First Financial Northwest, Inc. Reports Third Quarter Net Income of $2.1 Million or $0.21 per Diluted Share

·28 min read

RENTON, Wash., Oct. 27, 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 September 30, 2020, of $2.1 million, or $0.21 per diluted share, compared to net income of $2.1 million, or $0.22 per diluted share, for the quarter ended June 30, 2020, and $2.5 million, or $0.25 per diluted share, for the quarter ended September 30, 2019. For the nine months ended September 30, 2020, net income was $5.9 million, or $0.60 per diluted share, compared to net income of $7.8 million, or $0.77 per diluted share, for the comparable nine-month period in 2019.

While 2020 has presented plenty of challenges to the banking industry, I am pleased with our response and many aspects of our Banks business, said Joseph W. Kiley III, President and Chief Executive Officer. First, I welcome all the new customers we are fortunate to have banking with us after, adhering to our mission, they experienced our relationship focused community bank service via the Paycheck Protection Program. Thanks to those new and existing customers, our employees, and our expanded office network we continued broadening our deposit base, which contributed to the decline in our cost of funds to 1.19% during the quarter, compared to 1.34% in the previous quarter and 1.82% for the fourth quarter of 2019. If interest rates remain low, we expect this trend to continue as we have approximately $260 million in certificates of deposit maturing in the next 12 months at a weighted average rate of 1.88%, continued Kiley.

I am also very pleased with the efforts of our credit team that continues working very closely with borrowers to help them navigate through their individual challenges. By providing borrowers with loan payment deferrals where appropriate, we are able to assist customers with their cash flow needs. I am happy to report that as of September 30, 2020, total loan balances under a payment deferral program declined to $65.5 million or 5.7% of total loans outstanding, compared to $132.1 million or 11.4% of total loans outstanding at June 30, 2020. In addition, working closely with our borrowers helps us identify borrowers that may need additional support or require closer monitoring. In the third quarter, we identified approximately $26.8 million in commercial real estate loans that required a reduction in loan grade classification. These loan grade reductions were the primary reason for the increase in our provision for loan losses to $700,000 in the quarter ended September 30, 2020, compared to $300,000 in each of the two preceding quarters, added Kiley.

Finally, it is my pleasure to report that our 14th office opened October 5th in Gig Harbor, Washington, and a 15th office is scheduled to open in Issaquah, Washington, early next year. As noted previously, we expect to slow the pace of expansion following the opening of these two offices, concluded Kiley.

Highlights for the quarter ended September 30, 2020:

  • Net loans receivable declined slightly to $1.13 billion at September 30, 2020, compared to $1.14 billion at June 30, 2020, but were up from $1.08 billion at September 30, 2019.

  • The Bank reduced its brokered certificates of deposits by $22.4 million ending the quarter with a balance of $10.0 million.

  • The Companys book value per share was $15.62 at September 30, 2020, compared to $15.32 at June 30, 2020, and $15.06 at September 30, 2019.

  • The Company repurchased 155,049 shares during the quarter at an average price of $9.54 per share under a plan that went into effect on July 30, 2020, authorizing the Company to repurchase up to 5% of its outstanding shares of common stock over 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 September 30, 2020, were 10.0% and 15.3%, respectively, compared to 10.0% and 15.0% at June 30, 2020, and 10.1% and 14.4% at September 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 $700,000 provision for loan losses during the quarter.

Total deposits decreased $56.5 million to $1.07 billion at September 30, 2020, from $1.13 billion at June 30, 2020, primarily as a result of Paycheck Protection Program (PPP) loan-related deposits withdrawn during the quarter, and increased $52.9 million from $1.02 billion at September 30, 2019. Demand deposits decreased $1.1 million and retail certificates of deposit decreased $31.8 million during the quarter. The Bank further reduced its brokered deposits by $22.4 million in the quarter for a total reduction of $128.6 million over the past 12 months, while growing total deposits by $52.9 million during that period, reflecting, in part, deposits from its expanded office network.

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

 

Sep 30 ,
2020

 

Jun 30,
2020

 

Sep 3 0 ,
2019

 

Three
Month
Change

 

One
Year
Change

 

 

 

 

 

 

 

 

 

 

Deposits:

(Dollars in thousands)

 

Noninterest-bearing demand

$

82,376

 

$

91,593

 

$

49,398

 

$

(9,217

)

 

$

32,978

 

Interest-bearing demand

 

110,856

 

 

102,707

 

 

                 53,197

 

 

8,149

 

 

 

57,659

 

Statement savings

 

19,292

 

 

18,946

 

 

               21,647

 

 

346

 

 

 

(2,355

)

Money market

 

428,512

 

 

429,987

 

 

             332,722

 

 

(1,475

)

 

 

95,790

 

Certificates of deposit, retail (1)

 

418,646

 

 

450,487

 

 

421,274

 

 

(31,841

)

 

 

(2,628

)

Certificates of deposit, brokered

 

10,000

 

 

32,448

 

 

             138,590

 

 

(22,448

)

 

 

(128,590

)

Total deposits

$

1,069,682

 

$

1,126,168

 

$

1,016,828

 

$

(56,486

)

 

$

52,854

 

(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $14,000 at September 30, 2020, $17,000 at June 30, 2020, and $34,000 at September 30, 2019.

