA then requires bank regulators to consider the bank's record in meeting the needs of its community when considering certain applications by a bank, including applications to establish a banking center or to conduct certain mergers or acquisitions.
Our commercial and industrial loans generally have variable interest rates and terms that typically range from one to five years. Fixed-rate commercial and industrial loan maturities are generally short-term, with three to five-year maturities, including periodic interest rate resets. As of December 31, 2022, commercial and industrial loans were $361.0 million, or 14.6% of our total loan portfolio.
Our commercial and industrial loans generally have variable interest rates and terms that typically range from one to five years. Fixed-rate commercial and industrial loan maturities are generally short-term, with three to five-year maturities, including periodic interest rate resets. As of December 31, 2023, commercial and industrial loans were $337.2 million, or 13.3% of our total loan portfolio.
Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by clients, including actual damages, restitution, and attorneys’ fees.
Violations of applicable consumer protection laws can result in significant potential liability from litigation brought by clients, including actual damages, restitution, and attorneys’ fees. Federal bank regulators, the U.S.
As of December 31, 2022 and 2021, we had brokered deposits of $115.3 mill ion a nd $22.3 mill ion, respectively. We have experienced banking and business development teams who we believe provide superior client service, creative cash management solutions and competitive pricing to market our depository products and services.
As of December 31, 2023 and 2022, we had brokered deposits of $165.4 million and $115.3 million, respectively. We have experienced banking and business development teams who we believe provide superior client service, creative cash management solutions and competitive pricing to market our depository products and services.
As of December 31, 2022 , total deposits we re $2.41 billion, a n increase of $199.5 million, or 9.0%, compared to $2.21 billion as of December 31, 2021. 11 Table of Contents As of December 31, 2022 , our deposit portfolio contained a balanced and diverse mix of deposits, as shown below: Deposits Trust and Investment Management, Advisory We offer sophisticated wealth advisory and planning services including investment management, trusts and estate services, philanthropic services, insurance planning and retirement consulting.
As of December 31, 2023 , total deposits we re $2.53 billion, a n increase of $123.8 million, or 5.1%, compared to $2.41 billion as of December 31, 2022. 11 Table of Content s As of December 31, 2023 , our deposit portfolio contained a balanced and diverse mix of deposits, as shown below: Deposits Trust and Investment Management, Advisory We offer sophisticated wealth advisory and planning services including investment management, trusts and estate services, philanthropic services, insurance planning and retirement consulting.
Our board of directors delegates limited lending authority to individuals and internal loan committees. When the total relationship exceeds an individual’s loan authority, a higher authority or credit committee approval is required. The objective of our approval process is to provide a disciplined, collaborative approach to larger credits while maintaining responsiveness to client needs.
When the total relationship exceeds an individual’s loan authority, a higher authority or credit committee approval is required. The objective of our approval process is to provide a disciplined, collaborative approach to larger credits while maintaining responsiveness to client needs.
Investors should understand that the primary objective of the U.S. bank regulatory regime is the protection of depositors, the Deposit Insurance Fund ("DIF"), and the banking system as a whole, not the protection of the Company’s shareholders.
Banking laws, regulations, and policies affect the operations of the Company and its subsidiaries. Investors should understand that the primary objective of the U.S. bank regulatory regime is the protection of depositors, the Deposit Insurance Fund ("DIF"), and the banking system as a whole, not the protection of the Company’s shareholders.
They may also require us to provide financial support to any bank that we control, maintain capital balances in excess of those desired by management, and pay higher deposit insurance premiums as a result of a general deterioration in the financial condition of the Bank or other depository institutions we control.
They may also require us to provide financial support to any bank that we control, maintain capital balances in excess of those desired by management, and pay higher deposit insurance premiums as a result of a general deterioration in the financial condition of the Bank or other depository institutions we control. 18 Table of Content s The description below summarizes certain elements of the applicable bank regulatory framework.
We offer both owner occupied and non-owner occupied commercial real estate ("CRE") loans, as well as construction loans. Our consumer lending products include residential first mortgage loans, originated loans for our own portfolio, as well as those for which we conduct mortgage banking activities whereby we originate and sell, servicing-released, whole loans in the secondary market.
Our consumer lending products include residential first mortgage loans, originated loans for our own portfolio, as well as those for which we conduct mortgage banking activities whereby we originate and sell, servicing-released, whole loans in the secondary market.
We require independent appraisals or evaluations from a list of approved appraisers on all loans secured by commercial real estate. As of December 31, 2022, owner occupied commercial real estate loans were $216.1 million, or 8.7% of our total loan portfolio, and non-owner occupied commercial real estate loans were $496.8 million, or 20.1% of our total loan portfolio.
We require independent appraisals or evaluations from a list of approved appraisers on all loans secured by commercial real estate. As of December 31, 2023, owner occupied commercial real estate loans were $195.9 million, or 7.8% of our total loan portfolio, and non-owner occupied commercial real estate loans were $543.7 million, or 21.6% of our total loan portfolio.
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 secure a commercial purpose loan with 1-4 family residential properties.
Our 1-4 family residential loan portfolio consists of loans and home equity lines of credit secured by 1-4 family residential properties. These loans typically enable borrowers to purchase or refinance existing homes, most of which serve as the primary residence of the owner. In a ddition, some borrowers secure a commercial purpose loan with 1-4 family residential properties.
Electronic copies of our SEC filings are available to the public at the SEC’s website at https://www.sec.gov. You may also obtain copies of our annual, quarterly and special reports, proxy statements and certain other information filed by the Company with the SEC, as well as amendments thereto, free of charge from the Company’s website, https://myfw.gcs-web.com/investor-relations.
You may also obtain copies of our annual, quarterly and special reports, proxy statements and certain other information filed by the Company with the SEC, as well as amendments thereto, free of charge from the Company’s website, https://myfw.gcs-web.com/investor-relations. These documents are posted to our website after we have filed them with the SEC.
The AML Act seeks to strengthen, modernize, and streamline the existing AML regime by promoting innovation, regulatory reform, and industry engagement through forums, such as the Bank Secrecy Act Advisory Group (BSAAG) and FinCEN Exchange.
The NDAA includes the Anti-Money Laundering Act of 2020 (AML Act) and, within the AML Act, the Corporate Transparency Act (CTA). The AML Act seeks to strengthen, modernize, and streamline the existing AML regime by promoting innovation, regulatory reform, and industry engagement through forums, such as the Bank Secrecy Act Advisory Group (BSAAG) and FinCEN Exchange.
We attempt to identify potential problem loans early in an effort to seek aggressive resolution of these situations before the loans become a loss, record any necessary charge-offs promptly and maintain adequate allowance levels for probable incurred loan losses in the loan portfolio.
We attempt to identify potential problem loans early in an effort to seek aggressive resolution of these situations before the loans become a loss, record any necessary charge-offs promptly and management believes the allowance for credit losses is adequate to absorb losses in our portfolio. Lending Limits.
These loans are underwritten to either mature at the completion of construction, or transition to a traditional amortizing commercial real estate facility with the terms and characteristics in line with other commercial real estate loans we hold in our portfolio.
These loans are underwritten to either mature at the completion of construction, or transition to a traditional amortizing commercial real estate facility with the terms and characteristics in line with other commercial real estate loans we hold in our portfolio. As of December 31, 2023, construction and development loans were $345.5 million, or 13.7% of our total loan portfolio.
As of December 31, 2022 , total AUM was $6.11 billion , a decrea se of $1.24 billion, or 16.9%, compared to $7.35 billion as of December 31, 2021. 12 Table of Contents As of December 31, 2022 , we provided fiduciary and advisory services on $6.11 billion of trust and investment management assets, as shown below: Trust and Investment Management Assets 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.
As of December 31, 2023 , total AUM was $6.75 billion, an increase of $646.0 million, or 10.6%, compared to $6.11 billion as of December 31, 2022. 12 Table of Content s As of December 31, 2023 , we provided fiduciary and advisory services on $6.75 billion of trust and investment management assets, as shown below: Trust and Investment Management Assets 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.
For example, FDIC regulations provide that higher capital may be required to take adequate account of, among other things, interest rate risk and the risks posed by concentrations of credit, nontraditional activities or securities trading activities. As of December 31, 2022, and 2021, the Bank exceeded all regulatory minimum capital requirements. Prompt Corrective Regulatory Action.
For example, FDIC regulations provide that higher capital may be required to take adequate account of, among other things, interest rate risk and the risks posed by concentrations of credit, nontraditional activities or securities trading activities.
Loans held for investment accounted for under the fair value option are also classified within this line item and had an unpaid principal balance of $23.4 million as of December 31, 2022. Consumer and other loans were $50.0 million, or 2.0% of our total loan portfolio. Commercial and Industrial .
Loans held for investment accounted for under the fair value option are also classified within this line item and had an unpaid principal balance of $14.1 million as of December 31, 2023. Consumer and other loans were $27.0 million, or 1.1% of our loan portfolio, excluding $13.7 million in consumer and other loans accounted for under the fair value option.
As of December 31, 2022, management believes the allowance for loan losses is adequate to absorb probable incurred losses in our loan portfolio. Sound risk management practices and appropriate levels of capital are essential elements of the commercial real estate lending program.
As of December 31, 2023, management believes the allowance for credit losses is adequate to absorb losses in our loan portfolio. Sound risk management practices and appropriate levels of capital are essential elements of the commercial real estate lending program. Concentrations of commercial real estate exposures add a dimension of risk that compounds the risk inherent in individual loans.
As of December 31, 2022, 1-4 family residential loans were $898.2 million, or 36.3% of our total loan portfolio, consisting of $180.1 million and $718.1 million of fixed-rate and adjustable-rate loans, respectively.
As of December 31, 2023, 1-4 family residential loans were $928.0 million, or 36.9% of our total loan portfolio, consisting of $122.2 million and $805.8 million of fixed-rate and adjustable-rate loans, respectively.
Historically, we believe we have made sound, high quality loans while recognizing that lending money involves a degree of business risk. We have loan policies designed to assist us in managing this business risk. These policies provide a general framework for our loan origination, monitoring and funding activities, while recognizing that not all risks can be anticipated.
We have loan policies designed to assist us in managing this business risk. These policies provide 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 authority to individuals and internal loan committees.
Under the Dodd-Frank Act, creditors must make a reasonable and good faith determination, based on verified and documented information, that the consumer has a reasonable "ability to repay" a residential mortgage according to its terms.
Perhaps the most significant of these guidelines is the "Ability-to-Repay and Qualified Mortgage Standards under the Truth in Lending Act" portions of Regulation Z. Under the Dodd-Frank Act, creditors must make a reasonable and good faith determination, based on verified and documented information, that the consumer has a reasonable "ability to repay" a residential mortgage according to its terms.
The Federal Reserve may examine a bank holding company and any of its subsidiaries, and charge the company for the cost of such an examination. 22 Table of Contents The Bank is examined from time to time by its primary federal banking regulator, the FDIC, and the CDB and is charged for the cost of such an examination.
The Bank is examined from time to time by its primary federal banking regulator, the FDIC, and the CDB and is charged for the cost of such an examination.
Respectful – For First Westerners, Respectful means valuing the unique knowledge 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 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 looking for ways to improve processes, products, and services.
The Company and the Bank have not made an election to use the community bank leverage ratio framework but may make such an election in the future if determined to be possible and advantageous. 19 Table of Contents Regulation of the Company The Bank Holding Company Act of 1956, as amended ("BHC Act"), and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.
Regulation of the Company The Bank Holding Company Act of 1956, as amended ("BHC Act"), and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. Permitted Activities.
Under the FDIC Improvement Act ("FDICIA"), each federal banking agency has prescribed, by regulation, non-capital safety and soundness standards for institutions under its authority.
Most provisions of the final rule will become effective on January 1, 2026, and the data reporting requirements will become effective on January 1, 2027. Safety and Soundness Standards. Under the FDIC Improvement Act ("FDICIA"), each federal banking agency has prescribed, by regulation, non-capital safety and soundness standards for institutions under its authority.
Concentrations of commercial real estate exposures add a dimension of risk that compounds the risk inherent in individual loans. Interagency guidance on commercial real estate concentrations describe sound risk management practices which include board and management oversight, portfolio management, management information systems, market analysis, portfolio stress testing and sensitivity analysis, credit underwriting standards, and credit risk review functions.
Interagency guidance on commercial real estate concentrations describe sound risk management practices which include board and management oversight, portfolio management, management information systems, market analysis, portfolio stress testing and sensitivity analysis, credit underwriting standards, and credit risk review functions. Management believes it has implemented these practices in order to monitor concentrations in commercial real estate in our loan portfolio.
Our central product groups are designed to support a significantly larger client and AUM base, providing an opportunity for significant operating leverage as we open additional profit centers.
The profit centers work closely with our central product groups to customize our services to each client’s specific situation, without sacrificing the flexibility, expertise and authority to quickly meet complex client needs. Our central product groups are designed to support a significantly larger client and AUM base, providing an opportunity for significant operating leverage as we open additional profit centers.
These documents are posted to our website after we have filed them with the SEC. Our corporate governance guidelines, including our code of business conduct and ethics applicable to all of our associates, officers and directors, as well as the charters of our audit committee, compensation committee and corporate governance and nominating committee are available at https://myfw.gcs-web.com/investor-relations.
Our corporate governance guidelines, including our code of business conduct and ethics applicable to all of our associates, officers and directors, as well as the charters of our audit committee, compensation committee and corporate governance and nominating committee are 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.
The foregoing information is also available in print to any shareholder who requests it from the Company. Except as explicitly provided, information furnished by the Company and information on, or accessible through, the SEC’s or the Company’s website is not incorporated into this Annual Report on Form 10-K or our other securities filings and is not a part of them.
