First Financial Northwest, Inc. Reports Net Income of $2.1 Million or $0.23 per Diluted Share for the First Quarter Ended March 31, 2023
RENTON, Wash., April 27, 2023 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the “Company”) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported net income for the quarter ended March 31, 2023, of $2.1 million, or $0.23 per diluted share, compared to $3.2 million, or $0.35 per diluted share, for the quarter ended December 31, 2022, and $3.3 million, or $0.36 per diluted share, for the quarter ended March 31, 2022.President and CEO Joseph W. Kiley III stated, “While there was significant turmoil in the banking industry in the quarter, I am pleased to report that our liquidity, capital and credit quality metrics remain very strong. I sincerely appreciate our loyal customers who recognize how differently our community bank operates compared to the large banks that failed during the quarter. Our liquidity continues to be a strength, with total available liquidity from cash, investment securities and our line of credit at the Federal Home Loan Bank totaling over $600 million at quarter end.”
“Credit quality remained strong, with nonperforming assets under $200,000 and additional loan delinquencies under $30,000 on total loans receivable of $1.2 billion,” noted Kiley. “During the quarter, we adopted the current expected credit loss accounting standard, which resulted in a one-time $500,000 increase to our allowance for credit losses and a corresponding net of tax adjustment of $395,000 to retained earnings. At quarter end, with an increase in loans receivable and an increase in the forecast for Washington State unemployment rates in future quarters, we also recognized a $300,000 provision for credit losses, increasing our allowance for credit losses on loans to $16.0 million compared to $15.2 million at year end,” continued Kiley.
“With the volatility in the banking industry following the failures of two large regional banks, deposit customers looked for options to insure more of their deposits across the industry. Accordingly, we saw the level of uninsured deposits improve to 23.6% of deposits as of quarter-end from 27.4% at the end of 2022. I am proud of the efforts of our employees to help customers maximize their insured deposits and communicate to them how we are different from the larger banks in the news,” concluded Kiley.
Highlights for the quarter ended March 31, 2023:
· Net loans receivable increased by $17.7 million in the quarter to $1.18 billion at March 31, 2023.
· The Company increased its regular quarterly cash dividend to shareholders by 8.3% to $0.13 per share from $0.12 per share.
· The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 15.6% at March 31, 2023, compared to 10.3% and 15.6% at December 31, 2022, and 10.5% and 15.3% at March 31, 2022, respectively.
· Credit quality remained strong with nonperforming assets of $193,000, or 0.01% of total assets, and only $28,000 in additional loans over 30 days past due at March 31, 2023.
· Based on management’s evaluation of the adequacy of the Allowance for Credit Losses (“ACL”) at March 31, 2023, the Bank recorded a $300,000 provision for credit losses during the quarter. This is in addition to the $500,000 that was added to the ACL upon the adoption of the Current Expected Credit Loss (“CECL”) accounting standard.Deposits totaled $1.23 billion at March 31, 2023, compared to $1.17 billion at December 31, 2022, and $1.14 billion at March 31, 2022. Total deposits increased $57.1 million for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, primarily due to a $66.5 million increase in brokered deposits. Due in large part to certificate of deposit promotions during the quarter, money market balances declined by $58.4 million, while retail certificate of deposit balances increased by $70.4 million. During the quarter, management elected to obtain additional funding in the wholesale markets due to the considerable volatility in the banking industry. At March 31, 2023, the Company held $71.0 million in interest-earning deposits that can be used to reduce brokered deposits and/or other wholesale liabilities in future periods, compared to $16.6 million at December 31, 2022, and $19.6 million at March 31, 2022.
