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CST: 20/08/2019 03:54:52   

First Financial Northwest, Inc. Reports Second Quarter Net Income of $3.3 Million or $0.33 per Diluted Share

25 Days ago

RENTON, Wash., July 25, 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 June 30, 2019, of $3.3 million, or $0.33 per diluted share, compared to net income of $1.9 million, or $0.19 per diluted share, for the quarter ended March 31, 2019, and $3.1 million, or $0.30 per diluted share, for the quarter ended June 30, 2018. For the six months ended June 30, 2019, net income was $5.2 million, or $0.52 per diluted share, compared to net income of $9.9 million, or $0.96 per diluted share, for the comparable six-month period in 2018.

“I am very pleased with the improvement to net income in the quarter, despite the challenges that a flat yield curve presents,” stated Joseph W. Kiley III, President and Chief Executive Officer. “In recent quarters, interest expense increased more rapidly than interest income as competition for deposits in the Puget Sound Region remains intense,” continued Kiley. “However, it was great to see deposit growth during the quarter, including an increase of $3.2 million in noninterest‑bearing checking accounts. Two of our offices in particular produced strong results during the quarter. Our Edmonds office, increased deposits by $10.8 million, and our Crossroads office in Bellevue, increased their deposit base by $6.4 million,” concluded Kiley.

Net loans receivable remained stable at $1.05 billion at both June 30, 2019, and March 31, 2019, but were up from $989.3 million at June 30, 2018. The average balance of net loans receivable totaled $1.05 billion for the quarter ended June 30, 2019, compared to $1.03 billion for the quarter ended March 31, 2019, and $997.1 million for the quarter ended June 30, 2018.

The Company recorded an $800,000 recapture of provision for loan losses in the quarter ended June 30, 2019, compared to a $400,000 provision for loan losses in the quarter ended March 31, 2019, and a recapture of provision for loan losses of $400,000 in the quarter ended June 30, 2018. The recapture of provision for loan losses in the quarter ended June 30, 2019, was due primarily to the recapture of provision associated with a single construction loan with a balance of $11.6 million. The loan was technically in default and classified as impaired. Impaired loans are reviewed individually to determine any loan loss allowance requirement. All payments on the loan were current as of June 30, 2019, and the loan is well collateralized. The impairment analysis concluded that the Bank does not anticipate incurring losses on this loan and funds previously allocated to this loan in the allowance for loan and lease losses calculation were recaptured during the quarter. The provision in the quarter ended March 31, 2019, was due primarily to growth in net loans receivable. The recapture of provision for loan losses in the quarter ended June 30, 2018, was due primarily to a reduction in total construction loan balances outstanding.

Additional highlights for the quarter ended June 30, 2019:

  • Total deposits increased to $1.03 billion at June 30, 2019, compared to $955.3 million at March 31, 2019, and $832.8 million at June 30, 2018. Brokered deposits increased $57.4 million to $180.8 million and noninterest-bearing deposits increased $3.2 million to $49.2 million at June 30, 2019.
  • The Company’s book value per share was $14.83 at June 30, 2019, compared to $14.50 at March 31, 2019, and $13.97 at June 30, 2018.
  • The Company repurchased 82,300 shares during the quarter at an average price of $16.28 per share pursuant to its stock repurchase plan. The entire 550,000 shares authorized under the plan were repurchased at an average price of $15.72 per share over the term of the plan, which commenced on November 5, 2018, and expired on May 3, 2019.
  • The Bank’s Tier 1 leverage and total capital ratios at June 30, 2019, were 10.3% and 14.7%, respectively, compared to 10.3% and 14.4% at March 31, 2019, and 10.2% and 14.5% at June 30, 2018.
  • Based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”), there was an $800,000 recapture of provision for loan losses during the quarter ended June 30, 2019.

The ALLL represented 1.22% of total loans receivable, net of undisbursed funds, at June 30, 2019, compared to 1.30% at March 31, 2019, and 1.27% at June 30, 2018. Nonperforming assets totaled $600,000 at June 30, 2019, compared to $605,000 at March 31, 2019, and $647,000 at June 30, 2018.

