SHAREHOLDERS EQUITY

3 Months Ended

Mar. 31, 2021

SHAREHOLDERS EQUITY

SHAREHOLDERS EQUITY

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 plan (the "2019 Repurchase Plan") 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 2019 Repurchase Plan. The 2019 Repurchase Plan was 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 2019 Repurchase Plan expired in June of 2020. During the three months ended March 31, 2020, the Company repurchased 22,679 shares at an average price of $16.50.

On November 3, 2020, the Company announced that its board of directors authorized the repurchase of up to 400,000 shares of the Company’s common stock, no par value, from time to time, within one year (the "2020 Repurchase Plan") and that the Board of Governors of the Federal Reserve System advised the Company that it has no objection to the Company’s 2020 Repurchase Plan. The Company may repurchase shares in privately negotiated transactions, in the open market, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 promulgated by the Securities and Exchange Commission, or otherwise in a manner that complies with applicable federal securities laws. The 2020 Repurchase Plan does not obligate the Company to acquire a specific dollar amount or number of shares and it may be extended, modified or discontinued at any time without notice. During the three months ended March 31, 2021, the Company did not repurchase any shares under the 2020 Repurchase Plan.

During the three months ended March 31, 2021 and 2020, the Company sold no shares of common stock.

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. The performance based awards fully vested in the second quarter of 2020.

As of March 31, 2021, the Restricted Stock Awards have a weighted-average grant date fair value of $28.50 per share. The Company recognized compensation expense of $0.1 million and $0.2 million for the three months ended March 31, 2021 and 2020, respectively, for the Restricted Stock Awards. As of March 31, 2021, the Company has $0.4 million of unrecognized stock-based compensation expense related to the shares issued, which is expected to be recognized over a weighted average period of 1.0 year. No Restricted Stock Awards vested during the three months ended March 31, 2021 or 2020.

Stock-Based Compensation Plans

The 2008 Stock Incentive Plan ("the 2008 Plan") was frozen in connection with the adoption of the 2016 Plan and no new awards may be granted under the 2008 Plan. As of March 31, 2021, there were a total of 469,498 shares available for issuance under the First Western Financial, Inc. 2016 Omnibus Incentive Plan ("the 2016 Plan"). If the Awards outstanding under 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, 2021 and 2020.

During the three months ended March 31, 2021, the Company recognized an immaterial amount of stock based compensation expense. During the three months ended March 31, 2020, the Company recognized stock based compensation expense of $0.1 million. As of March 31, 2021, the Company has an immaterial amount of unrecognized stock-based compensation expense related to stock options which are unvested. That 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, 2021:

				Weighted
		Weighted		Average
	Number	Average		Remaining	Aggregate
	of	Exercise		Contractual	Intrinsic
	Options	Price		Term	Value
Outstanding as of December 31, 2020	419,197	$	29.02
Granted	—		—
Exercised	—		—
Forfeited or expired	(33,550)		36.57
Outstanding as of March 31, 2021	385,647		28.36	2.5	(1)
Options fully vested / exercisable as of March 31, 2021	381,577	$	28.38	2.4	(1)

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⁽¹⁾ Nonqualified stock options outstanding at the end of the period and those fully vested / exercisable had immaterial aggregate intrinsic values.

As of March 31, 2021, there were 381,577 options 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. Historically, the Company has 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, 2021:

	Time	Financial	Market
	Vesting	Performance	Performance
	Units	Units	Units
Outstanding as of December 31, 2020	285,052	152,430	14,862
Granted	—	—	—
Vested	(8,951)	—	—
Forfeited	(5,683)	(2,044)	—
Outstanding as of March 31, 2021	270,418	150,386	14,862

During the three months ended March 31, 2021, the Company issued 6,127 shares of common stock upon the settlement of Restricted Stock Units. The remaining 2,824 shares were surrendered with a combined market value at the dates of settlement of $0.1 million to cover employee withholding taxes. During the three months ended March 31, 2020, no Restricted Stock Units vested. As a result, the Company did not issue shares of common stock upon the settlement of Restricted Stock 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 did not grant any Time Vesting Units during the three months ended March 31, 2021. During the three months ended March 31, 2021 and 2020, the Company recognized compensation expense of $0.4 million and $0.3 million, respectively, for the Time Vesting Units. As of March 31, 2021, there was $3.4 million of unrecognized compensation expense related to the Time Vesting Units, which is expected to be recognized over a weighted-average period of 1.7 years.

Financial Performance Units

Financial Performance Units are granted to certain key associates and are earned based on the Company achieving various financial performance metrics. 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 vesting period.

The following presents the Company’s existing Financial Performance Units as of March 31, 2021 (dollars in thousands):

Grant Period	Threshold Accrual	Maximum Issuable Shares at Current Threshold	Unrecognized Compensation Expense		Weighted-Average (1)	Financial Metric End Date	Vesting Requirement End Date
Prior to May 1, 2019	50% on half; 100% on other half	10,035	$	60	0.8 years	December 31, 2019	December 31, 2021
May 1, 2019 through April 30, 2020	150%	84,531		475	2.8 years	December 31, 2021	December 31, 2023
May 1, 2020 through December 31, 2020, excluding November 18, 2020	150%	86,226		579	3.8 years	December 31, 2022	December 31, 2023
On November 18, 2020	150%	34,752	$	380	3.6 years	December 31, 2022	50% November 18, 2023 & 2025

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⁽¹⁾ Represents the expected unrecognized stock-based compensation expense recognition period.

The following presents the Company’s Financial Performance Units activity for the years noted March 31 (dollars in thousands, except share amounts

	Units Granted		Compensation Expense Recognized
Grant Period	2021	2020	2021		2020
Prior to May 1, 2019	—	—	$	15	$	*
May 1, 2019 through April 30, 2020	—	1,866		56		*
May 1, 2020 through December 31, 2020, excluding November 18, 2020	—	—		55		—
On November 18, 2020	—	—	$	34	$	—

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^* Not meaningful

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. 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, 2021 and 2020, the Company recognized an immaterial amount of compensation expense for the Market Performance Units. As of March 31, 2021, 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 1.3 years.

If the Company’s common stock is trading at or above certain prices, over a performance period which ended on June 30, 2020, the Market Performance Units would have been determined to be earned and vest following the completion of a subsequent service period ending on June 30, 2022. The Company’s common stock did not trade at or above the required prices over the performance period and as a result, no Market Performance Units are eligible to be earned.