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

September 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

$

35,066

$

47,957

$

14,677

$

235,680

$

335,675

$

-

$

669,055

Landing

 

3,209

 

3,193

 

37

 

16,398

 

8,251

 

-

 

31,088

Woodinville (1)

 

3,086

 

6,608

 

703

 

12,589

 

8,514

 

-

 

31,500

Bothell

 

2,270

 

2,104

 

54

 

4,675

 

3,290

 

-

 

12,393

Crossroads

 

6,755

 

8,085

 

48

 

50,304

 

11,076

 

-

 

76,268

Kent ( 2)

 

5,452

 

8,277

 

-  

 

13,802

 

1,070

 

-

 

28,601

Kirkland ( 2 )

 

4,534

 

56

 

1

 

2,627

 

-  

 

-

 

7,218

Total King County

 

60,372

 

76,280

 

15,520

 

336,075

 

367,876

 

-

 

856,123

 

 

 

 

 

 

 

 

Snohomish County

 

 

 

 

 

 

 

Mill Creek

 

3,713

 

3,236

 

856

 

14,695

 

10,675

 

-

 

33,175

Edmonds

 

5,853

 

13,865

 

485

 

28,229

 

19,300

 

-

 

67,732

Clearview (1)

 

6,102

 

6,478

 

853

 

18,014

 

4,881

 

-

 

36,328

Lake Stevens (1)

 

3,264

 

7,346

 

703

 

13,520

 

4,356

 

-

 

29,189

Smokey Point (1)

 

2,733

 

3,137

 

875

 

16,173

 

11,558

 

-

 

34,476

Total Snohomish County

 

21,665

 

34,062

 

3,772

 

90,631

 

50,770

 

-

 

200,900

 

 

 

 

 

 

 

 

Pierce County

 

 

 

 

 

 

 

University Place ( 2 )

 

339

 

514

 

-  

 

1,806

 

-  

 

-

 

2,659

Total Pierce County

 

339

 

514

 

-  

 

1,806

 

-  

 

-

 

2,659

 

 

 

 

 

 

 

 

Total retail deposits

 

82,376

 

110,856

 

19,292

 

428,512

 

418,646

 

-

 

1,059,682

Brokered deposits

 

-  

 

-  

 

 

-  

 

-  

 

10,000

 

10,000

Total deposits

$

82,376

$

110,856

$

19,292

$

   428,512

$

418,646

$

10,000

$

1,069,682

(1) Balance of retail certificates of deposit for acquired branches are net of an unamortized aggregate fair value adjustment of $14,000.
( 2) Kent office opened January 31, 2019; Kirkland, November 12, 2019; and University Place, March 2, 2020.

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.

Net loans receivable totaled $1.13 billion at September 30, 2020, compared to $1.14 billion at June 30, 2020, and $1.08 billion at September 30, 2019. New commercial loan activity remains muted as borrowers appear to be focused on their existing loans in lieu of seeking out new opportunities. The average balance of net loans receivable totaled $1.14 billion for the quarter ended September 30, 2020, compared to $1.12 billion for the quarter ended June 30, 2020, and $1.07 billion for the quarter ended September 30, 2019.

The Company recorded a $700,000 provision for loan losses in the quarter ended September 30, 2020, compared to a $300,000 provision for loan losses in the quarter ended June 30, 2020, and a $100,000 provision for loan losses in the quarter ended September 30, 2019. The provision in the quarter ended September 30, 2020, was primarily attributed to reductions in loan grades during the quarter, including $26.8 million in Commercial Real Estate Loans that were downgraded, while the provision in the quarter ended June 30, 2020, was primarily attributed to adjustments to economic factors due to COVID-19 in our Commercial Real Estate and Construction/Land portfolios. The provision in the quarter ended September 30, 2019, was due primarily to growth in loans receivable. In the quarter ended September 30, 2020, any relationship that requested a second loan payment deferral, and demonstrated other weaknesses, received additional scrutiny which resulted in many of these loans being downgraded.

The ALLL represented 1.27% of total loans receivable at September 30, 2020, compared to 1.20% at both June 30, 2020, and September 30, 2019. Excluding the PPP loan balances, which are 100% guaranteed by the Small Business Administration (SBA), the ALLL represented 1.33% of total loans receivable at September 30, 2020, compared to 1.25% of total loans receivable at June 30, 2020, and 1.20% at September 30, 2019. The ALLL as a percent of total loans excluding PPP loans is a non-GAAP financial measure. See Non-GAAP Financial Measures at the end of this press release for a reconciliation to its nearest GAAP equivalent. Nonperforming loans totaled $2.1 million at September 30, 2020, compared to $2.2 million at June 30, 2020, and $137,000 at September 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 and ongoing monitoring, the Company does not expect to incur a loss on this credit. Other than the $2.1 million multifamily loan in foreclosure, there was only one consumer loan of $32,000 that was 30 days or more past due and not on loan payment deferral at September 30, 2020. OREO remained unchanged at $454,000 at September 30, 2020, June 30, 2020, and September 30, 2019.