The following table presents a breakdown of our total deposits (unaudited):
*Mar 31,*
*2023* *Dec 31,*
*2022* *Mar 31,*
*2022* *Three*
*Month*
*Change* *One *
*Year *
*Change* (Dollars in thousands)
Deposits:
Noninterest-bearing demand $ 110,780 $ 119,944 $ 130,596 $ (9,164 ) $ (19,816 )
Interest-bearing demand 86,183 96,632 99,794 (10,449 ) (13,611 )
Savings 21,871 23,636 23,441 (1,765 ) (1,570 )
Money market 483,945 542,388 609,080 (58,443 ) (125,135 )
Certificates of deposit, retail 332,935 262,554 277,190 70,381 55,745
Brokered deposits 191,414 124,886 - 66,528 191,414
Total deposits 1,227,128 $ 1,170,040 $ 1,140,101 $ 57,088 $ 87,027
The following tables present an analysis of total deposits by branch office (unaudited):
*March 31, 2023* *Noninterest-
bearing
demand * *Interest-
bearing
demand* * Savings * *Money
market * *Certificates
of deposit,
retail* *Brokered
deposits* *Total * (Dollars in thousands)
King County
Renton $ 33,227 $ 44,884 $ 14,033 $ 238,966 $ 244,560 $ - $ 575,670
Landing 2,721 1,407 184 15,056 6,411 - 25,779
Woodinville 3,084 2,438 1,116 10,971 14,101 - 31,710
Bothell 4,066 659 60 5,263 2,067 - 12,115
Crossroads 11,766 2,956 95 35,242 11,956 - 62,015
Kent 9,505 9,305 4 18,415 3,449 - 40,678
Kirkland 7,318 1,282 99 10,643 627 - 19,969
Issaquah 2,128 1,189 27 3,825 4,627 - 11,796
Total King County 73,815 64,120 15,618 338,381 287,798 - 779,732
Snohomish County
Mill Creek 7,001 3,089 617 12,487 6,190 - 29,384
Edmonds 15,282 6,247 884 26,726 13,183 - 62,322
Clearview 4,933 4,485 1,640 19,490 6,999 - 37,547
Lake Stevens 4,177 3,577 1,355 33,824 9,197 - 52,130
Smokey Point 2,836 4,287 1,745 46,825 7,782 - 63,475
Total Snohomish County 34,229 21,685 6,241 139,352 43,351 - 244,858
Pierce County
University Place 2,189 82 3 3,999 946 - 7,219
Gig Harbor 547 296 9 2,213 840 - 3,905
Total Pierce County 2,736 378 12 6,212 1,786 - 11,124
Brokered deposits - - - - - 191,414 191,414
Total deposits $ 110,780 $ 86,183 $ 21,871 $ 483,945 $ 332,935 $ 191,414 $ 1,227,128
*December 31, 2022* *Noninterest-
bearing
demand * *Interest-
bearing
demand* * Savings * *Money
market * *Certificates
of deposit,
retail* *Brokered
deposits* *Total * (Dollars in thousands)
King County
Renton $ 35,123 $ 45,575 $ 15,515 $ 279,392 $ 203,463 $ - $ 579,068
Landing 3,781 1,720 143 18,153 3,771 - 27,568
Woodinville 2,925 3,315 1,181 15,648 10,428 - 33,497
Bothell 3,363 1,041 49 6,485 942 - 11,880
Crossroads 14,455 3,082 226 30,969 11,667 - 60,399
Kent 8,162 11,660 2 19,549 1,023 - 40,396
Kirkland 10,618 506 62 8,310 25 - 19,521
Issaquah 3,342 1,171 134 2,474 3,408 - 10,529
Total King County 81,769 68,070 17,312 380,980 234,727 - 782,858
Snohomish County
Mill Creek 6,594 4,005 911 15,445 5,443 - 32,398
Edmonds 16,619 6,191 766 33,904 7,768 - 65,248
Clearview 5,456 6,317 1,653 23,322 2,906 - 39,654
Lake Stevens 3,936 5,213 1,390 36,842 4,674 - 52,055
Smokey Point 2,617 6,330 1,391 46,486 6,012 - 62,836
Total Snohomish County 35,222 28,056 6,111 155,999 26,803 - 252,191
Pierce County
University Place 2,192 96 1 3,953 672 - 6,914
Gig Harbor 761 410 212 1,456 352 - 3,191
Total Pierce County 2,953 506 213 5,409 1,024 - 10,105
Brokered deposits - - - - - 124,886 124,886
Total deposits $ 119,944 $ 96,632 $ 23,636 $ 542,388 $ 262,554 $ 124,886 $ 1,170,040 Net loans receivable totaled $1.18 billion at March 31, 2023, compared to $1.17 billion at December 31, 2022, and $1.12 billion at March 31, 2022. During the quarter ended March 31, 2023, multifamily loans increased $16.5 million, one-to-four family residential loans increased $8.4 million, and consumer loans increased $6.1 million, which included an increase of $4.0 million in classic, collectible and other auto loans, partially offset by a $14.1 million decline in construction and land development loans. The average balance of net loans receivable totaled $1.17 billion for the quarter ended March 31, 2023, compared to $1.15 billion for the quarter ended December 31, 2022, and $1.12 billion for the quarter ended March 31, 2022.