 
The following table presents a breakdown of nonperforming assets (unaudited):
 
              Three   One
  Jun 30,   Mar 31,   Jun 30,   Month   Year
    2019       2019       2018     Change   Change
                               
  (Dollars in thousands)
Nonperforming loans:                  
One-to-four family residential $ 103     $ 107     $ 116     $ (4 )   $ (13 )
Consumer   43       44       48       (1 )     (5 )
Total nonperforming loans   146       151       164       (5 )     (18 )
                   
Other real estate owned (“OREO”)   454       454       483         (29 )
                   
Total nonperforming assets (1)(2) $ 600     $ 605     $ 647     $ (5 )   $ (47 )
                   
Nonperforming assets as a percent of total assets   0.05 %     0.05 %     0.05 %        
 
(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 June 30, 2019.
(2) The $11.6 million impaired loan referenced in this document is not included in this table as all payments on the loan were current at June 30, 2019.
 

OREO remained unchanged at $454,000 at both June 30, 2019, and March 31, 2019, but declined from $483,000 at June 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 June 30, 2019, TDRs totaled $6.7 million, compared to $7.8 million at March 31, 2019, and $13.8 million at June 30, 2018.

Net interest income for the quarter ended June 30, 2019, totaled $9.7 million, compared to $9.9 million for the quarter ended March 31, 2019, and $10.1 million for the quarter ended June 30, 2018. Net interest income decreased from all prior periods due to rising market rates and competitive pressures increasing the cost of liabilities.

Total interest income increased to $14.9 million during the quarter ended June 30, 2019, compared to $14.6 million in the quarter ended March 31, 2019, and $13.6 million in the quarter ended June 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 June 30, 2019.

Total interest expense increased to $5.2 million for the quarter ended June 30, 2019, compared to $4.7 million for the quarter ended March 31, 2019, and $3.5 million for the quarter ended June 30, 2018. The higher level of interest expense in the quarter ended June 30, 2019, was due primarily to the higher level of short-term market interest rates for liabilities and a competitive market for attracting deposits, in addition to an increase of $57.4 million in brokered certificates of deposit accounts. The balance of brokered certificates of deposits increased to $180.8 million at June 30, 2019, compared to $123.4 million at March 31, 2019, and $75.5 million at June 30, 2018, as the Bank continued to opportunistically acquire brokered deposits late in the quarter ended June 30, 2019. The Bank borrows from the FHLB or raises money in the national brokered deposit market to supplement its deposit gathering efforts when needed to support the Company’s growth. During the quarter ended June 30, 2019, interest rates in the brokered deposit market were lower than short term FHLB advances, therefore FHLB advances were replaced with lower cost brokered deposits. Advances from the Federal Home Loan Bank (“FHLB”) totaled $105.0 million at June 30, 2019, compared to $163.5 million at March 31, 2019, and $224.0 million at June 30, 2018. The average cost of FHLB advances was 2.28% for the quarter ended June 30, 2019, compared to 2.26% for the quarter ended March 31, 2019, and 1.92% for the quarter ended June 30, 2018.

 
The following table presents a breakdown of our total deposits (unaudited):
 
  Jun 30,
2019
  Mar 31,
2019
  Jun 30,
2018
  Three
Month
Change
  One Year
Change
                   
Deposits: (Dollars in thousands)  
Noninterest-bearing $ 49,219     $ 46,026     $ 51,454     $ 3,193     $ (2,235 )
Interest-bearing demand   50,414       51,096       39,231       (682 )     11,183  
Statement savings   22,593       23,770       26,597       (1,177 )     (4,004 )
Money market   310,587       312,057       304,542       (1,470 )     6,045  
Certificates of deposit, retail (1)   412,134       398,956       335,440       13,178       76,694  
Certificates of deposit, brokered   180,763       123,367       75,488       57,396       105,275  
Total deposits $ 1,025,710     $ 955,272     $ 832,752     $ 70,438     $ 192,958  
 
(1) Balance of retail certificates of deposit for acquired branches are net of an unamortized aggregate fair value adjustment of $41,000 at June 30, 2019, $49,000 at March 31, 2019, and $80,000 at June 30, 2018.


The following tables present an analysis of total deposits by branch office (unaudited):
 
  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.


