First Western Financial Inc

Previous wording

The following discussion and analysis is intended to assist readers in understanding our financial condition and results of operations for the three months ended March 31, 2025 and should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in this Quarterly Report on Form 10-Q (this "Form 10-Q") and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 7, 2025. Unless we state otherwise or the context otherwise requires, references in this Form 10-Q to "we," "our," "us," "the Company," and "First Western" refer to First Western Financial, Inc. and its consolidated subsidiaries, including First Western Trust Bank, which we sometimes refer to as "the Bank" or "our Bank."

Current wording

The following discussion and analysis is intended to assist readers in understanding our financial condition and results of operations for the three and six months ended June 30, 2025 and should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in this Quarterly Report on Form 10-Q (this "Form 10-Q") and in our Annual Report on Form 10-K filed with the SEC on March 7, 2025. Unless we state otherwise or the context otherwise requires, references in this Form 10-Q to "we," "our," "us," "the Company," and "First Western" refer to First Western Financial, Inc. and its consolidated subsidiaries, including First Western Trust Bank, which we sometimes refer to as "the Bank" or "our Bank."

Previous wording

From 2004, when we opened our first profit center, until March 31, 2025, we have expanded our footprint into fourteen full service profit centers, four loan production offices, and one trust office located across five states. As of and for the three months ended March 31, 2025, we had $2.91 billion in total assets, $24.7 million in total income before non-interest expense, and provided fiduciary and advisory services on $7.18 billion of assets under management ("AUM").

Current wording

From 2004, when we opened our first profit center, until June 30, 2025, we have expanded our footprint into fourteen full service profit centers, four loan production offices, and one trust office located across five states. As of and for the six months ended June 30, 2025, we had $3.03 billion in total assets, $47.1 million in total income before non-interest expense, and provided fiduciary and advisory services on $7.50 billion of AUM.

Previous wording

Coming off the headwinds of 2024, the banking sector is poised to have a stronger, albeit tempered, 2025. The banking industry faces a dynamic regulatory landscape shaped by a new administration and evolving supervisory priorities. Despite the uncertain economic and political landscape, the Company continues to position itself to capitalize on the areas in which it excels. The Bank remains stable with strong fundamentals. The Company has a low amount of held-to-maturity securities, which represent 2.5% of total assets, and carries unrecognized losses amounting to 2.5% of Total shareholders’ equity as of March 31, 2025. We have a conservative credit appetite as evidenced by our limited exposure to non-owner occupied office space commercial real estate (“CRE”), which has been impacted by the shift to hybrid work environments. Our client base is well diversified with no single industry concentration.

Current wording

Coming off the headwinds of 2024, the banking sector is poised to have a stronger, albeit tempered, 2025. The banking industry faces a dynamic regulatory landscape shaped by a new administration and evolving supervisory priorities. Despite the uncertain economic and political landscape, the Company continues to position itself to capitalize on the areas in which it excels. The Bank remains stable with strong fundamentals. The Company has a low amount of HTM securities, which represent 3.3% of Total assets, and carries unrecognized losses amounting to 2.3% of Total shareholders’ equity as of June 30, 2025. We have a conservative credit appetite and our client base is well diversified with no single industry concentration.

Previous wording

•Trust and investment management fees—fees and other sources of income charged to clients for managing their trust and investment assets, providing financial planning consulting services, 401(k) and retirement advisory consulting services, and other wealth management services. Trust and investment management fees are primarily impacted by rates charged and increases and decreases in AUM. AUM is primarily impacted by opening and closing of client advisory and trust accounts, contributions and withdrawals, and the fluctuation in market values.

Current wording

•Trust and investment management fees—fees and other sources of income charged to clients for managing their trust and investment assets, providing financial planning consulting services, 401(k) and retirement advisory consulting services, and other wealth management services. Trust and investment management fees are primarily impacted by rates charged and increases and decreases in AUM. AUM is primarily impacted by opening and closing of client advisory and trust accounts, contributions and withdrawals, and the fluctuations in market value.

Previous wording

•Bank fees—income generated through bank-related service charges such as: electronic transfer fees, treasury management fees, bill pay fees, servicing fees for Main Street Lending Program (“MSLP”), loan prepayment penalty fees, loan interest rate swap fees, and other banking fees. Banking fees are primarily impacted by the level of business activities and cash movement activities of our clients.