Except as explicitly provided, information furnished by the Company and information on, or accessible through, the SEC’s or the Company’s website is not incorporated into this Annual Report on Form 10-K or our other securities filings and is not a part of them. Supervision and Regulation The U.S. banking industry is highly regulated under federal and state law.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSummary of Risk Factors The following is a summary of the principal risks that we believe could adversely affect our business, financial condition or results of operations: Risks Related to Our Business – Geographic concentration in Colorado, Arizona, Wyoming, California, and Montana. – Negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses. – Changes in interest rates could reduce our net interest margins and net interest income. – If we are unable to continue to originate residential real estate loans and sell them into the secondary market for a profit, our earnings could decrease. – Our commercial loan portfolio involves risks specific to commercial borrowers. – We may be subject to claims and litigation pertaining to our fiduciary responsibilities. – We may be adversely affected by the soundness of certain securities brokerage firms. – The investment management contracts we have with our clients are terminable without cause and on relatively short notice by our clients. – Changes to the level or type of investment activity by our clients may reduce our fee revenue. – The trust wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings. – We may be adversely impacted by the transition from LIBOR as a reference rate and the uncertainty related to one or more alternative reference rates intended to replace LIBOR. – Our allowance for loan losses may not be adequate to cover actual losses. – Our business and operations may be adversely affected in numerous and complex ways by external business disruptors in the financial services industry – Liquidity risk could adversely affect our ability to fund operations and hurt our financial condition. – We may not be able to maintain a strong core deposit base or other low-cost funding sources. – We receive substantial deposits and assets under management as a result of referrals by professionals, such as attorneys, accountants, and doctors, and such referrals are dependent upon the continued positive interaction with and financial health of those referral sources. – Our largest trust client accounts for 36.4% of our total assets under management. – The success of our business depends on achieving our strategic objectives, including through acquisitions which may not increase our profitability and may adversely affect our future operating results. – We face intense competition from other banks and financial institutions and other wealth and investment management firms that could hurt our business. – We may not be successful in implementing our internal growth strategy or be able to manage the risks associated with our anticipated growth through opening new boutique private trust bank offices, which could have a material adverse effect on our business, financial condition and results of operations. – Our goodwill or other intangible assets may become impaired. – We are required to make significant estimates and assumptions in the preparation of our financial statements and our estimates and assumptions may not be accurate. 30 Table of Contents – Fraud, breaches of our information security, and cybersecurity attacks could adversely affect us. – We rely on communications, information, operating and financial control systems technology and related services from third-party service providers and we may suffer an interruption in those systems. – Our ability to attract and retain clients and key associates could be adversely affected if our reputation is harmed. – We may incur significant losses due to ineffective risk management processes and strategies. – New lines of business or new products and services may subject us to additional risks. – We rely on customer and counterparty information, which subjects us to risks if that information is not accurate or is incomplete. – A future pandemic could adversely impact our business and financial results. – Economic and trade sanctions against targeted foreign countries and regimes could adversely affect us.
Biggest changeSummary of Risk Factors The following is a summary of the principal risks that we believe could adversely affect our business, financial condition or results of operations: Risks Related to Our Business – Geographic concentration in Colorado, Arizona, Wyoming, Montana, and California. – The soundness of other financial institutions could adversely affect us. – Negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses. – Changes in interest rates could reduce our net interest margins and net interest income. – If we are unable to continue to originate residential real estate loans and sell them into the secondary market for a profit, our earnings could decrease. – Our commercial loan portfolio involves risks specific to commercial borrowers. – We may be subject to claims and litigation pertaining to our fiduciary responsibilities. – We may be adversely affected by the soundness of certain securities brokerage firms. – The investment management contracts we have with our clients are terminable without cause and on relatively short notice by our clients. – Changes to the level or type of investment activity by our clients may reduce our fee revenue. – The trust wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings. – Our allowance for credit losses may not be adequate to cover actual losses. – Increased credit risk, including as a result of deterioration in economic conditions, could require us to increase our allowance for credit losses and could have a material adverse effect on our results of operations and financial condition. – Our business and operations may be adversely affected in numerous and complex ways by external business disruptors in the financial services industry – Liquidity risk could adversely affect our ability to fund operations and hurt our financial condition. – We may not be able to maintain a strong core deposit base or other low-cost funding sources. – We receive substantial deposits and assets under management as a result of referrals by professionals, such as attorneys, accountants, and doctors, and such referrals are dependent upon the continued positive interaction with and financial health of those referral sources. – Our largest trust client accounts for 37.0% of our total assets under management. – The success of our business depends on achieving our strategic objectives, including through acquisitions which may not increase our profitability and may adversely affect our future operating results. – We face intense competition from other banks and financial institutions and other wealth and investment management firms that could hurt our business. – We may not be successful in implementing our internal growth strategy or be able to manage the risks associated with our anticipated growth through opening new boutique private trust bank offices, which could have a material adverse effect on our business, financial condition and results of operations. – Our goodwill or other intangible assets may become impaired. – We are required to make significant estimates and assumptions in the preparation of our financial statements and our estimates and assumptions may not be accurate. 32 Table of Content s – Fraud, breaches of our information security, and cybersecurity attacks could adversely affect us. – We rely on communications, information, operating and financial control systems technology and related services from third-party service providers and we may suffer an interruption in those systems. – Our ability to attract and retain clients and key associates could be adversely affected if our reputation is harmed. – We may incur significant losses due to ineffective risk management processes and strategies. – New lines of business or new products and services may subject us to additional risks. – We rely on customer and counterparty information, which subjects us to risks if that information is not accurate or is incomplete. – A future pandemic, epidemic, or highly contagious disease could adversely impact our business and financial results. – Economic and trade sanctions against targeted foreign countries and regimes could adversely affect us.
Difficult economic conditions, including state and local government deficits, in Colorado, Arizona, Wyoming, California, and Montana may affect our business, financial condition, results of operations and future prospects, where adverse economic developments, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio.
Difficult economic conditions, including state and local government deficits, in Colorado, Arizona, Wyoming, Montana, California may affect our business, financial condition, results of operations and future prospects, where adverse economic developments, among other things, could affect the volume of loan originations, increase the level of nonperforming assets, increase the rate of foreclosure losses on loans and reduce the value of our loans and loan servicing portfolio.
Any regional or local economic downturn that affects Colorado, Arizona, Wyoming, California, and Montana or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically concentrated.
Any regional or local economic downturn that affects Colorado, Arizona, Wyoming, Montana, and California or existing or prospective borrowers or property values in such areas may affect us and our profitability more significantly and more adversely than our competitors whose operations are less geographically concentrated.
Our ability to attract and retain clients and key associates could be adversely affected if our reputation is harmed. Our ability to attract and retain clients and key associates could be adversely affected if our reputation is harmed.
Our ability to attract and retain clients and key associates could be adversely affected if our reputation is harmed.
On the other hand, increasing interest rates generally lead to increases in net interest income; however, such increases also may result in a reduction in loan originations, declines in loan prepayment rates and reductions in the ability of borrowers to repay their current loan obligations, which could result in increased loan defaults and charge-offs and could require increases to our allowance for loan losses, thereby offsetting either partially or totally the increases in net interest income resulting from the increase in interest rates.
On the other hand, increasing interest rates generally lead to increases in net interest income; however, such increases also may result in a reduction in loan originations, declines in loan prepayment rates and reductions in the ability of borrowers to repay their current loan obligations, which could result in increased loan defaults and charge-offs and could require increases to our allowance for credit losses, thereby offsetting either partially or totally the increases in net interest income resulting from the increase in interest rates.
While we believe our allowance for loan losses is appropriate for the risk identified in our loan and lease portfolio, we may need to increase the allowance for loan losses, such increases may not be sufficient to address losses, and regulators may require us to increase this allowance even further.
While we believe our allowance for credit losses is appropriate for the risk identified in our loan and lease portfolio, we may need to increase the allowance for credit losses, such increases may not be sufficient to address losses, and regulators may require us to increase this allowance even further.
Department of Justice, or the DOJ, conditions the granting of cooperation credit in civil and criminal investigations of corporate wrongdoing on the company involved having provided to investigators all relevant facts relating to the individuals responsible for the alleged misconduct.
Department of Justice ("DOJ"), conditions the granting of cooperation credit in civil and criminal investigations of corporate wrongdoing on the company involved having provided to investigators all relevant facts relating to the individuals responsible for the alleged misconduct.
Any changes in any federal or state banking statute, regulation or governmental policy, including changes which occ urred in 2022 an d may occ ur in 2023 and beyond during the current and future administration, could affect us in substantial and unpredictable ways, including ways that may adversely affect our business, results of operations, financial condition or prospects.
Any changes in any federal or state banking statute, regulation or governmental policy, including changes which occ urred in 2023 an d may occ ur in 2024 and beyond during the current and future administration, could affect us in substantial and unpredictable ways, including ways that may adversely affect our business, results of operations, financial condition or prospects.
Critical estimates are made by management in determining, among other things, the allowance for loan losses, amounts of impairment of assets, fair values, intangibles, and valuation of income taxes. If our underlying estimates and assumptions prove to be incorrect, our financial condition and results of operations may be materially adversely affected.
Critical estimates are made by management in determining, among other things, the allowance for credit losses, amounts of impairment of assets, fair values, intangibles, and valuation of income taxes. If our underlying estimates and assumptions prove to be incorrect, our financial condition and results of operations may be materially adversely affected.
Future issuances and sales of parity preferred stock, or the perception that such issuances and sales could occur, may also cause prevailing market prices for the series of preferred stock and our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.
Future issuances and sales of parity preferred stock, or the perception that such issuances and sales could occur, may also cause prevailing market prices for the series of preferred stock and our common stock to decline an d may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.
Such declines and losses would have a material adverse effect on our business, financial condition and results of operations. If real estate values decline, it is also more likely that we would be required to increase our allowance for loan losses, which would adversely affect our business, financial condition and results of operations.
Such declines and losses would have a material adverse effect on our business, financial condition and results of operations. If real estate values decline, it is also more likely that we would be required to increase our allowance for credit losses, which would adversely affect our business, financial condition and results of operations.
However, the implementation of our growth strategy poses a number of risks for us, including that: • Any newly established offices may not generate revenues in amounts sufficient to cover the start-up costs of those offices, which would reduce our earnings; • Acquisitions we might consummate in the future may prove not to be accretive to or may reduce our earnings if we do not realize anticipated cost savings, or if we incur unanticipated costs in integrating the acquired businesses into our operations or if a substantial number of the clients of any of the acquired businesses move their business to our competitors; • Such expansion efforts will divert management time and effort from our existing banking operations, which could adversely affect our future financial performance; and • Additional capital which we may need to support our growth or the issuance of shares in any acquisitions will be dilutive of the investments that our existing shareholders have in the shares of our common stock that they own and in their respective percentage ownership interests they have in the Company.
However, the implementation of our growth strategy poses a number of risks for us, including that: • Any newly established offices may not generate revenues in amounts sufficient to cover the start-up costs of those offices, which would reduce our earnings; • Acquisitions we might consummate in the future may prove not to be accretive to or may reduce our earnings if we do not realize anticipated cost savings, or if we incur unanticipated costs in integrating the acquired businesses into our operations or if a substantial number of the clients of any of the acquired businesses move their business to our competitors; • Such expansion efforts will divert management time and effort from our existing banking operations, which could adversely affect ou r future financial performance; and 40 Table of Content s • Additional capital which we may need to support our growth or the issuance of shares in any acquisitions will be dilutive of the investments that our existing shareholders have in the shares of our common stock that they own and in their respective percentage ownership interests they have in the Company.
Although the Company takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. 40 Table of Contents We rely on communications, information, operating and financial control systems technology and related services from third-party service providers and we may suffer an interruption in those systems.
Although the Company takes significant steps to mitigate cybersecurity risk across a range of functions, such measures can never eliminate the risk entirely or provide absolute security. We rely on communications, information, operating and financial control systems technology and related services from third-party service providers and we may suffer an interruption in those systems.
In addition, account and deposit balances may decrease when clients perceive alternative investments, such as the stock market or real estate, as providing a better risk/return tradeoff. Furthermore, the portion of our deposit portfolio that is comprised of large uninsured deposits may be more likely to be withdrawn rapidly under adverse economic conditions.
In addition, account and deposit balances may decrease when clients perceive alternative investments, such as the stock market or real estate, as providing a better risk/return tradeoff. Furthermore, the portion of our deposit portfolio that is comprised of large uninsured deposits may be more li kely to be withdrawn rapidly under adverse economic conditions.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations, financial condition and prospects. 41 Table of Contents We rely on customer and counterparty information, which subjects us to risks if that information is not accurate or is incomplete.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, results of operations, financial condition and prospects. We rely on customer and counterparty information, which subjects us to risks if that information is not accurate or is incomplete.
A successful regulatory 44 Table of Contents challenge to an institution’s performance under the Community Reinvestment Act or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines.
A successful regulatory challenge to an institution’s performance under the Community Reinvestment Act or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines.
Given the lower trading volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause the price of our common stock to decline. The obligations associated with being a public company require significant resources and management attention, which will increase our costs of operations and may divert focus from our business operations.
Given the lower trading volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause the price of our common stock to decline. The obligations associated with being a public company require significant resources and management attention, which increases our costs of operations and may divert focus from our business operations.
If required payments on our subordinated debentures are not made or are deferred, or dividends on any preferred stock we may issue are not paid, we will be prohibited from paying dividends on our common stock. 48 Table of Contents Our corporate organizational documents and provisions of federal and state law to which we are subject contain certain provisions that could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition that you may favor or an attempted replacement of our board of directors or management.
If required payments on our subordinated debentures are not made or are deferred, or dividends on any preferred stock we may issue are not paid, we will be prohibited from paying dividends on our common stock. 51 Table of Content s Our corporate organizational documents and provisions of federal and state law to which we are subject contain certain provisions that could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition that you may favor or an attempted replacement of our board of directors or management.
The level of our commercial real estate loan portfolio may subject us to heightened regulatory scrutiny. The FDIC and the Federal Reserve have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending.
