First Financial Northwest, Inc. Reports Second Quarter Net Income of $2.1 Million or $0.22 per Diluted Share

·29 min read

RENTON, Wash., July 28, 2020 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the Company) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the Bank), today reported net income for the quarter ended June 30, 2020, of $2.1 million, or $0.22 per diluted share, compared to net income of $1.7 million, or $0.17 per diluted share, for the quarter ended March 31, 2020, and $3.3 million, or $0.33 per diluted share, for the quarter ended June 30, 2019. For the six months ended June 30, 2020, net income was $3.8 million, or $0.39 per diluted share, compared to net income of $5.2 million, or $0.52 per diluted share, for the comparable sixmonth period in 2019.

As we all know, the first six months of 2020 have been quite different than we initially anticipated, said Joseph W. Kiley III, President and Chief Executive Officer. I am extremely proud that through it all the First Financial Northwest team has maintained its strength, integrity and passion. While we took necessary precautions to support our team with flexible work accommodations and to manage COVID19 health risks, we also demonstrated our high touch philosophy to meet the needs and expectations of our customers, communities, and shareholders. We delivered quality solutions by working with existing customers in a variety of ways and invited new customers to experience our superior service via the Paycheck Protection Program. In the three months ending on June 30, 2020, we had facilitated 455 PPP loans totaling $51.7 million, with the potential to support upwards of 5,000 jobs, continued Kiley.

I am also very pleased with the progress being made to reduce our cost of funds and improve our deposit mix. During the quarter, our cost of funds declined to 1.34% compared to 1.69% in the previous quarter, with demand deposits increasing $72.0 million, continued Kiley. We also saw our net interest margin increase slightly even though we added over $50 million of lower-yielding PPP loans in the quarter.

Kiley stated, As a result of economic concerns because of the COVID-19 pandemic, we again increased our allowance for loan loss risk factors for certain loan categories, which resulted in a provision for loan losses of $300,000 for the second quarter. Without the adjustment for COVID19 related economic factors, we would not have recorded a provision for loan losses in the quarter.

While I am very positive about our geographical expansion strategy and our success to date, as well as the market opportunities offered with the two new offices planned for Gig Harbor in Pierce County and Issaquah in King County, we expect to slow the pace of expansion in the current environment, concluded Kiley.

Highlights for the quarter ended June 30, 2020:

  • Paycheck Protection Program (PPP) loans totaled $51.7 million.

  • Net loans receivable increased $46.1 million to $1.14 billion at June 30, 2020, from $1.09 billion at March 31, 2020, and $85.6 million from $1.05 billion at June 30, 2019.

  • Total deposits increased 12.6% to $1.13 billion as of June 30, 2020, from $1.00 billion at March 31, 2020, and 9.8% from $1.03 billion at June 30, 2019.

  • The Bank received regulatory approval to open offices in Gig Harbor, Pierce County, Washington, and Issaquah, King County, Washington.

  • The Companys book value per share was $15.32 at June 30, 2020, compared to $15.03 at March 31, 2020, and $14.83 at June 30, 2019.

  • The Company repurchased 135,450 shares during the quarter at an average price of $9.42 per share under a stock repurchase plan that expired on July 27, 2020.

  • The Companys Board of Directors authorized a new stock repurchase plan to repurchase up to 5% of its outstanding shares of common stock effective July 30, 2020, for a period of up to six months.

  • The Company paid a regular quarterly cash dividend of $0.10 per share to shareholders.

  • The Banks Tier 1 leverage and total capital ratios at June 30, 2020, were 10.0% and 15.0%, respectively, compared to 10.3% and 14.7%, respectively, at both March 31, 2020, and June 30, 2019.

  • Based on managements evaluation of the adequacy of the Allowance for Loan and Lease Losses (ALLL) and taking into account the estimated future impact of the COVID-19 pandemic, the Bank recorded a $300,000 provision for loan losses during the quarter ended June 30, 2020.

Total deposits at June 30, 2020, increased $126.2 million to $1.13 billion, from $1.00 billion at March 31, 2020, and was up $100.5 million from $1.03 billion at June 30, 2019. Demand deposits increased $72.0 million during the quarter, due in large part to deposits related to PPP loans funded during the quarter. The continued success of our deposit gathering efforts through our expanded branch network has allowed the Company to reduce its dependence on brokered deposits and FHLB advances as sources of funds.

The following table presents a breakdown of our total deposits (unaudited):

 

Jun 30,
2020

 

Mar 31,
2020

 

Jun 30,
2019

 

Three
Month
Change

 

One
Year
Change

Deposits:

(Dollars in thousands)

 

Noninterest-bearing demand

$

  91,593

 

$

  53,519

 

$

  49,219

 

$

  38,074

 

$

  42,374

 

Interest-bearing demand

 

  102,707

 

 

  68,803

 

 

  50,414

 

 

  33,904

 

 

  52,293

 

Statement savings

 

  18,946

 

 

  17,040

 

 

  22,593

 

 

  1,906

 

 

  (3,647

)

Money market

 

  429,987

 

 

  397,489

 

 

  310,587

 

 

  32,498

 

 

  119,400

 

Certificates of deposit, retail (1)

 

  450,487

 

 

  437,676

 

 

  412,134

 

 

  12,811

 

 

  38,353

 

Certificates of deposit, brokered

 

  32,448

 

 

  25,457

 

 

  180,763

 

 

  6,991

 

 

  (148,315

)

Total deposits

$

  1,126,168

 

$

  999,984

 

$

   1,025,710

 

$

  126,184

 

$

  100,458

 

(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $17,000 at June 30, 2020, $22,000 at March 31, 2020, and $41,000 at June 30, 2019.