The ACL represented 1.34% of total loans receivable at March 31, 2023, compared to the allowance for loan and lease losses (“ALLL”) to total loans receivable of 1.29% and 1.33% at December 31, 2022, and March 31, 2022, respectively.
There were $193,000 in nonperforming loans at both March 31, 2023, and December 31, 2022, compared to $179,000 at March 31, 2022. There was no other real estate owned (“OREO”) at March 31, 2023, December 31, 2022, or March 31, 2022.The following table presents a breakdown of our nonperforming assets (unaudited):
*Mar 31,* *Dec 31,* *Mar 31,* *Three *
*Month* *One *
*Year * *2023* *2022* *2022* *Change* *Change* (Dollars in thousands)
Nonperforming loans:
Consumer $ 193 $ 193 $ 179 $ – $ 14
Total nonperforming loans 193 193 179 – 14
OREO – – – – –
Total nonperforming assets $ 193 $ 193 $ 179 $ – $ 14
Nonperforming assets as a percent
of total assets 0.01 % 0.01 % 0.01 % Net interest income totaled $11.3 million for the quarter ended March 31, 2023, compared to $12.4 million for the quarter ended December 31, 2022, and $11.4 million for the quarter ended March 31, 2022. The decrease in the current quarter compared to the quarter ended December 31, 2022, was primarily due to higher interest expense on deposits and other borrowings, primarily reflecting the continued increase in market interest rates due to the ongoing increases to the targeted federal funds rate, and continued intense competition for deposits, partially offset by higher interest income on loans, including fees, and investments. Since March 2022, the Federal Open Market Committee of the Federal Reserve System has increased the target range for the federal funds rate by 475 basis points, including 50 basis points during the first quarter of 2023, to a range of 4.75% to 5.00%.
Total interest income was $18.5 million for the quarter ended March 31, 2023, compared to $17.3 million for the quarter ended December 31, 2022, and $12.9 million for the quarter ended March 31, 2022. The increase in the current quarter compared to the prior quarters was primarily due to an improvement in the average loan yield to 5.56% from 5.19% and 4.36% for the quarters ended December 31, 2022, and March 31, 2022, respectively, due in large part to recent increases in the targeted federal funds rate that increased our returns from LIBOR and Prime based variable rate loans and variable rate investment securities.
Total interest expense was $7.2 million for the quarter ended March 31, 2023, compared to $4.9 million for the quarter ended December 31, 2022, and $1.6 million for the quarter ended March 31, 2022. The average cost of interest-bearing deposits was 2.41% for the quarter ended March 31, 2023, compared to 1.51% for the quarter ended December 31, 2022, and 0.50% for the quarter ended March 31, 2022. The increase from the quarter ended December 31, 2022, was due primarily to increased interest expense on money market and certificate of deposit balances and the continued use of higher cost brokered deposits and wholesale sources to meet our funding needs. Advances from the FHLB increased to $160.0 million at March 31, 2023, compared to $145.0 million at December 31, 2022, and $95.0 million at March 31, 2022. At March 31, 2023, $95.0 million of our FHLB advances were tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Bank’s interest rate risk management efforts. These cash flow hedge agreements had a weighted average remaining term of 44 months and a weighted average fixed interest rate of 1.05% as of March 31, 2023. The average cost of borrowings was 2.69% for the quarter ended March 31, 2023, compared to 2.46% for the quarter ended December 31, 2022, and 1.28% for the quarter ended March 31, 2022.