  March 31, 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 $ 27,344 $ 25,277 $ 19,920 $ 202,635 $ 324,345 $ - $ 599,521
Landing   2,473   1,332   25   16,228   10,519   -   30,577
Woodinville (1)   1,522   3,324   628   14,719   6,814   -   27,007
Bothell   217   47   128   2,941   3,596   -   6,929
Crossroads   3,241   2,600   83   24,591   12,323   -   42,838
Kent (2)   7   1,565   1   4,946   638     7,157
Total King County   34,804   34,145   20,785   266,060   358,235   -   714,029
               
Snohomish County              
Mill Creek   1,816   5,711   629   12,865   10,555   -   31,576
Edmonds   3,443   2,867   195   14,520   13,945   -   34,970
Clearview (1)   3,037   4,163   1,080   5,923   2,672   -   16,875
Lake Stevens (1)   1,627   1,935   490   4,046   3,942   -   12,040
Smokey Point (1)   1,299   2,275   591   8,643   9,607   -   22,415
Total Snohomish County   11,222   16,951   2,985   45,997   40,721   -   117,876
               
Total retail deposits   46,026   51,096   23,770   312,057   398,956   -   831,905
Brokered deposits   -   -   -   -   -   123,367   123,367
Total deposits $ 46,026 $ 51,096 $ 23,770 $ 312,057 $ 398,956 $ 123,367 $ 955,272
 
(1) Balance of retail certificates of deposit for acquired branches are net of an unamortized aggregate fair value adjustment of $49,000.
(2) Kent branch opened January 31, 2019.
 

The net interest margin was 3.23% for the quarter ended June 30, 2019, compared to 3.37% for the quarter ended March 31, 2019, and 3.50% for the quarter ended June 30, 2018. This decline was primarily due to the increasing cost of liabilities between the periods. This continues to be a very challenging environment to acquire low-cost deposits. In addition, for the quarter ended June 30, 2019, loan yields declined, primarily related to the declining balance of higher yielding construction loans during the quarter.

Noninterest income for the quarter ended June 30, 2019, totaled $879,000, compared to $700,000 in the quarter ended March 31, 2019, and $663,000 in the quarter ended June 30, 2018. The increase in noninterest income for the quarter ended June 30, 2019, was due primarily to increases in wealth management revenue and higher deposit and loan related fees, partially offset by lower BOLI income recognition, compared to the quarters ended March 31, 2019, and June 30, 2018. BOLI income benefited from annual dividends received on certain BOLI policies during the quarter ended March 31, 2019. Loan related fees for the quarter ended June 30, 2019, benefited from higher prepayment penalty fees, as well as fees received on new loan interest rate swap agreements.

Noninterest expense decreased to $7.3 million for the quarter ended June 30, 2019, compared to $7.7 million in March 31, 2019, and $7.5 million in the quarter ended June 30, 2018. Noninterest expense for the quarter ended June 30, 2019, was lower in nearly all categories, including salaries and employee benefits, professional fees and data processing, but was partially offset by increases in other general and administrative and occupancy and equipment expenses consistent with the Bank’s branch expansion. Noninterest expense for the quarter ended March 31, 2019, benefited from the receipt of a $125,000 insurance claim that offset the $225,000 fraud loss reported in the prior quarter. Noninterest expense declined from the prior year period due primarily to lower salaries and employee benefits expense, professional fees and bond premium expense.

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 Jun 30,
2019
  Mar 31,
2019
  Jun 30,
2018
  Three
Month
Change
  One
Year
Change
                   
