First Western Financial Inc MYFW

First Western Financial reported net income of $6.7 million and diluted EPS of $0.57 for Q2 FY26, representing 129% and 119% increases year-over-year, respectively. Prudent balance sheet management contributed to a 2.6% increase in tangible book value per share to $25.53. Gross revenue grew 1.8% QoQ and 16% YoY, primarily driven by net interest income. The company is performing well against its internal earnings plan and expects continued gains through year-end.

Loans held for investment increased by $23 million QoQ, marking the fifth consecutive quarterly increase and a 7% YoY rise. New loan production was $115 million, diversified across markets and loan types, with an average rate of 6.37%, 6 basis points higher than the prior quarter and exceeding the average payoff rate of 5.89%. The company maintains conservative and disciplined production practices, prioritizing pricing over aggressive growth, and is seeing good opportunities to add clients and talent due to market disruption^🌐.

Total deposits increased QoQ, with a 12.6% YoY growth. Average non-interest-bearing deposits increased $18 million, or 5.1%, QoQ, contributing to an improved funding mix. Historically, Q2 sees about 2% shrinkage in core deposits, but focused efforts led to a 2% positive growth this quarter. The company is focused on continuing to improve the mix of deposits through non-interest-bearing growth, as new deposit acquisition costs have increased.

Net interest income increased 4.3% QoQ, and 21.7% YoY. Net interest margin expanded 9 basis points QoQ to 2.9%, primarily due to a decrease in cost of funds and an improved mix shift in interest-earning assets. The yield on interest-earning assets increased 4 basis points, while the cost of funds declined 4 basis points. The company noted 26 basis points of NIM expansion in 2025 and 19 basis points so far in 2026, and expects positive trends to continue.

Non-interest expense increased $1 million QoQ, including a $400,000 non-recurring^📎 charge for technology asset write-offs, which impacted diluted EPS by $0.03. The efficiency ratio was 74.03%. Management expects quarterly non-interest expense to be between $20 million and $21 million, with potential for higher expenses in Q3 due to incentive compensation from growth. The company plans to invest in talent acquisition (banking, trust, investment management) and new clients, leveraging market disruption^🌐, and has achieved $3 in revenue growth for each $1 in expense growth over the last three years.

The loan portfolio showed stable trends in Q2, with relatively flat non-accrual loans and non-performing assets (NPAs). There were no loan charge-offs for the second consecutive quarter, returning to historical zero loss levels. Allowance coverage stood at 75 basis points of total loans, with a $0.5 million provision release due to improved trends. Classified and criticized loans were slightly down QoQ, and management expressed confidence in underwriting standards protecting against losses, with an expectation for some NPA improvement in Q3.

The company has added 12 new front-office people and 8 new product group personnel this year, including 10 direct salespeople. To accelerate productivity, they launched the 'Westward 100' program, resulting in nearly 4,000 client calls company-wide and an 88% increase in calls YoY. The trust department saw a 180% increase in calls. A new activation program for client-facing new hires aims to quickly integrate them and optimize their client service capabilities, reflecting a culture shift towards proactive sales.