UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | |||
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
For the quarterly period ended June 30, |
or
☐ | |||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
For the transition period from _____ to _____ |
Commission File Number: 001-36741
FIRST NORTHWEST BANCORP
(Exact name of registrant as specified in its charter)
Washington | 46-1259100 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer I.D. Number) | |
105 West 8th Street, Port Angeles, Washington | 98362 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant's telephone number, including area code: | (360) 457-0461 |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: | Trading Symbol(s): | Name of each exchange on which registered: | ||
Common Stock, par value $0.01 per share | FNWB | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☒ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of July 31, 2019,August 4, 2020, there were 10,919,93210,302,737 shares of common stock, $.01$0.01 par value per share, outstanding.
FIRST NORTHWEST BANCORP
FORM 10-Q
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION | |
Page | |
Item 1 - Financial Statements (Unaudited) | |
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3 - Quantitative and Qualitative Disclosures About Market Risk | |
Item 4 - Controls and Procedures | |
PART II - OTHER INFORMATION | |
Item 1 - Legal Proceedings | |
Item 1A - Risk Factors | |
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3 - Defaults Upon Senior Securities | |
Item 4 - Mine Safety Disclosures | |
Item 5 - Other Information | |
Item 6 - Exhibits | |
SIGNATURES |
As used in this report, the terms, “we,” “our,” and “us,” and “Company” refer to First Northwest Bancorp ("First Northwest") and its consolidated subsidiary, unless the context indicates otherwise. When we refer to “First Federal” or the “Bank” in this report, we are referring to First Federal Savings and Loan Association of Port Angeles, the wholly owned subsidiary of First Northwest Bancorp.
PART I - FINANCIAL INFORMATION
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share information) (Unaudited)
June 30, 2020 | December 31, 2019 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 16,346 | $ | 13,519 | ||||
Interest-bearing deposits in banks | 33,242 | 35,220 | ||||||
Investment securities available for sale, at fair value | 364,273 | 315,580 | ||||||
Loans held for sale | 3,111 | 503 | ||||||
Loans receivable (net of allowance for loan losses of $12,109 and $9,628) | 986,351 | 878,437 | ||||||
Federal Home Loan Bank (FHLB) stock, at cost | 6,074 | 6,034 | ||||||
Accrued interest receivable | 5,360 | 3,931 | ||||||
Premises and equipment, net | 14,188 | 14,342 | ||||||
Mortgage servicing rights, net | 1,098 | 871 | ||||||
Bank-owned life insurance, net | 37,482 | 30,027 | ||||||
Prepaid expenses and other assets | 11,334 | 8,872 | ||||||
Total assets | $ | 1,478,859 | $ | 1,307,336 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Deposits | $ | 1,170,325 | $ | 1,001,645 | ||||
Borrowings | 112,379 | 112,930 | ||||||
Accrued interest payable | 253 | 373 | ||||||
Accrued expenses and other liabilities | 18,184 | 14,392 | ||||||
Advances from borrowers for taxes and insurance | 1,403 | 1,145 | ||||||
Total liabilities | 1,302,544 | 1,130,485 | ||||||
Shareholders' Equity | ||||||||
Preferred stock, $0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding | — | — | ||||||
Common stock, $0.01 par value, authorized 75,000,000 shares; issued and outstanding 10,432,963 shares at June 30, 2020, and 10,731,639 shares at December 31, 2019 | 103 | 107 | ||||||
Additional paid-in capital | 98,421 | 102,017 | ||||||
Retained earnings | 86,633 | 86,156 | ||||||
Accumulated other comprehensive income (loss), net of tax | 717 | (1,539 | ) | |||||
Unearned employee stock ownership plan (ESOP) shares | (9,559 | ) | (9,890 | ) | ||||
Total shareholders' equity | 176,315 | 176,851 | ||||||
Total liabilities and shareholders' equity | $ | 1,478,859 | $ | 1,307,336 |
ASSETS | June 30, 2019 | December 31, 2018 | |||||
Cash and due from banks | $ | 15,275 | $ | 15,430 | |||
Interest-bearing deposits in banks | 13,547 | 10,893 | |||||
Investment securities available for sale, at fair value | 250,051 | 262,967 | |||||
Investment securities held to maturity, at amortized cost | 37,990 | 43,503 | |||||
Loans held for sale | 2,516 | — | |||||
Loans receivable (net of allowance for loan losses of $9,731 and $9,533) | 873,958 | 863,852 | |||||
Federal Home Loan Bank (FHLB) stock, at cost | 6,773 | 6,927 | |||||
Accrued interest receivable | 4,094 | 4,048 | |||||
Premises and equipment, net | 14,719 | 15,255 | |||||
Mortgage servicing rights, net | 955 | 1,044 | |||||
Bank-owned life insurance, net | 29,607 | 29,319 | |||||
Prepaid expenses and other assets | 8,225 | 5,520 | |||||
Total assets | $ | 1,257,710 | $ | 1,258,758 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Deposits | $ | 933,265 | $ | 940,260 | |||
Borrowings | 131,337 | 136,552 | |||||
Accrued interest payable | 389 | 521 | |||||
Accrued expenses and other liabilities | 15,067 | 8,071 | |||||
Advances from borrowers for taxes and insurance | 1,251 | 1,090 | |||||
Total liabilities | 1,081,309 | 1,086,494 | |||||
Shareholders' Equity | |||||||
Preferred stock, $0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding | — | — | |||||
Common stock, $0.01 par value, authorized 75,000,000 shares; issued and outstanding 10,925,181 shares at June 30, 2019, and 11,170,018 shares at December 31, 2018 | 109 | 112 | |||||
Additional paid-in capital | 104,064 | 105,825 | |||||
Retained earnings | 83,795 | 81,607 | |||||
Accumulated other comprehensive loss, net of tax | (1,347 | ) | (4,731 | ) | |||
Unearned employee stock ownership plan (ESOP) shares | (10,220 | ) | (10,549 | ) | |||
Total shareholders' equity | 176,401 | 172,264 | |||||
Total liabilities and shareholders' equity | $ | 1,257,710 | $ | 1,258,758 |
See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data) (Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
INTEREST INCOME | ||||||||||||||||
Interest and fees on loans receivable | $ | 10,236 | $ | 10,473 | $ | 20,072 | $ | 20,565 | ||||||||
Interest on mortgage-backed securities | 740 | 1,192 | 1,699 | 2,449 | ||||||||||||
Interest on investment securities | 1,316 | 969 | 2,385 | 1,979 | ||||||||||||
Interest on deposits and other | 8 | 58 | 76 | 125 | ||||||||||||
FHLB dividends | 55 | 88 | 102 | 176 | ||||||||||||
Total interest income | 12,355 | 12,780 | 24,334 | 25,294 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Deposits | 2,041 | 2,068 | 4,179 | 3,992 | ||||||||||||
Borrowings | 201 | 1,036 | 635 | 2,026 | ||||||||||||
Total interest expense | 2,242 | 3,104 | 4,814 | 6,018 | ||||||||||||
Net interest income | 10,113 | 9,676 | 19,520 | 19,276 | ||||||||||||
PROVISION FOR LOAN LOSSES | 1,500 | 255 | 2,766 | 590 | ||||||||||||
Net interest income after provision for loan losses | 8,613 | 9,421 | 16,754 | 18,686 | ||||||||||||
NONINTEREST INCOME | ||||||||||||||||
Loan and deposit service fees | 765 | 995 | 1,646 | 1,900 | ||||||||||||
Mortgage servicing fees, net of amortization | (172 | ) | 54 | (157 | ) | 99 | ||||||||||
Net gain on sale of loans | 2,001 | 88 | 2,384 | 175 | ||||||||||||
Net gain on sale of investment securities | 661 | 57 | 1,266 | 57 | ||||||||||||
Increase in cash surrender value of bank-owned life insurance | 627 | 145 | 955 | 288 | ||||||||||||
Other income | 227 | 84 | 333 | 155 | ||||||||||||
Total noninterest income | 4,109 | 1,423 | 6,427 | 2,674 | ||||||||||||
NONINTEREST EXPENSE | ||||||||||||||||
Compensation and benefits | 5,966 | 4,753 | 11,327 | 9,326 | ||||||||||||
Data processing | 769 | 667 | 1,459 | 1,298 | ||||||||||||
Occupancy and equipment | 1,345 | 1,140 | 2,696 | 2,248 | ||||||||||||
Supplies, postage, and telephone | 284 | 242 | 495 | 470 | ||||||||||||
Regulatory assessments and state taxes | 223 | 195 | 397 | 364 | ||||||||||||
Advertising | 377 | 229 | 649 | 372 | ||||||||||||
Professional fees | 354 | 331 | 754 | 629 | ||||||||||||
FDIC insurance premium | 70 | 77 | 70 | 154 | ||||||||||||
FHLB prepayment penalty | — | — | 210 | — | ||||||||||||
Other expense | 894 | 638 | 1,607 | 1,211 | ||||||||||||
Total noninterest expense | 10,282 | 8,272 | 19,664 | 16,072 | ||||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 2,440 | 2,572 | 3,517 | 5,288 | ||||||||||||
PROVISION FOR INCOME TAXES | 464 | 493 | 668 | 1,002 | ||||||||||||
NET INCOME | $ | 1,976 | $ | 2,079 | $ | 2,849 | $ | 4,286 | ||||||||
Basic and diluted earnings per common share | $ | 0.21 | $ | 0.21 | $ | 0.30 | $ | 0.43 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
INTEREST INCOME | |||||||||||||||
Interest and fees on loans receivable | $ | 10,093 | $ | 8,952 | $ | 20,025 | $ | 17,535 | |||||||
Interest on mortgage-backed securities | 1,192 | 1,237 | 2,449 | 2,534 | |||||||||||
Interest on investment securities | 969 | 973 | 1,979 | 1,835 | |||||||||||
Interest on deposits and other | 58 | 41 | 125 | 86 | |||||||||||
FHLB dividends | 88 | 78 | 176 | 137 | |||||||||||
Total interest income | 12,400 | 11,281 | 24,754 | 22,127 | |||||||||||
INTEREST EXPENSE | |||||||||||||||
Deposits | 2,068 | 1,125 | 3,992 | 2,110 | |||||||||||
Borrowings | 1,036 | 997 | 2,026 | 1,886 | |||||||||||
Total interest expense | 3,104 | 2,122 | 6,018 | 3,996 | |||||||||||
Net interest income | 9,296 | 9,159 | 18,736 | 18,131 | |||||||||||
PROVISION FOR LOAN LOSSES | 255 | 395 | 590 | 705 | |||||||||||
Net interest income after provision for loan losses | 9,041 | 8,764 | 18,146 | 17,426 | |||||||||||
NONINTEREST INCOME | |||||||||||||||
Loan and deposit service fees | 1,375 | 915 | 2,440 | 1,808 | |||||||||||
Mortgage servicing fees, net of amortization | 54 | 70 | 99 | 132 | |||||||||||
Net gain on sale of loans | 88 | 150 | 175 | 317 | |||||||||||
Net gain on sale of investment securities | 57 | 13 | 57 | 135 | |||||||||||
Increase in cash surrender value of bank-owned life insurance | 145 | 149 | 288 | 298 | |||||||||||
Other income | 84 | 108 | 155 | 197 | |||||||||||
Total noninterest income | 1,803 | 1,405 | 3,214 | 2,887 | |||||||||||
NONINTEREST EXPENSE | |||||||||||||||
Compensation and benefits | 4,753 | 4,745 | 9,326 | 9,556 | |||||||||||
Data processing | 667 | 677 | 1,298 | 1,305 | |||||||||||
Occupancy and equipment | 1,140 | 1,127 | 2,248 | 2,229 | |||||||||||
Supplies, postage, and telephone | 242 | 243 | 470 | 474 | |||||||||||
Regulatory assessments and state taxes | 195 | 155 | 364 | 281 | |||||||||||
Advertising | 229 | 290 | 372 | 614 | |||||||||||
Professional fees | 331 | 458 | 629 | 780 | |||||||||||
FDIC insurance premium | 77 | 79 | 154 | 155 | |||||||||||
Other | 638 | 524 | 1,211 | 1,179 | |||||||||||
Total noninterest expense | 8,272 | 8,298 | 16,072 | 16,573 | |||||||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 2,572 | 1,871 | 5,288 | 3,740 | |||||||||||
PROVISION FOR INCOME TAXES | 493 | 345 | 1,002 | 691 | |||||||||||
NET INCOME | $ | 2,079 | $ | 1,526 | $ | 4,286 | $ | 3,049 | |||||||
Basic and diluted earnings per share | $ | 0.21 | $ | 0.15 | $ | 0.43 | $ | 0.29 | |||||||
See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS)
(In thousands) (Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
NET INCOME | $ | 1,976 | $ | 2,079 | $ | 2,849 | $ | 4,286 | ||||||||
Other comprehensive income: | ||||||||||||||||
Unrealized holding gains arising during the period | 12,018 | 2,313 | 4,121 | 4,343 | ||||||||||||
Income tax provision related to unrealized holding gains | (2,523 | ) | (487 | ) | (865 | ) | (914 | ) | ||||||||
Reclassification adjustment for gains on sales of securities realized in income | (661 | ) | (57 | ) | (1,266 | ) | (57 | ) | ||||||||
Income tax provision related to reclassification adjustment on sales of securities | 139 | 12 | 266 | 12 | ||||||||||||
Other comprehensive income, net of tax | 8,973 | 1,781 | 2,256 | 3,384 | ||||||||||||
COMPREHENSIVE INCOME | $ | 10,949 | $ | 3,860 | $ | 5,105 | $ | 7,670 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
NET INCOME | $ | 2,079 | $ | 1,526 | $ | 4,286 | $ | 3,049 | |||||||
Other comprehensive income (loss), net of tax | |||||||||||||||
Unrealized gain on securities: | |||||||||||||||
Unrealized holding gain (loss), net of tax provision (benefit) of $487, $(290), $914, and $(841), respectively | 1,826 | (1,100 | ) | 3,429 | (3,178 | ) | |||||||||
Reclassification adjustment for net (gain) loss on sales of securities realized in income, net of taxes of $(12), $3, $(12), and $(23), respectively | (45 | ) | 11 | (45 | ) | (85 | ) | ||||||||
Other comprehensive income (loss), net of tax | 1,781 | (1,089 | ) | 3,384 | (3,263 | ) | |||||||||
COMPREHENSIVE INCOME (LOSS) | $ | 3,860 | $ | 437 | $ | 7,670 | $ | (214 | ) |
See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Three Months Ended June 30, 20192020 and 2018
(Dollars in thousands, except share information) (Unaudited)
Common Stock | Additional Paid-in | Retained | Unearned ESOP | Accumulated Other Comprehensive (Loss) | Total Shareholders' | |||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Shares | Income, Net of Tax | Equity | ||||||||||||||||||||||
BALANCE, March 31, 2019 | 10,992,181 | $ | 110 | $ | 104,374 | $ | 82,436 | $ | (10,385 | ) | $ | (3,128 | ) | $ | 173,407 | |||||||||||||