Cash on hand and in banks $ 8,119     $ 9,366     $ 9,017     (13.3 )%   (10.0 )%
Interest-earning deposits   22,579       14,596       14,056     54.7     60.6  
Investments available-for-sale, at fair value   141,581       138,658       138,055     2.1     2.6  
Loans receivable, net of allowance of $13,057, $13,808, and $12,754, respectively   1,052,676       1,051,711       989,256     0.1     6.4  
Federal Home Loan Bank ("FHLB") stock, at cost   5,701       8,041       10,410     (29.1 )   (45.2 )
Accrued interest receivable   4,650       4,861       4,084     (4.3 )   13.9  
Deferred tax assets, net   1,379       1,728       1,296     (20.2 )   6.4  
Other real estate owned ("OREO")   454       454       483     0.0     (6.0 )
Premises and equipment, net   21,944       21,370       21,436     2.7     2.4  
Bank owned life insurance ("BOLI")   31,446       30,162       29,501     4.3     6.6  
Prepaid expenses and other assets   5,101       4,947       4,391     3.1     16.2  
Goodwill   889       889       889     0.0     0.0  
Core deposit intangible   1,042       1,079       1,191     (3.4 )   (12.5 )
Total assets $ 1,297,561     $ 1,287,862     $ 1,224,065     0.8 %   6.0 %
                   
Liabilities and Stockholders' Equity                  
                   
Deposits                  
Noninterest-bearing deposits $ 49,219     $ 46,026     $ 51,454     6.9 %   (4.3 )%
Interest-bearing deposits   976,491       909,246       781,298     7.4     25.0  
Total deposits   1,025,710       955,272       832,752     7.4     23.2  
Advances from the FHLB   105,000       163,500       224,000     (35.8 )   (53.1 )
Advance payments from borrowers for taxes and insurance   2,844       5,374       2,545     (47.1 )   11.7  
Accrued interest payable   461       478       570     (3.6 )   (19.1 )
Other liabilities   9,718       11,554       11,644     (15.9 )   (16.5 )
Total liabilities   1,143,733       1,136,178       1,071,511     0.7     6.7  
                   
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; 10,375,325 shares at June 30, 2019,
10,457,625 shares at March 31, 2019, and
10,916,556 shares at June 30, 2018
  104       104       109     0.0 %   (4.6 )%
Additional paid-in capital   88,725       89,800       96,344     (1.2 )   (7.9 )
Retained earnings   69,976       67,568       63,042     3.6     11.0  
Accumulated other comprehensive loss, net of tax   (1,309 )     (1,838 )     (2,145 )   (28.8 )   (39.0 )
Unearned Employee Stock Ownership Plan ("ESOP") shares   (3,668 )     (3,950 )     (4,796 )   (7.1 )   (23.5 )
Total stockholders' equity   153,828       151,684       152,554     1.4     0.8  
Total liabilities and stockholders' equity $ 1,297,561     $ 1,287,862     $ 1,224,065     0.8 %   6.0 %


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
 
  Quarter Ended        
  Jun 30,
2019
  Mar 31,
2019
  Jun 30,
2018
  Three
Month
Change
  One
Year
Change
Interest income                  
Loans, including fees $ 13,606     $ 13,281     $ 12,429     2.4 %   9.5 %
Investments available-for-sale   1,109       1,159       1,010     (4.3 )   9.8  
Interest-earning deposits   48       40       44     20.0     9.1  
Dividends on FHLB Stock   102       91       105     12.1     (2.9 )
Total interest income   14,865       14,571       13,588     2.0     9.4  
Interest expense                  
Deposits   4,330       3,822       2,435     13.3     77.8  
FHLB advances and other borrowings   829       897       1,024     (7.6 )   (19.0 )
Total interest expense   5,159       4,719       3,459     9.3     49.1  
Net interest income   9,706       9,852       10,129     (1.5 )   (4.2 )
(Recapture of provision) provision for loan losses   (800 )     400       (400 )   (300.0 )   100.0  
Net interest income after (recapture of provision) provision for loan losses   10,506       9,452       10,529     11.2     (0.2 )
                   
Noninterest income                  
Net loss on sale of investments   -       (8 )     (21 )   (100.0 )   (100.0 )
BOLI income   189       269       224     (29.7 )   (15.6 )
Wealth management revenue   261       196       156     33.2     67.3  
Deposit related fees   205       171       175     19.9     17.1  
Loan related fees   209       63       126     231.7     65.9  
Other   15       9       3     66.7     400.0  
Total noninterest income   879       700       663     25.6     32.6  
                   
