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What changed in First Western Financial Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of First Western Financial Inc's 2023 and 2024 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 2024 report.

+404 added−424 removedSource: 10-K (2025-03-07) vs 10-K (2024-03-15)

Top changes in First Western Financial Inc's 2024 10-K

404 paragraphs added · 424 removed · 322 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

96 edited+9 added−16 removed259 unchanged
Biggest changeUnder the FDIC’s prompt corrective action regulations, an institution is deemed to be "well capitalized" if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a CET1 risk-based capital ratio of 6.5% or greater and a leverage capital ratio of 5.0% or greater.
Biggest changeUnder the FDIC’s prompt corrective action regulations, an institutions capitalization is deemed to be as follows: • "Well capitalized" if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a CET1 risk-based capital ratio of 6.5% or greater and a leverage capital ratio of 5.0% or greater. • "Adequately capitalized" if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a CET1 risk-based capital ratio of 4.5% or greater and a leverage capital ratio of 4.0% or greater. • "Undercapitalized" if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a CET1 risk-based capital ratio of less than 4.5% or a leverage capital ratio of less than 4.0%. • "Significantly undercapitalized" if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a CET1 capital ratio of less than 3.0% or a leverage capital ratio of less than 3.0%. • "Critically undercapitalized" if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.
Our mortgage banking loan sales activities are primarily directed at originating single family mortgages, which generally conform to Fannie Mae and Freddie Mac guidelines and are delivered to the investor shortly after funding. Additionally, we offer installment loans and lines of credit, typically to facilitate investment opportunities for consumer clients whose financial characteristics support the request.
Our mortgage banking loan sales activities are primarily directed at originating single family mortgages, which generally conform to Fannie Mae and Freddie Mac guidelines and are delivered to the investor shortly after funding. Additionally, we offer installment loans and lines of credit, which are typically to facilitate investment opportunities for consumer clients whose financial characteristics support the request.
Our Chief Credit Officer, together with our central underwriting, credit administration and loan operations teams, provides credit oversight. We periodically review all credit risk portfolios to ensure that the risk identification processes are functioning properly and that our credit standards are followed.
Our Chief Risk Officer, together with our central underwriting, credit administration and loan operations teams, provides credit oversight. We periodically review all credit risk portfolios to ensure that the risk identification processes are functioning properly and that our credit standards are followed.
Dividends. The Company’s earnings and activities are affected by legislation, by regulations and by local legislative and administrative bodies and decisions of courts in the jurisdictions in which we conduct business. These include limitations on the ability of the Bank to pay dividends to the Company and the Company’s ability to pay dividends to its shareholders.
The Company’s earnings and activities are affected by legislation, by regulations and by local legislative and administrative bodies and decisions of courts in the jurisdictions in which we conduct business. These include limitations on the ability of the Bank to pay dividends to the Company and the Company’s ability to pay dividends to its shareholders.
These underwriting standards are designed to determine the maximum loan amount that a borrower has the capacity to repay based upon the type of collateral securing the loan and the borrower’s income. Such loan policies include maximum amortization schedules and loan terms for each category of loans collateralized by liens on real estate.
These underwriting standards are designed to determine the maximum loan amount that a borrower has the capacity to repay based upon the type of collateral securing the loan and the borrower’s income. Such credit policies include maximum amortization schedules and loan terms for each category of loans collateralized by liens on real estate.
Limitations on Incentive Compensation In June 2016, several federal financial agencies (including the Federal Reserve and FDIC) re-proposed restrictions on incentive-based compensation pursuant to Section 956 of the Dodd-Frank Act for financial institutions with $1 billion or more in total consolidated assets.
Limitations on Incentive Compensation In 2016, several federal financial agencies (including the Federal Reserve and FDIC) re-proposed restrictions on incentive-based compensation pursuant to Section 956 of the Dodd-Frank Act for financial institutions with $1 billion or more in total consolidated assets.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of recent bank failures and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF incurred as a result of 2023 bank failures and the FDIC's use of the systemic risk exception to cover certain deposits that were otherwise uninsured.
We believe that our strong relationships with our associates are central to establishing the corporate culture we need to serve our clients, shareholders, and our communities well. We are committed to implementing diverse, equitable and, inclusive ("DEI") policies and practices across the Company.
We believe that our strong relationships with our associates are central to establishing the corporate culture we need to serve our clients, shareholders, and our communities well. We are committed to implementing diverse, equitable, and inclusive policies and practices across the Company.
"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.
"Critically undercapitalized" institutions are subject to the appointment of a receiver or conservator. As of December 31, 2024 and 2023, the Bank qualified as "well capitalized" under the prompt 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.
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, 2024, 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.
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 deliver our services though our twenty 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 eighteen locations across Colorado, Arizona, Wyoming, Montana, and California.
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 twenty locations across Colorado, Arizona, Wyoming, Montana, and California.
Our lending activities are subject to a variety of lending limits imposed by state and federal regulation. The Bank is subject to a legal lending limit on loans to related borrowers based on the Bank’s capital level. The dollar amounts of the Bank’s lending limit increases or decreases as the Bank’s capital increases or decreases.
Our lending activities are subject to a variety of lending limits imposed by state and federal regulations. The Bank is subject to a legal lending limit on loans to related borrowers based on the Bank’s capital level. The dollar amounts of the Bank’s lending limit increases or decreases as the Bank’s capital increases or decreases.
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.
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.
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.
In addition, our credit 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. 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.
The Company is required to file an annual report with the Federal Reserve and to provide such additional information as the Federal Reserve may require. 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.
Annual Reporting; Examinations. The Company is required to file an annual report with the Federal Reserve and to provide such additional information as the Federal Reserve may require. 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.
Under this rule, banking organizations that are SEC registrants must generally disclose information about a material cybersecurity incident within four business days of determining it is material with periodic updates as to the status of the incident in subsequent filings as necessary. 30 Table of Content s Anti-Money Laundering Act of 2020 On January 1, 2021, Congress enacted the National Defense Authorization Act (NDAA), which included significant reforms to the U.S. anti-money laundering (AML) regime.
Under this rule, banking organizations that are SEC registrants must generally disclose information about a material cybersecurity incident within four business days of determining it is material with periodic updates as to the status of the incident in subsequent filings as necessary. 28 Table of Contents Anti-Money Laundering Act of 2020 On January 1, 2021, Congress enacted the National Defense Authorization Act (NDAA), which included significant reforms to the U.S. anti-money laundering (AML) regime.
There is a statutory presumption of compliance with this requirement for mortgages that meet the requirements to be deemed "qualified mortgages." The CFPB rule defines the key threshold terms "ability to repay" and "qualified mortgage." The CFPB has actively issued enforcement actions against both large and small entities and to entities across the entire financial service industry.
There is a statutory presumption of compliance with this requirement for mortgages that meet the requirements to be deemed "qualified mortgages." The CFPB rule defines the key threshold terms "ability to repay" and "qualified mortgage." 24 Table of Contents The CFPB has actively issued enforcement actions against both large and small entities and to entities across the entire financial service industry.
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 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.
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 .
The average maturity on our commercial and industrial portfolio was 3.7 years with an average remaining term of 1.7 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 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.
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.
We believe that our client service model, financial strength, growth strategy and public company status will further enhance our ability to attract and retain this talent. • Developing New Products . We seek to be the primary source of financial products and services for our clients.
We believe that our client service model, financial strength, growth strategy and public company status will further enhance our ability to attract and retain this talent. 6 Table of Contents • Developing New Products . We seek to be the primary source of financial products and services for our clients.
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.
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.
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.
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.
For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve approval of proposed distributions, or might be required to consent to a merger or to divest the troubled institution or other affiliates. State Law Restrictions.
For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve approval of proposed distributions, or might be required to consent to a merger or to divest the troubled institution or other affiliates. 22 Table of Contents State Law Restrictions.
Any company that proposes to acquire "control," as those terms are defined in the BHC Act and Federal Reserve regulations, of a bank holding company or to acquire 25% or more of any class of voting securities of a bank holding company would be required to seek the Federal Reserve’s prior approval under the BHC Act to become a bank holding company.
Any company that proposes to acquire "control," as those terms are defined in the BHC Act and Federal Reserve regulations, of a bank holding company or to acquire 25% or more of any class of voting securities of a bank holding company would be required to seek the Federal Reserve’s prior approval under the BHC Act to become a bank holding company. 20 Table of Contents Dividends.
The amount of gain or loss on the sale of loans is primarily driven by market conditions and changes in interest rates, as well as our pricing and asset liability management strategies. • Treasury Management.
The amount of gain or loss on the sale of loans is primarily driven by market conditions and changes in interest rates, as well as our pricing and asset liability management strategies. 13 Table of Contents • Treasury Management.
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.
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.
Our strategic commitment to learning and development ensures the Company’s leadership and management teams continue to grow at a pace consistent with our financial growth goals. Compensation and Benefits We offer a total rewards program to attract and retain team-oriented, respectful, problem solvers.
Our strategic commitment to learning and development ensures the Company’s leadership and management teams continue to grow at a pace consistent with our financial growth goals. 16 Table of Contents Compensation and Benefits We offer a total rewards program to attract and retain team-oriented, respectful, problem solvers.
The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain. 25 Table of Content s Consumer Financial Protection. The Bank is subject to a number of federal and state consumer protection laws that extensively govern its relationship with its clients.
The extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain. Consumer Financial Protection. The Bank is subject to a number of federal and state consumer protection laws that extensively govern its relationship with its clients.
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.
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 81.2% of the loans in our loan portfolio as of December 31, 2024 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. 27 Table of Content s 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. 25 Table of Contents Anti-Money Laundering.
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.
Human Capital Overview As of December 31, 2024 , we had 321 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, 2023, the average term on our 1-4 family portfolio was 20.1 years with an average remaining term of 18.1 years.
While we typically originate loans with adjustable rates and maturities up to 30 years, as of December 31, 2024, the average term on our 1-4 family portfolio was 20.8 years with an average remaining term of 18.3 years.
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.
