First Financial Northwest, Inc. Reports Net Income of $3.2 Million or $0.35 per Diluted Share for the Fourth Quarter and $13.2 Million or $1.45 per Diluted Share for the Year Ended December 31, 2022
RENTON, Wash., Jan. 26, 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 December 31, 2022, of $3.2 million, or $0.35 per diluted share, compared to $3.9 million, or $0.43 per diluted share, for the quarter ended September 30, 2022, and $2.7 million, or $0.29 per diluted share, for the quarter ended December 31, 2021. For the year ended December 31, 2022, net income was $13.2 million, or $1.45 per diluted share, compared to net income of $12.2 million, or $1.29 per diluted share, for the year ended December 31, 2021.The provision for loan losses was the primary reason for the decrease in net income for the quarter ended December 31, 2022, compared to the quarter ended September 30, 2022. As a result of the quarterly analysis of our loan portfolio, the Company recorded a provision for loan losses of $500,000 for the quarter ended December 31, 2022, compared to a $400,000 recapture of provision for loan losses for the quarter ended September 30, 2022. The provision in the current quarter was primarily attributable to growth in loans receivable, while the recapture in the prior quarter was primarily attributable to the net impact of changes in the loan portfolio mix, loan downgrades and changes in impairment status.
“Our residential lending division continued to exceed expectations, resulting in growth of $26.4 million in the quarter ended December 31, 2022, bringing year-to-date growth to $90.7 million in one-to-four family residential loan balances, despite a rapidly increasing interest rate environment throughout the year,” noted Joseph W. Kiley III, President and CEO. “This growth was fairly evenly distributed between owner occupied homes and non-owner occupied investment properties, with growth of $48.5 million and $42.3 million, respectively. In addition, I am very proud of the efforts of our credit underwriting teams and the focus on credit quality throughout the bank, with nonperforming asset and loan delinquency balances approximating $200,000 on total loans receivable of $1.2 billion,” continued Kiley.
“Finally, I am pleased to report that during a year when many financial institutions saw deterioration in their book value per share, ours increased to $17.57 at December 31, 2022, compared to $17.30 one year ago,” concluded Kiley.
Highlights for the quarter and year ended December 31, 2022:
· Net loans receivable increased by $23.7 million in the quarter to $1.17 billion at December 31, 2022, on continued strength in one-to-four family residential, construction/land, and classic, collectible and other auto loans.
· The Bank increased its reliance on brokered deposits to fund its asset growth in the quarter, while also increasing noninterest-bearing demand deposits by $1.1 million in the quarter and $2.2 million year over year.
· The Company’s book value per share increased to $17.57 at December 31, 2022, compared to $17.30 at both September 30, 2022, and December 31, 2021.
· The Company repurchased 84,981 shares at an average price of $16.43 per share during the year, an amount equal to approximately 1.0% of shares outstanding at the beginning of 2022.
· The Company paid regular quarterly cash dividends to shareholders totaling $0.48 per share for the year, a 9.1% increase over the prior year.
· The Bank’s Tier 1 leverage and total capital ratios at December 31, 2022, were 10.3% and 15.6%, respectively compared to 10.4% and 15.5%, respectively, at September 30, 2022, and 10.3% and 15.5%, respectively at December 31, 2021.
· Credit quality remained strong as nonperforming assets declined to $193,000, or 0.01% of total assets, and there were only an additional $27,000 in loans over 30 days past due at December 31, 2022.
· Based on management’s evaluation of the adequacy of the allowance for loan and lease losses (“ALLL”) at December 31, 2022, the Bank recorded a $500,000 provision for loan losses during the quarter, reducing the recapture of provision for loan losses recognized during the year to $400,000. For the year ended December 31, 2021, the Bank recorded a $300,000 provision for loan losses.
Deposits totaled $1.17 billion at December 31, 2022, compared to $1.15 billion at September 30, 2022, and $1.16 billion at December 31, 2021. Total deposits increased $20.6 million for the quarter ended December 31, 2022, compared to the quarter ended September 30, 2022, primarily due to a $55.3 million increase in brokered deposits and $2.0 million increase in demand deposits, partially offset by decreases across all other deposit categories, particularly money market balances. Management continually considers alternatives to increase deposits to fund anticipated asset growth in addition to efforts through its branch network, including wholesale markets, brokered deposits and the national deposit market.
