Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• First Western Financial Inc (NASDAQ:MYFW) reported a significant improvement in profitability, driven by an expansion in net interest margin and higher non-interest income.
• The company successfully increased non-interest bearing deposits and managed expenses well, contributing to financial stability.
• There was a successful resolution of two large OREO properties, resulting in a net gain and contributing to asset quality improvement.
• The tangible book value per share increased by 1.6% in the quarter, reflecting strong balance sheet management.
• The company maintained a conservative approach to new loan production, with disciplined underwriting and pricing criteria, resulting in a solid level of diversified loan production.

Negative Points

• Loan payoffs matched new loan production, resulting in a slight decrease in total loans, which could impact future growth.
• There was a $144 million decrease in assets under management due to net withdrawals, primarily in fixed fee accounts.
• The company anticipates potential flat or lower deposit balances in the second quarter due to typical outflows related to tax payments.
• Non-performing assets remain a concern, with one substantial non-performing loan still unresolved, dependent on court proceedings.
• The macroeconomic outlook remains uncertain, with potential impacts on loan demand and growth expectations for the year.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Sign with MYFW.

Q: Can you provide details on the interest recoveries that contributed to the increase in loan yields this quarter? A: David Weber, CFO: We saw higher amortized loan fees this quarter, which can be lumpy. This increase was about $200,000 higher than what we typically see in a quarter.

Q: What are your expectations for the net interest margin (NIM) in the coming quarters? A: David Weber, CFO: We expect the NIM to be relatively flat in the second quarter due to expected deposit runoff driven by tax payments. However, we anticipate opportunities for further expansion in the second half of the year, aiming to get back into the 270s range.

Q: With the recent Oreo property sales, how do you plan to deploy the excess liquidity if loan growth doesn't meet expectations? A: Scott Wiley, CEO: While our primary focus remains on growing our banking relationships, deploying liquidity into the bond book is certainly an option if loan growth doesn't materialize as expected.

Q: Can you provide guidance on expense management for the rest of the year? A: Scott Wiley, CEO: We aim to keep expenses under $20 million per quarter. This target remains reasonable unless we outperform expectations, which could lead to higher incentive compensation accruals.

Q: What is your target for return on assets (ROA) as you aim to improve profitability? A: Scott Wiley, CEO: Our current target is to get back to a 1% ROA. We believe that as our net interest margin and fee income improve, we will see operating leverage that will drive higher ROA and ROE.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.