NOTE 8 – SHAREHOLDERS EQUITY

Common Stock

The Company’s common stock has no par value and each holder of common stock is entitled to one vote for each share (though certain voting restrictions may exist on non‑vested restricted stock) held.

During the three months ended March 31, 2019 the Company sold no shares of common stock. During the three months ended March 31, 2018, the Company sold 67,242 shares of its common stock through a Private Placement Memorandum (“PPM”) resulting in proceeds to the Company of $1.9 million (net of issuance costs of an immaterial amount).

On July 23, 2018, the Company completed its initial public offering of 1,921,775 shares of its common stock at a price of $19.00 per share, which included 296,250 shares pursuant to the full exercise by the underwriters of their option to purchase additional shares of common stock from the Company, resulting in net proceeds of $32.5 million (net of issuance costs of $4.4 million).

Effective July 26, 2018, the Company redeemed at par value all of its outstanding shares of preferred stock, which consisted of 8,559 shares of Series A preferred stock, 428 shares of Series B preferred stock, 11,881 shares of Series C preferred stock, and 41,000 shares of Series D preferred stock. The aggregate redemption amount for the preferred stock was $25.0 million. The preferred stock was redeemed using the proceeds from the Company's initial public offering, which closed on July 23, 2018.

Certain of our common stock holders received Make Whole Rights pursuant to an Investor Agreement in connection with the conversion of Series D preferred stock into common stock and our private placement conducted from August 2017 to February 2018, which entitled the holder of such Make Whole Rights to, among other things, receive additional shares of our common stock (“Make Whole Shares”), subject to the satisfaction of the conditions of the Investor Agreements. As a result, the Company issued 128,978 Make Whole Shares on September 10, 2018. The Company’s issuance of the Make Whole Shares was exempt from the registration statement of the Securities Act pursuant to Section 4(a)(2) thereof.

Restricted Stock Awards

As of March 31, 2019, the Restricted Stock Awards have a weighted-average grant date fair value of $28.50 per share. During the three months ended March 31, 2019 and 2018, the Company has recognized compensation expense of $0.1 million in each period for the Restricted Stock Awards. As of March 31, 2019 and 2018, the Company has $2.6 million and $2.9 million, respectively, of unrecognized stock-based compensation expense related to the shares issued. As of March 31, 2019, the unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of three and one-half years. No Restricted Stock Awards vested during the three month period ended March 31, 2019 and 2018.

Stock‑Based Compensation Plans

As of March 31, 2019, there were a total of 717,804 shares available for issuance under the First Western Financial, Inc. 2016 Omnibus Inventive Plan (“the 2016 Plan”). As of March 31, 2019, if the 449,797 options outstanding under the First Western 2008 Stock Incentive Plan (“the 2008 Plan”) are forfeited, cancelled or terminated with no consideration paid to the Company, those amounts will be transferred to the 2016 Plan and increase the number of shares eligible to be granted under the 2016 Plan to a maximum of 1,167,601 shares.

Stock Options

The Company did not grant any stock options during the three months ended March 31, 2019 and 2018.

During the three months ended March 31, 2019 and 2018, the Company recognized stock‑based compensation expense of $0.1 million and $0.2 million, respectively, associated with stock options. As of March 31, 2019 and 2018, the Company has $0.5 million and $1.2 million, respectively, of unrecognized stock‑based compensation expense related to stock options which are unvested. As of March 31, 2019, the unrecognized cost is expected to be recognized over a weighted‑average period of approximately one year.

The following summarizes activity for nonqualified stock options for the three months ended March 31, 2019:


				Weighted
		Weighted		Average
	Number	Average		Remaining	Aggregate
	of	Exercise		Contractual	Intrinsic
	Options	Price		Term	Value
Outstanding at beginning of year	465,947	$	28.84
Granted	—		—
Exercised	—		—
Forfeited or expired	(16,150)	$	28.05
Outstanding at end of period	449,797	$	28.87	4.3	(a)
Options fully vested / exercisable at March 31, 2019	393,416	$	29.50	4.0	(a)

(a)

Nonqualified stock options outstanding at the end of the period and those fully vested / exercisable had immaterial aggregate intrinsic values.

