RENTON, Wash., Oct. 24, 2019 (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 September 30, 2019, of $2.5 million, or $0.25 per diluted share, compared to net income of $3.3 million, or $0.33 per diluted share, for the quarter ended June 30, 2019, and $2.8 million, or $0.27 per diluted share, for the quarter ended September 30, 2018. For the nine months ended September 30, 2019, net income was $7.8 million, or $0.77 per diluted share, compared to net income of $12.7 million, or $1.22 per diluted share, for the comparable nine-month period in 2018.
Fluctuations in the Company’s provision for loan and lease losses accounted for the majority of the difference in net income in the quarter ended September 30, 2019, compared to June 30, 2019. The Company recorded a $100,000 provision for loan losses in the quarter ended September 30, 2019, compared to an $800,000 recapture of provision for loan losses in the quarter ended June 30, 2019, and a $200,000 provision for loan losses in the quarter ended September 30, 2018. The provision for loan losses in the most recent quarter was primarily due to growth in loans receivable. The recapture of provision in the quarter ended June 30, 2019, was primarily related to a single construction loan that was classified as impaired; however, the Bank’s impairment analysis concluded that there were no anticipated losses from the loan, therefore funds previously allocated in the allowance for loan and lease loss calculations to this loan were recaptured during that quarter. All payments on the loan were current at both June 30, 2019, and September 30, 2019, and the loan is well collateralized. The provision for loan losses in the quarter ended September 30, 2018, was primarily due to growth in net loans receivable, partially offset by recoveries received on loans previously charged off.
“I am encouraged by the loan growth and progress being made on various initiatives throughout the Bank,” stated Joseph W. Kiley III, President and Chief Executive Officer. “We continue to build expertise in our efforts to expand the Bank’s product mix and diversify our balance sheet, hiring experienced business bankers, branch personnel and support staff. Our 12th branch office will open in Kirkland, Washington in the fourth quarter, as we continue to expand our footprint through deployment of micro branches with highly experienced bankers. We intend to continue to look for additional branch expansion opportunities to further support our growth,” concluded Kiley.
Net loans receivable totaled $1.08 billion at September 30, 2019, compared to $1.05 billion at June 30, 2019, and $995.6 million at September 30, 2018. The average balance of net loans receivable totaled $1.07 billion for the quarter ended September 30, 2019, compared to $1.05 billion for the quarter ended June 30, 2019, and $993.3 million for the quarter ended September 30, 2018.
Additional highlights for the quarter ended September 30, 2019:
- Total loans grew by $31.0 million in the quarter to $1.10 billion led by an increase of $9.7 million in multifamily residential real estate, $9.1 million in one-to-four family residential, $8.6 million in classic auto consumer loans, and $4.8 million in construction/land loans, partially offset by lower non-residential commercial real estate loans.
- Total deposits declined slightly to $1.02 billion at September 30, 2019, compared to $1.03 billion at June 30, 2019, but up from $916.3 million at September 30, 2018. Organic deposit growth was $33.3 million, increasing to $878.2 million in the quarter ended September 30, 2019, while brokered deposits declined $42.2 million to $138.6 million. Noninterest-bearing deposits increased modestly to $49.4 million at September 30, 2019.
- The Company’s book value per share was $15.06 at September 30, 2019, compared to $14.83 at June 30, 2019, and $14.17 at September 30, 2018.
- The Company repurchased 87,852 shares during the quarter at an average price of $14.05 per share pursuant to its stock repurchase plan, which commenced on July 30, 2019, and is set to expire on December 17, 2019. The plan authorizes the repurchase of up to 520,000 shares of the Company’s common stock, or approximately 5.0% of its outstanding shares. A total of 432,148 shares remain available for repurchase under the plan at September 30, 2019.
- The Bank’s Tier 1 leverage and total capital ratios at September 30, 2019, were 10.1% and 14.4%, respectively, compared to 10.3% and 14.7% at June 30, 2019, and 10.4% and 14.8% at September 30, 2018.
- Based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”), there was a $100,000 provision for loan losses during the quarter ended September 30, 2019.
The ALLL represented 1.20% of total loans receivable, net of undisbursed funds, at September 30, 2019, compared to 1.22% at June 30, 2019, and 1.30% at September 30, 2018. Nonperforming assets totaled $591,000 at September 30, 2019, compared to $600,000 at June 30, 2019, and $967,000 at September 30, 2018.
The following table presents a breakdown of nonperforming assets (unaudited):
| Sep 30, 2019 | Jun 30, 2019 | Sep 30, 2018 | Three Month Change | One Year Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Nonperforming loans: | |||||||||||||||||||
| One-to-four family residential | $ | 98 | $ | 103 | $ | 113 | $ | (5 | ) | $ | (15 | ) | |||||||
| Commercial real estate | ─ | ─ | 325 | ─ | (325 | ) | |||||||||||||
| Consumer | 39 | 43 | 46 | (4 | ) | (7 | ) | ||||||||||||
| Total nonperforming loans | 137 | 146 | 484 | (9 | ) | (347 | ) | ||||||||||||
| Other real estate owned (“OREO”) | 454 | 454 | 483 | ─ | (29 | ) | |||||||||||||
| Total nonperforming assets (1) | $ | 591 | $ | 600 | $ | 967 | $ | (9 | ) | $ | (376 | ) | |||||||
| Nonperforming assets as a percent of total assets | 0.05 | % | 0.05 | % | 0.08 | % | |||||||||||||
(1) The difference between nonperforming assets reported above, and the totals reported by other industry sources, is due to their inclusion of all Troubled Debt Restructured Loans ("TDRs") as nonperforming loans, although 100% of our TDRs were performing in accordance with their restructured terms at September 30, 2019.