The level of our commercial real estate loan portfolio may subject us to heightened regulatory scrutiny. The FDIC and the Federal Reserve have promulgated joint guidance on sound risk management practices for fi nancial institutions with concentrations in commercial real estate lending.
Many of our deposit clients and clients of our private trust bank offices are individuals involved in professional vocations, such as lawyers, accountants, and doctors. These clients are a significant source of referrals for new clients in 37 Table of Contents both the deposit and wealth management areas.
Many of our deposit clients and clients of our private trust bank offices are individuals involved in professional vocations, such as lawyers, accountants, and doctors. These clients are a significant source of referrals for new clients in both the deposit and wealth management areas.
Loan 42 Table of Contents closings could be delayed related to reductions in available staff in recording offices or the closing of courthouses in certain counties, which slows the process for title work, mortgage and UCC filings in those counties.
Loan closings could be delayed related to reductions in available staff in recording offices or the closing of courthouses in certain counties, which slows the process for title work, mortgage and UCC filings in those counties.
Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations. 45 Table of Contents We can be subject to legal and regulatory proceedings, investigations and inquiries related to conduct risk.
Our failure to comply with privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations. 48 Table of Content s We can be subject to legal and regulatory proceedings, investigations and inquiries related to conduct risk.
Increased market volatility may materially and adversely affect the market price of our common stock, which could make it difficult to sell your shares at the volume, prices and times desired. 50 Table of Contents
Increased market volatility may materially and adversely affect the market price of our common stock, which could make it difficult to sell your shares at the volume, prices and times desired.
In addition, adverse weather events, including wildfires, flooding, and mudslides, can cause damages to the property pledged as collateral on loans, which could result in additional losses upon a foreclosure. 32 Table of Contents Changes in interest rates could reduce our net interest margins and net interest income.
In addition, adverse weather events, including wildfires, flooding, and mudslides, can cause damages to the property pledged as collateral on loans, which could result in additional losses upon a foreclosure. Changes in interest rates could reduce our net interest margins and net interest income.
We may issue new debt securities, which would be senior to our common stock and may cause the market price of our common stock to decline. We have issued $18.0 million aggregate principal amount of subordinated notes due 2030, $15.0 million due 2031 a nd $20.0 milli on due 2032.
We may issue new debt securities, which would be senior to our common stock and may cause the market price of our common stock to decline. We have issued $18.0 million aggregate principal amount of subordinated notes due 2030, $15.0 million due 2031 and $20.0 million due 2032.
The foregoing factors should not be construed as exhaustive. This summary of risk factors should be read in conjunction with the more detailed risk factors below. 31 Table of Contents Risks Related to Our Business Our banking, trust and wealth advisory operations are geographically concentrated in Colorado, Arizona, Wyoming California, and Montana, leading to significant exposure to those markets.
The foregoing factors should not be construed as exhaustive. This summary of risk factors should be read in conjunction with the more detailed risk factors below. 33 Table of Content s Risks Related to Our Business Our banking, trust and wealth advisory operations are geographically concentrated in Colorado, Arizona, Wyoming Montana, and California, leading to significant exposure to those markets.
If we are not successful in retaining existing and attracting new 38 Table of Contents investment management clients, our business, financial condition, results of operations and prospects may be materially and adversely affected.
If we are not successful in retaining existing and attracting new investment management clients, our business, financial condition, results of operations and prospects may be materially and adversely affected.
Some of the services we provide, such as trust and investment services, require us to act as fiduciaries for our clients and others. From time to time, third parties make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities.
We may be subject to claims and litigation pertaining to our fiduciary responsibilities. Some of the services we provide, such as trust and investment services, require us to act as fiduciaries for our clients and others. From time to time, third parties make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities.
We expect to incur substantial costs related to operating as a public company, and these costs may be higher when we no longer qualify as an emerging growth company.
We expect to incur substantial costs related to operating as a public company, and these costs may be higher now that we no longer qualify as an emerging growth company.
We anticipate that these costs will materially increase our general and administrative expenses and such increases will reduce our profitability. 46 Table of Contents If we fail to maintain effective internal control over financial reporting, we may not be able to report our financial results accurately and timely.
We anticipate that these costs will materially increase our general and administrative expenses and such increases will reduce our profitability. 49 Table of Content s If we fail to maintain effective internal control over financial reporting, we may not be able to report our financial results accurately and timely.
If the third party service providers continue to have limited capacities for a prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect our operations. • Interest Rate Risk .
If the third party service providers continue to have limited capacities for a prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect our operations. 45 Table of Content s • Interest Rate Risk .
This includes a sustained downturn in the oil and gas market, which is important for the general economic health of Colorado in particular. A prolonged period of low oil prices could have a material adverse effect on our results of operations and financial condition.
This includes a sustained downturn in the oil and gas market, which is important for the general economic health of Colorado in particular. A prolonged period of low oil prices could have a material adverse effect on our results of operations and financial condition. The soundness of other financial institutions could adversely affect us.
The level of these fees is influenced by several factors, including the mix and volume of our assets under custody and administration and our assets under management, the value and type of securities positions held (with 34 Table of Contents respect to assets under custody) and the volume of portfolio transactions, and the types of products and services used by our clients.
The level of these fees is influenced by several factors, including the mix and volume of our assets under custody and administration and our assets under management, the value and type of secu rities positions held (with respect to assets under custody) and the volume of portfolio transactions, and the types of products and services used by our clients.
Further issuances of our common stock could be dilutive to holders of our common stock. 47 Table of Contents Our common stock is subordinate to our existing and future indebtedness, and is effectively subordinated to all the indebtedness and other non-common equity claims against our subsidiaries.
Further issuances of our common stock could be dilutive to holders of our common stock. 50 Table of Content s Our common stock is subordinate to our existing and future indebtedness, and is effectively subordinated to all the indebtedness and other non-common equity claims against our subsidiaries.
The issuance of any shares of our common stock in the future 49 Table of Contents also would, and equity-related securities could, dilute the percentage ownership interest held by shareholders prior to such issuance.
The issuance of any shares of our common stock in the future 52 Table of Content s also would, and equity-related securities could, dilute the percentage ownership interest held by shareholders prior to such issuance.
Our business activities and credit exposure, including real estate collateral for many of our loans, are concentrated in Colorado, Arizona, Wyoming, California, and Montana. As of December 31, 2022 , 83.6% of the loans in our loan portfolio were made to borrowers who live in or conduct business in those states.
Our business act ivities and credit exposure, including real estate collateral for many of our loans, are concentrated in Colorado, Arizona, Wyoming, Montana, and California. As of December 31, 2023, 83.2% of the loans in our loan portfolio were made to borrowers who live in or conduct business in those states.
If our ability to obtain funds from these sources becomes limited or the costs of those funds increase, whether due to factors that affect us specifically, including our financial performance, or due to factors that affect the financial services industry in general, including weakening economic conditions or negative views and expectations about the prospects, safety, soundness or security of the financial services industry as a whole, then our ability to fund our operations, maintain our financial condition and grow our banking and investment advisory and trust businesses would be harmed, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If our ability to obtain funds from these sources becomes limited or the costs of those funds increase, whether due to factors that affect us specifically, including our financial performance, or due to factors that affect the financial services industry in general, including weakening economic conditions or negative views and expectations about the prospects, safety, soundness or security of the financial services industry as a whole, then our ability to fund our operations, maintain our financial condition and grow our banking and investment advisory and trust businesses would be harmed, which could have a material adverse effect on our business, financial condition, results of operations and prospects. 39 Table of Content s We may not be able to maintain a strong core deposit base or other low-cost funding sources.
As a result, adverse developments affecting real estate values and the liquidity of real estate in our primary markets could increase the credit risk associated with our loan portfolio, and could result in losses that adversely affect credit quality, financial condition and results of operations.
The market value of real estate can fluctuate significantly in a short period of time. As a result, adverse developments affecting real estate values and the liquidity of real estate in our primary markets could increase the credit risk associated with our loan portfolio, and could result in losses that adversely affect credit quality, financial condition and results of operations.
For the year ended December 31, 2022 , non-interest income represented approximately 26.3% of our total income before non-interest expense.
For the year ended December 31, 2023, non-interest income represented approximately 26.5% of our total income before non-interest expense.
In addition, when we cease to be an emerging growth company under the JOBS Act, our independent registered public accounting firm will be required to report on the effectiveness of our internal control over financial reporting.
In addition, we ceased to be an emerging growth company under the JOBS Act in 2023. Beginning in 2023, our independent registered public accounting firm was required to report on the effectiveness of our internal control over financial reporting.
The financial services industry is extensively regulated and supervised under both federal and state laws and regulations that are intended primarily to protect clients, depositors, the FDIC deposit insurance fund, and the banking system as a whole, not our shareholders. We are subject to the regulation and supervision of the Federal Reserve, the FDIC and the CDB.
The financial services industry is extensively regulated and supervised under both federal and state laws and regulations that are intended primarily to protect clients, depositors, the FDIC deposit insurance fund, and the banking system as a whole, but is not designed to protect our shareholders.
Our loan portfolio includes a significant amount of commercial real estate loans and commercial lines of credit. Our typical commercial borrower is a small or medium-sized privately owned Colorado business entity.
Our loan portfolio includes a significant number of commercial loans, which involve risks specific to commercial borrowers. Our loan portfolio includes a significant amount of commercial real estate loans and commercial lines of credit. Our typical commercial borrower is a small or medium-sized privately owned Colorado business entity.
Since we commenced our banking business in 2004, we have grown our banking franchise and now hav e nineteen locations in Colorado, Arizona, Wyoming, California and Montana including a centralized operations center in downtown Denver.
Since we commence d our banking business in 2004, we have grown our banking franchise and now have eighteen locations in Colorado, Arizona, Wyoming, Montana, and California including a centralized operations center in downtown Denver.
Liquidity is essential to our banking business, as we use cash to make loans and purchase investment securities and other interest-earning assets and to fund deposit withdrawals that occur in the ordinary course of our business.
Liquidity risk could adversely affect our ability to fund operations and hurt our financial condition. Liquidity is essential to our banking business, as we use cash to make loans and purchase investment securities and other interest-earning assets and to fund deposit withdrawals that occur in the ordinary course of our business.
Additionally, interruptions in service and security breaches could damage our reputation, lead existing clients to terminate their business relationships with us, make it more difficult for us to attract new clients and subject us to additional regulatory scrutiny and possibly financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Additionally, interruptions in service and security breaches could damage our reputation, lead existing clients to terminate their business relationships with us, make it more difficult for us to attract new clients and subject us to additional regulatory scrutiny and possibly financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. 43 Table of Content s Our ability to attract and retain clients and key associates could be adversely affected if our reputation is harmed.
We also have increased risks from losses of bank deposit clients due to the large deposits we hold from certain clients. For example, as of December 31, 2022, 26.0% o f our total deposits consisted of o ur 10 lar gest depositors. Loss of any one of these deposit clients would have an outsized impact on our results of operations.
We also have increased risks from losses of bank deposit clients due to the large deposits we hold from certain clients. For example, as of December 31, 2023, 23.9% of our total deposits consisted of our 10 largest depositors. Loss of any one of these deposit clients would have an outsized impact on our results of operations.
Throughout 2022, the Federal Reserve increased the federal funds rate seven times by a total of 425 bps from the beginning of the year rate of 0.25% to the ending rate of 4.50% at December 31, 2022. The large and frequent rate increases have increased our funding costs and negatively affected market risk mitigation strategies.
Throughout 2023, the Federal Reserve increased the federal funds rate four times by a total of 100 basis points from the beginning of the year rate of 4.50% to the ending rate of 5.50% at December 31, 2023. The large and frequent rate increases have increased our funding costs and negatively affected market risk mitigation strategies.
Our largest trust client accounts for 36.4% of our total assets under management. As of December 31, 2022, our largest trust client accounted for, in the aggregate, 36.4% of our total assets under management and 2.6% of our non-interest income.
Our largest trust client accounts for 37.0% of our total assets under management. As of December 31, 2023, our largest trust client accounted for, in the aggregate, 37.0% of our total assets under management and 3.4% of our non-interest income.
If we are unable to continue to originate residential real estate loans and sell them into the secondary market for a profit, our earnings could decrease. We derive a portion of our non-interest income from the origination of residential real estate loans and the subsequent sale of such loans into the secondary market.
We derive a portion of our non-interest income from the origination of residential real estate loans and the subsequent sale of such loans into the secondary market. If we are unable to continue to originate and sell residential real estate loans at historical or greater levels, our residential real estate loan volume would decrease, which could decrease our earnings.
In accordance with regulatory requirements and GAAP, we maintain an allowance for loan losses to provide for incurred loan and lease losses and a reserve for unfunded loan commitments. Our allowance for loan losses may not be adequate to absorb actual loan losses, and future provisions for loan losses could materially and adversely affect our operating results.
Our allowance for credit losses may not be adequate to cover actual losses. In accordance with regulatory requirements and GAAP, we maintain an allowance for credit losses to provide for incurred loan and lease losses and a reserve for unfunded loan commitments.
As a result, our operating results are more vulnerable to adverse changes in the real estate market than other financial institutions with more diversified loan portfolios, and we could incur losses in the event of changes in economic conditions that disproportionately affect the real estate markets.
As a result, our operating results are more vulnerable to adverse changes in the real estate market than other financial institutions with more diversified loan portfolios, and we could incur losses in the event of changes in economic conditions that disproportionately affect the real estate markets. 34 Table of Content s Real estate values in many of our markets have generally experienced periods of fluctuation over the last five years.
The risk of another pandemic could adversely impact our business and financial results. • Credit Risk . Our risks of timely loan repayment and the value of collateral supporting the loans are affected by the strength of our borrower’s financial condition and business.
Our risks of timely loan repayment and the value of collateral supporting the loans are affected by the strength of our borrower’s financial condition and business.
To the extent our future investment performance is perceived to be poor in either relative or absolute terms, the revenues and profitability of our wealth management business will likely be reduced and our ability to attract new clients will likely be impaired.
