First Financial Northwest, Inc. Reports Second Quarter 2009 Financial Results
- Press Release
- Source: First Financial Northwest
- On 11:12 pm EDT, Thursday July 23, 2009
RENTON, Wash., July 23, 2009 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the "Company") (Nasdaq:FFNW - News), the holding company for First Savings Bank Northwest ("Bank"), today reported a net loss for the second quarter ended June 30, 2009 of $28.0 million, or $1.49 per diluted share, as compared to net income of $2.2 million, or $0.10 per diluted share for the quarter ended June 30, 2008.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| FFNW | 6.87 | -0.07 |
During the quarter ended June 30, 2009, the following items contributed to our net loss:
* We increased the provision for loan losses by $18.3 million;
* Goodwill impairment totaling $14.2 million was written-off;
* The remaining book value of $983,000 related to the building that
housed our lending division was expensed, as a new facility is
being built;
* A special assessment was levied on all financial institutions for
deposit insurance by the Federal Deposit Insurance Corporation
("FDIC"), our portion totaled $559,000; and
* We incurred an other-than-temporary impairment ("OTTI") loss on the
AMF Ultra Short Mortgage Fund totaling $152,000.
"The second quarter results reflect the continued deteriorating economic conditions in the Pacific Northwest, which have resulted in unprecedented and continued declines in employment and real estate valuations for the region. This has negatively affected nearly all home builders, developers and businesses related to the real estate industry. Despite this challenging market, we are confident that we have the necessary tools to continue to build our banking franchise including strong capital, solid core earnings and the commitment to reduce the level of our nonperforming assets," stated Mr. Victor Karpiak, Chairman, President and CEO of First Financial Northwest, Inc. The Bank's Tier 1 leverage, Tier 1 risk-based and Total risk-based capital ratios at June 30, 2009 were 13.82%, 21.42% and 22.70%, respectively, which represents $113.1 million, $127.6 million and $105.1 million, respectively, of capital in excess of the amount required to be "well capitalized" for regulatory purposes.
Net interest income for the quarter ended June 30, 2009 decreased to $7.0 million, as compared to $8.1 million for the same period in 2008. Total interest income for the second quarter of 2009 decreased $1.4 million, or 8.0%, to $15.7 million from $17.1 million for the quarter ended June 30, 2008. This decline was partially offset by a decrease in interest expense of $297,000 for the three months ended June 30, 2009 from the comparable quarter in 2008.
The decline in interest income was primarily the result of $2.2 million in foregone interest (interest that has not been accrued on loans classified as nonperforming) during the second quarter of 2009 and to a lesser extent the general decline in market interest rates. This decrease was partially offset by an increase in interest income due to the rise in average interest-earning assets during the quarter as compared to the second quarter of 2008. Interest earned on federal funds sold and interest-bearing deposits totaled $20,000 for the quarter ended June 30, 2009, a decrease of $200,000 from the same quarter in 2008. At the same time, our liquidity in the form of cash, federal funds sold and interest-bearing deposits increased to $55.4 million at June 30, 2009 from $9.4 million at June 30, 2008. In the second quarter of 2008, the federal funds rate was 2.00% as compared to the federal funds rate of between 0% and 0.25% in the second quarter of 2009 contributing to a decrease in our interest income. Our three-month average interest-earning assets at June 30, 2009 increased $96.5 million compared to the same period in 2008. Our average net loan balance increased $95.7 million to $1.0 billion and the average balance of federal funds sold and interest-bearing deposits increased $9.6 million to $50.7 million, offset by a decrease in average investments available for sale of $11.4 million as compared to the second quarter of last year. The yield on these average assets declined to 5.04% during the quarter ended June 30, 2009 from 5.94% during the same quarter in 2008. The yield on net loans receivable declined to 5.42% from 6.37%, a decrease of 95 basis points of which 85 basis points related to foregone interest with the balance of the decrease attributable to the general decline in interest rates. The yield on federal funds sold and interest-bearing deposits decreased 198 basis points to 0.16% during the quarter ended June 30, 2009, from 2.14% for the same period in 2008, reflecting the same general decline in interest rates.
