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First Financial Northwest, Inc. Reports First Quarter Net Income of $1.9 Million or $0.19 per Diluted Share

RENTON, Wash., April 25, 2019 (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 March 31, 2019, of $1.9 million, or $0.19 per diluted share, compared to net income of $2.2 million, or $0.21 per diluted share, for the quarter ended December 31, 2018, and $6.8 million, or $0.66 per diluted share, for the quarter ended March 31, 2018.

“The flattening of the yield curve continues to present challenges, as evidenced by our interest expense increasing more rapidly than our interest income,” stated Joseph W. Kiley III, President and Chief Executive Officer. “A significant part of our strategy to improve our deposit mix and ultimately reduce our cost of funds is our expansion into new markets to further support deposit growth and diversification of our customer base. To this end, we opened an office at Kent Station during the quarter and I am pleased to announce that we recently signed a lease to open an office in Kirkland, continuing our expansion along the I-405 corridor east of Seattle,” continued Kiley. “Finally, as previously announced, we are pleased to add Patricia Remch to our Board of Directors. Her extensive experience will be an asset to our Board of Directors and we look forward to her contributions,” concluded Kiley.

Net loans receivable increased to $1.05 billion at March 31, 2019, compared to $1.02 billion at December 31, 2018, and $991.1 million at March 31, 2018. The average balance of net loans receivable totaled $1.03 billion for the quarter ended March 31, 2019, compared to $1.01 billion for the quarter ended December 31, 2018, and $985.8 million for the quarter ended March 31, 2018.

The Company recorded a $400,000 provision for loan losses in the quarter ended March 31, 2019, compared to a provision for loan losses of $200,000 in the quarter ended December 31, 2018, and a recapture of provision for loan losses of $4.0 million in the quarter ended March 31, 2018. The provision in the quarter ended March 31, 2019, was due primarily to growth in net loans receivable, while the provision for loan losses in the quarter ended December 31, 2018, was due primarily to growth in net loans receivable and a change in loan mix. The recapture of provision for loan losses in the quarter ended March 31, 2018, was due primarily to $4.3 million in recoveries received during the quarter of loans previously charged off.

Additional highlights for the quarter ended March 31, 2019:

  • Net loans receivable increased to $1.05 billion at March 31, 2019, compared to $1.02 billion at December 31, 2018, and $991.1 million at March 31, 2018.

  • Total deposits increased to $955.3 million at March 31, 2019, compared to $939.0 million at December 31, 2018, and $863.2 million at March 31, 2018.

  • The Company’s book value per share was $14.50 at March 31, 2019, compared to $14.35 at December 31, 2018, and $13.80 at March 31, 2018.

  • The Company repurchased 263,800 shares during the quarter at an average price of $15.76 per share pursuant to its stock repurchase plan. Since the plan commenced on November 5, 2018, a total of 467,700 shares have been repurchased through March 31, 2019, at an average price of $15.62. The current stock repurchase plan expires on May 3, 2019, and there are 82,300 shares that still may be repurchased under this plan.

  • The Bank’s Tier 1 leverage and total capital ratios at March 31, 2019, were 10.3% and 14.4%, respectively, compared to 10.4% and 14.7% at December 31, 2018, and 10.4% and 14.4% at March 31, 2018.

  • Based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”), there was a $400,000 provision for loan losses during the quarter ended March 31, 2019.

The ALLL represented 1.30% of total loans receivable, net of undisbursed funds, at March 31, 2019, compared to 1.29% at December 31, 2018, and 1.31% at March 31, 2018. Nonperforming assets totaled $605,000 at March 31, 2019, compared to $1.2 million at December 31, 2018, and $658,000 at March 31, 2018. A total of $597,000 of nonperforming loans were paid off during the quarter ended March 31, 2019.

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

Mar 31,

Dec 31,

Mar 31,

Three
Month

One
Year

2019

2018

2018

Change

Change

(Dollars in thousands)

Nonperforming loans:

One-to-four family residential

$

107

$

382

$

125

$

(275

)

$

(18

)

Commercial real estate

-

326

-

(326

)

-

Consumer

44

44

50

-

(6

)

Total nonperforming loans

151

752

175

(601

)

(24

)

OREO

454

483

483

(29

)

(29

)

Total nonperforming assets (1)

$

605

$

1,235

$

658

$

(630

)

$

(53

)

Nonperforming assets as a percent of total assets

0.05

%

0.10

%

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 March 31, 2019.