To the extent our future investment performance is perceived to be poor in either relative or absolute terms, the revenues and profitability of our wealth management business will likely be reduced and our ability to attract new clients will likely be impaired. As such, fluctuations in the equity and debt markets can have a direct impact upon our net earnings.
W e may, at some point, be considered to have a concentration in the future, or our risk management practices may be found to be deficient, which could result in increased reserves and capital costs as well as potential regulatory enforcement action.
As of December 31, 2023, our CRE 1 Concentration level was 127.5% and our CRE 2 Concentration level was 206.1% We may, at some point, be considered to have a concentration in the future, or our risk management practices may be found to be deficient, which could result in increased reserves and capital costs as well as potential regulatory enforcement action.
Additionally, the adoption of CECL methodology for determining our allowance for credit losses in 2023 is expected to increase the complexity, and associated risk, of the analysis and processes relying on management judgment. 39 Table of Contents The occurrence of fraudulent activity, breaches of our information security, and cybersecurity attacks could adversely affect our ability to conduct our business, manage our exposure to risk or expand our businesses, result in the disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and security systems and infrastructure, and adversely impact our results of operations, liquidity and financial condition, as well as cause legal or reputational harm.
The occurrence of fraudulent activity, breaches of our information security, and cybersecurity attacks could adversely affect our ability to conduct our business, manage our exposure to risk or expand our businesses, result in the disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and security systems and infrastructure, and adversely impact our results of operations, liquidity and financial condition, as well as cause legal or reputational harm.
We may be adversely affected by the soundness of certain securities brokerage firms. We do not provide custodial services for our clients. Instead, client investment accounts are maintained under custodial arrangements with large, well established securities brokerage firms or bank institutions that provide custodial services (collectively, "brokerage firms"), either directly or through arrangements made by us with those firms.
Instead, client investment accounts are maintained under custodial arrangements with large, well established securities brokerage firms or bank institutions that provide custodial services (collectively, "brokerage firms"), either directly or through arrangements made by us with those firms.
While the Company has had no historic losses as a result of these indemnities, we could be required to repurchase the mortgage loans or reimburse the purchaser of our loans for losses incurred.
While the Company has had no historic losses as a result of these indemnities, we could be required to repurchase the mortgage loans or reimburse the purchaser of our loans for losses incurred. Both of these situations could have an adverse effect on the profitability of our mortgage lending activities and negatively impact our net income.
Conversely, in a declining interest rate environment, our earnings could be adversely affected if the interest rates we are able to charge on loans or other investments decline more quickly than those we pay on deposits and borrowings.
Conversely, in a declining interest rate environment, our earnings could be adversely affected if the interest rates we are able to charge on loans or other investments decline more quickly than those we pay on deposits and borrowings. 35 Table of Content s If we are unable to continue to originate residential real estate loans and sell them into the secondary market for a profit, our earnings could decrease.
These clients also, by their nature, are often able to exert considerable market influence, and this, combined with strong competitive forces in the markets for our services, has resulted in, and may continue to result in, significant pressure to reduce the fees we charge for our services in both our asset servicing and asset management business lines.
These clients also, by their nature, are often able to exert considerable market influence, and this, combined with strong competitive forces in the markets for our services, has resulted in, and may continue to result in, significant pressure to reduce the fees we charge for our services in both our asset servicing and asset management business lines. 37 Table of Content s The trust wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings.
These fluctuations can have an adverse effect on the revenue we generate from residential real estate loans and in certain instances, could result in a loss on the sale of the loans.
If interest rates increase after we originate the loans, our ability to market those loans is impaired as the profitability on the loans decreases. These fluctuations can have an adverse effect on the revenue we generate from residential real estate loans and in certain instances, could result in a loss on the sale of the loans.
In such an instance, management should employ heightened risk management practices, including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. As of December 31, 2022, o ur CRE 1 Concentration level was 114.3% and our CRE 2 Concentration level was 196.8%.
In such an instance, management should employ heightened risk management practices, including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing.
We may not be able to maintain a strong core deposit base or other low-cost funding sources. We depend on checking and savings deposit account balances and other forms of client deposits as our primary source of funding for our lending activities.
We depend on checking and savings deposit account balances and other forms of client deposits as our primary source of funding for our lending activities.
Additionally, we sell a large portion of our residential real estate loans to third-party investors, and rising interest rates could negatively affect our ability to generate suitable profits on the sale of such loans. If interest rates increase after we originate the loans, our ability to market those loans is impaired as the profitability on the loans decreases.
If new regulations continue to increase and we are unable to make technology upgrades, our ability to originate mortgage loans will be reduced or eliminated. Additionally, we sell a large portion of our residential real estate loans to third-party investors, and rising interest rates could negatively affect our ability to generate suitable profits on the sale of such loans.
Also, when credit markets tighten due to adverse developments in specific markets or the general economy, opportunities for refinancing may become more expensive or unavailable, resulting in loan defaults. We may be subject to claims and litigation pertaining to our fiduciary responsibilities.
Also, when credit markets tighten due to adverse developments in specific markets or the general economy, opportunities for refinancing may become more expensive or unavailable, resulting in loan defaults. In some cases, collateral consists of personal guarantees.
We conduct appropriate due diligence on such customer information and, where practical and economical, we engage valuation and other experts or sources of information to assist with assessing collateral and other customer risks. Our financial results could be adversely affected if the financial statements, collateral value or other financial information provided by clients or counterparties are incorrect.
We conduct appropriate due diligence on such customer information and, where practical and economical, we engage valuation and other experts or sources of information to assist with assessing collateral and other customer risks.
Our industry has seen increases in electronic fraudulent activity, hacking, security breaches, sophisticated social engineering and cyber-attacks within the financial services industry, including in the commercial banking sector, as cyber-criminals have been targeting commercial bank and brokerage accounts on an increasing basis.
Our industry has seen increases in electronic fraudulent activity, hacking, security breaches, sophisticated social engineering and cyber-attacks within the financial services industry, including in the commercial banking sector, as cyber-criminals have been targeting commercial bank and brokerage accounts on an increasing basis. 42 Table of Content s Our business is highly dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as those of third parties with whom we interact or on whom we rely.
If these claims and legal actions are not resolved in a manner favorable to us, we may be exposed to significant financial liability or our reputation could be damaged. Either of these results may adversely impact demand for our products and services or otherwise have a material adverse effect on our business, financial condition or results of operations.
If these claims and legal actions are not resolved in a manner favorable to us, we may be exposed to significant financial liability or our reputation could be damaged.
Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions which we are, or may become, subject to as a result of such examinations may adversely affect us.
Failure to comply with any such laws, regulations or regulatory policies could result in sanctions by regulatory agencies, restrictions on our business activities, civil money penalties or damage to our reputation, all of which could adversely affect our business, results of operations, financial condition or prospects. 46 Table of Content s Federal and state banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions which we are, or may become, subject to as a result of such examinations may adversely affect us.
Our allowance for loan losses is based on prior experience and an evaluation of the risks inherent in our then-current portfolio. The amount of future losses may also vary depending on changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control, and these losses may exceed current estimates.
The amount of future losses may also vary depending on changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control, and these losses may exceed current estimates. Federal and state regulators, as an integral part of their examination process, review our loans and leases and allowance for credit losses.
Failure to adequately manage the risks associated with our anticipated growth, including growth through creating new boutique private trust bank offices, could have a material adverse effect on our business and results of operations.
Failure to adequately manage the risks associated with our anticipated growth, including growth through creating new boutique private trust bank offices, could have a material adverse effect on our business and results of operations. 41 Table of Content s We may be required to recognize a significant charge to earnings if our goodwill or other intangible assets become impaired, which could have a material adverse effect on our financial condition and results of operations.
As of December 31, 2022 , approxi mately $1.91 billion, or 77.9%, of our t otal loans were loans with real estate as a primary or secondary component of collateral.
As of December 31, 2023, approximately $1.92 billion, or 76.1%, of our total loans were loans with real estate as a primary or secondary component of collateral.
As of December 31, 2022, our directors and executive officers beneficially owned an aggrega te of 1,671,775 shares, or approxim ately 17.4% of our shares of common stock.
As of December 31, 2023, our directors and executive officers beneficially owned an aggregate of 1,713,839 shares, or approximately 17.8% of our shares of common stock.
New entrants may use new technologies, advanced data and analytic tools, lower cost to serve, reduced regulatory burden or faster processes to challenge traditional banks. For example, new business models have been observed in retail payments, consumer and commercial lending, foreign exchange and low-cost investment advisory services.
New entrants may use new technologies, advanced data and analytic tools, lower cost to serve, reduced regulatory burden or faster processes to challenge traditional banks.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Any such actions could have a material adverse effect on our business, financial condition, results of operations and prospects.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.
We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
Any such actions could have a material adverse effect on our business, financial condition, results of operations and prospects. 47 Table of Content s We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The financial services industry is experiencing an increase in regulations and compliance requirements related to mortgage loan originations necessitating technology upgrades and other changes. If new regulations continue to increase and we are unable to make technology upgrades, our ability to originate mortgage loans will be reduced or eliminated.
A rising interest rate environment, general economic conditions, market volatility, or other factors beyond our control could adversely affect our ability to originate residential real estate loans. The financial services industry is experiencing an increase in regulations and compliance requirements related to mortgage loan originations necessitating technology upgrades and other changes.
The trust wealth management fees we receive may decrease as a result of poor investment performance, in either relative or absolute terms, which could decrease our revenues and net earnings. We derive a significant amount of our revenues primarily from investment management fees based on assets under management.
We derive a significant amount of our revenues primarily from investment management fees based on assets under management.
Any of these occurrences could have a material adverse effect on our business, financial condition, results of operations and prospects. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
Any of these occurrences could have a material adverse effect on our business, financial condition, results of operations and prospects. 38 Table of Content s Increased credit risk, including as a result of deterioration in economic conditions, could require us to increase our allowance for credit losses and could have a material adverse effect on our results of operations and financial condition.
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Real estate values in many of our markets have generally experienced periods of fluctuation over the last five years. The market value of real estate can fluctuate significantly in a short period of time.
Added
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 interdependent because of trading, clearing, counterparty or other relationships.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeCollins, Colorado, one location in Greenwood Village, Colorado, one location in Phoenix, Arizona, and one location in Bozeman, Montana; and two trust offices with one location in Laramie, Wyoming, and one location in Century City, California. We own our locations in Jackson Hole, Pinedale, and Rock Springs, while all remaining locations are leased.
Biggest changeCollins, Colorado, one location in Greenwood Village, Colorado and one location in Phoenix, Arizona; and one trust office with one location in Century City, California . We own our locations in Jackson Hole, Pinedale, and Rock Springs, while all remaining locations are leased. We believe that our facilities are suitable and adequate to meet our present needs.
Collins (3) Greenwood Village (3) Northern Colorado Vail Valley Broomfield _____________________________ (1) Headquarters and co-location of profit center, product groups and support centers (2) Trust office (3) Loan production office
Collins (2) Greenwood Village (2) Northern Colorado Vail Valley Broomfield _____________________________ (1) Headquarters and co-location of profit center, product groups and support centers (2) Loan production office (3) Trust office
The chart below describes our locations, which we believe are strategically located in affluent and high-growth markets in nineteen locations (listed below) across Colorado, Arizona, Wyoming, California, and Montana: Colorado Arizona Wyoming California Montana Downtown Denver (1) Phoenix Jackson Hole Century City (2) Bozeman (3) Aspen Phoenix (3) Laramie (2) Boulder Scottsdale Pinedale Cherry Creek Rock Springs Denver Tech Center / Cherry Hills Ft.
The chart below describes our locations, which we believe are strategically located in affluent and high-growth markets in eighteen locations (listed below) across Colorado, Arizona, Wyoming, Montana, and California: Colorado Arizona Wyoming Montana California Downtown Denver (1) Phoenix Jackson Hole Bozeman Century City (3) Aspen Phoenix (2) Pinedale Boulder Scottsdale Rock Springs Cherry Creek Denver Tech Center / Cherry Hills Ft.
ITEM 2: PROPERTIES Our corporate headquarters is located at 1900 16th Street, Suite 1200, Denver, Colorado 80202. Including our corporate headquarters, the Bank operates nineteen profit centers, which consists of thirteen boutique private trust bank offices with two locations in Arizona, eight locations in Colorado and three locations in Wyoming; four loan production offices with one location in Ft.
Including our corporate headquarters, the Bank ope rates eighteen profit centers, which consists of fourteen boutique private trust bank offices with two locations in Arizona, eight locations in Colorado, three locations in Wyoming and one location in Bozeman, Montana; three loan production offices with one location in Ft.
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We believe that our facilities are suitable and adequate to meet our present needs.
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ITEM 2: PROPERTIES Our corporate headquarters is located at 1900 16th Street, Suite 1200, Denver, Colorado 80202.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES Not applicable. 52 Table of Contents PART II
Biggest changeMINE SAFETY DISCLOSURES Not applicable. 55 Table of Content s PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 52 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 53 Item 6. [Reserved] 54 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 55 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 84 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 55 PART II Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 56 Item 6. [Reserved] 57 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 58 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 92 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 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 10, 2023, there were approximately 106 holders of record of our common stock.
Biggest changeITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Informatio n for Common Stock Shares of our common stock, no par value, are traded on the NASDAQ Global Select Market under the symbol "MYFW".
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 2022 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. 53 Table of Contents The following table sets forth information as of December 31, 2022, 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) Plan Category Number of securities to be issued upon exercise of outstanding options or vesting of outstanding restricted stock grants Weighted average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A) Equity compensation plans approved by shareholders 705,672 $ 22.76 329,035 Equity compensation plans not approved by shareholders — — — Total 705,672 329,035 Issuer Purchases of Equity Securities Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publically announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs October 1, 2022 through October 31, 2022 — $ — — — November 1, 2022 through November 30, 2022 1,413 28.93 — — December 1, 2022 through December 31, 2022 — — — — _____________________________ (1) These shares relate to the net settlement by employees related to vested, restricted stock awards and do not impact the shares available for repurchase.
