First Western earnings rose about 88% year over year to $6.0 million, or $0.60 per diluted share, in the third quarter of 2026. Results released on October 22 showed stronger loan growth and a wider net interest margin, although weaker fee income offset part of the improvement. A one-time tax benefit also helped lift profit from the preceding quarter.
Key Takeaways
- Loans increased $95 million during the quarter, while net interest margin widened to 2.95%.
- Sequential net profit growth included a tax benefit; pretax income declined slightly.
- Management expects roughly 10% loan growth in 2026 and targets a 1% return on assets during 2027.
Table of Contents
- First Western earnings show stronger lending income
- Tax benefit and lower expenses support net profit
- Credit indicators improve as loan-loss provisions return
- Management sees further growth, with profitability targets ahead
- Conclusion
First Western earnings show stronger lending income
First Western’s third-quarter financial results showed net interest income rising 5.5% from the second quarter to $23.0 million, and 17.9% from a year earlier. Net interest margin reached 2.95%, up from 2.90% in the preceding quarter and 2.54% in the third quarter of 2025.
Higher loan yields helped offset more expensive funding. The yield on interest-earning assets increased seven basis points sequentially, while the cost of funds rose two basis points. This meant the bank earned a wider spread even as its funding became slightly more costly.
Loans held for investment increased 3.5% during the quarter to $2.81 billion, marking a sixth consecutive quarterly increase. New loan production totaled $163 million at an average rate of 6.79%, above the 6.26% average yield on loans paying off. Total deposits grew $70 million to $2.92 billion.
| Item | Details |
|---|---|
| Efficiency ratio, non-GAAP | 72.2%, versus 74.0% in Q2 2026 |
| Tangible book value per share, non-GAAP | $26.28, up 2.9% sequentially |
| Assets under management | $7.21 billion, down 0.8% sequentially |
| Subordinated debt redemption | $10 million redeemed during the quarter |
Tax benefit and lower expenses support net profit
Net income increased from $5.7 million, or $0.57 per diluted share, in the second quarter. However, pretax income slipped to $7.28 million from $7.40 million. A $0.4 million benefit from a purchased clean-fuel tax credit reduced the quarter’s tax expense.
On the October 23 earnings call, Chief Financial Officer David Weber described the tax benefit as one-time and said an effective tax rate of about 23% was a reasonable estimate without similar opportunities.
Non-interest income fell 9.4% sequentially to $5.8 million, reflecting lower mortgage gains and bank fees. Trust and investment management fees provided a partial offset, increasing 2.6%. Non-interest expense declined 1.9% to $20.8 million, partly because the prior quarter included a $0.4 million technology-asset write-off.
Credit indicators improve as loan-loss provisions return
Non-performing assets declined to $13.3 million, or 0.39% of total assets, from $16.3 million, or 0.50%, at June 30. The company attributed the quarterly decline to paydowns and a charge-off.
First Western recorded a $647,000 provision for credit losses, compared with a $469,000 release in the second quarter. The new provision primarily reflected loan growth. The allowance for credit losses equaled 0.74% of total loans, slightly below 0.75% at June 30.
Management sees further growth, with profitability targets ahead
Chief Executive Scott Wylie said strengthening pipelines supported roughly 10% loan growth for 2026 and a mid-teens growth run rate heading into 2027. Those figures are management expectations, not completed results.
Wylie also said management expects First Western to operate at a 1% return on assets during 2027, without specifying whether that meant a full-year average or reaching the level during the year. The reported third-quarter return on average assets was 0.74%.
Funding costs remain a constraint. Weber put the total-deposit spot rate at 2.86% at September 30 and said $740 million of indexed money-market accounts would fully reflect changes in their reference rates.
Conclusion
The fourth quarter will show whether stronger loan production continues to lift interest income while funding costs rise. First Western’s growth outlook and 2027 profitability objective remain targets, with the one-time tax benefit making the latest sequential net-profit improvement less representative of underlying operating progress.
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