In addition, these rules include greater recognition of collateral and guarantees, and revised capital treatment for derivatives and repo-style transactions. 18 Table of Contents 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.
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.
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.
Under the Basel framework, these standards will generally be effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028.
Under the Basel framework, these standards were generally effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028.
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
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
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.
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 credit policies include other underwriting guidelines for loans collateralized by real estate.
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.
The Company filed an election and became a financial holding company in 2006. 19 Table of Contents 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, 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, 2024 and 2023, we had brokered deposits of $134.5 million and $165.4 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.
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.
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.
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.
As of December 31, 2024 , the carrying value of our investment portfolio totaled $75.7 million with an average y ield of 3.5%. 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.
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.
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, 2024, commercial and industrial loans were $220.3 million, or 9.1% of our total loan portfolio.
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.
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.
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.
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, 2024, loans secured with cash, marketable securities and other were $119.8 million, or 5.0% of our total loan portfolio.
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.
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 $7.5 million as of December 31, 2024. Consumer and other loans were $17.5 million, or 0.7% of our loan portfolio, excluding $7.3 million in consumer and other loans accounted for under the fair value option.
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.
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.
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.
As of December 31, 2024 , total AUM was $7.32 billion, an increase of $568.0 million, or 8.4%, compared to $6.75 billion as of December 31, 2023. 12 Table of Contents As of December 31, 2024 , we provided fiduciary and advisory services on $7.32 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.
Client focused – First Western’s highly ethical DNA guides us to act in the client’s interest while protecting the Bank. Our clients know that as their trusted partner, FW has the strength and sophistication to help them for generations.
We are always looking for ways to improve processes, products, and services. Client focused – First Western’s highly ethical DNA guides us to act in the client’s interest while protecting the Bank. Our clients know that as their trusted partner, FW has the strength and sophistication to help them for generations.
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.
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.
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.
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.
The federal bank regulatory agencies may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital.
Undercapitalized institutions are subject to growth limitations and are required to submit a capital restoration plan to the FDIC. The federal bank regulatory agencies may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital.
Our Markets Our strategic market area is defined by metropolitan areas in the Western United States having strong long-term economic growth prospects, a significant wealth demographic measured by growth in high net worth households, a dynamic commercial business landscape and the ability to sustain one or more of our profit centers.
Our ALCO and management review the status of our investment portfolio at least ten times per year. 14 Table of Contents Our Markets Our strategic market area is defined by metropolitan areas in the Western United States having strong long-term economic growth prospects, a significant wealth demographic measured by growth in high net worth households, a dynamic commercial business landscape and the ability to sustain one or more of our profit centers.
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.
As of December 31, 2024 , total deposits we re $2.51 billion, a n decrease of $14.8 million, or 0.6%, compared to $2.53 billion as of December 31, 2023. 11 Table of Contents As of December 31, 2024 , our deposit portfolio contained a 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.
However, the revised capital requirements of the proposed rule would not apply to the Company or the Bank because they have less than $100 billion in total consolidated assets and trading assets and liabilities below the threshold for market risk requirements. In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted.
However, the revised capital requirements of the proposed rule would not apply to the Company or the Bank because they have less than $100 billion in total consolidated assets and trading assets and liabilities below the threshold for market risk requirements. Imposition of Liability for Undercapitalized Subsidiaries.
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.
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, we provided fiduciary and advisory services on $6.75 billion of trust and investment management assets ("AUM"), and we had total assets of $2.98 billion, total loans, excluding mortgage loans held for sale, of $2.53 billion, total deposits of $2.53 billion and total shareholders’ equity of $242.7 million.
As of December 31, 2024, we provided fiduciary and advisory services on $7.32 billion of trust and investment management assets ("AUM"), and we had total assets of $2.92 billion, total loans excluding mortgage loans held for sale and loans held for sale of $2.43 billion, total deposits of $2.51 billion, and total shareholders’ equity of $252.3 million.
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.
We require independent appraisals or evaluations from a list of approved appraisers on all loans secured by commercial real estate. As of December 31, 2024, owner occupied commercial real estate loans were $172.0 million, or 7.1% of our total loan portfolio, and non-owner occupied commercial real estate loans were $611.2 million, or 25.3% of our total loan portfolio.
Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies. Stock Redemptions and Repurchases. It is an essential principle of safety and soundness that a banking organization’s redemption and repurchases of regulatory capital instruments, including common stock, from investors be consistent with the organization’s current and prospective capital needs.
It is an essential principle of safety and soundness that a banking organization’s redemption and repurchases of regulatory capital instruments, including common stock, from investors be consistent with the organization’s current and prospective capital needs.
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.
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, 2024 an d 2023, the Bank exceeded all regulatory minimum capital requirements. Prompt Corrective Regulatory Action.
Credit Policies and Procedures General. Asset quality and robust underwriting are integral to our strategy and credit culture. We place a considerable emphasis on effective risk management and preserving sound credit underwriting standards as we grow our loan portfolio. Underwriting considerations include collateral, defined sources of repayment, strength of guarantor(s) and opportunities to broaden the relationship with the client.
Credit Policies and Procedures General. Asset quality and robust underwriting are integral to our strategy and credit culture. We place a considerable emphasis on effective risk management and preserving sound credit underwriting standards as we grow our loan portfolio.
In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance pursuant to such laws and regulations, which are binding on us and our subsidiaries.
A change in such statutes or regulations, including changes in how they are interpreted or implemented, could have a material effect on our business. In addition to laws and regulations, state and federal bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance pursuant to such laws and regulations, which are binding on us and our subsidiaries.
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.
Historically, we believe we have made sound, high quality loans while recognizing that lending money involves a degree of business risk. We have credit 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 Asset and Liability Committee ("ALCO") and management are responsible for implementation of the investment policy and monitoring of our investment performance. Our ALCO and management review the status of our investment portfolio at least ten times per year.
Our Asset and Liability Committee ("ALCO") and management are responsible for implementation of the investment policy and monitoring of our investment performance.
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.
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.
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.
As of December 31, 2024, 1-4 family residential loans were $962.9 million, or 39.8% of our total loan portfolio, consisting of $133.6 million and $829.3 million of fixed-rate and adjustable-rate loans, respectively.
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 .
Our deposit footprint has provided, and we believe will continue to provide, primary support for our loan growth. A key part of our strategy is to continue to enhance our funding sources by continuing to build our private and commercial banking capabilities to keep building our base of attractively priced core deposits. • Attracting Talent .
For the year ended December 31, 2023, non-interest income was $21.9 million or 26.5% of total income before non-interest expense and net interest income, before the provision for credit losses, was $71.1 million, or 86.0% of total income before non-interest expense.
For the year ended December 31, 2024, non-interest income was $27.7 million or 30.7% of total income before non-interest expense and net interest income, before the provision for credit losses, was $64.3 million, or 71.4% of total income before non-interest expense.
Those elements include an internally developed manager training program designed to train our managers to be great bosses in support of a culture of learning, collaboration, growth and development.
Internally, we call this a “People First” mind-set and over the last several years have focused on building upon the foundational elements of this strategy. Those elements include an internally developed manager training program designed to train our managers to be great bosses in support of a culture of learning, collaboration, growth and development.
By combining internal research and a dedicated team of accredited specialized advisors like Chartered Financial Analysts and Certified Financial Planners with our pairing of proprietary and third-party investment options, we create unique solutions tailored to the specific needs of each of our clients. 13 Table of Content s Other Products In addition to the traditional loan, deposit and trust and investment management products and services, our profit centers are supported by a central team of specialized product experts in our "product groups," which include experienced professionals in commercial banking, investment management, wealth planning, risk management/insurance, personal trust, retirement planning and tax-advantaged products, and mortgage lending.
Other Products In addition to the traditional loan, deposit and trust and investment management products and services, our profit centers are supported by a central team of specialized product experts in our "product groups," which include experienced professionals in commercial banking, investment management, wealth planning, risk management/insurance, personal trust, retirement planning and tax-advantaged products, and mortgage lending.
Additionally, the FDIC's Information Technology Risk Examination (InTREx) Program, based on the Uniform Rating System for Information Technology (URSIT), includes core modules for Audit, Management, Development and Acquisition, and Support and Delivery component ratings.
Additionally, the FDIC's Information Technology Risk Examination (InTREx) Program, based on the Uniform Rating System for Information Technology (URSIT), includes core modules for Audit, Management, Development and Acquisition, and Support and Delivery component ratings. If we fail to remain compliant with changing components of this regulation, we could be subject to various regulatory sanctions, including financial penalties.
Our compensation program includes competitive salary/hourly pay and incentive pay in the form of an annual bonus and stock awards to officers and certain members of the management team. We have significant insider ownership, and, in 2021, the Board approved stock ownership guidelines applicable to our executive officers and other key position holders to further align management and shareholder interests.
Our compensation program includes competitive salary/hourly pay and incentive pay in the form of an annual bonus and stock awards to officers and certain members of the management team.
The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order, or condition enacted or imposed by the institution’s regulatory agency.
Assessments are based on an institution’s average consolidated total assets less average tangible equity, subject to adjustments for certain types of institutions, including custodial banks. 23 Table of Contents The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order, or condition enacted or imposed by the institution’s regulatory agency.
We utilize the COSO 2017 ERM Framework to govern the process of anticipating, identifying, assessing, managing, optimizing, and monitoring risks within the organization. Our Enterprise Risk Management ("ERM") Committee oversees our ERM program. This group contains key members of management including the Chief Executive Officer, the Chief Operating Officer, and the Chief Financial Officer.
Our Enterprise Risk Management ("ERM") Committee oversees our ERM program. This group contains key members of management including the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, and the Chief Risk Officer.
Our structure, with local teams and central experts, is designed to serve clients that have assets, liabilities, families, businesses, and long term goals that each require different types of expertise. 17 Table of Content s Respectful – For First Westerners, Respectful means valuing the unique knowledge and experiences each stakeholder brings to a discussion.
