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First Financial Northwest, Inc. Reports Second Quarter Net Income of $3.8 Million or $0.40 per Diluted Share

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RENTON, Wash., July 27, 2021 (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, 2021, of $3.8 million, or $0.40 per diluted share, compared to net income of $2.5 million, or $0.26 per diluted share, for the quarter ended March 31, 2021, and $2.1 million, or $0.22 per diluted share, for the quarter ended June 30, 2020. For the six months ended June 30, 2021, net income was $6.3 million, or $0.66 per diluted share, compared to net income of $3.8 million, or $0.39 per diluted share, for the comparable six-month period in 2020.

“I am pleased to report that we have no nonperforming loans and no loans over 30 days delinquent at June 30, 2021. During the quarter, a $2.0 million nonperforming loan paid off and our credit team continues to work diligently to maintain our excellent credit quality,” stated Joseph W. Kiley III, President and CEO. “In addition, we saw a further reduction in our cost of funds, with the average cost of deposits decreasing to 0.68% in the quarter ended June 30, 2021, compared to 0.85% in the quarter ended March 31, 2021, and 1.38% in the quarter ended June 30, 2020,” continued Kiley. “If market interest rates remain low, we expect this decline to continue as we have approximately $172.1 million in certificates of deposit maturing in the next 12 months and an additional $84.5 million of certificates of deposit maturing in the subsequent 12 months, all at a weighted average rate of 1.46%,” continued Kiley.

“As a result of our quarterly analysis of our loan portfolio, we downgraded to special mention $6.5 million of loans where we are a participating lender. These loans are secured by medical rehabilitation facilities and we expect improvement as elective medical procedures are currently being undertaken that were not available during the pandemic. In addition, we further downgraded $10.5 million in loans made to a single lending relationship to substandard. These substandard loans were analyzed for impairment and the analysis showed that no losses are anticipated from these loans. We also upgraded loans totaling $2.9 million in the quarter. As a result, we recorded a recapture of provision for loan losses of $700,000 during the quarter, compared to a provision for loan losses of $300,000 in the quarter ended March 31, 2021,” concluded Kiley.

Highlights for the quarter ended June 30, 2021:

  • Nonperforming loans reduced to none following resolution of a $2.0 million previously nonperforming multifamily loan.

  • The Company’s book value per share was $16.75, compared to $16.35 at March 31, 2021, and $15.32 at June 30, 2020.

  • The Company repurchased 43,430 shares at an average price of $14.21 per share during the quarter ended June 30, 2021, bringing the total to 132,449 shares repurchased at an average price of $13.42 per share under its most recent stock repurchase plan which went into effect February 1, 2021, and will expire no later than August 13, 2021.

  • The Company paid a regular quarterly cash dividend of $0.11 to shareholders.

  • The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 15.7%, respectively, at June 30, 2021, compared to 10.2% and 15.6%, respectively, at March 31, 2021, and 10.0% and 15.0% at June 30, 2020.

  • The Bank recorded a $700,000 recapture of provision for loan losses based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”) including the estimated impact of the COVID-19 pandemic.

Deposits totaled $1.13 billion at June 30, 2021, March 31, 2021, and June 30, 2020. The $52.3 million increase in money market deposits in the quarter ended June 30, 2021, more than offset the reduction in retail certificates of deposit based on strategic deposit pricing from the quarter ended March 31, 2021.

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

Jun 30,
2021

Mar 31,
2021

Jun 30,
2020

Three
Month
Change

One
Year
Change

Deposits:

(Dollars in thousands)

Noninterest-bearing demand

$

111,240

$

114,437

$

91,593

$

(3,197

)

$

19,647

Interest-bearing demand

110,338

114,098

102,707

(3,760

)

7,631

Statement savings

21,281

20,470

18,946

811

2,335

Money market

552,964

500,619

429,987

52,345

122,977

Certificates of deposit, retail

338,479

384,031

450,487

(45,552

)

(112,008

)

Certificates of deposit, brokered

32,448

(32,448

)

Total deposits

$

1,134,302

$

1,133,655

$

1,126,168

$

647

$

8,134

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

June 30, 2021

Noninterest-bearing demand

Interest-bearing demand

Statement savings

Money market

Certificates of deposit, retail

Total

(Dollars in thousands)

King County

Renton

$

41,247

$

46,092

$

14,611

$

296,292

$

285,563

$

683,805

Landing

6,324

3,827

177

22,677

5,905

38,910

Woodinville

4,546

7,115

729

18,631

5,230

36,251

Bothell

2,565

2,314

110

7,450

1,481

13,920

Crossroads

10,952

9,504

85

53,510

4,911

78,962

Kent

6,311

8,131

1

23,699

296

38,438

Kirkland

6,577

354

2

5,199

25

12,157

Issaquah (1)