OREO remained at $454,000 for both September 30, 2019, and June 30, 2019, but declined from $483,000 at September 30, 2018, as a result of a write down in value of the two remaining OREO properties during the quarter ended March 31, 2019.
In circumstances where a customer is experiencing significant financial difficulties, the Company may elect to restructure the loan so the customer can continue to make payments while minimizing the potential loss to the Company. Such restructures must be classified as TDRs. At September 30, 2019, TDRs totaled $6.6 million, compared to $6.7 million at June 30, 2019, and $13.2 million at September 30, 2018.
Net interest income for both the quarters ended September 30, 2019, and June 30, 2019, totaled $9.7 million, compared to $10.1 million for the quarter ended September 30, 2018. Net interest income remained stable in the current quarter compared to the quarter ended June 30, 2019, and was down from the quarter ended September 30, 2018, despite higher average net loan balances than both prior periods as deposit repricing lagged the reduction in market rates.
Total interest income increased to $15.2 million during the quarter ended September 30, 2019, compared to $14.9 million in the quarter ended June 30, 2019, and $13.9 million for the quarter ended September 30, 2018. The increase in total interest income from the prior periods was due primarily to the higher average net loan balances in the quarter ended September 30, 2019.
Total interest expense increased to $5.6 million for the quarter ended September 30, 2019, compared to $5.2 million for the quarter ended June 30, 2019, and $3.8 million for the quarter ended September 30, 2018. The higher level of interest expense in the quarter ended September 30, 2019, was due primarily to higher interest paid on money market and certificates of deposit in a continuing competitive marketplace for deposits, partially offset by lower interest expense related to Federal Home Loan Bank (“FHLB”) advances and other borrowings. The balance of brokered certificates of deposits totaled $138.6 million at September 30, 2019, compared to $180.8 million at June 30, 2019, and $102.1 million at September 30, 2018. The Bank replaced a portion of its callable brokered certificates of deposit portfolio with lower rate alternatives in the quarter ended September 30, 2019. Specifically, in addition to replacing certain maturing brokered deposits with short term FHLB advances, the Bank redeemed $17.4 million in callable brokered deposits with a weighted average rate of 3.17% and weighted average remaining term of 2.4 years. These funds were replaced with lower rate FHLB advances and a concurrent 5-year, $15.0 million notional pay fixed interest rate swap for which the Bank will pay 1.44% monthly and in exchange will receive variable rate amounts from the interest rate swap counter party based on one-month LIBOR. Based on current interest rates, this redemption is estimated to save the Bank in excess of $600,000 over the next 2.4 years compared to what would have been paid on the redeemed callable brokered deposits if the call options were not exercised. This redemption accelerated approximately $60,000 in unamortized fees relating to the original acquisition of the callable brokered deposits, increasing interest expense by this amount in the quarter ended September 30, 2019. Advances from the FHLB totaled $121.0 million at September 30, 2019, compared to $105.0 million at June 30, 2019, and $149.0 million at September 30, 2018. The average cost of FHLB advances was 2.02% for the quarter ended September 30, 2019, compared to 2.28% for the quarter ended June 30, 2019, and 2.05% for the quarter ended September 30, 2018.
The following table presents a breakdown of our total deposits (unaudited):
| Sep 30, 2019 | Jun 30, 2019 | Sep 30, 2018 | Three Month Change | One Year Change | ||||||||||||
| Deposits: | (Dollars in thousands) | |||||||||||||||
| Noninterest-bearing | $ | 49,398 | $ | 49,219 | $ | 51,180 | $ | 179 | $ | (1,782 | ) | |||||
| Interest-bearing demand | 53,197 | 50,414 | 41,954 | 2,783 | 11,243 | |||||||||||
| Statement savings | 21,647 | 22,593 | 24,106 | (946 | ) | (2,459 | ) | |||||||||
| Money market | 332,722 | 310,587 | 323,025 | 22,135 | 9,697 | |||||||||||
| Certificates of deposit, retail (1) | 421,274 | 412,134 | 373,931 | 9,140 | 47,343 | |||||||||||
| Certificates of deposit, brokered | 138,590 | 180,763 | 102,083 | (42,173 | ) | 36,507 | ||||||||||
| Total deposits | $ | 1,016,828 | $ | 1,025,710 | $ | 916,279 | $ | (8,882 | ) | $ | 100,549 | |||||
(1) Balance of retail certificates of deposit for acquired branches are net of an unamortized aggregate fair value adjustment of $34,000 at September 30, 2019, $41,000 at June 30, 2019, and $69,000 at September 30, 2018.