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

 

Sep 30,

 

Jun 30,

 

Sep 30,

 

Three
Month

 

One
Year

 

2020

 

2020

 

2019

 

Change

 

Change

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

Nonperforming loans:

 

 

 

 

 

 

 

 

 

One-to-four family residential

$

 

 

$

87

 

 

$

98

 

 

$

(87

)

 

$

(98

)

Multifamily

 

2,104

 

 

 

2,104

 

 

   

td cl

 

 

 

 

 

 

2,104

 

Consumer

 

td cl

 

 

  

td cl

 

 

 

39

 

 

 

 

 

 

(39

)

Total nonperforming loans

 

2,104

 

 

 

2,191

 

 

 

137

 

 

 

 

 

1,967

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned (OREO)

 

454

 

 

 

454

 

 

 

454

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

Total nonperforming assets (1)

$

2,558

 

 

$

2,645

 

 

$

591

 

 

$

(87

)

 

$

1,967

 

 

 

 

 

 

 

 

 

 

 

Nonperforming assets as a

 

 

 

 

 

 

 

 

 

percent of total assets

 

0.19

%

 

 

0.19

%

 

 

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 September 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 September 30, 2020, TDRs totaled $4.1 million, down from $4.3 million at June 30, 2020, and $6.6 million at September 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 categorized as TDRs.

Net interest income for both the quarters ended September 30, 2020, and June 30, 2020 totaled $10.1 million, compared to $9.7 million for the quarter ended September 30, 2019.

Interest income totaled $13.7 million for the quarter ended September 30, 2020, compared to $14.1 million for the quarter ended June 30, 2020, and $15.2 million for the quarter ended September 30, 2019. The decline in the current quarter compared to the quarter ended June 30, 2020, was primarily due to the continued decline in asset yields. In addition, the lower yielding PPP loans impacted the entire quarter ended September 30, 2020, compared to only a portion of the previous quarter. Further, the Bank received a payoff on a $7.7 million loan it had purchased at a premium, resulting in a reduction of $177,000 in interest income relating to the unamortized premium at the time of payoff. As a result, average loan yields declined to 4.49% at September 30, 2020, compared to 4.72% at June 30, 2020, and 5.14% at September 30, 2019. On a related note, the $7.7 million payoff also resulted in the receipt of a $233,000 prepayment penalty, which was included in noninterest income.

Total interest expense was $3.6 million for the quarter ended September 30, 2020, compared to $4.0 million for the quarter ended June 30, 2020, and $5.6 million for the quarter ended September 30, 2019. The average cost of interest-bearing deposits declined to 1.27% for the quarter ended September 30, 2020, compared to 1.49% for the quarter ended June 30, 2020, and 2.00% for the quarter ended September 30, 2019. The decline from the quarter ended September 30, 2019, was due primarily to a reduced level of brokered deposits and retail certificates of deposits, along with a declining interest rate environment. Specifically, the Bank replaced higher cost retail certificates of deposit and brokered deposits with lower cost deposits through its branch network. During the quarter ended September 30, 2020, the Bank redeemed $5.0 million in callable brokered certificates of deposit that carried a coupon of 1.35%. That redemption resulted in the recognition of $20,000 in unamortized fees during the quarter ended September 30, 2020, compared to $1,500 in such fees in the quarter ended June 30, 2020. Advances from the FHLB remained unchanged at $120.0 million at September 30, 2020, and June 30, 2020, and were down slightly from $121.0 million at September 30, 2019. The average cost of borrowings was 1.28% for the quarter ended September 30, 2020, compared to 1.08% for the quarter ended June 30, 2020, and 2.02% for the quarter ended September 30, 2019. At September 30, 2020, the entire balance of our $120.0 million in borrowings were comprised of short-term FHLB advances tied to cash flow hedge agreements, utilized to assist in the Banks interest rate risk management efforts.

The net interest margin was 3.07% for the quarter ended September 30, 2020, compared to 3.12% for the quarter ended June 30, 2020, and 3.07% for the quarter ended September 30, 2019. The modest reduction in the quarter ended September 30, 2020, from the quarter ended June 30, 2020, relates primarily to the reduction in the Banks average yield on interest earning assets outpacing the average cost of interest-bearing liabilities, due in part to the $177,000 accelerated amortization of the premium related to the $7.7 million loan payoff noted above, and the recognition of $20,000 of unamortized fees relating to the early redemption of $5.0 million in callable brokered deposits.

Noninterest income for the quarter ended September 30, 2020, totaled $1.0 million, compared to $789,000 for the quarter ended June 30, 2020, and $1.0 million for the quarter ended September 30, 2019. The increase in noninterest income for the quarter ended September 30, 2020, compared to the quarter ended June 30, 2020, was primarily due to an increase in loan related fees due to prepayment penalties.