Team oriented – Team oriented at First Western means using our teammates to deliver the best possible results for our stakeholders. Our structure, with local teams and central experts, is designed to serve clients that have assets, liabilities, families, businesses, and long term goals that each require different types of expertise.
As such, the Bank is subject to regulation, supervision, and examination by both the Colorado Division of Banking (the "CDB") and the Federal Deposit Insurance Corporation ("FDIC"). In addition, we expect that any additional businesses that we may invest in or acquire will be regulated by various state and/or federal banking regulators.
As such, the Bank is subject to regulation, supervision, and examination by both the Colorado Division of Banking (the "CDB") and the Federal Deposit Insurance Corporation ("FDIC").
In 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).
In 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.
As of December 31, 2023, our loan portfolio contained a balanced and diverse mix of loans, as shown below: Gross Loans (1) (1) Gross loans excludes $13.7 million in consumer and other loans acc ounted for under the fair value option.
We employ experienced banking and business development teams who provide superior client service, value-add lending solutions and competitive pricing to market our lending products and services. 7 Table of Contents As of December 31, 2024, our loan portfolio contained a balanced and diverse mix of loans, as shown below: Gross Loans (1) (1) Gross loans excludes $7.3 million in consumer and other loans acc ounted for under the fair value option.
We pick it up and we address it, and if appropriate, work to create or improve the “FW Way” for that type of issue. Team oriented – Team oriented at First Western means using our teammates to deliver the best possible results for our stakeholders.
Our core values reflect our continued focus to maintain a highly-engaged team. Problem solver – Being a Problem solver at First Western means that when we see a problem, we see opportunity. We pick it up and we address it, and if appropriate, work to create or improve the “FW Way” for that type of issue.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe banking laws, regulations and policies applicable to us govern matters ranging from the maintenance of adequate capital, safety and soundness, mergers and changes in control to the general business operations conducted by us, including permissible types, amounts and terms of loans and investments, the amount of reserves held against deposits, restrictions on dividends, imposition of specific accounting requirements, establishment of new offices and the maximum interest rate that may be charged on loans.
Biggest changeThe banking laws, regulations and policies applicable to us govern matters ranging from the maintenance of adequate capital, safety and soundness, mergers and changes in control to the general business operations conducted by us, including permissible types, amounts and terms of loans and investments, the amount of reserves held against deposits, restrictions on dividends, imposition of specific accounting requirements, establishment of new offices and the maximum interest rate that may be charged on loans. 43 Table of Contents We are subject to changes in federal and state banking statutes, regulations and governmental policies, or the interpretation or implementation of them, and are subject to changes and increased complexity in regulatory requirements as governments and regulators continue reforms intended to strengthen the stability of the financial system and protect key markets and participants.
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.
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.
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 allowance for credit losses.
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.
While we believe our allowance for credit losses is appropriate for the risk identified in our loan 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.
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.
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 • 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.
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.
Any changes in any federal or state banking statute, regulation or governmental policy, including changes which occ urred in 2024 an d may occ ur in 2025 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.
While we believe that our allowance for credit losses was appropriate at December 31, 2023, there is no assurance that it will be sufficient to cover future credit losses. In the event of a deterioration in economic conditions, we may be required to increase our allowance in future periods, which would reduce our earnings.
While we believe that our allowance for credit losses was appropriate at December 31, 2024 , there is no assurance that it will be sufficient to cover future credit losses. In the event of a deterioration in economic conditions, we may be required to increase our allowance in future periods, which would reduce our earnings.
Our allowance for credit losses may not be adequate to absorb actual credit losses, and future provisions for credit losses could materially and adversely affect our operating results. Our allowance for credit losses is based on prior experience and an evaluation of the risks inherent in our then-current portfolio.
Our allowance for credit losses may not be adequate to absorb actual credit losses, and future provisions for credit losses could materially and adversely affect our operating results. Our allowance for credit losses is based on Company and peer prior experience and an evaluation of the risks inherent in our then-current portfolio.
Additionally, any such loss of funds could result in lower loan originations, which could materially negatively impact our growth strategy. 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.
Additionally, any such loss of funds could result in lower loan originations, which could materially negatively impact our growth strategy. 37 Table of Contents 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.
The federal Financial Crimes Enforcement Network, established by the Treasury to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service.
The federal Financial Crimes Enforcement Network, established by the Treasury to administer the AML Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service.
Although we are not directly impacted by these recent bank failures, the resulting speed and with which news, including social media outlets, led depositors to withdraw or attempt to withdraw funds from these and other financial institutions, as well as the volatile impact to stock prices, could have a material effect on the Company’s operations.
Although we were not directly impacted by these bank failures, the resulting speed and with which news, including social media outlets, led depositors to withdraw or attempt to withdraw funds from these and other financial institutions, as well as the volatile impact to stock prices, could have a material effect on the Company’s operations.
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.
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 loan losses and a reserve for unfunded loan commitments.
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.
Since we commence d our banking business in 2004, we have grown our banking franchise and now have twenty locations in Colorado, Arizona, Wyoming, Montana, and California including a centralized operations center in downtown Denver.
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.
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.
A decline in the fair value of the assets under management caused by a decline in general economic conditions would decrease our wealth management fee income. Investment performance is one of the most important factors in retaining existing clients and competing for new wealth management clients.
A decline in the fair value of the assets under management caused by a decline in general economic conditions would decrease our wealth management fee income. 35 Table of Contents Investment performance is one of the most important factors in retaining existing clients and competing for new wealth management clients.
Risks Related to Our Regulatory Environment – The financial services industry is highly regulated and our failure to comply with any current or future regulation may adversely affect us. – 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. – We are subject to stringent capital requirements. – The level of our commercial real estate loan portfolio may subject us to heightened regulatory scrutiny. – We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions. – We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations. – Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. – We can be subject to legal and regulatory proceedings, investigations and inquiries related to conduct risk.
Risks Related to Our Regulatory Environment – The financial services industry is highly regulated and our failure to comply with any current or future regulation may adversely affect us. – 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. – We are subject to stringent capital requirements. – The level of our commercial real estate loan portfolio may subject us to heightened regulatory scrutiny. – We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions. – We face a risk of noncompliance and enforcement action with Anti-Money Laundering and Combating the Financing of Terrorism ("AML/CFT") laws and regulations. – Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. – We can be subject to legal and regulatory proceedings, investigations and inquiries related to conduct risk.
Summary 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.
Summary 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 – The development and use of Artificial Intelligence ("AI") presents risks and challenges that may adversely impact the Company’s business. – 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 37.8% 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. – Fraud, breaches of our information security, and cybersecurity attacks could adversely affect us. 30 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. – 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. – Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations.
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.
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. 33 Table of Contents 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 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.
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 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.
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, 2024, 81.2% of the loans in our loan portfolio were made to borrowers who live in or conduct business in those states.
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.
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. 32 Table of Contents Real estate values in many of our markets have generally experienced periods of fluctuation over the last five years.
The future effects of a pandemic on economic activity could negatively affect the future banking products we provide including the ability to sell mortgage loan that we originate with the intent to sell. • Operational Risk .
The future effects of a pandemic on economic activity could negatively affect the future banking products we provide including the ability to sell mortgage loan that we originate with the intent to sell. 42 Table of Contents • Operational Risk .
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.
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 Montana, and California, leading to significant exposure to those markets.
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.
Any of these occurrences could have a material adverse effect on our business, financial condition, results of operations and prospects. 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.
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.
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 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.
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, 2024, 32.0% 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.
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.
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.
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.
Our largest trust client accounts for 37.8% of our total assets under management. As of December 31, 2024, our largest trust client accounted for, in the aggregate, 37.8% of our total assets under management and 3.8% of our non-interest income.
Recent market volatility has adversely impacted the value of our assets under management. We derive a significant amount of our revenues primarily from investment management fees based on assets under management. As such, fluctuations in the equity and debt markets can have a direct impact upon our net earnings.
We derive a significant amount of our revenues primarily from investment management fees based on assets under management. As such, fluctuations in the equity and debt markets can have a direct impact upon our net earnings.
If those systems and review processes prove to be ineffective in identifying and managing risks, or testing scenarios reveal real-life failures of technology, we could be subjected to increased regulatory scrutiny and regulatory restrictions could be imposed on our business, including on our potential future business lines, as a result of which our business and operating results could be adversely affected.
If those systems and review processes prove to be ineffective in identifying and managing risks, or testing scenarios reveal real-life failures of technology, we could be subjected to increased regulatory scrutiny and regulatory restrictions could be imposed on our business, including on our potential future business lines, as a result of which our business and operating results could be adversely affected. 41 Table of Contents New lines of business or new products and services may subject us to additional risks.
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.
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.
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.
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. 43 Table of Content s Our ability to attract and retain clients and key associates could be adversely affected if our reputation is harmed.
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.
We may experience operational challenges in connection with the adoption of or failure to adopt, new technology, such as artificial intelligence, which could result in unintended consequences or expenses as a result of the technology's limitations, our failure to use new technology effectively or at all, not fully realizing the anticipated benefits from such new technology, or the cost to implement or remedy any challenges associated with the adoption of new technology in a timely manner.
We may experience operational challenges in connection with the adoption of or failure to adopt new technology, which could result in unintended consequences or expenses as a result of the technology's limitations, our failure to use new technology effectively or at all, not fully realizing the anticipated benefits from such new technology, or the cost to implement or remedy any challenges associated with the adoption of new technology in a timely manner. 36 Table of Contents The development and use of AI presents risks and challenges that may adversely impact the Company’s business.
New lines of business or new products and services may subject us to additional risks. From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts.
From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts. We may invest significant time and resources in developing and marketing new lines of business or new products and services.
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, 2024, approximately $1.91 billion, or 78.9%, of our total loans were loans with real estate as a primary or secondary component of collateral.
If we are unable to compete effectively with those banking or other financial services businesses, we could find it more difficult to attract new and retain existing clients and our net interest margins, net interest income and investment management fees could decline, which would materially adversely affect our business, results of operations and prospects, and could cause us to incur losses in the future.