The following tables present an analysis of total deposits by branch office (unaudited):
| September 30, 2019 | ||||||||||||||
| Noninterest-bearing demand | Interest-bearing demand | Statement savings | Money market | Certificates of deposit, |retail | Certificates of deposit, brokered | Total | ||||||||
| (Dollars in thousands) | ||||||||||||||
| King County | ||||||||||||||
| Renton | $ | 27,163 | $ | 21,905 | $ | 17,980 | $ | 208,086 | $ | 340,156 | $ | - | $ | 615,290 |
| Landing | 3,323 | 1,826 | 39 | 16,432 | 10,606 | - | 32,226 | |||||||
| Woodinville (1) | 2,287 | 2,130 | 672 | 13,303 | 6,996 | - | 25,388 | |||||||
| Bothell | 420 | 690 | 9 | 5,207 | 4,091 | - | 10,417 | |||||||
| Crossroads | 2,647 | 7,047 | 53 | 29,124 | 12,740 | - | 51,611 | |||||||
| Kent (2) | 134 | 2,657 | 6 | 4,524 | 849 | - | 8,170 | |||||||
| Total King County | 35,974 | 36,255 | 18,759 | 276,676 | 375,438 | - | 743,102 | |||||||
| Snohomish County | ||||||||||||||
| Mill Creek | 2,456 | 3,088 | 622 | 16,196 | 11,077 | - | 33,439 | |||||||
| Edmonds | 4,166 | 5,474 | 286 | 17,421 | 17,222 | - | 44,569 | |||||||
| Clearview (1) | 3,504 | 3,839 | 874 | 6,696 | 3,527 | - | 18,440 | |||||||
| Lake Stevens (1) | 1,817 | 1,935 | 509 | 6,216 | 3,666 | - | 14,143 | |||||||
| Smokey Point (1) | 1,481 | 2,606 | 597 | 9,517 | 10,344 | - | 24,545 | |||||||
| Total Snohomish County | 13,424 | 16,942 | 2,888 | 56,046 | 45,836 | - | 135,136 | |||||||
| Total retail deposits | 49,398 | 53,197 | 21,647 | 332,722 | 421,274 | - | 878,238 | |||||||
| Brokered deposits | - | - | - | - | - | 138,590 | 138,590 | |||||||
| Total deposits | $ | 49,398 | $ | 53,197 | $ | 21,647 | $ | 332,722 | $ | 421,274 | $ | 138,590 | $ | 1,016,828 |
(1) Balance of retail certificates of deposit for acquired branches are net of an unamortized aggregate fair value adjustment of $34,000.
(2) Kent branch opened January 31, 2019.
| June 30, 2019 | ||||||||||||||
| Noninterest-bearing demand | Interest-bearing demand | Statement savings | Money market | Certificates of deposit, retail | Certificates of deposit, brokered | Total | ||||||||
| (Dollars in thousands) | ||||||||||||||
| King County | ||||||||||||||
| Renton | $ | 24,692 | $ | 22,315 | $ | 18,848 | $ | 196,902 | $ | 331,260 | $ | - | $ | 594,017 |
| Landing | 3,837 | 2,357 | 25 | 14,068 | 10,655 | - | 30,942 | |||||||
| Woodinville (1) | 1,737 | 2,107 | 610 | 13,466 | 7,019 | - | 24,939 | |||||||
| Bothell | 505 | 79 | 5 | 2,285 | 3,928 | - | 6,802 | |||||||
| Crossroads | 2,773 | 6,842 | 53 | 26,733 | 12,840 | - | 49,241 | |||||||
| Kent (2) | 51 | 1,773 | 47 | 3,859 | 793 | - | 6,523 | |||||||
| Total King County | 33,595 | 35,473 | 19,588 | 257,313 | 366,495 | - | 712,464 | |||||||
| Snohomish County | ||||||||||||||
| Mill Creek | 1,681 | 2,088 | 700 | 14,521 | 10,545 | - | 29,535 | |||||||
| Edmonds | 7,260 | 4,409 | 255 | 16,635 | 17,170 | - | 45,729 | |||||||
| Clearview (1) | 3,491 | 3,942 | 998 | 6,281 | 3,540 | - | 18,252 | |||||||
| Lake Stevens (1) | 1,955 | 1,938 | 439 | 5,625 | 4,012 | - | 13,969 | |||||||
| Smokey Point (1) | 1,237 | 2,564 | 613 | 10,212 | 10,372 | - | 24,998 | |||||||
| Total Snohomish County | 15,624 | 14,941 | 3,005 | 53,274 | 45,639 | - | 132,483 | |||||||
| Total retail deposits | 49,219 | 50,414 | 22,593 | 310,587 | 412,134 | - | 844,947 | |||||||
| Brokered deposits | - | - | - | - | - | 180,763 | 180,763 | |||||||
| Total deposits | $ | 49,219 | $ | 50,414 | $ | 22,593 | $ | 310,587 | $ | 412,134 | $ | 180,763 | $ | 1,025,710 |
(1) Balance of retail certificates of deposit for acquired branches are net of an unamortized aggregate fair value adjustment of $41,000.
(2) Kent branch opened January 31, 2019.
The net interest margin was 3.07% for the quarter ended September 30, 2019, compared to 3.23% for the quarter ended June 30, 2019, and 3.46% for the quarter ended September 30, 2018. The declines in the most recent two quarters were due to the increasing cost of liabilities and decreasing yields on interest earning assets between the periods. This continues to be a very challenging environment to acquire low-cost deposits. In addition, loan yields declined in each of the two most recent quarters, primarily related to the reduction in Prime and LIBOR lending rates.
Noninterest income for the quarter ended September 30, 2019, totaled $1.0 million, compared to $879,000 in the quarter ended June 30, 2019, and $841,000 in the quarter ended September 30, 2018. The increase in noninterest income for the quarter ended September 30, 2019, was due primarily to an $88,000 net gain on sale of investments, higher loan related fees and BOLI income recognition, partially offset by lower deposit related fees and wealth management revenue, compared to the quarter ended June 30, 2019. With the exception of BOLI income recognition and other noninterest income, all other categories of noninterest income were higher for the quarter ended September 30, 2019, compared to the quarter ended September 30, 2018.