Net income | 2,079 | 2,079 | ||||||||||||||||||||||||||
Common stock repurchased | (63,000 | ) | (1 | ) | (628 | ) | (392 | ) | (1,021 | ) | ||||||||||||||||||
Restricted stock award forfeitures | (4,000 | ) | — | — | — | |||||||||||||||||||||||
Other comprehensive income, net of tax | 1,781 | 1,781 | ||||||||||||||||||||||||||
Share-based compensation | 270 | 270 | ||||||||||||||||||||||||||
ESOP shares committed to be released | 48 | 165 | 213 | |||||||||||||||||||||||||
Cash dividends declared and paid ($0.03 per share) | (328 | ) | (328 | ) | ||||||||||||||||||||||||
BALANCE, June 30, 2019 | 10,925,181 | $ | 109 | $ | 104,064 | $ | 83,795 | $ | (10,220 | ) | $ | (1,347 | ) | $ | 176,401 | |||||||||||||
BALANCE, March 31, 2020 | 10,432,963 | $ | 104 | $ | 99,479 | $ | 85,549 | $ | (9,725 | ) | $ | (8,256 | ) | $ | 167,151 | |||||||||||||
Net income | 1,976 | 1,976 | ||||||||||||||||||||||||||
Common stock repurchased | (130,237 | ) | (1 | ) | (1,301 | ) | (370 | ) | (1,672 | ) | ||||||||||||||||||
Restricted stock award forfeitures net of grants | 23,500 | — | — | — | ||||||||||||||||||||||||
Other comprehensive income, net of tax | 8,973 | 8,973 | ||||||||||||||||||||||||||
Share-based compensation | 251 | 251 | ||||||||||||||||||||||||||
ESOP shares committed to be released | (8 | ) | 166 | 158 | ||||||||||||||||||||||||
Cash dividends declared and paid ($0.05 per share) | (522 | ) | (522 | ) | ||||||||||||||||||||||||
BALANCE, June 30, 2020 | 10,326,226 | $ | 103 | $ | 98,421 | $ | 86,633 | $ | (9,559 | ) | $ | 717 | $ | 176,315 |
Common Stock | Additional Paid-in | Retained | Unearned ESOP | Accumulated Other Comprehensive (Loss) | Total Shareholders' | |||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Shares | Income, Net of Tax | Equity | ||||||||||||||||||||||
BALANCE, December 31, 2018 | 11,170,018 | $ | 112 | $ | 105,825 | $ | 81,607 | $ | (10,549 | ) | $ | (4,731 | ) | $ | 172,264 | |||||||||||||
Net income | 4,286 | 4,286 | ||||||||||||||||||||||||||
Common stock repurchased | (240,837 | ) | (3 | ) | (2,405 | ) | (1,439 | ) | (3,847 | ) | ||||||||||||||||||
Restricted stock award forfeitures | (4,000 | ) | — | — | — | |||||||||||||||||||||||
Other comprehensive income, net of tax | 3,384 | 3,384 | ||||||||||||||||||||||||||
Share-based compensation | 553 | 553 | ||||||||||||||||||||||||||
ESOP shares committed to be released | 91 | 329 | 420 | |||||||||||||||||||||||||
Cash dividends declared and paid ($0.06 per share) | (659 | ) | (659 | ) | ||||||||||||||||||||||||
BALANCE, June 30, 2019 | 10,925,181 | $ | 109 | $ | 104,064 | $ | 83,795 | $ | (10,220 | ) | $ | (1,347 | ) | $ | 176,401 | |||||||||||||
BALANCE, December 31, 2019 | 10,731,639 | $ | 107 | $ | 102,017 | $ | 86,156 | $ | (9,890 | ) | $ | (1,539 | ) | $ | 176,851 | |||||||||||||
Net income | 2,849 | 2,849 | ||||||||||||||||||||||||||
Common stock repurchased | (418,513 | ) | (4 | ) | (4,181 | ) | (1,317 | ) | (5,502 | ) | ||||||||||||||||||
Restricted stock award grants net of forfeitures | 13,100 | — | — | — | ||||||||||||||||||||||||
Other comprehensive income, net of tax | 2,256 | 2,256 | ||||||||||||||||||||||||||
Share-based compensation | 555 | 555 | ||||||||||||||||||||||||||
ESOP shares committed to be released | 30 | 331 | 361 | |||||||||||||||||||||||||
Cash dividends declared and paid ($0.10 per share) | (1,055 | ) | (1,055 | ) | ||||||||||||||||||||||||
BALANCE, June 30, 2020 | 10,326,226 | $ | 103 | $ | 98,421 | $ | 86,633 | $ | (9,559 | ) | $ | 717 | $ | 176,315 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Unearned ESOP Shares | Accumulated Other Comprehensive (Loss) Income, Net of Tax | Total Shareholders' Equity | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
BALANCE, March 31, 2018 | 11,577,394 | $ | 116 | $ | 109,354 | $ | 78,822 | $ | (11,043 | ) | $ | (3,747 | ) | $ | 173,502 | |||||||||||
Net income | 1,526 | 1,526 | ||||||||||||||||||||||||
Common stock repurchased | (88,900 | ) | (1 | ) | (886 | ) | (581 | ) | (1,468 | ) | ||||||||||||||||
Restricted stock award forfeitures | (5,000 | ) | — | — | — | |||||||||||||||||||||
Other comprehensive loss, net of tax | (1,089 | ) | (1,089 | ) | ||||||||||||||||||||||
Share-based compensation | 259 | 259 | ||||||||||||||||||||||||
ESOP shares committed to be released | 53 | 164 | 217 | |||||||||||||||||||||||
BALANCE, June 30, 2018 | 11,483,494 | $ | 115 | $ | 108,780 | $ | 79,767 | $ | (10,879 | ) | $ | (4,836 | ) | $ | 172,947 | |||||||||||
BALANCE, March 31, 2019 | 10,992,181 | $ | 110 | $ | 104,374 | $ | 82,436 | $ | (10,385 | ) | $ | (3,128 | ) | $ | 173,407 | |||||||||||
Net income | 2,079 | 2,079 | ||||||||||||||||||||||||
Common stock repurchased | (63,000 | ) | (1 | ) | (628 | ) | (392 | ) | (1,021 | ) | ||||||||||||||||
Restricted stock award forfeitures | (4,000 | ) | — | — | — | |||||||||||||||||||||
Other comprehensive income, net of tax | 1,781 | 1,781 | ||||||||||||||||||||||||
Share-based compensation | 270 | 270 | ||||||||||||||||||||||||
ESOP shares committed to be released | 48 | 165 | 213 | |||||||||||||||||||||||
Cash dividends declared and paid ($0.03 per share) | (328 | ) | (328 | ) | ||||||||||||||||||||||
BALANCE, June 30, 2019 | 10,925,181 | $ | 109 | $ | 104,064 | $ | 83,795 | $ | (10,220 | ) | $ | (1,347 | ) | $ | 176,401 |
See selected notes to the consolidated financial statements.
Common Stock | Additional Paid-in Capital | Retained Earnings | Unearned ESOP Shares | Accumulated Other Comprehensive (Loss) Income, Net of Tax | Total Shareholders' Equity | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
BALANCE, December 31, 2017 | 11,785,507 | $ | 118 | $ | 111,106 | $ | 78,602 | $ | (11,208 | ) | $ | (1,573 | ) | $ | 177,045 | |||||||||||
Net income | 3,049 | 3,049 | ||||||||||||||||||||||||
Common stock repurchased | (297,013 | ) | (3 | ) | (2,966 | ) | (1,884 | ) | (4,853 | ) | ||||||||||||||||
Restricted stock award forfeitures | (5,000 | ) | — | — | — | |||||||||||||||||||||
Other comprehensive loss, net of tax | (3,263 | ) | (3,263 | ) | ||||||||||||||||||||||
Share-based compensation | 532 | 532 | ||||||||||||||||||||||||
ESOP shares committed to be released | 108 | 329 | 437 | |||||||||||||||||||||||
BALANCE, June 30, 2018 | 11,483,494 | $ | 115 | $ | 108,780 | $ | 79,767 | $ | (10,879 | ) | $ | (4,836 | ) | $ | 172,947 | |||||||||||
BALANCE, December 31, 2018 | 11,170,018 | $ | 112 | $ | 105,825 | $ | 81,607 | $ | (10,549 | ) | $ | (4,731 | ) | $ | 172,264 | |||||||||||
Net income | 4,286 | 4,286 | ||||||||||||||||||||||||
Common stock repurchased | (240,837 | ) | (3 | ) | (2,405 | ) | (1,439 | ) | (3,847 | ) | ||||||||||||||||
Restricted stock award forfeitures | (4,000 | ) | — | — | — | |||||||||||||||||||||
Other comprehensive income, net of tax | 3,384 | 3,384 | ||||||||||||||||||||||||
Share-based compensation | 553 | 553 | ||||||||||||||||||||||||
ESOP shares committed to be released | 91 | 329 | 420 | |||||||||||||||||||||||
Cash dividends declared and paid ($0.06 per share) | (659 | ) | (659 | ) | ||||||||||||||||||||||
BALANCE, June 30, 2019 | 10,925,181 | $ | 109 | $ | 104,064 | $ | 83,795 | $ | (10,220 | ) | $ | (1,347 | ) | $ | 176,401 |
FIRST NORTHWEST BANCORP AND SUBSIDIARY | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) (Unaudited) |
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 2,849 | $ | 4,286 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 675 | 667 | ||||||
Amortization and accretion of premiums and discounts on investments, net | 954 | 920 | ||||||
(Accretion) amortization of deferred loan fees, net | (767 | ) | 486 | |||||
Amortization of mortgage servicing rights, net | 347 | 119 | ||||||
Additions to mortgage servicing rights, net | (574 | ) | (27 | ) | ||||
Net increase (decrease) on the valuation allowance on mortgage servicing rights | — | (3 | ) | |||||
Provision for loan losses | 2,766 | 590 | ||||||
Allocation of ESOP shares | 361 | 420 | ||||||
Share-based compensation | 555 | 553 | ||||||
Gain on sale of loans, net | (2,384 | ) | (175 | ) | ||||
Gain on sale of securities available for sale, net | (1,266 | ) | (57 | ) | ||||
Increase in cash surrender value of life insurance, net | (955 | ) | (288 | ) | ||||
Origination of loans held for sale | (79,472 | ) | (10,432 | ) | ||||
Proceeds from loans held for sale | 79,248 | 8,091 | ||||||
Change in assets and liabilities: | ||||||||
Increase in accrued interest receivable | (1,429 | ) | (46 | ) | ||||
Increase in prepaid expenses and other assets | (2,659 | ) | (3,606 | ) | ||||
Decrease in accrued interest payable | (120 | ) | (132 | ) | ||||
Increase in accrued expenses and other liabilities | 3,792 | 6,996 | ||||||
Net cash from operating activities | 1,921 | 8,362 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of securities available for sale | (166,253 | ) | — | |||||
Proceeds from maturities, calls, and principal repayments of securities available for sale | 26,296 | 12,860 | ||||||
Proceeds from sales of securities available for sale | 94,432 | 3,558 | ||||||
Proceeds from maturities, calls, and principal repayments of securities held to maturity | — | 5,433 | ||||||
(Purchase) redemption of FHLB stock | (40 | ) | 154 | |||||
Purchase of bank-owned life insurance | (6,500 | ) | — | |||||
Net increase in loans receivable | (110,316 | ) | (11,182 | ) | ||||
Purchase of premises and equipment, net | (521 | ) | (131 | ) | ||||
Net cash from investing activities | (162,902 | ) | 10,692 |
See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) (Unaudited) |
FIRST NORTHWEST BANCORP AND SUBSIDIARY | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) (Unaudited) | |||||||
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income | $ | 4,286 | $ | 3,049 | |||
Adjustments to reconcile net income to net cash from operating activities: | |||||||
Depreciation and amortization | 667 | 662 | |||||
Amortization and accretion of premiums and discounts on investments, net | 920 | 965 | |||||
Amortization (accretion) of deferred loan fees, net | 486 | (78 | ) | ||||
Amortization of mortgage servicing rights, net | 119 | 92 | |||||
Additions to mortgage servicing rights, net | (27 | ) | (98 | ) | |||
Net (decrease) increase on the valuation allowance on mortgage servicing rights | (3 | ) | — | ||||
Provision for loan losses | 590 | 705 | |||||
Allocation of ESOP shares | 420 | 437 | |||||
Share-based compensation | 553 | 532 | |||||
Gain on sale of loans, net | (175 | ) | (317 | ) | |||
Gain on sale of securities available for sale, net | (57 | ) | (108 | ) | |||
Gain on sale of securities held to maturity, net | — | (27 | ) | ||||
Increase in cash surrender value of life insurance, net | (288 | ) | (298 | ) | |||
Origination of loans held for sale | (10,432 | ) | (11,684 | ) | |||
Proceeds from loans held for sale | 8,091 | 11,227 | |||||
Change in assets and liabilities: | |||||||
Increase in accrued interest receivable | (46 | ) | (154 | ) | |||
Increase in prepaid expenses and other assets | (3,606 | ) | (147 | ) | |||
(Decrease) increase in accrued interest payable | (132 | ) | 49 | ||||
Increase in accrued expenses and other liabilities | 6,996 | 1,406 | |||||
Net cash from operating activities | 8,362 | 6,213 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Purchase of securities available for sale | — | (37,681 | ) | ||||
Proceeds from maturities, calls, and principal repayments of securities available for sale | 12,860 | 13,348 | |||||
Proceeds from sales of securities available for sale | 3,558 | 54,704 | |||||
Proceeds from maturities, calls, and principal repayments of securities held to maturity | 5,433 | 5,542 | |||||
Proceeds from sales of securities held to maturity | — | 2,702 | |||||
Redemption of FHLB stock | 154 | 502 | |||||
Proceeds from sale of real estate owned and repossessed assets | — | 46 | |||||
Net increase in loans receivable | (11,182 | ) | (42,958 | ) | |||
Purchase of premises and equipment, net | (131 | ) | (1,712 | ) | |||
Net cash from investing activities | 10,692 | (5,507 | ) | ||||
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net increase (decrease) in deposits | $ | 168,680 | $ | (6,995 | ) | |||
Proceeds from long-term FHLB advances | 30,000 | — | ||||||
Repayment of long-term FHLB advances | (30,000 | ) | — | |||||
Net decrease in short-term FHLB advances | (551 | ) | (5,215 | ) | ||||
Net increase in advances from borrowers for taxes and insurance | 258 | 161 | ||||||
Dividends paid | (1,055 | ) | (659 | ) | ||||
Repurchase of common stock | (5,502 | ) | (3,847 | ) | ||||
Net cash from financing activities | 161,830 | (16,555 | ) | |||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 849 | 2,499 | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 48,739 | 26,323 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 49,588 | $ | 28,822 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash paid during the year for: | ||||||||
Interest on deposits and borrowings | $ | 4,933 | $ | 6,151 | ||||
Income taxes | $ | — | $ | 990 | ||||
NONCASH INVESTING ACTIVITIES | ||||||||
Unrealized gain on securities available for sale | $ | 2,855 | $ | 4,286 | ||||
Loans transferred to real estate owned and repossessed assets, net of deferred loan fees and allowance for loan losses | $ | 403 | $ | 160 | ||||
Lease liabilities arising from obtaining right-of-use assets | $ | 902 | $ | — |
See selected notes to the consolidated financial statements.