Net interest income for the six months ended June 30, 2009 was $15.2 million compared to $16.2 million for the six months ended June 30, 2008. Total interest income for the first six months of 2009 and 2008 was $32.5 million and $34.4 million, respectively. Our foregone interest for the six months ended June 30, 2009 totaled $3.3 million as compared to $641,000 for the same period in 2008. For the first half of 2009, average interest-earning assets increased $81.2 million with an average yield of 5.32% compared to 6.03% for the same period in 2008.
Total interest expense for the quarter ended June 30, 2009 decreased $297,000 or 3.3% to $8.7 million from $9.0 million compared to the second quarter of 2008. Total average interest-bearing liabilities increased $129.4 million to $1.0 billion during the second quarter of 2009 as compared to $870.8 million during the same quarter in 2008. Average deposits increased $89.6 million while the average cost of funds for deposits decreased to 3.49% from 4.21% or 72 basis points for the second quarter of 2009 as a result of the general decline in interest rates. At the same time, the average balance of advances from the Federal Home Loan Bank of Seattle ("FHLB") increased $39.8 million. The related average cost of those funds declined 21 basis points to 3.50%. While total average interest-bearing liabilities increased $129.4 million, the favorable drop in interest rates allowed us to lower our average cost of funds to 3.50% from 4.15% on a year-over-year comparison. Both our net interest margin and interest rate spread for the quarter were negatively affected primarily by foregone interest on our nonperforming loans, resulting in a net interest margin of 2.24% and an interest rate spread of 1.54% for the second quarter of 2009 as compared to 2.80% and 1.79%, respectively, for the same period in 2008.
Total interest expense for the six months ended June 30, 2009 and 2008 was $17.3 million and $18.1 million, respectively. For the six months ended June 30, 2009, average interest-bearing liabilities increased $110.3 million to $970.5 million with an average cost of funds of 3.57% compared to 4.22% for the same period in 2008. The interest rate spread and net interest margin for the six months ended June 30, 2009 was 1.75% and 2.48%, respectively, compared to 1.81% and 2.85%, respectively, for the same period in 2008. The decrease in our interest rate spread and margin was primarily affected by the foregone interest on the loan portfolio.
During the quarter ended June 30, 2009, management took a more comprehensive approach in evaluating the adequacy of the allowance for loan losses including employing the services of an independent consulting firm and concluded that a provision of $18.3 million was required for the quarter. In the comparable quarter in 2008, the provision for loan losses was $445,000. "During the second quarter, we have taken a resolution focused approach to our nonperforming loans, in particular our nonperforming construction loans," stated Mr. Karpiak. "We have been working with our builders to get through this tough economic cycle. Unfortunately, the recession is lasting longer than predicted and some of our smaller builders will not be able to weather the storm. As a result, we have initiated foreclosure proceedings on approximately $60.0 million of loans during the second quarter of 2009, predominately nonperforming construction/land development loans," added Mr. Karpiak. Management determines additions to the allowance for loan losses based on several factors that could affect the loan portfolio. These factors, among others, include growth in the loan portfolio, delinquency rates and the effects of the economic environment. With the continuation of the recession, the rising unemployment rate and downward pressures on home prices, we anticipate further credit challenges. We are continuing to see a rise in the level of nonperforming assets and further discounts in home prices in our primary market area. In light of this environment, we determined that an independent stress test analysis performed on our construction/land development and commercial real estate loan portfolios was an appropriate action. Our total nonperforming loans, net of undisbursed funds, increased to $129.4 million from $80.2 million necessitating the increase in the provision for loan losses. The largest increase in nonperforming loans, net of undisbursed funds, was primarily related to the construction/land development loans which increased from $54.1 million at March 31, 2009 to $86.4 million at June 30, 2009. The allowance for loan losses was $32.5 million at June 30, 2009 compared to $17.0 million at December 31, 2008. We had no real estate owned at June 30, 2009.