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

June 30, 2020

 

Noninterest-bearing demand

Interest-bearing demand

Statement savings

Money market

Certificates of deposit, retail

Certificates of deposit, brokered

Total

 

 (Dollars in thousands)

King County

 

 

 

 

 

 

 

Renton

$

 40,619

$

  48,670

$

  14,525

$

  242,453

$

 367,483

$

  -

$

 713,750

Landing

 

  3,338

 

  1,892

 

  31

 

  15,306

 

  8,587

 

  -

 

  29,154

Woodinville (1)

 

  2,544

 

  5,505

 

  938

 

  16,364

 

  7,320

 

  -

 

  32,671

Bothell

 

  2,927

 

  2,793

 

  33

 

  5,650

 

  3,268

 

  -

 

  14,671

Crossroads

 

  7,435

 

  6,516

 

  158

 

  51,674

 

  11,756

 

  -

 

  77,539

Kent (2)

 

  7,144

 

  5,883

 

  1

 

  12,424

 

  1,065

 

  -

 

  26,517

Kirkland (2)

 

  5,748

 

  6

 

  -

 

  1,068

 

  -

 

  -

 

  6,822

Total King County

 

  69,755

 

  71,265

 

  15,686

 

  344,939

 

  399,479

 

  -

 

  901,124

 

 

 

 

 

 

 

 

Snohomish County

 

 

 

 

 

 

 

Mill Creek

 

  3,969

 

  2,120

 

  799

 

  15,029

 

  10,729

 

  -

 

  32,646

Edmonds

 

  6,884

 

  12,615

 

  229

 

  24,414

 

  19,379

 

  -

 

  63,521

Clearview (1)

 

  4,999

 

  5,953

 

  868

 

  15,278

 

  4,859

 

  -

 

  31,957

Lake Stevens (1)

 

  2,985

 

  6,788

 

  618

 

  13,794

 

  4,213

 

  -

 

  28,398

Smokey Point (1)

 

  2,168

 

  3,894

 

  745

 

  15,291

 

  11,828

 

  -

 

  33,926

Total Snohomish County

 

  21,005

 

  31,370

 

  3,259

 

  83,806

 

  51,008

 

  -

 

  190,448

 

 

 

 

 

 

 

 

Pierce County

 

 

 

 

 

 

 

University Place (2)

 

  833

 

  72

 

  1

 

  1,242

 

  -

 

  -

 

2,148

Total Pierce County

 

  833

 

  72

 

  1

 

  1,242

 

  -

 

  -

 

2,148

 

 

 

 

 

 

 

 

Total retail deposits

 

91,593

 

102,707

 

18,946

 

429,987

 

450,487

 

  -

 

1,093,720

Brokered deposits

 

  - 

 

  - 

 

  - 

 

  - 

 

  - 

 

   32,448

 

32,448

Total deposits

$

 91,593

$

   102,707

$

  18,946

$

  429,987

$

  450,487

$

   32,448

$

  1,126,168 

(1) Balance of retail certificates of deposit for acquired branches are net of an unamortized aggregate fair value adjustment of $17,000.
(2) Kent office opened January 31, 2019; Kirkland, November 12, 2019; and University Place, March 2, 2020.

March 31, 2020

 

Noninterest-bearing demand

Interest-bearing demand

Statement savings

Money market

Certificates of deposit, retail

Certificates of deposit, brokered

Total

 

 (Dollars in thousands)

King County

 

 

 

 

 

 

 

Renton

$

  28,624

$

  22,619

$

  13,811

$

  230,235

$

  355,710

$

  -

$

  650,999

Landing

 

4,476

 

2,173

 

36

 

13,286

 

9,821

 

  -

 

29,792

Woodinville (1)

 

1,705

 

5,623

 

733

 

15,790

 

6,908

 

  -

 

30,759

Bothell

 

556

 

886

 

20

 

6,221

 

3,297

 

  -

 

10,980

Crossroads

 

4,894

 

10,197

 

5

 

47,714

 

11,689

 

  -

 

74,499

Kent (2)

 

472

 

2,961

 

  - 

 

10,736

 

1,061

 

  -

 

15,230

Kirkland (2)

 

253

 

11

 

  - 

 

  - 

 

  - 

 

  -

 

264

Total King County

 

40,980

 

44,470

 

14,605

 

323,982

 

388,486

 

  -

 

812,523

 

 

 

 

 

 

 

 

Snohomish County

 

 

 

 

 

 

 

Mill Creek

 

2,292

 

3,610

 

467

 

18,619

 

10,552

 

  -

 

35,540

Edmonds

 

3,352

 

10,952

 

210

 

22,591

 

18,920

 

  -

 

56,025

Clearview (1)

 

3,627

 

4,596

 

753

 

13,288

 

4,775

 

  -

 

27,039

Lake Stevens (1)

 

2,024

 

2,446

 

468

 

7,142

 

4,240

 

  -

 

16,320

Smokey Point (1)

 

1,244

 

2,715

 

537

 

11,656

 

10,703

 

  -

 

26,855

Total Snohomish County

 

12,539

 

24,319

 

2,435

 

73,296

 

49,190

 

  -

 

161,779

 

 

 

 

 

 

 

 

Pierce County

 

 

 

 

 

 

 

University Place (2)

 

  - 

 

14

 

  - 

 

211

 

  - 

 

  -

 

225

Total Pierce County

 

  - 

 

14

 

  - 

 

211

 

  - 

 

  -

 

225

Total retail deposits

 

53,519

 

68,803

 

17,040

 

397,489

 

437,676

 

  -

 

974,527

 

 

 

 

 

 

 

 

Brokered deposits

 

  - 

 

  - 

 

  - 

 

  - 

 

  - 

 

  25,457

 

25,457

Total deposits

$

  53,519

$

  68,803

$

  17,040

$

  397,489

$

  437,676

$

  25,457

$

  999,984

(1) Balance of retail certificates of deposit for acquired branches are net of an unamortized aggregate fair value adjustment of $22,000.
(2) Kent office opened January 31, 2019; Kirkland, November 12, 2019; and University Place, March 2, 2020.

Net loans receivable increased to $1.14 billion at June 30, 2020, from $1.09 billion at March 31, 2020, and $1.05 billion at June 30, 2019. PPP loan originations of $51.7 million contributed to this quarterly increase. The average balance of net loans receivable totaled $1.12 billion for the quarter ended June 30, 2020, compared to $1.10 billion for the quarter ended March 31, 2020, and $1.05 billion for the quarter ended June 30, 2019.