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 2023 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. 56 Table of Content s The following table sets forth information as of December 31, 2023, 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) Plan Category Number of securities to be issued upon exercise of outstanding options or vesting of outstanding restricted stock grants Weighted average exercise price of outstanding options Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A) Equity compensation plans approved by shareholders 664,876 $ 23.79 350,145 Equity compensation plans not approved by shareholders — — — Total 664,876 350,145 Issuer Purchases of Equity Securities Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publically announced plans or programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs October 1, 2023 through October 31, 2023 — $ — — — November 1, 2023 through November 30, 2023 4,747 16.40 — — December 1, 2023 through December 31, 2023 — — — — _____________________________ (1) These shares relate to the net settlement by employees related to vested, restricted stock awards and do not impact the shares available for repurchase.
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.
Holders of Record As of March 12, 2024, there were approximately 126 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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

123 edited+110 added−52 removed54 unchanged
Biggest changeAs of and For the Year Ended December 31, 2022 2021 (Dollars in thousands) Average Balance (1) Interest Earned / Paid Average Yield / Rate Average Balance (1) Interest Earned / Paid Average Yield / Rate Assets Interest-earning assets: Interest-bearing deposits in other financial institutions $ 248,577 $ 2,235 0.90 % $ 261,752 $ 397 0.15 % Federal funds sold 652 10 1.53 1,491 — — Investment securities (2) 74,104 2,053 2.77 30,885 770 2.49 Correspondent bank stock 5,033 381 7.57 2,120 86 4.06 Loans (3) 2,154,253 95,795 4.45 1,594,084 60,758 3.81 Interest-earning assets (4) 2,482,619 100,474 4.05 1,890,332 62,011 3.28 Mortgage loans held for sale (5) 15,639 722 4.62 88,651 2,490 2.81 Total interest-earning assets, plus mortgage loans held for sale 2,498,258 101,196 4.05 1,978,983 64,501 3.26 Allowance for loan losses (14,678) (12,763) Noninterest-earning assets 122,663 93,688 Total assets $ 2,606,243 $ 2,059,908 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 1,553,758 13,012 0.84 $ 1,187,941 3,482 0.29 FHLB and Federal Reserve borrowings 96,963 2,649 2.73 103,925 385 0.37 Subordinated notes 34,104 1,609 4.72 29,232 1,549 5.30 Total interest-bearing liabilities 1,684,825 17,270 1.03 1,321,098 5,416 0.41 Noninterest-bearing liabilities: Noninterest-bearing deposits 670,299 550,683 Other liabilities 21,119 18,651 Total noninterest-bearing liabilities 691,418 569,334 Total shareholders’ equity 230,000 169,476 Total liabilities and shareholders’ equity $ 2,606,243 $ 2,059,908 Net interest rate spread (6) 3.02 2.88 Net interest income (7) $ 83,204 $ 56,595 Net interest margin (8) 3.35 2.99 _____________________________ (1) Average balance represents daily averages, unless otherwise noted.
Biggest changeAverage rates on interest bearing deposits increased 269 basis points, consistent with the higher interest rate environment, while the growth in interest-bearing deposits was primarily driven by new and expanded deposit relationships and a shift in clients moving out of non-interest bearing products into higher yielding products. 61 Table of Content s The following table presents an analysis of net interest income and net interest margin for the periods presented, using daily average balances for each major category of interest-earning assets and interest-bearing liabilities, the interest earned or paid, and the average rate earned or paid on those assets or liabilities: For the Year Ended December 31, 2023 2022 (Dollars in thousands) Average Balance (1) Interest Earned / Paid Average Yield / Rate Average Balance (1) Interest Earned / Paid Average Yield / Rate Assets Interest-earning assets: Interest-bearing deposits in other financial institutions $ 117,562 $ 5,711 4.86 % $ 248,577 $ 2,235 0.90 % Federal funds sold — — — 652 10 1.53 Investment securities (2) 79,150 2,463 3.11 74,104 2,053 2.77 Correspondent bank stock 8,285 620 7.48 5,033 381 7.57 Loans (3) 2,479,175 134,708 5.43 2,138,712 94,448 4.42 Mortgage loans held for sale (4) 11,499 721 6.27 15,639 722 4.62 Loans held at fair value 18,478 1,335 7.22 15,541 1,347 8.67 Interest-earning assets (5) 2,714,149 145,558 5.36 2,498,258 101,196 4.05 Allowance for credit losses (21,468) (14,678) Noninterest-earning assets 125,401 122,663 Total assets $ 2,818,082 $ 2,606,243 Liabilities and Shareholders’ Equity Interest-bearing liabilities: Interest-bearing deposits $ 1,854,017 65,460 3.53 $ 1,553,758 13,012 0.84 FHLB and Federal Reserve borrowings 132,667 6,065 4.57 96,963 2,649 2.73 Subordinated notes 52,216 2,928 5.61 34,104 1,609 4.72 Total interest-bearing liabilities 2,038,900 74,453 3.65 1,684,825 17,270 1.03 Noninterest-bearing liabilities: Noninterest-bearing deposits 510,506 670,299 Other liabilities 24,913 21,119 Total noninterest-bearing liabilities 535,419 691,418 Total shareholders’ equity 243,763 230,000 Total liabilities and shareholders’ equity $ 2,818,082 $ 2,606,243 Net interest rate spread (6) 1.71 3.02 Net interest income (7) $ 71,105 $ 83,926 Net interest margin (8) 2.62 3.36 _____________________________ (1) Average balance represents daily averages, unless otherwise noted.
These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. Commitments may expire without being utilized. Our exposure to loan loss is represented by the contractual amount of these commitments, although material losses are not anticipated.
These financial instruments include commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. Commitments may expire without being utilized. Our exposure to credit loss is represented by the contractual amount of these commitments, although material losses are not anticipated.
Loan Modifications As a result of the COVID-19 pandemic, a loan modification program was designed and implemented to assist our clients experiencing financial stress resulting from the economic impacts caused by the global pandemic.
As a result of the COVID-19 pandemic, a loan modification program was designed and implemented to assist our clients experiencing financial stress resulting from the economic impacts caused by the global pandemic.
Contractual maturities may differ from expected maturities because issuers can have the right to call or prepay obligations without penalties. Our investments are taxable securities. The weighted average yield for each range of maturities was calculated using the yield on each security within that range weighted by the amortized cost of each security as of December 31, 2022.
Contractual maturities may differ from expected maturities because issuers can have the right to call or prepay obligations without penalties. Our investments are taxable securities. The weighted average yield for each range of maturities was calculated using the yield on each security within that range weighted by the amortized cost of each security as of December 31, 2023.
Financial institution regulators have established guidelines for minimum capital ratios for banks and bank holding companies. The Company has adopted the Basel III regulatory capital framework. As of December 31, 2022, the Bank’s capital ratios exceeded the current well capitalized regulatory requirements established under Basel III.
Financial institution regulators have established guidelines for minimum capital ratios for banks and bank holding companies. The Company has adopted the Basel III regulatory capital framework. As of December 31, 2023, the Bank’s capital ratios exceeded the current well capitalized regulatory requirements established under Basel III.
Weighted average yields are not presented on a taxable equivalent basis. Maturity as of December 31, 2022 One Year or Less One to Five Years Five to Ten Years After Ten Years (Dollars in thousands) Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Held-to-maturity: U.S.
Weighted average yields are not presented on a taxable equivalent basis. Maturity as of December 31, 2023 One Year or Less One to Five Years Five to Ten Years After Ten Years (Dollars in thousands) Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Held-to-maturity: U.S.
Our profit centers, which are comprised of private bankers, lenders, wealth planners and portfolio managers, under the leadership of a local chairman and/or president, are also supported centrally by teams providing management services such as operations, risk management, credit administration, marketing, technology support, human capital, and accounting/finance services, which we refer to as support centers.
Our profit centers, which are comprised of private bankers, lenders, wealth planners and portfolio managers, under the leadership of and/or president, are also supported centrally by teams providing management services such as operations, risk management, credit administration, marketing, technology support, human capital, and accounting/finance services, which we refer to as support centers.
Banking fees are primarily impacted by the level of business activities and cash movement activities of our clients. • Risk management and insurance fees —commissions earned on insurance policies we have placed for clients through our client risk management team who incorporate insurance services, primarily life insurance, to 56 Table of Contents support our clients’ wealth planning needs.
Banking fees are primarily impacted by the level of business activities and cash movement activities of our clients. • Risk management and insurance fees —commissions earned on insurance policies we have placed for clients through our client risk management team who incorporate insurance services, primarily life insurance, to support our clients’ wealth planning needs.
To evaluate net interest income, we measure and monitor: (i) yields on loans, investment securities, and other interest-earning assets; (ii) the costs of deposits and other funding sources; (iii) the rates incurred on borrowings and other interest-bearing liabilities; and (iv) the regulatory risk weighting associated with the assets.
We incur interest expense on interest-bearing liabilities, primarily interest-bearing deposits and borrowings. To evaluate net interest income, we measure and monitor: (i) yields on loans, investment securities, and other interest-earning assets; (ii) the costs of deposits and other funding sources; (iii) the rates incurred on borrowings and other interest-bearing liabilities; and (iv) the regulatory risk weighting associated with the assets.
The Company has offered loan extensions, temporary payment moratoriums, and financial covenant waivers for commercial and consumer borrowers impacted by the pandemic who have a pass risk rating and have not been delinquent over 30 days on payments in the last two years.
The Company offered loan extensions, temporary payment moratoriums, and financial covenant waivers for commercial and consumer borrowers impacted by the pandemic who had a pass risk rating and had not been delinquent over 30 days on payments in the last two years.
Under capital adequacy guidelines and, additionally for banks, the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital levels are viewed as important indicators of an institution’s financial soundness by banking regulators.
Under capital adequacy guidelines and, additionally for banks, the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. 87 Table of Content s Capital levels are viewed as important indicators of an institution’s financial soundness by banking regulators.
The allocation of a portion of the allowance for loan losses to one category of loans does not preclude its availability to absorb losses in other categories.
The allocation of a portion of the allowance for credit losses to one category of loans does not preclude its availability to absorb losses in other categories.
Salaries and employee benefit costs are primarily impacted by changes in headcount and fluctuations in benefits costs. • Occupancy and equipment —costs related to building and land maintenance, leasing our office space, depreciation charges for the buildings, building improvements, furniture, fixtures and equipment, amortization of leasehold improvements, utilities, and other occupancy-related expenses.
Salaries and employee benefit costs are primarily impacted by changes in headcount and fluctuations in benefits costs. 59 Table of Content s • Occupancy and equipment —costs related to building and land maintenance, leasing our office space, depreciation charges for the buildings, building improvements, furniture, fixtures and equipment, amortization of leasehold improvements, utilities, and other occupancy-related expenses.
These loans are dependent on the strength of the industries of the related borrowers and the success of their businesses. • Commercial and Industrial —consists of commercial and industrial loans, including working capital lines of credit, permanent working capital term loans, business asset loans, acquisition, expansion and development loans, and other loan products, primarily in our target markets.
These loans are dependent on the strength of the industries of the related borrowers and the success of their businesses. 74 Table of Content s • Commercial and Industrial —consists of commercial and industrial loans, including working capital lines of credit, permanent working capital term loans, business asset loans, acquisition, expansion and development loans, and other loan products, primarily in our target markets.
As of December 31, 2022 and 2021, there were no amounts outstanding on any of the federal funds lines. Our borrowing facilities include various financial and other covenants, including, but not limited to, a requirement that the Bank maintains regulatory capital that is deemed "well capitalized" by federal banking agencies.
As of December 31, 2023 and 2022, there were no amounts outstanding on any of the federal funds lines. 85 Table of Content s Our borrowing facilities include various financial and other covenants, including, but not limited to, a requirement that the Bank maintains regulatory capital that is deemed "well capitalized" by federal banking agencies.
Access to purchased funds primarily include the ability to borrow from FHLB, other correspondent banks and the use of brokered deposits. 80 Table of Contents The following presents, during the periods presented, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods presented.
Access to purchased funds primarily include the ability to borrow from FHLB, other correspondent banks and the use of brokered deposits. 86 Table of Content s The following table presents, during the periods shown, the composition of our funding sources and the average assets in which those funds are invested as a percentage of average total assets for the periods presented.
They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans in this category may be placed on non-accrual status and may individually be evaluated for impairment if indicators of impairment exist.
They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans in this category may be placed on non-accrual status and may individually be evaluated.
As of December 31, 2022 and December 31, 2021, borrowings totaled $199.0 million and $77.7 million, respectively. On January 1, 2022, the Company redeemed subordinated notes due December 31, 2026 in the amount of $6.6 million, which were redeemable on or after January 1, 2022.
As of December 31, 2023 and December 31, 2022, borrowings totaled $178.1 million and $199.0 million, respectively. On January 1, 2022, the Company redeemed subordinated notes due December 31, 2026 in the amount of $6.6 million, which were redeemable on or after January 1, 2022.
The allocation for loan losses by category should neither be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in future periods will necessarily occur in these amounts or in the indicated 77 Table of Contents proportions.
The allocation for credit losses by category should neither be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in future periods will necessarily occur in these amounts or in the indicated proportions.
As of December 31, 2022 and December 31, 2021, respectively, our 81 Table of Contents holding company and Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as "well capitalized," for purposes of the prompt corrective action regulations.
As of December 31, 2023 and December 31, 2022, our holding company and Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as "well capitalized," for purposes of the prompt corrective action regulations.
We do not expect a change in the primary source or use of our funds in the foreseeable future. Capital Resources Total shareholders’ equity increased $21.8 million, or 10.0%, to $240.9 million as of December 31, 2022 compared to December 31, 2021. The increase is primarily due to net income.
