First Financial Northwest, Inc. Reports Net Income of $1.2 Million or $0.13 per Diluted Share for the Fourth Quarter and $6.3 Million or $0.69 per Diluted Share for the Year Ended December 31, 2023
RENTON, Wash., Jan. 25, 2024 (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, 2023, of $1.2 million, or $0.13 per diluted share, compared to $1.5 million, or $0.16 per diluted share, for the quarter ended September 30, 2023, and $3.2 million, or $0.35 per diluted share, for the quarter ended December 31, 2022. For the year ended December 31, 2023, net income was $6.3 million, or $0.69 per diluted share, compared to net income of $13.2 million, or $1.45 per diluted share, for the year ended December 31, 2022.
“Credit quality remained strong as of year-end with nonperforming assets of $220,000 on a $1.2 billion total loan portfolio. Our analysis of the allowance for credit losses was influenced by various factors during the quarter, including shifts in the balances and composition of the loan portfolio, a credit downgrade from “pass” to “watch” involving a $12.8 million lending relationship secured by mixed-use commercial real estate, and improvements in the unemployment rate forecast. After careful consideration, our analysis concluded that no provision for credit losses was necessary for the quarter,” stated Joseph W. Kiley III, President and CEO.
“Persistently elevated short term interest rates and intense competition have continued to place pressure on deposit rates, impacting our net interest income. Despite these challenges, we continue to actively manage these expenses to the extent possible, while prioritizing maintaining deposit balances and meeting our customers’ needs,” continued Kiley.
“Throughout the fourth quarter of 2023, our focus on cost reduction and operational efficiency yielded a decrease in noninterest expenses. We previously reported that we were in search of a senior C&I lending credit officer. However, in light of the announcement that we have entered into a Purchase and Assumption Agreement with Global Federal Credit Union pursuant to which Global will acquire substantially all of the assets and assume substantially all of the liabilities of the Bank, those hiring plans are currently on hold as we pursue regulatory approval for the sale,” concluded Kiley.
Highlights for the quarter and year ended December 31, 2023:
· Net loans receivable increased by $7.8 million in the quarter to $1.18 billion at December 31, 2023, on continued strength in our construction/land and one-to-four family residential portfolios, along with modest growth observed in other business and consumer loans.
· Book value per share was $17.61 at December 31, 2023, compared to $17.35 and $17.57 for September 30, 2023 and December 31, 2022, respectively.
· Paid regular quarterly cash dividends to shareholders totaling $0.52 per share for the year, an 8.3% increase over the prior year.
· The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 16.2% at December 31, 2023, compared to 10.3% and 16.0% at September 30, 2023, and 10.3% and 15.6% at December 31, 2022, respectively.
· Credit quality remained strong with nonperforming assets totaling $220,000, or 0.01% of total assets, and an additional $1.2 million in loans over 30 days past due at December 31, 2023.
· Based on management’s evaluation of the adequacy of the allowance for credit losses (“ACL”) at December 31, 2023, the Company did not record a provision for credit losses during the quarter, resulting in a net recapture of provision for credit losses of $208,000 for the year. The Company recorded a $434,000 recapture of provision for credit losses for the year ended December 31, 2022.
Deposits totaled $1.19 billion at December 31, 2023, compared to $1.21 billion at September 30, 2023, and $1.17 billion at December 31, 2022. Total deposits decreased $16.3 million for the quarter ended December 31, 2023, compared to the quarter ended September 30, 2023, primarily due to a $45.2 million decrease in brokered deposits and a $7.1 million decrease in demand deposits, partially offset by a $28.2 million increase in money market balances and a $7.7 million increase in retail certificates of deposit. Management continues to consider various sources of funds, including wholesale markets, brokered deposits and the national deposit market to fund its growth. Total deposits were up $24.1 million at December 31, 2023, compared to $1.17 billion at December 31, 2022.