The Company recorded a $300,000 provision for loan losses in both the quarters ended June 30, 2020, and March 31, 2020, and a recapture of provision for loan losses of $800,000 in the quarter ended June 30, 2019. The provision in the quarter ended June 30, 2020, was primarily attributed to adjustments to economic factors due to COVID-19 primarily in our Commercial Real Estate and Construction/Land portfolios. The provision in the quarter ended March 31, 2020, was due primarily to forecasted credit deterioration for all loans categories in response to disruption caused by the COVID-19 pandemic. The $800,000 recapture of provision for loan losses in the quarter ended June 30, 2019, was primarily due to the recapture of provision associated with a single construction loan with a balance of $11.6 million after an impairment analysis concluded that the Bank did not anticipate incurring losses on the loan.

The ALLL represented 1.20% of total loans receivable at June 30, 2020, compared to 1.22% at both March 31, 2020, and June 30, 2019. Excluding the PPP loan balances, which are 100% guaranteed by the Small Business Administration, the ALLL represented 1.25% of total loans receivable at June 30, 2020. Nonperforming loans totaled $2.2 million at both June 30, 2020, and March 31, 2020, compared to $146,000 at June 30, 2019. The increase from the prior year is due to a $2.1 million multifamily loan currently in foreclosure. Based on an impairment analysis conducted in the first quarter of 2020, the Company does not expect to incur a loss on this credit. As of June 30, 2020, there were no loans 30 days or more past due that had not requested a deferral other than the $2.1 million multifamily loan in foreclosure and one consumer loan of less than $10,000. OREO remained unchanged at $454,000 at June 30, 2020, March 31, 2020, and June 30, 2019.

The following table presents a breakdown of our nonperforming assets (unaudited):

 

Jun 30,

 

Mar 31,

 

Jun 30,

 

Three
Month

 

One
Year

 

 

2020

 

 

 

2020

 

 

 

2019

 

 

Change

 

Change

 

(Dollars in thousands)

Nonperforming loans:

 

 

 

 

 

 

 

 

 

One-to-four family residential

$

87

 

 

$

91

 

 

$

103

 

 

$

(4

)

 

$

(16

)

Multifamily

 

2,104

 

 

 

2,104

 

 


 

 


 

 

 

2,104

 

Consumer


 

 


 

 

 

43

 

 


 

 

 

(43

)

Total nonperforming loans

 

2,191

 

 

 

2,195

 

 

 

146

 

 

 

(4

)

 

 

2,045

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned (OREO)

 

454

 

 

 

454

 

 

 

454

 

 


 

 


 

 

 

 

 

 

 

 

 

 

 

Total nonperforming assets (1)

$

2,645

 

 

$

2,649

 

 

$

600

 

 

$

(4

)

 

$

2,045

 

 

 

 

 

 

 

 

 

 

 

Nonperforming assets as a

 

 

 

 

 

 

 

 

 

percent of total assets

 

0.19

%

 

 

0.20

%

 

 

0.05

%

 

 

 

 

(1) The difference between nonperforming assets reported above, and the totals reported by other industry sources, is due to their inclusion of all Troubled Debt Restructured Loans ("TDRs") as nonperforming loans, although 100% of our TDRs were performing in accordance with their restructured terms at June 30, 2020.

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 borrowers financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. At June 30, 2020, TDRs totaled $4.3 million, compared to $5.0 million at March 31, 2020, and $6.7 million at June 30, 2019. As discussed further below, The Coronavirus Aid, Relief, and Economic Security Act of 2020 signed into law on March 27, 2020 (CARES Act) provides guidance around the modification of loans as a result of the COVID19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs.

Net interest income for the quarter ended June 30, 2020, totaled $10.1 million, compared to $9.7 million for each of the quarters ended March 31, 2020, and June 30, 2019.

Interest income totaled $14.1 million for the quarter ended June 30, 2020, compared to $14.5 million for the quarter ended March 31, 2020, and $14.9 million for the quarter ended June 30, 2019. The decline in the current quarter compared to the quarter ended March 31, 2020, was primarily due to the recent decline in interest rates as the Federal Reserves Open Market Committee dramatically reduced its short-term interest rate targets by 150 basis points in March 2020 in response to the COVID-19 pandemic. This partially impacted the results for the quarter ended March 31, 2020, however it had a larger impact with the low rates in place for the entire quarter ended June 30, 2020. In addition, the yields on the PPP loans originated during the quarter ended June 30, 2020 were well below the yields in the remainder of our loan portfolio. As a result, average loan yields declined to 4.72% at June 30, 2020, compared to 4.94% at March 31, 2020, and 5.19% at June 30, 2019.

Total interest expense was $4.0 million for the quarter ended June 30, 2020, compared to $4.8 million for the quarter ended March 31, 2020, and $5.2 million for the quarter ended June 30, 2019. In addition to improving our deposit mix by increasing lower cost demand deposits, we were able to successfully reduce the rates paid on our interest-bearing deposits during the quarter ended June 30, 2020.  As a result, the average cost of  deposits declined to 1.49% for the quarter ended June 30, 2020, compared to 1.81% for the quarter ended March 31, 2020, and 1.89% for the quarter ended June 30, 2019. The decline from the quarter ended June 30, 2019, was due primarily to a reduced level of brokered deposits and a declining interest rate environment. Specifically, we replaced higher cost brokered deposits with retail deposits through our branch network and FHLB advances obtained in conjunction with interest rate swaps to secure lower long-term interest rates. Advances from the FHLB totaled $120.0 million at June 30, 2020, compared to $160.0 million at March 31, 2020, and $105.0 million at June 30, 2019. The average cost of borrowings was 1.08% for the quarter ended June 30, 2020, compared to 1.48% for the quarter ended March 31, 2020, and 2.28% for the quarter ended June 30, 2019. At June 30, 2020, the entire balance of our $120.0 million in borrowings were short-term FHLB advances tied to long-term interest rate swaps. During the quarter ended March 31, 2020, we entered into interest rate swap transactions totaling $45.0 million. In addition, we entered into $25.0 million in forward starting interest rate swaps beginning October 25, 2021, to partially replace a $50.0 million swap maturing on that date.