The following table presents a breakdown of our total deposits (unaudited):
*Dec 31,*
*2022* *Sep 30,*
*2022* *Dec 31,*
*2021* *Three*
*Month*
*Change* *One *
*Year *
*Change*
Deposits: (Dollars in thousands)
Noninterest-bearing demand $ 119,944 $ 118,842 $ 117,751 $ 1,102 $ 2,193
Interest-bearing demand 96,632 95,767 97,907 865 (1,275 )
Savings 23,636 24,625 23,146 (989 ) 490
Money market 542,388 572,137 624,543 (29,749 ) (82,155 )
Certificates of deposit, retail 262,554 268,528 294,127 (5,974 ) (31,573 )
Brokered deposits 124,886 69,537 - 55,349 124,886
Total deposits $ 1,170,040 $ 1,149,436 $ 1,157,474 $ 20,604 $ 12,566
The following tables present an analysis of total deposits by branch office (unaudited):
*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
*September 30, 2022* *Noninterest-
bearing
demand * *Interest-
bearing
demand* * Savings * *Money
market * *Certificates
of deposit,
retail* *Brokered
deposits* *Total * (Dollars in thousands)
King County
Renton $ 36,797 $ 43,129 $ 16,483 $ 301,912 $ 209,504 $ - $ 607,825
Landing 4,345 2,586 155 20,301 4,089 - 31,476
Woodinville 3,033 3,714 1,208 19,514 9,799 - 37,268
Bothell 3,287 1,045 54 7,307 1,694 - 13,387
Crossroads 13,047 4,225 49 38,668 9,228 - 65,217
Kent 6,323 13,945 4 19,843 1,499 - 41,614
Kirkland 9,101 365 42 7,297 25 - 16,830
Issaquah 3,396 1,480 60 3,037 2,295 - 10,268
Total King County 79,329 70,489 18,055 417,879 238,133 - 823,885
Snohomish County
Mill Creek 7,153 2,727 904 23,527 5,626 - 39,937
Edmonds 16,209 6,284 901 34,719 8,935 - 67,048
Clearview 5,143 5,957 1,662 26,923 2,873 - 42,558
Lake Stevens 4,977 5,233 1,471 40,297 4,975 - 56,953
Smokey Point 3,430 4,452 1,422 23,527 7,066 - 39,897
Total Snohomish County 36,912 24,653 6,360 148,993 29,475 - 246,393
Pierce County
University Place 1,879 108 2 3,883 670 - 6,542
Gig Harbor 722 517 208 1,382 250 - 3,079
Total Pierce County 2,601 625 210 5,265 920 - 9,621
Brokered deposits - - - - - 69,537 69,537
Total deposits $ 118,842 $ 95,767 $ 24,625 $ 572,137 $ 268,528 $ 69,537 $
1,149,436
Net loans receivable totaled $1.17 billion at December 31, 2022, compared to $1.14 billion at September 30, 2022, and $1.10 billion at December 31, 2021. During the quarter ended December 31, 2022, new originations of one-to-four family residential loans, construction/land and classic, collectible and other auto loans outpaced total loan repayments in the quarter. The average balance of net loans receivable totaled $1.15 billion for the quarter ended December 31, 2022, compared to $1.13 billion for the quarter ended September 30, 2022, and $1.11 billion for the quarter ended December 31, 2021. For the year ended December 31, 2022, the average balance of net loans receivable was $1.13 billion, compared to $1.10 billion for the year ended December 31, 2021.
The ALLL represented 1.29% of total loans receivable at December 31, 2022, compared to 1.27% at September 30, 2022, and 1.40% of total loans receivable at December 31, 2021.
There were $193,000 in nonperforming loans at December 31, 2022, compared to $232,000 at September 30, 2022, and none at December 31, 2021. There was no other real estate owned (“OREO”) at December 31, 2022, September 30, 2022, or December 31, 2021.
The following table presents a breakdown of our nonperforming assets (unaudited):
*Dec 31,* *Sep 30,* *Dec 31,* *Three *
*Month* *One *
*Year * *2022* *2022* *2021* *Change* *Change* (Dollars in thousands)
Nonperforming loans:
One-to-four family residential $ ─ $ 39 $ ─ $ (39 ) $ ─
Consumer 193 193 ─
─ 193
Total nonperforming loans 193 232 ─ (39 ) 193
OREO ─
─ ─ ─
─
Total nonperforming assets ^(1) $ 193 $ 232 $ ─
$ (39 ) $ 193
Nonperforming assets as a percent
of total assets 0.01 % 0.02 % 0.00 %
^(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 the Company’s TDRs were performing in accordance with their restructured terms for the periods presented.
The Company accounts for certain loan modifications or restructurings as TDRs. In general, the modification or restructuring of a debt is considered a TDR if, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. TDRs totaled $1.4 million at December 31, 2022, compared to $1.8 million at September 30, 2022, and $2.1 million at December 31, 2021. All TDRs were performing according to their modified repayment terms for the periods presented.