We do not expect a change in the primary source or use of our funds in the foreseeable future. Capital Resources Total shareholders’ equity increased $1.9 million, or 0.8%, to $242.7 million as of December 31, 2023 compared to December 31, 2022. The increase is primarily due to net income.
(2) Represents monthly averages. (3) Non-performing loans are included in the respective average loan balances. Income, if any, on such loans is recognized on a cash basis. (4) Tax-equivalent yield adjustments are immaterial.
(2) Represents monthly averages. (3) Non-performing loans are included in the respective average loan balances. Income, if any, on such loans is recognized on a cash basis.
In 2021, the deferral period ended for all non-acquired loans previously modified and payments resumed under the original terms. As of December 31, 2022, the Company's loan portfolio included 49 non-acquired loans which were previously modified under the loan modification program, totaling $78.4 million.
In 2021, the deferral period ended for all non-acquired loans previously modified and payments resumed under the original terms. As of December 31, 2023, the Company's loan portfolio included 41 non-acquired loans which were previously modified under the loan modification program, totaling $71.3 million.
The collateral pledged as of December 31, 2022 and December 31, 2021 amounted to $1.26 billion and $771.4 million, respectively. Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow an additional $751.2 million as of December 31, 2022.
The collateral pledged as of December 31, 2023 and December 31, 2022 amounted to $1.31 billion and $1.26 billion, respectively. Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow an additional $656.6 million as of December 31, 2023.
(8) Net interest margin is equal to net interest income divided by average interest-earning assets (excluding mortgage loans held for sale). 60 Table of Contents The following presents the dollar amount of changes in interest income and interest expense for the periods presented, for each component of interest-earning assets and interest-bearing liabilities (excluding mortgage loans held for sale), and distinguishes between changes attributable to volume and interest rates.
(8) Net interest margin is equal to net interest income divided by average interest-earning assets. 62 Table of Content s The following table presents the dollar amount of changes in interest income and interest expense for the periods presented, for each component of interest-earning assets and interest-bearing liabilities, and distinguishes between changes attributable to volume and interest rates.
As of December 31, 2022 and December 31, 2021, we had mortgage loans held for sale of $8.8 million and $30.6 million, respectively, in residential mortgage loans we originated.
As of December 31, 2023 and December 31, 2022, we had mortgage loans held for sale of $7.3 million and $8.8 million, respectively, in residential mortgage loans we originated.
The following presents balances of each of the borrowing facilities as of the dates noted (dollars in thousands): December 31, December 31, (Dollars in thousands) 2022 2021 Borrowings FHLB borrowings $ 141,498 $ 15,000 Federal Reserve borrowings 5,388 23,629 Subordinated notes 52,132 39,031 Total $ 199,018 $ 77,660 79 Table of Contents FHLB We have a blanket pledge and security agreement with FHLB that requires certain loans and securities to be pledged as collateral for any outstanding borrowings under the agreement.
The following table presents balances of each of the borrowing facilities as of the dates noted: December 31, (Dollars in thousands) 2023 2022 Borrowings FHLB borrowings $ 91,175 $ 141,498 Federal Reserve borrowings 34,536 5,388 Subordinated notes 52,340 52,132 Total $ 178,051 $ 199,018 FHLB We have a blanket pledge and security agreement with FHLB that requires certain loans and securities to be pledged as collateral for any outstanding borrowings under the agreement.
For the year ended December 31, 2022, our income before income tax was $28.8 million, a $1.5 million, or 5.7%, increase from December 31, 2021.
For the year ended December 31, 2023, our income before income tax was $7.1 million a $21.8 million, or 75.5%, decrease from December 31, 2022.
PPP loans that are fully guaranteed by the SBA are classified within this line item and had balances of $7.1 million and $46.8 million as of December 31, 2022 and 2021, respectively. • Consumer and Other— consists of unsecured consumer loans.
PPP loans that are fully guaranteed by the SBA are classified within this line item and had balances of $4.2 million and $6.9 million as of December 31, 2023 and 2022, respectively. • Consumer and Other— consists of unsecured consumer loans.
Investment securities Investments 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 increase was primarily attributable to improving market conditions year-over-year resulting in an increase in the value of assets under management balances. 70 Table of Content s Investment securities Investments 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.
We evaluate the comparative levels and trends of the line items in our Consolidated Balance Sheets and Statements of Income as well as various financial ratios that are commonly used in our industry. The primary factors we use to evaluate our results of operations include net interest income, non-interest income and non-interest expense.
We evaluate the comparative levels and trends of the line items in our Consolidated Balance Sheets and Statements of Income as well as various financial ratios that are commonly used in our industry.
As of and for the Year Ended December 31, (Dollars in thousands) 2022 Short-term borrowings Maximum outstanding at any month-end during the period $ 310,921 Balance outstanding at end of period 141,498 Average outstanding during the period 88,102 Average interest rate during the period 0.99 % Average interest rate at the end of the period 2.11 The Bank has borrowing capacity associated with two unsecured federal funds lines of credit up to $10 million and $19 million.
As of and for the Year Ended December 31, (Dollars in thousands) 2023 Short-term borrowings Maximum outstanding at any month-end during the period $ 343,100 Balance outstanding at end of period 91,175 Average outstanding during the period 102,184 Average interest rate during the period 5.08 % Average interest rate at the end of the period 5.58 The Bank has borrowing capacity associated with two unsecured federal funds lines of credit up to $10 million and $19 million.
Management believes the financial strength of the Bank’s clientele and the diversity of the portfolio continues to mitigate the credit risk within the portfolio. Non-Interest Income The year ended December 31, 2022 compared with the year ended December 31, 2021 .
The Company has increased loan level reviews and portfolio monitoring to address the changing environment. Management believes the financial strength of the Bank’s clientele and the diversity of the portfolio continues to mitigate the credit risk within the portfolio. Non-Interest Income The year ended December 31, 2023 compared with the year ended December 31, 2022 .
Primary Factors Used to Evaluate the Results of Operations As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition.
Our client base is well diversified with no single industry concentration. Primary Factors Used to Evaluate the Results of Operations As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition.
Excludes loans held for sale, at fair value of $2.0 million as of December 31, 2022. Potential Problem Loans We categorize loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.
Credit Quality Indicators We categorize loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.
We measure the profitability of each segment based on a post-allocation basis, as we believe it better approximates the operating cash flows generated by our reportable operating segments.
We measure the profitability of each segment based on a post-allocation basis, as we believe it better approximates the operating cash flows generated by our reportable operating segments. A description of each segment is provided in Note 18 – Segment Reporting of the accompanying Notes to the Consolidated Financial Statements.
We manage our liquidity based upon factors that include the level and quality of capital and our overall financial condition, the trend and volume of problem assets, our balance sheet risk exposure, the level of deposits as a percentage of total loans, the amount of non-deposit funding used to fund assets, the availability of unused funding sources and off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold, and other factors.
We manage the diversification and quality of our assets based upon factors that include the level, distribution, severity and trend of problem assets such as those determined to be classified, delinquent, non-accrual, non-performing or restructured; the adequacy of our allowance for credit losses; the diversification and quality of loan and investment portfolios; the extent of counterparty risks, credit risk concentrations, and other factors. 60 Table of Content s We manage our liquidity based upon factors that include the level and quality of capital and our overall financial condition, the trend and volume of problem assets, our balance sheet risk exposure, the level of deposits as a percentage of total loans, the amount of non-deposit funding used to fund assets, the availability of unused funding sources and off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold, and other factors.
As of December 31, 2022. all of our investment securities were classified as held-to-maturity. The following presents the amortized cost and estimated fair value of our investment securities as of the dates noted (dollars in thousands): December 31, 2022 (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Investment securities held-to-maturity: U.S.
The following tables present the amortized cost and estimated fair value of our investment securities as of the dates noted: December 31, 2023 (Dollars in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value Allowance for Credit Losses (1) Investment securities held-to-maturity: U.S.
However, the amount or certainty of eventual loss is not known because of specific pending factors. 75 Table of Contents Loans accounted for under the fair value option are not rated. Loans not meeting any of the three criteria above are considered to be pass-rated loans.
However, the amount or certainty of eventual loss is not known because of specific pending factors. Loans accounted for under the fair value option are not rated.
Our deferred tax assets, net, are valued based on the amounts that are expected to be recovered in the future utilizing the tax rates in effect at the time recognized. Our deferred tax assets, net, for the year ended December 31, 2022, increased $0.1 million from December 31, 2021.
Our deferred tax assets, net, are valued based on the amounts that are expected to be recovered in the future utilizing the tax rates in effect at the time recognized.
From 2004, when we opened our first profit center, until December 31, 2022, we have expanded our footprint into thirteen full service profit centers, three loan production offices, and two trust offices located across five states. Following the completion of the Teton Financial Services, Inc.
From 2004, when we opened our first profit center, until December 31, 2023, we have expanded our footprint into fourteen full service profit centers, three loan production offices, and one trust office located across five states.
Through the Teton Acquisition, the Company acquired loans which were previously modified and are still in their deferral period. As of December 31, 2022, there were 14 of these loans, totaling $3.3 million.
Through the Teton acquisition, the Company acquired loans which were previously modified and are still in their deferral period. As of December 31, 2023, there were 14 of these loans, totaling $2.9 million. All loans modified in response to COVID-19 are classified as performing and pass rated as of December 31, 2023.
As of December 31, 2022 and December 31, 2021, the Company was in compliance with the covenant requirements. Liquidity and Capital Resources Liquidity resources primarily include interest-bearing and noninterest-bearing deposits which primarily contribute to our ability to raise funds to support asset growth, acquisitions, and meet deposit withdrawals and other payment obligations.
Liquidity and Capital Resources Liquidity resources primarily include interest-bearing and noninterest-bearing deposits which primarily contribute to our ability to raise funds to support asset growth, acquisitions, and meet deposit withdrawals and other payment obligations.
Average Percentage for the Year Ended December 31, Average Percentage for the Year Ended December 31, 2022 2021 Sources of Funds: Deposits: Noninterest-bearing 25.72 % 26.73 % Interest-bearing 59.62 57.67 FHLB and Federal Reserve borrowings 3.72 5.05 Subordinated notes 1.31 1.42 Other liabilities 0.81 0.90 Shareholders’ equity 8.82 8.23 Total 100.00 % 100.00 % Uses of Funds: Total loans 82.09 % 76.77 % Investment securities 2.84 1.50 Correspondent bank stock 0.19 0.10 Mortgage loans held for sale 0.60 4.30 Interest-bearing deposits in other financial institutions 9.54 12.71 Federal funds sold 0.03 0.07 Noninterest-earning assets 4.71 4.55 Total 100.00 % 100.00 % Average noninterest-bearing deposits to total average deposits 30.14 % 31.67 % Average loans to total average deposits 96.86 91.69 Average interest-bearing deposits to total average deposits 69.86 68.33 Our primary source of funds is interest-bearing and noninterest-bearing deposits, and our primary use of funds is loans.
Average Percentage for the Year Ended December 31, 2023 2022 Sources of Funds: Deposits: Noninterest-bearing 18.12 % 25.72 % Interest-bearing 65.79 59.62 FHLB and Federal Reserve borrowings 4.71 3.72 Subordinated notes 1.85 1.31 Other liabilities 0.88 0.81 Shareholders’ equity 8.65 8.82 Total 100.00 % 100.00 % Uses of Funds: Total loans 87.21 % 81.49 % Investment securities 2.81 2.84 Correspondent bank stock 0.29 0.19 Mortgage loans held for sale 0.41 0.60 Loans held at fair value 0.66 0.60 Interest-bearing deposits in other financial institutions 4.17 9.54 Federal funds sold — 0.03 Noninterest-earning assets 4.45 4.71 Total 100.00 % 100.00 % Average noninterest-bearing deposits to total average deposits 21.59 % 30.14 % Average loans to total average deposits 104.85 96.16 Average interest-bearing deposits to total average deposits 78.41 69.86 Our primary source of funds is interest-bearing and noninterest-bearing deposits, and our primary use of funds is loans.
For the year ended December 31, 2022, our net interest margin was 3.35% and our net interest spread was 3.02%. For the year ended December 31, 2021, our net interest margin was 2.99% and our net interest spread was 2.88%.
For the year ended December 31, 2023, our net interest margin was 2.62% and our net interest spread was 1.71%. For the year ended December 31, 2022, our net interest margin was 3.36% and our net interest spread was 3.02%.
Interest income on our investment securities portfolio increased as a result of higher average investment balances for the year ended December 31, 2022 compared to the same period in 2021. Our average investment securities balance during the year ended December 31, 2022 was $74.1 million, an increase of $43.2 million from the year ended December 31, 2021.
Interest income on our investment securities portfolio increased as a result of higher average investment balances and higher average yield for the year ended December 31, 2023 compared to the same period in 2022.
Loans held for investment accounted for under the fair value option are also classified within this line item and had a balance of $23.4 million as of December 31, 2022.
Loans held for investment accounted for under the fair value option are also classified within this line item and had an unpaid principal balance of $14.1 million and $23.4 million as of December 31, 2023 and December 31, 2022, respectively. • Construction and Development —consists of loans to finance the construction of residential and non-residential properties.
(2) Includes loans held for investment accounted for under fair value option of $23.4 million as of December 31, 2022.
(2) Includes $14.1 million and $23.4 million of unpaid principal balance of loans held for investment accounted for under the fair value option loans as o f December 31, 2023 and 2022, respectively.
The decrease in net gain on mortgage loans was primarily driven by a slowdown in new lock volume on held for sale loans associated with rising interest rates, reduced housing inventory, and origination volume more heavily weighted to portfolio loans held for investment.
The decrease in net gain on mortgage loans was primarily driven by a slowdown in new lock volume on held for sale loans associated with the rising interest rate environment.
The decrease was driven by a reduction in loan origination volume primarily driven by a slowdown in new mortgage loan origination volume associated with the decrease in refinance activity. Goodwill and other intangible assets, net increased by $0.2 million, or 0.6%, to $32.1 million as of December 31, 2022 compared to December 31, 2021.
