First Western Financial (MYFW -4.70%), a regional wealth management-oriented banking firm, reported second-quarter earnings on July 24, 2025. Diluted earnings per share (GAAP) were $0.26, falling short of the $0.36 consensus estimate by $0.10. Non-GAAP revenue totaled $24.16 million, also missing the $25.28 million analyst forecast by $1.12 million. While loan and deposit balances strengthened and net interest margin improved to 2.67%, the company faced ongoing challenges in growing fee-based income and headline profitability. Overall, operational trends were mixed as progress in balance sheet growth and efficiency was offset by weaker non-GAAP revenue and GAAP earnings than forecasted.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $0.26 | $0.36 | $0.11 | 136.4 % |
| Revenue (Non-GAAP) | $24.16 million | $25.28 million | $23.07 million | 4.7 % |
| Net Interest Margin | 2.67 % | 2.35 % | 0.32 pp | |
| Net Interest Income | $17.88 million | $15.78 million | 13.3 % | |
| Total Loans | $2.54 billion | $2.46 billion | 3.3 % | |
| Total Deposits | $2.53 billion | $2.41 billion | 5.0 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Strategic Focus
First Western Financial builds its business around a mix of traditional banking and wealth management services. It operates a network of branches in the Western United States, targeting high-net-worth clients with a suite of deposit, lending, trust, and investment management products. This integrated approach is designed to create deeper client relationships and deliver more stable revenue streams by balancing interest income with advisory and fee-based services.
Recently, the company has remained focused on growing its wealth management segment while expanding into affluent western markets through a “hub-and-spoke” model. Its relationship-based banking strategy seeks to attract and retain clients seeking a one-stop shop for complex financial needs. Success for the firm hinges on its ability to deliver non-interest income from wealth management while managing lending risks and expanding its client base in key markets.
Quarter in Review: Financial and Operational Developments
Headline GAAP earnings and non-GAAP revenue came in below analyst expectations. GAAP EPS of $0.26 missed the mark by $0.10, and non-GAAP revenue also fell short by $1.12 million versus forecasts. Net income available to common shareholders (GAAP) was $2.5 million, compared to $1.1 million in Q2 2024, but down from $4.2 million in Q1 2025. Management pointed to higher credit loss provisions and a step-down in non-interest income as the main reasons for this shortfall, despite positive trends in other areas.
Net interest margin, which measures the difference between what the bank earns on loans and pays on deposits, improved to 2.67 %. This increase was supported by a stronger mix of interest-earning assets and a slight decrease in the cost of deposits. Net interest income (GAAP) rose 13.3% year over year. Loan balances climbed to $2.54 billion as of Q2 2025, up approximately 3.4% from Q2 2024, primarily driven by net growth in the 1-4 family residential and non-owner occupied commercial real estate portfolios, partially offset by net decreases in the construction and development, and commercial and industrial portfolios. Total deposits were $2.53 billion as of June 30, 2025, an increase from $2.41 billion as of June 30, 2024, primarily driven by an increase in interest-bearing deposits.
Non-interest income, which includes fees from trust, investment management, and insurance, declined compared to both Q1 2025 and Q2 2024. Key drivers of this decline included the absence of one-time gains from sold real estate properties and lower insurance-related fees. Trust and investment management fees were $4.51 million, a small drop from the previous year and previous quarter. Recent additions to the wealth and advisory team, including a senior hire from Goldman Sachs who joined on March 31, 2025, have yet to make a measurable impact on revenue growth in this area.
From an expense perspective, non-interest expense declined 1.5% sequentially, supported by lower compensation costs. The efficiency ratio, which compares operating expenses to income and is one measure of cost control, improved to 78.8% (non-GAAP), though it remains high by industry standards. Non-performing loan and asset ratios improved year over year. However, the provision for credit losses (GAAP) increased to $1.77 million, mainly as a result of loan growth and higher net charge-offs, which can pressure future profits if this trend continues.
Product Families and Business Performance
The wealth management business, which covers trust, advisory, and investment management products, remained a focal point for the company. Trust and investment management fees made up about 20% of income before expenses, down from roughly 24% in Q2 2024. Assets under management rose to $7.50 billion, up 4.5% quarter over quarter, primarily driven by market gains rather than net new inflows. Core bank lending included a mix of 1-4 family residential mortgages, commercial and industrial loans, construction lending, and owner and non-owner-occupied commercial real estate loans. This broad range strengthens loan book diversity, which is vital for risk management.
Deposit-taking operations saw continued momentum in money market and interest-bearing accounts. Although time deposit balances declined from a year earlier, the overall deposit mix improved in terms of cost, which helped margin expansion. The company also drew more funding from the Federal Home Loan Bank to support asset growth, raising its borrowing balance to $163.4 million.
Looking Ahead: Guidance and Key Issues
Management reaffirmed a focus on “solid balance sheet growth” and “continued expansion” in net interest margin, supported by a steady expense base, as discussed in management commentary. No explicit quantitative revenue or earnings outlook was provided in this release. The stated goal for return on assets, a measure of overall profitability, remains at 1%, compared to 0.36%, with management emphasizing improvement as margin and fee income recover.
Looking ahead, investors should focus on the trajectory of fee-based income from wealth management and trust operations, the sustainability of recent loan and deposit growth trends, and any shift in funding costs if borrowing remains elevated. Continued improvement in operating efficiency and expenses will also be crucial. With no dividend currently paid, future announcements in this area could draw attention.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