Net interest income totaled $12.5 million for the quarter ended December 31, 2022, compared to $12.7 million for the quarter ended September 30, 2022, and $11.6 million for the quarter ended December 31, 2021. The decrease in the current quarter compared to the quarter ended September 30, 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, which increased 125 basis points during the fourth calendar quarter of 2022, and increased competition for deposits, partially offset by higher interest income on loans, including fees, and investments. For the year ended December 31, 2022, net interest income totaled $48.4 million, compared to $45.0 million for the year ended December 31, 2021, as the increase in interest income on loans and investments outpaced the increase in interest expense on liabilities.
Total interest income was $17.4 million for the quarter ended December 31, 2022, compared to $15.4 million for the quarter ended September 30, 2022, and $13.3 million for the quarter ended December 31, 2021. The increase in the current quarter compared to the prior quarters was primarily due to an improvement in the average loan yield to 5.19% from 4.77% and 4.44% for the quarters ended September 30, 2022, and December 31, 2021, respectively, due in large part to recent increases in short term interest rates that increased our returns from LIBOR and Prime based variable rate loans and variable rate investment securities.
Total interest expense was $4.9 million for the quarter ended December 31, 2022, compared to $2.7 million for the quarter ended September 30, 2022, and $1.7 million for the quarter ended December 31, 2021. The average cost of interest-bearing deposits was 1.51% for the quarter ended December 31, 2022, compared to 0.87% for the quarter ended September 30, 2022, and 0.53% for the quarter ended December 31, 2021. The increase from the quarter ended September 30, 2022, was due primarily to increased interest expense on money market balances and the continued use of higher cost brokered deposits and wholesale sources to meet our funding needs. Advances from the FHLB decreased to $145.0 million at December 31, 2022, compared to $150.0 million at September 30, 2022, and increased from $95.0 million at December 31, 2021. Currently, $95.0 million of our FHLB advances are 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 have a weighted average remaining term of 47 months and a weighted average fixed interest rate of 1.05%. The average cost of borrowings was 2.46% for the quarter ended December 31, 2022, compared to 1.48% for the quarter ended September 30, 2022, and 1.33% for the quarter ended December 31, 2021.
The net interest margin was 3.52% for the quarter ended December 31, 2022, compared to 3.65% for the quarter ended September 30, 2022, and 3.40% for the quarter ended December 31, 2021. The decrease in the net interest margin for the quarter ended December 31, 2022, compared to the quarter ended September 30, 2022, was due primarily to the cost of interest-bearing liabilities increasing more than the yields on interest-earnings assets, with a 70-basis point increase in the Company’s average cost of interest-bearing liabilities to 1.63% from 0.93%, partially offset by a 48-basis point increase in the average yield on interest-earning assets to 4.91% from 4.43%.
Noninterest income for the quarter ended December 31, 2022, totaled $695,000, compared to $778,000 for the quarter ended September 31, 2022, and $1.1 million for the quarter ended December 31, 2021. The decrease in noninterest income for the quarter ended December 31, 2022, compared to the quarter ended September 30, 2022, was primarily due to lower wealth management revenue, and lower loan related fees. The decrease in the current quarter as compared to the quarter ended December 31, 2021, primarily reflects reduced loan fees, in addition to a reduction in wealth management revenue. For the year ended December 31, 2022, noninterest income declined $639,000 to $3.2 million, from $3.9 million for the year ended December 31, 2021, due primarily to lower loan related fees as loan prepayment penalties declined by $425,000, along with a decline of $182,000 in wealth management revenue in the year ended December 31, 2022, compared to the prior year.
Noninterest expense totaled $8.7 million for the quarter ended December 31, 2022, compared to $9.0 million for the quarter ended September 30, 2022, and $8.7 million for the quarter ended December 31, 2021. The decrease in noninterest expense for the quarter ended December 31, 2022, compared to the quarter ended September 30, 2022, was primarily due to a $440,000 decline in salaries and employee benefits due in part to the maturity of the Bank’s Employee Stock Ownership Plan (“ESOP”) in the quarter ended September 30, 2022, resulting in no associated compensation expense for the quarter ended December 31, 2022, compared to $430,000 in the quarter ended September 30, 2022. Effective January 1, 2023, this ESOP benefit was replaced by a new profit-sharing contribution and other enhancements to the Bank’s 401(k) plan for all eligible employees. The Company expects that the associated expenses will generally be in line with the previous ESOP related expenses. The decrease in noninterest expense for the quarter ended December 31, 2022, compared to the quarter ended December 31, 2021, primarily reflects the absence of expenses related to the matured ESOP, partially offset by higher other general and administrative expenses and professional fees. The increase year over year was due primarily to higher expenses across all categories except net OREO related expenses, regulatory assessments and data processing fees, which were lower.