Noninterest income (loss) was a loss of $97,000 for the quarter ended June 30, 2009, which was the result of an OTTI charge of $152,000. For the comparable quarter in 2008, noninterest income (loss) was a loss of $493,000 as a result of an OTTI charge of $623,000. The OTTI charges for both periods were related to our investment in the AMF Ultra Short Mortgage Fund. For the six months ended June 30, 2009, noninterest income was $33,000 compared to $870,000 for the same period in 2008. This decrease was the result of a $1.4 million gain on the sale of tax-exempt securities in January 2008 as compared to a $76,000 gain on the sale of investments in the first quarter of 2009.
Noninterest expense increased $16.9 million to $20.7 million in the second quarter of 2009 as compared to $3.8 million in the same quarter of 2008. The increase in the second quarter of 2009 was attributable to the impairment of goodwill, the loss related to the remaining book value of the building that houses our loan operations, an FDIC special assessment for deposit insurance and an increase in salaries and employee benefits. During the second quarter of 2009, we conducted a mid-year review of the carrying value of our goodwill as a result of the continued decline in the economic environment and concluded that it was appropriate to record an impairment of this entire asset. This impairment loss totaled $14.2 million in the second quarter of 2009. There was no comparable impairment charge in the same quarter in 2008. We also expensed the remaining book value of $983,000 related to the building that was adjacent to our headquarters which housed our lending operations. We are in the process of building a new structure to accommodate all of our lending staff. In addition, the FDIC levied a special assessment on all financial institutions as a result of the decline in the insurance fund attributable to bank failures throughout the country. Our portion of that special assessment was $559,000, which was required to be recorded in the second quarter of 2009. Finally, salaries and employee benefits expense increased $845,000 from the second quarter of 2008 primarily as a result of a $523,000 expense related to our equity incentive plan. No comparable expense was recorded in the same quarter in 2008 as the plan did not exist at that time. For the six months ended June 30, 2009, noninterest expense increased $19.2 million to $25.9 million compared to $6.7 million for the same period in 2008. The increase was primarily attributable to the events that occurred in the second quarter as discussed above.
At June 30, 2009, total assets increased $36.3 million to $1.3 billion from March 31, 2009. Cash, federal funds sold and interest-bearing deposits increased $18.0 million at June 30, 2009 from March 31, 2009. Investments available for sale increased $31.9 million, or 22.7% from March 31, 2009. This increase was primarily a result of the net growth in deposits for the three months ended June 30, 2009. Our loan portfolio, net of the allowance for loan losses, decreased $5.9 million or 0.6% during the three months ended June 30, 2009. Loan originations for the second quarter totaled: $25.1 million in one-to-four family mortgages; $17.0 million and $6.7 million in commercial real estate and multifamily loans, respectively; and $5.4 million in consumer loans. Included in the one-to-four family residential loan originations are $16.4 million of permanent loans on completed projects where the builder has paid-off the construction loan and entered into a permanent loan to finance the home while it is being leased by a third party. This practice is used to help our builders with cash flow management. We also originated $1.7 million in construction related loans to our merchant builders so they could continue to complete their projects and utilize their existing land inventory. We are concentrating on working with our existing builders and have not expanded our customer base for this loan type. During the second quarter of 2009, we offered a new business line of credit loan product to our customers and originated $251,000 in that portfolio. The following table presents a breakdown of our loan portfolio:
At June 30, At December 31,
2009 2008
---------------------- ----------------------
Amount Percent Amount Percent
---------- ---------- ---------- ----------
(Dollars in thousands)
Real Estate:
One-to-four family
residential $ 502,930 44.75% $ 512,446 45.05%
Multifamily
residential 109,691 9.76 100,940 8.87
Commercial 273,607 24.35 260,727 22.92
Construction/land
development 220,816 19.65 250,512 22.02
---------- ---------- ---------- ----------
Total real estate 1,107,044 98.51 1,124,625 98.86
Business 251 0.02 -- --
Consumer 16,557 1.47 12,927 1.14
---------- ---------- ---------- ----------
Total loans 1,123,852 100.00% 1,137,552 100.00%
========== ========== ========== ==========
Less:
Loans in process 63,346 82,541
Deferred loan fees 2,732 2,848
Allowance for loan
losses 32,450 16,982
---------- ----------
Loans receivable, net $1,025,324 $1,035,181
========== ==========
Our loan policy limits the maximum amount of loans we can make to one borrower to 20% of the Bank's risk-based capital. As of June 30, 2009, the maximum amount which we could lend to any one borrower was $37.6 million based on our policy. Exceptions may be made to this policy with the prior approval of the Board of Directors if the borrower exhibits financial strength or compensating factors to sufficiently offset any weaknesses based on the loan-to-value ratio, borrower's financial condition, net worth, credit history, earnings capacity, installment obligations and current payment habits. The five largest borrowing relationships, as of June 30, 2009 and December 31, 2008, in descending order were:
June 30, 2009 December 31, 2008
Aggregate Aggregate
Borrower Amount Number Amount Number
of Loans(1) of Loans of Loans(1) of Loans
-----------------------------------------------------------------------
Real estate
builder $48.5 million 138 $47.3 million 131
Real estate
builder 38.4 million 131 37.2 million 132
Real estate
builder 28.7 million 113 29.0 million 103
Real estate
builder 20.5 million (2) 83 25.2 million (4) 88
Real estate
builder 19.1 million (3) 98 19.1 million (5) 100
----------------- ------------------
Total $155.2 million $157.8 million
================= ==================
-------------------
(1) Net of undisbursed funds.