480

18

3

1,299

100

1,900

Total King County

79,002

77,355

15,718

428,757

303,511

904,343

Snohomish County

Mill Creek

5,275

3,343

1,288

16,616

7,954

34,476

Edmonds

12,962

9,983

688

38,773

13,439

75,845

Clearview

5,662

5,676

1,456

21,899

1,796

36,489

Lake Stevens

3,106

9,613

937

19,874

4,561

38,091

Smokey Point

3,834

3,874

1,135

24,999

7,216

41,058

Total Snohomish County

30,839

32,489

5,504

122,161

34,966

225,959

Pierce County

University Place

1,007

164

28

484

2

1,685

Gig Harbor

392

330

31

1,562

2,315

Total Pierce County

1,399

494

59

2,046

2

4,000

Total retail deposits

111,240

110,338

21,281

552,964

338,479

1,134,302

Total deposits

$

111,240

$

110,338

$

21,281

$

552,964

$

338,479

$

1,134,302

(1) Issaquah opened March 1, 2021.

March 31, 2021

Noninterest-bearing demand

Interest-bearing demand

Statement savings

Money market

Certificates of deposit, retail

Total

(Dollars in thousands)

King County

Renton

$

41,934

$

48,476

$

14,070

$

255,917

$

318,113

$

678,510

Landing

8,425

2,904

133

16,165

6,912

34,539

Woodinville

4,351

7,350

757

18,530

6,076

37,064

Bothell

3,056

1,160

55

6,286

2,646

13,203

Crossroads

10,515

13,881

72

59,995

6,023

90,486

Kent

6,752

7,508

1

22,924

346

37,531

Kirkland

8,144

157

18

4,400

12,719

Issaquah (1)

361

1

325

687

Total King County

83,538

81,436

15,107

384,542

340,116

904,739

Snohomish County

Mill Creek

4,811

4,258

1,414

14,553

8,286

33,322

Edmonds

13,210

8,672

615

37,765

17,910

78,172

Clearview

4,814

5,615

1,217

20,309

3,257

35,212

Lake Stevens

3,352

9,974

922

18,005

4,726

36,979

Smokey Point

3,418

3,690

1,098

22,330

9,736

40,272

Total Snohomish County

29,605

32,209

5,266

112,962

43,915

223,957

Pierce County

University Place

940

174

24

670

1,808

Gig Harbor

354

279

73

2,445

3,151

Total Pierce County

1,294

453

97

3,115

4,959

Total retail deposits

114,437

114,098

20,470

500,619

384,031

1,133,655

Total deposits

$

114,437

$

114,098

$

20,470

$

500,619

$

384,031

$

1,133,655

(1) Issaquah opened March 1, 2021.

Net loans receivable declined to $1.08 billion at June 30, 2021, from $1.10 billion at March 31, 2021, and $1.14 billion at June 30, 2020. Loan repayments and loan forgiveness of Paycheck Protection Program (“PPP”) loans totaling $16.4 million contributed to this reduction. The average balance of net loans receivable totaled $1.09 billion for the quarter ended June 30, 2021, compared to $1.10 billion for the quarter ended March 31, 2021, and $1.12 billion for the quarter ended June 30, 2020.

The Company recorded a $700,000 recapture of provision for loan losses in the quarter ended June 30, 2021, compared to a $300,000 provision for loan losses in both the quarters ended March 31, 2021, and June 30, 2020. During the quarter ended June 30, 2021, management evaluated the adequacy of the ALLL and concluded that a $700,000 recapture of provision for loan losses was appropriate. This recapture of provision was primarily attributed to the downgrade to substandard of $10.5 million of loans made to a single lending relationship secured by a facility housing bowling, roller skating and restaurant operations, and a separate hostel business, as these properties continue to be adversely impacted by government-imposed restrictions due to the pandemic. The impairment analysis on these properties showed no anticipated loss on these loans, resulting in a recapture of provision. In addition, upgrades to $2.9 million of loans and a reduction in loan balances contributed to the recapture of provision for the quarter ended June 30, 2021. Partially offsetting this recapture of provision, $6.5 million of loans secured by medical rehabilitation facilities were downgraded to special mention during the quarter.

The ALLL represented 1.35% of total loans receivable at June 30, 2021, compared to 1.39% of total loans receivable at March 31, 2021, and 1.20% of total loans receivable at June 30, 2020. Excluding Paycheck Protection Program (“PPP”) loan balances, which are 100% guaranteed by the Small Business Administration (“SBA”), the ALLL represented 1.39% of total loans receivable at June 30, 2021, compared to 1.45% of total loans receivable at March 31, 2021, and 1.25% of total loans receivable at June 30, 2020. 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.