Noninterest expense totaled $7.9 million for both the quarters ended September 30, 2020, and June 30, 2020, compared to $7.5 million in the quarter ended September 30, 2019. Salaries and employee benefits for the quarter ended September 30, 2020, were higher than the quarter ended June 30, 2020, due primarily to the reclassification of the compensation expense related to PPP loan originations to loan direct costs in the quarter ended June 30, 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.

COVID-19 Related Information

The Bank is committed to assisting its customers and communities in response to the COVID-19 pandemic. Under the CARES Act, it is providing certain short-term loan modifications. In addition, the Bank is participating in the PPP as an SBA lender. The Bank continues to take the steps necessary while working with its loan customers to effectively manage the portfolio through the ongoing uncertainty surrounding the duration, impact and government response to the crisis.

Paycheck Protection Program
As of September 30, 2020, the Bank had funded $52.0 million in PPP loans, which represents 462 loans, a slight increase from the 455 loans totaling $51.7 million as of June 30, 2020. Based on information provided with the borrowers applications, these funds are estimated to have provided support for approximately 5,000 jobs in the communities we serve. A total of 381 of these loans, or more than 82%, are for loan amounts of $150,000 or less and represent $18.0 million of the total, of which 253 loans, representing $6.4 million, are for loan amounts of $50,000 or less. As of October 21, 2020, a total of 17 loan customers representing PPP loans totaling $3.8 million had submitted loan forgiveness applications.

Modifications
The primary method of relief is to allow the borrower to defer their loan payments for three to six months, while certain borrowers are allowed to pay interest only or have payment deferrals for periods longer than six months 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 balance of loans remaining on deferral status as of September 30, 2020:

 

As of September  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

 

Modifications as % of total loans in each category

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

One-to-four family residential

$

              283

 

$

      1,765

 

$

            2,048

 

$

391,871

 

0.5

%

Multifamily

 

                       -

 

 

                 2,349

 

 

                 2,349

 

 

142,619

 

1.6

 

 

 

 

 

 

 

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

Office

 

                    -

 

 

                  -

 

 

             -

 

 

              81,556

 

-

 

Retail

 

                         -

 

 

                  8,667

 

 

                 8,667

 

 

121,338

 

7.1

 

Mobile home park

 

                        -

 

 

                       -

 

 

           -

 

 

25,510

 

-

 

Hotel/motel

 

                         -

 

 

               35,117

 

 

                 35,117

 

 

              69,157

 

50.8

 

Nursing home

 

                  -

 

 

                 6,368

 

 

                 6,368  

 

 

12,868

 

49.5

 

Warehouse

 

                        -

 

 

                 8,844

 

 

                   8,844

 

 

17,512

 

50.5

 

Storage

 

-

 

 

                   -

 

 

                -

 

 

36,093

 

-

 

Other non-residential

 

                     -

 

 

                        -

 

 

                     -

 

 

25,724

 

-

 

Total commercial real estate

 

          -

 

 

             58,996

 

 

               58,996

 

 

389,768

 

15.1

 

 

 

 

 

 

 

 

 

 

 

Construction/land

 

                    -

 

 

                  -

 

 

                       -

 

 

            99,598

 

-

 

 

 

 

 

 

 

 

 

 

 

Business:

 

 

 

 

 

 

 

 

 

Aircraft

 

                   -

 

 

                         -

 

 

                    -

 

 

              11,735

 

-

 

SBA

 

                        -

 

 

                   -

 

 

                         -

 

 

819

 

-

 

PPP

 

                   -

 

 

                        -

 

 

                  -

 

 

52,045

 

-

 

Other business

 

                        -

 

 

                 1,899

 

 

1,899

 

 

              21,181

 

9.0

 

Total business

 

                  -

 

 

1,899

 

 

1,899

 

 

85,780

 

2.2

 

 

 

 

 

 

 

 

 

 

 

Consumer:

 

 

 

 

 

 

 

 

 

Classic/collectible auto

 

                      86

 

 

                    105   

 

 

                    191

 

 

27,784

 

0.7

 

Other consumer

 

                       -

 

 

                  -

 

 

                       -

 

 

13,061

 

-

 

Total consumer

 

                 86

 

 

                    105   

 

 

191

 

 

              40,845

 

0.5

 

 

 

 

 

 

 

 

 

 

 

Total loans with COVID19 pandemic modifications

$

             369

 

$

65,114

 

$

         65,483

 

$

1,150,481

 

5.7

%

As of September 30, 2020, $36.1 million in loans had been granted modifications of greater than six months, of which $30.1 million were for loans in the hotel/motel category. Total loans with modifications granted declined from $132.1 million, or 11.4% of total loans outstanding, at June 30, 2020.