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 oil prices and supply chain disruptions, and any governmental or societal responses new COVID-19 variants; 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 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 2022 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* * Dec 31, *
*2022* * Sep 30,*
*2022* * Dec 31,*
*2021* *Three*
*Month*
*Change* *One*
*Year*
*Change*
Cash on hand and in banks $ 7,722 $ 9,684 $ 7,246 (20.3 )% 6.6 %
Interest-earning deposits with banks 16,598 15,227 66,145 9.0 (74.9 )
Investments available-for-sale, at fair value 217,977 221,278 168,948 (1.5 ) 29.0
Investments held-to-maturity, at amortized cost 2,444 2,438 2,432 0.2 0.5
Loans receivable, net of allowance of $15,227, $14,726, and $15,657 respectively 1,167,083 1,143,348 1,103,461 2.1 5.8
Federal Home Loan Bank (“FHLB”) stock, at cost 7,512 7,712 5,465 (2.6 ) 37.5
Accrued interest receivable 6,513 6,261 5,285 4.0 23.2
Deferred tax assets, net 2,597 2,355 850 10.3 205.5
Premises and equipment, net 21,192 21,608 22,440 (1.9 ) (5.6 )
Bank owned life insurance (“BOLI”), net 36,286 36,064 35,210 0.6 3.1
Prepaid expenses and other assets 12,280 13,605 3,628 (9.7 ) 238.5
Right of use asset (“ROU”), net 3,275 3,260 3,646 0.5 (10.2 )
Goodwill 889 889 889 0.0 0.0
Core deposit intangible, net 548 582 684 (5.8 ) (19.9 )
Total assets $ 1,502,916 $ 1,484,311 $ 1,426,329 1.3 % 5.4 %
*Liabilities and Stockholders’ Equity*
Deposits
Noninterest-bearing deposits $ 119,944 $ 118,842 $ 117,751 0.9 % 1.9 %
Interest-bearing deposits 1,050,096 1,030,594 1,039,723 1.9 1.0
Total deposits 1,170,040 1,149,436 1,157,474 1.8 1.1
Advances from the FHLB 145,000 150,000 95,000 (3.3 ) 52.6
Advance payments from borrowers for taxes and insurance 3,051 5,033 2,909 (39.4 ) 4.9
Lease liability, net 3,454 3,441 3,805 0.4 (9.2 )
Accrued interest payable 328 185 112 77.3 192.9
Other liabilities 20,683 18,326 9,150 12.9 126.0
Total liabilities 1,342,556 1,326,421 1,268,450 1.2 5.8
*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 9,127,595 shares at December 31 2022, 9,127,595 shares at September 30 2022,
and 9,125,759 shares at December 31, 2021 91 91 91 0.0 0.0
Additional paid-in capital 72,424 72,295 72,298 0.2 0.2
Retained earnings 95,059 92,928 86,162 2.3 10.3
Accumulated other comprehensive (loss) income, net of tax (7,214 ) (7,424 ) 174 (2.8 ) (4,246.0 )
Unearned Employee Stock Ownership Plan (“ESOP”) shares - - (846 ) n/a (100.0 )
Total stockholders’ equity 160,360 157,890 157,879 1.6 1.6
Total liabilities and stockholders’ equity $ 1,502,916 $ 1,484,311 $ 1,426,329 1.3 % 5.4 %
*
*
*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
*Quarter Ended* *Dec 31,*
*2022* * Sep 30,*
*2022 * *Dec 31,*
*2021* *Three*
*Month*
*Change * *One*
*Year*
*Change *
Interest income
Loans, including fees $ 15,042 $ 13,618 $ 12,398 10.5 % 21.3 %
Investments 2,032 1,609 804 26.3 152.7
Interest-earning deposits with banks 205 125 19 64.0 978.9
Dividends on FHLB Stock 89 83 85 7.2 4.7
Total interest income 17,368 15,435 13,306 12.5 30.5
Interest expense
Deposits 3,972 2,326 1,390 70.8 185.8
FHLB advances and other borrowings 928 392 340 136.7 172.9
Total interest expense 4,900 2,718 1,730 80.3 183.2
Net interest income 12,468 12,717 11,576 (2.0 ) 7.7
Provision (recapture of provision) for loan losses 500 (400 ) 600 (225.0 ) (16.7 )
Net interest income after provision (recapture of provision) for loan losses 11,968 13,117 10,976 (8.8 ) 9.0
