First Western Financial signals steady earnings momentum

First Western Financial ((MYFW)) has held its Q1 earnings call. Read on for the main highlights of the call.

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First Western Financial’s latest earnings call struck a notably upbeat tone as management highlighted sharp profitability gains, healthier margins, and broad-based growth across loans, deposits, and fee businesses. Executives acknowledged some one-off and seasonal headwinds, but framed them as manageable against a backdrop of improving efficiency, stronger asset quality, and disciplined balance sheet management.

Strong Profitability and EPS Growth

First Western reported net income of $6.2 million and diluted EPS of $0.63 for the first quarter of 2026, marking an ~85% jump in earnings per share versus the prior quarter. Management underscored that this was the third straight quarter of EPS improvement, signaling that the profitability rebound is becoming more durable rather than a one-off recovery.

Balance Sheet Growth and Loan Production

Loans held for investment increased by $41 million quarter over quarter, supported by $116 million of new loan production in the period. On a year-over-year basis, management pointed to roughly 11% loan growth, suggesting the bank is successfully deploying capital while maintaining a measured approach to credit risk.

Deposit Growth and Improved Liquidity

Deposits also expanded meaningfully, with management citing a $95 million quarter-over-quarter increase and year-over-year growth in the 11–13% range. As a result, the loan-to-deposit ratio edged down from 96.5% to below 95%, giving the bank a bit more liquidity cushion and flexibility in funding future loan growth.

Net Interest Income and Margin Expansion

Net interest income climbed 1.5% sequentially and nearly 19.7% from a year earlier, reflecting both loan growth and a more profitable asset mix. Net interest margin improved to 2.81%, up 10 basis points from the prior quarter, though management cautioned that future gains may come at a slower pace given macro uncertainty and funding competition.

Mortgage and Fee Income Momentum

Noninterest income rose by about $0.6 million quarter over quarter as mortgage banking activity picked up. Mortgage gain-on-sale revenue nearly doubled from $0.8 million in the fourth quarter to $1.5 million in the first, while secondary lock volume reached roughly $180 million, up about $40 million from the previous period.

Tight Expense Management and Operating Leverage

Noninterest expense fell by $1.1 million from the prior quarter, aided in part by the absence of certain nonrecurring items that had inflated fourth-quarter costs. The bank’s efficiency ratio improved for the sixth consecutive quarter, declining from roughly 79% a year ago into the low 70s, underscoring growing operating leverage as revenues outpace expenses.

Asset Quality Improvement

Asset quality trends were another bright spot, with management reporting no loan charge-offs during the quarter and declines in nonaccrual loans and nonperforming assets. The bank also sold its last OREO property and was able to release some provision for credit losses, while keeping allowance coverage at 77 basis points of total loans.

Wealth/Trust Growth and AUM Trends

The wealth and trust franchise showed steady progress, as assets under management increased by $43 million quarter over quarter, driven mainly by $42 million of net new accounts and contributions. AUM was up around 1% year over year, while trust and investment management fees climbed 5.3%, helped by a restructured team aimed at accelerating future growth.

Q4 2025 OREO Write-Down Impact

Management reminded investors that fourth-quarter 2025 expenses were distorted by a roughly $1.3 million write-down on OREO, which has now been resolved. That one-time hit had inflated prior noninterest expense and muddied comparisons, so the first-quarter figures better reflect the underlying cost base and ongoing efficiency initiatives.

Deposit Seasonality and Competitive Deposit Pricing

Looking ahead to the second quarter, the bank expects typical seasonal deposit outflows related to tax payments, a pattern seen in prior years. Management also noted that deposit pricing remains highly competitive, with a spot deposit rate of about 2.79% at quarter end, which could influence funding costs and limit how fast margins can expand.

NIM Expansion Uncertainty

Despite recent margin gains, leadership signaled caution about the pace of further NIM expansion in 2026 relative to the strong 2025 improvement. The bank continues to target a long-term net interest margin in the 3.15–3.20% range but does not expect to reach that level this year, given macro risks and the balance between loan yields and deposit costs.

Concentration and Portfolio Rebalancing

The call also addressed prior concentration risk, particularly in owner-occupied commercial real estate, which management felt had grown above desired levels. The bank has been intentionally pulling that exposure down as part of a broader portfolio rebalancing effort, aiming to reduce risk concentrations while preserving attractive risk-adjusted returns.

Macroeconomic and Geopolitical Uncertainty

Executives flagged macroeconomic and geopolitical uncertainties, including future Federal Reserve policy, as potential wildcards for credit demand and funding markets. However, they emphasized that no material shifts in client behavior were observed in the first quarter, suggesting that customers remain generally stable despite the broader noise.

Conservative Near-Term Growth Guidance

Even with strong early-quarter trends, management maintained a conservative stance on near-term expansion, guiding to high-single-digit balance sheet growth rather than committing to double-digit gains. This reflects a preference for disciplined, profitable growth over chasing volume, especially amid a fluid interest-rate and competitive environment.

Forward-Looking Guidance and Long-Term Targets

Management reiterated 2026 guidance calling for loan and deposit growth roughly in line with 2025 levels, backed by a solid loan pipeline and ongoing deposit inflows. They expect continued but more moderate NIM improvement from the current 2.81%, rising fee income, further operating leverage from cost control, and continued asset quality gains, all supporting longer-term goals of lifting ROA above 1% and pushing ROE into the low teens.

First Western’s earnings call painted a picture of a bank steadily rebuilding profitability while maintaining disciplined risk management in a still-uncertain environment. With improving margins, growing fee and wealth businesses, and cleaner credit metrics, the company appears positioned for measured, sustainable growth, even as management tempers expectations for the speed of future margin expansion.