Noninterest expense increased to $7.5 million for the quarter ended September 30, 2019, compared to $7.3 million in June 30, 2019, and $7.2 million in the quarter ended September 30, 2018. Noninterest expense increased as the Bank continued to pursue its branch expansion strategy, which resulted in higher salaries and benefits, occupancy and equipment and data processing expenses among others, partially offset by lower other general and administrative expenses and a $120,000 small bank assessment credit that reduced the regulatory assessment for the quarter ended September 30, 2019.
First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; an FDIC insured Washington State-chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through 11 full-service banking offices. We are a part of the ABA NASDAQ Community Bank Index and the Russell 2000 Index. For additional information about us, please visit our website at ffnwb.com and click on the “Investor Relations” link at the bottom of the page.
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: increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; 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 filings with 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 2019 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, except share data)
(Unaudited)
| Assets | Sep 30, 2019 | Jun 30, 2019 | Sep 30, 2018 | Three Month Change | One Year Change | ||||||||||||
| Cash on hand and in banks | $ | 7,615 | $ | 8,119 | $ | 7,167 | (6.2 | )% | 6.3 | % | |||||||
| Interest-earning deposits | 6,103 | 22,579 | 19,094 | (73.0 | ) | (68.0 | ) | ||||||||||
| Investments available-for-sale, at fair value | 138,224 | 141,581 | 140,868 | (2.4 | ) | (1.9 | ) | ||||||||||
| Loans receivable, net of allowance of $13,161, $13,057, and $13,116, respectively | 1,083,850 | 1,052,676 | 995,557 | 3.0 | 8.9 | ||||||||||||
| Federal Home Loan Bank ("FHLB") stock, at cost | 6,341 | 5,701 | 7,410 | 11.2 | (14.4 | ) | |||||||||||
| Accrued interest receivable | 4,407 | 4,650 | 4,664 | (5.2 | ) | (5.5 | ) | ||||||||||
| Deferred tax assets, net | 1,202 | 1,379 | 2,092 | (12.8 | ) | (42.5 | ) | ||||||||||
| Other real estate owned ("OREO") | 454 | 454 | 483 | 0.0 | (6.0 | ) | |||||||||||
| Premises and equipment, net | 22,346 | 21,944 | 21,277 | 1.8 | 5.0 | ||||||||||||
| Bank owned life insurance ("BOLI") | 31,681 | 31,446 | 29,745 | 0.7 | 6.5 | ||||||||||||
| Prepaid expenses and other assets | 4,242 | 5,101 | 4,460 | (16.8 | ) | (4.9 | ) | ||||||||||
| Goodwill | 889 | 889 | 889 | 0.0 | 0.0 | ||||||||||||
| Core deposit intangible | 1,005 | 1,042 | 1,153 | (3.6 | ) | (12.8 | ) | ||||||||||
| Total assets | $ | 1,308,359 | $ | 1,297,561 | $ | 1,234,859 | 0.8 | % | 6.0 | % | |||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||
| Deposits | |||||||||||||||||
| Noninterest-bearing deposits | $ | 49,398 | $ | 49,219 | $ | 51,180 | 0.4 | % | (3.5 | )% | |||||||
| Interest-bearing deposits | 967,430 | 976,491 | 865,099 | (0.9 | ) | 11.8 | |||||||||||
| Total deposits | 1,016,828 | 1,025,710 | 916,279 | (0.9 | ) | 11.0 | |||||||||||
| Advances from the FHLB | 121,000 | 105,000 | 149,000 | 15.2 | (18.8 | ) | |||||||||||
| Advance payments from borrowers for taxes and insurance | 5,043 | 2,844 | 4,737 | 77.3 | 6.5 | ||||||||||||
| Accrued interest payable | 382 | 461 | 541 | (17.1 | ) | (29.4 | ) | ||||||||||
| Other liabilities | 10,004 | 9,718 | 9,589 | 2.9 | 4.3 | ||||||||||||
| Total liabilities | 1,153,257 | 1,143,733 | 1,080,146 | 0.8 | 6.8 | ||||||||||||
| 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 | |||||||||||||||||
| 10,296,053 shares at September 30, 2019, 10,375,325 shares at June 30, 2019, and 10,914,556 shares at September 30, 2018 | 103 | 104 | 109 | (1.0 | )% | (5.5 | )% | ||||||||||
| Additional paid-in capital | 87,835 | 88,725 | 96,664 | (1.0 | ) | (9.1 | ) | ||||||||||
| Retained earnings | 71,592 | 69,976 | 65,004 | 2.3 | 10.1 | ||||||||||||
| Accumulated other comprehensive loss, net of tax | (1,042 | ) | (1,309 | ) | (2,550 | ) | (20.4 | ) | (59.1 | ) | |||||||
