First Western Financial Signals Sustained Earnings Momentum

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

First Western Financial’s latest earnings call struck a distinctly upbeat tone, with management emphasizing a third straight quarter of stronger profitability and broad-based improvement across the franchise. While they acknowledged pockets of pressure, such as competitive deposit costs and macro uncertainty, the clear message was that earnings momentum, balance sheet strength, and asset quality are all moving in the right direction.

Strong Profitability and EPS Growth

First Western posted 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 highlighted this as the third consecutive quarter of EPS improvement, underscoring that recent strategic and efficiency initiatives are now flowing through the income statement.

Balance Sheet Growth and Loan Production

Loans held for investment increased by $41 million quarter-over-quarter on the back of $116 million in new loan originations, reflecting solid client demand despite a complex rate backdrop. On a year-over-year basis, the bank is running at roughly 11% loan growth, showing it can grow prudently while still tightening portfolio concentrations that had been elevated.

Deposit Growth and Improved Liquidity

Total deposits rose by about $95 million compared with the prior quarter, with management citing year-over-year deposit growth in the 11–13% range, a notable achievement in a fiercely competitive funding environment. As a result, the loan-to-deposit ratio improved, falling from roughly 96.5% to below 95%, giving the bank more liquidity flexibility.

Net Interest Income and Margin Expansion

Net interest income climbed 1.5% sequentially and nearly 20% from a year earlier, supported by both balance sheet growth and improved mix. The net interest margin expanded to 2.81%, up 10 basis points quarter-over-quarter, though management was careful to temper expectations about how fast margin can continue to widen from here.

Mortgage and Fee Income Momentum

Noninterest income advanced by roughly $0.6 million from the prior quarter, powered by a sharp rebound in mortgage-related revenue. Mortgage gain-on-sale income nearly doubled, rising from $0.8 million in the fourth quarter to $1.5 million, as secondary lock volume improved to about $180 million, up roughly $40 million quarter-over-quarter.

Tight Expense Management and Operating Leverage

Noninterest expenses fell by $1.1 million from the previous quarter, partly reflecting the absence of nonrecurring items that had weighed on fourth-quarter results. The efficiency ratio improved for the sixth straight quarter, moving from around 79% a year ago into the low 70s, as management continues to squeeze more revenue growth out of a leaner cost base.

Asset Quality Improvement

Credit quality metrics strengthened further, with no loan charge-offs recorded in the quarter and declines in both nonaccrual loans and nonperforming assets. The bank also completed the sale of its last OREO property, while maintaining allowance coverage at 77 basis points of total loans and even releasing some provision given improved portfolio performance.

Wealth/Trust Growth and AUM Trends

Assets under management increased by $43 million quarter-over-quarter, with net new accounts and client contributions accounting for $42 million of that growth, signaling healthy underlying client activity. Overall AUM rose about 1% year-over-year, while trust and investment management fees grew 5.3%, supported by a restructured team geared toward accelerating future inflows.

Q4 2025 OREO Write-Down Impact

Management reminded investors that a roughly $1.3 million write-down on an OREO property in the fourth quarter of 2025 had temporarily inflated prior-period expenses and distorted comparisons. With that nonrecurring hit now behind them and the property sold, current expense and profitability trends offer a cleaner, more favorable view of underlying performance.

Deposit Seasonality and Competitive Deposit Pricing

Executives cautioned that the second quarter typically brings seasonal deposit outflows tied to tax payments, a pattern they expect to see again this year. They also underscored that deposit pricing remains highly competitive, with the quarter-end spot deposit rate around 2.79%, which will continue to influence funding costs and margin dynamics.

NIM Expansion Uncertainty

While the first quarter delivered another step-up in net interest margin, management signaled that the pace of further increases in 2026 is likely to be slower than the robust expansion achieved in 2025. Their longer-term NIM goal remains in the 3.15–3.20% range, but they do not expect to reach that level this year given rate path ambiguity and funding pressures.

Concentration and Portfolio Rebalancing

The bank has been deliberately dialing back its exposure to owner-occupied commercial real estate, which had climbed above management’s comfort zone in prior periods. This portfolio rebalancing is intended to reduce concentration risk and position the balance sheet to better weather potential economic or sector-specific shocks.

Macroeconomic and Geopolitical Uncertainty

Despite solid first-quarter performance, leadership repeatedly referenced external uncertainties, including Federal Reserve policy and geopolitical developments, as potential swing factors for future quarters. They noted that client behavior has not materially changed so far, but they remain cautious and are planning with an eye toward multiple macro scenarios.

Conservative Near-Term Growth Guidance

Even with early-quarter momentum, management stuck to a conservative outlook, reiterating expectations for high-single-digit balance sheet growth rather than promising double-digit expansion. The focus is on maintaining disciplined underwriting and deposit pricing while letting strong pipelines in loans and wealth management drive measured, sustainable growth.

Forward-Looking Guidance and Strategic Targets

Looking ahead to 2026, First Western expects loan and deposit growth to roughly match 2025’s pace, supported by a solid loan pipeline and recent $95 million deposit inflow, while NIM should grind higher from the current 2.81% but not at last year’s speed. Management is targeting higher fee income, further efficiency gains, ongoing credit improvement, and longer-term returns that restore return on assets above 1% and push return on equity into the low teens.

First Western’s earnings call painted the picture of a franchise that has moved past one-off issues and is now delivering more consistent, broad-based growth. For investors, the key themes were accelerating earnings, improving balance sheet resilience, and tight risk management, balanced by a deliberately cautious stance on how quickly margins and growth can advance in an uncertain macro environment.