If we are unable to compete effectively with those banking or other financial services businesses, we could find it more difficult to attract new and retain existing clients and our net interest margins, net interest income and investment management fees could decline, which would materially adversely affect our business, results of operations and prospects, and could cause us to incur losses in the future. 38 Table of Contents In addition, our ability to successfully attract and retain investment advisory and wealth management clients is dependent on our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities.
For the year ended December 31, 2023, non-interest income represented approximately 26.5% of our total income before non-interest expense.
For the year ended December 31, 2024, non-interest income represented approximately 30.7% of our total income before non-interest expense.
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.
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.
The federal Bank Secrecy Act, Title III of the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate.
The Anti-Money Laundering Act of 2020 (AML Act) and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering and combating the financing of terrorism programs and file suspicious activity and currency transaction reports as appropriate.
The recognition of a significant charge to earnings in our consolidated financial statements resulting from any impairment of our goodwill or other intangible assets could have a material adverse effect on our financial condition and results of operations.
The recognition of a significant charge to earnings in our consolidated financial statements resulting from any impairment of our goodwill or other intangible assets could have a material adverse effect on our financial condition and results of operations. 39 Table of Contents 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.
In addition, the cost and operational consequences of responding to breaches and implementing remediation measures could be significant. The Company also experiences and responds to cybersecurity threats. Although we have not experienced a material cybersecurity event to date, there is no assurance that there will not be a cybersecurity attack resulting in material adverse effect in the future.
The Company also experiences and responds to cybersecurity threats. 40 Table of Contents Although we have not experienced a material cybersecurity event to date, there is no assurance that there will not be a cybersecurity attack resulting in material adverse effect in the future.
Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from or, in some cases, our business decisions may result in, a delay in our taking certain remediation actions, such as foreclosure. In addition, we have unfunded commitments to extend credit to clients, which are generally not drawn upon.
Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from or, in some cases, our business decisions may result in, a delay in our taking certain remediation actions, such as foreclosure. • Strategic Risk .
Recent events relating to the failures of certain banking entities in March and April of 2023 have caused general uncertainty regarding the adequacy of liquidity of banks, in particular regional banks which in turn has generated significant market volatility among publicly traded bank holding companies.
Bank failures in 2023 caused general uncertainty regarding the adequacy of liquidity of banks, in particular regional banks, which in turn generated significant market volatility among publicly traded bank holding companies.
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.
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.
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.
As of December 31, 2024, our directors and executive officers beneficially owned an aggregate of 1,459,535 shares, or approximately 15.0% of our shares of common stock.
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 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.
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.
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, 2024, our CRE 1 Concentration level was 115.5% and our CRE 2 Concentration level was 225.9%.
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 .
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. • Trust and Investment Management Risk. Recent market volatility has adversely impacted the value of our assets under management.
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.
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.
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 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 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.
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.
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.
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.
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.
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.
A sustained decline in the value of the assets that we manage or otherwise administer or service for others, could have an adverse effect on related fee income and demand for our services. Economic and trade sanctions against targeted foreign countries and regimes could adversely affect us. The U.S.
A sustained decline in the value of the assets that we manage or otherwise administer or service for others, could have an adverse effect on related fee income and demand for our services. Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and 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.
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.
Risks Related to Our Regulatory Environment The financial services industry is highly regulated, and legislative or regulatory actions taken now or in the future may have a significant adverse effect on our operations.
Our general business strategy may be adversely affected by any such economic downturn, volatile business environment, hostile third-party action or continued unpredictable and unstable market conditions. Risks Related to Our Regulatory Environment The financial services industry is highly regulated, and legislative or regulatory actions taken now or in the future may have a significant adverse effect on our operations.
In addition, we may issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments and pursuant to compensation and incentive plans.
The issuance of any shares of our common stock in the future also would, and equity-related securities could, dilute the percentage ownership interest held by shareholders prior to such issuance. 49 Table of Contents In addition, we may issue shares of our common stock or other securities from time to time as consideration for future acquisitions and investments and pursuant to compensation and incentive plans.
Such an occurrence could negatively impact our ability to retain existing or attract new clients and, as a result, could have a material adverse effect on our business, financial condition, results of operations and prospects.
Such an occurrence could negatively impact our ability to retain existing or attract new clients and, as a result, could have a material adverse effect on our business, financial condition, results of operations and prospects. 34 Table of Contents The investment management contracts we have with our clients are terminable without cause and on relatively short notice by our clients, which makes us vulnerable to short-term declines in the performance of the securities under our management.
Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.
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.
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.
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. 44 Table of Contents We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
We derive a significant amount of our revenues primarily from investment management fees based on assets under management.
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.
Removed
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. 36 Table of Content s We may be adversely affected by the soundness of certain securities brokerage firms. We do not provide custodial services for our clients.
Added
The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to the Company’s business.
Removed
The investment management contracts we have with our clients are terminable without cause and on relatively short notice by our clients, which makes us vulnerable to short-term declines in the performance of the securities under our management.
Added
The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI.
Removed
In addition, our ability to successfully attract and retain investment advisory and wealth management clients is dependent on our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities.
Added
These evolving laws and regulations could require changes in the Company’s implementation of AI technology and increase the Company’s compliance costs and risk of non-compliance.
Removed
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.
Added
AI models, particularly generative AI models, may produce output or take actions that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful.
Removed
We may invest significant time and resources in developing and marketing new lines of business or new products and services.
Added
In addition, the complexity of many AI models makes it difficult to understand why they are generating particular opinions.
Removed
Our financial results could be adversely affected if the financial statements, collateral value or other financial information provided by clients or counterparties are incorrect. 44 Table of Content s The risk of another pandemic could adversely impact our business and financial results. • Credit Risk .
Added
This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding, monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made.
Removed
During a challenging economic environment, such as an ongoing pandemic, our clients are more dependent on our credit commitments and increased borrowings under these commitments could adversely impact our liquidity. • Strategic Risk .
Added
Further, the Company may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which the Company may have limited visibility.
Removed
In response to a pandemic, we may modify our business practices and, from time to time, our employees may work remotely from their homes to have our operations uninterrupted as much as possible.
Added
Any of these risks could expose the Company to liability or adverse legal or regulatory consequences and harm the Company’s reputation and the public perception of its business or the effectiveness of its security measures. Liquidity risk could adversely affect our ability to fund operations and hurt our financial condition.
Removed
Further, technology in employees’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than in our offices, the continuation of these work-from-home measures introduces additional operational risk, especially including increased cybersecurity risk.
Added
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFor more information on our cybersecurity related risks, see Item 1A Risk Factors. Governance The Company’s information security officer ("ISO") leads the Company’s overall cybersecurity function and currently reports to our Chief Operations Officer. The Company's current ISO has formal education in information technology and extensive work experience gained from over 10+ years in various technology leadership roles.
Biggest changeFor more information on our cybersecurity related risks, see Item 1A Risk Factors. Governance The Company’s information security officer ("ISO") leads the Company’s overall cybersecurity function and reports to our Chief Risk Officer ("CRO"). The Company's CRO has 30 years of experience in banking and risk management and has experience in various technology oversight roles.
The Company leverages recognized security frameworks and guidelines, such as the National Institute of Standards and Technology Framework Cybersecurity Framework and Federal Financial Institution Examination Counsel ("FFIEC") guidelines, to organize, assess, and improve our Program.
The Company leverages recognized security frameworks and guidelines, such as the National Institute of Standards and Technology Framework Cybersecurity Framework and Federal Financial Institution Examination Counsel ("FFIEC") guidelines, to organize, assess, and improve the Program.
Our Board of Directors (the “Board”) considers cybersecurity risk as part of its risk management oversight function and has delegated to the Audit Committee oversight of cybersecurity risks. The Audit Committee receives updates from the ISO and other Company management on cybersecurity matters at least annually.
Our Board of Directors (the “Board”) considers cybersecurity risk as part of its risk management oversight function and has delegated to the Audit Committee oversight of cybersecurity risks. The Audit Committee receives updates from the CRO and other Company management on cybersecurity matters at least annually.
In addition, any cybersecurity incident assessed as being, or potentially becoming, material is escalated for further assessment and then reported to designated members of our senior management and, if necessary, the Audit Committee. 54 Table of Content s
In addition, any cybersecurity incident assessed as being, or potentially becoming, material is escalated for further assessment and then reported to designated members of our senior management and, if necessary, the Audit Committee. 51 Table of Contents
Our executive leadership team is actively engaged in the oversight and strategic direction of our Program and meets with the ISO to review and discuss the Company’s Program, including emerging cybersecurity risks, threats, and industry trends.
Our ISO works with stakeholders across the Company, including with our technology group, to maintain the cybersecurity program. Our executive leadership team is actively engaged in the oversight and strategic direction of our Program and meets with the CRO to review and discuss the Company’s Program, including emerging cybersecurity risks, threats, and industry trends.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeCollins, Greenwood Village, and Loveland, in addition to single locations in Phoenix, Arizona and Cheyenne, Wyoming; and one trust office located in in Century City, California . We o wn our Wyoming locations in Jackson Hole, Pinedale, and Rock Springs, while all remaining locations are leased.
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
Collins (2) Greenwood Village (2) Northern Colorado Vail Valley Broomfield Loveland (2) _____________________________ (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 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.
The chart below describes our locations, which we believe are strategically located in affluent and high-growth markets in twenty 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 Cheyenne (2) Denver Tech Center / Cherry Hills 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.
Including our corporate headquarters, the Bank ope rates twenty 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; five loan production offices with three Colorado locations in Ft.
Added
W e believe that our facilities are suitable and adequate to meet our present needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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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.
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 86 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities 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.
Biggest changeSecurities 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 2025 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, 2024, 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 454,808 $ 25.30 468,753 Equity compensation plans not approved by shareholders — — — Total 454,808 468,753 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 (2) October 1, 2024 through October 31, 2024 — $ — — 194,499 November 1, 2024 through November 30, 2024 1,233 20.41 — 194,499 December 1, 2024 through December 31, 2024 — — — 194,499 _____________________________ (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.