There were no nonperforming loans at June 30, 2021, compared to $2.0 million at March 31, 2021, and $2.2 million at June 30, 2020. The prior quarter’s nonperforming loan balance consisted of a single multifamily loan in foreclosure that was sold and repaid in full in the second quarter. OREO remained unchanged at $454,000 at June 30, 2021, March 31, 2021, and June 30, 2020.

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

Jun 30,

Mar 31,

Jun 30,

Three
Month

One
Year

2021

2021

2020

Change

Change

(Dollars in thousands)

Nonperforming loans:

One-to-four family residential

$

$

$

87

$

$

(87

)

Multifamily

2,036

2,104

(2,036

)

(2,104

)

Total nonperforming loans

2,036

2,191

(2,036

)

(2,191

)

Other real estate owned (“OREO”)

454

454

454

Total nonperforming assets (1)

$

454

$

2,490

$

2,645

$

(2,036

)

$

(2,191

)

Nonperforming assets as a percent

of total assets

0.03

%

0.17

%

0.19

%

(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 the Bank’s TDRs were performing in accordance with their restructured terms at June 30, 2021.

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 borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. At June 30, 2021, TDRs totaled $3.6 million, compared to $3.8 million at March 31, 2021, and $4.3 million at June 30, 2020. All TDRs were performing according to their modified repayment terms for the periods presented. As discussed below, The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), signed into law on March 27, 2020, provided guidance on the modification of loans due to the COVID-19 pandemic, and 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. The Consolidated Appropriations Act, 2021 (“CAA”), signed into law on December 27, 2020, provided additional COVID relief and extended TDR relief to the earlier of 60 days after the national emergency termination date or January 1, 2022.

Net interest income totaled $11.3 million for the quarter ended June 30, 2021, compared to $10.7 million for the quarter ended March 31, 2021, and $10.1 million for the quarter ended June 30, 2020. The improvement was due to lower deposit-related interest expense and additional interest income from the payoff of the $2.0 million nonperforming loan in the quarter, as discussed below.

Total interest income was $13.6 million for the quarter ended June 30, 2021, compared to $13.5 million for the quarter ended March 31, 2021, and $14.1 million for the quarter ended June 30, 2020. The decrease in the current quarter compared to the quarter ended June 30, 2020, was primarily due to lower interest income on loans, including fees, as yields on loans continue to decline as loans either adjust downward or are refinanced in this low interest rate environment. In addition, rates on new loans and investments are lower than the average yield on existing interest-earning assets, which further adversely impacts interest income. The average balance of loans receivable declined by $6.7 million in the quarter ended June 30, 2021, compared to the quarter ended March 31, 2021, negatively impacting interest income. However, the quarter ended June 30, 2021, was positively impacted by the receipt of $394,000 in interest and late charges from the payoff of the $2.0 million nonperforming loan, resulting in a modest increase in total interest income from the quarter ended March 31, 2021.

Total interest expense was $2.3 million for the quarter ended June 30, 2021, compared to $2.7 million for the quarter ended March 31, 2021, and $4.0 million for the quarter ended June 30, 2020. The average cost of interest-bearing deposits declined to 0.75% for the quarter ended June 30, 2021, compared to 0.94% for the quarter ended March 31, 2021, and 1.49% for the quarter ended June 30, 2020. The decline from the quarter ended March 31, 2021, was due primarily to the repricing of maturing certificates of deposits to a lower interest rate and a reduction in the average balance of higher cost certificates of deposit. Advances from the FHLB remained unchanged at $120.0 million for the quarters ended June 30, 2021, March 31, 2021, and June 30, 2020. The FHLB advances are tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Bank’s interest rate risk management efforts. The average cost of borrowings was 1.37% for the quarter ended June 30, 2021, compared to 1.41% for the quarter ended March 31, 2021, and 1.08% for the quarter ended June 30, 2020.

The net interest margin was 3.36% for the quarter ended June 30, 2021, compared to 3.31% for the quarter ended March 31, 2021, and 3.12% for the quarter ended June 30, 2020. The expansion in the net interest margin is due to a number of factors, including the 17 basis point reduction in the Company’s average cost of interest-bearing liabilities during the quarter to 0.82% from 0.99% for the quarter ended March 31, 2021, and a 62 basis point reduction from 1.44% for the quarter ended June 30, 2020. Offsetting this improvement was a nine basis point reduction in the average yield on interest-earning assets to 4.06% for the quarter ended June 30, 2021, from 4.15% for the quarter ended March 31, 2021, and a 31 basis point reduction from 4.37% for the quarter ended June 30, 2020. These asset yields were impacted by net deferred fee recognition on PPP loans, with the recognition of previously unamortized deferred fees and costs on forgiven PPP loans totaling $512,000 in the quarter ended June 30, 2021, compared to $718,000 in the quarter ended March 31, 2021. At June 30, 2021, the balance of net deferred fees relating to PPP loans totaled $1.1 million, which will be recognized in future periods. In addition, the payoff of the $2.0 million nonperforming loan resulted in recognition of $394,000 in interest and late charge income during the quarter, further contributing to the improvement in the net interest margin for the quarter ended June 30, 2021.