The net interest margin was 3.22% for the quarter ended March 31, 2023, compared to 3.52% for the quarter ended December 31, 2022, and 3.43% for the quarter ended March 31, 2022. The decrease in the net interest margin for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, was due primarily to the cost of interest-bearing liabilities increasing more than the yields on interest-earnings assets, with an 81-basis point increase in the Company’s average cost of interest-bearing liabilities to 2.44% from 1.63%, partially offset by a 39-basis point increase in the average yield on interest-earning assets to 5.29% from 4.90%.
Noninterest income for the quarter ended March 31, 2023, totaled $665,000, compared to $720,000 for the quarter ended December 31, 2022, and $789,000 for the quarter ended March 31, 2022. The decrease in noninterest income for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, was primarily due to lower loan related fees and other noninterest income, partially offset by higher income on bank-owned life insurance. In addition, the prior quarter benefited from a net gain on sale of investments not duplicated in the current period. The decrease for the quarter ended March 31, 2023, compared to the prior year quarter, primarily reflects lower loan related fees and wealth management revenue.
Noninterest expense totaled $9.0 million for the quarter ended March 31, 2023, compared to $8.7 million for the quarter ended December 31, 2022, and $8.6 million for the quarter ended March 31, 2022. The increase in noninterest expense for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, was primarily due to a $484,000 increase in salaries and employee benefits due to annual merit-based salary increases and expenses associated with enhancements to the Bank’s 401(k) plan for all eligible employees, whereas the prior quarter benefited from the absence of compensation expense related to the Bank’s Employee Stock Ownership Plan (“ESOP”) which matured and was fully allocated during the third quarter of 2022 and averaged approximately $458,000 in expense per quarter in the first three quarters of 2022. The increase was partially offset by a $190,000 reduction in professional fees in the quarter. The increase in noninterest expense for the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022, primarily reflects a $215,000 increase in other general and administrative expenses, including a $60,000 increase in reserve for unfunded commitments and a $54,000 increase in state and local taxes, a $200,000 increase in salaries and employee benefits and higher marketing expense, partially offset by lower occupancy and equipment expenses and professional fees.
Forward-looking statements:
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management’s current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include, but are not limited to, the following: potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as increasing prices and supply chain disruptions, and any governmental or societal responses to new COVID-19 variants; the uncertain impacts of quantitative tightening and current and future monetary policies of the Federal Reserve; increased competitive pressures; changes in the interest rate environment; legislative and regulatory changes; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other reports filed with or furnished to the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC’s website at www.sec.gov.
Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management’s beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2023 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance.*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
*Assets* *Mar 31,*
*2023* *Dec 31,*
*2022* * Mar 31, *
*2022* *Three*
*Month*
*Change* *One*
*Year*
*Change*
Cash on hand and in banks $ 9,618 $ 7,722 $ 7,979 24.6 % 20.5 %
Interest-earning deposits with banks 70,998 16,598 19,633 327.8 261.6
Investments available-for-sale, at fair value 214,948 217,778 180,212 (1.3 ) 19.3
Investments held-to-maturity, at amortized cost 2,439 2,444 2,426 (0.2 ) 0.5
Loans receivable, net of allowance of $16,028, $15,227, and $15,159 respectively 1,184,750 1,167,083 1,121,382 1.5 5.7
Federal Home Loan Bank ("FHLB") stock, at cost 8,203 7,512 5,512 9.2 48.8
Accrued interest receivable 7,011 6,513 5,590 7.6 25.4
Deferred tax assets, net 2,990 2,597 1,069 15.1 179.7
Premises and equipment, net 20,732 21,192 22,254 (2.2 ) (6.8 )
Bank owned life insurance ("BOLI"), net 36,647 36,286 35,552 1.0 3.1
Prepaid expenses and other assets 11,336 12,479 8,451 (9.2 ) 34.1
Right of use asset ("ROU"), net 3,194 3,275 3,455 (2.5 ) (7.6 )
Goodwill 889 889 889 0.0 0.0
Core deposit intangible, net 516 548 650 (5.8 ) (20.6 )
Total assets $ 1,574,271 $ 1,502,916 $ 1,415,054 4.7 11.3
*Liabilities and Stockholders' Equity*
Deposits
Noninterest-bearing deposits $ 110,780 $ 119,944 $ 130,596 (7.6 ) (15.2 )
Interest-bearing deposits 1,116,348 1,050,096 1,009,505 6.3 10.6
Total deposits 1,227,128 1,170,040 1,140,101 4.9 7.6
Advances from the FHLB 160,000 145,000 95,000 10.3 68.4
Advance payments from borrowers for taxes and insurance 5,447 3,051 5,299 78.5 2.8
Lease liability, net 3,374 3,454 3,617 (2.3 ) (6.7 )
Accrued interest payable 749 328 112 128.4 568.8
Other liabilities 17,928 20,683 13,168 (12.8 ) 36.9
Total liabilities 1,414,626 1,342,556 1,257,297 5.4 12.5
*Commitments and contingencies*
Stockholders' Equity
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding - - - n/a n/a
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding 9,148,086 shares at March 31, 2023, 9,127,595 shares at December 31, 2022, and 9,107,977 shares at March 31, 2022 92 91 91 1.1 1.1
Additional paid-in capital 72,445 72,424 71,780 0.0 0.9
Retained earnings 95,597 95,059 88,339 0.5 8.1
Accumulated other comprehensive loss, net of tax (8,489 ) (7,214 ) (1,889 ) 17.7 349.4
Unearned Employee Stock Ownership Plan ("ESOP") shares - - (564 ) n/a (100.0 )
Total stockholders' equity 159,645 160,360 157,757 (0.5 ) 1.1
Total liabilities and stockholders' equity $ 1,574,271 $ 1,502,916 $ 1,415,054 4.7 % 11.3 %*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Consolidated Income Statements
(Dollars in thousands, except per share data)
(Unaudited) *Quarter Ended* *Mar 31,*
*2023* * Dec 31, *
*2022 * *Mar 31, *
*2022* *Three*
*Month*
*Change* *One*
*Year*
*Change*
Interest income
Loans, including fees $ 16,029 $ 15,042 $ 12,001 6.6 % 33.6 %
Investments 2,105 2,007 831 4.9 153.3
Interest-earning deposits with banks 236 205 19 15.1 1142.1
Dividends on FHLB Stock 130 89 74 46.1 75.7
Total interest income 18,500 17,343 12,925 6.7 43.1