Current wording

•Bank fees—income generated through bank-related service charges such as: electronic transfer fees, treasury management fees, bill pay fees, loan prepayment penalty fees, loan interest rate swap fees, and other banking fees. Bank fees are primarily impacted by the level of business activities and cash movement activities of our clients.

Previous wording

We manage the diversification and quality of our assets based upon factors that include the level, distribution, severity, and trend of problem assets such as those determined to be classified, delinquent, non-accrual, non-performing or restructured; the adequacy of our allowance for credit losses; the diversification and quality of loan and investment portfolios; and the extent of counterparty risks, credit risk concentrations, and other factors.

Current wording

We manage the diversification and quality of our assets based upon factors that include the level, distribution, severity, and trend of problem assets such as those determined to be classified, delinquent, non-accrual, non-performing or restructured; the adequacy of our ACL; the diversification and quality of loan and investment portfolios; and the extent of counterparty risks, credit risk concentrations, and other factors.

Previous wording

The three months ended March 31, 2025 compared with the three months ended March 31, 2024. We reported Net income available to common shareholders of $4.2 million for the three months ended March 31, 2025, compared to $2.5 million of Net income available to common shareholders for the three months ended March 31, 2024, a $1.7 million, or 68.0% increase. For the three months ended March 31, 2025, our Income before income tax was $5.4 million, a $1.8 million, or 50.0% increase from the three months ended March 31, 2024. The increase was primarily driven by a $1.4 million increase in Net interest income, $0.1 million increase in Non-interest income, and $0.3 million decrease in Non-interest expense.

Current wording

The three months ended June 30, 2025 compared with the three months ended June 30, 2024. We reported Net income available to common shareholders of $2.5 million for the three months ended June 30, 2025, compared to $1.1 million of Net income available to common shareholders for the three months ended June 30, 2024, a $1.4 million, or 127.3% increase. For the three months ended June 30, 2025, our Income before income tax was $3.3 million, a $1.9 million, or 134.4% increase from the three months ended June 30, 2024. The increase was primarily driven by a $2.1 million increase in Net interest income and a $0.6 million decrease in Provision for credit losses, partially offset by a $0.7 million decrease in Non-interest income.

Previous wording

•The increase in Non-interest income was primarily due to an increase in Net gain on other real estate (“OREO”) due to the sale of our two largest OREO properties and an increase in Net gain on loans accounted for under the fair value option, offset partially by a decrease in Bank fees primarily due to a large loan prepayment penalty fee collected in the first quarter of 2024 and a decrease in Trust and investment management fees due to mix shifts within AUM product balances.

Current wording

•The decrease in Non-interest income was primarily driven by decreases in Net gain on mortgage loans due to a decrease in origination volume, Trust and investment management fees due to a mix-shift in AUM to lower fee product categories, and Bank fees due to a large loan prepayment penalty fee collected in the first quarter of 2024, partially offset by increases in Net gain on loans accounted for under the fair value option and Net gain on other real estate owned.

Previous wording

Interest expense on interest-bearing deposits decreased $2.1 million, or 10.2%, during the three months ended March 31, 2025 compared to the same period in 2024. Average interest-bearing deposit rates were 3.59% for the three months ended March 31, 2025, compared to 4.13% for the three months ended March 31, 2024. The decrease in Interest-bearing deposit rates was primarily attributable to the lower interest rate environment.

Current wording

Interest expense on Interest-bearing deposits decreased $2.6 million, or 12.7%, during the three months ended June 30, 2025 compared to the same period in 2024. Average Interest-bearing deposit rates were 3.57% for the three months ended June 30, 2025, compared to 4.19% for the three months ended June 30, 2024. The decrease in Interest-bearing deposit rates was primarily attributable to the lower interest rate environment.