FIRST NORTHWEST BANCORP AND SUBSIDIARY | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(In thousands) (Unaudited) | |||||||
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Net (decrease) increase in deposits | $ | (6,995 | ) | $ | 8,294 | ||
Net decrease in FHLB short-term advances | (5,215 | ) | (17,829 | ) | |||
Net increase (decrease) in advances from borrowers for taxes and insurance | 161 | (235 | ) | ||||
Dividends paid | (659 | ) | — | ||||
Repurchase of common stock | (3,847 | ) | (4,853 | ) | |||
Net cash from financing activities | (16,555 | ) | (14,623 | ) | |||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,499 | (13,917 | ) | ||||
CASH AND CASH EQUIVALENTS, beginning of period | 26,323 | 36,801 | |||||
CASH AND CASH EQUIVALENTS, end of period | $ | 28,822 | $ | 22,884 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |||||||
Cash paid during the year for: | |||||||
Interest on deposits and borrowings | $ | 6,151 | $ | 3,947 | |||
Income taxes | $ | 990 | $ | 250 | |||
NONCASH INVESTING ACTIVITIES | |||||||
Unrealized gain (loss) on securities available for sale | $ | 4,286 | $ | (4,127 | ) | ||
Loans transferred to real estate owned and repossessed assets, net of deferred loan fees and allowance for loan losses | $ | 160 | $ | 102 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation and Critical Accounting Policies
Organization and Nature of business
- First Northwest Bancorp, a Washington corporation, became the holding company of First Federal Savings and Loan Association of Port Angeles on January 29, 2015, upon completion of the Bank's conversion from a mutual to stock form of organization (the "Conversion"). In connection with the Conversion, the Company issued an aggregate of 12,167,000 shares of common stock at an offering price of $10.00 per share for gross proceeds of $121.7 million. An additional 933,360 shares of Company common stock and $400,000 in cash were contributed to the First Federal Community Foundation ("Foundation"), a charitable foundation that was established in connection with the Conversion, resulting in the issuance of a total of 13,100,360 shares. The Company received $117.6 million in net proceeds from the stock offering of which $58.4 million were contributed to the Bank upon Conversion.Pursuant to the Bank's Plan of Conversion (the "Plan") adopted by its Board of Directors, and as approved by its members, the Company established an employee stock ownership plan ("ESOP"). On December 18, 2015, the ESOP completed its open market purchases, with funds borrowed from the Company, of 8% of the common stock issued in the Conversion for a total of 1,048,029 shares.
First Northwest's business activities generally are limited to passive investment activities and oversight of its investment in First Federal. Accordingly, the information set forth in this report, including the consolidated unaudited financial statements and related data, relates primarily to the Bank.
The Bank is a community-oriented financial institution providing commercial and consumer banking services to individuals and businesses in Western Washington State with offices in Clallam, Jefferson, Kitsap, King, and Whatcom counties. These services include deposit and lending transactions that are supplemented with borrowing and investing activities.
Basis of presentation
- The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the Company's Annual Report on FormIn preparing the unaudited interim consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to a determination of the allowance for loan losses ("ALLL"), fair value of financial instruments, and deferred tax assets and liabilities.
Principles of consolidation
- The accompanying consolidated financial statements include the accounts of First Northwest Bancorp and its wholly owned subsidiary, First Federal. All material intercompany accounts and transactions have been eliminated in consolidation.Subsequent Events
- The Company has evaluated subsequent events for potential recognition and disclosure andRecently adopted accounting pronouncements
In February 2016, the August 2018, FASB issued ASU No. 2016-02,
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In OctoberAugust 2018, the FASB issued ASU No. 2018-16 Derivatives and Hedging (Topic 815)2018-15,Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, Inclusion ofto provide guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. The ASU aligns the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rateaccounting for Hedge Accounting Purposes. The amendments in this ASU permit use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815 in addition to the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (LIBOR) swap rate, the Overnight Index Swap (OIS) Rate based on the Fed Funds Effective Rate and the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate. The amendments in this ASU are required to be adopted concurrentlysuch costs with the amendmentsguidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, the ASU amends ASC 350 to include in its scope implementation costs of such arrangements that are service contracts and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized. This ASU, 2017-12. For public companies, this would bewhich is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2018. Adoption of ASU 2018-16 2019, did not have a material impact on the Company's consolidatedCompany’s financial statements.
In August 2018, March 2020, the SecuritiesFASB issued ASU No.2020-03,Codification Improvements to Financial Instruments. The amendments represent clarification and Exchange Commission issuedimprovements to the codification and correct unintended application. This standard was effective immediately upon issuance and its adoption did not have a final rule that amends certain of its disclosure requirements. The rule simplifies various disclosure requirements for public companies including primarily that it (i) eliminatesmaterial effect on the requirement for public companies to disclose in their filings a schedule of earnings to fixed charges, (ii) requires an analysis of changes in stockholders’ equity for the current and comparative year-to-date interim periods in interim reports, and (iii) reduces the requirements for market price information disclosures in annual reports. These changes are effective for public companies beginning on November 5, 2018. The Company will be complying with these new requirements beginning with the Quarterly Report for the period ended March 31, 2019, on Form 10-Q.
Recently issued accounting pronouncements not yet adopted
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13,
Additional updates were issued in ASU No. 2019-04,
In addition, new updates were issued through ASU No. 2019-05,
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In November 2019, the FASB issued ASU 2019-10 which defers the effective date for this guidance for smaller reporting companies from the interim and annual periods beginning after December 15, 2020 to the interim and annual periods beginning after December 15, 2022. Early adoption is permitted for interim and annual periods beginning after December 15, 2018. The Company plans to defer adoption of CECL until January 1, 2023.
The Company is evaluating the provisions of ASU No. 2016-13,2016-13, ASU No. 2019-042019-04 and ASU No. 2019-05,2019-05, and will closely monitor developments and additional guidance to determine the potential impact on the Company’s consolidated financial statements. At this time, we cannot reasonably estimate the impact the implementation of this ASUthese ASUs will have on the Company's consolidated financial statements. The Company's internal project management team continues to review models, work with our third-partythird-party vendor, and discuss changes to processes and procedures to ensure the Company is fully compliant with the amendments at the adoption date.
Other Pronouncements
In August 2018, December 2019, FASB issued ASU No. 2018-13,
In January 2020, the FASB issued ASU No.2020-01,Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. ASU 2020-01 clarifies the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives including accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. The ASU, which is effective for fiscal years beginning after December 15, 2020, is not expected to have a material effect on the Company's financial statements.
In March 2020, the FASB issued ASU No.2020-04Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments are effective for the Company as of March 12, 2020 through December 31, 2022. The Company does not believe this standard will have a material impact on its financial statements.
Reclassifications
- Certain amounts in the unaudited interim consolidated financial statements for prior periods have been reclassified to conform to the current unaudited financial statement presentation with no effect on net income or shareholders' equity.FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2 - Securities
The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale and held-to-maturity at June 30, 20192020 are summarized as follows:
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Available for Sale | |||||||||||||||
Municipal bonds | $ | 881 | $ | 51 | $ | — | $ | 932 | |||||||
U.S. government agency issued asset-backed securities (ABS agency) | 25,995 | — | (559 | ) | 25,436 | ||||||||||
Corporate issued asset-backed securities (ABS corporate) | 37,877 | — | (667 | ) | 37,210 | ||||||||||
Corporate issued debt securities (Corporate debt) | 9,986 | — | (504 | ) | 9,482 | ||||||||||
U.S. Small Business Administration securities (SBA) | 31,865 | 151 | (41 | ) | 31,975 | ||||||||||
Mortgage-backed securities: | |||||||||||||||
U.S. government agency issued mortgage-backed securities (MBS agency) | 135,337 | 499 | (597 | ) | 135,239 | ||||||||||
Corporate issued mortgage-backed securities (MBS corporate) | 9,841 | 3 | (67 | ) | 9,777 | ||||||||||
Total securities available for sale | $ | 251,782 | $ | 704 | $ | (2,435 | ) | $ | 250,051 | ||||||
Held to Maturity | |||||||||||||||
Municipal bonds | $ | 7,080 | $ | 71 | $ | — | $ | 7,151 | |||||||
SBA | 144 | — | — | 144 | |||||||||||
Mortgage-backed securities: | |||||||||||||||
MBS agency | 30,766 | 639 | (25 | ) | 31,380 | ||||||||||
Total securities held to maturity | $ | 37,990 | $ | 710 | $ | (25 | ) | $ | 38,675 |
Gross | Gross | Estimated | ||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Available for Sale | ||||||||||||||||
Municipal bonds | $ | 104,641 | $ | 3,337 | $ | (368 | ) | $ | 107,610 | |||||||
U.S. government agency issued asset-backed securities (ABS agency) | 63,220 | 662 | (3,063 | ) | 60,819 | |||||||||||
Corporate issued asset-backed securities (ABS corporate) | 41,695 | — | (1,891 | ) | 39,804 | |||||||||||
Corporate issued debt securities (Corporate debt) | 22,486 | 134 | (192 | ) | 22,428 | |||||||||||
U.S. Small Business Administration securities (SBA) | 23,338 | 221 | (12 | ) | 23,547 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
U.S. government agency issued mortgage-backed securities (MBS agency) | 100,113 | 2,578 | (44 | ) | 102,647 | |||||||||||
Corporate issued mortgage-backed securities (MBS corporate) | 7,873 | 4 | (459 | ) | 7,418 | |||||||||||
Total securities available for sale | $ | 363,366 | $ | 6,936 | $ | (6,029 | ) | $ | 364,273 |
The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale and held-to-maturity at December 31, 2018,2019, are summarized as follows:
Gross | Gross | Estimated | ||||||||||||||
Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Available for Sale | ||||||||||||||||
Municipal bonds | $ | 39,524 | $ | 125 | $ | (367 | ) | $ | 39,282 | |||||||
ABS agency | 29,796 | — | (938 | ) | 28,858 | |||||||||||
ABS corporate | 41,728 | — | (873 | ) | 40,855 | |||||||||||
Corporate debt | 9,986 | — | (343 | ) | 9,643 | |||||||||||
SBA | 28,423 | 72 | (36 | ) | 28,459 | |||||||||||
Mortgage-backed securities: | ||||||||||||||||
MBS agency | 159,697 | 811 | (341 | ) | 160,167 | |||||||||||
MBS corporate | 8,374 | — | (58 | ) | 8,316 | |||||||||||
Total securities available for sale | $ | 317,528 | $ | 1,008 | $ | (2,956 | ) | $ | 315,580 |
There were 0 securities classified as held-to-maturity at June 30, 2020 and December 31, 2019.
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Available for Sale | |||||||||||||||
Municipal bonds | $ | 882 | $ | — | $ | (13 | ) | $ | 869 | ||||||
ABS agency | 26,125 | — | (373 | ) | 25,752 | ||||||||||
ABS corporate | 37,897 | — | (1,174 | ) | 36,723 | ||||||||||
Corporate debt | 9,986 | 98 | (196 | ) | 9,888 | ||||||||||
SBA | 35,936 | 23 | (289 | ) | 35,670 | ||||||||||
Mortgage-backed securities: | |||||||||||||||
MBS agency | 147,205 | 12 | (3,762 | ) | 143,455 | ||||||||||
MBS corporate | 10,953 | — | (343 | ) | 10,610 | ||||||||||
Total securities available for sale | $ | 268,984 | $ | 133 | $ | (6,150 | ) | $ | 262,967 | ||||||
Held to Maturity | |||||||||||||||
Municipal bonds | $ | 11,919 | $ | 43 | $ | — | $ | 11,962 | |||||||
SBA | 302 | — | (1 | ) | 301 | ||||||||||
Mortgage-backed securities: | |||||||||||||||
MBS agency | 31,282 | 40 | (595 | ) | 30,727 | ||||||||||
Total securities held to maturity | $ | 43,503 | $ | 83 | $ | (596 | ) | $ | 42,990 |
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following shows the unrealized gross losses and fair value of the investment portfolio by length of time that individual securities in each category have been in a continuous loss position as of June 30, 2019:
Less Than Twelve Months | Twelve Months or Longer | Total | |||||||||||||||||||||
Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Available for Sale | |||||||||||||||||||||||
ABS agency | $ | — | $ | — | $ | (559 | ) | $ | 25,436 | $ | (559 | ) | $ | 25,436 | |||||||||
ABS corporate | — | — | (667 | ) | 37,210 | (667 | ) | 37,210 | |||||||||||||||
Corporate debt | (136 | ) | 4,864 | (368 | ) | 4,618 | (504 | ) | 9,482 | ||||||||||||||
SBA | — | — | (41 | ) | 9,146 | (41 | ) | 9,146 | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
MBS agency | — | — | (597 | ) | 82,736 | (597 | ) | 82,736 | |||||||||||||||
MBS corporate | — | — | (67 | ) | 7,259 | (67 | ) | 7,259 | |||||||||||||||
Total available for sale | $ | (136 | ) | $ | 4,864 | $ | (2,299 | ) | $ | 166,405 | $ | (2,435 | ) | $ | 171,269 | ||||||||
Held to Maturity | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
MBS agency | — | — | (25 | ) | 13,782 | (25 | ) | 13,782 | |||||||||||||||
Total held to maturity | $ | — | $ | — | $ | (25 | ) | $ | 13,782 | $ | (25 | ) | $ | 13,782 |
Less Than Twelve Months | Twelve Months or Longer | Total | ||||||||||||||||||||||
Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Available for Sale | ||||||||||||||||||||||||
Municipal bonds | $ | (368 | ) | $ | 14,515 | $ | — | $ | — | $ | (368 | ) | $ | 14,515 | ||||||||||
ABS agency | (318 | ) | 8,086 | (2,745 | ) | 23,025 | (3,063 | ) | 31,111 | |||||||||||||||
ABS corporate | (93 | ) | 3,787 | (1,798 | ) | 36,017 | (1,891 | ) | 39,804 | |||||||||||||||
Corporate debt | (3 | ) | 997 | (189 | ) | 4,811 | (192 | ) | 5,808 | |||||||||||||||
SBA | — | — | (12 | ) | 4,020 | (12 | ) | 4,020 | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
MBS agency | (44 | ) | 13,994 | — | 7 | (44 | ) | 14,001 | ||||||||||||||||
MBS corporate | (37 | ) | 2,215 | (422 | ) | 3,750 | (459 | ) | 5,965 | |||||||||||||||
Total available for sale | $ | (863 | ) | $ | 43,594 | $ | (5,166 | ) | $ | 71,630 | $ | (6,029 | ) | $ | 115,224 |
The following shows the unrealized gross losses and fair value of the investment portfolio by length of time that individual securities in each category have been in a continuous loss position as of December 31, 2018:
Less Than Twelve Months | Twelve Months or Longer | Total | |||||||||||||||||||||
Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Available for Sale | |||||||||||||||||||||||
Municipal bonds | $ | (8 | ) | $ | 757 | $ | (5 | ) | $ | 110 | $ | (13 | ) | $ | 867 | ||||||||
ABS agency | (302 | ) | 23,286 | (71 | ) | 2,466 | (373 | ) | 25,752 | ||||||||||||||
ABS corporate | (571 | ) | 14,527 | (603 | ) | 22,196 | (1,174 | ) | 36,723 | ||||||||||||||
Corporate debt | — | — | (196 | ) | 4,791 | (196 | ) | 4,791 | |||||||||||||||
SBA | (44 | ) | 13,400 | (245 | ) | 13,089 | (289 | ) | 26,489 | ||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
MBS agency | (28 | ) | 17,996 | (3,734 | ) | 120,617 | (3,762 | ) | 138,613 | ||||||||||||||
MBS corporate | — | — | (343 | ) | 10,610 | (343 | ) | 10,610 | |||||||||||||||
Total available for sale | $ | (953 | ) | $ | 69,966 | $ | (5,197 | ) | $ | 173,879 | $ | (6,150 | ) | $ | 243,845 | ||||||||
Held to Maturity | |||||||||||||||||||||||
SBA | $ | (1 | ) | $ | — | $ | — | $ | 301 | $ | (1 | ) | $ | 301 | |||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
MBS agency | (70 | ) | 6,241 | (525 | ) | 18,073 | (595 | ) | 24,314 | ||||||||||||||
Total held to maturity | $ | (71 | ) | $ | 6,241 | $ | (525 | ) | $ | 18,374 | $ | (596 | ) | $ | 24,615 |
Less Than Twelve Months | Twelve Months or Longer | Total | ||||||||||||||||||||||
Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Available for Sale | ||||||||||||||||||||||||
Municipal bonds | $ | (367 | ) | $ | 29,928 | $ | — | $ | — | $ | (367 | ) | $ | 29,928 | ||||||||||
ABS agency | (59 | ) | 3,855 | (879 | ) | 25,002 | (938 | ) | 28,857 | |||||||||||||||
ABS corporate | (31 | ) | 3,848 | (842 | ) | 37,007 | (873 | ) | 40,855 | |||||||||||||||
Corporate debt | (17 | ) | 4,983 | (326 | ) | 4,660 | (343 | ) | 9,643 | |||||||||||||||
SBA | — | — | (36 | ) | 15,034 | (36 | ) | 15,034 | ||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||
MBS agency | (166 | ) | 18,744 | (175 | ) | 47,463 | (341 | ) | 66,207 | |||||||||||||||
MBS corporate | — | — | (58 | ) | 8,316 | (58 | ) | 8,316 | ||||||||||||||||
Total available for sale | $ | (640 | ) | $ | 61,358 | $ | (2,316 | ) | $ | 137,482 | $ | (2,956 | ) | $ | 198,840 |
The Company may hold certain investment securities in an unrealized loss position that are not considered other than temporarily impaired ("OTTI"). At June 30, 20192020 and December 31, 2018,2019, there were 4733 and 6962 investment securities in an unrealized loss position, respectively.