Noninterest income for the quarter ended June 30, 2021, totaled $972,000, compared to $764,000 for the quarter ended March 31, 2021, and $789,000 for the quarter ended June 30, 2020. The increase in noninterest income for the quarter ended June 30, 2021, compared to the quarter ended March 31, 2021, was primarily due to higher loan related fees in the current quarter, including an increase of $162,000 in prepayment penalty income.

Noninterest expense totaled $8.2 million for the quarter ended June 30, 2021, compared to $8.1 million for the quarter ended March 31, 2021, and $7.9 million for the quarter ended June 30, 2020. Salaries and employee benefits for the quarter ended June 30, 2021, increased $117,000 compared to the quarter ended March 31, 2021, while occupancy and equipment increased $87,000 between the same periods, due to various maintenance items. In addition, the aforementioned payoff of a nonperforming loan resulted in an $84,000 reimbursement of legal fees, contributing to the reduction in professional fees during the quarter ended June 30, 2021.

COVID-19 Related Information

The Bank is committed to assisting its customers and communities in response to the COVID-19 pandemic, including providing certain short-term loan modifications and participating in the PPP as an SBA lender. The Bank continues to work with its loan customers and manage its portfolio through the ongoing uncertainty surrounding the impact, duration and government response to the crisis.

Paycheck Protection Program
The SBA provided assistance to small businesses impacted by COVID-19 through the PPP, which was designed to provide near-term relief to help small businesses sustain operations. The SBA deadline for the final round of PPP loan applications was May 31, 2021. As of June 30, 2021, there were 275 PPP loans outstanding totaling $30.8 million, compared to 324 PPP loans outstanding totaling $45.2 million as of March 31, 2021, and 372 PPP loans totaling $41.3 million as of December 31, 2020. As of June 30, 2021, 211 PPP loans have an outstanding balance of $150,000 or less, totaling $10.0 million, or 32.4% of total PPP loans outstanding, including 135 loans representing $3.1 million with an outstanding balance of $50,000 or less. As of June 30, 2021, 457 PPP loans totaling $46.7 million were approved for forgiveness under the PPP loan program.

Modifications
The primary method of relief is to allow borrowers to defer their loan payments for three to six months, while certain borrowers are allowed to pay interest only or were granted 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 COVID-19 pandemic from being treated as TDRs. Recent legislation extended this accounting treatment through the earlier of 60 days after the national emergency termination date or January 1, 2022. The following table provides detail on the balance of loans remaining on deferral status as of June 30, 2021:

As of June 30, 2021

Balance of loans with modifications of 4-6 months

Balance of loans with modifications of greater than 6 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

$

-

$

1,063

$

1,063

$

370,935

0.3

%

Multifamily

-

-

-

142,881

-

Commercial real estate:

Office

-

7,153

7,153

83,120

8.6

Retail

-

3,972

3,972

103,175

3.8

Mobile home park

-

-

-

26,894

-

Hotel/motel

-

16,613

16,613

65,446

25.4

Nursing home

-

6,368

6,368

12,818

49.7

Warehouse

-

-

-

17,217

-

Storage

-

-

-

33,332

-

Other non-residential

-

-

-

28,704

-

Total commercial real estate

-

34,106

34,106

370,706

9.2

Construction/land

-

-

-

104,922

-

Business:

Aircraft

-

-

-

9,315

-

SBA

-

-

-

884

-

PPP

-

-

-

30,823

-

Other business

-

-

-

26,409

-

Total business

-

-

-

67,431

-

Consumer:

Classic/collectible auto

-

-

-

30,593

-

Other consumer

-

-

-

10,752

-

Total consumer

-

-

-

41,345

-

Total loans with COVID-19 pandemic modifications

$

-

$

35,169

$

35,169

$

1,098,220

3.2

%

Total loans with modifications granted were $35.2 million, or 3.2% of total loans outstanding at June 30, 2021, a decrease from $56.7 million, or 5.1% of total loans outstanding at March 31, 2021, and $132.1 million, or 11.4% of total loans outstanding at June 30, 2020. The decline in the current quarter is due to the improvement in economic conditions in our market areas, and the return to regular payments for many of our loan customers. As of June 30, 2021, all of these loans had been granted modifications of greater than six months.