The following table presents a breakdown of our total deposits (unaudited):
*Dec 31,*
*2023* *Sep 30,*
*2023* *Dec 31,*
*2022* *Three*
*Month*
*Change* *One *
*Year *
*Change*
Deposits: (Dollars in thousands)
Noninterest-bearing demand $ 100,899 $ 104,164 $ 119,944 $ (3,265 ) $ (19,045 )
Interest-bearing demand 56,968 60,816 96,632 (3,848 ) (39,664 )
Savings 18,886 18,844 23,636 42 (4,750 )
Money market 529,411 501,168 542,388 28,243 (12,977 )
Certificates of deposit, retail 357,153 349,446 262,554 7,707 94,599
Brokered deposits 130,790 175,972 124,886 (45,182 ) 5,904
Total deposits $ 1,194,107 $ 1,210,410 $ 1,170,040 $ (16,303 ) $ 24,067
The following tables present an analysis of total deposits by branch office (unaudited):
*December 31, 2023* *Noninterest-
bearing
demand * *Interest-
bearing
demand* * Savings * *Money
market * *Certificates
of deposit,
retail* *Brokered
deposits* *Total * (Dollars in thousands)
King County
Renton $ 32,707 $ 16,280 $ 12,637 $ 317,003 $ 241,983 $ - $ 620,610
Landing 2,789 1,658 104 12,447 9,842 - 26,840
Woodinville 1,909 2,292 1,000 9,491 10,671 - 25,363
Bothell 3,380 840 33 1,892 4,738 - 10,883
Crossroads 11,075 3,873 45 27,564 14,958 - 57,515
Kent 7,267 5,086 4 16,424 7,706 - 36,487
Kirkland 9,341 1,989 137 12,233 2,032 - 25,732
Issaquah 1,646 1,696 57 2,417 6,213 - 12,029
Total King County 70,114 33,714 14,017 399,471 298,143 - 815,459
Snohomish County
Mill Creek 4,985 2,333 850 13,672 8,309 - 30,149
Edmonds 11,455 5,386 460 26,458 14,375 - 58,134
Clearview 4,614 4,964 1,541 17,597 9,243 - 37,959
Lake Stevens 3,849 4,919 940 24,009 12,633 - 46,350
Smokey Point 2,665 4,333 1,060 44,484 11,750 - 64,292
Total Snohomish County 27,568 21,935 4,851 126,220 56,310 - 236,884
Pierce County
University Place 2,205 67 3 2,496 1,172 - 5,943
Gig Harbor 1,012 1,252 15 1,224 1,528 - 5,031
Total Pierce County 3,217 1,319 18 3,720 2,700 - 10,974
Brokered deposits - - - - - 130,790 130,790
Total deposits $ 100,899 $ 56,968 $ 18,886 $ 529,411 $ 357,153 $ 130,790 $ 1,194,107
*September 30, 2023* *Noninterest-
bearing
demand * *Interest-
bearing
demand* * Savings * *Money
market * *Certificates
of deposit,
retail* *Brokered
deposits* *Total * (Dollars in thousands)
King County
Renton $ 32,025 $ 15,316 $ 12,140 $ 284,433 $ 239,940 $ - $ 583,854
Landing 3,036 1,689 91 16,606 8,934 - 30,356
Woodinville 2,377 2,425 981 9,016 10,453 - 25,252
Bothell 3,798 751 35 4,363 2,365 - 11,312
Crossroads 10,589 4,067 77 28,773 14,460 - 57,966
Kent 6,665 7,397 4 13,310 7,839 - 35,215
Kirkland 10,385 1,765 148 12,277 1,174 - 25,749
Issaquah 1,476 1,966 30 3,719 6,170 - 13,361
Total King County 70,351 35,376 13,506 372,497 291,335 - 783,065
Snohomish County
Mill Creek 5,126 3,474 639 14,069 7,910 - 31,218
Edmonds 11,817 6,735 950 24,681 14,848 - 59,031
Clearview 5,497 5,468 1,495 18,896 9,132 - 40,488
Lake Stevens 3,740 4,567 964 23,657 12,126 - 45,054
Smokey Point 3,568 3,877 1,272 42,544 11,835 - 63,096
Total Snohomish County 29,748 24,121 5,320 123,847 55,851 - 238,887
Pierce County
University Place 3,176 99 3 3,279 996 - 7,553
Gig Harbor 889 1,220 15 1,545 1,264 - 4,933
Total Pierce County 4,065 1,319 18 4,824 2,260 - 12,486
Brokered deposits - - - - - 175,972 175,972
Total deposits $ 104,164 $ 60,816 $ 18,844 $ 501,168 $ 349,446 $ 175,972 $ 1,210,410
Net loans receivable totaled $1.18 billion at December 31, 2023, compared to $1.17 billion at both September 30, 2023 and December 31, 2022. During the quarter ended December 31, 2023, new originations of primarily construction/land and one-to-four family residential loans outpaced total loan repayments in the quarter. The average balance of net loans receivable totaled $1.17 billion for both the quarter ended December 31, 2023 and September 30, 2023, compared to $1.15 billion for the quarter ended December 31, 2022. For the year ended December 31, 2023, the average balance of net loans receivable was $1.17 billion, compared to $1.13 billion for the year ended December 31, 2022.
The allowance for credit losses (“ACL”) represented 1.28% of total loans receivable at December 31, 2023, compared to 1.29% at both September 30, 2023 and December 31, 2022.
Nonperforming loans totaled $220,000 at December 31, 2023, compared to $201,000 at September 30, 2023, and $193,000 at December 31, 2022. There was no other real estate owned (“OREO”) at December 31, 2023, September 30, 2023, or December 31, 2022.