Noninterest income
Net gain on sale of investments 27 - 32 n/a (15.6 )
BOLI income 222 243 216 (8.6 ) 2.8
Wealth management revenue 36 89 104 (59.6 ) (65.4 )
Deposit related fees 231 245 218 (5.7 ) 6.0
Loan related fees 172 195 551 (11.8 ) (68.8 )
Other 7 6 5 16.7 40.0
Total noninterest income 695 778 1,126 (10.7 ) (38.3 )
Noninterest expense
Salaries and employee benefits 4,977 5,417 5,374 (8.1 ) (7.4 )
Occupancy and equipment 1,155 1,188 1,154 (2.8 ) 0.1
Professional fees 607 549 477 10.6 27.3
Data processing 634 675 689 (6.1 ) (8.0 )
Regulatory assessments 108 105 100 2.9 8.0
Insurance and bond premiums 111 112 110 (0.9 ) 0.9
Marketing 77 92 37 (16.3 ) 108.1
Other general and administrative 997 876 775 13.8 28.6
Total noninterest expense 8,666 9,014 8,716 (3.9 ) (0.6 )
Income before federal income tax provision 3,997 4,881 3,386 (18.1 ) 18.0
Federal income tax provision 771 935 643 (17.5 ) 19.9
Net income $ 3,226 $ 3,946 $ 2,743 (18.2 )% 17.6 %
Basic earnings per share $ 0.35 $ 0.44 $ 0.30
Diluted earnings per share $ 0.35 $ 0.43 $ 0.29
Weighted average number of common shares outstanding 9,073,323 8,981,037 9,129,724
Weighted average number of diluted shares outstanding 9,149,044 9,068,541 9,273,502
*
*
*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
*Year Ended December 31,* *2022* *2021* * One
Year
Change *
Interest income
Loans, including fees $ 52,935 $ 50,170 5.5 %
Investments 5,627 3,224 74.5
Interest-earning deposits with banks 386 72 436.1
Dividends on FHLB Stock 318 332 (4.2 )
Total interest income 59,266 53,798 10.2
Interest expense
Deposits 8,955 7,216 24.1
FHLB advances and other borrowings 1,934 1,603 20.6
Total interest expense 10,889 8,819 23.5
Net interest income 48,377 44,979 7.6
(Recapture of provision) provision for loan losses (400 ) 300 (233.3 )
Net interest income after (recapture of provision) provision for loan losses 48,777 44,679 9.2
Noninterest income
Net gain on sale of investments 27 32 (15.6 )
BOLI income 1,004 1,107 (9.3 )
Wealth management revenue 312 494 (36.8 )
Deposit related fees 936 872 7.3
Loan related fees 919 1,265 (27.4 )
Other 25 92 (72.8 )
Total noninterest income 3,223 3,862 (16.5 )
Noninterest expense
Salaries and employee benefits 21,133 20,237 4.4
Occupancy and equipment 4,776 4,557 4.8
Professional fees 2,339 1,899 23.2
Data processing 2,678 2,692 (0.5 )
Regulatory assessments 403 456 (11.6 )
Insurance and bond premiums 464 451 2.9
Marketing 303 154 96.8
Other general and administrative 3,495 2,921 19.7
Total noninterest expense 35,591 33,367 6.7
Income before federal income tax provision 16,409 15,174 8.1
Federal income tax provision 3,169 2,925 8.3
Net income $ 13,240 $ 12,249 8.1 %
Basic earnings per share $ 1.47 $ 1.31
Diluted earnings per share $ 1.45 $ 1.29
Weighted average number of common shares outstanding 9,006,369 9,340,997
Weighted average number of diluted shares outstanding 9,102,283 9,454,495
The following table presents a breakdown of the loan portfolio (unaudited):
*December 31, 2022* *September 30, 2022* *December 31, 2021* *Amount* *Percent* *Amount* *Percent* *Amount* *Percent* (Dollars in thousands)
Commercial real estate:
Residential:
Other multifamily $ 126,895 10.7 % $ 132,755 11.4 % $ 130,146 11.6 %
Total multifamily residential 126,895 10.7 132,755 11.4 130,146 11.6
Non-residential:
Office 84,315 7.1 84,768 7.3 90,727 8.1
Retail 132,595 11.2 137,417 11.9 138,463 12.4
Mobile home park 25,420 2.2 23,531 2.0 20,636 1.8