Noninterest expense                  
Salaries and employee benefits   4,734       5,000       4,931     (5.3 )   (4.0 )
Occupancy and equipment   898       866       829     3.7     8.3  
Professional fees   326       496       442     (34.3 )   (26.2 )
Data processing   397       518       351     (23.4 )   13.1  
OREO related expenses, net   1       31       2     (96.8 )   (50.0 )
Regulatory assessments   136       137       110     (0.7 )   23.6  
Insurance and bond premiums   88       105       154     (16.2 )   (42.9 )
Marketing   76       86       77     (11.6 )   (1.3 )
Other general and administrative   627       470       591     33.4     6.1  
Total noninterest expense   7,283       7,709       7,487     (5.5 )   (2.7 )
Income before federal income tax provision   4,102       2,443       3,705     67.9     10.7  
Federal income tax provision   798       498       603     60.2     32.3  
Net income $ 3,304     $ 1,945     $ 3,102     69.9 %   6.5 %
                   
Basic earnings per share $ 0.33     $ 0.19     $ 0.30          
Diluted earnings per share $ 0.33     $ 0.19     $ 0.30          
Weighted average number of common shares outstanding   9,952,419       10,118,286       10,271,432          
Weighted average number of diluted shares outstanding   10,046,355       10,220,900       10,405,949          

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)

  Six Months Ended
June 30,
   
    2019       2018     One Year
Change
Interest income          
Loans, including fees $ 26,887     $ 25,472     5.6 %
Investments available-for-sale   2,268       1,939     17.0  
Interest-earning deposits   88       82     7.3  
Dividends on FHLB Stock   193       208     (7.2 )
Total interest income   29,436       27,701     6.3  
Interest expense          
Deposits   8,152       4,711     73.0  
FHLB advances and other borrowings   1,726       1,877     (8.0 )
Total interest expense   9,878       6,588     49.9  
Net interest income   19,558       21,113     (7.4 )
Recapture of provision for loan losses   (400 )     (4,400 )   (90.9 )
Net interest income after recapture of provision for loan losses   19,958       25,513     (21.8 )
           
Noninterest income          
Net loss on sale of investments   (8 )     (21 )   (61.9 )
BOLI   458       473     (3.2 )
Wealth management revenue   457       255     79.2  
Deposit related fees   376       336     11.9  
Loan related fees   272       260     4.6  
Other   24       6     300.0  
Total noninterest income   1,579       1,309     20.6  
           
Noninterest expense          
Salaries and employee benefits   9,734       9,593     1.5  
Occupancy and equipment   1,764       1,598     10.4  
Professional fees   822       770     6.8  
Data processing   915       675     35.6  
OREO related expenses, net   32       3     966.7  
Regulatory assessments   273       265     3.0  
Insurance and bond premiums   193       260     (25.8 )
Marketing   162       184     (12.0 )
Other general and administrative   1,097       1,166     (5.9 )
Total noninterest expense   14,992       14,514     3.3  
Income before federal income tax provision   6,545       12,308     (46.8 )
Federal income tax provision   1,296       2,364     (45.2 )
Net income $ 5,249     $ 9,944     (47.2 )%
           
Basic earnings per share $ 0.52     $ 0.97      
Diluted earnings per share $ 0.52     $ 0.96      
Weighted average number of common shares outstanding   10,034,895       10,241,297      
Weighted average number of diluted shares outstanding   10,132,107       10,372,474      


The following table presents a breakdown of our loan portfolio, net of undisbursed funds (unaudited):
 
  June 30, 2019   March 31, 2019   June 30, 2018
  Amount   Percent   Amount   Percent   Amount   Percent
                       
  (Dollars in thousands)
Commercial real estate:                      
Multifamily residential:                      
Micro-unit apartments $ 13,943     1.3 %   $ 14,008     1.3 %   $ 14,204     1.4 %
Other multifamily   147,517     13.8       153,835     14.4       180,649     18.0  
Total multifamily residential   161,460     15.1       167,843     15.7       194,853     19.4  
                       