OREO totaled $454,000 at March 31, 2019, compared to $483,000 at both December 31, 2018 and March 31, 2018. The change during the quarter ended March 31, 2019, represents a write down in value of the remaining OREO properties, which consisted of two undeveloped lots located in Pierce County.

In circumstances where a customer is experiencing significant financial difficulties, the Company may elect to restructure the loan so the customer can continue to make payments while minimizing the potential loss to the Company. Such restructures must be classified as TDRs. At March 31, 2019, TDRs totaled $7.8 million, compared to $9.4 million at December 31, 2018, and $16.2 million at March 31, 2018.

Net interest income for the quarter ended March 31, 2019, totaled $9.9 million, compared to $10.0 million for the quarter ended December 31, 2018, and $11.0 million for the quarter ended March 31, 2018. The decline from the December 31, 2018, quarter was a result of interest expense increasing more rapidly than interest income in the current flat yield curve environment. The quarter ended March 31, 2018, included an additional $1.0 million in interest income relating to payments received on loans previously charged off.

Total interest income increased to $14.6 million during the quarter ended March 31, 2019, compared to $14.3 million in the quarter ended December 31, 2018, and $14.1 million in the quarter ended March 31, 2018.

Total interest expense increased to $4.7 million for the quarter ended March 31, 2019, compared to $4.3 million for the quarter ended December 31, 2018, and $3.1 million for the quarter ended March 31, 2018. The higher level of interest expense in the quarter ended March 31, 2019, was due primarily to increases in short-term interest rates and a competitive market for attracting deposits. Advances from the Federal Home Loan Bank (“FHLB”) totaled $163.5 million at March 31, 2019, compared to $146.5 million at December 31, 2018, and $200.0 million at March 31, 2018. The Bank borrows from the FHLB to supplement its deposit gathering efforts when needed to support the Company’s growth. The average cost of FHLB advances was 2.26% for the quarter ended March 31, 2019, compared to 2.12% for the quarter ended December 31, 2018, and 1.66% for the quarter ended March 31, 2018. The balance of brokered certificates of deposits was $123.4 million at March 31, 2019, compared to $97.8 million at December 31, 2018, and $75.5 million at March 31, 2018. The primary reason for the increase in brokered deposits in the quarter ended March 31, 2019, was an opportunity to raise funds in the brokered deposit market at an interest rate of 2.34% for three months commencing in early March 2019. The Bank raised $35.0 million on those terms and used the funds to pay down approximately the same amount in overnight FHLB advances that cost approximately 2.60%.

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

Mar 31,
2019

Dec 31,
2018

Mar 31,
2018

Three
Month
Change

One Year
Change

Deposits:

(Dollars in thousands)

Noninterest-bearing

$

46,026

$

46,108

$

48,135

$

(82

)

$

(2,109

)

Interest-bearing demand

51,096

40,079

40,804

11,017

10,292

Statement savings

23,770

24,799

26,388

(1,029

)

(2,618

)

Money market

312,057

339,047

334,508

(26,990

)

(22,451

)

Certificates of deposit, retail (1)

398,956

391,174

337,906

7,782

61,050

Certificates of deposit, brokered

123,367

97,825

75,488

25,542

47,879

Total deposits

$

955,272

$

939,032

$

863,229

$

16,240

$

92,043

(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $49,000 at March 31, 2019, $58,000 at December 31, 2018, and $93,000 at March 31, 2018.

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

March 31, 2019

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

$

27,344

$

25,277

$

19,920

$

202,635

$

324,345

$

-

$

599,521

Landing

2,473

1,332

25

16,228

10,519

-

30,577

Woodinville (1)

1,522

3,324

628

14,719

6,814

-

27,007

Bothell

217

47

128

2,941

3,596

-

6,929

Crossroads

3,241

2,600

83

24,591

12,323

-

42,838

Kent (2)

7

1,565

1

4,946

638

7,157

Total King County

34,804

34,145

20,785

266,060

358,235

-

714,029

Snohomish County

Mill Creek

1,816

5,711

629

12,865

10,555

-

31,576

Edmonds

3,443

2,867

195

14,520

13,945

-

34,970

Clearview (1)

3,037

4,163

1,080

5,923

2,672

-

16,875

Lake Stevens (1)

1,627

1,935

490

4,046

3,942

-

12,040

Smokey Point (1)

1,299

2,275

591

8,643

9,607

-

22,415

Total Snohomish County

11,222

16,951

2,985

45,997

40,721

-

117,876

Total retail deposits

46,026

51,096

23,770

312,057

398,956

-

831,905

Brokered deposits

-

-

-

-

-

123,367

123,367

Total deposits

$

46,026

$

51,096

$

23,770

$

312,057

$

398,956

$

123,367

$

955,272

(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $49,000.