As of March 31, 2019 and December 31, 2018, there were 393,416 and 402,872 options, respectively, that were exercisable. Exercise prices are between $20.00 and $40.00 per share, and the options are exercisable for a period of ten‑years from the original grant date and expire on various dates between 2022 and 2026.

Share Awards

Pursuant to the 2016 Plan, the Company can grant associates and non‑associate directors long‑term cash and stock‑based compensation. During the three months ended March 31, 2019, the Company granted certain associates restricted stock units which are earned over time or based on various performance measures and convert to common stock upon vesting, which are summarized here and expanded further below:

The following summarizes the activity for the Time Vesting Units, the Financial Performance Units and the Market Performance Units for the three months ended March 31, 2019:


	Time	Financial	Market
	Vesting	Performance	Performance
	Units	Units	Units
Outstanding at beginning of year	184,369	15,932	17,258
Granted	3,779	—	—
Vested	—	—	—
Forfeited	(7,092)	(802)	(401)
Outstanding at end of period	181,056	15,130	16,857

Time Vesting Units

The Time Vesting Units are granted to full‑time associates and board members at the date approved by the Company’s board of directors. The Company granted 3,779 Time Vesting Units with a five‑year service period in 2019 that vest in equal installments of 50% on the third and fifth anniversaries of the grant date, assuming continuous employment through the scheduled vesting dates. The Time Vesting Units granted in 2019 have a weighted‑average grant‑date fair value of $14.55 per unit. During the three months ended March 31, 2019 and 2018, the Company recognized compensation expense of $0.2 million and $0.3 million, respectively, for the Time Vesting Units. As of March 31, 2019 and 2018, there was $3.5 million and $4.7 million, respectively, of unrecognized compensation expense related to the Time Vesting Units. As of March 31, 2019, the unrecognized stock-based compensation expense is expected to be recognized over a weighted‑average period of approximately two years.

Financial Performance Units

The Financial Performance Units were granted to certain key associates and are earned based on the Company achieving various financial performance metrics beginning on the grant date and ending on December 31, 2020. If the Company achieves the financial metrics, which include various thresholds from 0% up to 150%, then the Financial Performance Units will have a subsequent two‑year service period vesting requirement ending on December 31, 2021. There were no Financial Performance Units granted during the three months ended March 31, 2019. As of March 31, 2019, the Company is accruing at the maximum threshold for 50% of the awards and the threshold for the remainder. The maximum shares that can be issued at 150% as of March 31, 2019 was 22,695 shares. During the three months ended March 31, 2019 and 2018, the Company recognized an immaterial amount in each period, respectively, of compensation expense for the Financial Performance Units. As of March 31, 2019 and 2018, there was $0.2 million and $0.5 million, respectively, of unrecognized compensation expense related to the Financial Performance Units. As of March 31, 2019, the unrecognized stock-based compensation expense is expected to be recognized over a weighted‑average period of two and three-quarter years.

Market Performance Units

Market Performance Units were granted to certain key associates and are earned based on growth in the value of the Company’s common stock and were dependent on the Company completing an initial public offering of stock during a defined period of time. If the Company’s common stock is trading at or above certain prices, over a performance period ending on June 30, 2020, the Market Performance Units will be determined to be earned and vest following the completion of a subsequent service period ending on June 30, 2022.

On July 23, 2018, the Company completed its initial public offering and the Market Performance Units performance condition was met. Subsequent to the performance condition there is also a market condition as a vesting requirement for the Market Performance Units which affects the determination of the grant date fair value. The Company estimated the grant date fair value using various valuation assumptions. During the three months ended March 31, 2019, the Company recognized an immaterial amount of compensation expense for the Market Performance Units. As of March 31, 2019, there was an immaterial amount of unrecognized compensation expense related to the Market Performance Units which is expected to be recognized over a weighted‑average period of three and one-quarter years.