First Western Financial Inc (MYFW) stock intrinsic value fair value estimate & owner earnings analysis

First Western Financial is a private bank and trust company based in Denver. It was founded in 2002 and serves wealthy individuals and families, along with their businesses and foundations, from nineteen offices in Colorado, Arizona, Wyoming, Montana and California. It makes money in three ways. The largest is net interest income: it earned $75.4 million in 2025 on about $2.7 billion of loans, funded by about $2.8 billion of deposits. Second, it earned $18.5 million of trust and investment management fees on $7.3 billion of client assets. Third, a small mortgage business that makes and sells home loans produced $4.4 million of gains. About 83% of loans are to borrowers in its five states, and 76% of its $1.0 billion commercial real estate book is in Colorado. How we measured earnings. At a bank, the operating cash flow line is dominated by mortgages that are made and sold within weeks. It moves with the mortgage pipeline rather than with profit: in 2025 it was minus $1.8 million while net income was $13.2 million. So we measure owner earnings starting from net income to common shareholders. We add back depreciation and a 2019 goodwill write-off, and we subtract the spending on premises and equipment needed to stay in business. Credit-loss provisions and stock-based pay stay in as real costs. A growing bank must also keep back about 8 cents of new capital for every dollar of new assets, in line with its consolidated leverage ratio of about 7.7%. We subtract that from what owners can take out in each forecast year. On that basis, owner earnings per share were $1.38 in 2019, $3.14 in 2020, $2.41 in 2021, $2.16 in 2022, $0.54 in 2023, $1.02 in 2024 and $1.22 in 2025. The 2020 to 2022 results were lifted by the mortgage refinancing boom and near-zero deposit costs. In 2023 and 2024 the opposite happened. Interest paid jumped from $16.5 million in 2022 to $90.1 million in 2024, and credit losses rose: a $12.1 million provision in 2023 and $9.0 million of net charge-offs in 2024. Our starting level is the median of this full 2019 to 2025 cycle, about $1.38 per share. The recent trend is better. Net interest margin rose from 2.36% to 2.63% in 2025 as deposit costs fell. In the first half of 2026, net interest income was about 21% above a year earlier, and net income was $11.9 million against $6.7 million. Most problem loans were dealt with in 2025: non-performing assets fell from $48.7 million to $19.6 million as $32 million of foreclosed property was sold. Part of the 2026 gain came from releasing credit reserves, which we do not count as recurring. Base case ($29.79 per share). Owner earnings grow 19% in the first year to about $1.65 per share. That matches the growth rate in 2025 and is close to the first-half 2026 pace once normal credit costs are included. They then grow 8% a year for two years as older, higher-cost funding keeps repricing, and 4% a year after that. The 4% is below the 5 to 6% a year the bank has grown deposits since 2021. Trust fees stay flat, as they have with client assets at $7.3 billion in both 2024 and 2025. Because growth needs retained capital, owners can take out only about $0.60 to $1.05 per share a year during the decade. After year 10 we hold earnings flat with no further growth, because the deposit and trust business has operated since 2004. The bank earns a return on equity near our 6% discount rate, so it is worth about its book value of roughly $28 per share, and that is what this case shows. Bear case ($11.78). Margin gains stop at the 2025 level of $1.22 per share. Trust fees fall 5% a year. In both 2024 and 2025, withdrawals and closed accounts were larger than new client money, and only market gains kept client assets level. Two more credit years like 2023 happen within the decade. That reflects the Colorado commercial property concentration and a balance sheet of about twelve dollars of assets for every dollar of equity. By year 10 owner earnings are about $0.65 per share and stay there. Bull case ($40.22). The first-half 2026 pace continues with normal credit costs, giving about $2.10 per share in year one. Earnings then grow 8% a year for two years and 5% a year after that, as the balance sheet grows 5% a year. Retained capital is subtracted in the same way as in the base case. We give no value to future acquisitions in any case. The largest trust client holds 36.8% of client assets but pays only 4.6% of trust fees, so losing it would hurt less than the first number suggests. Operating cash flow cannot be matched to earnings because of the mortgage flows described above. This is normal for a bank that sells mortgages and does not point to a problem. What would make this estimate wrong: deposit costs rising again, a downturn in Colorado commercial property, or continued client outflows at the trust business would push value toward the bear case. A return on equity held above 8% would push it toward the bull case. The margin-of-safety price is $16.00, about 46% below the base case. Bank leverage, credit cycles and a return on equity close to 6% call for a wide margin of safety, and value per share grows slowly for a bank earning near its cost of capital.