Interest expense
Deposits 6,332 3,972 1,257 59.4 403.7
FHLB advances and other borrowings 912 928 300 (1.7 ) 204.0
Total interest expense 7,244 4,900 1,557 47.8 365.3
Net interest income 11,256 12,443 11,368 (9.5 ) (1.0 )
Provision (recapture of provision) for credit losses 300 500 (500 ) (40.0 ) (160.0 )
Net interest income after provision (recapture of provision) for credit losses 10,956 11,943 11,868 (8.3 ) (7.7 )
Noninterest income
Net gain on sale of investments - 27 - (100.0 ) n/a
BOLI income 308 222 288 38.7 6.9
Wealth management revenue 45 36 82 25.0 (45.1 )
Deposit related fees 223 231 215 (3.5 ) 3.7
Loan related fees 91 172 199 (47.1 ) (54.3 )
Other (2 ) 32 5 (106.3 ) (140.0 )
Total noninterest income 665 720 789 (7.6 ) (15.7 )
Noninterest expense
Salaries and employee benefits 5,461 4,977 5,261 9.7 3.8
Occupancy and equipment 1,165 1,155 1,228 0.9 (5.1 )
Professional fees 417 607 452 (31.3 ) (7.7 )
Data processing 686 634 677 8.2 1.3
Regulatory assessments 101 108 101 (6.5 ) 0.0
Insurance and bond premiums 130 111 129 17.1 0.8
Marketing 77 77 37 0.0 108.1
Other general and administrative 956 997 741 (4.1 ) 29.0
Total noninterest expense 8,993 8,666 8,626 3.8 4.3
Income before federal income tax provision 2,628 3,997 4,031 (34.3 ) (34.8 )
Federal income tax provision 506 771 771 (34.4 ) (34.4 )
Net income $ 2,122 $ 3,226 $ 3,260 (34.2 )% (34.9 )%
Basic earnings per share $ 0.23 $ 0.35 $ 0.36
Diluted earnings per share $ 0.23 $ 0.35 $ 0.36
Weighted average number of common shares outstanding 9,104,371 9,073,323 8,987,482
Weighted average number of diluted shares outstanding 9,173,276 9,149,044 9,117,432
The following table presents a breakdown of the loan portfolio (unaudited):
*March 31, 2023* *December 31, 2022* *March 31, 2022* *Amount* *Percent* *Amount * *Percent* *Amount* *Percent* (Dollars in thousands)
Commercial real estate:
Residential:
Multifamily $ 143,430 11.9 % $ 126,895 10.7 % $ 152,855 13.4 %
Total multifamily residential 143,430 11.9 126,895 10.7 152,855 13.4
Non-residential:
Office 79,795 6.6 84,315 7.1 87,394 7.7
Retail 130,502 10.9 132,595 11.2 142,725 12.6
Mobile home park 22,125 1.9 25,420 2.2 20,409 1.8
Hotel / motel 67,339 5.6 55,471 4.7 58,406 5.1
Nursing home 12,275 1.0 12,365 1.0 12,622 1.1
Warehouse 19,655 1.7 19,783 1.7 21,103 1.9
Storage 33,677 2.8 33,876 2.9 34,442 3.0
Other non-residential 43,619 3.6 44,057 3.6 39,887 3.5
Total non-residential 408,987 34.1 407,882 34.4 416,988 36.7
Construction/land:
One-to-four family residential 54,191 4.5 52,836 4.5 35,953 3.2
Multifamily - 0.0 15,501 1.3 17,196 1.5
Commercial - 0.0 - 0.0 6,189 0.5
Land development 9,801 0.8 9,783 0.8 15,359 1.4
Total construction/land 63,992 5.3 78,120 6.6 74,697 6.6
One-to-four family residential:
Permanent owner occupied 243,366 20.3 233,785 19.8 197,447 17.4
Permanent non-owner occupied 240,894 20.1 242,051 20.5 214,784 18.9
Total one-to-four family residential 484,260 40.4 475,836 40.3 412,231 36.3
Business:
Aircraft 2,051 0.1 2,086 0.1 4,647 0.4
Small Business Administration (“SBA”) 494 0.1 509 0.1 816 0.1
Paycheck Protection Plan (“PPP”) 708 0.1 785 0.1 5,181 0.5
Other business 28,415 2.3 27,991 2.4 19,902 1.7