Total stockholders equity increased slightly to $154.0 million at June 30, 2020, from $153.1 million at March 31, 2020, primarily due to net income partially offset by share repurchases. The Companys book value per common share increased to $15.32 at June 30, 2020, from $15.03 at March 31, 2020, due in part to the Companys success in repurchasing shares well below book value per share during the quarter.

The net interest margin was 3.12% for the quarter ended June 30, 2020, compared to 3.11% for the quarter ended March 31, 2020, and 3.23% for the quarter ended June 30, 2019. The modest improvement in the quarter ended June 30, 2020, from the quarter ended March 31, 2020, relates primarily to the reduction in our cost of interest-bearing liabilities outpacing the reduction in yield on interest-earning assets. The decline in net interest margin for the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019, was due primarily to a significant decline in interest-earning asset yields, partially offset by a decline in cost of interest-bearing liabilities.

Noninterest income for the quarter ended June 30, 2020, totaled $789,000, compared to $990,000 for the quarter ended March 31, 2020, and $879,000 for the quarter ended June 30, 2019. The decrease in noninterest income for the quarter ended June 30, 2020, compared to the quarter ended March 31, 2020, was primarily due to a reduction in loan prepayment penalties. The decrease from the year-ago quarter was primarily due to lower loan prepayment penalties in the quarter ended June 30, 2020, and fees received on new loan interest rate swap agreements in the quarter ended June 30, 2019.

Noninterest expense totaled $7.9 million for the quarter ended June 30, 2020, compared to $8.3 million for the quarter ended March 31, 2020, and $7.3 million in the quarter ended June 30, 2019. Salaries and employee benefits for the quarter ended June 30, 2020, decreased from the quarter ended March 31, 2020, primarily due to a reduction in stock-based compensation elements reflecting the recent decline in the Companys stock price, along with the reclassification of the compensation expense related to PPP loan originations to loan direct costs. Other general and administrative expenses increased in the current quarter due to an increase in the Companys unfunded commitment reserve. Unfunded commitments totaled $114.0 million as of June 30, 2020, compared to $102.9 million as of March 31, 2020. The change in unfunded commitments resulted in a $29,000 expense for the quarter ended June 30, 2020, compared to a recapture of expense of $72,000 for the quarter ended March 31, 2020. Noninterest expense increased from the same quarter last year as the Bank continued to pursue its branch expansion strategy, which resulted in higher salaries and benefits, occupancy and equipment and data processing expense among increases in other noninterest expenses due to the growth in our operations.

COVID-19 Related Information

As noted above, in response to the current global situation surrounding the COVID-19 pandemic, we are providing assistance to our customers in a variety of ways and participating in the PPP offered under the CARES Act as a Small Business Administration (SBA) lender, and taking the steps necessary while working with our loan customers to effectively manage our portfolio through the ongoing uncertainty surrounding the duration, impact and government response to the crisis. The following is presented to outline certain activities in this regard:

Paycheck Protection Program
As of June 30, 2020, we had originated 455 requests for PPP loans totaling approximately $51.7 million. A total of 375 of these loans, or more than 82%, are for loan amounts of $150,000 or less and represent $17.8 million of the total. According to data received from customers in this process, these funds will assist small businesses who provided approximately 5,000 jobs in the community to retain employees. We are very proud of the countless hours our employees spent processing these applications and helping so many small businesses.

Modifications
The primary method of relief is to allow the borrower to defer their loan payments for three to nine months, while others have been provided the opportunity to pay interest only depending upon their specific circumstances. The CARES Act and regulatory guidelines suspend the determination of certain loan modifications related to the COVID19 pandemic from being treated as TDRs. The following table provides detail on the modifications approved and processed through June 30, 2020:

 

As of June 30, 2020

 

Balance of loans with modifications of 1-3 months

 

Balance of loans with modifications of greater than 3 months

 

Total balance of loans with modifications granted

 

Total loans
as of
June 30, 2020

 

Modifications as % of total loans as of June 30, 2020

 

(Dollars in thousands)

 

 

One-to-four family residential

$

20,605

 

$

7,367

 

$

27,972

 

$

382,213

 

7.3

%

Multifamily

 

4,657

 

 

2,877

 

 

7,534

 

 

159,371

 

4.7

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

Office

 

2,408

 

 

-

 

 

2,408

 

 

83,439

 

2.9

 

Retail

 

16,094

 

 

7,636

 

 

23,730

 

 

121,936

 

19.5

 

Mobile home park

 

-

 

 

-

 

 

-

 

 

25,961

 

-

 

Hotel/motel

 

996

 

 

39,027

 

 

40,023

 

 

68,165

 

58.7

 

Nursing home

 

5,400

 

 

6,368

 

 

11,768

 

 

11,768

 

100.0

 

Warehouse

 

-

 

 

8,796

 

 

8,796

 

 

17,422

 

50.5

 

Storage

 

-

 

 

-

 

 

-

 

 

36,266

 

-

 

Other non-residential

 

2,114

 

 

-

 

 

2,114

 

 

25,793

 

8.2

 

Total commercial real estate

 

27,012

 

 

61,827

 

 

88,839

 

 

390,750

 

22.7

 

 

 

 

 

 

 

 

 

 

 

Construction/land

 

1,100

 

 

-

 

 

1,100

 

 

96,497

 

1.1

 

 

 

 

 

 

 

 

 

 

 

Business:

 

 

 

 

 

 

 

 

 

Aircraft

 

1,364

 

 

-

 

 

1,364

 

 

15,460

 

8.8

 

SBA

 

-

 

 

-

 

 

-

 

 

737

 

-

 

PPP

 

-

 

 

-

 

 

-

 

 

51,661

 

-

 

Other business

 

2,065

 

 

657

 

 

2,722

 

 

18,212

 

14.9

 

Total business

 

3,429

 

 

657

 

 

4,086

 

 

86,070

 

4.7

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

Classic/collectible auto

 

1,831

 

 

-

 

 

1,831

 

 

24,767

 

7.4

 

Other consumer

 

760

 

 

-

 

 

760

 

 

14,464

 

5.3

 

Total consumer

 

2,591

 

 

-

 

 

2,591

 

 

39,231

 

6.6

 

 

 

 

 

 

 

 

 

 

 

Total loans with COVID19 pandemic modifications

$

59,394

 

$

72,728

 

$

132,122

 

$

1,154,132

 

11.4

%

As of July 16, 2020, $16.6 million in loans included in the table above for which the deferral period had expired had resumed their scheduled payments. Extension requests were approved on eight loans with a total balance of $17.6 million which were previously modified.