The following table presents a breakdown of our nonperforming assets (unaudited):
*Dec 31,* *Sep 30,* *Dec 31,* *Three *
*Month* *One *
*Year * *2023* *2023* *2022* *Change* *Change* (Dollars in thousands)
Nonperforming loans:
Consumer $ 220 $ 201 $ 193 $ 19 $ 27
Total nonperforming loans 220 201 193 19 27
OREO – – ─ – –
Total nonperforming assets $ 220 $ 201 $ 193 $ 19 $ 27
Nonperforming assets as a percent
of total assets 0.01 % 0.01 % 0.01 %
Net interest income totaled $9.3 million for the quarter ended December 31, 2023, down from $9.7 million and $12.4 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease in the current quarter compared to the quarter ended September 30, 2023, was primarily due to higher interest expense on deposits, reflecting the sustained high levels of short-term interest rates and intense competition for deposits. Since March 2022, the Federal Open Market Committee of the Federal Reserve System has increased the target range for the federal funds rate by 525 basis points to a range of 5.25% to 5.50%. For the year ended December 31, 2023, net interest income totaled $40.5 million, compared to $48.4 million for the year ended December 31, 2022, as the increase in interest expense on liabilities outpaced the increase in interest income on loans and investments.
Total interest income was $20.3 million for the quarter ended December 31, 2023, compared to $19.7 million and $17.3 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. Yield on loans increased to 5.83% during the recent quarter, compared to 5.73% and 5.19% for the quarters ended September 30, 2023, and December 31, 2022, respectively. Yield on investments increased to 4.11% during the current quarter, compared to 3.98% and 3.60% for the quarters ended September 30, 2023, and December 31, 2022, respectively.
Total interest expense was $11.0 million for the quarter ended December 31, 2023, up from $10.0 million and $4.9 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The average cost of interest-bearing deposits was 3.62% for the quarter ended December 31, 2023, compared to 3.33% and 1.51% for the quarters ended September 30, 2023 and December 31, 2022, respectively. The increase from the quarter ended September 30, 2023, was due primarily to increased interest expense on money market and certificate of deposit balances along with the maturity of brokered deposits with lower rates that were entered into during a lower rate environment. Advances from the FHLB totaled $125.0 million at both December 31, 2023 and September 30, 2023, compared to $145.0 million at December 31, 2022. At December 31, 2023, $115.0 million of our $125.0 million of FHLB advances were tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Bank’s interest rate risk management efforts. These cash flow hedge agreements had a weighted average remaining term of 36 months and a weighted average fixed interest rate of 1.87% as of December 31, 2023. The average cost of borrowings was 2.40% for the quarter ended December 31, 2023, compared to 2.42% and 2.46% for the quarters ended September 30, 2023 and December 31, 2022, respectively.
The net interest margin was 2.54% for the quarter ended December 31, 2023, down from 2.69% and 3.52% for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was due primarily to the increase in the cost of interest-bearing liabilities outpacing the yields on interest-earnings assets. The average cost of interest-bearing liabilities increased 26 basis points to 3.50% during the quarter, from 3.24% during the quarter ended September 30, 2023, and increased 187 basis points from 1.63% during the quarter ended December 31, 2022, while the average yield on interest-earning assets increased 10 basis points to 5.56% during the fourth quarter of 2023, from 5.46% during the quarter ended September 30, 2023, and increased 66 basis points from 4.90% during the quarter ended December 31, 2022. The decline in the net interest margin in the current quarter was due in large part to the maturity of lower cost retail and brokered certificates of deposit, repricing in a higher interest rate environment. The net interest margin for the month of December 2023 was 2.52%.
Noninterest income for the quarter ended December 31, 2023, totaled $633,000, down from $677,000 and $720,000 for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was primarily due to a $30,000 decrease in other noninterest income related to our fintech focused venture capital investment and lower loan and deposit related fees, partially offset by increases in wealth management revenue and BOLI income. The decrease in the quarter ended December 31, 2023, as compared to the quarter ended December 31, 2022, primarily reflects reduced loan related fees and the absence of a net gain on sale of investments, partially offset by higher BOLI income and wealth management revenue. Noninterest income declined $474,000 to $2.8 million for the year ended December 31, 2023, from $3.2 million for the year ended December 31, 2022, due primarily to a $644,000 decline in loan related fees due largely to a $495,000 decline in loan prepayment penalties, along with a $59,000 decline in wealth management revenue, partially offset by increases in other noninterest and BOLI income.
Noninterest expense totaled $8.4 million for the quarter ended December 31, 2023, down from $8.8 million and $8.7 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was primarily due to decreases of $196,000 in salaries and employee benefits and $122,000 in professional fees. The decline in salaries and employee benefit expenses was due primarily to the reversal of $250,000 in incentive accruals following an analysis of the metrics impacting employee incentives for the year, compared to no incentive accrual activity in the quarter ended September 30, 2023. The decrease compared to the quarter ended December 31, 2022, was primarily due to decreases of $176,000 in professional fees, $155,000 in salaries and employee benefits and $153,000 in other general and administrative expenses, partially offset by increases of $88,000 in regulatory assessments, $84,000 in data processing and $76,000 in occupancy and equipment expenses. Noninterest expense totaled $35.7 million for the year ended December 31, 2023, compared to $35.6 million for the year ended December 31, 2022. The moderate increase year over was due primarily to an increase in regulatory assessments and other general and administrative expenses, partially offset by declines in salaries and employee benefits and professional fees.