We believe that the unrealized losses on our investment securities relate principally to the general change in interest rates, and market demand, and notrelated volatility, rather than credit quality, that has occurred since the initial purchase, and such unrecognized losses or gains will continue to vary with general interest rate level and market fluctuations in the future. Certain investments in a loss position are guaranteed by government entities or government sponsored entities. The Company does not intend to sell the securities in an unrealized loss position and believes it is not likely it will be required to sell these investments prior to a market price recovery or maturity.
There were no0 OTTI losses during the three and six months ended June 30, 2019 2020 and 2018.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The amortized cost and estimated fair value of investment securities by contractual maturity are shown in the following tables at the dates indicated. Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties; therefore, these securities are shown separately.
June 30, 2020 | ||||||||
Available-for-Sale | ||||||||
Amortized Cost | Estimated Fair Value | |||||||
(In thousands) | ||||||||
Mortgage-backed securities: | ||||||||
Due within one year | $ | — | $ | — | ||||
Due after one through five years | 8,574 | 8,791 | ||||||
Due after five through ten years | 218 | 219 | ||||||
Due after ten years | 99,194 | 101,055 | ||||||
Total mortgage-backed securities | 107,986 | 110,065 | ||||||
All other investment securities: | ||||||||
Due within one year | — | — | ||||||
Due after one through five years | 3,034 | 3,112 | ||||||
Due after five through ten years | 54,171 | 52,943 | ||||||
Due after ten years | 198,175 | 198,153 | ||||||
Total all other investment securities | 255,380 | 254,208 | ||||||
Total investment securities | $ | 363,366 | $ | 364,273 |
December 31, 2019 | ||||||||
Available-for-Sale | ||||||||
Amortized Cost | Estimated Fair Value | |||||||
(In thousands) | ||||||||
Mortgage-backed securities: | ||||||||
Due within one year | $ | — | $ | — | ||||
Due after one through five years | 13,360 | 13,391 | ||||||
Due after five through ten years | 6,261 | 6,257 | ||||||
Due after ten years | 148,450 | 148,835 | ||||||
Total mortgage-backed securities | 168,071 | 168,483 | ||||||
All other investment securities: | ||||||||
Due within one year | — | — | ||||||
Due after one through five years | 2,043 | 2,084 | ||||||
Due after five through ten years | 58,460 | 57,680 | ||||||
Due after ten years | 88,954 | 87,333 | ||||||
Total all other investment securities | 149,457 | 147,097 | ||||||
Total investment securities | $ | 317,528 | $ | 315,580 |
June 30, 2019 | |||||||||||||||
Available-for-Sale | Held-to-Maturity | ||||||||||||||
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||
Due within one year | $ | — | $ | — | $ | — | $ | — | |||||||
Due after one through five years | 7,122 | 7,156 | 421 | 425 | |||||||||||
Due after five through ten years | 11,341 | 11,312 | 1,768 | 1,749 | |||||||||||
Due after ten years | 126,715 | 126,548 | 28,577 | 29,206 | |||||||||||
Total mortgage-backed securities | 145,178 | 145,016 | 30,766 | 31,380 | |||||||||||
All other investment securities: | |||||||||||||||
Due within one year | — | — | — | — | |||||||||||
Due after one through five years | — | — | 794 | 812 | |||||||||||
Due after five through ten years | 28,628 | 28,143 | 6,430 | 6,483 | |||||||||||
Due after ten years | 77,976 | 76,892 | — | — | |||||||||||
Total all other investment securities | 106,604 | 105,035 | 7,224 | 7,295 | |||||||||||
Total investment securities | $ | 251,782 | $ | 250,051 | $ | 37,990 | $ | 38,675 | |||||||
December 31, 2018 | |||||||||||||||
Available-for-Sale | Held-to-Maturity | ||||||||||||||
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||
Due within one year | $ | — | $ | — | $ | — | $ | — | |||||||
Due after one through five years | 7,204 | 7,089 | 578 | 569 | |||||||||||
Due after five through ten years | 11,862 | 11,637 | 2,035 | 1,978 | |||||||||||
Due after ten years | 139,092 | 135,339 | 28,669 | 28,180 | |||||||||||
Total mortgage-backed securities | 158,158 | 154,065 | 31,282 | 30,727 | |||||||||||
All other investment securities: | |||||||||||||||
Due within one year | — | — | — | — | |||||||||||
Due after one through five years | — | — | 734 | 741 | |||||||||||
Due after five through ten years | 19,564 | 19,362 | 6,728 | 6,743 | |||||||||||
Due after ten years | 91,262 | 89,540 | 4,759 | 4,779 | |||||||||||
Total all other investment securities | 110,826 | 108,902 | 12,221 | 12,263 | |||||||||||
Total investment securities | $ | 268,984 | $ | 262,967 | $ | 43,503 | $ | 42,990 | |||||||
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Sales of securities available-for-sale for the periods shown are summarized as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Proceeds from sales | $ | 54,359 | $ | 3,558 | $ | 94,432 | $ | 3,558 | ||||||||
Gross realized gains | 867 | 57 | 1,504 | 57 | ||||||||||||
Gross realized losses | (206 | ) | — | (238 | ) | — |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands) | |||||||||||||||
Proceeds from sales | $ | 3,558 | $ | 21,845 | $ | 3,558 | $ | 54,704 | |||||||
Gross realized gains | 57 | 69 | 57 | 233 | |||||||||||
Gross realized losses | — | (83 | ) | — | (125 | ) |
Note 3 - Loans Receivable
Loans receivable consisted of the following at the dates indicated:
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
Real Estate: | |||||||
One-to-four family | $ | 331,748 | $ | 336,178 | |||
Multi-family | 68,440 | 82,331 | |||||
Commercial real estate | 250,250 | 253,235 | |||||
Construction and land | 63,741 | 54,102 | |||||
Total real estate loans | 714,179 | 725,846 | |||||
Consumer: | |||||||
Home equity | 37,194 | 37,629 | |||||
Auto and other consumer | 112,583 | 87,357 | |||||
Total consumer loans | 149,777 | 124,986 | |||||
Commercial business loans | 15,098 | 18,898 | |||||
Total loans | 879,054 | 869,730 | |||||
Less: | |||||||
Net deferred loan fees | 103 | 292 | |||||
Premium on purchased loans, net | (4,738 | ) | (3,947 | ) | |||
Allowance for loan losses | 9,731 | 9,533 | |||||
Total loans receivable, net | $ | 873,958 | $ | 863,852 |
June 30, 2020 | December 31, 2019 | |||||||
�� | (In thousands) | |||||||
Real Estate: | ||||||||
One-to-four family | $ | 325,349 | $ | 306,014 | ||||
Multi-family | 103,279 | 96,098 | ||||||
Commercial real estate | 267,233 | 255,722 | ||||||
Construction and land | 58,153 | 37,187 | ||||||
Total real estate loans | 754,014 | 695,021 | ||||||
Consumer: | ||||||||
Home equity | 33,696 | 35,046 | ||||||
Auto and other consumer | 109,214 | 112,119 | ||||||
Total consumer loans | 142,910 | 147,165 | ||||||
Commercial business loans | 99,477 | 41,571 | ||||||
Total loans | 996,401 | 883,757 | ||||||
Less: | ||||||||
Net deferred loan fees | 1,842 | 206 | ||||||
Premium on purchased loans, net | (3,901 | ) | (4,514 | ) | ||||
Allowance for loan losses | 12,109 | 9,628 | ||||||
Total loans receivable, net | $ | 986,351 | $ | 878,437 |
Allowance for Loan Losses.