Additional Loan Portfolio Details
Total balances drawn on outstanding lines of credit as of December 31, 2019, were $47.1 million and the unused portion of lines of credit totaled $38.1 million. As of March 31, 2020, total balances drawn increased slightly to $48.4 million with $30.3 million in available lines of credit remaining. At June 30, 2020, total balances drawn declined to $46.6 million and the unused portion of lines of credit totaled $35.1 million.

The Bank is monitoring its loan portfolio for delinquencies of loans that have not requested modification qualifying under the CARES Act or regulatory guidance. The following table presents the loan to value (LTV) ratios of select segments of our loan portfolio that we believe may be more likely to be impacted by COVID-19 pandemic considerations at June 30, 2020. The LTV ratio is derived by dividing the current loan balance by the lower of the original appraised value or purchase price of the real estate or other collateral:

 

June 30, 2020

 

LTV 0-60%

 

LTV 61-75%

 

LTV 76%+

 

Total

 

Average LTV

Category: (1)

(Dollars in thousands)

One-to-four family

$

 236,995

 

$

   151,660

 

$

  37,206

 

$

  425,861

 

48.13

%

Church

 

1,392

 

 

-

 

 

-

 

 

1,392

 

47.81

 

Classic auto

 

3,501

 

 

9,948

 

 

11,318

 

 

24,767

 

69.02

 

Gas station

 

3,547

 

 

-

 

 

517

 

 

4,064

 

54.92

 

Hotel / motel

 

58,534

 

 

9,347

 

 

-

 

 

67,881

 

47.61

 

Marina

 

7,808

 

 

-

 

 

-

 

 

7,808

 

38.05

 

Mobile home park

 

19,701

 

 

6,260

 

 

-

 

 

25,961

 

34.03

 

Nursing home

 

12,868

 

 

-

 

 

-

 

 

12,868

 

20.87

 

Office

 

53,861

 

 

26,234

 

 

2,922

 

 

83,017

 

48.17

 

Other non-residential

 

6,478

 

 

4,762

 

 

-

 

 

11,240

 

50.69

 

Retail

 

75,482

 

 

40,706

 

 

-

 

 

116,188

 

50.46

 

Storage

 

26,438

 

 

11,254

 

 

-

 

 

37,692

 

53.67

 

Warehouse

 

15,341

 

 

1,930

 

 

-

 

 

17,271

 

49.51

 

(1) Represents select segments of loans that may include construction loans; classifications may differ from those used elsewhere in this release because they are based on type of collateral rather than loan category.

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 13 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. 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: the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; increased competitive pressures; changes in the interest rate environment; legislative and regulatory changes; and other factors described in the Companys 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 2020 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.

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)

Asset s

 Jun 30,
2020

 

 Mar 31,
2020

 

 Jun 30,
2019

 

Three
Month Change

 

One
Year Change

 

 

 

 

 

 

 

 

 

 

Cash on hand and in banks

$

   7,688

 

 

$

 6,453

 

 

$

   8,119

 

 

19.1

%

 

(5.3

)%

Interest-earning deposits with banks

 

66,250

 

 

 

  22,063

 

 

 

  22,579

 

 

200.3

 

 

193.4

 

Investments available-for-sale, at fair value

 

128,874

 

 

 

  132,159

 

 

 

  141,581

 

 

(2.5

)

 

(9.0

)

Annuity held-to-maturity

 

2,395

 

 

 

  2,371

 

 

 

  -

 

 

1.0

 

 

n/a

 

Loans receivable, net of allowance of $13,836, $13,530, and $13,057, respectively

 

1,138,243

 

 

 

  1,092,128

 

 

 

  1,052,676

 

 

4.2

 

 

8.1

 

Federal Home Loan Bank ("FHLB") stock, at cost

 

6,410

 

 

 

  8,010

 

 

 

  5,701

 

 

(20.0

)

 

12.4

 

Accrued interest receivable

 

4,981

 

 

 

  4,302

 

 

 

  4,650

 

 

15.8

 

 

7.1

 

Deferred tax assets, net

 

2,007

 

 

 

  2,227

 

 

 

  1,379

 

 

(9.9

)

 

45.5

 

Other real estate owned ("OREO")

 

454

 

 

 

  454

 

 

 

  454

 

 

0.0

 

 

0.0

 

Premises and equipment, net

 

22,222

 

 

 

  22,591

 

 

 

  21,944

 

 

(1.6

)

 

1.3

 

Bank owned life insurance ("BOLI")

 

32,561

 

 

 

  32,290

 

 

 

  31,446

 

 

0.8

 

 

3.5

 

Prepaid expenses and other assets

 

1,513

 

 

 

  1,898

 

 

 

  3,492

 

 

(20.3

)

 

(56.7

)

Right of use asset ("ROU")

 

2,972

 

 

 

  2,446

 

 

 

  1,609

 

 

21.5

 

 

84.7

 

Goodwill

 

889

 

 

 

  889

 

 

 

  889

 

 

0.0

 

 

0.0

 

Core deposit intangible

 

896

 

 

 

  932

 

 

 

  1,042

 

 

(3.9

)

 

(14.0

)

Total assets

$

  1,418,355

 

 

$

 1,331,213

 

 

$

   1,297,561

 

 

6.5

%

 

9.3

%

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

  91,593

 

 

$

 53,519

 

 

$

   49,219

 

 

71.1

%

 