Hotel / motel 55,471 4.7 56,715 4.9 64,854 5.8
Nursing home 12,365 1.0 12,452 1.2 12,713 1.1
Warehouse 19,783 1.7 19,934 1.7 17,724 1.6
Storage 33,876 2.9 34,069 2.9 32,990 2.9
Other non-residential 44,057 3.6 44,600 3.9 41,310 3.8
Total non-residential 407,882 34.4 413,486 35.8 419,417 37.5
Construction/land:
One-to-four family residential 52,836 4.5 41,606 3.6 34,677 3.1
Multifamily 15,501 1.3 15,500 1.3 37,194 3.3
Commercial - 0.0 - 0.0 6,189 0.6
Land development 9,783 0.8 15,518 1.3 15,395 1.4
Total construction/land 78,120 6.6 72,624 6.2 93,455 8.4
One-to-four family residential:
Permanent owner occupied 233,785 19.8 221,212 19.1 185,320 16.6
Permanent non-owner occupied 242,051 20.5 228,223 19.7 199,796 17.8
Total one-to-four family residential 475,836 40.3 449,435 38.8 385,116 34.4
Business:
Aircraft 2,086 0.1 2,335 0.2 6,079 0.5
Small Business Administration (“SBA”) 509 0.1 520 0.1 839 0.1
Paycheck Protection Plan (“PPP”) 785 0.1 1,209 0.1 10,849 1.0
Other business 27,991 2.4 27,990 2.4 28,823 2.5
Total business 31,371 2.7 32,054 2.8 46,590 4.1
Consumer:
Classic, collectible and other auto 53,705 4.6 47,141 4.1 35,861 3.2
Other consumer 8,350 0.7 10,478 0.9 8,951 0.8
Total consumer 62,055 5.3 57,619 5.0 44,812 4.0
Total loans 1,182,159 100.0 % 1,157,973 100.0 % 1,119,536 100.0 %
Less:
Deferred loan (costs) fees, net (151 ) (101 ) 418
ALLL 15,227 14,726 15,657
Loans receivable, net $ 1,167,083 $ 1,143,348 $ 1,103,461
Concentrations of credit: ^(1)
Construction loans as % of total capital 53.1 % 49.1 % 59.7 %
Total non-owner occupied commercial real estate as % of total capital 346.9 % 354.6 % 384.0 %
^(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 * * * * * *Dec 31,* *Sep 30,* *Jun 30,* *Mar 31,* *Dec 31,* *2022* *2022* *2022* *2022* *2021* *(Dollars in thousands, except per share data)*
*Performance Ratios**: *^*(1)*
Return on assets 0.86 % 1.06 % 0.79 % 0.93 % 0.76 %
Return on equity 8.04 9.88 7.11 8.33 6.79
Dividend payout ratio 34.29 27.40 38.51 33.20 36.67
Equity-to-assets ratio 10.67 10.64 10.78 11.15 11.07
Tangible equity ratio ^(2) 10.58 10.55 10.69 11.05 10.97
Net interest margin 3.52 3.65 3.53 3.43 3.40
Average interest-earning assets to average interest-bearing liabilities 117.93 119.08 120.21 119.59 119.08
Efficiency ratio 65.84 66.80 72.62 70.96 68.62
Noninterest expense as a percent of average total assets 2.30 2.43 2.60 2.46 2.42
Book value per common share $ 17.57 $ 17.30 $ 17.26 $ 17.32 $ 17.30
Tangible book value per share ^(2) 17.41 17.14 17.09 17.15 17.13
*Capital Ratios**: *^*(*^*3*^*)*
Tier 1 leverage ratio 10.31 % 10.43 % 10.53 % 10.51 % 10.34 %
Common equity tier 1 capital ratio 14.37 14.24 14.22 14.08 14.23
Tier 1 capital ratio 14.37 14.24 14.22 14.08 14.23
Total capital ratio 15.62 15.49 15.47 15.33 15.48
*Asset Quality Ratios**: *^*(*^*4*^*)*
Nonperforming loans as a percent of total loans 0.02 % 0.02 % 0.00 % 0.02 % 0.00 %
Nonperforming assets as a percent of total assets 0.01 0.02 0.00 0.01 0.00
ALLL as a percent of total loans 1.29 1.27 1.33 1.33 1.40
Net (recoveries) charge-offs to average loans receivable, net (0.00 ) (0.00 ) 0.00 (0.00 ) 0.00
*Allowance for Loan Losses:*
ALLL, beginning of the quarter $ 14,726 $ 15,125 $ 15,159 $ 15,657 $ 15,057
Provision (recapture of provision) 500 (400 ) - (500 ) 600
Charge-offs - - (37 ) - -
Recoveries 1 1 3 2 -
ALLL, end of the quarter $ 15,227 $ 14,726 $ 15,125 $ 15,159 $ 15,657
^(1) Performance ratios are calculated on an annualized basis.