Non-residential:                      
Office   100,620     9.5       99,639     9.3       99,739     9.9  
Retail   144,050     13.5       146,864     13.8       141,451     14.3  
Mobile home park   21,533     2.0       15,697     1.5       15,655     1.6  
Motel   27,725     2.6       27,882     2.6       14,478     1.4  
Nursing Home   16,172     1.5       16,243     1.5       16,454     1.6  
Warehouse   18,303     1.7       18,274     1.7       28,185     2.8  
Storage   36,096     3.4       36,283     3.4       30,383     3.0  
Other non-residential   19,703     1.8       23,804     2.2       25,345     2.5  
Total non-residential   384,202     36.0       384,686     36.0       371,690     37.1  
                       
Construction/land:                      
One-to-four family residential   45,953     4.3       47,661     4.5       46,379     4.6  
Multifamily   37,032     3.5       47,006     4.4       34,483     3.4  
Commercial   13,793     1.3       12,878     1.2       4,574     0.5  
Land   8,356     0.8       6,965     0.7       12,788     1.3  
Total construction/land   105,134     9.9       114,510     10.8       98,224     9.8  
                       
One-to-four family residential:                      
Permanent owner occupied   201,989     18.9       194,648     18.3       169,275     16.9  
Permanent non-owner occupied   159,267     14.9       156,684     14.7       134,297     13.4  
Total one-to-four family residential   361,256     33.8       351,332     33.0       303,572     30.3  
                       
Business                      
Aircraft   14,459     1.4       11,860     1.1       9,978     1.0  
Other business   21,899     2.1       21,653     2.0       12,143     1.2  
Total business   36,358     3.5       33,513     3.1       22,121     2.2  
                       
Consumer   17,891     1.7       14,336     1.4       12,329     1.2  
Total loans   1,066,301     100.0 %     1,066,220     100.0 %     1,002,789     100.0 %
Less:                      
Deferred loan fees, net   568           701           779      
ALLL   13,057           13,808           12,754      
Loans receivable, net $ 1,052,676         $ 1,051,711         $ 989,256      
                       
Concentrations of credit: (1)                      
Construction loans as % of total capital   80.1 %         87.5 %         73.5 %    
Total non-owner occupied commercial
real estate as % of total capital
  441.0 %         460.9 %         475.2 %    
 
(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
  Jun 30   Mar 31,   Dec 31,   Sep 30   Jun 30,
    2019       2019       2018       2018       2018  
                                       
  (Dollars in thousands, except per share data)
Performance Ratios:                  
Return on assets   1.04 %     0.63 %     0.69 %     0.90 %     1.01 %
Return on equity   8.70       5.16       5.54       7.17       8.28  
Dividend payout ratio   27.27       42.11       38.10       29.63       26.67  
Equity-to-assets ratio   11.86       11.78       12.28       12.53       12.46  
Tangible equity ratio (1)   11.72       11.64       12.13       12.38       12.31  
Net interest margin   3.23       3.37       3.41       3.46       3.50  
Average interest-earning assets to average interest-bearing liabilities   113.23       113.87       114.27       115.20       114.21  
Efficiency ratio   68.80       73.06       72.18       66.06       69.38  
Noninterest expense as a percent of average total assets   2.28       2.48       2.49       2.33       2.44  
Book value per share $ 14.83     $ 14.50     $ 14.35     $ 14.17     $ 13.97  
Tangible book value per share (1)   14.64       14.32       14.17       13.99       13.78  
                   
Capital Ratios: (2)                  
Tier 1 leverage ratio   10.34 %     10.28 %     10.37 %     10.37 %     10.22 %
Common equity tier 1 capital ratio   13.46       13.13       13.43       13.58       13.21  
Tier 1 capital ratio   13.46       13.13       13.43       13.58       13.21  
Total capital ratio   14.71       14.38       14.68       14.83       14.47  
                   
Asset Quality Ratios:                  
Nonperforming loans as a percent of total loans   0.01 %     0.01 %     0.07 %     0.05 %     0.02 %
Nonperforming assets as a percent of total assets   0.05       0.05       0.10       0.08       0.05  
ALLL as a percent of total loans   1.22       1.30       1.29       1.30       1.27  
Net (recoveries) charge-offs to average loans receivable, net   (0.00 )     (0.01 )     (0.00 )     (0.02 )     (0.00 )
                   