Additional Loan Portfolio Details
The Bank is monitoring its loan portfolio for potentially delinquent loans that have not requested a loan modification qualifying under the CARES Act or regulatory guidance. The following table presents the loan to value (“LTV”) ratios of select segments of its loan portfolio at June 30, 2021, that may be more likely to be impacted by COVID-19 pandemic considerations. 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:

As of June 30, 2021

LTV 0-60%

LTV 61-75%

LTV 76%+

Total

Average LTV

Category: (1)

(Dollars in thousands)

One-to-four family

$

241,997

$

144,389

$

20,672

$

407,058

46.89

%

Church

1,351

-

-

1,351

45.61

Classic/collectible auto

5,781

12,454

12,358

30,593

77.24

Gas station

3,463

-

499

3,962

50.31

Hotel/motel

54,160

11,286

-

65,446

59.70

Marina

7,754

-

-

7,754

37.72

Mobile home park

18,854

7,665

375

26,894

45.64

Nursing home

12,818

-

-

12,818

24.58

Office

44,651

38,190

4,245

87,086

40.19

Other non-residential

13,396

2,241

-

15,637

44.90

Retail

72,122

31,053

-

103,175

48.23

Storage

24,342

11,079

-

35,421

43.74

Warehouse

15,084

2,133

-

17,217

47.91

(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 collateral type 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 15 full-service banking offices. For additional information about us, please visit our website at ffnwb.com and click on the “Investor Relations” link at the bottom of the page.

Forward-looking statements:
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. 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 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 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 2021 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

Jun 30,
2021

Mar 31,
2021

Jun 30,
2020

Three
Month
Change

One
Year
Change

Cash on hand and in banks

$

7,518

$

7,211

$

7,688

4.3

%

(2.2

)%

Interest-earning deposits with banks

72,045

75,023

66,250

(4.0

)

8.7

Investments available-for-sale, at fair value

187,873

168,042

128,874

11.8

45.8

Annuity held-to-maturity, at amortized cost

2,419

2,413

2,395

0.2

1.0

Loans receivable, net of allowance of $14,878, $15,502, and $13,836 respectively

1,081,640

1,098,832

1,138,243

(1.6

)

(5.0

)

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

6,465

6,465

6,410

0.0

0.9

Accrued interest receivable

5,498

5,702

4,981

(3.6

)

10.4

Deferred tax assets, net

688

1,163

2,007

(40.8

)

(65.7

)

Other real estate owned ("OREO")

454

454

454

0.0

0.0

Premises and equipment, net

22,567

22,512

22,222

0.2

1.6

Bank owned life insurance ("BOLI"), net

35,536

33,357

32,561

6.5

9.1

Prepaid expenses and other assets

2,332

3,398

1,513

(31.4

)

54.1

Right of use asset ("ROU"), net

4,025

3,976

2,972

1.2

35.4

Goodwill

889

889

889

0.0

0.0

Core deposit intangible, net

754

789

896

(4.4

)

(15.8

)

Total assets

$

1,430,703

$

1,430,226

$

1,418,355

0.0

%

0.9

%

Liabilities and Stockholders' Equity

Deposits

Noninterest-bearing deposits

$

111,240

$

114,437

$

91,593

(2.8

)%

21.5

%

Interest-bearing deposits

1,023,062

1,019,218

1,034,575

0.4

(1.1

)

Total deposits

1,134,302

1,133,655

1,126,168

0.1

0.7

Advances from the FHLB

120,000

120,000

120,000

0.0

0.0

Advance payments from borrowers for taxes and insurance

2,616

4,813

2,475

(45.6

)

5.7

Lease liability, net

4,176

4,123

3,070

1.3

36.0

Accrued interest payable

193

197

218

(2.0

)

(11.5

)

Other liabilities

7,795

8,995

12,448

(13.3

)

(37.4

)

Total liabilities

1,269,082

1,271,783

1,264,379

(0.2

)

0.4

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 9,651,180 shares at June 30, 2021, 9,692,610 shares at March 31, 2021, and 10,048,961 shares at June 30, 2020

97

97

100

0.0

(3.0

)

Additional paid-in capital

80,770

81,099

85,119

(0.4

)

(5.1

)

Retained earnings

82,224

79,455

75,181

3.5

9.4

Accumulated other comprehensive loss, net of tax

(59

)

(515

)

(3,885

)

(88.5

)

(98.5

)

Unearned Employee Stock Ownership Plan ("ESOP") shares

(1,411

)

(1,693

)

(2,539

)

(16.7

)

(44.4

)

Total stockholders' equity

161,621

158,443

153,976

2.0

5.0

Total liabilities and stockholders' equity

$

1,430,703

$

1,430,226

$

1,418,355

0.0

%

0.9

%


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)

Quarter Ended

Jun 30,
2021

Mar 31,
2021

Jun 30,
2020

Three
Month
Change

One
Year
Change

Interest income

Loans, including fees

$

12,641

$

12,624

$

13,183

0.1

%

(4.1

)%

Investments available-for-sale

850

735

796

15.6

6.8

Investments held-to-maturity

4

13

9

(69.2

)

(55.6

)