The decrease was driven by a reduction in loan origination volume primarily driven by a slowdown in new lock volume associated with the rising interest rate environment. Goodwill and other intangible assets, net decreased by $0.3 million, or 0.8%, to $31.9 million as of December 31, 2023 compared to December 31, 2022.
We work to identify potential losses in a timely manner and proactively manage the problem credits to minimize losses. For the years ended December 31, 2022 and 2021, we recorded $3.7 million and $1.2 million, respectively, of provision for loan losses. The Company has increased loan level reviews and portfolio monitoring to address the changing environment.
We work to identify potential losses in a timely manner and proactively manage the problem credits to minimize losses. For the years ended December 31, 2023 and 2022, we recorded $10.4 million and $3.7 million, respectively, of provision for credit losses.
Total time deposits as of December 31, 2022 were $224.1 million, an increase of $53.6 million, or 31.4%, compared to December 31, 2021.
Total time deposits as of December 31, 2023 were $496.5 million, an increase of $272.4 million, or 121.5%, compared to December 31, 2022.
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.
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 $5.1 million and $5.9 million as of December 31, 2023 and 2022, respectively, are included in this category.
This increase was driven by a $560.2 million increase in average loans outstanding and a 64 bps increase in the average yield on loans, partially offset by a $365.8 million increase 58 Table of Contents in average interest bearing deposit balances and a 54 bps increase in average rates paid on interest bearing deposits.
This decrease was driven by a $300.3 million increase in average interest bearing deposit balances and a 269 bps increase in average rates paid on interest bearing deposits partially offset by a $340.5 million increase in average loans outstanding and a 102 bps increase in the average yield on loans.
As of December 31, 2022, the Company has $23.3 million in loans accounted for under the fair value option with an unpaid principal balance of $23.4 million. See Note 17 - Fair Value in the Notes to Condensed Consolidated Financial Statements.
As of December 31, 2023, the Compan y has $13.7 million in loans accounted for under the fair value option with an unpaid principal balance of $14.1 million. As of December 31, 2022, the Company had $23.3 million in loans accounted for under the fair value option with an unpaid principal balance $23.4 million.
Treasury debt $ 243 $ — $ (9) $ 234 Corporate bonds 23,819 — (2,453) 21,366 Government National Mortgage Association ("GNMA") mortgage -backed securities—residential 39,426 — (2,800) 36,626 Federal National Mortgage Association ("FNMA") mortgage-backed securities—residential 6,708 — (506) 6,202 Government collateralized mortgage obligations ("GMO") and mortgage-backed securities ("MBS") - commercial 6,786 13 (403) 6,396 Corporate collateralized mortgage obligations ("CMO") and mortgage-backed securities ("MBS") 4,074 — (180) 3,894 Total securities held-to-maturity $ 81,056 $ 13 $ (6,351) $ 74,718 69 Table of Contents December 31, 2021 (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Investment securities available-for-sale: U.S.
Treasury debt $ 243 $ — $ (9) $ 234 Corporate bonds 23,819 — (2,453) 21,366 GNMA mortgage-backed securities – residential 39,426 — (2,800) 36,626 FNMA mortgage-backed securities – residential 6,708 — (506) 6,202 GMO and MBS – commercial 6,786 13 (403) 6,396 CMO and MBS 4,074 — (180) 3,894 Total securities held-to-maturity $ 81,056 $ 13 $ (6,351) $ 74,718 71 Table of Content s The following presents the book value of our contractual maturities and weighted average yield for our investment securities as of the dates presented.
For the year ended December 31, 2022, we reported net income available to common shareholders of $21.7 million, compared to net income available to common shareholders for December 31, 2021 of $20.6 million, a $1.1 million, or 5.3% increase.
Results of Operations Overview The year ended December 31, 2023 compared with the year ended December 31, 2022 . For the year ended December 31, 2023, we reported net income available to common shareholders of $5.2 million, compared to net income available to common shareholders for December 31, 2022 of $21.7 million, a $16.5 million, or 75.9% decrease.
(7) Net interest income is the difference between income earned on interest-earning assets (excluding interest on mortgage loans held for sale), and expense paid on interest-bearing liabilities.
(6) Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities. (7) Net interest income is the difference between income earned on interest-earning assets and expense paid on interest-bearing liabilities.
A description of each segment is provided in Note 18 - Segment Reporting of the accompanying Notes to the Consolidated Financial Statements. 57 Table of Contents P rimary Factors Used to Evaluate our Balance Sheet The primary factors we use to evaluate our balance sheet include asset and liability levels, asset quality, capital, liquidity, and potential profit production from assets.
P rimary Factors Used to Evaluate our Balance Sheet The primary factors we use to evaluate our balance sheet include asset and liability levels, asset quality, capital, liquidity, and potential profit production from assets.
Total money market accounts as of December 31, 2022 were $1.34 billion, an increase of $279.4 million, or 26.4%, compared to $1.06 billion as of December 31, 2021. NOW accounts decreased $75.2 million, or 24.3%, to $234.8 million compared to December 31, 2021.
Total money market accounts as of December 31, 2023 were $1.39 billion, an increase of $50.1 million, or 3.7%, compared to $1.34 billion as of December 31, 2022. NOW accounts decreased $87.3 million, or 37.2%, to $147.5 million compared to December 31, 2022.
The following presents future contractual obligations to make future payments for the periods presented (dollars in thousands): As of December 31, 2022 1 Year or Less More than 1 Year but Less than 3 Years More than 3 Years but Less than 5 Years 5 Years or More Total FHLB and Federal Reserve $ 141,498 $ — $ 5,388 $ — $ 146,886 Subordinated notes — — — 52,132 (1) 52,132 Time deposits 181,036 35,890 7,164 — 224,090 Minimum lease payments 3,228 5,224 1,544 1,752 11,748 Total $ 325,762 $ 41,114 $ 14,096 $ 53,884 $ 434,856 _____________________________ (1) Reflects contractual maturity dates of March 31, 2030, December 1, 2030, September 1, 2031, and December 15, 2032. 82 Table of Contents The following presents financial instruments whose contract amounts represent credit risk, as of the periods presented (dollars in thousands): December 31, December 31, 2022 2021 (Dollars in thousands) Fixed Rate Variable Rate Fixed Rate Variable Rate Unused lines of credit $ 211,285 $ 601,202 $ 136,289 $ 442,035 Standby letters of credit 8,571 16,737 2,420 20,940 Commitments to make loans to sell 13,553 — 60,529 — Commitments to make loans 20,895 81,663 16,256 14,920 We may enter into contracts for services in the conduct of ordinary business operations, which may require payment for services to be provided in the future and may contain penalty clauses for early termination of the contracts.
The following presents future contractual obligations to make future payments for the periods presented: As of December 31, 2023 (Dollars in thousands) 1 Year or Less More than 1 Year but Less than 3 Years More than 3 Years but Less than 5 Years 5 Years or More Total FHLB and Federal Reserve $ 122,172 $ — $ 3,539 $ — $ 125,711 Subordinated notes — — — 52,340 (1) 52,340 Time deposits 414,613 44,670 37,169 — 496,452 Minimum lease payments 3,506 4,165 2,429 1,436 11,536 Total $ 540,291 $ 48,835 $ 43,137 $ 53,776 $ 686,039 _____________________________ (1) Reflects contractual maturity dates of March 31, 2030, December 1, 2030, September 1, 2031, and December 15, 2032. 88 Table of Content s The following presents financial instruments whose contract amounts represent credit risk, as of the periods presented: December 31, December 31, 2023 2022 (Dollars in thousands) Fixed Rate Variable Rate Fixed Rate Variable Rate Unused lines of credit $ 86,398 $ 540,255 $ 211,285 $ 601,202 Standby letters of credit 13,922 12,094 8,571 16,737 Commitments to make loans to sell 18,917 — 13,553 — Commitments to make loans 5,275 7,115 20,895 81,663 We may enter into contracts for services in the conduct of ordinary business operations, which may require payment for services to be provided in the future and may contain penalty clauses for early termination of the contracts.
(2) Excludes average outstanding balances of mortgage loans held for sale of $15.6 million and $88.7 million for the years ended December 31, 2022 and 2021, respectively. (3) Excludes mortgage loans held for sale of $8.8 million and $30.6 million as of December 31, 2022 and 2021, respectively.
(2) Excludes average outstanding balances of mortgage loans held for sale of $11.5 million and $15.6 million for the years ended December 31, 2023 and 2022, respectively. Excludes average outstanding balances of loans held for investment accounted for under the fair value option of $18.5 million and $15.5 million for the years ended December 31, 2023 and 2022, respectively.
Risk management and insurance fees — For the year ended December 31, 2022 compared to the same period in 2021, our risk management and insurance fees increased by $0.1 million, or 9.9%, to $1.2 million.
Bank fees — For the year ended December 31, 2023 compared to the same period in 2022, our bank fees decreased by $0.6 million or 24.0%.
We believe the allowance for loan losses is adequate as of December 31, 2022. 76 Table of Contents The following presents summary information regarding our allowance for loan losses for the periods presented (dollars in thousands): Year Ended December 31, (Dollars in thousands) 2022 2021 Average loans outstanding (1)(2) $ 2,154,253 $ 1,594,084 Total loans outstanding at end of period (3) $ 2,469,413 $ 1,949,137 Allowance for loan losses at beginning of period $ 13,732 $ 12,539 Provision for loan losses 3,682 1,230 Charge-offs: Cash, Securities, and Other (1) — Consumer and Other (262) (44) Construction and Development — — 1-4 Family Residential — — Non-Owner Occupied CRE — — Owner Occupied CRE — — Commercial and Industrial (71) — Total charge-offs (334) (44) Recoveries: Cash, Securities, and Other — 7 Consumer and Other 103 — Construction and Development — — 1-4 Family Residential — — Non-Owner Occupied CRE — — Owner Occupied CRE — — Commercial and Industrial — — Total recoveries 103 7 Net (charge-offs) recoveries (231) (37) Allowance for loan losses at end of period $ 17,183 $ 13,732 Allowance for loan losses to total loans (4) 0.70 % 0.70 % Net charge-offs to average loans 0.01 * _____________________________ (1) Average balances are average daily balances.
The allowance on credit losses on non-performing loans was $3.8 million as of December 31, 2023. 81 Table of Content s The following presents summary information regarding our allowance for credit losses for the periods presented: Year Ended December 31, (Dollars in thousands) 2023 2022 Average loans outstanding (1)(2) $ 2,479,175 $ 2,138,712 Total loans outstanding at end of period (3) $ 2,517,189 $ 2,446,092 Allowance for credit losses at beginning of period $ 17,183 $ 13,732 Impact of adopting ASU 2016-13 3,470 Provision for credit losses (4) 12,077 3,682 Charge-offs: Cash, Securities, and Other — (1) Consumer and Other (101) (262) Construction and Development — — 1-4 Family Residential — — Non-Owner Occupied CRE — — Owner Occupied CRE — — Commercial and Industrial (8,737) (71) Total charge-offs (8,838) (334) Recoveries: Cash, Securities, and Other — — Consumer and Other 22 103 Construction and Development — — 1-4 Family Residential 13 — Non-Owner Occupied CRE — — Owner Occupied CRE — — Commercial and Industrial 4 — Total recoveries 39 103 Net (charge-offs) recoveries (8,799) (231) Allowance for credit losses at end of period $ 23,931 $ 17,183 Allowance for credit losses to total loans (4) 0.95 % 0.70 % Net charge-offs to average loans 0.35 — _____________________________ (1) Average balances are average daily balances.
The following presents the average balances and average rates paid on deposits during the periods presented (dollars in thousands): As of and For the Year Ended December 31, 2022 2021 (Dollars in thousands) Average Balance Average Rate Average Balance Average Rate Deposits Money market deposit accounts $ 1,060,258 1.00 % $ 899,970 0.23 % NOW accounts 297,134 0.18 134,039 0.17 Uninsured time deposits 52,457 1.26 43,199 1.28 Other time deposits 112,967 1.12 104,637 0.63 Total time deposits 165,424 1.16 147,836 0.82 Savings accounts 30,942 0.04 6,096 0.03 Total interest-bearing deposits 1,553,758 0.84 1,187,941 0.29 Noninterest-bearing accounts 670,299 550,683 Total deposits $ 2,224,057 0.59 % $ 1,738,624 0.20 % 78 Table of Contents Average noninterest-bearing deposits to average total deposits was 30.1% and 31.7% for the year ended December 31, 2022 and 2021, respectively.
The following table presents the average balances and average rates paid on deposits during the periods presented: For the Year Ended December 31, 2023 2022 (Dollars in thousands) Average Balance Average Rate Average Balance Average Rate Deposits Money market deposit accounts $ 1,296,139 3.86 % $ 1,060,258 1.00 % NOW accounts 177,522 0.38 297,134 0.18 Uninsured time deposits 63,813 3.68 52,457 1.26 Other time deposits 297,286 4.16 112,967 1.12 Total time deposits 361,099 4.08 165,424 1.16 Savings accounts 19,257 0.06 30,942 0.04 Total interest-bearing deposits 1,854,017 3.53 1,553,758 0.84 Noninterest-bearing accounts 510,506 670,299 Total deposits $ 2,364,523 2.77 % $ 2,224,057 0.59 % Average noninterest-bearing deposits to average total deposits was 21.6% and 30.1% for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2022 , the Company has $7.1 million in PPP loans outstanding with $0.2 million in remaining fees to be recognized. The remaining fees represent the net amount of the fees from the SBA for participation in the PPP less the loan origination costs on these loans.
The remaining fees represent the net amount of the fees from the SBA for participation in the PPP less the loan origination costs on these loans.