The Company maintains a general allowance for loan losses based on evaluating known and inherent risks in the loan portfolio, including management’s continuing analysis of the factors underlying the quality of the loan portfolio. These factors include changes in the size and composition of the loan portfolio, actual loan loss experience, and current and anticipated economic conditions. The reserve is an estimate based upon factors and trends identified by management at the time the financial statements are prepared.FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables summarize changes in the ALLL and loan portfolio by segment and impairment method for the periods shown:
At or For the Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
One-to- | Commercial | Construction | Home | Auto and other | Commercial | |||||||||||||||||||||||||||||||
four family | Multi-family | real estate | and land | equity | consumer | business | Unallocated | Total | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
ALLL: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,396 | $ | 923 | $ | 2,722 | $ | 592 | $ | 449 | $ | 2,317 | $ | 250 | $ | 181 | $ | 10,830 | ||||||||||||||||||
Provision for (recapture of) loan losses | 383 | 205 | 299 | 146 | (20 | ) | 157 | 213 | 117 | 1,500 | ||||||||||||||||||||||||||
Charge-offs | — | — | — | — | — | (240 | ) | — | — | (240 | ) | |||||||||||||||||||||||||
Recoveries | 1 | — | — | — | — | 18 | — | — | 19 | |||||||||||||||||||||||||||
Ending balance | $ | 3,780 | $ | 1,128 | $ | 3,021 | $ | 738 | $ | 429 | $ | 2,252 | $ | 463 | $ | 298 | $ | 12,109 |
At or For the Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
One-to- | Commercial | Construction | Home | Auto and other | Commercial | |||||||||||||||||||||||||||||||
four family | Multi-family | real estate | and land | equity | consumer | business | Unallocated | Total | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
ALLL: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,024 | $ | 888 | $ | 2,243 | $ | 399 | $ | 454 | $ | 2,261 | $ | 208 | $ | 151 | $ | 9,628 | ||||||||||||||||||
Provision for (recapture of) loan losses | 702 | 240 | 778 | 337 | (26 | ) | 333 | 255 | 147 | 2,766 | ||||||||||||||||||||||||||
Charge-offs | — | — | — | — | — | (374 | ) | — | — | (374 | ) | |||||||||||||||||||||||||
Recoveries | 54 | — | — | 2 | 1 | 32 | — | — | 89 | |||||||||||||||||||||||||||
Ending balance | $ | 3,780 | $ | 1,128 | $ | 3,021 | $ | 738 | $ | 429 | $ | 2,252 | $ | 463 | $ | 298 | $ | 12,109 |
At June 30, 2020 | ||||||||||||||||||||||||||||||||||||
One-to- | Commercial | Construction | Home | Auto and other | Commercial | |||||||||||||||||||||||||||||||
four family | Multi-family | real estate | and land | equity | consumer | business | Unallocated | Total | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
Total ALLL | $ | 3,780 | $ | 1,128 | $ | 3,021 | $ | 738 | $ | 429 | $ | 2,252 | $ | 463 | $ | 298 | $ | 12,109 | ||||||||||||||||||
General reserve | 3,734 | 1,128 | 3,021 | 737 | 421 | 2,096 | 463 | 298 | 11,898 | |||||||||||||||||||||||||||
Specific reserve | 46 | — | — | 1 | 8 | 156 | — | — | 211 | |||||||||||||||||||||||||||
Total loans | $ | 325,349 | $ | 103,279 | $ | 267,233 | $ | 58,153 | $ | 33,696 | $ | 109,214 | $ | 99,477 | $ | — | $ | 996,401 | ||||||||||||||||||
Loans collectively evaluated (1) | 321,575 | 102,982 | 266,076 | 58,016 | 33,402 | 108,318 | 99,170 | — | 989,539 | |||||||||||||||||||||||||||
Loans individually evaluated (2) | 3,774 | 297 | 1,157 | 137 | 294 | 896 | 307 | — | 6,862 |
(1) Loans collectively evaluated for general reserves. | |||||||||||||||||||||||||||||||||||
(2) Loans individually evaluated for specific reserves. |
At or For the Three Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||
One-to- four family | Multi-family | Commercial real estate | Construction and land | Home equity | Auto and other consumer | Commercial business | Unallocated | Total | |||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||
ALLL: | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,441 | $ | 769 | $ | 2,337 | $ | 700 | $ | 467 | $ | 1,678 | $ | 191 | $ | 176 | $ | 9,759 | |||||||||||||||||
Provision for loan losses | (25 | ) | (118 | ) | 20 | 11 | (22 | ) | 416 | (20 | ) | (7 | ) | 255 | |||||||||||||||||||||
Charge-offs | — | — | — | — | — | (362 | ) | — | — | (362 | ) | ||||||||||||||||||||||||
Recoveries | 1 | — | — | — | 20 | 58 | — | — | 79 | ||||||||||||||||||||||||||
Ending balance | $ | 3,417 | $ | 651 | $ | 2,357 | $ | 711 | $ | 465 | $ | 1,790 | $ | 171 | $ | 169 | $ | 9,731 | |||||||||||||||||
At or For the Six Months Ended June 30, 2019 | |||||||||||||||||||||||||||||||||||
One-to- four family | Multi-family | Commercial real estate | Construction and land | Home equity | Auto and other consumer | Commercial business | Unallocated | Total | |||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||
ALLL: | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,297 | $ | 762 | $ | 2,289 | $ | 585 | $ | 480 | $ | 1,611 | $ | 334 | $ | 175 | $ | 9,533 | |||||||||||||||||
Provision for loan losses | 117 | (111 | ) | 68 | 126 | (36 | ) | 593 | (161 | ) | (6 | ) | 590 | ||||||||||||||||||||||
Charge-offs | — | — | — | — | — | (548 | ) | (4 | ) | — | (552 | ) | |||||||||||||||||||||||
Recoveries | 3 | — | — | — | 21 | 134 | 2 | — | 160 | ||||||||||||||||||||||||||
Ending balance | $ | 3,417 | $ | 651 | $ | 2,357 | $ | 711 | $ | 465 | $ | 1,790 | $ | 171 | $ | 169 | $ | 9,731 | |||||||||||||||||
At June 30, 2019 | |||||||||||||||||||||||||||||||||||
One-to- four family | Multi-family | Commercial real estate | Construction and land | Home equity | Auto and other consumer | Commercial business | Unallocated | Total | |||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||
Total ALLL | $ | 3,417 | $ | 651 | $ | 2,357 | $ | 711 | $ | 465 | $ | 1,790 | $ | 171 | $ | 169 | $ | 9,731 | |||||||||||||||||
General reserve | 3,381 | 650 | 2,347 | 710 | 458 | 1,740 | 164 | 169 | 9,619 | ||||||||||||||||||||||||||
Specific reserve | 36 | 1 | 10 | 1 | 7 | 50 | 7 | — | 112 | ||||||||||||||||||||||||||
Total loans | $ | 331,748 | $ | 68,440 | $ | 250,250 | $ | 63,741 | $ | 37,194 | $ | 112,583 | $ | 15,098 | $ | — | $ | 879,054 | |||||||||||||||||
Loans collectively evaluated (1) | 328,739 | 68,331 | 248,320 | 63,676 | 36,793 | 112,343 | 14,800 | — | 873,002 | ||||||||||||||||||||||||||
Loans individually evaluated (2) | 3,009 | 109 | 1,930 | 65 | 401 | 240 | 298 | — | 6,052 | ||||||||||||||||||||||||||
(1) Loans collectively evaluated for general reserves. | |||||||||||||||||||||||||||||||||||
(2) Loans individually evaluated for specific reserves. |
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At or For the Three Months Ended June 30, 2018 | |||||||||||||||||||||||||||||||||||
One-to- four family | Multi-family | Commercial real estate | Construction and land | Home equity | Auto and other consumer | Commercial business | Unallocated | Total | |||||||||||||||||||||||||||
ALLL: | (In thousands) | ||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,167 | $ | 647 | $ | 2,053 | $ | 679 | $ | 744 | $ | 948 | $ | 709 | $ | 37 | $ | 8,984 | |||||||||||||||||
Provision for loan losses | (102 | ) | 194 | 107 | (166 | ) | (110 | ) | 476 | 6 | (10 | ) | 395 | ||||||||||||||||||||||
Charge-offs | (16 | ) | — | — | — | — | (134 | ) | — | — | (150 | ) | |||||||||||||||||||||||
Recoveries | 1 | — | — | 1 | 8 | 42 | 1 | — | 53 | ||||||||||||||||||||||||||
Ending balance | $ | 3,050 | $ | 841 | $ | 2,160 | $ | 514 | $ | 642 | $ | 1,332 | $ | 716 | $ | 27 | $ | 9,282 |
At or For the Six Months Ended June 30, 2018 | |||||||||||||||||||||||||||||||||||
One-to- four family | Multi-family | Commercial real estate | Construction and land | Home equity | Auto and other consumer | Commercial business | Unallocated | Total | |||||||||||||||||||||||||||
ALLL: | (In thousands) | ||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,061 | $ | 648 | $ | 1,847 | $ | 648 | $ | 787 | $ | 712 | $ | 265 | $ | 792 | $ | 8,760 | |||||||||||||||||
Provision for loan losses | 3 | 193 | 313 | (135 | ) | (161 | ) | 807 | 450 | (765 | ) | 705 | |||||||||||||||||||||||
Charge-offs | (16 | ) | — | — | — | — | (257 | ) | — | — | (273 | ) | |||||||||||||||||||||||
Recoveries | 2 | — | — | 1 | 16 | 70 | 1 | — | 90 | ||||||||||||||||||||||||||
Ending balance | $ | 3,050 | $ | 841 | $ | 2,160 | $ | 514 | $ | 642 | $ | 1,332 | $ | 716 | $ | 27 | $ | 9,282 | |||||||||||||||||
At December 31, 2018 | |||||||||||||||||||||||||||||||||||
One-to- four family | Multi-family | Commercial real estate | Construction and land | Home equity | Auto and other consumer | Commercial business | Unallocated | Total | |||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||
Total ALLL | $ | 3,297 | $ | 762 | $ | 2,289 | $ | 585 | $ | 480 | $ | 1,611 | $ | 334 | $ | 175 | $ | 9,533 | |||||||||||||||||
General reserve | 3,262 | 761 | 2,281 | 584 | 474 | 1,552 | 168 | 175 | 9,257 | ||||||||||||||||||||||||||
Specific reserve | 35 | 1 | 8 | 1 | 6 | 59 | 166 | — | 276 | ||||||||||||||||||||||||||
Total loans | $ | 336,178 | $ | 82,331 | $ | 253,235 | $ | 54,102 | $ | 37,629 | $ | 87,357 | $ | 18,898 | $ | — | $ | 869,730 | |||||||||||||||||
Loans collectively evaluated (1) | 333,062 | 82,221 | 251,263 | 54,058 | 37,002 | 87,113 | 18,453 | — | 863,172 | ||||||||||||||||||||||||||
Loans individually evaluated (2) | 3,116 | 110 | 1,972 | 44 | 627 | 244 | 445 | — | 6,558 | ||||||||||||||||||||||||||
(1) Loans collectively evaluated for general reserves. | |||||||||||||||||||||||||||||||||||
(2) Loans individually evaluated for specific reserves. |
At or For the Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||
One-to- | Commercial | Construction | Home | Auto and other | Commercial | |||||||||||||||||||||||||||||||
four family | Multi-family | real estate | and land | equity | consumer | business | Unallocated | Total | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
ALLL: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,441 | $ | 769 | $ | 2,337 | $ | 700 | $ | 467 | $ | 1,678 | $ | 191 | $ | 176 | $ | 9,759 | ||||||||||||||||||
(Recapture of) provision for loan losses | (25 | ) | (118 | ) | 20 | 11 | (22 | ) | 416 | (20 | ) | (7 | ) | 255 | ||||||||||||||||||||||
Charge-offs | — | — | — | — | — | (362 | ) | — | — | (362 | ) | |||||||||||||||||||||||||
Recoveries | 1 | — | — | — | 20 | 58 | — | — | 79 | |||||||||||||||||||||||||||
Ending balance | $ | 3,417 | $ | 651 | $ | 2,357 | $ | 711 | $ | 465 | $ | 1,790 | $ | 171 | $ | 169 | $ | 9,731 |
At or For the Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||||||||||
One-to- | Commercial | Construction | Home | Auto and other | Commercial | |||||||||||||||||||||||||||||||
four family | Multi-family | real estate | and land | equity | consumer | business | Unallocated | Total | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
ALLL: | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,297 | $ | 762 | $ | 2,289 | $ | 585 | $ | 480 | $ | 1,611 | $ | 334 | $ | 175 | $ | 9,533 | ||||||||||||||||||
Provision for (recapture of) loan losses | 117 | (111 | ) | 68 | 126 | (36 | ) | 593 | (161 | ) | (6 | ) | 590 | |||||||||||||||||||||||
Charge-offs | — | — | — | — | — | (548 | ) | (4 | ) | — | (552 | ) | ||||||||||||||||||||||||
Recoveries | 3 | — | — | — | 21 | 134 | 2 | — | 160 | |||||||||||||||||||||||||||
Ending balance | $ | 3,417 | $ | 651 | $ | 2,357 | $ | 711 | $ | 465 | $ | 1,790 | $ | 171 | $ | 169 | $ | 9,731 |
At December 31, 2019 | ||||||||||||||||||||||||||||||||||||
One-to- | Commercial | Construction | Home | Auto and other | Commercial | |||||||||||||||||||||||||||||||
four family | Multi-family | real estate | and land | equity | consumer | business | Unallocated | Total | ||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
Total ALLL | $ | 3,024 | $ | 888 | $ | 2,243 | $ | 399 | $ | 454 | $ | 2,261 | $ | 208 | $ | 151 | $ | 9,628 | ||||||||||||||||||
General reserve | 2,993 | 887 | 2,235 | 399 | 439 | 2,119 | 203 | 151 | 9,426 | |||||||||||||||||||||||||||
Specific reserve | 31 | 1 | 8 | — | 15 | 142 | 5 | — | 202 | |||||||||||||||||||||||||||
Total loans | $ | 306,014 | $ | 96,098 | $ | 255,722 | $ | 37,187 | $ | 35,046 | $ | 112,119 | $ | 41,571 | $ | — | $ | 883,757 | ||||||||||||||||||
Loans collectively evaluated (1) | 303,026 | 95,991 | 253,839 | 37,158 | 34,775 | 111,271 | 41,308 | — | 877,368 | |||||||||||||||||||||||||||
Loans individually evaluated (2) | 2,988 | 107 | 1,883 | 29 | 271 | 848 | 263 | — | 6,389 |
(1) Loans collectively evaluated for general reserves. | |||||||||||||||||||||||||||||||||||
(2) Loans individually evaluated for specific reserves. |
Impaired loans.