(2) Kent branch opened January 31, 2019.


December 31, 2018

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

$

29,355

$

18,896

$

20,694

$

228,475

$

318,705

$

-

$

616,125

Landing

2,453

495

256

17,853

10,480

-

31,537

Woodinville (1)

1,362

3,771

549

19,024

7,217

-

31,923

Bothell

198

97

100

2,636

3,066

-

6,097

Crossroads

2,530

3,199

83

24,383

11,474

-

41,669

Total King County

35,898

26,458

21,682

292,371

350,942

-

727,351

Snohomish County

Mill Creek

1,485

3,226

658

12,272

10,524

-

28,165

Edmonds

2,698

2,532

157

15,175

16,123

-

36,685

Clearview (1)

3,496

3,968

1,283

6,743

2,489

-

17,979

Lake Stevens (1)

1,415

1,702

428

3,926

3,644

-

11,115

Smokey Point (1)

1,116

2,193

591

8,560

7,452

-

19,912

Total Snohomish County

10,210

13,621

3,117

46,676

40,232

-

113,856

Total retail deposits

46,108

40,079

24,799

339,047

391,174

-

841,207

Brokered deposits

-

-

-

-

-

97,825

97,825

Total deposits

$

46,108

$

40,079

$

24,799

$

339,047

$

391,174

$

97,825

$

939,032

(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $58,000.

The net interest margin was 3.37% for the quarter ended March 31, 2019, compared to 3.41% for the quarter ended December 31, 2018, and 3.88% for the quarter ended March 31, 2018. The Company recorded $1.0 million in additional interest related to payments received on amounts previously charged off in the quarter ended March 31, 2018, which increased net interest margin for this period.

Noninterest income for the quarter ended March 31, 2019, totaled $700,000, compared to $728,000 in the quarter ended December 31, 2018, and $646,000 in the quarter ended March 31, 2018. An increase in BOLI income recognition and a decrease in other loan related fees essentially offset each other between the quarters ended March 31, 2019, and December 31, 2018. In addition, wealth management revenues were slightly lower in the quarter ended March 31, 2018.

Noninterest expense remained unchanged at $7.7 million, for both the quarters ended March 31, 2019, and December 31, 2018, and increased from $7.0 million in the quarter ended March 31, 2018. Noninterest expense for the quarter ended March 31, 2019, benefited from the receipt of a $125,000 insurance claim relating to the $225,000 fraud loss reported in the prior quarter. Noninterest expense increased from the prior year period due primarily to growth in the Bank’s number of locations in the last twelve months, including the opening of a new branch at The Junction in Bothell in April 2018 and at Kent Station in January 2019.

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 11 full-service banking offices. We are a part of the ABA NASDAQ Community Bank Index and the Russell 2000 Index. 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: increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC's website at www.sec.gov.

Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2019 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

Mar 31,
2019

Dec 31,
2018

Mar 31,
2018

Three
Month
Change

One Year
Change

Cash on hand and in banks

$

9,366

$

8,122

$

6,595

15.3

%

42.0

%

Interest-earning deposits

14,596

8,888

13,954

64.2

4.6

Investments available-for-sale, at fair value

138,658

142,170

142,872

(2.5

)

(2.9

)

Loans receivable, net of allowance of $13,808, $13,347 and $13,136 respectively

1,051,711

1,022,904

991,138

2.8

6.1

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

8,041

7,310

9,450

10.0

(14.9

)

Accrued interest receivable

4,861

4,068

3,981

19.5

22.1

Deferred tax assets, net

1,728

1,844

1,362

(6.3

)

26.9

Other real estate owned ("OREO")

454

483

483

(6.0

)

(6.0

)

Premises and equipment, net

21,370

21,331

21,208

0.2

0.8

Bank owned life insurance ("BOLI"), net

30,162

29,841

29,276

1.1

3.0

Prepaid expenses and other assets

4,947

3,458

3,922

43.1

26.1

Goodwill

889

889

889

0.0

0.0

Core deposit intangible

1,079

1,116

1,228

(3.3

)

(12.1

)