Previous wording

The three months ended March 31, 2025 compared with the three months ended March 31, 2024. For the three months ended March 31, 2025, Net interest income, before the Provision for credit losses, was $17.5 million, an increase of $1.4 million, or 8.7%, compared to the three months ended March 31, 2024. The increase was primarily driven by a 54 basis point decrease in average rates paid on Interest-bearing deposits, partially offset by an $82.8 million decrease in average loans outstanding. Our net interest margin increased 27 basis points to 2.61% for the three months ended March 31, 2025 from 2.34% reported for the three months ended March 31, 2024.

Current wording

The six months ended June 30, 2025 compared with the six months ended June 30, 2024. For the six months ended June 30, 2025, Net interest income, before the Provision for credit losses, was $35.3 million, an increase of $3.5 million, or 11.0%, compared to the six months ended June 30, 2024. The increase was primarily driven by a 58 basis point decrease in average rates paid on Interest-bearing deposits, partially offset by a 4 basis point decrease in average interest-earning asset yields. Net interest margin increased 30 basis points to 2.64% for the six months ended June 30, 2025 from 2.34% reported for the six months ended June 30, 2024.

Previous wording

The decrease in average loans outstanding for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to a net decline in the Cash, Securities and Other, Construction and Development, and Commercial and Industrial portfolios offset by net growth in the 1 - 4 Family Residential and Commercial Real Estate portfolios. Average loan yield was 5.71% for the three months ended March 31, 2025, compared to 5.66% for the three months ended March 31, 2024.

Current wording

The decrease in average interest-earning asset yields for the six months ended June 30, 2025 compared to the same period in 2024 was primarily due to a $41.4 million decrease in average loan balances. The average loan yield was 5.71% for the six months ended June 30, 2025, compared to 5.70% for the six months ended June 30, 2024.

Previous wording

We have a dedicated problem loan resolution team comprised of associates from our credit, senior leadership, risk, and accounting teams that meets frequently to ensure that watch list and problem credits are identified early and actively managed. We work to identify potential losses in a timely manner and proactively manage the problem credits to minimize losses. For the three months ended March 31, 2025, we recorded a $0.1 million Provision for credit losses. For the three months ended March 31, 2024, we recorded a $0.1 million Provision for credit losses. The $0.1 million provision recorded for the three months ended March 31, 2025 was primarily due to the charge-off of a loan previously classified as held for sale and modest macroeconomic forecast deterioration, offset partially by mix shifts within our portfolio towards loans with lower loss rates and the release provision on unfunded loan commitments.

Current wording

We have a dedicated problem loan resolution team comprised of associates from our credit, senior leadership, risk, and accounting teams that meets frequently to ensure that watch list and problem credits are identified early and actively managed. We work to identify potential losses in a timely manner and proactively manage the problem credits to minimize losses. For the three and six ended June 30, 2025, we recorded a $1.8 million and $1.9 million Provision for credit losses, respectively. For the three and six months ended June 30, 2024, we recorded a $2.3 million and $2.4 million Provision for credit losses, respectively. The provision recorded for the three and six months ended June 30, 2025 was primarily due to loan growth, charge-offs, an increase in specific reserves related to individually analyzed loans, and modest macroeconomic forecast deterioration, partially offset by mix shifts within our portfolio towards loans with lower loss rates.

Previous wording

Trust and investment management fees—The decrease in Trust and investment management fees of $0.3 million, or 5.1%, for the three months ended March 31, 2025, was primarily attributable to mix shift to products with lower fee structures.

Current wording

Trust and investment management fees—The decrease in Trust and investment management fees of $0.4 million, or 7.4%, and $0.6 million, or 6.3%, for the three and six months ended June 30, 2025, respectively, was primarily attributable to mix-shift in AUM to lower fee product categories.

Previous wording

Net gain on mortgage loans—The decrease in Net gain on mortgage loans of $0.2 million, or 15.6%, for the three months ended March 31, 2025, was primarily driven by a decrease in rate lock pull-through.

Current wording

Net gain on mortgage loans—The decrease in Net gain on mortgage loans of $0.6 million, or 34.8%, and $0.8 million, or 26.9%, for the three and six months ended June 30, 2025, respectively, was primarily attributable to lower origination volume.

Previous wording

Net gain on loans held for sale—During the three months ended March 31, 2025, the Net gain on loans held for sale of $0.2 million was due to the reversal of the previous quarter's write-down on a non-performing loan. This loan was previously classified as held for sale; however, during the quarter it was transferred to held for investment and charged off through the Allowance for credit losses.