(2) Of this amount, $16.1 million is considered impaired loans.
(3) Of this amount, $7.3 million is considered impaired loans.
(4) Of this amount, $20.8 million is considered impaired loans.
(5) Of this amount, $7.7 million is considered impaired loans.
All of the loans to these five builders have personal guarantees in place as an additional source of repayment, including those made to partnerships and corporations and the Bank is in the first lien position.
The following table details the breakdown of the types of loans to our top five builder relationships at June 30, 2009:
Permanent
One-to-Four
Family Permanent Permanent
Residential Multifamily Commercial Construc-
Loans Loans Loans tion/Land Aggregate
(Rental (Rental (Rental Develop- Amount
Borrower Properties) Properties) Properties) ment(1) of Loans(1)
---------------------------------------------------------------------
Real
estate $17.8 $0.3 $30.4 $48.5
builder million $ -- million million million
Real
estate 23.8 0.8 13.8 38.4
builder million -- million million million
Real
estate 18.1 1.1 0.1 9.4 28.7
builder million million million million million
Real
estate 12.6 7.9 20.5
builder million -- -- million million
Real
estate 11.8 7.3 19.1
builder million -- -- million million
----------- ----------- ----------- -------- -----------
Total $84.1 $1.1 $1.2 $68.8 $155.2
million million million million million
=========== =========== =========== ======== ===========
--------------
(1) Net of undisbursed funds.
The builders listed in the above tables, as part of their business strategy, retain a certain percentage of their finished homes in their own inventory of permanent investment properties, (i.e. one-to-four family rental properties). These properties are used to enhance the builders' liquidity through rental income and improve their equity through the appreciation in market value of the property. As part of our underwriting process we review the borrowers' business strategy to determine the feasibility of the project. Although this has been included in these builders' business strategy prior to the current economic crises that we are experiencing, these builders have taken more rental properties into their portfolio in the last eighteen months than originally planned as a result of the sluggish housing market. In the aggregate, these five builders' one-to-four family residential rental property portfolios have increased $10.7 million as compared to December 31, 2008.
At June 30, 2009, nonperforming loans, net of the undisbursed portion, totaled $129.4 million. These loans represented 12.20% of total loans, net of undisbursed funds, and 9.97% of total assets at the end of the second quarter in 2009.
The following table presents a breakdown of our nonperforming loans:
June 30, December 31, Amount of % of
2009 2008 Change Change
---------- ----------- ----------- -----------
(Dollars in thousands)
One-to-four family
residential (1) $ 27,803 $ 10,837 $ 16,966 156.56%
Commercial real
estate 14,405 3,762 10,643 282.91
Construction/land
development 86,361 44,043 42,318 96.08
Multifamily
residential 809 -- 809 100.00
Consumer 50 -- 50 100.00
---------- ----------- ----------- -----------
Total nonperforming
loans $ 129,428 $ 58,642 $ 70,786 120.71%
========== =========== =========== ===========
(1) At June 30, 2009 and December 31, 2008, $21.7 million and $10.3
million, respectively, were related to rental properties, of which
$13.1 million and $9.5 million, respectively, were related to the
builders' rental inventory.