Total assets

$

1,287,862

$

1,252,424

$

1,226,358

2.8

%

5.0

%

Liabilities and Stockholders' Equity

Deposits

Noninterest-bearing deposits

$

46,026

$

46,108

$

48,135

(0.2

)%

(4.4

)%

Interest-bearing deposits

909,246

892,924

815,094

1.8

11.6

Total deposits

955,272

939,032

863,229

1.7

10.7

Advances from the FHLB

163,500

146,500

200,000

11.6

(18.3

)

Advance payments from borrowers for taxes and insurance

5,374

2,933

4,478

83.2

20.0

Accrued interest payable

478

478

270

0.0

77.0

Other liabilities

11,554

9,743

9,626

18.6

20.0

Total liabilities

1,136,178

1,098,686

1,077,603

3.4

5.4

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 shares 10,457,625 at March 31, 2019, 10,710,656 at December 31, 2018 and 10,779,424 at March 31, 2018

104

107

108

(2.8

)%

(3.7

)%

Additional paid-in capital

89,800

93,773

94,527

(4.2

)

(5.0

)

Retained earnings

67,568

66,343

60,767

1.8

11.2

Accumulated other comprehensive loss, net of tax

(1,838

)

(2,253

)

(1,568

)

(18.4

)

17.2

Unearned Employee Stock Ownership Plan ("ESOP") shares

(3,950

)

(4,232

)

(5,079

)

(6.7

)

(22.2

)

Total stockholders' equity

151,684

153,738

148,755

(1.3

)

2.0

Total liabilities and stockholders' equity

$

1,287,862

$

1,252,424

$

1,226,358

2.8

%

5.0

%


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Consolidated Income Statements

(Dollars in thousands, except share data)

(Unaudited)

Quarter Ended

Mar 31,
2019

Dec 31,
2018

Mar 31,
2018

Three
Month
Change

One Year
Change

Interest income

Loans, including fees

$

13,281

$

13,024

$

13,042

2.0

%

1.8

%

Investments available-for-sale

1,159

1,124

929

3.1

24.8

Interest-earning deposits with banks

40

61

38

(34.4

)

5.3

Dividends on FHLB Stock

91

115

104

(20.9

)

(12.5

)

Total interest income

14,571

14,324

14,113

1.7

3.2

Interest expense

Deposits

3,822

3,595

2,276

6.3

67.9

FHLB advances

897

726

853

23.6

5.2

Total interest expense

4,719

4,321

3,129

9.2

50.8

Net interest income

9,852

10,003

10,984

(1.5

)

(10.3

)

Provision (recapture of provision) for loan losses

400

200

(4,000

)

100.0

(110.0

)

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

9,452

9,803

14,984

(3.6

)

(36.9

)

Noninterest income

Net loss on sale of investments

(8

)

-

-

n/a

n/a

BOLI

269

96

249

180.2

8.0

Wealth management revenue

196

211

99

(7.1

)

98.0

Deposit related fees

171

178

161

(3.9

)

6.2

Loan related fees

63

235

134

(73.2

)

(53.0

)

Other

9

8

3

12.5

200.0

Total noninterest income

700

728

646

(3.8

)

8.4

Noninterest expense

Salaries and employee benefits

5,000

4,977

4,662

0.5

7.3

Occupancy and equipment

866

871

769

(0.6

)

12.6

Professional fees

496

415

328

19.5

51.2

Data processing

518

361

324

43.5

59.9

OREO related expenses, net

31

3

1

933.3

3,000.0

Regulatory assessments

137

111

155

23.4

(11.6

)

Insurance and bond premiums

105

88

106

19.3

(0.9

)

Marketing

86

75

107

14.7

(19.6

)

Other general and administrative

470

845

575

(44.4

)

(18.3

)

Total noninterest expense

7,709

7,746

7,027

(0.5

)

9.7

Income before federal income tax provision

2,443

2,785

8,603

(12.3

)

(71.6

)

Federal income tax provision

498

622

1,761

(19.9

)

(71.7

)

Net income

$

1,945

$

2,163

$

6,842

(10.1

)%

(71.6

)%

Basic earnings per share

$

0.19

$

0.21

$

0.67

Diluted earnings per share

$

0.19

$

0.21

$

0.66

Weighted average number of common shares outstanding

10,118,286

10,385,612

10,210,828

Weighted average number of diluted shares outstanding

10,220,900

10,484,350

10,336,566

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

March 31, 2019

December 31, 2018

March 31, 2018

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Commercial real estate:

Residential:

Micro-unit apartments

$

14,008

1.3

%

$

14,076

1.3

%

$

14,266

1.3

%

Other multifamily

153,835

13.3

155,279

13.8

176,126

16.2

Total multifamily

167,843

14.6

169,355

15.1

190,392

17.5

Non-residential:

Office

99,639

8.7

100,495

8.9

107,966

9.9

Retail

146,864

12.7

131,222

11.7

131,978

12.1

Mobile home park

15,697

1.4

16,003

1.4

20,783

1.9

Motel

27,882

2.4

28,035

2.5

13,521

1.2

Nursing Home

16,243

1.4

16,315

1.5

16,522

1.5

Warehouse

18,274

1.6

25,398

2.3

22,611

2.1

Storage

36,283

3.1

32,462

2.9

32,031

2.9

Other non-residential

23,804

2.1

23,889

2.1

21,362

2.0

Total non-residential

384,686

33.4

373,819

33.3

366,774

33.6

Construction/land development:

One-to-four family residential

84,191

7.3

86,604

7.7

97,779

9.0

Multifamily

87,748

7.6

83,642

7.4

85,773

7.9

Commercial

22,400

1.9

18,300

1.6

5,735

0.5

Land

6,965

0.6

6,740

0.7

13,299

1.2

Total construction/land development

201,304

17.4

195,286

17.4

202,586

18.6

One-to-four family residential:

Permanent owner occupied

194,648

16.9

194,141

17.3

162,544

14.9

Permanent non-owner occupied

156,684

13.6

147,825

13.2

133,351

12.2

Total one-to-four family residential

351,332

30.5

341,966

30.5

295,895

27.1

Business

Aircraft

11,860

1.0

11,058

1.0

10,514

1.0

Other business

21,653

1.9

19,428

1.7

13,723

1.2

Total business

33,513

2.9

30,486

2.7

24,237

2.2

Consumer

14,336

1.2

12,970

1.0

11,131

1.0

Total loans

1,153,014

100.0

%

1,123,882

100.0

%

1,091,015

100.0

%

Less:

Loans in Process ("LIP")

86,794

86,453

85,576

Deferred loan fees, net

701

1,178

1,165

ALLL

13,808

13,347

13,136

Loans receivable, net

$

1,051,711

$

1,022,904

$

991,138

Concentrations of credit: (1)

Construction loans as % of total capital

87.5

%

81.9

%

84.9

%

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

460.9

%

451.8

%

484.8

%

(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

At or For the Quarter Ended

Mar 31,

Dec 31,

Sep 30

Jun 30,

Mar 31,

2019

2018

2018

2018

2018

(Dollars in thousands, except per share data)

Performance Ratios:

Return on assets

0.63

%

0.69

%

0.90

%

1.01

%

2.28

%

Return on equity

5.16

5.54

7.17

8.28

19.16

Dividend payout ratio

42.11

38.10

29.63

26.67

10.47

Equity-to-assets ratio

11.78

12.28

12.53

12.46

12.13

Tangible equity ratio (1)

11.64

12.13

12.38

12.31

11.98

Net interest margin

3.37

3.41

3.46

3.50

3.88

Average interest-earning assets to average interest-bearing liabilities

113.87

114.27

115.20

114.21

113.46

Efficiency ratio

73.06

72.18

66.06

69.38

60.42

Noninterest expense as a percent of average total assets

2.48

2.49

2.33

2.44

2.34

Book value per share

$

14.50

$

14.35

$

14.17

$

13.97

$

13.80

Tangible book value per share (1)

14.32

14.17

13.99

13.78

13.60

Capital Ratios: (2)

Tier 1 leverage ratio

10.28

%

10.37

%

10.37

%

10.22

%

10.44

%

Common equity tier 1 capital ratio

13.13

13.43

13.58

13.21

13.13

Tier 1 capital ratio

13.13

13.43

13.58

13.21

13.13

Total capital ratio

14.38

14.68

14.83

14.47

14.38

Asset Quality Ratios: (3)

Nonperforming loans as a percent of total loans

0.01

%

0.07

%

0.05

%

0.02

%

0.02

%

Nonperforming assets as a percent of total assets

0.05

0.10

0.08

0.05

0.05

ALLL as a percent of total loans

1.30

1.29

1.30

1.27

1.31

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

(0.01

)

(0.00

)

(0.02

)

(0.00

)

(0.43

)

Allowance for Loan Losses:

ALLL, beginning of the quarter

$

13,347

$

13,116

$

12,754

$

13,136

$

12,882

Provision (Recapture of provision)

400

200

200

(400

)

(4,000

)

Charge-offs

-

-

-

-

-

Recoveries

61

31

162

18

4,254

ALLL, end of the quarter

$

13,808

$

13,347

$

13,116

$

12,754

$

13,136

(1) Tangible equity ratio and tangible book value are non-GAAP financial measures. Refer to page 11 for reconciliation between the GAAP and non‑GAAP financial measures.