Current wording

Net gain on loans held for sale—During the six months ended June 30, 2025, the Net gain on loans held for sale of $0.2 million was due to the reversal of a write-down on a non-performing loan recorded during the three months ended December 31, 2024. This loan was previously classified as held for sale; however, during the three months ended March 31, 2025 it was transferred to held for investment and charged off through the ACL.

Previous wording

Bank fees—The decrease in Bank fees of $0.5 million, or 52.6%, for the three months ended March 31, 2025, was primarily driven by a large loan prepayment penalty fee collected in the first quarter of 2024.

Current wording

Bank fees—The decrease in Bank fees of $0.5 million, or 41.3%, for the six months ended June 30, 2025, was primarily driven by a large loan prepayment penalty fee collected in the first quarter of 2024.

Previous wording

Risk management and insurance fees—The increase in Risk management and insurance fees of $0.2 million for the three months ended March 31, 2025, was primarily driven by an increase in insurance client agreements compared to the first quarter of 2024.

Current wording

Risk management and insurance fees—The increase in Risk management and insurance fees of $0.1 million, or 93.7%, for the six months ended June 30, 2025, was primarily driven by an increase in insurance client agreements.

Previous wording

Net gain (loss) on loans accounted for under the fair value option—The Company elected the fair value option on certain loans purchased in 2022. The increase in Net gain (loss) on loans accounted for under the fair value option of $0.3 million, or 102.0%, was primarily attributable to lower amounts of charges off and overall improved performance of the portfolio.

Current wording

Net gain (loss) on loans accounted for under the fair value option—The increase in Net gain on loans accounted for under the fair value option of $0.3 million, or 108.3%, and $0.6 million, or 105.2%, for the three and six months ended June 30, 2025, respectively, was primarily attributable to lower charges offs and improved overall performance of the portfolio.

Previous wording

Occupancy and equipment—The increase in Occupancy and equipment of $0.2 million, or 11.8%, for the three months ended March 31, 2025, was primarily driven by additional rent expense related to the extension of a lease in the first quarter of 2024.

Current wording

Occupancy and equipment—The increase in Occupancy and equipment of $0.1 million, or 6.9%, and $0.4 million, or 9.3% for the three and six months ended June 30, 2025, respectively, was driven by additional rent expense relating to multiple lease extensions and an increase in variable lease costs.

Previous wording

Professional services—The decrease in Professional services of $0.7 million, or 29.3%, for the three months ended March 31, 2025, was driven by decreases in legal expenses, audit fees, and FDIC insurance fees.

Current wording

Professional services—The decrease in Professional services of $0.7 million, or 16.0% for the six months ended June 30, 2025, was driven by decreases in legal expenses, audit fees, and FDIC insurance fees.

Previous wording

Data processing—The increase in Data processing of $0.2 million, or 18.4%, for the three months ended March 31, 2025, was primarily driven by increased costs related to our trust and investment management system.

Current wording

Data processing—The increase in Data processing of $0.2 million, or 11.7%, for the six months ended June 30, 2025, was primarily driven by increased costs related to our trust and investment management system.

Previous wording

Other—The decrease in Other of $0.3 million, or 18.2%, for the three months ended March 31, 2025, was primarily driven by decreased costs related to non-performing asset workouts.

Current wording

Other—The decrease in Other of $0.4 million, or 11.9%, for the six months ended June 30, 2025, was primarily driven by lower expenses related to problem assets and lower reciprocal deposit fees.

Previous wording

The Company recorded an income tax provision of $1.2 million and $1.1 million for the three months ended March 31, 2025 and 2024, respectively, reflecting an effective tax rate of 21.9% and 29.7%, respectively.

Current wording

The Company recorded an income tax provision of $0.8 million and $0.3 million for the three months ended June 30, 2025 and 2024, respectively, reflecting an effective tax rate of 24.5% and 24.0%, respectively. The Company recorded an income tax provision of $2.0 million and $1.4 million for the six months ended June 30, 2025 and 2024, respectively, reflecting an effective tax rate of 22.9% and 28.1%, respectively.