Our nonperforming assets increased $49.2 million during the second quarter of 2009. This increase was the result of the continued weakening of the local economy, the increase in unemployment which has risen to 9.4% in Washington State and the increased foreclosure activity. Foreclosures are expected to remain high for the remainder of the year and into 2010. The nonperforming construction/land development loans are located predominately in King County. The worsening economy has forced builders to transfer finished homes into their rental property inventory, as opposed to selling them, until the market values of these homes rebound. In addition, a portion of the increase in the nonperforming assets is related to builders of higher price-point homes. Their homes are in the construction process or have been completed but have not sold. The sales activity has slowed dramatically in homes priced in excess of $500,000 and as a result, these projects are delinquent on their payments, thereby contributing to the increase in our nonperforming assets during the three and six months ended June 30, 2009. We have also experienced an increase in our troubled debt restructured loans. At June 30, 2009, our troubled debt restructured loans totaled $38.2 million, an increase of $15.9 million from $22.3 million at March 31, 2009. As we work with our borrowers to help them through this difficult economic cycle, we explore all options available to us to minimize our risk of loss. At times, the best option for our customers and the Bank is to modify the loan for a period of time, usually one year or less. These modifications have included items such as lowering the interest rate on the loan for a period of time and extending the maturity date of the loan. These modifications are made only when there is a reasonable and attainable workout plan that has been agreed to by the borrower and is in the Bank's best interest.
Total liabilities increased $65.9 million, or 6.7%, to $1.0 billion at June 30, 2009 from $978.4 million at March 31, 2009. Deposits increased $63.0 million to $884.2 million during the quarter ended June 30, 2009, as customers are saving more as a result of the current economic conditions. We had no brokered deposits at June 30, 2009. Advances from the FHLB totaled $149.9 million at the end of June 30, 2009, compared to $148.2 million at March 31, 2009, a $1.8 million, or 1.2% increase.
Our total equity decreased $29.6 million, or 10.4%, to $253.8 million at June 30, 2009 from $283.4 million at March 31, 2009. This decrease was primarily the result of the net loss for the quarter of $28.0 million and cash dividends paid of $1.6 million.
First Financial Northwest, Inc. is a Washington corporation headquartered in Renton, Washington. It is the parent company of First Savings Bank Northwest; a Washington chartered stock savings bank that was originally organized in 1923. We serve the Puget Sound Region of Washington that includes King, Snohomish, Pierce and Kitsap Counties, through our full-service banking office. We are a part of the ABA NASDAQ Community Bank Index as well as the Russell 3000 Index. For additional information about us, please visit our website at www.fsbnw.com and click on the "Investor Relations" section.
Forward-looking statements:
Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and nonperforming assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Office of Thrift Supervision and our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our branch expansion strategy; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; costs and effects of litigation, including settlements and judgments; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business including changes in regulatory polices and principles, including the interpretation of regulatory capital or other rules; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations; pricing, products and services; and other risks detailed in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2008. Any of the forward-looking statements that we make in this Press Release and in the other public statements we make 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. Because of these and other uncertainties, our actual future results may be materially different from those expressed in any forward-looking statements made by or on our behalf. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We undertake no responsibility to update or revise any forward-looking statements.