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.
Holders of Record As of March 5, 2025, there were approximately 119 ho lders 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.
Net settlements represent instances where employees elect to satisfy their income tax liability related to the vesting of restricted stock through the surrender of a proportionate number of the vested shares to the Company.
They were purchased at an average price paid per share of $20.41. Net settlements represent instances where employees elect to satisfy their income tax liability related to the vesting of restricted stock through the surrender of a proportionate number of the vested shares to the Company. (2) These shares relate to the 2024 Repurchase Plan.
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Refer to Note 11 - Shareholders' Equity for further information.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe contractual maturity ranges of loans in our loan portfolio and the amount of such loans with fixed and floating interest rates in each maturity range, excluding deferred fees, and unamortized premiums/(unaccreted discounts), as of the dates noted, are summarized in the following tables: As of December 31, 2023 (Dollars in thousands) One Year or Less One Through Five Years Five Through Fifteen Years After Fifteen Years Total Cash, Securities, and Other $ 70,558 (1) $ 67,101 (1) $ 1,611 $ 677 $ 139,947 Consumer and Other 18,425 6,175 1,206 1,222 27,028 Construction and Development 106,993 180,210 51,253 7,060 345,516 1-4 Family Residential 43,275 172,349 34,053 678,288 927,965 Non-Owner Occupied CRE 34,328 334,516 161,669 13,179 543,692 Owner Occupied CRE 13,491 93,844 79,610 8,916 195,861 Commercial and Industrial 120,061 187,240 29,879 — 337,180 Total loans $ 407,131 $ 1,041,435 $ 359,281 $ 709,342 $ 2,517,189 Loans accounted for under the fair value option 105 13,163 458 — 13,726 Total loans $ 407,236 $ 1,054,598 $ 359,739 $ 709,342 $ 2,530,915 Amounts with fixed rates 141,485 699,578 235,132 23,903 1,100,098 Amounts with floating rates 265,751 355,020 124,607 685,439 1,430,817 Total loans $ 407,236 $ 1,054,598 $ 359,739 $ 709,342 $ 2,530,915 _____________________________ (1) Includes PPP loans.
Biggest changeCredit policies are robust and are updated as needed to meet the strategic and risk mitigation goals of the company. 72 Table of Contents The contractual maturity ranges of loans in our loan portfolio and the amount of such loans with fixed and floating interest rates in each maturity range, at amortized cost as of the dates noted, are summarized in the following tables: As of December 31, 2024 (dollars in thousands) One Year or Less One Through Five Years Five Through Fifteen Years After Fifteen Years Total Cash, Securities, and Other $ 40,409 (1) $ 76,386 (1) $ 2,376 $ 663 $ 119,834 Consumer and Other 10,129 5,430 712 1,211 17,482 Construction and Development 120,043 187,101 124 7,213 314,481 1-4 Family Residential 99,641 141,450 26,106 695,704 962,901 Non-Owner Occupied CRE 123,471 403,385 71,889 12,494 611,239 Owner Occupied CRE 11,903 97,600 54,942 7,574 172,019 Commercial and Industrial 91,564 84,459 44,303 — 220,326 Total loans $ 497,160 $ 995,811 $ 200,452 $ 724,859 $ 2,418,282 Loans accounted for under the fair value option (2) 257 6,895 131 — 7,283 Total loans $ 497,417 $ 1,002,706 $ 200,583 $ 724,859 $ 2,425,565 Amounts with fixed rates 220,192 650,979 100,903 31,371 1,003,445 Amounts with floating rates 277,225 351,727 99,680 693,488 1,422,120 Total loans $ 497,417 $ 1,002,706 $ 200,583 $ 724,859 $ 2,425,565 As of December 31, 2023 (dollars in thousands) One Year or Less One Through Five Years Five Through Fifteen Years After Fifteen Years Total Cash, Securities, and Other $ 70,558 (1) $ 67,101 (1) $ 1,611 $ 677 $ 139,947 Consumer and Other 18,425 6,175 1,206 1,222 27,028 Construction and Development 106,993 180,210 51,253 7,060 345,516 1-4 Family Residential 43,275 172,349 34,053 678,288 927,965 Non-Owner Occupied CRE 34,328 334,516 161,669 13,179 543,692 Owner Occupied CRE 13,491 93,844 79,610 8,916 195,861 Commercial and Industrial 120,061 187,240 29,879 — 337,180 Total loans $ 407,131 $ 1,041,435 $ 359,281 $ 709,342 $ 2,517,189 Loans accounted for under the fair value option (2) 105 13,163 458 — 13,726 Total loans $ 407,236 $ 1,054,598 $ 359,739 $ 709,342 $ 2,530,915 Amounts with fixed rates 141,485 699,578 235,132 23,903 1,100,098 Amounts with floating rates 265,751 355,020 124,607 685,439 1,430,817 Total loans $ 407,236 $ 1,054,598 $ 359,739 $ 709,342 $ 2,530,915 _____________________________ (1) Includes PPP loans.
Interest income is primarily impacted by loan growth and loan repayments, along with changes in interest rates on the loans. Interest expense is primarily impacted by changes in deposit balances, changes in interest rates on deposits, along with the volume and type of interest-bearing liabilities.
Interest income is primarily impacted by loan growth and loan repayments, along with changes in interest rates on the loans. Interest expense is primarily impacted by changes in deposit balances, changes in interest rates on deposits, and the volume and type of interest-bearing liabilities.
The management team and credit culture demands prudent, practical, and conservative approaches to all credit requests in compliance with the loan policy guidelines to ensure strong credit underwriting practices. In addition to originating loans for our own portfolio, we conduct mortgage banking activities in which we originate and sell, servicing-released, whole loans in the secondary market.
The management team and credit culture demands prudent, practical, and conservative approaches to all credit requests in compliance with the credit policy guidelines to ensure strong credit underwriting practices. In addition to originating loans for our own portfolio, we conduct mortgage banking activities in which we originate and sell, servicing-released, whole loans in the secondary market.
ACL - held-to-maturity securities: Held-to maturity securities are carried at amortized cost when management has the positive intent and ability to hold them to maturity. The majority of our held-to-maturity investment portfolio consists of securities issues by U.S. government entities and agencies.
ACL - held-to-maturity debt securities: Held-to-maturity debt securities are carried at amortized cost when management has the positive intent and ability to hold them to maturity. The majority of our held-to-maturity investment portfolio consists of securities issues by U.S. government entities and agencies.
Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts.
Loans are charged off against the allowance when management believes the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts.
As of December 31, 2023 and December 31, 2022, the Company was in compliance with the covenant requirements. Derivatives Cash Flow Hedges : On March 21, 2023, the Company executed an interest rate swap with a notional amount that was designated as a cash flow hedge of certain Federal Home Loan Bank borrowings.
As of December 31, 2024 and 2023, the Company was in compliance with the covenant requirements. Derivatives Cash Flow Hedges : On March 21, 2023, the Company executed an interest rate swap with a notional amount that was designated as a cash flow hedge of certain Federal Home Loan Bank borrowings.
The swap hedges the benchmark index (SOFR) with a receive float/pay fixed swap for the period March 21, 2023 through April 1, 2026. The notional amount of the interest rate swap as of December 31, 2023 was $50.0 million .
The swap hedges the benchmark index (SOFR) with a receive float/pay fixed swap for the period March 21, 2023 through April 1, 2026. The notional amount of the interest rate swap as of December 31, 2024 and 2023 was $50.0 million .
We have identified our Allowance for Credit Losses ("ACL"), Goodwill, and Fair Value Measurement as being critical because our policies require management to use significant judgement and use subjective and complex measurements about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.
We have identified our Allowance for Credit Losses ("ACL") and Goodwill as being critical because our policies require management to use significant judgement and use subjective and complex measurements about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions.
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.
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.
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.
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.
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.
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.
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.
Contractual maturities may differ from expected maturities because issuers can have the right to call or prepay obligations without penalties. Our debt securities 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, 2024.
Occupancy and equipment costs are primarily impacted by the number of locations we occupy. • Professional services —costs related to legal, accounting, tax, consulting, personnel recruiting, insurance and other outsourcing arrangements. Professional services costs are primarily impacted by corporate activities requiring specialized services.
Occupancy and equipment costs are primarily impacted by the number of locations we occupy. 56 Table of Contents • Professional services —costs related to legal, accounting, tax, consulting, personnel recruiting, insurance and other outsourcing arrangements. Professional services costs are primarily impacted by corporate activities requiring specialized services.
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.
From 2004, when we opened our first profit center, until December 31, 2024, we have expanded our footprint into fourteen full service profit centers, five loan production offices, and one trust office located across five states.
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.
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.
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.
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.
The Company's non-government backed securities include private label CMO and MBS and bank subordinated debt. Private label refers to private institutions such as brokerage firms, banks, and home builders, that also securitize mortgages. 80 Table of Content s Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type.
The Company's non-government backed securities include private label CMO and MBS and bank subordinated debt. Private label refers to private institutions such as brokerage firms, banks, and home builders, that also securitize mortgages. Management measures expected credit losses on held-to-maturity debt securities on a collective basis by major security type.
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.
Weighted average yields are not presented on a taxable equivalent basis. Maturity as of December 31, 2024 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 Debt securities held-to-maturity: U.S.
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.
As of December 31, 2024 and 2023, 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.
(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.
(8) Net interest margin is equal to net interest income divided by average interest-earning assets. 59 Table of Contents 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.
(2) Includes $13.7 million and $23.3 million of loans held for investment accounted for under fair value option as of December 31, 2023 and 2022, respectively. 79 Table of Content s Allowance for Credit Losses on Loans On January 1, 2023, the Company adopted the new CECL standard, ASU 2016-13, using the modified retrospective method for all financial assets measured at amortized cost.
(2) Includes $7.3 million and $13.7 million of loans held for investment accounted for under the fair value option as of December 31, 2024 and 2023, respectively. Allowance for Credit Losses on Loans On January 1, 2023, the Company adopted the new CECL standard, ASU 2016-13, using the modified retrospective method for all financial assets measured at amortized cost.