86.1

%

Interest-bearing deposits

 

1,034,575

 

 

 

  946,465

 

 

 

  976,491

 

 

9.3

 

 

5.9

 

Total deposits

 

1,126,168

 

 

 

  999,984

 

 

 

  1,025,710

 

 

12.6

 

 

9.8

 

Advances from the FHLB

 

120,000

 

 

 

  160,000

 

 

 

  105,000

 

 

(25.0

)

 

14.3

 

Advance payments from borrowers for taxes and insurance

 

2,475

 

 

 

  4,960

 

 

 

  2,844

 

 

(50.1

)

 

(13.0

)

Lease liability

 

3,070

 

 

 

  2,538

 

 

 

  1,633

 

 

21.0

 

 

88.0

 

Accrued interest payable

 

218

 

 

 

  236

 

 

 

  461

 

 

(7.6

)

 

(52.7

)

Other liabilities

 

12,448

 

 

 

  10,403

 

 

 

  8,085

 

 

19.7

 

 

54.0

 

Total liabilities

 

1,264,379

 

 

 

  1,178,121

 

 

 

  1,143,733

 

 

7.3

 

 

10.5

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding

$

   -

 

 

$

 -

 

 

$

   -

 

 

n/a

 

 

n/a

 

Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding

 

 

 

 

 

 

 

 

 

10,048,961shares at June 30, 2020,
10,184,411 shares at March 31, 2020,

 

 

 

 

 

 

 

 

 

and 10,375,325 shares at June 30, 2019

 

100

 

 

 

  102

 

 

 

  104

 

 

(2.0

)

 

(3.8

)

Additional paid-in capital

 

85,119

 

 

 

  86,357

 

 

 

  88,725

 

 

(1.4

)

 

(4.1

)

Retained earnings

 

75,181

 

 

 

  74,017

 

 

 

  69,976

 

 

1.6

 

 

7.4

 

Accumulated other comprehensive loss, net of tax

 

(3,885

)

 

 

  (4,563

)

 

 

  (1,309

)

 

(14.9

)

 

196.8

 

Unearned Employee Stock Ownership Plan ("ESOP") shares

 

(2,539

)

 

 

  (2,821

)

 

 

  (3,668

)

 

(10.0

)

 

(30.8

)

Total stockholders' equity

 

153,976

 

 

 

  153,092

 

 

 

  153,828

 

 

0.6

 

 

0.1

 

Total liabilities and stockholders' equity

$

  1,418,355

 

 

$

   1,331,213

 

 

$

   1,297,561

 

 

6.5

%

 

9.3

%


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

 

Quarter Ended

 

 

 

 

 

 Jun 30,
2020

 

Mar 31,
2020

 

 Jun 30,
2019

 

Three Month Change

 

One Year Change

Interest income 

 

 

 

 

 

 

 

 

 

Loans, including fees

$

  13,183

 

$

  13,474

 

$

  13,606

 

 

(2.2

)%

 

(3.1

)%

Investments available-for-sale

 

  796

 

 

  919

 

 

  1,109

 

 

(13.4

)

 

(28.2

)

Investments held-to-maturity

 

  9

 

 

  -

 

 

  -

 

 

n/a

 

 

n/a

 

Interest-earning deposits with banks

 

  8

 

 

  31

 

 

   48

 

 

(74.2

)

 

(83.3

)

Dividends on FHLB Stock

 

  81

 

 

  76

 

 

  102

 

 

6.6

 

 

(20.6

)

Total interest income

 

  14,077

 

 

  14,500

 

 

  14,865

 

 

(2.9

)

 

(5.3

)

Interest expense

 

 

 

 

 

 

 

 

 

Deposits

 

  3,666

 

 

  4,366

 

 

  4,330

 

 

(16.0

)

 

(15.3

)

Borrowings

 

  344

 

 

  470

 

 

  829

 

 

(26.8

)

 

(58.5

)

Total interest expense

 

  4,010

 

 

  4,836

 

 

  5,159

 

 

(17.1

)

 

(22.3

)

Net interest income

 

  10,067

 

 

  9,664

 

 

  9,706

 

 

4.2

 

 

3.7

 

Provision (recapture of provision) for loan losses

 

  300

 

 

  300

 

 

  (800

)

 

0.0

 

 

(137.5

)

Net interest income after provision (recapture of provision) for loan losses

 

  9,767

 

 

  9,364

 

 

  10,506

 

 

4.3

 

 

(7.0

)

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

Net gain on sale of investments

 

  69

 

 

  -

 

 

  -

 

 

n/a

 

 

n/a

 

BOLI income

 

  254

 

 

  254

 

 

  189

 

 

0.0

 

 

34.4

 

Wealth management revenue

 

  183

 

 

  165

 

 

  261

 

 

10.9

 

 

(29.9

)

Deposit related fees

 

  184

 

 

  176

 

 

  205

 

 

4.5

 

 

(10.2

)

Loan related fees

 

  97

 

 

  392

 

 

  209

 

 

(75.3

)

 

(53.6

)

Other

 

  2

 

 

  3

 

 

  15

 

 

(33.3

)

 

(86.7

)

Total noninterest income

 

  789

 

 

  990

 

 

  879

 

 

(20.3

)

 

(10.2

)

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

  4,801

 

 

  5,212

 

 

  4,734

 

 

(7.9

)

 

1.4

 

Occupancy and equipment

 

  1,031

 

 

  1,071

 

 

  898

 

 

(3.7

)

 

14.8

 

Professional fees

 

  455

 

 

  430

 

 

  326

 

 

5.8

 

 

39.6

 

Data processing

 

  687

 

 

  694

 

 

  397

 

 

(1.0

)

 

73.0

 

OREO related expenses, net

 

  5

 

 

  1

 

 

  1

 

 

400.0

 

 

400.0

 

Regulatory assessments

 

  127

 

 

  144

 

 

  136

 

 

(11.8

)

 

(6.6

)

Insurance and bond premiums

 

  103

 

 

  120

 

 

   88

 

 

(14.2

)

 

17.0

 

Marketing

 

  29

 

 