Interest-earning deposits with banks

17

12

8

41.7

112.5

Dividends on FHLB Stock

83

79

81

5.1

2.5

Total interest income

13,595

13,463

14,077

1.0

(3.4

)

Interest expense

Deposits

1,915

2,299

3,666

(16.7

)

(47.8

)

Other borrowings

413

418

344

(1.2

)

20.1

Total interest expense

2,328

2,717

4,010

(14.3

)

(41.9

)

Net interest income

11,267

10,746

10,067

4.8

11.9

(Recapture of provision) provision for loan losses

(700

)

300

300

(333.3

)

(333.3

)

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

11,967

10,446

9,767

14.6

22.5

Noninterest income

Net gain on sale of investments

-

-

69

n/a

(100.0

)

BOLI income

246

269

254

(8.6

)

(3.1

)

Wealth management revenue

167

160

183

4.4

(8.7

)

Deposit related fees

227

200

184

13.5

23.4

Loan related fees

281

132

97

112.9

189.7

Other

51

3

2

1600.0

2450.0

Total noninterest income

972

764

789

27.2

23.2

Noninterest expense

Salaries and employee benefits

5,062

4,945

4,801

2.4

5.4

Occupancy and equipment

1,187

1,100

1,031

7.9

15.1

Professional fees

389

532

455

(26.9

)

(14.5

)

Data processing

680

697

687

(2.4

)

(1.0

)

OREO related expenses, net

-

1

5

(100.0

)

(100.0

)

Regulatory assessments

113

121

127

(6.6

)

(11.0

)

Insurance and bond premiums

111

124

103

(10.5

)

7.8

Marketing

23

29

29

(20.7

)

(20.7

)

Other general and administrative

625

580

706

7.8

(11.5

)

Total noninterest expense

8,190

8,129

7,944

0.8

3.1

Income before federal income tax provision

4,749

3,081

2,612

54.1

81.8

Federal income tax provision

939

584

469

60.8

100.2

Net income

3,810

$

2,497

$

2,143

52.6

%

77.8

%

Basic earnings per share

$

0.40

$

0.26

$

0.22

Diluted earnings per share

$

0.40

$

0.26

$

0.22

Weighted average number of common shares outstanding

9,434,004

9,490,058

9,808,854

Weighted average number of diluted shares outstanding

9,528,623

9,566,671

9,819,664



FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)

Six Months Ended
June 30,

2021

2020

One Year
Change

Interest income

Loans, including fees

$

25,265

$

26,657

(5.2

)%

Investments available-for-sale

1,586

1,715

(7.5

)

Investments held-to-maturity

16

11

45.5

Interest-earning deposits with banks

29

37

(21.6

)

Dividends on FHLB Stock

162

157

3.2

Total interest income

27,058

28,577

(5.3

)

Interest expense

Deposits

4,213

8,032

(47.5

)

Other borrowings

832

814

2.2

Total interest expense

5,045

8,846

(43.0

)

Net interest income

22,013

19,731

11.6

(Recapture of provision) provision for loan losses

(400

)

600

(166.7

)

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

22,413

19,131

17.2

Noninterest income

Net gain on sale of investments

-

69

(100.0

)

BOLI income

515

509

1.2

Wealth management revenue

327

348

(6.0

)

Deposit related fees

426

359

18.7

Loan related fees

413

489

(15.5

)

Other

55

4

1275.0

Total noninterest income

1,736

1,778

(2.4

)

Noninterest expense

Salaries and employee benefits

10,007

10,013

(0.1

)

Occupancy and equipment

2,286

2,103

8.7

Professional fees

921

885

4.1

Data processing

1,377

1,381

(0.3

)

OREO related expenses, net

1

6

(83.3

)

Regulatory assessments

235

271

(13.3

)

Insurance and bond premiums

235

223

5.4

Marketing

53

93

(43.0

)

Other general and administrative

1,204

1,236

(2.6

)

Total noninterest expense

16,319

16,211

0.7

Income before federal income tax provision

7,830

4,698

66.7

Federal income tax provision

1,523

871

74.9

Net income

$

6,307

$

3,827

64.8

%

Basic earnings per share

$

0.66

$

0.39

Diluted earnings per share

$

0.66

$

0.39

Weighted average number of common shares outstanding

9,461,876

9,852,544

Weighted average number of diluted shares outstanding

9,546,784

9,890,239

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

June 30, 2021

March 31, 2021

June 30, 2020

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Commercial real estate:

Residential:

Micro-unit apartments

$

11,652

1.1

%

$

11,708

1.0

%

$

11,177

1.0

%

Other multifamily

131,229

11.9

128,360

11.5

148,194

12.8

Total multifamily residential

142,881

13.0

140,068

12.5

159,371

13.8

Non-residential:

Office

83,120

7.6

83,176

7.5

83,439

7.3

Retail

103,175

9.4

110,843

9.9

121,936

10.6

Mobile home park

26,894

2.4

29,708

2.7

25,961

2.2

Hotel / motel

65,446

6.0

65,475

5.9

68,165

5.9

Nursing Home

12,818

1.2

12,852

1.1

11,768

1.0

Warehouse

17,217

1.6

17,435

1.6

17,422

1.5

Storage

33,332

3.0

33,498

3.0

36,266

3.1

Other non-residential

28,704

2.5

32,483

2.8

25,793

2.2

Total non-residential

370,706

33.7

385,470

34.5

390,750

33.8

Construction/land:

One-to-four family residential

36,123

3.3

27,817

2.5

45,128

3.9

Multifamily

56,090

5.1

58,718

5.3

40,120

3.5

Commercial

6,056

0.6

5,837

0.5

6,134

0.5

Land development

6,653

0.6

2,173

0.2

5,115

0.4

Total construction/land

104,922

9.6

94,545

8.5

96,497

8.3

One-to-four family residential:

Permanent owner occupied

191,906

17.5

199,845

17.9

208,484

18.1

Permanent non-owner occupied

179,029

16.3

179,401

16.1

173,729

15.1

Total one-to-four family residential

370,935

33.8

379,246

34.0

382,213

33.2

Business

Aircraft

9,315

0.8

9,512

0.8

15,460

1.3

Small Business Administration ("SBA")

884

0.1

906

0.1

737

0.1

Paycheck Protection Plan ("PPP")

30,823

2.8

45,220

4.1

51,661

4.5

Other business

26,409

2.4

22,656

2.0

18,212

1.6

Total business

67,431

6.1

78,294

7.0

86,070

7.5

Consumer

Classic auto

30,593

2.8

26,488

2.4

24,767

2.1

Other consumer

10,752

1.0

12,280

1.1

14,464

1.3

Total consumer

41,345

3.8

38,768

3.5

39,231

3.4

Total loans

1,098,220

100.0

%

1,116,391

100.0

%

1,154,132

100.0

%

Less:

Deferred loan fees, net

1,702

2,057

2,053

ALLL

14,878

15,502

13,836

Loans receivable, net

$

1,081,640

$

1,098,832

$

1,138,243

Concentrations of credit: (1)

Construction loans as % of total capital

69.3

%

64.0

%

67.3

%

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

384.4

%

391.8

%

420.7

%

(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,

2021

2021

2020

2020

2020

(Dollars in thousands, except per share data)

Performance Ratios: (1)

Return on assets

1.07

%

0.73

%

0.77

%

0.60

%

0.63

%

Return on equity

9.54

6.42

6.76

5.34

5.59

Dividend payout ratio

27.50

42.31

35.71

45.45

45.45

Equity-to-total assets

11.30

11.08

11.26

11.34

10.86

Tangible equity-to-tangible assets (2)

11.19

10.97

11.15

11.22

10.74

Net interest margin

3.36

3.31

3.29

3.07

3.12

Average interest-earning assets to average interest-bearing liabilities

117.99

117.92

116.42

116.08

115.96

Efficiency ratio

66.92

70.63

68.55

70.88

73.18

Noninterest expense as a percent of average total assets

2.31

2.36

2.46

2.26

2.33

Book value per common share

$

16.75

$

16.35

$

16.05

$

15.62

$

15.32

Tangible book value per share (2)

16.58

16.17

15.88

15.44

15.14

Capital Ratios: (3)

Tier 1 leverage ratio

10.15

%

10.15

%

10.29

%

10.03

%

10.02

%

Common equity tier 1 capital ratio

14.45

14.36

14.32

14.01

13.70

Tier 1 capital ratio

14.45

14.36

14.32

14.01

13.70

Total capital ratio

15.70

15.62

15.57

15.26

14.95

Asset Quality Ratios:

Nonperforming loans as a percent of total loans

0.00

0.18

0.19

0.18

0.19

Nonperforming assets as a percent of total assets

0.03

0.17

0.18

0.19

0.19

ALLL as a percent of total loans

1.35

1.39

1.36

1.27

1.20

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

(0.01

)

(0.00

)

(0.00

)

(0.00

)

(0.00

)

Allowance for Loan Losses:

ALLL, beginning of the quarter

$

15,502

$

15,174

$

14,568

$

13,836

$

13,530

Provision

(700

)

300

600

700

300

Charge-offs

-

-

(2

)

-

-

Recoveries

76

28

8

32

6

ALLL, end of the quarter

$

14,878

$

15,502

$

15,174

$

14,568

$

13,836

(1) Performance ratios are calculated on an annualized basis.
(2) Tangible equity excludes goodwill and core deposit intangible assets. Tangible assets exclude goodwill and other intangible assets. The tangible equity-to-tangible assets ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.
(3) Capital ratios are for First Financial Northwest Bank only.