A loan is considered impaired when First Federal has determined that it may be unable to collect payments of principal or interest when due under the contractual terms of the loan.FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a summary of loans individually evaluated for impairment by portfolio segment at the dates indicated:
June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Recorded Investment | Unpaid Principal Balance | Related Allowance | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
With no allowance recorded: | ||||||||||||||||||||||||
One-to-four family | $ | 316 | $ | 344 | $ | — | $ | 297 | $ | 332 | $ | — | ||||||||||||
Multi-family | 297 | 297 | — | — | — | — | ||||||||||||||||||
Commercial real estate | 1,157 | 1,311 | — | 1,240 | 1,320 | — | ||||||||||||||||||
Construction and land | 110 | 142 | — | — | 33 | — | ||||||||||||||||||
Home equity | 62 | 119 | — | 45 | 110 | — | ||||||||||||||||||
Auto and other consumer | — | 270 | — | 251 | 548 | — | ||||||||||||||||||
Commercial business | 307 | 307 | — | — | — | — | ||||||||||||||||||
Total | 2,249 | 2,790 | — | 1,833 | 2,343 | — | ||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||
One-to-four family | $ | 3,458 | $ | 3,669 | $ | 46 | 2,691 | 2,911 | 31 | |||||||||||||||
Multi-family | — | — | — | 107 | 107 | 1 | ||||||||||||||||||
Commercial real estate | — | — | — | 643 | 643 | 8 | ||||||||||||||||||
Construction and land | 27 | 27 | 1 | 29 | 29 | — | ||||||||||||||||||
Home equity | 232 | 292 | 8 | 226 | 286 | 15 | ||||||||||||||||||
Auto and other consumer | 896 | 1,174 | 156 | 597 | 690 | 142 | ||||||||||||||||||
Commercial business | — | — | — | 263 | 263 | 5 | ||||||||||||||||||
Total | 4,613 | 5,162 | 211 | 4,556 | 4,929 | 202 | ||||||||||||||||||
Total impaired loans: | ||||||||||||||||||||||||
One-to-four family | 3,774 | 4,013 | 46 | 2,988 | 3,243 | 31 | ||||||||||||||||||
Multi-family | 297 | 297 | — | 107 | 107 | 1 | ||||||||||||||||||
Commercial real estate | 1,157 | 1,311 | — | 1,883 | 1,963 | 8 | ||||||||||||||||||
Construction and land | 137 | 169 | 1 | 29 | 62 | — | ||||||||||||||||||
Home equity | 294 | 411 | 8 | 271 | 396 | 15 | ||||||||||||||||||
Auto and other consumer | 896 | 1,444 | 156 | 848 | 1,238 | 142 | ||||||||||||||||||
Commercial business | 307 | 307 | — | 263 | 263 | 5 | ||||||||||||||||||
Total | $ | 6,862 | $ | 7,952 | $ | 211 | $ | 6,389 | $ | 7,272 | $ | 202 |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Recorded Investment | Unpaid Principal Balance | Related Allowance | Recorded Investment | Unpaid Principal Balance | Related Allowance | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
With no allowance recorded: | |||||||||||||||||||||||
One-to-four family | $ | 188 | $ | 222 | $ | — | $ | 306 | $ | 339 | $ | — | |||||||||||
Commercial real estate | 1,274 | 1,346 | — | 1,308 | 1,374 | — | |||||||||||||||||
Construction and land | — | — | — | — | 1 | — | |||||||||||||||||
Home equity | 57 | 161 | — | 330 | 478 | — | |||||||||||||||||
Auto and other consumer | (7 | ) | 504 | — | — | 276 | — | ||||||||||||||||
Commercial business | — | — | — | — | 3 | — | |||||||||||||||||
Total | 1,512 | 2,233 | — | 1,944 | 2,471 | — | |||||||||||||||||
With an allowance recorded: | |||||||||||||||||||||||
One-to-four family | 2,821 | 3,088 | 36 | 2,810 | 3,085 | 35 | |||||||||||||||||
Multi-family | 109 | 109 | 1 | 110 | 110 | 1 | |||||||||||||||||
Commercial real estate | 656 | 656 | 10 | 664 | 663 | 8 | |||||||||||||||||
Construction and land | 65 | 99 | 1 | 44 | 71 | 1 | |||||||||||||||||
Home equity | 344 | 410 | 7 | 297 | 364 | 6 | |||||||||||||||||
Auto and other consumer | 247 | 247 | 50 | 244 | 244 | 59 | |||||||||||||||||
Commercial business | 298 | 298 | 7 | 445 | 445 | 166 | |||||||||||||||||
Total | 4,540 | 4,907 | 112 | 4,614 | 4,982 | 276 | |||||||||||||||||
Total impaired loans: | |||||||||||||||||||||||
One-to-four family | 3,009 | 3,310 | 36 | 3,116 | 3,424 | 35 | |||||||||||||||||
Multi-family | 109 | 109 | 1 | 110 | 110 | 1 | |||||||||||||||||
Commercial real estate | 1,930 | 2,002 | 10 | 1,972 | 2,037 | 8 | |||||||||||||||||
Construction and land | 65 | 99 | 1 | 44 | 72 | 1 | |||||||||||||||||
Home equity | 401 | 571 | 7 | 627 | 842 | 6 | |||||||||||||||||
Auto and other consumer | 240 | 751 | 50 | 244 | 520 | 59 | |||||||||||||||||
Commercial business | 298 | 298 | 7 | 445 | 448 | 166 | |||||||||||||||||
Total | $ | 6,052 | $ | 7,140 | $ | 112 | $ | 6,558 | $ | 7,453 | $ | 276 |
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a summary of loans individually evaluated for impairment by portfolio segment at the dates indicated:
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, 2019 | June 30, 2019 | ||||||||||||||
Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | ||||||||||||
(In thousands) | |||||||||||||||
With no allowance recorded: | |||||||||||||||
One-to-four family | $ | 189 | $ | 3 | $ | 246 | $ | 5 | |||||||
Commercial real estate | 1,278 | 13 | 1,288 | 25 | |||||||||||
Home equity | 55 | 9 | 190 | 17 | |||||||||||
Auto and other consumer | — | 9 | — | 11 | |||||||||||
Total | 1,522 | 34 | 1,724 | 58 | |||||||||||
With an allowance recorded: | |||||||||||||||
One-to-four family | 2,827 | 69 | 2,829 | 112 | |||||||||||
Multi-family | 109 | 1 | 110 | 3 | |||||||||||
Commercial real estate | 658 | 8 | 660 | 15 | |||||||||||
Construction and land | 66 | 3 | 59 | 3 | |||||||||||
Home equity | 307 | 8 | 303 | 13 | |||||||||||
Auto and other consumer | 311 | 6 | 287 | 9 | |||||||||||
Commercial business | 302 | 5 | 315 | 10 | |||||||||||
Total | 4,580 | 100 | 4,563 | 165 | |||||||||||
Total impaired loans: | |||||||||||||||
One-to-four family | 3,016 | 72 | 3,075 | 117 | |||||||||||
Multi-family | 109 | 1 | 110 | 3 | |||||||||||
Commercial real estate | 1,936 | 21 | 1,948 | 40 | |||||||||||
Construction and land | 66 | 3 | 59 | 3 | |||||||||||
Home equity | 362 | 17 | 493 | 30 | |||||||||||
Auto and other consumer | 311 | 15 | 287 | 20 | |||||||||||
Commercial business | 302 | 5 | 315 | 10 | |||||||||||
Total | $ | 6,102 | $ | 134 | $ | 6,287 | $ | 223 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2020 | June 30, 2020 | |||||||||||||||
Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
With no allowance recorded: | ||||||||||||||||
One-to-four family | $ | 153 | $ | 9 | $ | 130 | $ | 9 | ||||||||
Multi-family | 198 | — | 148 | — | ||||||||||||
Commercial real estate | 1,205 | — | 1,218 | 15 | ||||||||||||
Construction and land | 36 | — | 18 | — | ||||||||||||
Home equity | 48 | 1 | 46 | — | ||||||||||||
Auto and other consumer | — | 12 | — | 14 | ||||||||||||
Commercial business | 102 | — | 51 | — | ||||||||||||
Total | 1,742 | 22 | 1,611 | 38 | ||||||||||||
With an allowance recorded: | ||||||||||||||||
One-to-four family | 2,932 | 71 | 2,804 | 112 | ||||||||||||
Multi-family | 170 | — | 237 | — | ||||||||||||
Commercial real estate | 429 | — | 536 | — | ||||||||||||
Construction and land | 28 | 2 | 28 | 2 | ||||||||||||
Home equity | 246 | 5 | 247 | 10 | ||||||||||||
Auto and other consumer | 765 | 20 | 727 | 29 | ||||||||||||
Commercial business | 175 | — | 219 | — | ||||||||||||
Total | 4,745 | 98 | 4,798 | 153 | ||||||||||||
Total impaired loans: | ||||||||||||||||
One-to-four family | 3,085 | 80 | 2,934 | 121 | ||||||||||||
Multi-family | 368 | — | 385 | — | ||||||||||||
Commercial real estate | 1,634 | — | 1,754 | 15 | ||||||||||||
Construction and land | 64 | 2 | 46 | 2 | ||||||||||||
Home equity | 294 | 6 | 293 | 10 | ||||||||||||
Auto and other consumer | 765 | 32 | 727 | 43 | ||||||||||||
Commercial business | 277 | — | 270 | — | ||||||||||||
Total | $ | 6,487 | $ | 120 | $ | 6,409 | $ | 191 |
Interest income recognized on a cash basis on impaired loans for the three and six months ended June 30, 2019,2020, was $94,000$56,000 and $183,000,$126,000, respectively.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the average recorded investment in loans individually evaluated for impairment and the related interest income recognized for the periods shown:
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, 2018 | June 30, 2018 | ||||||||||||||
Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | ||||||||||||
(In thousands) | |||||||||||||||
With no allowance recorded: | |||||||||||||||
One-to-four family | $ | 407 | $ | 6 | $ | 408 | $ | 10 | |||||||
Commercial real estate | 2,720 | 13 | 2,554 | 26 | |||||||||||
Construction and land | 2,486 | — | 2,487 | — | |||||||||||
Home equity | 356 | 9 | 358 | 9 | |||||||||||
Auto and other consumer | — | 5 | — | 9 | |||||||||||
Total | 5,969 | 33 | 5,807 | 54 | |||||||||||
With an allowance recorded: | |||||||||||||||
One-to-four family | 2,779 | 62 | 3,080 | 102 | |||||||||||
Multi-family | 113 | 1 | 114 | 3 | |||||||||||
Commercial real estate | 785 | 7 | 790 | 17 | |||||||||||
Construction and land | 49 | 3 | 50 | 4 | |||||||||||
Home equity | 268 | 6 | 277 | 11 | |||||||||||
Auto and other consumer | 116 | 4 | 108 | 5 | |||||||||||
Commercial business | 862 | 33 | 769 | 36 | |||||||||||
Total | 4,972 | 116 | 5,188 | 178 | |||||||||||
Total impaired loans: | |||||||||||||||
One-to-four family | 3,186 | 68 | 3,488 | 112 | |||||||||||
Multi-family | 113 | 1 | 114 | 3 | |||||||||||
Commercial real estate | 3,505 | 20 | 3,344 | 43 | |||||||||||
Construction and land | 2,535 | 3 | 2,537 | 4 | |||||||||||
Home equity | 624 | 15 | 635 | 20 | |||||||||||
Auto and other consumer | 116 | 9 | 108 | 14 | |||||||||||
Commercial business | 862 | 33 | 769 | 36 | |||||||||||
Total | $ | 10,941 | $ | 149 | $ | 10,995 | $ | 232 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2019 | June 30, 2019 | |||||||||||||||
Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
With no allowance recorded: | ||||||||||||||||
One-to-four family | $ | 189 | $ | 3 | $ | 246 | $ | 5 | ||||||||
Commercial real estate | 1,278 | 13 | 1,288 | 25 | ||||||||||||
Home equity | 55 | 9 | 190 | 17 | ||||||||||||
Auto and other consumer | — | 9 | — | 11 | ||||||||||||
Total | 1,522 | 34 | 1,724 | 58 | ||||||||||||
With an allowance recorded: | ||||||||||||||||
One-to-four family | 2,827 | 69 | 2,829 | 112 | ||||||||||||
Multi-family | 109 | 1 | 110 | 3 | ||||||||||||
Commercial real estate | 658 | 8 | 660 | 15 | ||||||||||||
Construction and land | 66 | 3 | 59 | 3 | ||||||||||||
Home equity | 307 | 8 | 303 | 13 | ||||||||||||
Auto and other consumer | 311 | 6 | 287 | 9 | ||||||||||||
Commercial business | 302 | 5 | 315 | 10 | ||||||||||||
Total | 4,580 | 100 | 4,563 | 165 | ||||||||||||
Total impaired loans: | ||||||||||||||||
One-to-four family | 3,016 | 72 | 3,075 | 117 | ||||||||||||
Multi-family | 109 | 1 | 110 | 3 | ||||||||||||
Commercial real estate | 1,936 | 21 | 1,948 | 40 | ||||||||||||
Construction and land | 66 | 3 | 59 | 3 | ||||||||||||
Home equity | 362 | 17 | 493 | 30 | ||||||||||||
Auto and other consumer | 311 | 15 | 287 | 20 | ||||||||||||
Commercial business | 302 | 5 | 315 | 10 | ||||||||||||
Total | $ | 6,102 | $ | 134 | $ | 6,287 | $ | 223 |
Interest income recognized on a cash basis on impaired loans for the three and six months ended June 30, 2018,2019, was $111,000$94,000 and $194,000,$183,000, respectively.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the recorded investment in nonaccrual loans by class of loan at the dates indicated:
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
One-to-four family | $ | 685 | $ | 759 | |||
Commercial real estate | 123 | 133 | |||||
Construction and land | 65 | 44 | |||||
Home equity | 148 | 369 | |||||
Auto and other consumer | 240 | 245 | |||||
Commercial business | 30 | 173 | |||||
Total nonaccrual loans | $ | 1,291 | $ | 1,723 | |||
June 30, 2020 | December 31, 2019 | |||||||
(In thousands) | ||||||||
One-to-four family | $ | 1,543 | $ | 698 | ||||
Multi-family | 297 | — | ||||||
Commercial real estate | 35 | 109 | ||||||
Construction and land | 137 | 29 | ||||||
Home equity | 140 | 112 | ||||||
Auto and other consumer | 896 | 848 | ||||||
Commercial business | 308 | — | ||||||
Total nonaccrual loans | $ | 3,356 | $ | 1,796 |
Past due loans.
Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. There wereThe following table presents past due loans, net of partial loan charge-offs, by class, as of June 30, 2019:
30-59 Days | 60-89 Days | 90 Days or More | Total | |||||||||||||||||||||
Past Due | Past Due | Past Due | Past Due | Current | Total Loans | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Real Estate: | ||||||||||||||||||||||||
One-to-four family | $ | 1,594 | $ | 1,127 | $ | 444 | $ | 3,165 | $ | 322,184 | $ | 325,349 | ||||||||||||
Multi-family | — | — | 297 | 297 | 102,982 | 103,279 | ||||||||||||||||||
Commercial real estate | — | 76 | — | 76 | 267,157 | 267,233 | ||||||||||||||||||
Construction and land | — | — | — | — | 58,153 | 58,153 | ||||||||||||||||||
Total real estate loans | 1,594 | 1,203 | 741 | 3,538 | 750,476 | 754,014 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Home equity | 78 | — | 36 | 114 | 33,582 | 33,696 | ||||||||||||||||||
Auto and other consumer | 772 | 520 | 566 | 1,858 | 107,356 | 109,214 | ||||||||||||||||||
Total consumer loans | 850 | 520 | 602 | 1,972 | 140,938 | 142,910 | ||||||||||||||||||
Commercial business loans | — | — | 307 | 307 | 99,170 | 99,477 | ||||||||||||||||||
Total loans | $ | 2,444 | $ | 1,723 | $ | 1,650 | $ | 5,817 | $ | 990,584 | $ | 996,401 |
30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Current | Total Loans | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Real Estate: | |||||||||||||||||||||||
One-to-four family | $ | 685 | $ | — | $ | 100 | $ | 785 | $ | 330,963 | $ | 331,748 | |||||||||||
Multi-family | — | — | — | — | 68,440 | 68,440 | |||||||||||||||||
Commercial real estate | — | — | — | — | 250,250 | 250,250 | |||||||||||||||||
Construction and land | — | — | 31 | 31 | 63,710 | 63,741 | |||||||||||||||||
Total real estate loans | 685 | — | 131 | 816 | 713,363 | 714,179 | |||||||||||||||||
Consumer: | |||||||||||||||||||||||
Home equity | 145 | — | 25 | 170 | 37,024 | 37,194 | |||||||||||||||||
Auto and other consumer | 795 | 158 | 15 | 968 | 111,615 | 112,583 | |||||||||||||||||
Total consumer loans | 940 | 158 | 40 | 1,138 | 148,639 | 149,777 | |||||||||||||||||
Commercial business loans | — | — | 30 | 30 | 15,068 | 15,098 | |||||||||||||||||
Total loans | $ | 1,625 | $ | 158 | $ | 201 | $ | 1,984 | $ | 877,070 | $ | 879,054 |
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents past due loans, net of partial loan charge-offs, by class, as of December 31, 2018:
30-59 Days Past Due | 60-89 Days Past Due | 90 Days or More Past Due | Total Past Due | Current | Total Loans | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Real Estate: | |||||||||||||||||||||||
One-to-four family | $ | 289 | $ | 176 | $ | 164 | $ | 629 | $ | 335,549 | $ | 336,178 | |||||||||||
Multi-family | — | — | — | — | 82,331 | 82,331 | |||||||||||||||||
Commercial real estate | — | — | — | — | 253,235 | 253,235 | |||||||||||||||||
Construction and land | 35 | 14 | 31 | 80 | 54,022 | 54,102 | |||||||||||||||||
Total real estate loans | 324 | 190 | 195 | 709 | 725,137 | 725,846 | |||||||||||||||||
Consumer: | |||||||||||||||||||||||
Home equity | 97 | 30 | 9 | 136 | 37,493 | 37,629 | |||||||||||||||||
Auto and other consumer | 471 | 92 | — | 563 | 86,794 | 87,357 | |||||||||||||||||
Total consumer loans | 568 | 122 | 9 | 699 | 124,287 | 124,986 | |||||||||||||||||
Commercial business loans | 923 | — | — | 923 | 17,975 | 18,898 | |||||||||||||||||
Total loans | $ | 1,815 | $ | 312 | $ | 204 | $ | 2,331 | $ | 867,399 | $ | 869,730 |
30-59 Days | 60-89 Days | 90 Days or More | Total | |||||||||||||||||||||
Past Due | Past Due | Past Due | Past Due | Current | Total Loans | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Real Estate: | ||||||||||||||||||||||||
One-to-four family | $ | 928 | $ | 92 | $ | 116 | $ | 1,136 | $ | 304,878 | $ | 306,014 | ||||||||||||
Multi-family | — | — | — | — | 96,098 | 96,098 | ||||||||||||||||||
Commercial real estate | — | — | — | — | 255,722 | 255,722 | ||||||||||||||||||
Construction and land | 38 | — | — | 38 | 37,149 | 37,187 | ||||||||||||||||||
Total real estate loans | 966 | 92 | 116 | 1,174 | 693,847 | 695,021 | ||||||||||||||||||
Consumer: | ||||||||||||||||||||||||
Home equity | 299 | 24 | — | 323 | 34,723 | 35,046 | ||||||||||||||||||
Auto and other consumer | 1,423 | 370 | 614 | 2,407 | 109,712 | 112,119 | ||||||||||||||||||
Total consumer loans | 1,722 | 394 | 614 | 2,730 | 144,435 | 147,165 | ||||||||||||||||||
Commercial business loans | — | 115 | — | 115 | 41,456 | 41,571 | ||||||||||||||||||
Total loans | $ | 2,688 | $ | 601 | $ | 730 | $ | 4,019 | $ | 879,738 | $ | 883,757 |
Credit quality indicator.