(2) Capital ratios are for First Financial Northwest Bank only.

(3) Loans are reported net of undisbursed funds.


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Key Financial Measures (continued)

At or For the Quarter Ended

Mar 31,

Dec 31,

Sep 30

Jun 30,

Mar 31,

2019

2018

2018

2018

2018

(Dollars in thousands, except per share data)

Yields and Costs:

Yield on loans

5.22

%

5.13

%

5.05

%

5.00

%

5.37

%

Yield on investments available-for-sale

3.35

3.17

3.00

2.87

2.65

Yield on interest-earning deposits

2.50

2.27

1.92

1.48

1.32

Yield on FHLB stock

4.68

6.63

6.27

4.21

4.40

Yield on interest-earning assets

4.98

%

4.88

%

4.77

%

4.70

%

4.98

%

Cost of interest-bearing deposits

1.76

%

1.61

%

1.40

%

1.22

%

1.15

%

Cost of FHLB advances

2.26

2.12

2.05

1.92

1.66

Cost of interest-bearing liabilities

1.84

%

1.68

%

1.52

%

1.37

%

1.25

%

Cost of total deposits

1.67

%

1.53

%

1.31

%

1.15

%

1.09

%

Cost of funds

1.76

1.61

1.44

1.30

1.20

Average Balances:

Loans

$

1,031,994

$

1,006,905

$

993,272

$

997,059

$

985,799

Investments available-for-sale

140,433

140,568

140,584

141,035

142,236

Interest-earning deposits

6,484

10,653

12,223

11,927

11,717

FHLB stock

7,888

6,886

8,540

10,004

9,593

Total interest-earning assets

$

1,186,799

$

1,165,012

$

1,154,619

$

1,160,025

$

1,149,345

Interest-bearing deposits

$

881,260

$

883,672

$

825,055

$

801,852

$

804,451

Borrowings

160,950

135,886

177,250

213,857

208,544

Total interest-bearing liabilities

$

1,042,210

$

1,019,558

$

1,002,305

$

1,015,709

$

1,012,995

Noninterest-bearing deposits

$

47,002

$

47,580

$

53,982

$

50,145

$

46,071

Total deposits and borrowings

$

1,089,212

$

1,067,138

$

1,056,287

$

1,065,854

$

1,059,066

Average assets

$

1,258,902

$

1,236,460

$

1,225,189

$

1,229,341

$

1,218,418

Average stockholders' equity

152,850

154,958

154,444

150,243

144,786

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. The Company's intangible assets consist of goodwill and core deposit intangible. Tangible equity is calculated by subtracting intangible assets from total stockholder's 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 our 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:

Mar 31,
2019

Dec 31,
2018

Sep 30,
2018

Jun 30,
2018

Mar 31,
2018

(Dollars in thousands, except per share data)

Total stockholders' equity

$

151,684

$

153,738

$

154,713

$

152,554

$

148,755

Less:

Goodwill

889

889

889

889

889

Core deposit intangible

1,079

1,116

1,153

1,191

1,228

Tangible equity

$

149,716

$

151,733

$

152,671

$

150,474

$

146,638

Total assets

1,287,862

1,252,424

1,234,859

1,224,065

1,226,358

Less:

Goodwill

889

889

889

889

889

Core deposit intangible

1,079

1,116

1,153

1,191

1,228

Tangible assets

$

1,285,894

$

1,250,419

$

1,232,817

$

1,221,985

$

1,224,241

Common shares outstanding at period end

10,457,625

10,710,656

10,914,556

10,916,556

10,779,424

Equity to assets ratio

11.78

%

12.28

%

12.53

%

12.46

%

12.13

%

Tangible equity ratio

11.64

12.13

12.38

12.31

11.98

Book value per share

$

14.50

$

14.35

$

14.17

$

13.97

$

13.80

Tangible book value per share

14.32

14.17

13.99

13.78

13.60

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