Additional Loan Portfolio Details
Total balances drawn on outstanding lines of credit were $46.4 million and the unused portion of lines of credit totaled $35.0 million as of September 30, 2020. At December 31, 2019, total balances drawn on outstanding lines of credit were $47.1 million and the unused portion of lines of credit totaled $38.1 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 September 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:

 

September 30 , 2020

 

LTV 0-60 %

 

LTV 61-75 %

 

LTV 76 % +

 

Total

 

Average LTV

 

 

 

 

 

 

 

 

 

 

Category : (1)

(Dollars in thousands)

One-to-four family

$

        247,005

 

$

           156,273

 

$

             33,824

 

$

           437,102

 

52.89

%

Church

 

1,382

 

 

-

 

 

-

 

 

1,382

 

46.77

 

Classic auto

 

4,359

 

 

10,349

 

 

13,076

 

 

27,784

 

68.22

 

Gas station

 

3,529

 

 

-

 

 

513

 

 

4,042

 

51.37

 

Hotel / motel

 

58,750

 

 

10,407

 

 

-

 

 

69,157

 

56.07

 

Marina

 

7,795

 

 

-

 

 

-

 

 

7,795

 

37.97

 

Mobile home park

 

19,870

 

 

5,465

 

 

175

 

 

25,510

 

39.85

 

Nursing home

 

12,868

 

 

-

 

 

-

 

 

12,868

 

20.87

 

Office

 

56,882

 

 

24,239

 

 

4,259

 

 

85,380

 

45.54

 

Other non-residential

 

7,761

 

 

4,745

 

 

-

 

 

12,506

 

49.01

 

Retail

 

80,793

 

 

40,545

 

 

-

 

 

121,338

 

49.76

 

Storage

 

26,540

 

 

11,213

 

 

-

 

 

37,753

 

44.23

 

Warehouse

 

15,593

 

 

1,919

 

 

-

 

 

17,512

 

42.65

 

(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 14 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 for ward-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 COVID 19 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 A nnual 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 20 20 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance.

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

Assets

Sep 30,
2020

 

Jun 30,
2020

 

Sep 30,
2019

 

Three
Month
Change

 

One
Year
Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash on hand and in banks

$

             7,440

 

 

$

             7,688

 

 

$

             7,615

 

 

(3.2

)%

 

(2.3

)%

Interest-earning deposits with banks

 

18,674

 

 

 

66,250

 

 

 

6,103

 

 

(71.8

)

 

206.0

 

Investments available-for-sale, at fair value

 

126,020

 

 

 

128,874

 

 

 

138,224

 

 

(2.2

)

 

(8.8

)

Annuity held-to-maturity

 

2,406

 

 

 

2,395

 

 

 

                     -

 

 

0.5

 

 

n/a

 

ÿLoans receivable, net of allowance of $14,568, $13,836 and $13,161, respectively

 

1,133,984

 

 

 

1,138,243

 

 

 

1,083,850

 

 

(0.4

)

 

4.6

 

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

 

6,410

 

 

 

6,410

 

 

 

6,341

 

 

0.0

 

 

1.1

 

Accrued interest receivable

 

5,676

 

 

 

4,981

 

 

 

4,407

 

 

14.0

 

 

28.8

 

Deferred tax assets, net

 

1,879

 

 

 

2,007

 

 

 

1,202

 

 

(6.4

)

 

56.3

 

Other real estate owned ("OREO")

 

454

 

 

 

454

 

 

 

454

 

 

0.0

 

 

0.0

 

Premises and equipment, net

 

22,409

 

 

 

22,222

 

 

 

22,346

 

 

0.8

 

 

0.3

 

Bank owned life insurance ("BOLI")

 

32,830

 

 

 

32,561

 

 

 

31,681

 

 

0.8

 

 

3.6

 

Prepaid expenses and other assets

 

1,704

 

 

 

1,513

 

 

 

2,756

 

 

12.6

 

 

(38.2

)

Right of use asset

 

3,834

 

 

 

2,972

 

 

 

1,486

 

 

29.0

 

 

158.0

 

Goodwill

 

889

 

 

 

889

 

 

 

889

 

 

0.0

 

 

0.0

 

Core deposit intangible

 

860

 

 

 

896

 

 

 

1,005

 

 

(4.0

)

 

(14.4

)

Total assets

$

      1,365,469

 

 

$

      1,418,355

 

 

$

      1,308,359

 

 

(3.7

)

 

4.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

$

82,376

 

 

$

91,593

 

 

$

49,398

 

 

(10.1

)

 

66.8

 

Interest-bearing deposits

 

987,306

 

 

 

1,034,575

 

 

 

967,430

 

 

(4.6

)

 

2.1

 

Total deposits

 

1,069,682

 

 

 

1,126,168

 

 

 

1,016,828

 

 

(5.0

)

 

5.2

 

Advances from the FHLB

 

120,000

 

 

 

120,000

 

 

 

121,000

 

 

0.0

 

 

(0.8

)

Advance payments from borrowers for taxes and insurance

 

4,742

 

 

 

2,475

 

 

 

5,043

 

 

91.6

 

 

(6.0

)

Lease liability

 

3,942

 

 

 

3,070

 

 

 

1,513

 

 

28.4

 

 

160.5

 

Accrued interest payable

 

197

 

 

 

218

 

 

 

382

 

 

(9.6

)

 

(48.4

)

Other liabilities

 

12,128

 

 

 

12,448

 

 

 

8,491

 

 

(2.6

)

 

42.8

 

Total liabilities

 

1,210,691

 

 

 

1,264,379

 