^(^2^) Tangible equity and tangible assets exclude goodwill and core deposit intangible assets. Tangible equity, tangible assets, tangible equity ratio and tangible book value per share are non-GAAP financial measures. 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* *Dec 31,*
*2022* *Sep 30, *
*2022* *Jun 30,*
*2022* *Mar 31,*
*2022* *Dec 31,*
*2021* (Dollars in thousands)
*Average Yields and Costs**: *^*(1)*
Yield on loans 5.19 % 4.77 % 4.41 % 4.36 % 4.44 %
Yield on investments 3.64 2.90 2.33 1.96 1.79
Yield on interest-earning deposits 3.31 2.02 0.67 0.15 0.13
Yield on FHLB stock 4.58 5.56 4.82 5.49 5.89
Yield on interest-earning assets 4.91 % 4.43 % 4.04 % 3.90 % 3.91 %
Cost of interest-bearing deposits 1.51 % 0.87 % 0.55 % 0.50 % 0.53 %
Cost of borrowings 2.46 1.48 1.21 1.28 1.33
Cost of interest-bearing liabilities 1.63 % 0.93 % 0.61 % 0.56 % 0.61 %
Cost of total deposits 1.36 % 0.78 % 0.49 % 0.44 % 0.48 %
Cost of funds 1.48 0.84 0.55 0.51 0.55
*Average Balances:*
Loans $ 1,150,181 $ 1,132,233 $ 1,117,079 $ 1,115,428 $ 1,108,836
Investments 221,180 220,244 198,819 171,685 178,500
Interest-earning deposits 24,608 24,565 22,010 49,857 56,800
FHLB stock 7,710 5,923 5,905 5,467 5,726
Total interest-earning assets $ 1,403,679 $ 1,382,965 $ 1,343,813 $ 1,342,437 $ 1,349,862
Interest-bearing deposits $ 1,040,357 $ 1,056,079 $ 1,013,080 $ 1,027,507 $ 1,032,090
Borrowings 149,946 105,272 104,835 95,000 101,522
Total interest-bearing liabilities 1,190,303 1,161,351 1,117,915 1,122,507 1,133,612
Noninterest-bearing deposits 121,518 125,561 131,415 122,175 119,142
Total deposits and borrowings $ 1,311,821 $ 1,286,912 $ 1,249,330 $ 1,244,682 $ 1,252,754
Average assets $ 1,496,125 $ 1,470,816 $ 1,431,003 $ 1,424,054 $ 1,430,199
Average stockholders’ equity 159,120 158,515 158,349 158,756 160,183
^(1) Yields and costs are annualized.
*
*
*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Key Financial Measures
(Unaudited)
*At or For the Year Ended December 31,* *2022* *2021* *2020* *2019* *2018* (Dollars in thousands, except per share data)
*Performance Ratios:*
Return on assets 0.91 % 0.86 % 0.63 % 0.80 % 1.21 %
Return on equity 8.34 7.65 5.50 6.73 9.86
Dividend payout ratio 32.65 33.59 45.45 33.65 21.53
Equity-to-assets ratio 10.67 11.07 11.26 11.65 12.28
Tangible equity ratio ^(^1^) 10.58 10.97 11.15 11.53 12.13
Net interest margin 3.54 3.35 3.15 3.19 3.56
Average interest-earning assets to average interest-bearing liabilities 119.18 118.59 115.62 113.44 114.28
Efficiency ratio 68.97 68.32 72.39 70.66 66.88
Noninterest expense as a percent of average total assets 2.44 2.35 2.39 2.35 2.40
Book value per common share $ 17.57 $ 17.30 $ 16.05 $ 15.25 $ 14.35
Tangible book value per share ^(^1^) 17.41 17.13 15.88 15.07 14.17
*Capital Ratios**: *^*(*^*2*^*)*
Tier 1 leverage ratio 10.31 % 10.34 % 10.29 % 10.27 % 10.37 %
Common equity tier 1 capital ratio 14.37 14.23 14.32 13.13 13.43
Tier 1 capital ratio 14.37 14.23 14.32 13.13 13.43
Total capital ratio 15.62 15.48 15.57 14.38 14.68
*Asset Quality Ratios**: *^*(*^*3*^*)*
Nonperforming loans as a percent of total loans 0.02 % 0.00 % 0.19 % 0.01 % 0.07 %
Nonperforming assets as a percent of total assets 0.01 0.00 0.18 0.04 0.10
ALLL as a percent of total loans 1.29 1.40 1.36 1.18 1.29
Net charge-offs (recoveries) to average loans receivable, net 0.00 (0.02 ) (0.00 ) (0.02 ) (0.45 )
*Allowance for Loan Losses:*
ALLL, beginning of the year $ 15,657 $ 15,174 $ 13,218 $ 13,347 $ 12,882
(Recapture of provision) provision (400 ) 300 1,900 (300 ) (4,000 )
Charge-offs (37 ) - (2 ) - -
Recoveries 7 183 58 171 4,465
ALLL, end of the year $ 15,227 $ 15,657 $ 15,174 $ 13,218 $ 13,347
^(^1^) Tangible equity and tangible assets exclude goodwill and core deposit intangible assets. Tangible equity, tangible, tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.
^(^2^) Capital ratios are for First Financial Northwest Bank only.
^(^3^) Loans are reported net of undisbursed funds.