Federal regulations provide for the classification of lower quality loans and other assets, such as debt and equity securities, as substandard, doubtful, or loss; risk ratings 6,7, and 8 in ourWhen First Federal classifies problem assets as either substandard or doubtful, it may establish a specific allowance to address the risk specifically or allow the loss to be addressed in the general allowance. General allowances represent loss allowances that have been established to recognize the inherent risk associated with lending activities but that, unlike specific allowances, have not been specifically allocated to particularcertain problem assets. When an insured institution classifies problem assets as a loss, it is required to charge off such assets in the period in which they are deemed uncollectible. Assets that do not currently expose First Federal to sufficientenough risk to warrant classification as substandard or doubtful but do possess identified weaknesses are designated as either watch or special mention assets; risk ratings 4 and 5 in our risk rating system, respectively. Loans not otherwise classified are considered pass graded loans and are rated 1-31-3 in our risk rating system.
Additionally, First Federal categorizes loans as performing or nonperforming based on payment activity. Loans that are more than 90 days past due and nonaccrual loans are considered nonperforming.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table represents the internally assigned grade as of June 30, 2019,2020, by class of loans:
Pass | Watch | Special Mention | Substandard | Total | |||||||||||||||
(In thousands) | |||||||||||||||||||
Real Estate: | |||||||||||||||||||
One-to-four family | $ | 326,047 | $ | 3,761 | $ | 1,136 | $ | 804 | $ | 331,748 | |||||||||
Multi-family | 68,028 | 303 | 109 | — | 68,440 | ||||||||||||||
Commercial real estate | 242,070 | 3,821 | 3,026 | 1,333 | 250,250 | ||||||||||||||
Construction and land | 62,102 | 1,527 | 47 | 65 | 63,741 | ||||||||||||||
Total real estate loans | 698,247 | 9,412 | 4,318 | 2,202 | 714,179 | ||||||||||||||
Consumer: | |||||||||||||||||||
Home equity | 36,119 | 648 | 154 | 273 | 37,194 | ||||||||||||||
Auto and other consumer | 110,265 | 1,668 | 356 | 294 | 112,583 | ||||||||||||||
Total consumer loans | 146,384 | 2,316 | 510 | 567 | 149,777 | ||||||||||||||
Commercial business loans | 13,015 | 87 | 1,635 | 361 | 15,098 | ||||||||||||||
Total loans | $ | 857,646 | $ | 11,815 | $ | 6,463 | $ | 3,130 | $ | 879,054 |
Pass | Watch | Special Mention | Substandard | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Real Estate: | ||||||||||||||||||||
One-to-four family | $ | 318,430 | $ | 4,197 | $ | 1,813 | $ | 909 | $ | 325,349 | ||||||||||
Multi-family | 102,982 | — | — | 297 | 103,279 | |||||||||||||||
Commercial real estate | 256,775 | 7,117 | 2,133 | 1,208 | 267,233 | |||||||||||||||
Construction and land | 45,547 | 12,384 | 74 | 148 | 58,153 | |||||||||||||||
Total real estate loans | 723,734 | 23,698 | 4,020 | 2,562 | 754,014 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity | 32,724 | 697 | 126 | 149 | 33,696 | |||||||||||||||
Auto and other consumer | 103,857 | 2,654 | 1,776 | 927 | 109,214 | |||||||||||||||
Total consumer loans | 136,581 | 3,351 | 1,902 | 1,076 | 142,910 | |||||||||||||||
Commercial business loans | 97,960 | 51 | — | 1,466 | 99,477 | |||||||||||||||
Total loans | $ | 958,275 | $ | 27,100 | $ | 5,922 | $ | 5,104 | $ | 996,401 |
The following table represents the internally assigned grade as of December 31, 2018,2019, by class of loans:
Pass | Watch | Special Mention | Substandard | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Real Estate: | ||||||||||||||||||||
One-to-four family | $ | 301,312 | $ | 2,685 | $ | 1,148 | $ | 869 | $ | 306,014 | ||||||||||
Multi-family | 95,694 | — | 107 | 297 | 96,098 | |||||||||||||||
Commercial real estate | 251,531 | 97 | 2,800 | 1,294 | 255,722 | |||||||||||||||
Construction and land | 35,897 | 1,184 | 77 | 29 | 37,187 | |||||||||||||||
Total real estate loans | 684,434 | 3,966 | 4,132 | 2,489 | 695,021 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity | 34,260 | 470 | 89 | 227 | 35,046 | |||||||||||||||
Auto and other consumer | 107,327 | 3,243 | 594 | 955 | 112,119 | |||||||||||||||
Total consumer loans | 141,587 | 3,713 | 683 | 1,182 | 147,165 | |||||||||||||||
Commercial business loans | 39,653 | 376 | 263 | 1,279 | 41,571 | |||||||||||||||
Total loans | $ | 865,674 | $ | 8,055 | $ | 5,078 | $ | 4,950 | $ | 883,757 |
Pass | Watch | Special Mention | Substandard | Total | |||||||||||||||
(In thousands) | |||||||||||||||||||
Real Estate: | |||||||||||||||||||
One-to-four family | $ | 330,476 | $ | 3,767 | $ | 957 | $ | 978 | $ | 336,178 | |||||||||
Multi-family | 82,221 | — | 110 | — | 82,331 | ||||||||||||||
Commercial real estate | 244,919 | 6,281 | 663 | 1,372 | 253,235 | ||||||||||||||
Construction and land | 51,480 | 2,578 | — | 44 | 54,102 | ||||||||||||||
Total real estate loans | 709,096 | 12,626 | 1,730 | 2,394 | 725,846 | ||||||||||||||
Consumer: | |||||||||||||||||||
Home equity | 36,559 | 465 | 123 | 482 | 37,629 | ||||||||||||||
Auto and other consumer | 85,579 | 1,310 | 151 | 317 | 87,357 | ||||||||||||||
Total consumer loans | 122,138 | 1,775 | 274 | 799 | 124,986 | ||||||||||||||
Commercial business loans | 16,520 | 1,733 | 472 | 173 | 18,898 | ||||||||||||||
Total loans | $ | 847,754 | $ | 16,134 | $ | 2,476 | $ | 3,366 | $ | 869,730 |
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table represents the credit risk profile based on payment activity as of June 30, 2019,2020, by class of loans:
Nonperforming | Performing | Total | |||||||||
(In thousands) | |||||||||||
Real Estate: | |||||||||||
One-to-four family | $ | 685 | $ | 331,063 | $ | 331,748 | |||||
Multi-family | — | 68,440 | 68,440 | ||||||||
Commercial real estate | 123 | 250,127 | 250,250 | ||||||||
Construction and land | 65 | 63,676 | 63,741 | ||||||||
Consumer: | |||||||||||
Home equity | 148 | 37,046 | 37,194 | ||||||||
Auto and other consumer | 240 | 112,343 | 112,583 | ||||||||
Commercial business | 30 | 15,068 | 15,098 | ||||||||
Total loans | $ | 1,291 | $ | 877,763 | $ | 879,054 |
Nonperforming | Performing | Total | ||||||||||
(In thousands) | ||||||||||||
Real Estate: | ||||||||||||
One-to-four family | $ | 1,543 | $ | 323,806 | $ | 325,349 | ||||||
Multi-family | 297 | 102,982 | 103,279 | |||||||||
Commercial real estate | 35 | 267,198 | 267,233 | |||||||||
Construction and land | 137 | 58,016 | 58,153 | |||||||||
Consumer: | ||||||||||||
Home equity | 140 | 33,556 | 33,696 | |||||||||
Auto and other consumer | 896 | 108,318 | 109,214 | |||||||||
Commercial business | 308 | 99,169 | 99,477 | |||||||||
Total loans | $ | 3,356 | $ | 993,045 | $ | 996,401 |
The following table represents the credit risk profile based on payment activity as of December 31, 2018,2019, by class of loans:
Nonperforming | Performing | Total | |||||||||
(In thousands) | |||||||||||
Real Estate: | |||||||||||
One-to-four family | $ | 759 | $ | 335,419 | $ | 336,178 | |||||
Multi-family | — | 82,331 | 82,331 | ||||||||
Commercial real estate | 133 | 253,102 | 253,235 | ||||||||
Construction and land | 44 | 54,058 | 54,102 | ||||||||
Consumer: | |||||||||||
Home equity | 369 | 37,260 | 37,629 | ||||||||
Auto and other consumer | 245 | 87,112 | 87,357 | ||||||||
Commercial business | 173 | 18,725 | 18,898 | ||||||||
Total loans | $ | 1,723 | $ | 868,007 | $ | 869,730 |
Nonperforming | Performing | Total | ||||||||||
(In thousands) | ||||||||||||
Real Estate: | ||||||||||||
One-to-four family | $ | 698 | $ | 305,316 | $ | 306,014 | ||||||
Multi-family | — | 96,098 | 96,098 | |||||||||
Commercial real estate | 109 | 255,613 | 255,722 | |||||||||
Construction and land | 29 | 37,158 | 37,187 | |||||||||
Consumer: | ||||||||||||
Home equity | 112 | 34,934 | 35,046 | |||||||||
Auto and other consumer | 848 | 111,271 | 112,119 | |||||||||
Commercial business | — | 41,571 | 41,571 | |||||||||
Total loans | $ | 1,796 | $ | 881,961 | $ | 883,757 |
Troubled debt restructuring.
A TDR is a loan to a borrower who is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that First Federal is granting the borrower a concession of some kind. First Federal has granted a variety of concessions to borrowers in the form of loan modifications. The modifications are generally related to the loan's interest rate, term and payment amount or a combination thereof.The Coronavirus Aid, Relief, and Economic Security Act of 2020 signed into law on March 27, 2020, ("CARES Act") provided guidance around the modification of loans as a TDR loan, First Federal classifiesresult of the loanCOVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as impaired for purposes of determining the allowance for loan losses. This requires the loan to initially be evaluated individually for impairment, generally based on the expected cash flowsdefined under the newCARES Act prior to any relief, are not TDRs. This includes short-term (i.e., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, discountedor other delays in payment that are insignificant. Borrowers are considered current under the CARES Act and related regulatory guidance if they are less than 30 days past due on their contractual payments at the loan’s original effective interest rates. For TDRtime a modification program is implemented. As of June 30, 2020, the Company had approved COVID-19 pandemic related loan modifications for 297 loans that subsequently default,aggregating to $128.4 million, or 12.9% of loans receivable. Loan modifications in accordance with the method ofCARES Act and related regulatory guidance are still subject to an evaluation in regard to determining impairmentwhether or not a loan is generally the fair value of the collateral less estimated selling costs.
The following table is a sustained periodsummary of repayment performance, usually six months or longer, and there is a reasonable assurance that repayment will continue. First Federal allows reclassificationinformation with respect to total COVID-19 loan modifications as of a troubled debt restructuring back into the general loan pool (as a non-troubled debt restructuring) if the borrower is able to refinance the loan at then-current market rates and meet all of the underwriting criteria of First Federal
Count | Balance | Percent | ||||||||||
Real Estate: | ||||||||||||
One-to-four family | 38 | $ | 11,157 | 8.7 | % | |||||||
Multi-family | 8 | 25,150 | 19.6 | |||||||||
Commercial real estate | 37 | 70,800 | 55.1 | |||||||||
Construction and land | 13 | 6,939 | 5.4 | |||||||||
Total real estate loans | 96 | 114,046 | 88.8 | |||||||||
Consumer: | ||||||||||||
Home equity | 8 | 784 | 0.6 | |||||||||
Auto and other consumer | 182 | 9,620 | 7.5 | |||||||||
Total consumer loans | 190 | 10,404 | 8.1 | |||||||||
Commercial business loans | 11 | 3,970 | 3.1 | |||||||||
Total loans | 297 | $ | 128,420 | 100.0 | % |
The following table is a summary of information pertaining to TDR loans included in impaired loans at the dates indicated:
June 30, 2020 | December 31, 2019 | |||||||
(In thousands) | ||||||||
Total TDR loans | $ | 2,495 | $ | 3,544 | ||||
Allowance for loan losses related to TDR loans | 31 | 41 | ||||||
Total nonaccrual TDR loans | 110 | 81 |
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
Total TDR loans | $ | 3,744 | $ | 3,745 | |||
Allowance for loan losses related to TDR loans | 48 | 43 | |||||
Total nonaccrual TDR loans | 134 | 84 |
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
There were 0 newly restructured and renewals or modifications of existing TDR loans that occurred during the three and six months ended June 30, 2020 or June 30, 2019.
There were 0 TDR loans which incurred a payment default within 12 months of the restructure date during three and six months ended June 30, 2020.
The following table presents newly restructured and renewals or modifications of existing TDR loans by class that occurred during the three and six months ended June 30, 2019, by type of concession granted.
Number of Contracts | Rate Modification | Term Modification | Combination Modification | Total Modifications | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Pre-modification outstanding recorded investment | ||||||||||||||||||
One- to four-family | 1 | $ | — | $ | 50 | $ | — | $ | 50 | |||||||||
Post-modification outstanding recorded investment | ||||||||||||||||||
One- to four-family | 1 | $ | — | $ | 51 | $ | — | $ | 51 |
Number | Rate | Term | Combination | Total | ||||||||||||||||
of Contracts | Modification | Modification | Modification | Modifications | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Pre-modification outstanding recorded investment | ||||||||||||||||||||
One- to four-family | 1 | $ | — | $ | 50 | $ | — | $ | 50 | |||||||||||
Post-modification outstanding recorded investment | ||||||||||||||||||||
One- to four-family | 1 | $ | — | $ | 51 | $ | — | $ | 51 |
The following is a summary of TDR loans which incurred a payment default within 12 months of the restructure date during the three and six months ended June 30, 2019.