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 15 full-service banking offices. 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 made by, or on behalf of, us and could negatively affect our operating and stock performance. 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; changes in the interest rate environment, including the recent increases in the Federal Reserve benchmark rate and duration at which such increased interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; the impact of continuing high inflation and the current and future monetary policies of the Federal Reserve in response thereto; the effects of any federal government shutdown; increased competitive pressures; legislative and regulatory changes; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; effects of critical accounting policies and judgments, including the use of estimate in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other reports filed with or furnished to the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC’s website at www.sec.gov.
Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management’s beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
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
*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
*Assets* * Dec 31,*
* 2023* * Sep 30,*
*2023* * Dec 31,*
*2022* *Three*
*Month*
*Change* *One*
*Year*
*Change*
Cash on hand and in banks $ 8,391 $ 8,074 $ 7,722 3.9 % 8.7 %
Interest-earning deposits with banks 22,138 49,618 16,598 (55.4 ) 33.4
Investments available-for-sale, at fair value 207,915 204,975 217,778 1.4 (4.5 )
Investments held-to-maturity, at amortized cost 2,456 2,450 2,444 0.2 0.5
Loans receivable, net of allowance of $15,306, $15,306, and $15,227 respectively 1,175,925 1,168,079 1,167,083 0.7 0.8
Federal Home Loan Bank ("FHLB") stock, at cost 6,527 6,803 7,512 (4.1 ) (13.1 )
Accrued interest receivable 7,359 7,263 6,513 1.3 13.0
Deferred tax assets, net 2,648 3,156 2,597 (16.1 ) 2.0
Premises and equipment, net 19,667 19,921 21,192 (1.3 ) (7.2 )
Bank owned life insurance ("BOLI"), net 37,653 37,398 36,286 0.7 3.8
Prepaid expenses and other assets 10,478 13,673 12,479 (23.4 ) (16.0 )
Right of use asset ("ROU"), net 2,617 2,818 3,275 (7.1 ) (20.1 )
Goodwill 889 889 889 0.0 0.0
Core deposit intangible, net 419 451 548 (7.1 ) (23.5 )
Total assets $ 1,505,082 $ 1,525,568 $ 1,502,916 (1.3 ) 0.1
*Liabilities and Stockholders' Equity*
Deposits
Noninterest-bearing deposits $ 100,899 $ 104,164 $ 119,944 (3.1 ) (15.9 )
Interest-bearing deposits 1,093,208 1,106,246 1,050,096 (1.2 ) 4.1
Total deposits 1,194,107 1,210,410 1,170,040 (1.3 ) 2.1
Advances from the FHLB 125,000 125,000 145,000 0.0 (13.8 )
Advance payments from borrowers for taxes and insurance 2,952 4,760 3,051 (38.0 ) (3.2 )
Lease liability, net 2,806 3,011 3,454 (6.8 ) (18.8 )
Accrued interest payable 2,739 2,646 328 3.5 735.1
Other liabilities 15,818 20,506 20,683 (22.9 ) (23.5 )
Total liabilities 1,343,422 1,366,333 1,342,556 (1.7 ) 0.1
*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 9,179,510 shares at December 31, 2023,
9,179,510 shares at September 30, 2023, and 9,127,595 shares at December 31, 2022 92 92 91 0.0 1.1
Additional paid-in capital 73,035 72,926 72,424 0.1 0.8
Retained earnings 96,206 96,206 95,059 0.0 1.2
Accumulated other comprehensive loss, net of tax (7,673 ) (9,989 ) (7,214 ) (23.2 ) 6.4
Total stockholders' equity 161,660 159,235 160,360 1.5 0.8
Total liabilities and stockholders' equity $ 1,505,082 $ 1,525,568 $ 1,502,916 (1.3 )% 0.1 %
*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited) *Quarter Ended* *Dec 31,*
*2023* * Sep 30,*
*2023 * *Dec 31,*