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.
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 $7.5 million and $14.1 million as of December 31, 2024 and 2023, respectively. • Construction and Development —consists of loans to finance the construction of residential and non-residential properties.
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.
The following tables present the amortized cost and estimated fair value of our debt securities as of the dates noted: December 31, 2024 (dollars in thousands) Amortized Cost Gross Unrecognized Gains Gross Unrecognized Losses Fair Value Allowance for Credit Losses Debt securities held-to-maturity: U.S.
The accrual of interest on loans is discontinued at the time the loan becomes 90 or more days delinquent unless the loan is well secured and in the process of collection or renewal due to maturity. Past due status is based on the contractual terms of the loan.
Non-Performing Assets Non-performing assets include non-accrual loans and OREO. The accrual of interest on loans is discontinued at the time the loan becomes 90 or more days delinquent unless the loan is well secured and in the process of collection or renewal due to maturity. Past due status is based on the contractual terms of the loan.
The notional amount of interest rate swaps with its loan customers as of December 31, 2023 was $30.3 million . While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.
The notional amount of interest rate swaps with its loan customers as of December 31, 2024 and 2023 was $70.4 million and $30.3 million, respectively . While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.
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.
As of December 31, 2024, the Compan y has $7.3 million in loans accounted for under the fair value option with an unpaid principal balance of $7.5 million. As of December 31, 2023, the Company had $13.7 million in loans accounted for under the fair value option with an unpaid principal balance $14.1 million.
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.
PPP loans that are fully guaranteed by the SBA are classified within this line item and had balances of $2.0 million and $4.2 million as of December 31, 2024 and 2023, respectively. • Consumer and Other— consists of unsecured consumer loans.
Marketing costs are primarily impacted by the levels of advertising programs and other marketing activities and events held throughout the year. • Amortization of other intangible assets —primarily represents the amortization of intangible assets including client lists, core deposit intangibles, and other similar items recognized in connection with acquisitions. • Other —includes costs related to operational expenses associated with office supplies, postage, travel expenses, meals and entertainment, dues and memberships, costs to maintain or prepare other real estate owned ("OREO") for sale, director compensation and travel, and other general corporate expenses that do not fit within one of the specific non-interest expense lines described above.
Marketing costs are primarily impacted by the levels of advertising programs and other marketing activities and events held throughout the year. • Amortization of other intangible assets —primarily represents the amortization of intangible assets including client lists, core deposit intangibles, and other similar items recognized in connection with acquisitions. • Other —includes costs related to operational expenses associated with office supplies, postage, travel expenses, meals and entertainment, dues and memberships, costs to maintain or prepare other real estate owned ("OREO") for sale, changes in OREO valuations subsequent to the initial acquisition when updated fair values are lower than the cost basis, director compensation and travel, and other general corporate expenses that do not fit within one of the specific non-interest expense lines described above.
(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.
(2) Excludes average outstanding balances of mortgage loans held for sale of $18.0 million and $11.5 million for the years ended December 31, 2024 and 2023, respectively. Excludes average outstanding balances of loans held for investment under the fair value option of $10.6 million and $18.5 million for the years ended December 31, 2024 and 2023, respectively.
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.
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, 2024 and 2023, we recorded $1.9 million and $10.4 million Provision for credit losses, respectively.
Loans not meeting any of the three criteria above are considered to be pass-rated loans. 78 Table of Content s As of December 31, 2023 and December 31, 2022, non-performing loans of $50.8 million and $12.1 million, respectively, were included in the substandard category in the table below.
Loans not meeting any of the three criteria above are considered to be pass-rated loans. 75 Table of Contents As of December 31, 2024 and 2023, non-performing loans of $12.8 million and $50.8 million, respectively, were included in the substandard category in the table below.
The following table presents the changes in the ACL on unfunded loan commitments: December 31, 2023 Amount % Beginning balance $ 419 19.2 % Impact of adopting ASU 2016-13 3,481 159.8 (Release) provision for credit losses (1,722) (79.1) Ending balance $ 2,178 100.0 % Deferred Tax Assets, Net Deferred tax assets, net of our valuation allowance, represent the differences in timing of when items are recognized for GAAP purposes and when they are recognized for tax purposes, as well as our net operating losses.
The following table presents the changes in the ACL on unfunded loan commitments: December 31, (dollars in thousands) 2024 2023 Beginning balance $ 2,178 $ 419 Impact of adopting ASU 2016-13 — 3,481 Release of credit losses (1,506) (1,722) Ending balance $ 672 $ 2,178 Deferred Tax Assets, Net Deferred tax assets, net of our valuation allowance, represent the differences in timing of when items are recognized for GAAP purposes and when they are recognized for tax purposes, as well as our net operating losses.
Our Mortgage segment consists of operations relating to the Company’s residential mortgage service offerings. Services provided by our mortgage segment include soliciting, originating, and selling mortgage loans into the secondary market. Mortgage products are financial in nature for which origination fees are recognized net of origination expenses, upon the funding of the mortgage loans.
Services provided by our mortgage segment include soliciting, originating, and selling mortgage loans into the secondary market. Mortgage products are financial in nature for which origination fees are recognized net of origination expenses, upon the funding of the mortgage loans.
Events that may trigger goodwill impairment include deterioration in economic conditions, increased competitive environment, negative trends in overall financial performance, legal or regulatory proceedings, loss of key personnel, and change in strategy or sustained decreases in share value.
Events that may trigger goodwill impairment include deterioration in economic conditions, increased competitive environment, negative trends in overall financial performance, legal or regulatory proceedings, loss of key personnel, and change in strategy or sustained decreases in share value. We performed a qualitative goodwill assessment as of October 31, 2024.
Segment Reporting We have two reportable operating segments: Wealth Management and Mortgage. Our Wealth Management segment consists of operations relating to the Company’s fully integrated wealth management products and services. Services provided include deposit, loan, insurance, and trust and investment management advisory products and services for which fee revenue is recognized.
Our Wealth Management segment consists of operations relating to the Company’s fully integrated wealth management products and services. Services provided include deposit, loan, insurance, and trust and investment management advisory products and services for which fee revenue is recognized.
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.
The collateral pledged as of December 31, 2024 and 2023 amounted to $1.30 billion and $1.31 billion, respectively. Based on this collateral and the Company’s holdings of FHLB stock, the Company was eligible to borrow an additional $582.0 million as of December 31, 2024.
CECL requires an allowance for credit losses on all portfolio loans including purchased loans without credit deterioration. As of December 31, 2023, the Company held $208.2 million in acquired loans with $2.0 million in allowance for credit losses as well as $3.9 million in unamortized discounts.
CECL requires an allowance for credit losses on all portfolio loans including purchased loans without credit deterioration. As of December 31, 2024, the Company held $164.3 million in acquired loans with $1.4 million in allowance for credit losses as well as $4.0 million in unamortized net discounts.
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.
The following table presents balances of each of the borrowing facilities as of the dates noted: December 31, (dollars in thousands) 2024 2023 Borrowings FHLB borrowings $ 55,000 $ 91,175 Federal Reserve borrowings 2,038 34,536 Subordinated notes 52,565 52,340 Total $ 109,603 $ 178,051 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.
Management will continue evaluating the economic conditions at future reporting periods for triggering events. Goodwill totaled $30.4 million as of December 31, 2023 and 2022. As of December 31, 2023 and 2022, there has not been any impairment of goodwill identified or recorded. See Note 6 – Goodwill and Other Intangible Assets for further information on Goodwill.
Management will continue evaluating the economic conditions at future reporting periods for triggering events. Goodwill totaled $30.4 million as of December 31, 2024 and 2023. As of December 31, 2024 and 2023, there has not been any impairment of goodwill identified or recorded.
The primary factors we use to evaluate our results of operations include net interest income, non-interest income and non-interest expense. 58 Table of Content s Net Interest Income Net interest income represents interest income less interest expense. We generate interest income on interest-earning assets, primarily loans and investment securities.
The primary factors we use to evaluate our results of operations include net interest income, non-interest income and non-interest expense. 55 Table of Contents Net Interest Income Net interest income represents interest income less interest expense. We generate interest income on interest-earning assets, primarily loans and investment securities. We incur interest expense on interest-bearing liabilities, primarily interest-bearing deposits and borrowings.
The majority of our assets and liabilities are on the Wealth Management segment balance sheet and the decrease in income before taxes is primarily attributable to a decrease in net interest income, after provision for credit losses.
The majority of our assets and liabilities are on the Wealth Management segment balance sheet and the increase in Income before taxes is primarily attributable to an increases in Net interest income, after provision for credit losses and Non-interest income, partially offset by increases in Non-interest expense.
See Note 16 – Fair Value in the Notes to Consolidated Financial Statements. 73 Table of Content s As of December 31, 2023 , the Company has $4.2 million in PPP loans outstanding with $0.1 million in remaining fees to be recognized.
See Note 16 – Fair Value in the Notes to the Consolidated Financial Statements. As of December 31, 2024 , the Company has $2.0 million in PPP loans outstanding with $40 thousand in remaining fees to be recognized.
Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-maturity portfolio into the following major security types: Corporate bonds and Corporate CMO.
Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
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").
As of and for the year ended December 31, 2024, we had $2.92 billion in total assets, $90.1 million in total revenues, and provided fiduciary and advisory services on $7.32 billion of assets under management ("AUM").
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.
The following table presents our regulatory capital ratios for the dates noted: December 31, 2024 December 31, 2023 (dollars in thousands) Amount Ratio Amount Ratio Tier 1 capital to risk-weighted assets Bank $ 256,419 11.41 % $ 244,390 10.54 % Consolidated 226,244 10.07 218,150 9.40 CET1 to risk-weighted assets Bank 256,419 11.41 244,390 10.54 Consolidated 226,244 10.07 218,150 9.40 Total capital to risk-weighted assets Bank 271,981 12.10 265,391 11.45 Consolidated 294,807 13.12 292,151 12.59 Tier 1 capital to average assets Bank 256,419 8.94 244,390 8.71 Consolidated 226,244 7.88 218,150 7.77 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.