December 31, 2022 December 31, 2021 (Dollars in thousands) Amount Ratio Amount Ratio Tier 1 capital to risk-weighted assets Bank $ 234,738 0.10 $ 203,164 0.11 Consolidated 212,229 0.09 188,777 0.11 CET1 to risk-weighted assets Bank 234,738 0.10 203,164 0.11 Consolidated 212,229 0.09 188,777 0.11 Total capital to risk-weighted assets Bank 252,398 0.11 217,215 0.12 Consolidated 282,889 0.12 242,388 0.14 Tier 1 capital to average assets Bank 234,738 0.09 203,164 0.10 Consolidated 212,229 0.08 188,777 0.09 Contractual Obligations and Off-Balance Sheet Arrangements We enter into credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our clients.
The following table presents our regulatory capital ratios for the dates noted: December 31, 2023 December 31, 2022 (Dollars in thousands) Amount Ratio Amount Ratio Tier 1 capital to risk-weighted assets Bank $ 244,390 10.54 % $ 234,738 10.29 % Consolidated 218,150 9.40 212,229 9.28 CET1 to risk-weighted assets Bank 244,390 10.54 234,738 10.29 Consolidated 218,150 9.40 212,229 9.28 Total capital to risk-weighted assets Bank 265,391 11.45 252,398 11.06 Consolidated 292,151 12.59 282,889 12.37 Tier 1 capital to average assets Bank 244,390 8.71 234,738 8.65 Consolidated 218,150 7.77 212,229 7.81 Contractual Obligations and Off-Balance Sheet Arrangements We enter into credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our clients.
Government agency — — — — — — — — Corporate bonds — — 1,991 0.11 21,548 1.20 280 0.01 GNMA mortgage-backed securities - residential — — 103 * — — 39,323 1.22 FNMA mortgage-backed securities - residential — — — — 1,334 0.02 5,374 0.12 Government CMO and MBS - commercial — — 47 * 1,200 0.04 5,539 0.14 Corporate CMO and MBS — — — — 26 * 4,048 0.19 Total held-to-maturity $ — — % $ 2,384 0.11 % $ 24,108 1.26 % $ 54,564 1.68 % 70 Table of Contents Maturity as of December 31, 2021 One Year or Less One to Five Years Five to Ten Years After Ten Years (Dollars in thousands) Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Amortized Cost Weighted Average Yield Available-for-sale: U.S.
Treasury debt $ — — % $ 243 * % $ — — % $ — — % Corporate bonds — — 1,991 0.11 21,548 1.20 280 0.01 GNMA mortgage-backed securities – residential — — 103 * — — 39,323 1.22 FNMA mortgage-backed securities – residential — — — — 1,334 0.02 5,374 0.12 Government CMO and MBS – commercial — — 47 * 1,200 0.04 5,539 0.14 Corporate CMO and MBS — — — — 26 * 4,048 0.19 Total held-to-maturity $ — — % $ 2,384 0.11 % $ 24,108 1.26 % $ 54,564 1.68 % _____________________________ * Represents percentages that are not meaningful due to being insignificant or exceeding 100% As of December 31, 2023 and December 31, 2022, there were no holdings of s ecurities of any one issuer, other than the U.S.
Unrealized gain/(loss) on Equity Securities — For the year ended December 31, 2022 compared to the same period in 2021, our unrealized gains on equity securities decreased by $0.1 million, or 27.1% . The decrease was primarily driven by fair value adjustments on equity warrants. There were no equity warrants in equity securities during the same period in 2021.
The decrease was primarily driven by fair value adjustments on equity warrants. 64 Table of Content s Other — For the year ended December 31, 2023 compared to the same period in 2022, our other income decreased by $1.3 million.
(3) Loans held for investment exclude deferred fees, unamortized premiums/(unaccreted discounts), net, and fair value adjustments on loans held for investment accounted for under fair value option, which collectively totaled ($6.7) million and ($5.0) million as of December 31, 2022 and 2021, respectively. • Cash, Securities and Other— consists of consumer and commercial purpose loans that are primarily secured by securities managed and under custody with us, cash on deposit with us or life insurance policies.
(3) Includes $7.1 million and $8.8 million of unpaid principal balance of mortgage loans held for sale as of December 31, 2023 and 2022, respectively. • Cash, Securities and Other— consists of consumer and commercial purpose loans that are primarily secured by securities managed and under custody with us, cash on deposit with us or life insurance policies.
The overall decrease in non-interest income was primarily driven by a slowdown in new lock volume on held for sale loans associated with rising interest rates, reduced housing inventory, and origination volume more heavily weighted to portfolio loans held for investment.
The overall decrease in non-interest income was primarily driven by a slowdown in new lock volume on held for sale loans associated with rising interest rates, which continue to impact loan demand. The decrease in non-interest expense was driven by a reduction in headcount to better align the operations functions with the slowdown in volume.
During the year ended December 31, 2022, we recognized an immaterial amount of gains on the sale of OREO. The amount of lost interest for non-accrual loans was $0.2 million for each of the years ended December 31, 2022 and 2021.
As of December 31, 2023 and December 31, 2022, we did not own any OREO properties. The amount of lost interest for non-accrual loans was $6.4 million and $0.2 million for each of the years ended December 31, 2023 and 2022, respectively.
For the year ended December 31, 2022 compared to the year ended December 31, 2021, non-interest income decreased $11.6 million, or 29.0%, to $28.4 million.
For the year ended December 31, 2023 compared to the year ended December 31, 2022, non-interest income decreased $5.7 million, or 20.7%, to $21.9 million.
As of December 31, 2022 2021 (Dollars in thousands) Amount % (1) Amount % (1) Cash, Securities and Other $ 1,198 6.6 % $ 1,598 13.4 % Consumer and Other 191 2.0 266 1.8 Construction and Development 2,025 11.7 1,092 9.1 1-4 Family Residential 6,309 36.3 3,553 29.7 Non-Owner Occupied CRE 3,490 20.1 2,952 24.7 Owner Occupied CRE 1,510 8.7 1,292 10.9 Commercial and Industrial 2,460 14.6 2,979 10.4 Total allowance for loan losses $ 17,183 100.0 % $ 13,732 100.0 % _____________________________ (1) Represents the percentage of loans to total loans in the respective category.
As of December 31, 2023 2022 (Dollars in thousands) Amount % (2) Amount (1) % (2) Cash, Securities and Other $ 961 5.6 % $ 1,198 6.7 % Consumer and Other 124 1.1 191 1.0 Construction and Development 7,945 13.7 2,025 11.7 1-4 Family Residential 4,370 36.9 6,309 36.8 Non-Owner Occupied CRE 2,325 21.6 3,490 20.2 Owner Occupied CRE 1,034 7.8 1,510 8.8 Commercial and Industrial 7,172 13.3 2,460 14.8 Total allowance for credit losses $ 23,931 100.0 % $ 17,183 100.0 % _____________________________ (1) Allowance for credit loss amounts for periods prior to the ASU 2016-13 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
As of December 31, 2021, all our investments in securities were classified as available-for-sale. The Company reassessed classification of investment securities and, effective April 1, 2022, elected to transfer all securities, fair valued at $58.7 million, from available-for-sale to held-to-maturity.
The Company reassessed classification of investment securities and, effective April 1, 2022, elected to transfer all securities, fair valued at $58.7 million, from available-for-sale to held-to-maturity. The related unrealized loss of $2.3 million included in other comprehensive income on April 1, 2022 remained in other comprehensive income and is being amortized out over the remaining term of the securities.
Changes attributable to both rate and volume that cannot be separated have been allocated to volume (dollars in thousands): Year Ended December 31, 2022 Compared to 2021 Increase (Decrease) Due to Change in: Total Increase (Decrease) (Dollars in thousands) Volume Rate Interest-earning assets: Interest-bearing deposits in other financial institutions $ (118) $ 1,956 $ 1,838 Federal funds sold (13) 23 10 Investment securities 1,197 86 1,283 Correspondent bank stock 221 74 295 Loans 24,910 10,127 35,037 Total increase in interest income $ 26,197 $ 12,266 $ 38,463 Interest-bearing liabilities: Interest-bearing deposits 3,064 6,466 9,530 FHLB and Federal Reserve borrowings (190) 2,454 2,264 Subordinated notes 230 (170) 60 Total increase in interest expense $ 3,104 $ 8,750 $ 11,854 Increase in net interest income $ 23,093 $ 3,516 $ 26,609 Provision for Loan Losses We have a dedicated problem loan resolution team comprised of associates from our credit, senior leadership, risk, and accounting teams that meets frequently to ensure that watch list and problem credits are identified early and actively managed.
Changes attributable to both rate and volume that cannot be separated have been allocated to volume: Year Ended December 31, 2023 Compared to 2022 Increase (Decrease) Due to Change in: Total Increase (Decrease) (Dollars in thousands) Volume Rate Interest-earning assets: Interest-bearing deposits in other financial institutions $ (6,365) $ 9,841 $ 3,476 Federal funds sold (10) — (10) Investment securities 157 253 410 Correspondent bank stock 243 (4) 239 Loans 18,499 21,761 40,260 Mortgage loans held for sale (260) 259 (1) Loans held at fair value 212 (224) (12) Total increase in interest income $ 12,476 $ 31,886 $ 44,362 Interest-bearing liabilities: Interest-bearing deposits 10,601 41,847 52,448 FHLB and Federal Reserve borrowings 1,632 1,784 3,416 Subordinated notes 1,016 303 1,319 Total increase in interest expense $ 13,249 $ 43,934 $ 57,183 Increase in net interest income $ (773) $ (12,048) $ (12,821) Provision for Credit Losses We have a dedicated problem loan resolution team comprised of associates from our credit, senior leadership, risk, and accounting teams that meets frequently to ensure that watch list and problem credits are identified early and actively managed.
Net gain/(loss) on loans accounted for under the fair value option — The Company elected the fair value option on certain new loans purchased in 2022. During the year ended December 31, 2022, the Company recorded a net loss on loans accounted for under the fair value option of $0.9 million.
Risk management and insurance fees — For the year ended December 31, 2023 compared to the same period in 2022, our risk management and insurance fees decreased by $0.3 million, or 25.3%, to $0.9 million. Net loss on loans accounted for under the fair value option — The Company elected the fair value option on certain loans purchased in 2022.
The increase was primarily driven by a $24.2 million increase in net interest income, after provision for loan losses, partially offset by a $10.8 million decrease in net gain on mortgage loans and an $11.0 million increase in non-interest expense.
The decrease was primarily driven b y a $19.5 million decrease in net interest income, after provision for credit losses and a $5.7 million decrease in non-interest income, partially offset by a $3.5 million decrease in non-interest expense.
(“Teton”) acquisition in the fourth quarter of 2021, we added three full service profit centers in Jackson Hole, Pinedale, and Rock Springs, Wyoming. As of and for the year ended December 31, 2022, we had $2.87 billion in total assets, $107.9 million in total revenues and provided fiduciary and advisory services on $6.11 billion of assets under management ("AUM").
As of and for the year ended December 31, 2023, we had $2.98 billion in total assets, $82.7 million in total revenues and provided fiduciary and advisory services on $6.75 billion of assets under management ("AUM").
Interest expense on deposits increased during the year ended December 31, 2022 compared to the same period in 2021.
Our average investment securities balance during the year ended December 31, 2023 was $79.2 million, an increase of $5.0 million from the year ended December 31, 2022. Interest expense on deposits increased during the year ended December 31, 2023 compared to the same period in 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed9 unchanged
Biggest changeFurther, our balance sheet is better positioned to protect net interest margin in a declining interest rate environment as of December 31, 2022 compared to our balance sheet as of December 31, 2021. Although the simulation model is useful in identifying potential exposure to interest rate changes, actual results for net interest income and economic value of equity may differ.
Biggest changeAlthough the simulation model is useful in identifying potential exposure to interest rate changes, actual results for net interest income and economic value of equity may differ.
Interest rates do not necessarily move in the same direction 84 Table of Contents or magnitude as prices of general goods and services, while other operating expenses can be correlated with the impact of general levels of inflation. 85 Table of Contents
Interest rates do not necessarily move in the same direction or magnitude as prices of general goods and services, while other operating expenses can be correlated with the impact of general levels of inflation. 93 Table of Content s
There are a variety of factors that can impact the outcomes such as timing and magnitude of interest rate changes, asset and liability mix, pre-payment speeds, deposit beta assumptions, and decay rates that differ from our projections. Additionally, the results do not account for actions implemented to manage our interest rate risk exposure.
There are a variety of factors that can impact the outcomes such as timing and magnitude of interest rate changes, asset and liability mix, pre-payment speeds, deposit beta assumptions, and decay rates that differ from our projections.
Impact of Inflation Our consolidated financial statements and related notes included within this Form 10-K have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.
Additionally, the results do not account for actions implemented to manage our interest rate risk exposure. 92 Table of Content s Impact of Inflation Our consolidated financial statements and related notes included within this Form 10-K have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.
As of December 31, 2022 As of December 31, 2021 Change in Interest Rates (Basis Points) Percent Change in Net Interest Income Percent Change in Fair Value of Equity Percent Change in Net Interest Income Percent Change in Fair Value of Equity 200 (2.26) % (9.99) % 9.31 % 11.43 % 100 (1.13) (5.09) 4.88 7.78 Base — — — — -100 1.08 2.07 (2.58) (26.39) -200 4.33 (4.27) (3.32) (46.36) The model simulations as of December 31, 2022 imply that our balance sheet has shifted to a more neutral position in terms of interest rate sensitivity compared to our balance sheet as of December 31, 2021.
As of December 31, 2023 As of December 31, 2022 Change in Interest Rates (Basis Points) Percent Change in Net Interest Income Percent Change in Fair Value of Equity Percent Change in Net Interest Income Percent Change in Fair Value of Equity 200 (5.19) % (11.03) % (2.26) % (9.99) % 100 (2.82) (5.90) (1.13) (5.09) Base — — — — -100 2.38 3.16 1.08 2.07 -200 8.27 (5.27) 4.33 (4.27) The model simulations as of December 31, 2023 imply that our balance sheet is more liability sensitive compared to our balance sheet as of December 31, 2022.

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