| Unearned Employee Stock Ownership Plan ("ESOP") shares | (3,386 | ) | (3,668 | ) | (4,514 | ) | (7.7 | ) | (25.0 | ) | |||||||
| Total stockholders' equity | 155,102 | 153,828 | 154,713 | 0.8 | 0.3 | ||||||||||||
| Total liabilities and stockholders' equity | $ | 1,308,359 | $ | 1,297,561 | $ | 1,234,859 | 0.8 | % | 6.0 | % | |||||||
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
| Quarter Ended | |||||||||||||||
| Sep 30, 2019 | Jun 30, 2019 | Sep 30, 2018 | Three Month Change | One Year Change | |||||||||||
| Interest income | |||||||||||||||
| Loans, including fees | $ | 13,897 | $ | 13,606 | $ | 12,631 | 2.1 | % | 10.0 | % | |||||
| Investments available-for-sale | 1,066 | 1,109 | 1,063 | (3.9 | ) | 0.3 | |||||||||
| Interest-earning deposits with banks | 158 | 48 | 59 | 229.2 | 167.8 | ||||||||||
| Dividends on FHLB Stock | 97 | 102 | 135 | (4.9 | ) | (28.1 | ) | ||||||||
| Total interest income | 15,218 | 14,865 | 13,888 | 2.4 | 9.6 | ||||||||||
| Interest expense | |||||||||||||||
| Deposits | 5,037 | 4,330 | 2,912 | 16.3 | 73.0 | ||||||||||
| FHLB advances and other borrowings | 529 | 829 | 917 | (36.2 | ) | (42.3 | ) | ||||||||
| Total interest expense | 5,566 | 5,159 | 3,829 | 7.9 | 45.4 | ||||||||||
| Net interest income | 9,652 | 9,706 | 10,059 | (0.6 | ) | (4.0 | ) | ||||||||
| Provision (recapture of provision) for loan losses | 100 | (800 | ) | 200 | (112.5 | ) | (50.0 | ) | |||||||
| Net interest income after provision (recapture of provision) for loan losses | 9,552 | 10,506 | 9,859 | (9.1 | ) | (3.1 | ) | ||||||||
| Noninterest income | |||||||||||||||
| Net gain on sale of investments | 88 | - | 1 | n/a | 8,700.0 | ||||||||||
| BOLI income | 235 | 189 | 245 | 24.3 | (4.1 | ) | |||||||||
| Wealth management revenue | 245 | 261 | 145 | (6.1 | ) | 69.0 | |||||||||
| Deposit related fees | 179 | 205 | 167 | (12.7 | ) | 7.2 | |||||||||
| Loan related fees | 290 | 209 | 273 | 38.8 | 6.2 | ||||||||||
| Other | 2 | 15 | 10 | (86.7 | ) | (80.0 | ) | ||||||||
| Total noninterest income | 1,039 | 879 | 841 | 18.2 | 23.5 | ||||||||||
| Noninterest expense | |||||||||||||||
| Salaries and employee benefits | 4,813 | 4,734 | 4,732 | 1.7 | 1.7 | ||||||||||
| Occupancy and equipment | 924 | 898 | 814 | 2.9 | 13.5 | ||||||||||
| Professional fees | 440 | 326 | 353 | 35.0 | 24.6 | ||||||||||
| Data processing | 478 | 397 | 356 | 20.4 | 34.3 | ||||||||||
| OREO related expenses, net | 1 | 1 | 1 | 0.0 | 0.0 | ||||||||||
| Regulatory assessments | 13 | 136 | 126 | (90.4 | ) | (89.7 | ) | ||||||||
| Insurance and bond premiums | 95 | 88 | 95 | 8.0 | 0.0 | ||||||||||
| Marketing | 118 | 76 | 85 | 55.3 | 38.8 | ||||||||||
| Other general and administrative | 573 | 627 | 639 | (8.6 | ) | (10.3 | ) | ||||||||
| Total noninterest expense | 7,455 | 7,283 | 7,201 | 2.4 | 3.5 | ||||||||||
| Income before federal income tax provision | 3,136 | 4,102 | 3,499 | (23.5 | ) | (10.4 | ) | ||||||||
| Federal income tax provision | 631 | 798 | 707 | (20.9 | ) | (10.7 | ) | ||||||||
| Net income | $ | 2,505 | $ | 3,304 | $ | 2,792 | (24.2 | )% | (10.3 | )% | |||||
| Basic earnings per share | $ | 0.25 | $ | 0.33 | $ | 0.27 | |||||||||
| Diluted earnings per share | $ | 0.25 | $ | 0.33 | $ | 0.27 | |||||||||
| Weighted average number of common shares outstanding | 9,901,586 | 9,952,419 | 10,356,994 | ||||||||||||
| Weighted average number of diluted shares outstanding | 9,991,011 | 10,046,355 | 10,468,802 | ||||||||||||
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
| Nine Months Ended | ||||||||||
| September 30, | ||||||||||
| 2019 | 2018 | One Year Change | ||||||||
| Interest income | ||||||||||
| Loans, including fees | $ | 40,784 | $ | 38,103 | 7.0 | % | ||||
| Investments available-for-sale | 3,334 | 3,002 | 11.1 | |||||||
| Interest-earning deposits with banks | 246 | 141 | 74.5 | |||||||
| Dividends on FHLB Stock | 290 | 343 | (15.5 | ) | ||||||
| Total interest income | 44,654 | 41,589 | 7.4 | |||||||