*2022* * Three*
*Month*
*Change * * One*
*Year*
*Change *
Interest income
Loans, including fees $ 17,143 $ 16,918 $ 15,042 1.3 % 14.0 %
Investments 2,143 2,118 2,007 1.2 6.8
Interest-earning deposits with banks 880 525 205 67.6 329.3
Dividends on FHLB Stock 121 113 89 7.1 36.0
Total interest income 20,287 19,674 17,343 3.1 17.0
Interest expense
Deposits 10,281 9,205 3,972 11.7 158.8
FHLB advances and other borrowings 731 766 928 (4.6 ) (21.2 )
Total interest expense 11,012 9,971 4,900 10.4 124.7
Net interest income 9,275 9,703 12,443 (4.4 ) (25.5 )
(Recapture of provision) provision for credit losses - (300 ) 486 (100.0 ) (100.0 )
Net interest income after (recapture of provision) provision for credit losses 9,275 10,003 11,957 (7.3 ) (22.4 )
Noninterest income
Net gain on sale of investments - - 27 n/a (100.0 )
BOLI income 255 244 222 4.5 14.9
Wealth management revenue 60 53 36 13.2 66.7
Deposit related fees 234 247 231 (5.3 ) 1.3
Loan related fees 60 79 172 (24.1 ) (65.1 )
Other 24 54 32 (55.6 ) (25.0 )
Total noninterest income 633 677 720 (6.5 ) (12.1 )
Noninterest expense
Salaries and employee benefits 4,822 5,018 4,977 (3.9 ) (3.1 )
Occupancy and equipment 1,231 1,193 1,155 3.2 6.6
Professional fees 431 553 607 (22.1 ) (29.0 )
Data processing 718 742 634 (3.2 ) 13.2
Regulatory assessments 196 200 108 (2.0 ) 81.5
Insurance and bond premiums 113 111 111 1.8 1.8
Marketing 70 97 77 (27.8 ) (9.1 )
Other general and administrative 858 856 1,011 0.2 (15.1 )
Total noninterest expense 8,439 8,770 8,680 (3.8 ) (2.8 )
Income before federal income tax provision 1,469 1,910 3,997 (23.1 ) (63.2 )
Federal income tax provision 275 409 771 (32.8 ) (64.3 )
Net income $ 1,194 $ 1,501 $ 3,226 (20.5 )% (63.0 )%
Basic earnings per share $ 0.13 $ 0.16 $ 0.35
Diluted earnings per share $ 0.13 $ 0.16 $ 0.35 Weighted average number of common shares outstanding 9,151,892 9,127,568 9,073,323
Weighted average number of diluted shares outstanding 9,176,724 9,150,059 9,149,044
*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited) *Year Ended December 31,* * * *2023* *2022* * One*
*Year*
*Change *
Interest income
Loans, including fees $ 66,938 $ 52,935 26.5 %
Investments 8,474 5,603 51.2
Interest-earning deposits with banks 2,261 386 485.8
Dividends on FHLB Stock 485 318 52.5
Total interest income 78,158 59,242 31.9
Interest expense
Deposits 34,407 8,955 284.2
FHLB advances 3,208 1,934 65.9
Total interest expense 37,615 10,889 245.4
Net interest income 40,543 48,353 (16.2 )
Recapture of provision for credit losses (208 ) (434 ) (52.1 )
Net interest income after recapture of provision for credit losses 40,751 48,787 (16.5 )
Noninterest income
Net gain on sale of investments - 27 (100.0 )
BOLI 1,081 1,004 7.7
Wealth management revenue 253 312 (18.9 )
Deposit accounts related fees 956 936 2.1
Loan related fees 275 919 (70.1 )
Other 208 49 324.5
Total noninterest income 2,773 3,247 (14.6 )
Noninterest expense
Salaries and employee benefits 20,366 21,133 (3.6 )
Occupancy and equipment 4,748 4,776 (0.6 )
Professional fees 2,288 2,339 (2.2 )
Data processing 2,857 2,678 6.7
Regulatory assessments 763 403 89.3
Insurance and bond premiums 468 464 0.9
Marketing 343 303 13.2
Other general and administrative 3,833 3,529 8.6
Total noninterest expense 35,666 35,625 0.1
Income before federal income tax provision 7,858 16,409 (52.1 )
Federal income tax provision 1,553 3,169 (51.0 )
Net income $ 6,305 $ 13,240 (52.4 )%
Basic earnings per share $ 0.69 $ 1.47
Diluted earnings per share $ 0.69 $ 1.45 Weighted average number of common shares outstanding 9,126,209 9,006,369
Weighted average number of diluted shares outstanding 9,152,617 9,102,283