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%.
For the year ended December 31, 2024, our net interest margin was 2.37% and our net interest spread was 1.50%. For the year ended December 31, 2023, our net interest margin was 2.62% and our net interest spread was 1.71%.
Potential changes in any one economic variable may or may not affect the overall allowance because a variety of economic variables and inputs are considered in estimating the allowance, and changes in those variables and inputs may not occur at the same rate, may not be consistent across product types and may have offsetting impacts to other changing variables and inputs. 89 Table of Content s Additionally, our ACL model adjusts for qualitative factors in addition to historical information and our economic forecast.
Potential changes in any one economic variable may or may not affect the overall allowance because a variety of economic variables and inputs are considered in estimating the allowance, and changes in those variables and inputs may not occur at the same rate, may not be consistent across product types and may have offsetting impacts to other changing variables and inputs.
GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported and include the following; (i) principal forgiveness, (ii) interest rate reduction, (iii) other than insignificant payment delay, (iv) term extension, or (v) any combination of the foregoing.
(2) Loans accounted for under the fair value option are disclosed at fair value rather than amortized cost 73 Table of Contents Loan Modifications GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported and include the following; (i) principal forgiveness, (ii) interest rate reduction, (iii) other than insignificant payment delay, (iv) term extension, or (v) any combination of the foregoing.
Total average deposits for the year ended December 31, 2023 were $2.36 billion, an increase of $140.5 million, or 6.3%, compared to $2.22 billion as of December 31, 2022.
Total average deposits for the year ended December 31, 2024 were $2.44 billion, an increase of $78.2 million, or 3.3%, compared to $2.36 billion for the year ended December 31, 2023.
Management considered factors that are likely to cause estimated credit losses and differ from historical loss experience. The factors management reviews include acquired loan underwriting, residential mortgage debt-to-income, macroeconomic factors, concentration of our loan portfolio, negative probability of default, classified loan trends, non-core loans, loan to value ratios, and CRE exposure.
The factors management reviews include acquired loan underwriting, residential mortgage debt-to-income, macroeconomic factors, concentration of our loan portfolio, negative probability of default, classified loan trends, non-core loans, loan to value ratios, and CRE exposure.
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.
(dollars in thousands) As of and for the Year Ended December 31, 2024 Short-term borrowings Maximum outstanding at any month-end during the period $ 178,712 Balance outstanding at end of period 55,000 Average outstanding during the period 51,250 Average interest rate during the period 5.23 % Average Interest rate at the end of the period 4.83 The Bank has borrowing capacity associated with two unsecured federal funds lines of credit up to $10 million and $19 million.
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 .
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, 2024 compared with the year ended December 31, 2023 .
(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.
(4) Includes $0.6 million of pr incipal balance of loans held for sale as of December 31, 2024. • 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.
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.
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: Average Percentage for the Year Ended December 31, 2024 2023 Sources of Funds: Deposits: Noninterest-bearing 14.55 % 18.12 % Interest-bearing 71.21 65.79 FHLB and Federal Reserve borrowings 2.42 4.71 Subordinated notes 1.85 1.85 Other liabilities 1.25 0.88 Shareholders’ equity 8.72 8.65 Total 100.00 % 100.00 % Uses of Funds: Total loans 84.75 % 87.21 % Investment securities 2.69 2.81 Correspondent bank stock 0.19 0.29 Mortgage loans held for sale 0.63 0.41 Loans held at fair value 0.37 0.66 Interest-bearing deposits in other financial institutions 6.01 4.17 Noninterest-earning assets 5.36 4.45 Total 100.00 % 100.00 % Average noninterest-bearing deposits to total average deposits 16.97 % 21.59 % Average loans to total average deposits 99.78 104.85 Average interest-bearing deposits to total average deposits 83.03 78.41 Our primary source of funds is interest-bearing and noninterest-bearing deposits, and our primary use of funds is loans.
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.
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.
We are subject to various regulatory capital adequacy requirements at a consolidated level and the bank level. These requirements are administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements.
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.
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, 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.
As of December 31, 2024 and 2023, 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. As we continue to grow our operations and maintain capital requirements, our regulatory capital levels may decrease depending on our level of earnings.
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.
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 $9.6 million , or 3.9%, to $252.3 million as of December 31, 2024 compared to December 31, 2023.
(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.
(2) Includes $7.5 million and $14.1 million of unpaid principal balance of loans held for investment accounted for under the fair value option as o f December 31, 2024 and 2023, respectively. (3) Include s $25.2 million and $7.1 million of u npaid principal balance of mortgage loans held for sale as of December 31, 2024 and 2023, respectively.
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.
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.
Treasury debt $ 253 * % $ — — % $ — — % $ — — % Corporate bonds — — 4,078 0.30 19,395 1.23 214 0.01 GNMA mortgage-backed securities – residential — — 66 * — — 34,513 1.14 FNMA mortgage-backed securities – residential — — — — 1,116 0.02 4,919 0.13 Government CMO and MBS – commercial — — 178 0.01 1,579 0.07 4,079 0.13 Corporate CMO and MBS — — — — 415 0.03 3,368 0.18 Total held-to-maturity $ 253 — % $ 4,322 0.31 % $ 22,505 1.35 % $ 47,093 1.59 % 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.
Treasury Debt $ 253 * % $ — — % $ — — % $ — — % Corporate bonds — — 4,078 0.30 19,395 1.23 214 0.01 GNMA mortgage-backed securities – residential — — 66 * — — 34,513 1.14 FNMA mortgage-backed securities – residential — — — — 1,116 0.02 4,919 0.13 Government GMO and MBS – commercial — — 178 0.01 1,579 0.07 4,079 0.13 Corporate CMO and MBS — — — — 415 0.03 3,368 0.18 Total debt securities held-to-maturity $ 253 — % $ 4,322 0.31 % $ 22,505 1.35 % $ 47,093 1.59 % _____________________________ (*) Represents percentages that are insignificant As of December 31, 2024 and 2023, there were no holdings of debt s ecurities of any one issuer, other than the U.S.
The increase in average loans outstanding for the year ended December 31, 2023 compared to the same periods in 2022 was due to an increase in construction and development, non-owner occupied CRE, and residential mortgage offset by a decrease in cash, securities, and other, consumer and other, commercial and industrial, and owner occupied CRE.
The decrease in average loans outstanding for the year ended December 31, 2024 compared to the same periods in 2023 was primarily due to net declines in the Cash, Securities and Other, Construction and Development, and Commercial and Industrial portfolios, offset by net growth in the 1-4 Family Residential and Non-Owner Occupied Commercial Real Estate portfolios.
On March 12, 2023 the Federal Reserve Board announced it would make additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of depositors made available through the creation of a new Bank Term Funding Program (“BTFP”).
As of December 31, 2024 and 2023, borrowings totaled $109.6 million and $178.1 million, respectively. On March 12, 2023, the FRB announced it would make additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of depositors made available through the creation of a new Bank Term Funding Program ("BTFP").
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, 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, 2024, decreased $3.3 million, or 51.9%, from December 31, 2023.
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.
As of December 31, 2024 and 2023, we had Loans held for sale of $0.3 million and $0.0 million , respectively.
The amount of gain or loss on the sale of loans is primarily driven by market conditions and changes in interest rates, as well as our pricing and asset liability management strategies.
The amount of gain or loss on the sale of loans is primarily driven by market conditions and changes in interest rates, as well as our pricing and asset liability management strategies. As of December 31, 2024 and 2023, we had Mortgage loans held for sale of $25.5 million and $7.3 million , respectively, in residential mortgage loans we originated.
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.
Interest income on our Debt securities portfolio increased as a result of an increase in average yield of 3.47% for the year ended December 31, 2024, compared to 3.11% for the year ended December 31, 2023.
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.
For the year ended December 31, 2024 compared to the year ended December 31, 2023, Non-interest income increased $5.7 million, or 26.1%, to $27.7 million.
Treasury debt $ 253 $ — $ (11) $ 242 $ — Corporate bonds 23,687 — (3,020) 20,667 (71) Government National Mortgage Association ("GNMA") mortgage-backed securities – residential 34,579 — (3,410) 31,169 — Federal National Mortgage Association ("FNMA") mortgage-backed securities – residential 6,035 — (509) 5,526 — Government collateralized mortgage obligations ("GMO") and mortgage-backed securities ("MBS") – commercial 5,836 9 (377) 5,468 — Corporate collateralized mortgage obligations ("CMO") and mortgage-backed securities ("MBS") 3,783 — (238) 3,545 — Total securities held-to-maturity $ 74,173 $ 9 $ (7,565) $ 66,617 $ (71) ___________________________ (1) Refer to Note 1 – Organization and Summary of Significant Accounting Policies for further information on our credit loss methodology.
Treasury debt $ 253 $ — $ (11) $ 242 $ — Corporate bonds 23,687 — (3,020) 20,667 (71) GNMA mortgage-backed securities – residential 34,579 — (3,410) 31,169 — FNMA mortgage-backed securities – residential 6,035 — (509) 5,526 — Government GMO and MBS – commercial 5,836 9 (377) 5,468 — Corporate CMO and MBS 3,783 — (238) 3,545 — Total debt securities held-to-maturity $ 74,173 $ 9 $ (7,565) $ 66,617 $ (71) 68 Table of Contents The following presents the book value of our contractual maturities and weighted average yield for our debt securities as of the dates presented.
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 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.
Investments for which we have the intent and ability to hold to their maturity are classified as held-to-maturity securities and are recorded at amortized cost. Securities held-to-maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity.
Debt securities held-to-maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity. As of December 31, 2024 and 2023, all our investments in debt securities were classified as held-to-maturity.
It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor.
It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor. 84 Table of Contents ACL - loans: The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.
As we continue to grow our operations and maintain capital requirements, our regulatory capital levels may decrease depending on our level of earnings. We continue to monitor growth and control our capital activities in order to remain in compliance with all applicable regulatory capital standards.