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
At
----------------------------------
June 30, December 31, June 30, Six Month One Year
Assets 2009 2008 2008 Change Change
---------- ---------- ---------- -------- -------
Cash on
hand and
in banks $ 3,105 $ 3,366 $ 4,000 (7.75)% (22.38)%
Interest-
bearing
deposits 49,975 600 526 8,229.17 9,400.95
Federal
funds sold 2,295 1,790 4,870 28.21 (52.87)
Investments
available
for sale 172,586 149,323 177,978 15.58 (3.03)
Loans
receivable,
net of
allowance
of $32,450;
$16,982
and $8,416 1,025,324 1,035,181 960,420 (0.95) 6.76
Premises
and
equipment,
net 13,713 13,026 13,007 5.27 5.43
Federal
Home Loan
Bank stock,
at cost 7,413 7,413 4,850 0.00 52.85
Accrued
interest
receivable 5,387 5,532 5,220 (2.62) 3.20
Deferred
tax assets,
net 15,039 9,266 7,677 62.30 95.90
Goodwill -- 14,206 14,206 (100.00) (100.00)
Prepaid
expenses
and other
assets 3,279 4,737 3,418 (30.78) (4.07)
---------- ---------- ---------- -------- -------
Total
assets $1,298,116 $1,244,440 $1,196,172 4.31% 8.52%
========== ========== ========== ======== =======
Liabilities and Stockholders' Equity
Deposits $ 884,155 $ 791,483 $ 764,244 11.71% 15.69%
Advances
from the
Federal
Home Loan
Bank 149,900 156,150 110,000 (4.00) 36.27
Advance
payments
from
borrowers
for taxes
and
insurance 2,510 2,745 3,714 (8.56) (32.42)
Accrued
interest
payable 514 478 119 7.53 331.93
Federal
income
tax payable 2,001 336 55 495.54 3,538.18
Other lia-
bilities 5,222 3,140 4,047 66.31 29.03
---------- ---------- ---------- -------- -------
Total
liabil-
ities 1,044,302 954,332 882,179 9.43 18.38
Commitments and contingencies
Stockholders'
Equity
Preferred
stock, $0.01
par value;
authorized
10,000,000
shares, no
shares
issued or
outstanding -- -- -- -- --
Common
stock,$0.01
par value;
authorized
90,000,000
shares;
issued
and out-
standing
20,337,220;
21,293,368
and
22,852,800
shares at
June 30,
2009,
December
31, 2008
and June
30, 2008 204 213 229 (4.23) (10.92)
Additional
paid-in
capital 195,379 202,167 224,166 (3.36) (12.84)
Retained
earnings,
substan-
tially
restricted 72,303 102,358 107,874 (29.36) (32.97)
Accumulated
other
compre-
hensive
income
(loss),
net of tax 881 887 (2,194) (0.68) (140.15)
Unearned
Employee
Stock
Ownership
Plan (ESOP)
shares (14,953) (15,517) (16,082) (3.63) (7.02)
---------- ---------- ---------- -------- -------
Total stock-
holders'
equity 253,814 290,108 313,993 (12.51) (19.17)
---------- ---------- ---------- -------- -------
Total
liabilities
and stock-
holders'
equity $1,298,116 $1,244,440 $1,196,172 4.31% 8.52%
========== ========== ========== ======== =======
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except share data)
(Unaudited)
Quarter Ended
----------------------------- Three One
June 30, March 31, June 30, Month Year
2009 2009 2008 Change Change
-------- ------- ------- ------ -------
Interest
income
Loans,
including
fees $ 14,016 $15,123 $14,928 (7.32)% (6.11)%
Investments
available
for sale 1,691 1,625 1,918 4.06 (11.84)
Federal
funds sold
and
interest
-bearing
deposits
with banks 20 2 220 900.00 (90.91)
Dividends on
Federal
Home Loan
Bank stock -- -- 36 0.00 (100.00)
-------- ------- ------- ------ ------
Total
interest
income $ 15,727 $16,750 $17,102 (6.11)% (8.04)%
-------- ------- ------- ------ ------
Interest
expense
Deposits 7,428 7,329 8,016 1.35 (7.34)
Federal
Home
Loan Bank
advances 1,312 1,246 1,021 5.30 28.50
-------- ------- ------- ------ ------
Total
interest
expense $ 8,740 $ 8,575 $ 9,037 1.92% (3.29)%
-------- ------- ------- ------ ------
Net
interest
income 6,987 8,175 8,065 (14.53) (13.37)
Provision for
loan losses 18,256 1,544 445 1,082.38 4,002.47