 

 

1,153,257

 

 

(4.2

)

 

5.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 9,911,607 shares at September 30, 2020, 10,048,961 shares at June 30, 2020,and 10,296,053 shares at September 30, 2019

 

99

 

 

 

100

 

 

 

103

 

 

(1.0

)

 

(3.9

)

Additional paid-in capital

 

83,839

 

 

 

85,119

 

 

 

87,835

 

 

(1.5

)

 

(4.5

)

Retained earnings

 

76,300

 

 

 

75,181

 

 

 

71,592

 

 

1.5

 

 

6.6

 

Accumulated other comprehensive loss, net of tax

 

(3,203

)

 

 

(3,885

)

 

 

(1,042

)

 

(17.6

)

 

207.4

 

Unearned Employee Stock Ownership Plan ("ESOP") shares

 

(2,257

)

 

 

(2,539

)

 

 

(3,386

)

 

(11.1

)

 

(33.3

)

Total stockholders' equity

 

154,778

 

 

 

153,976

 

 

 

155,102

 

 

0.5

 

 

(0.2

)

Total liabilities and stockholders' equity

$

      1,365,469

 

 

$

      1,418,355

 

 

$

      1,308,359

 

 

(3.7

)%

 

4.4

%

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

 

Quarter Ended

 

 

 

 

 

Sep 30,
2020

 

Jun 30,
2020

 

Sep 30,
2019

 

Three
Month
Change

 

One
Year
Change

Interest income

 

 

 

 

 

 

 

 

 

Loans, including fees

$

12,847

 

$

13,183

 

$

13,897

 

(2.5

)%

 

(7.6

)%

Investments available-for-sale

 

751

 

 

796

 

 

1,066

 

(5.7

)

 

(29.5

)

Investments held-to-maturity

 

6

 

 

9

 

 

-

 

(33.3

)

 

n/a

Interest-earning deposits with banks

 

8

 

 

8

 

 

158

 

0.0

 

 

(94.9

)

Dividends on FHLB Stock

 

82

 

 

81

 

 

97

 

1.2

 

 

(15.5

)

Total interest income

 

13,694

 

 

14,077

 

 

15,218

 

(2.7

)

 

(10.0

)

Interest expense

 

 

 

 

 

 

 

 

 

Deposits

 

3,206

 

 

3,666

 

 

5,037

 

(12.5

)

 

(36.4

)

Other borrowings

 

400

 

 

344

 

 

529

 

16.3

 

 

(24.4

)

Total interest expense

 

3,606

 

 

4,010

 

 

5,566

 

(10.1

)

 

(35.2

)

Net interest income

 

10,088

 

 

10,067

 

 

9,652

 

0.2

 

 

4.5

 

Provision for loan losses

 

700

 

 

300

 

 

100

 

133.3

 

 

600.0

 

Net interest income after provision for loan losses

 

9,388

 

 

9,767

 

 

9,552

 

(3.9

)

 

(1.7

)

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

Net gain on sale of investments

 

18

 

 

69

 

 

88

 

(73.9

)

 

(79.5

)

BOLI income

 

269

 

 

254

 

 

235

 

5.9

 

 

14.5

 

Wealth management revenue

 

145

 

 

183

 

 

245

 

(20.8

)

 

(40.8

)

Deposit related fees

 

201

 

 

184

 

 

179

 

9.2

 

 

12.3

 

Loan related fees

 

376

 

 

97

 

 

290

 

287.6

 

 

29.7

 

Other

 

2

 

 

2

 

 

2

 

0.0

 

 

0.0

 

Total noninterest income

 

1,011

 

 

789

 

 

1,039

 

28.1

 

 

(2.7

)

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

4,880

 

 

4,801

 

 

4,813

 

1.6

 

 

1.4

 

Occupancy and equipment

 

987

 

 

1,031

 

 

924

 

(4.3

)

 

6.8

 

Professional fees

 

371

 

 

455

 

 

440

 

(18.5

)

 

(15.7

)

Data processing

 

731

 

 

687

 

 

478

 

6.4

 

 

52.9

 

OREO related expenses, net

 

1

 

 

5

 

 

1

 

(80.0

)

 

0.0

 

Regulatory assessments

 

134

 

 

127

 

 

13

 

5.5

 

 

930.8

 

Insurance and bond premiums

 

116

 

 

103

 

 

95

 

12.6

 

 

22.1

 

Marketing

 

41

 

 

29

 

 

118

 

41.4

 

 

(65.3

)

Other general and administrative

 

606

 

 

706

 

 

573

 

(14.2

)

 

5.8

 

Total noninterest expense

7,867 7,944 7,455 (1.0) 5.5 Income before federal income tax provision 2,532 2,612 3,136 (3.1) (19.3)Federal income tax provision 450 469 631 (4.1) (28.7)Net income$2,082 $2,143 $2,505 (2.8)% (16.9)% Basic earnings per share$0.22 $0.22 $0.25 Diluted earnings per share$0.21 $0.22 $0.25 Weighted average number of common shares outstanding 9,661,498 9,808,854 9,901,586 Weighted average number of diluted shares outstanding 9,675,567 9,819,664 9,991,011

