First Western Q2 2025 slides: EPS dips to $0.26 as NIM expansion continues

Introduction & Market Context

First Western Financial Inc (NASDAQ:MYFW) reported its second quarter 2025 results, showing a decline in earnings from the previous quarter while maintaining positive momentum in key operational metrics. The financial services company, currently trading at $24.77, has seen its stock appreciate significantly since its Q1 earnings announcement when it closed at $18.85.

The company reported net income available to common shareholders of $2.5 million, or $0.26 per diluted share, down from $4.2 million, or $0.43 per share, in the first quarter. Despite this quarter-over-quarter decline, First Western continues to show improvement in its net interest margin and loan growth while maintaining its conservative risk management approach.

Quarterly Performance Highlights

First Western’s second quarter results reflect a mixed performance with several positive trends offset by higher loan loss provisions and the absence of one-time gains that boosted Q1 results.

Net interest income increased by $0.4 million, or 2.3%, from $17.5 million in Q1 2025 to $17.9 million in Q2, marking the third consecutive quarterly increase. This improvement was primarily driven by a 6 basis point expansion in net interest margin from 2.61% to 2.67%.

As shown in the following chart of quarterly net interest income and margin trends:

The company’s loan portfolio showed strong growth, increasing by $114.4 million from the previous quarter to reach $2,567 million. This growth was achieved while maintaining a disciplined approach to new loan production, which carried an average rate of 6.35%.

The composition and growth of the loan portfolio is illustrated in this breakdown:

Total (EPA:TTEF) deposits increased modestly by 0.4% to $2.53 billion, with a shift in composition as noninterest-bearing deposits decreased by 11.7% due to seasonal outflows for tax payments, while interest-bearing deposits grew by 2.8%, primarily in money market and time deposit accounts.

Detailed Financial Analysis

First Western’s earnings per share declined from $0.43 in Q1 2025 to $0.26 in Q2, primarily due to a $1.7 million pre-tax increase in loan loss provisions and the absence of a one-time $0.5 million pre-tax gain on other real estate owned (OREO) that benefited the previous quarter.

The quarterly earnings trend is illustrated in this chart:

Gross revenue decreased 1.6% from the prior quarter, with non-interest income declining by $1.0 million, partially offset by growth in mortgage banking revenue due to higher volumes from newly hired mortgage loan officers (MLOs).

The company’s revenue composition remains diversified, with wealth management continuing to be a significant contributor:

First Western’s trust and investment management business showed solid growth, with total assets under management increasing by $320 million, or 4.5%, to $7.50 billion during the quarter. Year-over-year, assets under management grew by 6.9%, highlighting the company’s strength in wealth management services.

On the expense side, non-interest expenses decreased to $19.1 million from $19.4 million in Q1 2025, primarily due to lower salaries and employee benefits. The efficiency ratio improved slightly from 79.16% to 78.83%, reflecting the company’s ongoing efforts to enhance operational efficiency.

Asset quality metrics showed a slight deterioration, with an increase in non-performing loans and assets due to one credit relationship that is in active workout. The allowance for credit losses to total loans ratio increased marginally from 0.74% to 0.75%.

Strategic Initiatives & Outlook

First Western continues to prioritize prudent risk management and a conservative approach to new loan production, while focusing on growing its core businesses. The company’s tangible book value per share increased by 0.9% to $23.39, reflecting continued value creation for shareholders.

Management expressed optimism about the company’s near-term outlook, noting that First Western’s markets continue to perform well. Loan and deposit pipelines remain strong, which should support solid balance sheet growth in the second half of the year.

The positive trends in key areas, including net interest margin expansion and growth in the wealth management business, are expected to continue, potentially leading to steady improvement in financial performance.

When comparing these projections to statements made during the Q1 earnings call, First Western appears to be executing on its strategy. The company had anticipated stable net interest margins in Q2 with potential expansion in the latter half of 2025, but has already achieved margin expansion this quarter.

The company’s stock has performed well since Q1 earnings, appreciating from $18.85 to $24.77, approaching its 52-week high of $24.88. This performance suggests investor confidence in First Western’s strategy and growth prospects, despite the quarter-over-quarter earnings decline.

Full presentation:

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