| Interest expense | ||||||||||
| Deposits | 13,189 | 7,623 | 73.0 | |||||||
| FHLB advances and other borrowings | 2,255 | 2,794 | (19.3 | ) | ||||||
| Total interest expense | 15,444 | 10,417 | 48.3 | |||||||
| Net interest income | 29,210 | 31,172 | (6.3 | ) | ||||||
| Recapture of provision for loan losses | (300 | ) | (4,200 | ) | (92.9 | ) | ||||
| Net interest income after recapture of provision for loan losses | 29,510 | 35,372 | (16.6 | ) | ||||||
| Noninterest income | ||||||||||
| Net gain (loss) on sale of investments | 80 | (20 | ) | (500.0 | ) | |||||
| BOLI income | 693 | 718 | (3.5 | ) | ||||||
| Wealth management revenue | 702 | 400 | 75.5 | |||||||
| Deposit related fees | 555 | 503 | 10.3 | |||||||
| Loan related fees | 562 | 533 | 5.4 | |||||||
| Other | 26 | 16 | 62.5 | |||||||
| Total noninterest income | 2,618 | 2,150 | 21.8 | |||||||
| Noninterest expense | ||||||||||
| Salaries and employee benefits | 14,547 | 14,325 | 1.5 | |||||||
| Occupancy and equipment | 2,688 | 2,412 | 11.4 | |||||||
| Professional fees | 1,262 | 1,123 | 12.4 | |||||||
| Data processing | 1,393 | 1,031 | 35.1 | |||||||
| OREO related expenses, net | 33 | 4 | 725.0 | |||||||
| Regulatory assessments | 286 | 391 | (26.9 | ) | ||||||
| Insurance and bond premiums | 288 | 355 | (18.9 | ) | ||||||
| Marketing | 280 | 269 | 4.1 | |||||||
| Other general and administrative | 1,670 | 1,805 | (7.5 | ) | ||||||
| Total noninterest expense | 22,447 | 21,715 | 3.4 | |||||||
| Income before federal income tax provision | 9,681 | 15,807 | (38.8 | ) | ||||||
| Federal income tax provision | 1,927 | 3,071 | (37.3 | ) | ||||||
| Net income | $ | 7,754 | $ | 12,736 | (39.1 | )% | ||||
| Basic earnings per share | $ | 0.77 | $ | 1.24 | ||||||
| Diluted earnings per share | $ | 0.77 | $ | 1.22 | ||||||
| Weighted average number of common shares outstanding | 9,989,970 | 10,280,287 | ||||||||
| Weighted average number of diluted shares outstanding | 10,091,631 | 10,405,315 | ||||||||
The following table presents a breakdown of the loan portfolio, net of undisbursed funds (unaudited):
| September 30, 2019 | June 30, 2019 | September 30, 2018 | ||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Commercial real estate: | ||||||||||||||||||||
| Multifamily residential: | ||||||||||||||||||||
| Micro-unit apartments | $ | 13,877 | 1.3 | % | $ | 13,943 | 1.3 | % | $ | 14,141 | 1.4 | % | ||||||||
| Other multifamily | 157,275 | 14.3 | 147,517 | 13.8 | 162,380 | 16.1 | ||||||||||||||
| Total multifamily residential | 171,152 | 15.6 | 161,460 | 15.1 | 176,521 | 17.5 | ||||||||||||||
| Non-residential: | ||||||||||||||||||||
| Office | 98,738 | 9.0 | 100,620 | 9.5 | 96,542 | 9.6 | ||||||||||||||
| Retail | 142,639 | 12.9 | 144,050 | 13.5 | 139,085 | 13.8 | ||||||||||||||
| Mobile home park | 23,070 | 2.1 | 21,533 | 2.0 | 15,649 | 1.5 | ||||||||||||||
| Motel | 27,572 | 2.5 | 27,725 | 2.6 | 17,201 | 1.7 | ||||||||||||||
| Nursing Home | 16,104 | 1.5 | 16,172 | 1.5 | 16,162 | 1.6 | ||||||||||||||
| Warehouse | 18,200 | 1.7 | 18,303 | 1.7 | 22,252 | 2.2 | ||||||||||||||
| Storage | 35,908 | 3.3 | 36,096 | 3.4 | 32,625 | 3.2 | ||||||||||||||
| Other non-residential | 19,659 | 1.8 | 19,703 | 1.8 | 20,746 | 2.1 | ||||||||||||||
| Total non-residential | 381,890 | 34.8 | 384,202 | 36.0 | 360,262 | 35.7 | ||||||||||||||
| Construction/land: | ||||||||||||||||||||
| One-to-four family residential | 47,524 | 4.3 | 45,953 | 4.3 | 48,528 | 4.8 | ||||||||||||||
| Multifamily | 40,078 | 3.7 | 37,032 | 3.5 | 36,400 | 3.6 | ||||||||||||||
| Commercial | 15,913 | 1.5 | 13,793 | 1.3 | 11,086 | 1.1 | ||||||||||||||
| Land development | 6,400 | 0.6 | 8,356 | 0.8 | 6,994 | 0.7 | ||||||||||||||
| Total construction/land | 109,915 | 10.1 | 105,134 | 9.9 | 103,008 | 10.2 | ||||||||||||||
| One-to-four family residential: | ||||||||||||||||||||
| Permanent owner occupied | 205,679 | 18.7 | 201,989 | 18.9 | 184,698 | 18.3 | ||||||||||||||
| Permanent non-owner occupied | 164,707 | 15.0 | 159,267 | 14.9 | 143,226 | 14.2 | ||||||||||||||