The following table presents a breakdown of the loan portfolio (unaudited):
*December 31, 2023* *September 30, 2023* *December 31, 2022* *Amount* *Percent* *Amount* *Percent* *Amount* *Percent* (Dollars in thousands)
Commercial real estate:
Residential:
Multifamily $ 138,149 11.6 % $ 140,022 11.7 % $ 126,866 10.7 %
Total multifamily residential 138,149 11.6 140,022 11.7 126,866 10.7
Non-residential:
Office 72,778 6.1 72,773 6.1 84,301 7.1
Retail 124,172 10.4 130,101 11.0 132,917 11.3
Mobile home park 21,701 1.8 21,285 1.8 25,283 2.1
Hotel / motel 63,597 5.3 63,954 5.4 55,408 4.7
Nursing Home 11,610 1.0 11,676 1.0 12,348 1.0
Warehouse 19,218 1.6 19,446 1.6 19,917 1.7
Storage 33,033 2.8 33,229 2.8 33,797 2.9
Other non-residential 31,750 2.6 42,227 3.7 43,933 3.7
Total non-residential 377,859 31.6 394,691 33.4 407,904 34.5
Construction/land:
One-to-four family residential 47,149 4.0 43,532 3.7 52,492 4.5
Multifamily 4,004 0.3 2,043 0.2 15,393 1.3
Land development 9,771 0.8 9,766 0.8 9,759 0.8
Total construction/land 60,924 5.1 55,341 4.7 77,644 6.6
One-to-four family residential:
Permanent owner occupied 228,752 19.2 260,970 22.1 232,869 19.7
Permanent non-owner occupied 284,471 23.9 232,238 19.6 241,311 20.4
Total one-to-four family residential 513,223 43.1 493,208 41.7 474,180 40.1
Business
Aircraft 1,945 0.1 1,981 0.2 2,087 0.2
Small Business Administration ("SBA") 1,794 0.3 1,810 0.3 514 0.1
Paycheck Protection Plan ("PPP") 473 0.0 551 0.0 783 0.1
Other business 24,869 2.1 23,633 1.9 27,979 2.3
Total business 29,081 2.5 27,975 2.4 31,363 2.7
Consumer
Classic, collectible and other auto 58,618 5.0 59,955 5.1 55,838 4.7
Other consumer 13,377 1.1 12,193 1.0 8,515 0.7
Total consumer 71,995 6.1 72,148 6.1 64,353 5.4
Total loans 1,191,231 100.0 % 1,183,385 100.0 % 1,182,310 100.0 %
Less:
ACL 15,306 15,306 15,227
Loans receivable, net $ 1,175,925 $ 1,168,079 $ 1,167,083
Concentrations of credit: ^(1)
Construction loans as % of total capital 38.3 % 37.8 % 53.1 %
Total non-owner occupied commercial
real estate as % of total capital 316.8 % 328.1 % 346.9 %
^(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,* *2023* *2023* *2023* *2023* *2022* (Dollars in thousands, except per share data)
*Performance Ratios**: *^*(1)*
Return on assets 0.31 % 0.39 % 0.39 % 0.57 % 0.86 %
Return on equity 2.97 3.71 3.74 5.31 8.04
Dividend payout ratio 100.00 79.26 79.90 56.52 34.29
Equity-to-assets ratio 10.74 10.44 10.39 10.14 10.67
Tangible equity ratio ^(2) 10.66 10.36 10.31 10.06 10.58
Net interest margin 2.54 2.69 2.84 3.22 3.52
Average interest-earning assets to average interest-bearing liabilities 115.84 116.94 116.27 117.78 117.93
Efficiency ratio 85.17 84.49 85.57 75.12 65.94
Noninterest expense as a percent of average total assets 2.18 2.29 2.50 2.42 2.30
Book value per common share $ 17.61 $ 17.35 $ 17.35 $ 17.45 $ 17.57
Tangible book value per share ^(2) 17.47 17.20 17.20 17.30 17.41
*Capital Ratios**: *^*(3)*
Tier 1 leverage ratio 10.18 % 10.25 % 10.02 % 10.24 % 10.31 %
Common equity tier 1 capital ratio 14.90 14.75 14.49 14.33 14.37
Tier 1 capital ratio 14.90 14.75 14.49 14.33 14.37
Total capital ratio 16.15 16.00 15.75 15.59 15.62
*Asset Quality Ratios**: *^*(4)*
Nonperforming loans as a percent of total loans 0.02 % 0.02 % 0.02 % 0.02 % 0.02 %
Nonperforming assets as a percent of total assets 0.01 0.01 0.01 0.01 0.01
ACL as a percent of total loans 1.28 1.29 1.31 1.33 1.29
Net (recoveries) charge-offs to average loans receivable, net 0.00 0.00 0.00 (0.00 ) (0.00 )
*Allowance for Credit Losses:*
ACL, beginning of the quarter $ 15,306 $ 15,606 $ 16,028 $ 15,227 $ 14,726
Beginning balance adjustment from adoption of Topic 326 - - - 500 -