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,

2021

2021

2020

2020

2020

(Dollars in thousands, except per share data)

Yields and Costs: (1)

Yield on loans

4.64

%

4.66

%

4.61

%

4.49

%

4.72

%

Yield on investments available-for-sale

1.92

1.91

2.21

2.32

2.41

Yield on investments held-to-maturity

0.66

2.18

0.99

0.99

1.52

Yield on interest-earning deposits

0.11

0.09

0.11

0.10

0.10

Yield on FHLB stock

5.13

5.00

4.99

4.95

4.84

Yield on interest-earning assets

4.06

%

4.15

%

4.26

%

4.16

%

4.37

%

Cost of interest-bearing deposits

0.75

%

0.94

%

1.12

%

1.27

%

1.49

%

Cost of borrowings

1.37

1.41

1.40

1.28

1.08

Cost of interest-bearing liabilities

0.82

%

0.99

%

1.15

%

1.27

%

1.44

%

Cost of total deposits

0.68

%

0.85

%

1.03

%

1.18

%

1.38

%

Cost of funds

0.75

0.91

1.07

1.19

1.34

Average Balances:

Loans

$

1,092,710

$

1,099,364

$

1,126,554

$

1,137,742

$

1,122,913

Investments available-for-sale

177,713

155,795

127,456

128,885

133,038

Investments held-to-maturity

2,415

2,413

2,410

2,399

2,378

Interest-earning deposits

64,035

52,336

26,092

32,701

30,989

FHLB stock

6,485

6,412

6,459

6,592

6,736

Total interest-earning assets

$

1,343,358

$

1,316,320

$

1,288,971

$

1,308,319

$

1,296,054

Interest-bearing deposits

$

1,018,083

$

996,295

$

985,945

$

1,002,518

$

989,549

Borrowings

120,494

120,000

121,218

124,543

128,154

Total interest-bearing liabilities

1,138,577

1,116,295

1,107,163

1,127,061

1,117,703

Noninterest-bearing deposits

110,207

99,013

83,719

81,694

82,750

Total deposits and borrowings

$

1,248,784

$

1,215,308

$

1,190,882

$

1,208,755

$

1,200,453

Average assets

$

1,424,126

$

1,394,213

$

1,366,061

$

1,383,736

$

1,371,269

Average stockholders' equity

160,189

157,856

155,765

154,988

154,115

(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 that include tangible equity; tangible assets; tangible book value per share; tangible equity-to-tangible assets; and ALLL as a percent of total loans 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 tables provide a reconciliation between the GAAP and non-GAAP measures:

Quarter Ended

Jun 30, 2021

Mar 31, 2021

Dec 31, 2020

Sep 30, 2020

Jun 30, 2020

(Dollars in thousands, except per share data)

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

Total stockholders' equity (GAAP)

$

161,621

$

158,443

$

156,302

$

154,778

$

153,976

Less:

Goodwill

889

889

889

889

889

Core deposit intangible, net

754

789

824

860

896

Tangible equity (Non-GAAP)

$

159,978

$

156,765

$

154,589

$

153,029

$

152,191

Total assets (GAAP)

$

1,430,703

$

1,430,226

$

1,387,669

$

1,365,469

$

1,418,355

Less:

Goodwill

889

889

889

889

889

Core deposit intangible, net

754

789

824

860

896

Tangible assets (Non-GAAP)

$

1,429,060

$

1,428,548

$

1,385,956

$

1,363,720

$

1,416,570

Common shares outstanding at period end

9,651,180

9,692,610

9,736,875

9,911,607

10,048,961

Equity-to-total assets (GAAP)

11.30

%

11.08

%

11.26

%

11.34

%

10.86

%

Tangible equity-to-tangible assets (Non-GAAP)

11.19

10.97

11.15

11.22

10.74

Book value per share (GAAP)

$

16.75

$

16.35

$

16.05

$

15.62

$

15.32

Tangible book value per share (Non-GAAP)

16.58

16.17

15.88

15.44

15.14

ALLL on loans to total loans receivable, excluding PPP loans:

Allowance for loan losses

$

14,878

$

15,502

$

15,174

$

14,568

$

13,836

Total loans (GAAP)

$

1,098,220

$

1,116,391

$

1,117,410

$

1,150,481

$

1,154,132

Less:

PPP loans

30,823

45,220

41,251

52,045

51,661

Total loans excluding PPP loans (Non-GAAP)

$

1,067,397

$

1,071,171

$

1,076,159

$

1,098,436

$

1,102,471

ALLL as a percent of total loans (GAAP)

1.35

%

1.39

%

1.36

%

1.27

%

1.20

%

ALLL as a percent of total loans excluding PPP loans (Non-GAAP)

1.39

1.45

1.41

1.33

1.25

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