  64

 

 

  76

 

 

(54.7

)

 

(61.8

)

Other general and administrative

 

  706

 

 

  532

 

 

  627

 

 

32.7

 

 

12.6

 

Total noninterest expense

 

  7,944

 

 

  8,268

 

 

  7,283

 

 

(3.9

)

 

9.1

 

Income before federal income tax provision

 

  2,612

 

 

  2,086

 

 

  4,102

 

 

25.2

 

 

(36.3

)

Federal income tax provision

 

  469

 

 

402 798 16.7 (41.2)Net income$ 2,143 $ 1,684 $ 3,304 27.3% (35.1)% Basic earnings per share$ 0.22 $ 0.17 $ 0.33 Diluted earnings per share$ 0.22 $ 0.17 $ 0.33 Weighted average number of common shares outstanding 9,808,854 9,896,234 9,952,419 Weighted average number of diluted shares outstanding 9,819,664 9,978,060 10,046,355


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

Six Months Ended
June 30,

2020

2019

One Year Change

Interest income

Loans, including fees

$

26,657

$

26,887

(0.9

)%

Investments available-for-sale

1,715

2,268

(24.4

)

Investments held-to-maturity

11

-

n/a

Interest-earning deposits with banks

37

88

(58.0

)

Dividends on FHLB Stock

157

193

(18.7

)

Total interest income

28,577

29,436

(2.9

)

Interest expense

Deposits

8,032

8,152

(1.5

)

Borrowings

814

1,726

(52.8

)

Total interest expense

8,846

9,878

(10.4

)

Net interest income

19,731

19,558

0.9

Provision (recapture of provision) for loan losses

600

(400

)

(250.0

)

Net interest income after provision (recapture of provision) for loan losses

19,131

19,958

(4.1

)

Noninterest income

Net gain (loss) on sale of investments

69

(8

)

(962.5

)

BOLI income

509

458

11.1

Wealth management revenue

348

457

(23.9

)

Deposit related fees

359

376

(4.5

)

Loan related fees

489

272

79.8

Other

4

24

(83.3

)

Total noninterest income

1,778

1,579

12.6

Noninterest expense

Salaries and employee benefits

10,013

9,734

2.9

Occupancy and equipment

2,103

1,764

19.2

Professional fees

885

822

7.7

Data processing

1,381

915

50.9

OREO related expenses, net

6

32

(81.3

)

Regulatory assessments

271

273

(0.7

)

Insurance and bond premiums

223

193

15.5

Marketing

93

162

(42.6

)

Other general and administrative

1,236

1,097

12.7

Total noninterest expense

16,211

14,992

8.1

Income before federal income tax provision

4,698

6,545

(28.2

)

Federal income tax provision

871

1,296

(32.8

)

Net income

$

3,827

$

5,249

(27.1

)%

Basic earnings per share

$

0.39

$

0.52

Diluted earnings per share

$

0.39

$

0.52

Weighted average number of common shares outstanding

9,852,544

10,034,895

Weighted average number of diluted shares outstanding

9,890,239

10,132,107


The following table presents a breakdown of the loan portfolio (unaudited):

June 30, 2020

March 31, 2020

June 30, 2019

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Commercial real estate:

Residential:

Micro-unit apartments

$

11,177

1.0

%

$

11,230

1.0

%

$

13,943

1.3

%

Other multifamily

148,194

12.8

158,238

14.3

147,517

13.8

Total multifamily residential

159,371

13.8

169,468

15.3

161,460

15.1

Non-residential:

Office

83,439

7.3

95,911

8.7

100,620

9.5

Retail

121,936

10.6

122,460

11.1

144,050

13.5

Mobile home park

25,961

2.2

25,370

2.3

21,533

2.0

Hotel / motel

68,165

5.9

52,515

4.7

27,725

2.6

Nursing Home

11,768

1.0

11,783

1.1

16,172

1.5

Warehouse

17,422

1.5

17,489

1.6

18,303

1.7

Storage

36,266

3.1

34,551

3.1

36,096

3.4

Other non-residential

25,793

2.2

25,831

2.3

19,703

1.8

Total non-residential

390,750

33.8

385,910

34.9

384,202

36.0

Construction/land:

One-to-four family residential

45,128

3.9

43,279

3.9

45,953

4.3

Multifamily

40,120

3.5

35,201

3.2

37,032

3.5

Commercial

6,134

0.5

22,946

2.1

13,793

1.3

Land development

5,115

0.4

5,975

0.5

8,356

0.8

Total construction/land

96,497

8.3

107,401

9.7

105,134

9.9

One-to-four family residential:

Permanent owner occupied

208,484

18.1

203,045

18.4

201,989

18.9

Permanent non-owner occupied

173,729

15.1

168,208

15.2

159,267

14.9

Total one-to-four family residential

382,213

33.2

371,253

33.6

361,256

33.8

Business

Aircraft

15,460

1.3

13,741

1.2

14,459

1.4

Small Business Administration ("SBA")

737

0.1

753

0.1

-

0.0

Payroll Protection Plan ("PPP")

51,661

4.5

-

0.0

-

0.0

Other business

18,212

1.6

20,208

1.8

21,899

2.1

Total business

86,070

7.5

34,702

3.1

36,358

3.5

Consumer

Classic Auto

24,767

2.1

22,029

2.0

-

0.0

Other consumer

14,464

1.3

15,196

1.4

17,891

1.7

Total consumer

39,231

3.4

37,225

3.4

17,891

1.7

Total loans

1,154,132

100.0

%

1,105,959

100.0

%

1,066,301

100.0

%

Less:

Deferred loan fees, net

2,053

301

568

ALLL

13,836

13,530

13,057

Loans receivable, net

$

1,138,243

$

1,092,128

$

1,052,676

Concentrations of credit: (1)

Construction loans as % of total capital

67.3

%

77.6

%

80.1

%

Total non-owner occupied commercial
real estate as % of total capital

420.7

%

437.7

%

441.0

%

(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

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2020

2020

2019

2019

2019

(Dollars in thousands, except per share data)

Performance Ratios: (1)