| Total one-to-four family residential | 370,386 | 33.7 | 361,256 | 33.8 | 327,924 | 32.5 | ||||||||||||||
| Business: | ||||||||||||||||||||
| Aircraft | 14,186 | 1.3 | 14,459 | 1.4 | 10,172 | 1.0 | ||||||||||||||
| Other business | 23,321 | 2.1 | 21,899 | 2.1 | 19,483 | 1.9 | ||||||||||||||
| Total business | 37,507 | 3.4 | 36,358 | 3.5 | 29,655 | 2.9 | ||||||||||||||
| Consumer: | ||||||||||||||||||||
| Classic auto | 14,636 | 1.3 | 6,056 | 0.6 | - | 0.0 | ||||||||||||||
| Other consumer | 11,815 | 1.1 | 11,834 | 1.1 | 12,419 | 1.2 | ||||||||||||||
| Total consumer | 26,451 | 2.4 | 17,891 | 1.7 | 12,419 | 1.2 | ||||||||||||||
| Total loans | 1,097,301 | 100.0 | % | 1,066,301 | 100.0 | % | 1,009,789 | 100.0 | % | |||||||||||
| Less: | ||||||||||||||||||||
| Deferred loan fees, net | 290 | 568 | 1,116 | |||||||||||||||||
| ALLL | 13,161 | 13,057 | 13,116 | |||||||||||||||||
| Loans receivable, net | $ | 1,083,850 | $ | 1,052,676 | $ | 995,557 | ||||||||||||||
| Concentrations of credit: (1) | ||||||||||||||||||||
| Construction loans as % of total capital | 82.6 | % | 80.1 | % | 77.1 | % | ||||||||||||||
| Total non-owner occupied commercial real estate as % of total capital | 444.9 | % | 441.0 | % | 454.5 | % | ||||||||||||||
(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
| At or For the Quarter Ended | |||||||||||||||||||
| Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |||||||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Performance Ratios: | |||||||||||||||||||
| Return on assets | 0.75 | % | 1.04 | % | 0.63 | % | 0.69 | % | 0.90 | % | |||||||||
| Return on equity | 6.41 | 8.70 | 5.16 | 5.54 | 7.17 | ||||||||||||||
| Dividend payout ratio | 36.00 | 27.27 | 42.11 | 38.10 | 29.63 | ||||||||||||||
| Equity-to-assets ratio | 11.85 | 11.86 | 11.78 | 12.28 | 12.53 | ||||||||||||||
| Tangible equity ratio (1) | 11.73 | 11.72 | 11.64 | 12.13 | 12.38 | ||||||||||||||
| Net interest margin | 3.07 | 3.23 | 3.37 | 3.41 | 3.46 | ||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 113.17 | 113.23 | 113.87 | 114.27 | 115.20 | ||||||||||||||
| Efficiency ratio | 69.73 | 68.80 | 73.06 | 72.18 | 66.06 | ||||||||||||||
| Noninterest expense as a percent of average total assets | 2.24 | 2.28 | 2.48 | 2.49 | 2.33 | ||||||||||||||
| Book value per share | $ | 15.06 | $ | 14.83 | $ | 14.50 | $ | 14.35 | $ | 14.17 | |||||||||
| Tangible book value per share (1) | 14.88 | 14.64 | 14.32 | 14.17 | 13.99 | ||||||||||||||
| Capital Ratios: (2) | |||||||||||||||||||
| Tier 1 leverage ratio | 10.13 | % | 10.34 | % | 10.28 | % | 10.37 | % | 10.37 | % | |||||||||
| Common equity tier 1 capital ratio | 13.14 | 13.46 | 13.13 | 13.43 | 13.58 | ||||||||||||||
| Tier 1 capital ratio | 13.14 | 13.46 | 13.13 | 13.43 | 13.58 | ||||||||||||||
| Total capital ratio | 14.39 | 14.71 | 14.38 | 14.68 | 14.83 | ||||||||||||||
| Asset Quality Ratios: | |||||||||||||||||||
| Nonperforming loans as a percent of total loans | 0.01 | % | 0.01 | % | 0.01 | % | 0.07 | % | 0.05 | % | |||||||||
| Nonperforming assets as a percent of total assets | 0.05 | 0.05 | 0.05 | 0.10 | 0.08 | ||||||||||||||
| ALLL as a percent of total loans | 1.20 | 1.22 | 1.30 | 1.29 | 1.30 | ||||||||||||||
| Net (recoveries) charge-offs to average loans receivable, net | (0.00 | ) | (0.00 | ) | (0.01 | ) | (0.00 | ) | (0.02 | ) | |||||||||
| Allowance for Loan Losses: | |||||||||||||||||||
| ALLL, beginning of the quarter | $ | 13,057 | $ | 13,808 | $ | 13,347 | $ | 13,116 | $ | 12,754 | |||||||||
| Provision (Recapture of provision) | 100 | (800 | ) | 400 | 200 | 200 | |||||||||||||
| Charge-offs | - | - | - | - | - | ||||||||||||||
| Recoveries | 4 | 49 | 61 | 31 | 162 | ||||||||||||||
| ALLL, end of the quarter | $ | 13,161 | $ | 13,057 | $ | 13,808 | $ | 13,347 | $ | 13,116 | |||||||||
(1) Tangible equity ratio and tangible book value are non-GAAP financial measures. Refer to page 13 for reconciliation between the GAAP and non‑GAAP financial measures.
(2) Capital ratios are for First Financial Northwest Bank only.