Total business 31,668 2.6 31,371 2.7 30,546 2.7
Consumer:
Classic, collectible and other auto 57,703 4.8 53,705 4.6 38,781 3.4
Other consumer 10,469 0.9 8,350 0.7 10,650 0.9
Total consumer 68,172 5.7 62,055 5.3 49,431 4.3
Total loans 1,200,509 100.0 % 1,182,159 100.0 % 1,136,748 100.0 %
Less:
Deferred loan (costs) fees, net (269 ) (151 ) 207
ACL 16,028 15,227 15,159
Loans receivable, net $ 1,184,750 $ 1,167,083 $ 1,121,382
Concentrations of credit: ^(1)
Construction loans as % of total capital 44.9 % 53.1 % 51.9 %
Total non-owner occupied commercial real estate as % of total capital 347.7 % 346.9 % 379.6 %
^(1) Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC regulatory guidelines.*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Key Financial Measures
(Unaudited) *At or For the Quarter Ended* *Mar 31,* *Dec 31,* *Sep 30,* *Jun 30,* *Mar 31,* *2023* *2022* *2022* *2022* *2022* *(Dollars in thousands, except per share data)*
*Performance Ratios**: *^*(1)*
Return on assets 0.57 % 0.86 % 1.06 % 0.79 % 0.93 %
Return on equity 5.31 8.04 9.88 7.11 8.33
Dividend payout ratio 56.52 34.29 27.40 38.51 33.20
Equity-to-assets ratio 10.14 10.67 10.64 10.78 11.15
Tangible equity-to-tangible assets ratio ^(2) 10.06 10.58 10.55 10.69 11.05
Net interest margin 3.22 3.52 3.65 3.53 3.43
Average interest-earning assets to average interest-bearing liabilities 117.78 117.93 119.08 120.21 119.59
Efficiency ratio 75.44 65.84 66.80 72.62 70.96
Noninterest expense as a percent of average total assets 2.42 2.30 2.43 2.60 2.46
Book value per common share $ 17.45 $ 17.57 $ 17.30 $ 17.26 $ 17.32
Tangible book value per common share ^(2) 17.30 17.41 17.14 17.09 17.15
*Capital Ratios**: *^*(3)*
Tier 1 leverage ratio 10.24 % 10.31 % 10.43 % 10.53 % 10.51 %
Common equity tier 1 capital ratio 14.33 14.37 14.24 14.22 14.08
Tier 1 capital ratio 14.33 14.37 14.24 14.22 14.08
Total capital ratio 15.59 15.62 15.49 15.47 15.33
*Asset Quality Ratios**: *^*(4)*
Nonperforming loans as a percent of total loans 0.02 % 0.02 % 0.02 % 0.00 % 0.02 %
Nonperforming assets as a percent of total assets 0.01 0.01 0.02 0.00 0.01
ACL as a percent of total loans 1.34 1.29 1.27 1.33 1.33
Net (recoveries) charge-offs to average loans receivable, net (0.00 ) (0.00 ) (0.00 ) 0.00 (0.00 )
*Allowance for Credit Losses:*
ALLL, beginning of the quarter $ 15,227 $ 14,726 $ 15,125 $ 15,159 $ 15,657
Beginning balance adjustment from adoption
of Topic 326 500 - - - -
Provision (recapture of provision) 300 500 (400 ) - (500 )
Charge-offs - - - (37 ) -
Recoveries 1 1 1 3 2
ACL, end of the quarter $ 16,028 $ 15,227 $ 14,726 $ 15,125 $ 15,159
^(1) Performance ratios are calculated on an annualized basis.
^(^2^) Represent non-GAAP financial measures. Tangible equity-to-tangible assets ratio is calculated by dividing tangible equity by tangible assets. Tangible book value per common share is calculated by dividing tangible equity by common shares outstanding at period end. Tangible equity and tangible assets exclude goodwill and core deposit intangible assets. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.
^(3) Capital ratios are for First Financial Northwest Bank only.