-------- ------- ------- -------- ------
Net
interest
income
after
provision
for loan
losses $(11,269) $ 6,631 $ 7,620 (269.94)% (247.89)%
-------- ------- ------- ------ ------
Noninterest
income (loss)
Net gain on
sale of
investments -- 76 10 (100.00) (100.00)
Other-than-
temporary
impairment
loss on
investments (152) -- (623) (100.00) 75.60
Other 55 54 120 1.85 (54.17)
-------- ------- ------- ------ ------
Total
noninterest
income
(loss) $ (97) $ 130 $ (493) (174.62)% (80.32)%
-------- ------- ------- ------ ------
Noninterest
expense
Salaries and
employee
benefits 3,037 3,039 2,192 (0.07) 38.55
Occupancy
and
equipment 1,293 350 290 269.43 345.86
Professional
fees 389 307 552 26.71 (29.53)
Data
processing 150 144 113 4.17 32.74
FDIC/OTS
assessments 896 682 127 31.38 605.51
Goodwill
impairment 14,206 -- -- 100.00 100.00
Other
general and
administrative 736 622 512 18.33 43.75
-------- ------- ------- ------ ------
Total
noninterest
expense $ 20,707 $ 5,144 $ 3,786 302.55% 446.94%
-------- ------- ------- ------ ------
Income
(loss)
before
provision
(benefit)
for
federal
income
taxes (32,073) 1,617 3,341 (2,083.49) (1,059.98)
Provision
(benefit)
for federal
income taxes (4,076) 421 1,119 (1,068.17) (464.25)
-------- ------- ------- -------- ------
Net income
(loss) $(27,997) $ 1,196 $ 2,222 (2,440.89)% (1,359.99)%
======== ======= ======= ========= ========
Basic
earnings
(loss)
per share $ (1.49) $ 0.06 $ 0.10 N/M% N/M%
======== ======= ======= ========= ========
Diluted
earnings
(loss)
per share $ (1.49) $ 0.06 $ 0.10 N/M% N/M%
======== ======= ======= ========= ========
N/M - Not meaningful
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except share data)
(Unaudited)
Six Months Ended
--------------------------------- One Year
June 30, 2009 June 30, 2008 Change
------------- ------------- ----------
Interest income
Loans, including
fees $ 29,139 $ 29,997 (2.86)%
Investments
available for sale 3,316 3,571 (7.14)
Federal funds sold
and interest
-bearing deposits
with banks 22 756 (97.09)
Dividends on
Federal Home Loan
Bank stock -- 47 (100.00)
-------- -------- --------
Total interest
income $ 32,477 $ 34,371 (5.51)%
-------- -------- --------
Interest expense
Deposits 14,757 16,095 (8.31)
Federal Home Loan
Bank advances 2,558 2,050 24.78
-------- -------- --------
Total interest
expense $ 17,315 $ 18,145 (4.57)%
-------- -------- --------
Net interest
income 15,162 16,226 (6.56)
Provision for loan
losses 19,800 445 4,349.44
-------- -------- --------
Net interest
income (loss)
after provision
for loan losses $ (4,638) $ 15,781 (129.39)%
-------- -------- --------
Noninterest income
Net gain on sale of
investments 76 1,383 (94.50)
Other-than-
temporary
impairment loss
on investments (152) (623) (75.60)
Other 109 110 (0.91)
-------- -------- --------
Total noninterest
income $ 33 $ 870 (96.21)%
-------- -------- --------
Noninterest expense
Salaries and
employee benefits 6,076 3,953 53.71
Occupancy and
equipment 1,643 584 181.34
Professional fees 696 847 (17.83)
Data processing 294 226 30.09
FDIC/OTS assessments 1,578 157 905.10
Goodwill impairment 14,206 -- 100.00
Other general and
administrative 1,358 905 50.06
-------- -------- --------
Total noninterest
expense $ 25,851 $ 6,672 287.46%
-------- -------- --------
Income (loss)
before provision
(benefit) for
federal income
taxes (30,456) 9,979 (405.20)
Provision (benefit)
for federal income
taxes (3,655) 3,285 (211.26)
-------- -------- --------
Net income (loss) $(26,801) $ 6,694 (500.37)%
======== ======== ========
Basic earnings
(loss) per share $ (1.41) $ 0.32 N/M %
======== ======== ========
Diluted earnings