Return on assets

0.63

%

0.51

%

0.79

%

0.75

%

1.04

%

Return on equity

5.59

4.30

6.64

6.41

8.70

Dividend payout ratio

45.45

58.82

34.62

36.00

27.27

Equity-to-assets ratio

10.86

11.50

11.65

11.85

11.86

Tangible equity ratio (2)

10.74

11.38

11.53

11.73

11.72

Net interest margin

3.12

3.11

3.09

3.07

3.23

Average interest-earning assets to average interest-bearing liabilities

115.96

113.78

113.50

113.17

113.23

Efficiency ratio

73.18

77.60

71.04

69.73

68.80

Noninterest expense as a percent of average total assets

2.33

2.51

2.40

2.24

2.28

Book value per common share

$

15.32

$

15.03

$

15.25

$

15.06

$

14.83

Tangible book value per share (2)

15.14

14.85

15.07

14.88

14.64

Capital Ratios: (3)

Tier 1 leverage ratio

10.02

%

10.25

%

10.27

%

10.13

%

10.34

%

Common equity tier 1 capital ratio

13.70

13.42

13.13

13.14

13.46

Tier 1 capital ratio

13.70

13.42

13.13

13.14

13.46

Total capital ratio

14.95

14.67

14.38

14.39

14.71

Asset Quality Ratios:

Nonperforming loans as a percent of total loans

0.19

%

0.20

%

0.01

%

0.01

%

0.01

%

Nonperforming assets as a percent of total assets

0.19

0.20

0.04

0.05

0.05

ALLL as a percent of total loans

1.20

1.22

1.18

1.20

1.22

Net (recoveries) charge-offs to average loans receivable, net

(0.00

)

(0.00

)

(0.01

)

(0.00

)

(0.00

)

Allowance for Loan Losses:

ALLL, beginning of the quarter

$

13,530

$

13,218

$

13,161

$

13,057

$

13,808

Provision (Recapture of provision)

300

300

-

100

(800

)

Charge-offs

-

-

-

-

-

Recoveries

6

12

57

4

49

ALLL, end of the quarter

$

13,836

$

13,530

$

13,218

$

13,161

$

13,057

(1) Performance ratios are calculated on an annualized basis.
(2) Tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to page 15 for reconciliation between the GAAP and non‑GAAP financial measures.
(3) Capital ratios are for First Financial Northwest Bank only.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures (continued)
(Unaudited)

At or For the Quarter Ended

Jun 30,

Mar 31,

Dec 31,

Sep 30,

Jun 30,

2020

2020

2019

2019

2019

(Dollars in thousands)

Yields and Costs: (1)

Yield on loans

4.72

%

4.94

%

5.05

%

5.14

%

5.19

%

Yield on investments available-for-sale

2.41

2.72

2.85

3.02

3.21

Yield on investments held-to-maturity

1.52

-

-

-

-

Yield on interest-earning deposits

0.10

1.18

1.61

2.24

2.33

Yield on FHLB stock

4.84

4.62

4.84

6.81

5.58

Yield on interest-earning assets

4.37

%

4.67

%

4.78

%

4.84

%

4.94

%

Cost of interest-bearing deposits

1.49

%

1.81

%

1.94

%

2.00

%

1.89

%

Cost of borrowings

1.08

1.48

1.66

2.02

2.28

Cost of interest-bearing liabilities

1.44

%

1.77

%

1.91

%

2.00

%

1.94

%

Cost of total deposits

1.38

%

1.72

%

1.84

%

1.91

%

1.80

%

Cost of funds

1.34

1.69

1.82

1.92

1.86

Average Balances:

Loans

$

1,122,913

$

1,096,091

$

1,087,558

$

1,073,283

$

1,051,894

Investments available-for-sale

133,038

135,765

138,331

140,031

138,634

Investments held-to-maturity

2,378

2,061

-

-

-

Interest-earning deposits

30,989

10,555

11,572

27,992

8,275

FHLB stock

6,736

6,615

5,897

5,649

7,337

Total interest-earning assets

$

1,296,054

$

1,251,087

$

1,243,358

$

1,246,955

$

1,206,140

Interest-bearing deposits

$

989,549

$

970,062

$

985,532

$

998,123

$

919,306

Borrowings

128,154

127,707

109,895

103,707

145,895

Total interest-bearing liabilities

1,117,703

1,097,769

1,095,427

1,101,830

1,065,201

Noninterest-bearing deposits

82,750

53,199

50,951

47,613

48,137

Total deposits and borrowings

$

1,200,453

$

1,150,968

$

1,146,378

$

1,149,443

$

1,113,338

Average assets

$

1,371,269

$

1,324,845

$

1,317,586

$

1,319,777

$

1,279,880

Average stockholders' equity

154,115

157,492

156,147

155,057

152,267

(1) Yields and costs are annualized.

Non-GAAP Financial Measures

In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains non-GAAP financial measures of the tangible equity ratio and tangible book value per share. The Company's intangible assets consist of goodwill and core deposit intangible. Tangible equity is calculated by subtracting intangible assets from total stockholders’ equity. Tangible assets are calculated by subtracting intangible assets from total assets. The tangible equity ratio is tangible equity divided by tangible assets. Tangible book value per share is calculated by dividing tangible equity by the number of common shares outstanding. The Company believes that these non-GAAP measures provide a more consistent presentation of its capital and facilitate peer comparison that is desired by investors.

Non-GAAP financial measures have limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation and are not a substitute for other measures in this earnings release that are presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

The following table provides a reconciliation between the GAAP and non-GAAP measures:

Jun 30, 2020

Mar 31, 2020

Dec 31, 2019

Sep 30, 2019

Jun 30, 2019

(Dollars in thousands, except per share data)

Total stockholders' equity (GAAP)

$

153,976

$

153,092

$

156,319

$

155,102

$

153,828

Less:

Goodwill

889

889

889

889

889

Core deposit intangible

896

932

968

1,005

1,042

Tangible equity (Non-GAAP)

$

152,191

$

151,271

$

154,462

$

153,208

$

151,897