Previous wording

The Wealth Management segment reported Income before income tax of $5.4 million for the three months ended March 31, 2025, compared to $3.4 million for the same period in 2024. The majority of our assets and liabilities are on the Wealth Management segment balance sheet. The increase in Income before taxes was driven primarily by an increase in Net interest income, an increase in Non-interest income, and a decrease in Non-interest expense. The increase in Net interest income was primarily driven by a decrease in Total interest expense due to the lower interest rate environment, offset partially by a decrease in Total interest and dividend income due to a decline in average interest-earning assets. The increase in Non-interest income was driven primarily by increases in Net gain on other real estate owned and Net gain on loans accounted for under the fair value option, offset partially by decreases in Trust and investment management fees and Bank fees. The decrease in Non-interest expense was driven primarily by a decrease in Professional services, partially offset by increases in Occupancy and equipment expenses and Salaries and employee benefits.

Current wording

The Wealth Management segment reported Income before income tax of $3.1 million for the three months ended June 30, 2025, compared to $0.7 million for the same period in 2024, as well as Income before income tax of $8.5 million for the six months ended June 30, 2025, compared to $4.1 million for the same period in 2024. The majority of our assets and liabilities are on the Wealth Management segment balance sheet. The increase in Income before taxes for both the three and six month periods ended June 30, 2025 was driven primarily by an increase in Net interest income, after provision for credit losses. The increase in Net interest income, after provision for credit losses was primarily driven by a decrease in Total interest expense due to the lower interest rate environment and a decrease in provision due to a large individually analyzed specific reserve recorded in the second quarter of 2024, partially offset by a decrease in Total interest and dividend income due to a decline in average interest-earning assets.

Previous wording

The Mortgage segment reported Income before income tax of $6 thousand for the three months ended March 31, 2025, compared to $0.2 million for the same period in 2024. The decrease in Income before taxes was primarily driven by a decrease in Net gain on mortgage loans. The decrease in Net gain on mortgage loans was primarily driven by a decrease in rate lock pull-through.

Current wording

The Mortgage segment reported Income before income tax of $0.2 million for the three months ended June 30, 2025, compared to $0.8 million for the same period in 2024, as well as Income before income tax of $0.2 million for the six months ended June 30, 2025, compared to $0.9 million for the same period in 2024. The decrease in Income before taxes for both the three and six month periods ended June 30, 2025 was primarily driven by a decrease in Net gain on mortgage loans, which was primarily driven by lower origination volume.

Previous wording

Mortgage loans held for sale decreased $14.9 million, or 58.5%, to $10.6 million as of March 31, 2025 compared to December 31, 2024. The decrease was primarily due to lower origination volumes.

Current wording

Mortgage loans held for sale decreased $1.3 million, or 5.1%, to $24.2 million as of June 30, 2025 compared to December 31, 2024. The decrease was prim arily due to lower origination volumes.

Previous wording

Other assets increased by $0.1 million, or 0.1%, to $89.9 million as of March 31, 2025 compared to December 31, 2024.

Current wording

Other assets increased by $6.5 million, or 7.2%, to $96.3 million as of June 30, 2025 compared to December 31, 2024. The increase was primarily due to the purchase of FHLB stock.

Previous wording

Deposits increased $1.2 million, or 0.0%, to $2.52 billion as of March 31, 2025 compared to December 31, 2024. Money market deposit accounts increased $53.1 million, or 3.5%, to $1.57 billion as of March 31, 2025 compared to December 31, 2024. Time deposit accounts decreased $91.9 million, or 19.5%, from December 31, 2024 to $379.5 million as of March 31, 2025. Interest checking accounts increased $5.6 million, or 4.0%, to $145.0 million from December 31, 2024 to March 31, 2025.

Current wording

Deposits increased $14.9 million, or 0.6%, to $2.53 billion as of June 30, 2025 compared to December 31, 2024. Money market deposit accounts increased $119.4 million, or 7.9%, to $1.63 billion as of June 30, 2025 compared to December 31, 2024. Time deposit accounts decreased $74.4 million, or 15.8%, from December 31, 2024 to $397.0 million as of June 30, 2025. Interest checking accounts decreased $15.4 million, or 11.1%, to $124.0 million from December 31, 2024 to June 30, 2025.

