First Western (MYFW) Q3 2026 earnings review
First Western loan growth accelerates, but wholesale borrowings jump
First Western, a Denver-based private bank and wealth manager, accelerated its lending while expanding its lending spread. Net interest income rose 18% from a year ago to $23 million as net interest margin reached 2.95%, and chief executive Scott Wylie credited new banking talent for lifting loan originations to $163 million. Headline profit per share nearly doubled from a year ago, though a purchased clean-fuel tax credit added four cents per share by our math.
| Net interest income | $23.0M +18% from a year ago (+5.5% from last quarter) |
|---|---|
| Profit per share | $0.60 +88% from a year ago ($0.56 without tax credit, by our math) |
| New loan production | $162.6M +42% from last quarter at a 6.79% average rate |
| Near-term outlook | Unchanged solid loan growth and continued margin expansion |
⚖️ Verdict: 🟢 Bullish
The story got better because the bank revived loan growth without cutting its lending rates. Loan originations jumped 42% from last quarter and the average rate on new loans rose to 6.79%, easing fears that management would sacrifice spreads to expand. One caution: deposit gathering lagged asset growth, so the bank added $115 million of Federal Home Loan Bank borrowings that will raise fourth-quarter funding costs.
The question now is whether deposit gathering can replace those late-quarter wholesale borrowings and keep the lending margin rising. If client deposits catch up, higher loan yields will carry the margin toward 3.15%; if wholesale debt stays high and money market rates keep creeping up, margin gains will stall. Fourth-quarter average borrowing balances and deposit costs will decide it.
🐂 Bull Case
New Bankers Lift Loan Growth Without Rate Cuts
First Western has been hiring experienced bankers from rival lenders to accelerate growth after two slow quarters. Some observers worried the private bank would have to cut loan interest rates to win business in competitive Western markets. Instead, third-quarter originations jumped while pricing improved.
- New loan production: $162.6 million, up 41.8% from last quarter and 11.6% from a year ago by our math
- Average rate on new loans: 6.79%, up from 6.37% last quarter
- Net loans held for investment: up $95.0 million, or 3.5% from last quarter, to $2.81 billion
The company said new production was "supported by new banking talent that is helping drive solid loan growth" across residential mortgages and commercial credit. Because the 6.79% rate on new loans was "higher than the average rate of loans paying off in 3Q26", the bank grew its loan book without sacrificing lending spreads.
What to watch: fourth-quarter loan originations and average new loan yields. Another quarter above $140 million at stable rates would show the new hires can sustain growth without price concessions.
Higher Loan Yields Offset Rising Deposit Costs
Net interest margin (NIM, the profit spread between what a bank earns on loans and pays on deposits and debt) expanded for a fourth straight quarter. Critics feared the margin would stall near 2.90% once deposit rate cuts ran their course. Deposit funding costs did stop falling this quarter, but higher asset yields carried the margin up 0.05 percentage points to 2.95%.
Average loan yields rose 0.06 percentage points from last quarter to 5.78%, and debt securities yields rose 0.23 percentage points to 4.64%. Meanwhile, average noninterest-bearing deposits (customer accounts that pay no interest) grew 3.9% to $379.5 million. Together, those gains beat a 0.02 percentage point uptick in total funding costs and lifted net interest income 5.5% from last quarter to $23.0 million.
What to watch: the spread between average loan yields and interest-bearing deposit costs in the fourth quarter. Further loan repricing above 5.80% would keep the margin moving toward the 3.15% long-term goal.
Problem Loans Fall to a Multi-Year Low
First Western has spent the past year clearing problem loans and foreclosed properties from its balance sheet. In the third quarter, non-performing assets (loans not paying interest plus foreclosed real estate) fell 18.6% from last quarter to $13.3 million, or 0.39% of total assets, down from 0.50% in June and 0.70% a year ago.
Borrower paydowns drove the $3.0 million reduction in non-accrual loans, while net charge-offs (loans written off as uncollectible) were just $118 thousand. Because credit stayed clean, the $647 thousand credit loss provision went toward backing the $95.0 million of new loans, and the allowance covering non-accrual loans rose from 124.6% to 156.8%.
What to watch: non-accrual loan balances in the fourth quarter. A further drop below $12 million would confirm that remaining workout credits are resolving without eating into capital.
Cost Discipline Holds Inside the Raised Target
Operating expenses had crept above management's earlier $19–20 million quarterly target during the first half of 2026, prompting the leadership team to raise the target band to $20–21 million last quarter. In the third quarter, non-interest expense fell 1.9% from last quarter to $20.8 million, keeping the bank inside its new cost ceiling.
Excluding last quarter's $380 thousand technology write-off, underlying operating costs were $20.84 million against $20.83 million in the second quarter. Salaries and employee benefits fell by 2.3 percentage points of gross revenue (revenue before credit provisions and fair-value swings) by our math, to 44.0%, on lower payroll taxes. That pushed the efficiency ratio (operating expenses as a share of gross revenue, where lower is better) down 1.8 percentage points to 72.2%.
What to watch: fourth-quarter salaries and employee benefits expense. Holding total non-interest expense below $21.0 million while new bankers ramp up production would prove operating leverage is intact.
🐻 Bear Case
Wholesale Borrowings Funded the Balance Sheet Expansion
"Healthy client demand in our markets drove robust loan growth during the quarter, while continued growth in noninterest-bearing deposits reflects the strength of our relationship-based banking model," chief executive Scott Wylie said. Yet deposit gathering did not keep up with the bank's asset expansion, forcing First Western to lean on wholesale debt.