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

Nine Months Ended

September 30,

2020

2019

One Year
Change

Interest income

Loans, including fees

$

39,504

$

40,784

(3.1

)%

Investments available-for-sale

2,466

3,334

(26.0

)

Investments held-to-maturity

17

-

n/a

Interest-earning deposits with banks

45

246

(81.7

)

Dividends on FHLB Stock

240

290

(17.2

)

Total interest income

42,272

44,654

(5.3

)

Interest expense

Deposits

11,238

13,189

(14.8

)

Other borrowings

1,214

2,255

(46.2

)

Total interest expense

12,452

15,444

(19.4

)

Net interest income

29,820

29,210

2.1

Provision (recapture of provision) for loan losses

1,300

(300

)

(533.3

)

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

28,520

29,510

(3.4

)

Noninterest income

Net gain on sale of investments

86

80

7.5

BOLI income

778

693

12.3

Wealth management revenue

493

702

(29.8

)

Deposit related fees

560

555

0.9

Loan related fees

865

562

53.9

Other

7

26

(73.1

)

Total noninterest income

2,789

2,618

6.5

Noninterest expense

Salaries and employee benefits

14,893

14,547

2.4

Occupancy and equipment

3,090

2,688

15.0

Professional fees

1,257

1,262

(0.4

)

Data processing

2,112

1,393

51.6

OREO related expenses, net

7

33

(78.8

)

Regulatory assessments

405

286

41.6

Insurance and bond premiums

339

288

17.7

Marketing

133

280

(52.5

)

Other general and administrative

1,843

1,670

10.4

Total noninterest expense

24,079

22,447

7.3

Income before federal income tax provision

7,230

9,681

(25.3

)

Federal income tax provision

1,320

1,927

(31.5

)

Net income

$

5,910

$

7,754

(23.8

)%

Basic earnings per share

$

0.60

$

0.77

Diluted earnings per share

$

0.60

$

0.77

Weighted average number of common shares outstanding

9,788,397

9,989,970

Weighted average number of diluted shares outstanding

9,811,602

10,091,631

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

September 30, 2020

June 30, 2020

September 30, 2019

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Commercial real estate:

Residential:

Micro-unit apartments

$

11,422

1.0

%

$

11,177

1.0

%

$

13,877

1.3

%

Other multifamily

131,197

11.4

148,194

12.8

157,275

14.3

Total multifamily residential

142,619

12.4

159,371

13.8

171,152

15.6

Non-residential:

Office

81,566

7.1

83,439

7.3

98,738

9.0

Retail

121,338

10.6

121,936

10.6

142,639

12.9

Mobile home park

25,510

2.2

25,961

2.2

23,070

2.1

Hotel / motel

69,157

6.0

68,165

5.9

27,572

2.5

Nursing Home

12,868

1.1

11,768

1.0

16,104

1.5

Warehouse

17,512

1.5

17,422

1.5

18,200

1.7

Storage

36,093

3.1

36,266

3.1

35,908

3.3

Other non-residential

25,724

2.3

25,793

2.2

19,659

1.8

Total non-residential

389,768

33.9

390,750

33.8

381,890

34.8

Construction/land:

One-to-four family residential

45,231

4.0

45,128

3.9

47,524

4.3

Multifamily

47,547

4.1

40,120

3.5

40,078

3.7

Commercial

5,475

0.5

6,134

0.5

15,913

1.5

Land development

1,345

0.1

5,115

0.4

6,400

0.6

Total construction/land

99,598

8.7

96,497

8.3

109,915

10.1

One-to-four family residential:

Permanent owner occupied

214,250

18.6

208,484

18.1

205,679

18.7

Permanent non-owner occupied

177,621

15.4

173,729

15.1

164,707

15.0

Total one-to-four family residential

391,871

34.0

382,213

33.2

370,386

33.7

Business:

Aircraft

11,735

1.0

15,460

1.3

14,186

1.3

Small Business Administration ("SBA")

819

0.1

737

0.1

-

0.0

Paycheck Protection Plan ("PPP")

52,045

4.5

51,661

4.5

-

0.0

Other business

21,181

1.8

18,212

1.6

23,321

2.1

Total business

85,780

7.4

86,070

7.5

37,507

3.4

Consumer:

Classic Auto

27,784

2.4

24,767

2.1

14,636

1.3

Other consumer

13,061

1.2

14,464

1.3

11,815

1.1

Total consumer

40,845

3.6

39,231

3.4

26,451

2.4

Total loans

1,150,481

100.0

%

1,154,132

100.0

%

1,097,301

100.0

%

Less:

Deferred loan fees, net

1,929

2,053

290

ALLL

14,568

13,836

13,161

Loans receivable, net

$

1,133,984

$

1,138,243

$

1,083,850

Concentrations of credit: (1)

Construction loans as % of total capital

68.4

%

67.3

%

82.6

%

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

407.1

%

420.7

%

444.9

%

(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

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

2020

2020

2020

2019

2019

(Dollars in thousands, except per share data)

