SHAREHOLDERS EQUITY

9 Months Ended

Sep. 30, 2022

SHAREHOLDERS EQUITY

SHAREHOLDERS EQUITY

NOTE 10 - 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 January 6, 2022, the Company filed a Form S-3 Registration Statement with the SEC providing that the Company may offer and sell from time to time, separately or together, in multiple series or in one or more offerings, any combination of common stock, preferred stock, debt securities, warrants, depository shares and units, up to a maximum aggregate offer price of $100 million. During the nine months ended September 30, 2022, 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) vested ratably over five years. These awards fully vested in the third quarter of 2022. The remaining $1.5 million, or 52,632 shares, were able to be earned based on performance of the mortgage division of the Company. The performance based awards fully vested in the second quarter of 2020.

During the three months ended September 30, 2022 and 2021, the Company recognized compensation expense of $0.1 million for the Restricted Stock Awards. During the nine months ended September 30, 2022 and 2021, the Company recognized compensation expense of $0.2 million for the Restricted Stock Awards. During the nine months ended September 30, 2022 and 2021, 10,527 and 10,526, respectively, shares of the restricted stock awards vested. As of September 30, 2022, all restricted stock awards were fully vested and no unrecognized compensation expense remains.

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 September 30, 2022, there were a total of 167,653 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 nine months ended September 30, 2022 and 2021.

During the three and nine months ended September 30, 2022, the Company recognized no stock based compensation expense associated with stock options. During the three and nine months ended September 30, 2021, the Company recognized an immaterial amount of stock based compensation expense associated with stock options. As of September 30, 2022, the Company has no unrecognized stock-based compensation expense related to stock options.

The following presents activity for nonqualified stock options during the nine months ended September 30, 2022:

					Weighted
			Weighted		Average
	Number		Average		Remaining		Aggregate
	of		Exercise		Contractual		Intrinsic
	Options		Price		Term		Value
Outstanding as of December 31, 2021		308,574	$	29.21
Granted		—		—
Exercised		(8,309)		21.50
Forfeited or expired		(116,100)		40.00
Outstanding as of September 30, 2022		184,165		22.76		2.3		(1)
Options fully vested / exercisable as of September 30, 2022		184,165		22.76		2.3		(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 September 30, 2022, there were 184,165 options that were exercisable. Exercise prices are between $20.00 and $27.00 per share, and the options are exercisable for a period of ten years from the original grant date and expire on various dates between 2023 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 presents the activity for the Time Vesting Units, the Financial Performance Units, and the Market Performance Units during the nine months ended September 30, 2022:

	Time	Financial	Market
	Vesting	Performance	Performance
	Units	Units	Units
Outstanding as of December 31, 2021	249,821	183,483	13,746
Granted	156,453	91,901	—
Vested	(79,071)	(12,100)	—
Forfeited	(28,050)	(21,241)	(13,746)
Outstanding as of September 30, 2022	299,153	242,043	—

During the three months ended September 30, 2022, 3,851 Restricted Stock Units vested. The Company issued 2,740 shares of common stock upon the settlement and the remaining 1,111 shares were surrendered with an immaterial combined market value at the dates of settlement to cover employee withholding taxes. During the nine months ended September 30, 2022, 91,171 Restricted Stock Units vested. The Company issued 64,426 shares of common stock upon the settlement and the remaining 26,745 shares were surrendered with a combined market value at the dates of settlement of $0.8 million to cover employee withholding taxes. During the three months ended September 30, 2021, 6,025 Restricted Stock Units vested. The Company issued 4,292 shares of common stock upon the settlement and the remaining 1,733 shares were surrendered with an immaterial combined market value at the dates of settlement to cover employee withholding taxes. During the nine months ended September 30, 2021, 66,453 Restricted Stock Units vested. The Company issued 47,351 shares of common stock upon the settlement and the remaining 19,102 shares were surrendered with a combined market value at the dates of settlement of $0.5 million to cover employee withholding taxes.

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 156,453 Time Vesting Units with a five-year service period during the nine months ended September 30, 2022 that vest in equal installments of 20% on the anniversary of the grant date, assuming continuous employment through the scheduled vesting dates. During the three months ended September 30, 2022 and 2021, the Company recognized compensation expense of $0.4 million for the Time Vesting Units. During the nine months ended September 30, 2022 and 2021, the Company recognized compensation expense of $1.3 million and $1.2 million, respectively, for the Time Vesting Units. As of September 30, 2022, there was $6.5 million of unrecognized compensation expense related to the Time Vesting Units, which is expected to be recognized over a weighted-average period of 2.1 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 September 30, 2022 (dollars in thousands, except share amounts):

Grant Period	Threshold Accrual		Maximum Issuable Shares at Current Threshold	Unrecognized Compensation Expense		Weighted-Average (1)	Financial Metric End Date	Vesting Requirement End Date
May 1, 2019 through April 30, 2020	150	%	71,547	$	188	1.3 years	December 31, 2021	December 31, 2023
May 1, 2020 through December 31, 2020, excluding November 18, 2020	150		75,846		306	2.3 years	December 31, 2022	December 31, 2023
November 18, 2020	116		25,221		262	2.1 years	December 31, 2022	50% November 18, 2023 & 2025
May 3, 2021 through August 11, 2021	150		55,413		673	3.3 years	December 31, 2023	December 31, 2025
May 2, 2022	52		29,996		2,619	4.3 years	December 31, 2024	December 31, 2026
August 4, 2022	100		27,272		723	4.3 years	December 31, 2024	December 31, 2026

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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 during the periods presented (dollars in thousands, except share amounts):

	Units Granted				Compensation Expense Recognized
	Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
Grant Period	2022		2021		2022		2021			2022	2021
Prior to May 1, 2019		—		—	$	—	$	5	$	—	$	23
May 1, 2019 through April 30, 2020		—		—		4		37		94		154
May 1, 2020 through December 31, 2020, excluding November 18, 2020		—		—		45		44		127		153
November 18, 2020				—		(1)		30		27		94
May 3, 2021 through August 11, 2021		—		41,743		72		83		211		140
May 2, 2022		64,629		—		31		—		89		—
August 4, 2022		27,272		—		28		—		28		—

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 was also a market condition as a vesting requirement for the Market Performance Units. If the Company’s common stock was 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, which ended 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 were eligible to be earned.

During the first two quarters of 2022, the Company recognized an immaterial amount of compensation expense for the Market Performance Units. During the three and nine months ended September 30, 2021, the Company recognized an immaterial amount of compensation expense for the Market Performance Units. As of the end of the subsequent service period, or June 30, 2022, the Company had no remaining unrecognized compensation expense related to the Market Performance Units.