First Western Q1 2025 slides: EPS jumps 54% as asset quality improves dramatically

First Western Financial Inc (NASDAQ:MYFW) reported a significant improvement in profitability during its first quarter 2025 earnings presentation, with earnings per share jumping 54% year-over-year as the company successfully executed on strategic initiatives to enhance asset quality and expand net interest margin.

Quarterly Performance Highlights

First Western reported net income available to common shareholders of $4.2 million or $0.43 per diluted share for Q1 2025, representing a substantial increase from both the previous quarter ($2.7 million or $0.28 per share) and the same quarter last year ($2.5 million or $0.26 per share).

The company’s shares closed at $18.85 on April 24, 2025, up 3.06% from the previous close, suggesting positive market reaction to the results.

"We continued execution on strategic priorities with prudent risk management and a conservative approach to new loan production," the company noted in its presentation, highlighting "positive trends in key areas resulting in improvement in profitability."

As shown in the following chart of quarterly earnings growth, First Western has demonstrated consistent improvement in profitability over the past five quarters:

Detailed Financial Analysis

First Western’s net interest income increased to $17.5 million in Q1 2025, up 3.6% from $16.9 million in Q4 2024 and 8.6% from $16.1 million in Q1 2024. This improvement was primarily driven by net interest margin expansion, which increased 16 basis points quarter-over-quarter to 2.61%.

The margin improvement came despite total loans held for investment remaining flat at $2.43 billion compared to the previous quarter. The company reported new loan production of $70.8 million in Q1 with an average rate of 6.89%, focusing on relationship-based lending.

The following chart illustrates the company’s improving net interest margin trend:

Non-interest income increased by $0.9 million to $7.3 million from the prior quarter, driven by higher mortgage gains and a $0.5 million net gain on the sale of OREO properties. This was partially offset by a decrease in insurance fees, which are seasonally higher in the fourth quarter.

The company’s gross revenue increased 3.4% from the previous quarter, with net interest income representing 70.4% of total revenue and non-interest income accounting for 29.6%.

On the expense side, First Western reported non-interest expenses of $19.4 million, down from $20.4 million in Q4 2024. This decrease was primarily attributed to a one-time $1.1 million OREO write-down recognized in the previous quarter. The efficiency ratio improved to 79.16% from 80.74% in Q4 2024 and 83.68% in Q1 2024, reflecting the company’s ongoing efforts to enhance operational efficiency.

Asset Quality & Capital Position

One of the most significant improvements in the quarter was the dramatic reduction in non-performing assets, which decreased by $31.8 million to $17.1 million due to the successful sale of two OREO properties. This resulted in the ratio of non-performing assets to total assets declining sharply from 1.68% in Q4 2024 to 0.59% in Q1 2025.

The following chart demonstrates this substantial improvement in asset quality:

First Western’s capital position remained strong, with tangible book value per share increasing 1.6% to $23.18. The company reported a CET1 to risk-weighted assets ratio of 10.35% and total capital to risk-weighted assets of 13.15%, well above regulatory requirements.

The company’s total deposits increased slightly by 0.4% to $2.52 billion, with non-interest-bearing deposits growing by 9.0% to $410 million. This deposit mix improvement should further support net interest margin expansion going forward.

Strategic Initiatives & Outlook

First Western’s trust and investment management segment, a key differentiator for the company, reported total assets under management of $7.18 billion, down 2.0% from the previous quarter but up 0.5% from Q1 2024. The company attributed the quarterly decrease to net withdrawals primarily in fixed fee accounts.

Looking ahead, First Western outlined several drivers expected to improve financial performance in 2025, including increased loan growth from the addition of banking talent, continued expansion in net interest margin, redeployment of cash from OREO sales, more robust wealth management business, higher mortgage production, and disciplined expense control.

"Markets continue to perform well, providing opportunities to capitalize on market disruption," the company stated in its outlook section, adding that "deposit gathering will remain a top priority."

This represents a significant turnaround from the previous quarter, where the company had missed revenue expectations despite meeting EPS forecasts. The Q1 2025 results demonstrate that First Western’s strategic shift "from defense to offense," as mentioned by CEO Scott Wiley in the previous earnings call, is beginning to yield tangible results in terms of improved profitability and asset quality.

With its strengthened balance sheet, expanding margins, and strategic focus on relationship banking, First Western appears well-positioned to continue its positive momentum throughout 2025, provided it can successfully execute on its loan growth initiatives while maintaining the improved asset quality metrics achieved in the first quarter.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.