Performance Ratios: (1)

Return on assets

0.60

%

0.63

%

0.51

%

0.79

%

0.75

%

Return on equity

5.34

5.59

4.30

6.64

6.41

Dividend payout ratio

45.45

45.45

58.82

34.62

36.00

Equity-to-assets ratio

11.34

10.86

11.50

11.65

11.85

Tangible equity ratio (2)

11.22

10.74

11.38

11.53

11.73

Net interest margin

3.07

3.12

3.11

3.09

3.07

Average interest-earning assets to average interest-bearing liabilities

116.08

115.96

113.78

113.50

113.17

Efficiency ratio

70.88

73.18

77.60

71.04

69.73

Noninterest expense as a percent of average total assets

2.26

2.33

2.51

2.40

2.24

Book value per common share

$

15.62

$

15.32

$

15.03

$

15.25

$

15.06

Tangible book value per share (2)

15.44

15.14

14.85

15.07

14.88

Capital Ratios: (3)

Tier 1 leverage ratio

10.03

%

10.02

%

10.25

%

10.27

%

10.13

%

Common equity tier 1 capital ratio

14.01

13.70

13.42

13.13

13.14

Tier 1 capital ratio

14.01

13.70

13.42

13.13

13.14

Total capital ratio

15.26

14.95

14.67

14.38

14.39

Asset Quality Ratios:

Nonperforming loans as a percent of total loans

0.18

%

0.19

%

0.20

%

0.01

%

0.01

%

Nonperforming assets as a percent of total assets

0.19

0.19

0.20

0.04

0.05

ALLL as a percent of total loans

1.27

1.20

1.22

1.18

1.20

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

(0.00

)

(0.00

)

(0.00

)

(0.01

)

(0.00

)

Allowance for Loan Losses:

ALLL, beginning of the quarter

$

13,836

$

13,530

$

13,218

$

13,161

$

13,057

Provision

700

300

300

-

100

Charge-offs

-

-

-

-

-

Recoveries

32

6

12

57

4

ALLL, end of the quarter

$

14,568

$

13,836

$

13,530

$

13,218

$

13,161

(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 nonGAAP 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

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Sep 30,

2020

2020

2020

2019

2019

(Dollars in thousands)

Yields and Costs: (1)

Yield on loans

4.49

%

4.72

%

4.94

%

5.05

%

5.14

%

Yield on investments available-for-sale

2.32

2.41

2.72

2.85

3.02

Yield on investments held-to-maturity

0.99

1.52

-

-

-

Yield on interest-earning deposits

0.10

0.10

1.18

1.61

2.24

Yield on FHLB stock

4.95

4.84

4.62

4.84

6.81

Yield on interest-earning assets

4.16

%

4.37

%

4.67

%

4.78

%

4.84

%

Cost of interest-bearing deposits

1.27

%

1.49

%

1.81

%

1.94

%

2.00

%

Cost of borrowings

1.28

1.08

1.48

1.66

2.02

Cost of interest-bearing liabilities

1.27

%

1.44

%

1.77

%

1.91

%

2.00

%

Cost of total deposits

1.18

%

1.38

%

1.72

%

1.84

%

1.91

%

Cost of funds

1.19

1.34

1.69

1.82

1.92

Average Balances:

Loans

$

1,137,742

$

1,122,913

$

1,096,091

$

1,087,558

$

1,073,283

Investments available-for-sale

128,885

133,038

135,765

138,331

140,031

Investments held-to-maturity

2,399

2,378

2,061

-

-

Interest-earning deposits

32,701

30,989

10,555

11,572

27,992

FHLB stock

6,592

6,736

6,615

5,897

5,649

Total interest-earning assets

$

1,308,319

$

1,296,054

$

1,251,087

$

1,243,358

$

1,246,955

Interest-bearing deposits

$

1,002,518

$

989,549

$

970,062

$

985,532

$

998,123

Borrowings

124,543

128,154

127,707

109,895

103,707

Total interest-bearing liabilities

1,127,061

1,117,703

1,097,769

1,095,427

1,101,830

Noninterest-bearing deposits

81,694

82,750

53,199

50,951

47,613

Total deposits and borrowings

$

1,208,755

$

1,200,453

$

1,150,968

$

1,146,378

$

1,149,443

Average assets

$

1,383,736

$

1,371,269

$

1,324,845

$

1,317,586

$

1,319,777

Average stockholders' equity

154,988

154,115

157,492

156,147

155,057

(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 which include: tangible assets; tangible book value per share; tangible equity to tangible assets ratio; and the ratio of the ALLL excluding PPP loans. 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 certain items 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 table provides a reconciliation between the GAAP and non-GAAP measures:

Sep 30, 2020

Jun 30, 2020

Mar 31, 2020

Dec 31, 2019

Sep 30, 2019

(Dollars in thousands, except per share data)

Tangible equity to tangible assets and tangible book value per share:

Total stockholders' equity (GAAP)

$

154,778

$

153,976

$

153,092

$

156,319

$

155,102

Less:

Goodwill

889

889

889

889

889

Core deposit intangible

860

896