Allowance for Loan Losses:                  
ALLL, beginning of the quarter $ 13,808     $ 13,347     $ 13,116     $ 12,754     $ 13,136  
Provision (Recapture of provision)   (800 )     400       200       200       (400 )
Charge-offs   -       -       -       -       -  
Recoveries   49       61       31       162       18  
ALLL, end of the quarter $ 13,057     $ 13,808     $ 13,347     $ 13,116     $ 12,754  
 
(1) Tangible equity ratio and tangible book value are non-GAAP financial measures. Refer to page 12 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
  Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
    2019       2019       2018       2018       2018  
                                       
  (Dollars in thousands, except per share data)
Yields and Costs:                  
Yield on loans   5.19 %     5.22 %     5.13 %     5.05 %     5.00 %
Yield on investments available-for-sale   3.21       3.35       3.17       3.00       2.87  
Yield on interest-earning deposits   2.33       2.50       2.27       1.92       1.48  
Yield on FHLB stock   5.58       4.68       6.63       6.27       4.21  
Yield on interest-earning assets   4.94 %     4.98 %     4.88 %     4.77 %     4.70 %
                   
Cost of interest-bearing deposits   1.89 %     1.76 %     1.61 %     1.40 %     1.22 %
Cost of FHLB advances   2.28       2.26       2.12       2.05       1.92  
Cost of interest-bearing liabilities   1.94 %     1.84 %     1.68 %     1.52 %     1.37 %
                   
Cost of total deposits   1.80 %     1.67 %     1.53 %     1.31 %     1.15 %
Cost of funds   1.86       1.76       1.61       1.44       1.30  
                   
Average Balances:                  
Loans $ 1,051,894     $ 1,031,994     $ 1,006,905     $ 993,272     $ 997,059  
Investments available-for-sale   138,634       140,433       140,568       140,584       141,035  
Interest-earning deposits   8,275       6,484       10,653       12,223       11,927  
FHLB stock   7,337       7,888       6,886       8,540       10,004  
Total interest-earning assets $ 1,206,140     $ 1,186,799     $ 1,165,012     $ 1,154,619     $ 1,160,025  
                   
Interest-bearing deposits $ 919,306     $ 881,260     $ 883,672     $ 825,055     $ 801,852  
Borrowings   145,895       160,950       135,886       177,250       213,857  
Total interest-bearing liabilities $ 1,065,201     $ 1,042,210     $ 1,019,558     $ 1,002,305     $ 1,015,709  
Noninterest-bearing deposits   48,137       47,002       47,580       53,982       50,145  
Total deposits and borrowings $ 1,113,338     $ 1,089,212     $ 1,067,138     $ 1,056,287     $ 1,065,854  
                   
Average assets $ 1,279,880     $ 1,258,902     $ 1,236,460     $ 1,225,189     $ 1,229,341  
Average stockholders' equity   152,267       152,850       154,958       154,444       150,243  
                                       

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:
 
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Sep 30,
2018
  Jun 30,
2018
                   
  (Dollars in thousands, except per share data)
Total stockholders' equity (GAAP) $ 153,828     $ 151,684     $ 153,738     $ 154,713     $ 152,554  
Less:                  
Goodwill   889       889       889       889       889  
Core deposit intangible   1,042       1,079       1,116       1,153       1,191  
Tangible equity (Non-GAAP) $ 151,897     $ 149,716     $ 151,733     $ 152,671     $ 150,474  
                   
Total assets (GAAP)   1,297,561       1,287,862       1,252,424       1,234,859       1,224,065  
Less:                  
Goodwill   889       889       889       889       889  
Core deposit intangible   1,042       1,079       1,116       1,153       1,191  
Tangible assets (Non-GAAP) $ 1,295,630     $ 1,285,894     $ 1,250,419     $ 1,232,817     $ 1,221,985  
                   
Common shares outstanding at
period end
  10,375,325       10,457,625       10,710,656       10,914,556       10,916,556  
                   
Equity to assets ratio   11.86 %     11.78 %     12.28 %     12.53 %     12.46 %
Tangible equity ratio   11.72       11.64       12.13       12.38       12.31  
Book value per share $ 14.83     $ 14.50     $ 14.35     $ 14.17     $ 13.97  
Tangible book value per share   14.64       14.32       14.17       13.99       13.78  
                   


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


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