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures (continued)
| At or For the Quarter Ended | |||||||||||||||||||
| Sep 30, | Jun 30, | Mar 31, | Dec 31, | Sep 30, | |||||||||||||||
| 2019 | 2019 | 2019 | 2018 | 2018 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Yields and Costs: | |||||||||||||||||||
| Yield on loans | 5.14 | % | 5.19 | % | 5.22 | % | 5.13 | % | 5.05 | % | |||||||||
| Yield on investments available-for-sale | 3.02 | 3.21 | 3.35 | 3.17 | 3.00 | ||||||||||||||
| Yield on interest-earning deposits | 2.24 | 2.33 | 2.50 | 2.27 | 1.92 | ||||||||||||||
| Yield on FHLB stock | 6.81 | 5.58 | 4.68 | 6.63 | 6.27 | ||||||||||||||
| Yield on interest-earning assets | 4.84 | % | 4.94 | % | 4.98 | % | 4.88 | % | 4.77 | % | |||||||||
| Cost of interest-bearing deposits | 2.00 | % | 1.89 | % | 1.76 | % | 1.61 | % | 1.40 | % | |||||||||
| Cost of FHLB advances | 2.02 | 2.28 | 2.26 | 2.12 | 2.05 | ||||||||||||||
| Cost of interest-bearing liabilities | 2.00 | % | 1.94 | % | 1.84 | % | 1.68 | % | 1.52 | % | |||||||||
| Cost of total deposits | 1.91 | % | 1.80 | % | 1.67 | % | 1.53 | % | 1.31 | % | |||||||||
| Cost of funds | 1.92 | 1.86 | 1.76 | 1.61 | 1.44 | ||||||||||||||
| Average Balances: | |||||||||||||||||||
| Loans | $ | 1,073,283 | $ | 1,051,894 | $ | 1,031,994 | $ | 1,006,905 | $ | 993,272 | |||||||||
| Investments available-for-sale | 140,031 | 138,634 | 140,433 | 140,568 | 140,584 | ||||||||||||||
| Interest-earning deposits | 27,992 | 8,275 | 6,484 | 10,653 | 12,223 | ||||||||||||||
| FHLB stock | 5,649 | 7,337 | 7,888 | 6,886 | 8,540 | ||||||||||||||
| Total interest-earning assets | $ | 1,246,955 | $ | 1,206,140 | $ | 1,186,799 | $ | 1,165,012 | $ | 1,154,619 | |||||||||
| Interest-bearing deposits | $ | 998,123 | $ | 919,306 | $ | 881,260 | $ | 883,672 | $ | 825,055 | |||||||||
| Borrowings | 103,707 | 145,895 | 160,950 | 135,886 | 177,250 | ||||||||||||||
| Total interest-bearing liabilities | $ | 1,101,830 | $ | 1,065,201 | $ | 1,042,210 | $ | 1,019,558 | $ | 1,002,305 | |||||||||
| Noninterest-bearing deposits | 47,613 | 48,137 | 47,002 | 47,580 | 53,982 | ||||||||||||||
| Total deposits and borrowings | $ | 1,149,443 | $ | 1,113,338 | $ | 1,089,212 | $ | 1,067,138 | $ | 1,056,287 | |||||||||
| Average assets | $ | 1,319,777 | $ | 1,279,880 | $ | 1,258,902 | $ | 1,236,460 | $ | 1,225,189 | |||||||||
| Average stockholders' equity | 155,057 | 152,267 | 152,850 | 154,958 | 154,444 | ||||||||||||||
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 of the tangible equity ratio and tangible book value. The Company's intangible assets consist of goodwill and core deposit intangible. Tangible equity is calculated by subtracting intangible assets from total stockholders’ equity. Tangible assets are calculated by subtracting intangible assets from total assets. The tangible equity ratio is tangible equity divided by tangible assets. Tangible book value per share is calculated by dividing tangible equity by the number of common shares outstanding. The Company believes that these non-GAAP measures provide a more consistent presentation of its capital and facilitate peer comparison that is desired by investors.
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 table provides a reconciliation between the GAAP and non-GAAP measures:
| Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||
| Total stockholders' equity (GAAP) | $ | 155,102 | $ | 153,828 | $ | 151,684 | $ | 153,738 | $ | 154,713 | |||||||||
| Less: | |||||||||||||||||||
| Goodwill | 889 | 889 | 889 | 889 | 889 | ||||||||||||||
| Core deposit intangible | 1,005 | 1,042 | 1,079 | 1,116 | 1,153 | ||||||||||||||
| Tangible equity (Non-GAAP) | $ | 153,208 | $ | 151,897 | $ | 149,716 | $ | 151,733 | $ | 152,671 | |||||||||
| Total assets (GAAP) | 1,308,359 | 1,297,561 | 1,287,862 | 1,252,424 | 1,234,859 | ||||||||||||||
| Less: | |||||||||||||||||||
| Goodwill | 889 | 889 | 889 | 889 | 889 | ||||||||||||||
| Core deposit intangible | 1,005 | 1,042 | 1,079 | 1,116 | 1,153 | ||||||||||||||
| Tangible assets (Non-GAAP) | $ | 1,306,465 | $ | 1,295,630 | $ | 1,285,894 | $ | 1,250,419 | $ | 1,232,817 | |||||||||
| Common shares outstanding at period end | 10,296,053 | 10,375,325 | 10,457,625 | 10,710,656 | 10,914,556 | ||||||||||||||
| Equity to assets ratio | 11.85 | % | 11.86 | % | 11.78 | % | 12.28 | % | 12.53 | % | |||||||||
| Tangible equity ratio | 11.73 | 11.72 | 11.64 | 12.13 | 12.38 | ||||||||||||||
| Book value per share | $ | 15.06 | $ | 14.83 | $ | 14.50 | $ | 14.35 | $ | 14.17 | |||||||||
| Tangible book value per share | 14.88 | 14.64 | 14.32 | 14.17 | 13.99 | ||||||||||||||
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