First Western Financial (MYFW) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01Our banking, trust and wealth advisory operations are geographically concentrated in Colorado, Arizona, Wyoming Montana, and California, leading to significant exposure to those markets
2. 02Because a significant portion of our loan portfolio is comprised of real estate loans, 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
3. 03Changes in interest rates could reduce our net interest margins and net interest income
4. 04If 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
5. 05Our loan portfolio includes a significant number of commercial loans, which involve risks specific to commercial borrowers77% rewritten
6. 06We rely on communications, information, operating and financial control systems technology and related services from third-party service providers, including reliance on cloud-based vendors, and we may suffer an interruption in those systems
7. 07We may be subject to claims and litigation pertaining to our fiduciary responsibilities
8. 08Negative developments affecting the banking industry and resulting media coverage have eroded customer confidence in the banking systemNew
9. 09We may be adversely affected by the soundness of certain securities brokerage firms
10. 10The 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
11. 11Fee revenue represents a significant portion of our consolidated revenue and is subject to decline, among other things, in the event of a reduction in, or changes to, the level or type of investment activity by our clients
12. 12The 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
13. 13Our allowance for credit losses may not be adequate to cover actual losses
14. 14Increased 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
15. 15Our business and operations may be adversely affected in numerous and complex ways by external business disruptors in the financial services industry
16. 16The development and use of AI presents risks and challenges that may adversely impact the Company’s business
17. 17Liquidity risk could adversely affect our ability to fund operations and hurt our financial condition
18. 18We may not be able to maintain a strong core deposit base or other low-cost funding sources
19. 19We 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
20. 20Our largest trust client accounts for 36.8% of our total assets under management and 4.6% of our total Trust and investment management fees52% rewritten
21. 21The 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
22. 22We face intense competition from other banks and financial institutions and other wealth and investment management firms that could hurt our business
23. 23We 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
24. 24We 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
25. 25We are required to make significant estimates and assumptions in the preparation of our financial statements and our estimates and assumptions may not be accurate87% rewritten
26. 26Our ability to attract and retain clients and key associates could be adversely affected if our reputation is harmed
27. 27We may incur significant losses due to ineffective risk management processes and strategies
28. 28New lines of business or new products and services may subject us to additional risks
29. 29We rely on customer and counterparty information, which subjects us to risks if that information is not accurate or is incomplete
30. 30Severe weather, natural disasters, acts of war or terrorism, pandemics, and other adverse external events could significantly impact our business and customersNew
31. 31Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations

Risks Related to Our Regulatory Environment

1. 32The 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
2. 33Federal 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
3. 34We are subject to stringent capital requirements
4. 35The level of our commercial real estate loan portfolio may subject us to heightened regulatory scrutiny
5. 36We 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
6. 37We face a risk of noncompliance and enforcement action with Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) laws and regulations
7. 38Regulations 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
8. 39We can be subject to legal and regulatory proceedings, investigations and inquiries related to conduct risk

Risks Related to Ownership of our Common Stock

1. 40The trading volume in our common stock is less than other larger financial institutions
2. 41As a public company, we face increased legal, accounting, administrative and other costs and expenses that we did not incur as a private company, particularly after we no longer qualify as an emerging growth company
3. 42If we fail to maintain effective internal control over financial reporting, we may not be able to report our financial results accurately and timely
4. 43Securities analysts may not initiate or continue coverage on us
5. 44Our management and Board of Directors have significant control over our business
6. 45We may issue new debt securities, which would be senior to our common stock and may cause the market price of our common stock to decline
7. 46Our 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
8. 47We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock
9. 48We are dependent upon the Bank for cash flow, and the Bank’s ability to make cash distributions is restricted
10. 49An investment in our common stock is not an insured deposit and is subject to risk of loss
11. 50The market price of our common stock may be subject to substantial fluctuations and significant declines, which may make it difficult for you to sell your shares at the volume, prices and times desired