First Western Financial Inc Q3 FY2026 earnings call

• Loan Growth & Production: Loans held for investment increased $95 million sequentially (6th consecutive quarter of growth). New loan production was $163 million, diversified across markets. Average yield on new loans was 6.79%, significantly higher than the 6.26% average rate on payoffs, expanding margins.
• Deposit Mix Improvement: Total deposits rose 2.5% sequentially. A key strategic driver is the requirement for borrowers to use First Western as their primary bank, shifting mix toward non-interest-bearing accounts (up 14 million/3.9% sequentially). New hires from acquired institutions are accelerating this trend.
• Net Interest Margin (NIM): NIM expanded 5 basis points to 2.95%. This was driven by a 7 basis point increase in asset yields, partially offset by a 2 basis point rise in funding costs. Management expects continued expansion due to repricing of floating-rate loans and fair value swaps.
• Fee Income Turnaround: While headline non-interest income dipped due to lower mortgage gains and insurance sales, Trust and Investment Management (PTIM) fees rose 2.6% QoQ (annualized ~10.4%). This reflects the success of recent restructuring and hiring of senior talent (e.g., former Goldman Sachs executive).
• Expense Discipline: Non-interest expenses decreased $400,000 QoQ, aided by the absence of a $400,000 non-recurring tech charge from Q2. The efficiency ratio improved to 72%.
• Asset Quality: Improved significantly with non-performing assets dropping to 39 basis points. Provision expense was modest at $600,000. No meaningful deterioration expected.
• Strategic Hiring & M&A Disruption: Management is capitalizing on market consolidation (specifically around First Bank) by recruiting experienced bankers who bring client relationships. Over 14 senior hires have been made, hitting the ground running.

The provided transcript does not break down financial performance by specific product segments (e.g., Commercial Banking vs. Wealth Management) with absolute dollar amounts or revenue contribution percentages for each distinct line item. The company reports consolidated Gross Revenue of approximately $24.5 million (implied from growth rates), Net Income of $6 million ($0.60 per diluted share), and Pre-tax, Pre-provision Net Income (PTPPI) which increased 27% year-over-year. Non-interest income decreased slightly due to mortgage headwinds, while Trust and Investment Management fees grew 2.6% quarter-over-quarter.

• Financial Performance Outlook: Management expresses strong encouragement regarding Q4 and 2027 prospects, expecting further improvement in profitability.
• Loan Growth: On track for approximately 10% full-year 2026 growth. Management sees a reasonable run rate of 15% into 2027, driven by strong pipelines and new talent productivity.
• Return on Assets (ROA): Targeting achievement of 1% ROA during 2027. Long-term medium-term outlook suggests potential for 1.3%-1.5% ROA if stable economic conditions persist.
• NIM Expansion: Expects continued NIM expansion, building on 26 bps gain in 2025 and 24 bps YTD in 2026. Driven by rising rates on floating-rate loans (~$1 billion exposure) and repricing of maturing loans.
• Expense Management: Commitment to tight expense control while selectively investing in high-impact areas like wealth management and treasury services.
• Asset Quality: No expectation of meaningful deterioration in asset quality through the remainder of the year.

• Mortgage Rate Sensitivity: Higher mortgage rates have negatively impacted origination volumes and net gains on sale. However, management views this as a minor component of revenue (<small number>) and focuses on strategic client acquisition via jumbo mortgages.
• Interest Rate Volatility: While currently benefiting from rising rates, there is inherent risk in funding cost increases. Management hedges ~$200 million of deposit portfolio via cash flow swaps to mitigate beta risk on index money market accounts.
• Integration Risk: Rapid hiring of senior talent from competitors (e.g., First Bank) carries execution risk, though early indicators show successful cultural fit and immediate impact.
• Market Disruption Dependency: Current growth advantages are partly derived from competitor instability (M&A activity). If the competitive landscape stabilizes, these tailwinds may diminish.

Q: Hannah Wynn asked about Q4 loan pipeline strength and whether double-digit growth can continue, plus trends in mortgage activity amid rising rates.

A: Scott Wylie confirmed pipelines are stronger than in H1, with credit committee activity up. He anticipates ~10% growth for 2026 and a 15% run rate heading into 2027. Regarding mortgages, he noted that while national demand has fallen, First Western is outperforming peers because they control fixed costs and maintain productive, commission-based Mortgage Loan Originators (MLOs). He emphasized mortgages are strategically important for client defense/offense but are a "sideshow" compared to the bright spot in PTEM fee growth.

Q: Matthew Clark inquired about deposit pricing betas, end-of-quarter borrowings, and the timeline for achieving 1% ROA.

A: CFO David Weber stated the spot deposit rate was 2.86% in Sept. He outlined a beta strategy: 100% beta on $740M index money markets (hedged by $200M swap) and ~28% beta on standard money markets. Borrowings normalized on average despite end-of-quarter spikes. Scott Wylie projected 1% ROA will be achieved in 2027, with a long-term medium-term view of 1.3%-1.5% ROA given stable markets and upward-sloping curves.

Q: Liam Cuhill asked about drivers of non-interest-bearing deposit growth and how payoffs will trend in a higher rate environment.

A: Wylie attributed DDA growth to business development focus, treasury management upgrades, and relationship-based lending requirements. He highlighted that M&A disruption allows them to hire top talent (e.g., Bill Sullivan) who bring client relationships. Regarding payoffs, he noted they are episodic (~$100M/qtr) with no major trend. Higher rates actually create opportunity as clients refinance from low rates to high renewal rates elsewhere, prompting them to shop around for better terms at First Western.

Q: Bill DeZellum asked if loan growth dynamics are accelerating enough for 20% YoY growth quarters and requested details on a $10M note redemption.

A: Wylie declined to target 20% growth, preferring mid-teens to remain selective and avoid risky pricing. He argued that current competition leads to poor pricing by rivals, allowing First Western to buy high-yielding floating jumbos with no credit risk. Regarding the notes, CFO Weber clarified it was a full call of $10M subordinated debt issued in Nov 2020 (Tier 2 capital), reducing holding company debt load and improving NIM, with no issues to capital ratios.