^(4) Loans are reported net of undisbursed funds.*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Key Financial Measures
(Unaudited) *For the Quarter Ended* *Mar 31,*
*2023* *Dec 31,*
*2022* *Sep 30,*
*2022* *Jun 30,*
*2022* *Mar 31,*
*2022* (Dollars in thousands)
*Yields and Costs**: *^*(1)*
Yield on loans 5.56 % 5.19 % 4.77 % 4.41 % 4.36 %
Yield on investments 3.88 3.60 2.90 2.33 1.96
Yield on interest-earning deposits 4.40 3.31 2.02 0.67 0.15
Yield on FHLB stock 7.30 4.58 5.56 4.82 5.49
Yield on interest-earning assets 5.29 % 4.90 % 4.43 % 4.04 % 3.90 %
Cost of interest-bearing deposits 2.41 % 1.51 % 0.87 % 0.55 % 0.50 %
Cost of borrowings 2.69 2.46 1.48 1.21 1.28
Cost of interest-bearing liabilities 2.44 % 1.63 % 0.93 % 0.61 % 0.56 %
Cost of total deposits 2.17 % 1.36 % 0.78 % 0.49 % 0.44 %
Cost of funds 2.23 1.48 0.84 0.55 0.51
*Average Balances:*
Loans $ 1,168,539 $ 1,150,181 $ 1,132,233 $ 1,117,079 $ 1,115,428
Investments 219,969 221,113 220,244 198,819 171,685
Interest-earning deposits 21,729 24,608 24,565 22,010 49,857
FHLB stock 7,219 7,710 5,923 5,905 5,467
Total interest-earning assets $ 1,417,456 $ 1,403,612 $ 1,382,965 $ 1,343,813 $ 1,342,437
Interest-bearing deposits $ 1,065,827 $ 1,040,357 $ 1,056,079 $ 1,013,080 $ 1,027,507
Borrowings 137,600 149,946 105,272 104,835 95,000
Total interest-bearing liabilities 1,203,427 1,190,303 1,161,351 1,117,915 1,122,507
Noninterest-bearing deposits 115,708 121,518 125,561 131,415 122,175
Total deposits and borrowings $ 1,319,135 $ 1,311,821 $ 1,286,912 $ 1,249,330 $ 1,244,682
Average assets $ 1,509,297 $ 1,496,125 $ 1,470,816 $ 1,431,003 $ 1,424,054
Average stockholders' equity 162,016 159,120 158,515 158,349 158,756
^(1) Yields and costs are annualized.*Non-GAAP Financial Measures*
In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains non-GAAP financial measures that include tangible equity, tangible assets, tangible book value per share, and the tangible equity ratio. The Company believes that these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of goodwill and core deposit intangible, net and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors. Non-GAAP financial measures have limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation and are not a substitute for other measures in this earnings release that are presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
The following tables provide a reconciliation between the GAAP and non-GAAP measures:
*Quarter Ended* *Mar 31,*
*2023* *Dec 31, *
*2022* *Sep 30, *
*2022* *Jun 30, *
*2022* *Mar 31,
2022* (Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP) $ 159,645 $ 160,360 $ 157,890 $ 156,896 $ 157,757
Less:
Goodwill 889 889 889 889 889
Core deposit intangible, net 516 548 582 616 650
Tangible equity (Non-GAAP) $ 158,240 $ 158,923 $ 156,419 $ 155,391 $ 156,218
Total assets (GAAP) $ 1,574,271 $ 1,502,916 $ 1,484,311 $ 1,454,768 $ 1,415,054
Less:
Goodwill 889 889 889 889 889
Core deposit intangible, net 516 548 582 616 650
Tangible assets (Non-GAAP) $ 1,572,866 $ 1,501,479 $ 1,482,840 $ 1,453,263 $ 1,413,515
Common shares outstanding at period end 9,148,086 9,127,595 9,127,595 9,091,533 9,107,977
Equity-to-assets ratio (GAAP) 10.14 % 10.67 % 10.64 % 10.78 % 11.15 %
Tangible equity-to-tangible assets ratio (Non-GAAP) 10.06 10.58 10.55 10.69 11.05
Book value per common share (GAAP) $ 17.45 $ 17.57 $ 17.30 $ 17.26 $ 17.32
Tangible book value per share (Non-GAAP) 17.30 17.41 17.14 17.09 17.15 For more information, contact:
Joseph W. Kiley III, President and Chief Executive Officer
Rich Jacobson, Executive Vice President and Chief Financial Officer
(425) 255-4400