We continue to monitor growth and control our capital activities in order to remain in compliance with all applicable regulatory capital standards.
The following presents the amortized cost basis of loans by credit quality indicator, by class of financing receivable, as of the dates noted: As of December 31, 2023 (Dollars in thousands) Pass Special Mention Substandard Doubtful Not Rated Total Cash, Securities, and Other (1) $ 138,243 $ — $ 1,704 $ — $ — $ 139,947 Consumer and Other (2) 19,528 — 7,500 — 13,726 40,754 Construction and Development 328,454 14,343 2,719 — — 345,516 1-4 Family Residential 924,949 — 3,016 — — 927,965 Non-Owner Occupied CRE 538,693 4,999 — — — 543,692 Owner Occupied CRE 191,881 — 3,980 — — 195,861 Commercial and Industrial 302,276 649 34,255 — — 337,180 Total $ 2,444,024 $ 19,991 $ 53,174 $ — $ 13,726 $ 2,530,915 As of December 31, 2022 (Dollars in thousands) Pass Special Mention Substandard Doubtful Not Rated Total Cash, Securities and Other (1) $ 165,555 $ — $ 4 $ — $ — $ 165,559 Consumer and Other (2) 26,065 — 5 — 23,321 49,391 Construction and Development 285,426 — 201 — — 285,627 1-4 Family Residential 899,722 — — — — 899,722 Non-Owner Occupied CRE 493,134 — — — — 493,134 Owner Occupied CRE 213,024 — 1,165 — — 214,189 Commercial and Industrial 348,844 2,185 10,762 — — 361,791 Total $ 2,431,770 $ 2,185 $ 12,137 $ — $ 23,321 $ 2,469,413 _____________________________ (1) Includes PPP loans of $4.2 million an d $6.9 million as of December 31, 2023 and 2022, respectively.
The following presents the amortized cost basis of loans by credit quality indicator, by class of financing receivable, as of the dates noted: December 31, 2024 Pass Special Mention Substandard Doubtful Not Rated Total Cash, Securities, and Other (1) $ 118,130 $ — $ 1,704 $ — $ — $ 119,834 Consumer and Other (2) 17,482 — — — 7,283 24,765 Construction and Development 310,196 — 4,285 — — 314,481 1-4 Family Residential 962,901 — — — — 962,901 Non-Owner Occupied CRE 611,239 — — — — 611,239 Owner Occupied CRE 169,573 — 2,446 — — 172,019 Commercial and Industrial 192,484 9,120 18,722 — — 220,326 Total $ 2,382,005 $ 9,120 $ 27,157 $ — $ 7,283 $ 2,425,565 December 31, 2023 Pass Special Mention Substandard Doubtful Not Rated Total Cash, Securities, and Other (1) $ 138,243 $ — $ 1,704 $ — $ — $ 139,947 Consumer and Other (2) 19,528 — 7,500 — 13,726 40,754 Construction and Development 328,454 14,343 2,719 — — 345,516 1-4 Family Residential 924,949 — 3,016 — — 927,965 Non-Owner Occupied CRE 538,693 4,999 — — — 543,692 Owner Occupied CRE 191,881 — 3,980 — — 195,861 Commercial and Industrial 302,276 649 34,255 — — 337,180 Total $ 2,444,024 $ 19,991 $ 53,174 $ — $ 13,726 $ 2,530,915 _____________________________ (1) Includes PPP loans of $2.0 million an d $4.2 million as of December 31, 2024 and 2023, respectively.
(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.
(2) Represents monthly averages. (3) Non-accrual loans are included in the respective average loan balances. Income, if any, is not recognized until all principal has been repaid.
The ACL is an estimate that is subject to uncertainty due to the various assumptions and judgments used in the estimation process. The estimate is based on our quantitative discounted cash flow models using economic forecasts including; HPI, GDP, and national unemployment.
The estimate is based on our quantitative discounted cash flow models using economic forecasts including; HPI, GDP, and national unemployment.
The increase is primarily due to Net income for the year and a $2.4 million increase in Additional paid-in capital driven by stock-based compensation expense, partially offset by a $5.3 million net reduction to Retained earnings as a result of the adoption of ASU 2016-13 for Current Expected Credit Losses ("CECL"). 69 Table of Content s Assets Under Management Year Ended December 31, (Dollars in millions) 2023 2022 Managed Trust Balance as of Beginning of Period $ 1,802 $ 2,204 New relationships 10 41 Closed relationships (11) (24) Contributions 51 12 Withdrawals (277) (292) Market change, net 338 (139) Ending Balance $ 1,913 $ 1,802 Yield* 0.18 % 0.19 % Directed Trust Balance as of Beginning of Period $ 1,285 $ 1,309 New relationships — 7 Closed relationships (5) (4) Contributions 214 122 Withdrawals (40) (22) Market change, net 168 (127) Ending Balance $ 1,622 $ 1,285 Yield* 0.07 % 0.90 % Investment Agency Balance as of Beginning of Period $ 1,618 $ 2,063 New relationships 56 61 Closed relationships (82) (61) Contributions 78 120 Withdrawals (240) (294) Market change, net 177 (271) Ending Balance $ 1,607 $ 1,618 Yield* 0.77 % 0.77 % Custody Balance as of Beginning of Period $ 493 $ 633 New relationships 9 16 Closed relationships (20) (1) Contributions 90 80 Withdrawals (109) (192) Market change, net 82 (43) Ending Balance $ 545 $ 493 Yield* 0.04 % 0.04 % 401(k)/Retirement Balance as of Beginning of Period $ 909 $ 1,143 New relationships 3 14 Closed relationships (4) (45) Contributions 124 112 Withdrawals (101) (96) Market change, net 135 (219) Ending Balance (1) $ 1,066 $ 909 Yield* 0.15 % 0.18 % Total Assets Under Management as of Beginning of Period $ 6,107 $ 7,352 New relationships 78 139 Closed relationships (122) (135) Contributions 557 446 Withdrawals (767) (896) Market change, net 900 (799) Total Assets Under Management $ 6,753 $ 6,107 Yield* 0.28 % 0.31 % _____________________________ * Trust and investment management fees divided by period-end balance.
The increase was primarily due to Net income for the year and a $0.7 million increase in Additional paid-in capital driven by stock-based compensation expense. 66 Table of Contents Assets Under Management Year Ended December 31, (dollars in millions) 2024 2023 Managed Trust Balance as of Beginning of Period $ 1,913 $ 1,802 New relationships 8 10 Closed relationships (19) (11) Contributions 74 51 Withdrawals (289) (277) Market change, net 331 338 Ending Balance $ 2,018 $ 1,913 Yield* 0.17 % 0.18 % Directed Trust Balance as of Beginning of Period $ 1,622 $ 1,285 New relationships — — Closed relationships (6) (5) Contributions 108 214 Withdrawals (132) (40) Market change, net 342 168 Ending Balance $ 1,934 $ 1,622 Yield* 0.09 % 0.07 % Investment Agency Balance as of Beginning of Period $ 1,607 $ 1,618 New relationships 28 56 Closed relationships (28) (82) Contributions 98 78 Withdrawals (288) (240) Market change, net 167 177 Ending Balance $ 1,584 $ 1,607 Yield* 0.77 % 0.77 % Custody Balance as of Beginning of Period $ 545 $ 493 New relationships 8 9 Closed relationships (4) (20) Contributions 145 90 Withdrawals (199) (109) Market change, net 94 82 Ending Balance $ 589 $ 545 Yield* 0.05 % 0.04 % 401(k)/Retirement Balance as of Beginning of Period $ 1,066 $ 909 New relationships 10 3 Closed relationships (127) (4) Contributions 164 124 Withdrawals (108) (101) Market change, net 191 135 Ending Balance (1) $ 1,196 $ 1,066 Yield* 0.13 % 0.15 % Total Assets Under Management as of Beginning of Period $ 6,753 $ 6,107 New relationships 54 78 Closed relationships (184) (122) Contributions 589 557 Withdrawals (1,016) (767) Market change, net 1,125 900 Total Assets Under Management $ 7,321 $ 6,753 Yield* 0.26 % 0.28 % _____________________________ (*) Trust and investment management fees divided by period-end balance.
The Company's non-government backed securities include private label CMO and MBS as well as bank subordinated debt. Accrued interest receivable on held-to-maturity debt securities totaled $0.4 million at December 31, 2023 and is excluded from the estimate of credit losses.
Accrued interest receivable on Held-to-maturity debt securities totaled $0.3 million and $0.4 million as of December 31, 2024 and 2023, respectively, and was excluded from the estimate of credit losses.
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.
We reported Net income available to common shareholders of $8.5 million for the year ended December 31, 2024, compared to $5.2 million of Net income available to common shareholders for the year ended December 31, 2023, a $3.2 million, or 63.5% increase.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs 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.
Biggest changeThe following presents the sensitivity in net interest income and fair value of equity as of the dates indicated, using a parallel ramp scenario: As of December 31, 2024 2023 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 0.94 % (8.37) % (5.19) % (11.03) % 100 (2.51) (2.30) (2.82) (5.90) Base — — — — -100 5.11 6.94 2.38 3.16 -200 16.86 2.97 8.27 (5.27) The model simulations as of December 31, 2024 imply that our balance sheet maintains a similar interest rate risk profile compared to our balance sheet as of December 31, 2023.
If potential changes to net economic value of equity and net interest income resulting from hypothetical interest rate changes are not within the limits established by our board of directors, the board of directors may direct management to adjust the asset and liability mix to bring interest rate risk within board-approved limits.
If potential changes to net economic value of equity and net interest income resulting from hypothetical interest rate changes are not within the limits established by our Board of Directors, the Board of Directors may direct management to adjust the asset and liability mix to bring interest rate risk within Board of Director-approved limits.
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
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. 86 Table of Contents
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.
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.
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.
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.
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The following presents the sensitivity in net interest income and fair value of equity as of the dates indicated, using a parallel ramp scenario.

Other MYFW 10-K year-over-year comparisons