*
*
*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Key Financial Measures (continued)
(Unaudited)
*For the Year Ended December 31,* *2022* *2021* *2020* *2019* *2018* (Dollars in thousands)
*Average Yields and Costs**:*
Yield on loans 4.69 % 4.57 % 4.69 % 5.15 % 5.13 %
Yield on investments 2.77 1.83 2.39 3.11 2.92
Yield on interest-earning deposits 1.28 0.12 0.21 2.15 1.74
Yield on FHLB stock 5.08 5.29 4.85 5.42 5.24
Yield on interest-earning assets 4.33 % 4.01 % 4.36 % 4.88 % 4.83 %
Cost of interest-bearing deposits 0.87 % 0.71 % 1.42 % 1.90 % 1.35 %
Cost of borrowings 1.70 1.39 1.31 2.09 1.92
Cost of interest-bearing liabilities 0.95 % 0.78 % 1.41 % 1.92 % 1.46 %
Cost of total deposits 0.77 % 0.64 % 1.32 % 1.81 % 1.28 %
Cost of funds 0.86 0.71 1.32 1.84 1.39
*Average Balances:*
Loans $ 1,128,835 $ 1,098,772 $ 1,120,889 $ 1,061,367 $ 995,810
Investments 203,165 176,110 133,584 139,354 141,100
Interest-earning deposits 30,176 60,482 25,108 13,634 11,628
FHLB stock 6,256 6,271 6,600 6,684 8,748
Total interest-earning assets $ 1,368,432 $ 1,341,635 $ 1,286,181 $ 1,221,039 $ 1,157,286
Interest-bearing deposits $ 1,034,351 $ 1,015,852 $ 987,069 $ 946,484 $ 828,965
Borrowings 113,890 115,466 125,392 129,899 183,667
Total interest-bearing liabilities 1,148,241 1,131,318 1,112,461 1,076,383 1,012,632
Noninterest-bearing deposits 125,166 112,484 75,388 48,434 49,461
Total deposits and borrowings $ 1,273,407 $ 1,243,802 $ 1,187,849 $ 1,124,817 $ 1,062,093
Average assets $ 1,455,739 $ 1,421,476 $ 1,361,604 $ 1,294,164 $ 1,227,396
Average stockholders’ equity 158,685 160,041 155,587 154,092 151,145
*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* *Dec 31,
2022* *Sep 30,
2022* *Jun 30,
2022* *Mar 31,
2022* *Dec 31,
2021* (Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders’ equity (GAAP) $ 160,360 $ 157,890 $ 156,896 $ 157,757 $ 157,879
Less:
Goodwill 889 889 889 889 889
Core deposit intangible, net 548 582 616 650 684
Tangible equity (Non-GAAP) $ 158,923 $ 156,419 $ 155,391 $ 156,218 $ 156,306
Total assets (GAAP) $ 1,502,916 $ 1,484,311 $ 1,454,768 $ 1,415,054 $ 1,426,329
Less:
Goodwill 889 889 889 889 889
Core deposit intangible, net 548 582 616 650 684
Tangible assets (Non-GAAP) $ 1,501,479 $ 1,482,840 $ 1,453,263 $ 1,413,515 $ 1,424,756
Common shares outstanding at period end 9,127,595 9,127,595 9,091,533 9,107,977 9,125,759
Equity-to-assets ratio (GAAP) 10.67 % 10.64 % 10.78 % 11.15 % 11.07 %
Tangible equity ratio (Non-GAAP) 10.58 10.55 10.69 11.05 10.97
Book value per common share (GAAP) $ 17.57 $ 17.30 $ 17.26 $ 17.32 $ 17.30
Tangible book value per share (Non-GAAP) 17.41 17.14 17.09 17.15 17.13
*Year Ended December 31,* *2022* *2021* *2020* *2019* *2018* (Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders’ equity (GAAP) $ 160,360 $ 157,879 $ 156,302 $ 156,319 $ 153,738
Less:
Goodwill 889 889 889 889 889
Core deposit intangible 548 684 824 968 1,116
Tangible equity (Non-GAAP) $ 158,923 $ 156,306 $ 154,589 $ 154,462 $ 151,733
Total assets (GAAP) 1,502,916 1,426,329 1,387,669 1,341,885 1,252,424
Less:
Goodwill 889 889 889 889 889
Core deposit intangible 548 684 824 968 1,116
Tangible assets (Non-GAAP) $ 1,501,479 $ 1,424,756 $ 1,385,956 $ 1,340,028 $ 1,250,419
Common shares outstanding at period end 9,127,595 9,125,759 9,736,875 10,252,953 10,710,656
Equity-to-assets ratio (GAAP) 10.67 % 11.07 % 11.26 % 11.65 % 12.28 %
Tangible equity ratio (Non-GAAP) 10.58 10.97 11.15 11.53 12.13
Book value per common share (GAAP) $ 17.57 $ 17.30 $ 16.05 $ 15.25 $ 14.35
Tangible book value per share (Non-GAAP) 17.41 17.13 15.88 15.07 14.17
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