NOTE 9 - 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.

On June 14, 2019, the Company announced that its Board of Directors had authorized a share repurchase program under which the Company may repurchase up to 300,000 shares of its common stock and that the Board of Governors of the Federal Reserve System advised the Company that it had no objection to the Company’s stock repurchase program. The repurchase program authorizes the Company to purchase its common stock from time to time in privately negotiated transactions, in the open market, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 plan promulgated by the Securities and Exchange Commissions, or otherwise in a manner that complies with applicable federal securities laws. The program will be in effect for a one-year period, with the timing of purchases and the number of shares repurchased under the program dependent upon a variety of factors including price, trading volume, corporate and regulatory requirements and market conditions. The repurchase program may be suspended or discontinued at any time without notice. During the year ended December 31, 2019, the Company repurchased 43,698 shares at an average price of $16.51. During the three months ended March 31, 2020, the Company repurchased 22,679 shares at an average price of $16.50 and as of March 31, 2020, 233,623 shares may yet be purchased under the program. In response to the COVID-19 pandemic, the Company does not currently anticipate continuing to repurchase shares and instead, intends to use its capital to support its clients and communities through the duration of the COVID-19 pandemic.

Restricted Stock Awards

In 2017, the Company issued 105,264 shares of common stock ("Restricted Stock Awards") with a value of $3.0 million to the sole member of EMC Holdings, LLC ("EMC"), subject to forfeiture based on his continued employment with the Company. Half of the Restricted Stock Awards ($1.5 million or 52,632 shares) vests ratably over five-years. The remaining $1.5 million, or 52,632 shares, may be earned based on performance of the mortgage division of the Company. During the three months ended March 31, 2020, the Company recognized compensation expense of $0.2 million, representing 14,114 shares, related to the performance based awards. During the year ended December 31, 2019, the Company recognized compensation expense of $0.6 million, representing 38,518 shares, related to the performance-based awards.

As of March 31, 2020, the Restricted Stock Awards have a weighted-average grant date fair value of $28.50 per share. During the three months ended March 31, 2020 and 2019, the Company has recognized compensation expense of $0.2 and $0.1 million for the Restricted Stock Awards, respectively. As of March 31, 2020, the Company has $1.2 million of unrecognized stock-based compensation expense related to the shares issued. As of March 31, 2020, the unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 1.0 years. No Restricted Stock Awards vested during the three months ended March 31, 2020 or 2019.

Stock‑Based Compensation Plans

As of March 31, 2020, there were a total of 648,635 shares available for issuance under the First Western Financial, Inc. 2016 Omnibus Incentive Plan (“the 2016 Plan”). If the Awards outstanding under the First Western 2008 Stock Incentive Plan (“the 2008 Plan”) or the 2016 Plan are forfeited, cancelled or terminated with no consideration paid to the Company, those amounts will increase the number of shares eligible to be granted under the 2016 Plan.

Stock Options

The Company did not grant any stock options during the three months ended March 31, 2020 and 2019.

The Company recognized compensation expense of $0.1 million for each of the three months ended March 31, 2020 and 2019, respectively, associated with stock options. As of March 31, 2020, the Company has $0.2 million of unrecognized stock‑based compensation expense related to stock options which are unvested. As of March 31, 2020, the unrecognized cost is expected to be recognized over a weighted‑average period of less than one year.

The following summarizes activity for nonqualified stock options for the three months ended March 31, 2020:

:
				Weighted
		Weighted		Average
	Number	Average		Remaining	Aggregate
	of	Exercise		Contractual	Intrinsic
	Options	Price		Term	Value
Outstanding at December 31, 2019	419,197	$	29.02
Granted	-		-
Exercised	-		-
Forfeited or expired	-		-
Outstanding at March 31, 2020	419,197		29.02	3.4	(a)
Options fully vested / exercisable at March 31, 2020	396,916	$	29.20	3.2	(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, 2020 and December 31, 2019, there were 396,916 and 394,020 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.

Restricted Stock Units

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, 2020, 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, 2020:


	Time	Financial	Market
	Vesting	Performance	Performance
	Units	Units	Units
Outstanding at December 31, 2019	209,444	69,426	14,862
Granted	2,072	1,866	-
Vested	-	-	-
Forfeited	(304)	-	-
Outstanding at March 31, 2020	211,212	71,292	14,862

During the three months ended March 31, 2020 and 2019, no Time Vesting Units vested. As a result, the Company did not issue shares of common stock upon the settlement of Time Vesting Units.

Time Vesting Units

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 2,072 Time Vesting Units with a five year service period in the three months ended March 31, 2020, that vest in equal installments of 20% on the anniversary of the grant date, assuming continuous employment through the scheduled vesting dates. Time Vesting Units granted in 2020 have a weighted‑average grant‑date fair value of $14.43 per unit. During the three months ended March 31, 2020 and 2019, the Company recognized compensation expense of $0.3 million and $0.2 million, respectively, for Time Vesting Units. As of March 31, 2020, there was $3.2 million of unrecognized compensation expense related to Time Vesting Units. As of March 31, 2020, the unrecognized stock-based compensation expense is expected to be recognized over a weighted‑average period of approximately 1.6 years.

Financial Performance Units Granted Prior to 2019

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, 2019. 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. As of March 31, 2020, the Company is accruing at the target threshold for 50% of the awards and at 50% for the remainder. The maximum shares that can be issued at the current thresholds as of March 31, 2020 was approximately 10,000 shares. During the three months ended March 31, 2020 and 2019, the Company recognized an immaterial amount of compensation expense for the Financial Performance Units. As of March 31, 2020, there was $0.1 million of unrecognized compensation expense related to the Financial Performance Units. As of March 31, 2020, the unrecognized stock-based compensation expense is expected to be recognized over a weighted‑average period of 1.8 years.

Financial Performance Units Granted in 2019

The Company granted 1,866 Financial Performance Units during the three months ended March 31, 2020. In 2019, the Company granted an additional 62,569 Financial Performance Units to officers and other key employees. All Financial Performance Units granted on or after May 1, 2019, have a five-year term and are earned based on the Company achieving various financial metrics beginning on the grant date and ending on December 31, 2021, which include various thresholds from 0% to 150%, then the Financial Performance Units will have a subsequent two-year service period vesting requirement ending on December 31, 2023. As of March 31, 2020, the Company is accruing at the target threshold for the awards. The maximum shares that can be issued at 100% as of March 31, 2020 was approximately 58,000 shares. During the three months ended March 31, 2020, the Company recognized an immaterial amount of compensation expense for the Financial Performance Units. As of March 31, 2020, there was $0.7 million of unrecognized compensation expense related to the Financial Performance Units. As of March 31, 2020, the unrecognized stock-based compensation expense is expected to be recognized over a weighted‑average period of 3.8 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, 2020 and 2019 the Company recognized an immaterial amount of compensation expense for the Market Performance Units. As of March 31, 2020, there was $0.4 million of unrecognized compensation expense related to the Market Performance Units which is expected to be recognized over a weighted‑average period of 2.3 years.