(Recapture of provision) provision - (300 ) (400 ) 300 500
Charge-offs - - (22 ) - -
Recoveries - - - 1 1
ACL, end of the quarter $ 15,306 $ 15,306 $ 15,606 $ 16,028 $ 15,227
^(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) *At or For the Quarter Ended* *Dec 31,* *Sep 30,* *Jun 30,* *Mar 31,* *Dec 31,* *2023* *2023* *2023* *2023* *2022* (Dollars in thousands)
*Yields and Costs**: *^*(1)*
Yield on loans 5.83 % 5.73 % 5.71 % 5.56 % 5.19 %
Yield on investments 4.11 3.98 3.93 3.88 3.60
Yield on interest-earning deposits 5.32 5.18 4.91 4.40 3.31
Yield on FHLB stock 7.29 6.57 7.06 7.30 4.58
Yield on interest-earning assets 5.56 % 5.46 % 5.43 % 5.29 % 4.90 %
Cost of interest-bearing deposits 3.62 % 3.33 % 3.06 % 2.41 % 1.51 %
Cost of borrowings 2.40 2.42 2.55 2.69 2.46
Cost of interest-bearing liabilities 3.50 % 3.24 % 3.01 % 2.44 % 1.63 %
Cost of total deposits 3.31 % 3.03 % 2.78 % 2.17 % 1.36 %
Cost of funds 3.23 2.97 2.76 2.23 1.48
*Average Balances:*
Loans $ 1,167,339 $ 1,171,483 $ 1,182,939 $ 1,168,539 $ 1,150,181
Investments 206,837 211,291 215,113 219,969 221,113
Interest-earning deposits 65,680 40,202 50,691 21,729 24,608
FHLB stock 6,584 6,820 6,814 7,219 7,710
Total interest-earning assets $ 1,446,440 $ 1,429,796 $ 1,455,557 $ 1,417,456 $ 1,403,612
Interest-bearing deposits $ 1,127,690 $ 1,097,324 $ 1,126,598 $ 1,065,827 $ 1,040,357
Borrowings 120,978 125,402 125,275 137,600 149,946
Total interest-bearing liabilities $ 1,248,668 $ 1,222,726 $ 1,251,873 $ 1,203,427 $ 1,190,303
Noninterest-bearing deposits 102,869 109,384 111,365 115,708 121,518
Total deposits and borrowings $ 1,351,537 $ 1,332,110 $ 1,363,238 $ 1,319,135 $ 1,311,821
Average assets $ 1,538,955 $ 1,522,224 $ 1,547,321 $ 1,509,297 $ 1,496,125
Average stockholders' equity 159,659 160,299 159,764 162,016 159,120
^(1) [Yields and costs are annualized.]
*FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES*
Key Financial Measures
(Unaudited) *At or For the Year Ended December 31,* *2023* *2022* *2021* *2020* *2019* (Dollars in thousands, except per share data)
*Performance Ratios:*
Return on assets 0.41 % 0.91 % 0.86 % 0.63 % 0.80 %
Return on equity 3.93 8.34 7.65 5.50 6.73
Dividend payout ratio 75.36 32.65 33.59 45.45 33.65
Equity-to-assets ratio 10.74 10.67 11.07 11.26 11.65
Tangible equity ratio ^(1) 10.66 10.58 10.97 11.15 11.53
Net interest margin 2.82 3.54 3.35 3.15 3.19
Average interest-earning assets to average interest-bearing liabilities 116.69 119.18 118.59 115.62 113.44
Efficiency ratio 82.34 69.04 68.32 72.39 70.66
Noninterest expense as a percent of average total assets 2.33 2.44 2.35 2.39 2.35
Book value per common share $ 17.61 $ 17.57 $ 17.30 $ 16.05 $ 15.25
Tangible book value per share ^(1) 17.47 17.41 17.13 15.88 15.07
*Capital Ratios**: *^*(2)*
Tier 1 leverage ratio 10.18 % 10.31 % 10.34 % 10.29 % 10.27 %
Common equity tier 1 capital ratio 14.90 14.37 14.23 14.32 13.13
Tier 1 capital ratio 14.90 14.37 14.23 14.32 13.13
Total capital ratio 16.15 15.62 15.48 15.57 14.38
*Asset Quality Ratios**: *^*(3)*
Nonperforming loans as a percent of total loans 0.02 % 0.02 % 0.00 % 0.19 % 0.01 %
Nonperforming assets as a percent of total assets 0.01 0.01 0.00 0.18 0.04
ACL as a percent of total loans 1.28 1.29 1.40 1.36 1.18
Net charge-offs (recoveries) to average loans receivable, net 0.00 0.00 (0.02 ) (0.00 ) (0.02 )
*Allowance for Credit Losses:*
ACL, beginning of the year $ 15,227 $ 15,657 $ 15,174 $ 13,218 $ 13,347
Beginning balance adjustment from adoption of Topic 326 500 - - - -
(Recapture of provision) provision (400 ) (400 ) 300 1,900 (300 )
Charge-offs (22 ) (37 ) - (2 ) -
Recoveries 1 7 183 58 171