(loss) per share $ (1.41) $ 0.32 N/M %
======== ======== ========
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Ratios
(Dollars in thousands, except share data)
(Unaudited)
At or For the Quarter Ended
-----------------------------------------------
June 30, March 31, Dec. 31, June 30,
2009 2009 2008 2008
--------- ---------- ---------- ----------
Performance Ratios:
-------------------
Return (loss)
on assets(1) (8.64)% 0.39% (0.96)% 0.74%
Return (loss)
on equity(2) (39.54) 1.66 (3.97) 2.88
Equity-to-assets
ratio (3) 21.86 23.15 24.26 25.77
Interest rate
spread(4) 1.54 1.96 1.85 1.79
Net interest
margin(5) 2.24 2.74 2.71 2.80
Tangible equity
to tangible
assets(6) 19.55 21.57 22.43 25.36
Average
interest-earning
assets to average
interest-bearing
liabilities 124.86 126.95 128.63 132.32
Efficiency
ratio(7) 300.54 59.70 60.07 50.00
Noninterest
expense
as a percent of
average total
assets 6.39 1.60 1.37 1.26
Book value per
common share(8) $ 12.48 $ 13.92 $ 13.62 $ 13.74
Capital Ratios(9):
------------------
Tier 1 leverage 13.82% 15.65% 15.61% 16.30%
Tier 1
risk-based 21.42 23.14 23.04 24.56
Total
risk-based 22.70 24.40 24.30 25.64
Asset Quality
Ratios (10):
------------------
Nonaccrual and 90
days or more past
due loans as a
percent of total
loans 12.20% 7.65% 5.56% 2.98%
Nonperforming
assets as a
percent of
total assets 9.97 6.36 4.71 2.65
Allowance for loan
losses as a
percent of total
loans 3.06 1.36 1.61 0.79
Allowance for loan
losses as a
percent of
nonperforming
loans 25.07 17.82 28.96 26.52
Net charge-offs
to average loans
receivable, net 0.01 0.41 0.03 --
Allowance for
Loan Losses:
------------------
Allowance for loan
losses, beginning
of the quarter $ 14,294 $ 16,982 $ 11,837 $ 7,971
Provision 22,488 1,544 5,500 445
Charge-offs (4,332) (4,232) (355) --
Recoveries -- -- -- --
--------- -------- -------- ----------
Allowance for
loan losses, end
of the quarter $ 32,450 $ 14,294 $ 16,982 $ 8,416
========= ======== ======== ==========
Reserve for
unfunded
commitments,
beginning of the
quarter $ 186 $ -- $ -- $ --
Additions 144 186 -- --
--------- -------- -------- ----------
Reserve for
unfunded
commitments, end
of the quarter $ 330 $ 186 $ -- $ --
========= ======== ======== ==========
Nonperforming
Assets(10):
------------------
Nonperforming loans
90 days or
more past due and
still accruing $ 7,130 $ 12,657 $ 2,104 $ 1,252
Nonaccrual loans 98,054 51,041 35,720 30,488
Nonaccrual
troubled
debt
restructured
loans 24,244 16,514 20,818 --
--------- -------- -------- ----------
Total
nonperforming
loans $ 129,428 $ 80,212 $ 58,642 $ 31,740
REO -- -- -- --
--------- -------- -------- ----------
Total
nonperforming
assets (NPA) $ 129,428 $ 80,212 $ 58,642 $ 31,740
========= ======== ======== ==========
Performing
troubled
debt
restructured
loans $ 13,965 $ 5,776 $ 2,226 $ --
========= ======== ======== ==========
-------------------------------------------
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Average equity divided by average total assets.
(4) Difference between weighted-average yield on interest-earning
assets and weighted-average cost of interest-bearing liabilities.
(5) Net interest income divided by average interest-earning assets.
(6) Equity less goodwill divided by assets less goodwill.
(7) Noninterest expense divided by net interest income plus
noninterest income.
(8) Outstanding shares divided by stockholders' equity.
(9) Capital ratios are for First Savings Bank Northwest only.
(10)Nonaccrual, nonperforming and total loans are calculated net of
undisbursed funds.
Contact:
First Financial Northwest, Inc.
Victor Karpiak
(425) 255-4400
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