- Period-end FHLB borrowings: $150.9 million, up $114.5 million from $36.4 million last quarter
- Deposit cost uptick: total cost of funds rose 0.02 percentage points to 2.88%, "primarily driven by higher cost of deposits as a result of higher rates on money market accounts"
- Loan-to-deposit ratio: 96.2%, up from 95.3% last quarter
Total deposits grew $70.2 million, but loans grew $95.0 million and the debt securities portfolio expanded by $88.0 million. Because average FHLB borrowings were only $18.1 million during the quarter, the $150.9 million period-end balance arrived late in the period and carries a 4.04% rate that will weigh on fourth-quarter funding costs.
What to watch: fourth-quarter average FHLB borrowings and money market deposit rates. If the $150.9 million borrowing balance stays on the books, higher interest expense will slow net interest margin gains.
Mortgage Gains Drop and Client Assets Shrink
First Western relies on fee businesses — wealth management and residential mortgages — to diversify its lending income, and it has been recruiting mortgage loan officers to boost volume. Instead, non-interest income fell 9.1% from last quarter by our math (reported as 9.4% on rounded figures) to $5.8 million, dragging on total revenue.
Net gains on mortgage loans dropped 46.7% from last quarter and 65.4% from a year ago by our math to $483 thousand as high mortgage rates curbed homebuyer borrowing. Meanwhile, trust and investment management fees edged up 2.6% from last quarter to $4.87 million, but assets under management (AUM, the client wealth the bank oversees) fell $61 million to $7.21 billion on "lower market values in low fee account types, partially offset by increased net contributions".
What to watch: fourth-quarter mortgage banking gains and wealth management AUM. Continued sub-$500 thousand mortgage gains would leave the enlarged mortgage lending team unprofitable.
Risks this quarter didn't answer
Three standing credit and wealth-management concerns cannot be fully tested from the earnings release and presentation alone.
- Substandard commercial real estate loans: stood at $68.6 million last quarter while the credit allowance ratio edged down 0.01 percentage points to 0.74% in Q3; the 10-Q filing's credit quality table will show whether criticized balances shrank.
- Commercial and industrial non-accrual loans: total non-accrual loans fell $3.0 million to $13.3 million, and the 10-Q loan note will show how much came from the persistent C&I workout book.
- Wealth management gross client outflows: the release noted positive net contributions against market declines, and the 10-Q AUM rollforward table will show exact client withdrawals by account type.
👓 Other Themes
One-Time Tax Credit Lifted Headline Profit
Reported net income rose 4.4% from last quarter to $6.0 million ($0.60 per share), and return on average assets ticked up to 0.74%. However, income before taxes actually dipped 1.6% to $7.3 million because the bank recorded a $647 thousand credit provision after releasing $469 thousand last quarter. A "clean fuel tax credit purchased during the third quarter of 2026" cut tax expense by $0.4 million; without it, profit was $5.6 million ($0.56 per share) and return on assets was 0.69% by our math.
💲 Other KPIs
Core operating profit before taxes and credit provisions rose 14.3% from last quarter and 27.4% from a year ago by our math. Pre-tax, pre-provision net income strips out credit reserve swings and tax credits, showing that higher net interest income and flat operating expenses drove genuine underlying profit improvement.
Net worth per share excluding goodwill and intangible assets rose 2.9% from last quarter and 11.0% from a year ago. Steady retained earnings and a lack of share dilution have lifted tangible book value in every quarter over the past year.
Consolidated Tier 1 capital to risk-weighted assets edged down 0.17 percentage points from 9.93% last quarter, while total capital fell 0.67 percentage points to 11.80%. The bank redeemed $10.0 million of subordinated debt and added $95.0 million of loans, consuming a portion of its excess capital buffer.
🔮 Guidance
Unchanged. First Western still expects "Solid loan and deposit growth" alongside an improved deposit mix in the fourth quarter. Third-quarter loan growth accelerated to 3.5% from last quarter on $162.6 million of originations, putting the bank back on track after first-half loan growth of just 2.5%.
Unchanged. The bank plans for "Continued expansion in net interest margin" after reaching 2.95% in the third quarter. First Western has met or beaten its directional margin outlook in five of the last six quarters, though late-quarter wholesale borrowings and money market deposit costs will test the fourth-quarter pace.
Unchanged. Management reiterated "No meaningful deterioration expected in asset quality" as clients continue to perform well. Non-performing assets have fallen for four consecutive quarters to 0.39% of total assets. Notably, the presentation's near-term outlook dropped its prior bullet calling for higher mortgage production.
❓ Key Questions
Will the $151 million of FHLB borrowings stay on?
Period-end Federal Home Loan Bank borrowings jumped by $114.5 million to $150.9 million, while the quarterly average was just $18.1 million. If that 4.04% debt stays on the balance sheet in Q4, interest expense will rise and compress the net interest margin.
Why did the outlook drop higher mortgage production?
Prior presentations guided for a higher level of mortgage production from newly hired loan officers, but the Q3 outlook slide removed that bullet as mortgage gains fell 47% to $483 thousand. Investors need to know if the mortgage segment is losing money.
What are gross client inflows and outflows in wealth?
Assets under management fell $61 million to $7.21 billion, which the release blamed on market values in low-fee accounts partially offset by net contributions. Last quarter's 10-Q showed net outflows in high-fee accounts, so the Q3 rollforward table needs to confirm the turnaround.
Did substandard commercial real estate loans shrink in Q3?
Non-accrual loans fell $3.0 million to $13.3 million, but substandard loans stood at $97.1 million last quarter ($68.6 million in non-owner-occupied commercial real estate). Meanwhile, the credit allowance ratio dipped to 0.74%.