ACL, end of the year $ 15,306 $ 15,227 $ 15,657 $ 15,174 $ 13,218
^(^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) *At or For the Year Ended December 31,* *2023* *2022* *2021* *2020* *
* *2019* (Dollars in thousands)
*Yields and Costs:*
Yield on loans 5.71 % 4.69 % 4.57 % 4.69 % 5.15 %
Yield on investments 3.97 2.77 1.83 2.39 3.11
Yield on interest-earning deposits 5.06 1.28 0.12 0.21 2.15
Yield on FHLB stock 7.07 5.08 5.29 4.85 5.42
Yield on interest-earning assets 5.44 % 4.33 % 4.01 % 4.36 % 4.88 %
Cost of deposits 3.12 % 0.87 % 0.71 % 1.42 % 1.90 %
Cost of borrowings 2.52 1.70 1.39 1.31 2.09
Cost of interest-bearing liabilities 3.05 % 0.95 % 0.78 % 1.41 % 1.92 %
Cost of interest-bearing deposits 2.83 % 0.77 % 0.64 % 1.32 % 1.81 %
Cost of funds 2.80 0.86 0.71 1.32 1.84
*Average Balances:*
Loans $ 1,172,569 $ 1,128,835 $ 1,098,772 $ 1,120,889 $ 1,061,367
Investments 213,261 203,165 176,110 133,584 139,354
Interest-earning deposits 44,684 30,176 60,482 25,108 13,634
FHLB stock 6,857 6,256 6,271 6,600 6,684
Total interest-earning assets $ 1,437,371 $ 1,368,432 $ 1,341,635 $ 1,286,181 $ 1,221,039
Interest-bearing deposits $ 1,104,510 $ 1,034,351 $ 1,015,852 $ 987,069 $ 946,484
Borrowings 127,263 113,890 115,466 125,392 129,899
Total interest-bearing liabilities $ 1,231,773 $ 1,148,241 $ 1,131,318 $ 1,112,461 $ 1,076,383
Noninterest-bearing deposits 109,795 125,166 112,484 75,388 48,434
Total deposits and borrowings $ 1,341,568 $ 1,273,407 $ 1,243,802 $ 1,187,849 $ 1,124,817
Average assets $ 1,529,511 $ 1,455,739 $ 1,421,476 $ 1,361,604 $ 1,294,164
Average stockholders' equity 160,428 158,685 160,041 155,587 154,092
*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-to-assets 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,*
*2023* *Sep 30,*
*2023* *Jun 30,*
*2023* *Mar 31,*
*2023* *Dec 31,
2022* (Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP) $ 161,660 $ 159,235 $ 158,715 $ 159,645 $ 160,360
Less:
Goodwill 889 889 889 889 889
Core deposit intangible, net 419 451 484 516 548
Tangible equity (Non-GAAP) $ 160,352 $ 157,895 $ 157,342 $ 158,240 $ 158,923
Total assets (GAAP) $ 1,505,082 $ 1,525,568 $ 1,528,079 $ 1,574,271 $ 1,502,916
Less:
Goodwill 889 889 889 889 889
Core deposit intangible, net 419 451 484 516 548
Tangible assets (Non-GAAP) $ 1,503,774 $ 1,524,228 $ 1,526,706 $ 1,572,866 $ 1,501,479
Common shares outstanding at period end 9,179,510 9,179,510 9,148,086 9,148,086 9,127,595
Equity-to-assets ratio (GAAP) 10.74 % 10.44 % 10.39 % 10.14 % 10.67 %
Tangible equity-to-tangible assets ratio (Non-GAAP) 10.66 10.36 10.31 10.06 10.58
Book value per common share (GAAP) $ 17.61 $ 17.35 $ 17.35 $ 17.45 $ 17.57
Tangible book value per share (Non-GAAP) 17.47 17.20 17.20 17.30 17.41
*Year Ended December 31,* *2023* *2022* *2021* *2020* *2019* (Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP) $ 161,660 $ 160,360 $ 157,879 $ 156,302 $ 156,319
Less:
Goodwill 889 889 889 889 889
Core deposit intangible 419 548 684 824 968
Tangible equity (Non-GAAP) $ 160,352 $ 158,923 $ 156,306 $ 154,589 $ 154,462
Total assets (GAAP) 1,505,082 1,502,916 1,426,329 1,387,669 1,341,885
Less:
Goodwill 889 889 889 889 889
Core deposit intangible 419 548 684 824 968
Tangible assets (Non-GAAP) $ 1,503,774 $ 1,501,479 $ 1,424,756 $ 1,385,956 $ 1,340,028
Common shares outstanding at period end 9,179,510 9,127,595 9,125,759 9,736,875 10,252,953
Equity-to-assets ratio (GAAP) 10.74 % 10.67 % 11.07 % 11.26 % 11.65 %
Tangible equity ratio (Non-GAAP) 10.66 10.58 10.97 11.15 11.53
Book value per common share (GAAP) $ 17.61 $ 17.57 $ 17.30 $ 16.05 $ 15.25
Tangible book value per share (Non-GAAP) 17.47 17.41 17.13 15.88 15.07