Previous wording

Other liabilities decreased $4.8 million, or 11.2%, to $38.1 million as of March 31, 2025 compared to December 31, 2024. The decrease was primarily due to payments related to participated non-performing assets resolved through the sale of two OREO properties, offset by an increase in payables related to the redemption of a subordinated note prior to quarter-end that was not remitted to the note holders until after quarter-end.

Current wording

Other liabilities decreased $12.2 million, or 28.4%, to $30.7 million as of June 30, 2025 compared to December 31, 2024. The decrease was primarily due to to payments related to participated non-performing assets resolved through the sale of two OREO properties and payment of 2024 bonuses in the first quarter of 2025.

Previous wording

Total shareholders’ equity increased $4.2 million, or 1.7%, from December 31, 2024 to $256.6 million as of March 31, 2025. The increase was primarily due to Net income for the year.

Current wording

Total shareholders’ equity increased $6.5 million, or 2.6%, from December 31, 2024 to $258.8 million as of June 30, 2025. The increase was primarily due to Net income for the year.

Previous wording

Debt securities we intend to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale and are recorded at fair value using current market information from a pricing service, with unrealized gains and losses excluded from earnings and reported in other comprehensive income, net of tax. The carrying values of our debt securities classified as available-for-sale are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in shareholders’ equity.

Current wording

Debt securities we intend to hold for an indefinite period of time, but not necessarily to maturity, are classified as available-for-sale and are recorded at fair value using current market information from a pricing service, with unrealized gains and losses excluded from earnings and reported in OCI, net of tax. The carrying values of our debt securities classified as available-for-sale are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of OCI in shareholders’ equity.

Previous wording

Debt securities for which we have the intent and ability to hold to their maturity are classified as Held-to-maturity debt securities and are recorded at amortized cost. Debt securities held-to-maturity are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity. As of March 31, 2025 and December 31, 2024, all our investments in debt securities were classified as held-to-maturity.

Current wording

Debt securities for which we have the intent and ability to hold to their maturity are classified as Held-to-maturity debt securities and are recorded at amortized cost. Debt securities HTM are carried at cost, adjusted for the amortization of premiums and the accretion of discounts using the level-yield method over the remaining period until maturity. As of June 30, 2025 and December 31, 2024, all our investments in debt securities were classified as HTM.

Previous wording

Management measures expected credit losses on Held-to-maturity debt securities on a collective basis by major security type. The majority of our held-to-maturity investment portfolio consists of debt securities issued by U.S. government entities and agencies and we consider the risk of credit loss to be zero and, therefore, we do not record an ACL. The Company's non-government backed debt securities include private label CMO and MBS as well as corporate bonds. Accrued interest receivable on Held-to-maturity debt securities totaled $0.5 million and $0.3 million as of March 31, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses. The Allowance for credit losses on HTM debt securities was $0.1 million and $0.1 million as of March 31, 2025 and December 31, 2024, respectively.

Current wording

Management measures expected credit losses on HTM debt securities on a collective basis by major security type. The majority of our HTM investment portfolio consists of debt securities issued by U.S. government entities and agencies and we consider the risk of credit loss to be zero and, therefore, we do not record an ACL. The Company's non-government backed debt securities include private label CMO and MBS as well as corporate bonds. The ACL on HTM debt securities was $0.1 million as of June 30, 2025 and December 31, 2024.

Previous wording

In addition to originating loans for our own portfolio, we conduct mortgage banking activities in which we originate and sell servicing-released, whole loans in the secondary market. Our mortgage banking loan sale activities are primarily directed at originating single family mortgages that are priced and underwritten to conform to previously agreed-upon criteria before loan funding and are delivered to the investor shortly after funding. The level of future loan originations, loan sales, and loan repayments depends on overall credit availability, the interest rate environment, the strength of the general economy, local real estate markets and the housing industry, and conditions in the secondary loan sale market. The amount of gain or loss on the sale of loans is primarily driven by market conditions and changes in interest rates, as well as our pricing and asset liability management strategies. As of March 31, 2025 and December 31, 2024, we had Mortgage loans held for sale of $10.6 million and $25.5 million, respectively, of residential mortgage loans we originated.

Current wording

In addition to originating loans for our own portfolio, we conduct mortgage banking activities in which we originate and sell servicing-released, whole loans in the secondary market. Our mortgage banking loan sale activities are primarily directed at originating single family mortgages that are priced and underwritten to conform to previously agreed-upon criteria before loan funding and are delivered to the investor shortly after funding. The level of future loan originations, loan sales, and loan repayments depends on overall credit availability, the interest rate environment, the strength of the general economy, local real estate markets and the housing industry, and conditions in the secondary loan sale market. The amount of gain or loss on the sale of loans is primarily driven by market conditions and changes in interest rates, as well as our pricing and asset liability management strategies. As of June 30, 2025 and December 31, 2024, we had Mortgage loans held for sale of $24.2 million and $25.5 million, respectively, of residential mortgage loans we originated.

Previous wording

As of March 31, 2025 and December 31, 2024, we had loans held for sale of $0.0 million and $0.3 million, respectively. As of March 31, 2025, the Company has $6.1 million in loans accounted for under the fair value option with an unpaid principal balance amount of $6.3 million. As of December 31, 2024, the Company had $7.3 million in loans accounted for under the fair value option with an unpaid principal balance amount of $7.5 million. See Note 12 – Fair Value in the Notes to Condensed Consolidated Financial Statements.

Current wording

As of June 30, 2025 and December 31, 2024, we had loans held for sale of $0.0 million and $0.3 million, respectively. As of June 30, 2025, the Company has $5.1 million in loans accounted for under the fair value option with an unpaid principal balance amount of $5.2 million. As of December 31, 2024, the Company had $7.3 million in loans accounted for under the fair value option with an unpaid principal balance amount of $7.5 million. See Note 12 – Fair Value in the Notes to Condensed Consolidated Financial Statements.

Previous wording

(1)Includes $6.3 million and $7.5 million of unpaid principal balance of Loans held for investment accounted for under fair value option as of March 31, 2025 and December 31, 2024, respectively.

Current wording

(1)Includes $5.2 million and $7.5 million of unpaid principal balance of Loans held for investment accounted for under fair value option as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

(2)Includes $10.3 million and $25.2 million of unpaid principal balance of Mortgage loans held for sale as of March 31, 2025 and December 31, 2024, respectively.

Current wording

(2)Includes $23.6 million and $25.2 million of unpaid principal balance of Mortgage loans held for sale as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

•Consumer and Other—consists of unsecured consumer loans. This segment of our portfolio is affected by a variety of local and national economic factors affecting borrowers’ employment prospects, income levels, and overall economic sentiment. Loans held for investment accounted for under the fair value option are primarily consumer and other loans and are presented separately within the above table. They had an unpaid principal balance of $6.3 million and $7.5 million as of March 31, 2025 and December 31, 2024, respectively.

Current wording

•Consumer and Other—consists of unsecured consumer loans. This segment of our portfolio is affected by a variety of local and national economic factors affecting borrowers’ employment prospects, income levels, and overall economic sentiment. Loans held for investment accounted for under the fair value option are primarily consumer and other loans and are presented separately within the above table.

Previous wording

The largest category of the Company’s loan portfolio is Commercial Real Estate (“CRE”). An additional breakdown of the Company’s CRE portfolio follows:

Current wording

The largest category of the Company’s loan portfolio is CRE. An additional breakdown of the Company’s CRE portfolio follows:

Previous wording

The CRE portfolio is comprised of loans made to purchase, construct and finance commercial real estate properties. On average, the balances are small and geographically disbursed across our footprint. Specifically, our CRE portfolio has an average loan balance of $2.55 million and $2.47 million with a weighted average loan-to-value ratio (“LTV”) of 53.6% and 52.9% as of March 31, 2025 and December 31, 2024, respectively.

Current wording

The CRE portfolio is comprised of loans made to purchase, construct, and finance commercial real estate properties. On average, the balances are small and geographically disbursed across our footprint. Specifically, our CRE portfolio has an average loan balance of $2.62 million and $2.47 million with a weighted average loan-to-value ratio (LTV) of 54.3% and 52.9% as of June 30, 2025 and December 31, 2024, respectively.