Number of Contracts | Rate Modification | Term Modification | Combination Modification | Total Modifications | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
TDR loans that subsequently defaulted | ||||||||||||||||||
One- to four-family | 1 | $ | — | $ | — | $ | 48 | $ | 48 |
Number of Contracts | Rate Modification | Term Modification | Combination Modification | Total Modifications | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Pre-modification outstanding recorded investment | ||||||||||||||||||
One- to four-family | 2 | $ | — | $ | — | $ | 180 | $ | 180 | |||||||||
Post-modification outstanding recorded investment | ||||||||||||||||||
One- to four-family | 2 | $ | — | $ | — | $ | 179 | $ | 179 |
Number | Rate | Term | Combination | Total | ||||||||||||||||
of Contracts | Modification | Modification | Modification | Modifications | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
TDR loans that subsequently defaulted | ||||||||||||||||||||
One- to four-family | 1 | $ | — | $ | — | $ | 48 | $ | 48 |
NaN additional funds were committed to be advanced in connection with impaired loans at June 30, 2019.
The following table presents TDR loans by class at the dates indicated by accrual and nonaccrual status.
June 30, 2020 | December 31, 2019 | |||||||||||||||||||||||
Accrual | Nonaccrual | Total | Accrual | Nonaccrual | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
One-to-four family | $ | 2,231 | $ | 110 | $ | 2,341 | $ | 2,290 | $ | 81 | $ | 2,371 | ||||||||||||
Multi-family | — | — | — | 107 | — | 107 | ||||||||||||||||||
Commercial real estate | — | — | — | 643 | — | 643 | ||||||||||||||||||
Home equity | 154 | — | 154 | 160 | — | 160 | ||||||||||||||||||
Commercial business | — | — | — | 263 | — | 263 | ||||||||||||||||||
Total TDR loans | $ | 2,385 | $ | 110 | $ | 2,495 | $ | 3,463 | $ | 81 | $ | 3,544 |
June 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Accrual | Nonaccrual | Total | Accrual | Nonaccrual | Total | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
One-to-four family | $ | 2,324 | $ | 134 | $ | 2,458 | $ | 2,358 | $ | 84 | $ | 2,442 | |||||||||||
Multi-family | 109 | — | 109 | 110 | — | 110 | |||||||||||||||||
Commercial real estate | 656 | — | 656 | 663 | — | 663 | |||||||||||||||||
Home equity | 253 | — | 253 | 258 | — | 258 | |||||||||||||||||
Commercial business | 268 | — | 268 | 272 | — | 272 | |||||||||||||||||
Total TDR loans | $ | 3,610 | $ | 134 | $ | 3,744 | $ | 3,661 | $ | 84 | $ | 3,745 |
Note 4 - Deposits
The aggregate amount of time deposits in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limit, currently $250,000,$250,000, at June 30, 20192020 and December 31, 2018, was $87.82019, were $94.0 million and $107.0$93.5 million, respectively. Deposits and weighted-average interest rates at the dates indicated are as follows:
June 30, 2020 | December 31, 2019 | |||||||||||||
Amount | Weighted-Average Interest Rate | Amount | Weighted-Average Interest Rate | |||||||||||
(Dollars in thousands) | ||||||||||||||
Savings | $ 175,749 | 0.53% | $ 168,983 | 0.86% | ||||||||||
Transaction accounts | 339,151 | 0.01% | 276,496 | 0.03% | ||||||||||
Money market accounts | 330,261 | 0.44% | 248,086 | 0.46% | ||||||||||
Certificates of deposit | 325,164 | 1.57% | 308,080 | 1.85% | ||||||||||
$ 1,170,325 | 0.64% | $ 1,001,645 | 0.84% |
June 30, 2019 | December 31, 2018 | ||||||||||
Amount | Weighted-Average Interest Rate | Amount | Weighted-Average Interest Rate | ||||||||
(Dollars in thousands) | |||||||||||
Savings | $ | 164,190 | 0.94% | $ | 143,412 | 0.74% | |||||
Transaction accounts | 260,701 | 0.06% | 262,152 | 0.05% | |||||||
Money market accounts | 251,002 | 0.43% | 273,344 | 0.43% | |||||||
Certificates of deposit | 257,372 | 2.11% | 261,352 | 1.86% | |||||||
$ | 933,265 | 0.88% | $ | 940,260 | 0.77% | ||||||
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Maturities of certificates at the dates indicated are as follows:
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
Within one year or less | $ | 179,950 | $ | 148,119 | |||
After one year through two years | 50,195 | 78,966 | |||||
After two years through three years | 14,079 | 20,934 | |||||
After three years through four years | 4,441 | 6,759 | |||||
After four years through five years | 8,707 | 6,574 | |||||
After five years | — | — | |||||
$ | 257,372 | $ | 261,352 |
June 30, 2020 | December 31, 2019 | |||||||
(In thousands) | ||||||||
Within one year or less | $ | 240,053 | $ | 241,127 | ||||
After one year through two years | 60,814 | 42,274 | ||||||
After two years through three years | 9,353 | 11,167 | ||||||
After three years through four years | 8,540 | 6,593 | ||||||
After four years through five years | 6,404 | 6,919 | ||||||
After five years | — | — | ||||||
$ | 325,164 | $ | 308,080 |
Brokered certificates of deposits of $13.7$86.3 million and $51.6 million are included in the June 30, 2020 and December 31, 2019 certificate of deposits total. As needed, we will increase our portfolio of these brokered deposits as a source of additional funding in future periods.
Deposits at June 30, 20192020 and December 31, 2018,2019, included $56.2$76.9 million and $80.0$57.4 million, respectively, in public fund deposits. Investment securities with a carrying value of $43.1$43.2 million and $47.6$35.5 million were pledged as collateral for these deposits at June 30, 20192020 and December 31, 2018,2019, respectively. This exceeds the minimum collateral requirements established by the Washington Public Deposit Protection Commission.
Interest on deposits by type for the periods shown was as follows:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Savings | $ | 269 | $ | 372 | $ | 609 | $ | 688 | ||||||||
Transaction accounts | 4 | 36 | 23 | 72 | ||||||||||||
Money market accounts | 400 | 313 | 756 | 633 | ||||||||||||
Certificates of deposit | 1,368 | 1,347 | 2,791 | 2,599 | ||||||||||||
$ | 2,041 | $ | 2,068 | $ | 4,179 | $ | 3,992 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands) | |||||||||||||||
Savings | $ | 372 | $ | 28 | $ | 688 | $ | 44 | |||||||
Transaction accounts | 36 | 9 | 72 | 13 | |||||||||||
Insured money market accounts | 313 | 282 | 633 | 497 | |||||||||||
Certificates of deposit | 1,347 | 806 | 2,599 | 1,556 | |||||||||||
$ | 2,068 | $ | 1,125 | $ | 3,992 | $ | 2,110 |
Note 5 - Federal Taxes on Income
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. These calculations are based on many complex factors including estimates of the timing of reversals of temporary differences, the interpretation of federal income tax laws, and a determination of the differences between the tax and the financial reporting basis of assets and liabilities. Actual results could differ significantly from the estimates and interpretations used in determining the current and deferred income tax assets and liabilities.
The effective tax rates were 18.9% and 18.5%18.9% for the six months ended June 30, 2019 2020 and 2018,2019, respectively. The effective tax rates differ from the statutory maximum federal tax rate for 20192020 and 20182019 of 21%, largely due to the nontaxable earnings on bank owned life insurance and tax-exempt interest income earned on certain investment securities and loans.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6 - Earnings per Share
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. In addition, nonvested share-based payment awards
The following table presents a reconciliation of the components used to compute basic and diluted earnings per share for the three and six months ended June 30, 2019 2020 and 2018.
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands, except share data) | |||||||||||||||
Numerator: | |||||||||||||||
Net income | $ | 2,079 | $ | 1,526 | $ | 4,286 | $ | 3,049 | |||||||
Denominator: | |||||||||||||||
Basic weighted average common shares outstanding | 9,856,423 | 10,329,680 | 9,916,423 | 10,412,704 | |||||||||||
Dilutive restricted stock grants | 100,664 | 126,666 | 90,907 | 120,526 | |||||||||||
Diluted weighted average common shares outstanding | 9,957,087 | 10,456,346 | 10,007,330 | 10,533,230 | |||||||||||
Basic earnings per share | $ | 0.21 | $ | 0.15 | $ | 0.43 | $ | 0.29 | |||||||
Diluted earnings per share | $ | 0.21 | $ | 0.15 | $ | 0.43 | $ | 0.29 | |||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In thousands, except share data) | (In thousands, except share data) | |||||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 1,976 | $ | 2,079 | $ | 2,849 | $ | 4,286 | ||||||||
Denominator: | ||||||||||||||||
Basic weighted average common shares outstanding | 9,373,253 | 9,856,423 | 9,488,197 | 9,916,423 | ||||||||||||
Dilutive restricted stock grants | 34,870 | 100,664 | 40,011 | 90,907 | ||||||||||||
Diluted weighted average common shares outstanding | 9,408,123 | 9,957,087 | 9,528,208 | 10,007,330 | ||||||||||||
Basic earnings per share | $ | 0.21 | $ | 0.21 | $ | 0.30 | $ | 0.43 | ||||||||
Diluted earnings per share | $ | 0.21 | $ | 0.21 | $ | 0.30 | $ | 0.43 |
Unallocated ESOP shares are not included as outstanding for either basic or diluted earnings per share calculations. As of June 30, 2019 2020 and 2018,2019, there were 820,556767,522 and 873,445820,556 shares in the ESOP that remain unallocated, respectively.
Potential dilutive shares are excluded from the computation of EPS if their effect is anti-dilutive. There were no35,508 and 0 restricted stock award anti-dilutive weighted-average shares at for the three months ended June 30, 2019 2020 and 2018,2019 respectively. There were 28,111 and 0 restricted stock award anti-dilutive weighted-average shares for the six months ended June 30, 2020 and 2019 respectively.
Note 7 - Employee Benefits
Employee Stock Ownership Plan
In connection with the Conversion, the Company established an ESOP for eligible employees of the Company and the Bank. Employees of the Company and the Bank who have been credited with at least 1,000 hours of service during a 12-month12-month period are eligible to participate in the ESOP.
Pursuant to the Plan, the ESOP purchased shares in the open market with funds borrowed from First Northwest. The Bank will make contributions to the ESOP in amounts necessary to amortize the ESOP loan payable to First Northwest over a period of 20 years, bearing estimated interest at 2.46%. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Bank's discretionary contributions to the ESOP and earnings on the ESOP assets. An annual principal and interest payment of $835,000 was made by the ESOP during the six months ended June 30, 2019.
As shares are committed to be released from collateral, the Company reports compensation expense equal to the average daily market prices of the shares and the shares become outstanding for EPS computations. The compensation expense is accrued monthly throughout the year. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Compensation expense related to the ESOP for the three months ended June 30, 2019 2020 and 2018,2019, was $109,000 and $120,000, and $217,000, respectively. For the six months ended June 30, 2019 and 2018 compensationCompensation expense related to the ESOP for the six months ended June 30, 2020 and 2019, was $260,000 and $327,000, and $437,000, respectively.
Shares issued to the ESOP as of the dates indicated are as follows:
June 30, 2020 | December 31, 2019 | |||||||
(Dollars in thousands) | ||||||||
Allocated shares | 280,507 | 227,473 | ||||||
Committed to be released shares | — | 26,514 | ||||||
Unallocated shares | 767,522 | 794,042 | ||||||
Total ESOP shares issued | 1,048,029 | 1,048,029 | ||||||
Fair value of unallocated shares | $ | 9,533 | $ | 14,396 |
June 30, 2019 | December 31, 2018 | ||||||
(Dollars in thousands) | |||||||
Allocated shares | 227,473 | 174,584 | |||||
Committed to be released shares | — | 26,442 | |||||
Unallocated shares | 820,556 | 847,003 | |||||
Total ESOP shares issued | 1,048,029 | 1,048,029 | |||||
Fair value of unallocated shares | $ | 13,334 | $ | 12,561 | |||
Note 8 - Stock-based Compensation
In May 2020, the Company's shareholders approved the First Northwest Bancorp 20152020 Equity Incentive Plan (the "2015("2020 EIP"), which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock andshares or restricted stock units, and performance share awards to eligible participants. participants through May 2030. The cost of awards under the 20152020 EIP generally is based on the fair value of the awards on their grant date. The maximum number of shares that may be utilized for awards under the 20152020 EIP is 1,834,050. The 2015 EIP provides for the use of authorized but unissued shares or shares that have been reacquired by First Northwest to fund share-based awards.520,000. At June 30, 2019,2020, there were 1,316,550520,000 total shares available for grant under the 20152020 EIP, including 76,014 sharesall of which are available to be granted as restricted stock.
As a result of the approval of the 2020 EIP, the First Northwest Bancorp 2015 Equity Incentive Plan (the "2015 EIP") was frozen and 0 additional awards will be made. At June 30, 2020, there were 0 shares available for grant under the 2015 EIP. At this date, there were 277,400 shares granted under the 2015 EIP that are expected to vest subject to the 2015 EIP plan provisions.
During the three and six months ended June 30, 20192020, 27,500 and 2018, no62,600 shares of restricted stock were awarded, respectively, and no0 stock options were granted. There were 0 shares of restricted stock awarded during the three and six months ended June 30, 2019. Awarded shares of restricted stock vest ratably over five years from the date of grant as long asprovided the eligible participant remains in service to the Company. The Company recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the grant date amortized over five years.
For the three months ended June 30, 2019 2020 and 2018,2019, total compensation expense for the 2015 EIP was $270,000$250,000 and $259,000,$270,000, respectively. For the six months ended June 30, 2019 2020 and 2018,2019, total compensation expense for the 2015 EIP was $555,000 and $553,000, and $532,000, respectively.
Included in the above compensation expense for the three months ended June 30, 2019 2020 and 2018, was2019, directors' compensation of $85,000was $86,000 and $85,000, respectively. For the six months ended June 30, 2019 2020 and 2018,2019, directors' compensation was $170,000$171,000 and $170,000, respectively.
The following tablestable provide a summary of changes in non-vested restricted stock awards for the periodsperiod shown:
For the Three Months Ended | ||||||||
June 30, 2020 | ||||||||
Shares | Weighted-Average Grant Date Fair Value | |||||||
Non-vested at April 1, 2020 | 253,900 | $ | 15.05 | |||||
Granted | 27,500 | 11.23 | ||||||
Forfeited | (4,000 | ) | 14.61 | |||||
Non-vested at June 30, 2020 | 277,400 | $ | 14.68 |
For the Six Months Ended | ||||||||
June 30, 2020 | ||||||||
Shares | Weighted-Average Grant Date Fair Value | |||||||
Non-vested at January 1, 2020 | 264,300 | $ | 14.60 | |||||
Granted | 62,600 | 14.03 | ||||||
Forfeited | (49,500 | ) | 13.41 | |||||
Non-vested at June 30, 2020 | 277,400 | $ | 14.68 |
For the Three Months Ended | ||||||
June 30, 2019 | ||||||
Shares | Weighted-Average Grant Date Fair Value | |||||
Non-vested at April 1, 2019 | 290,600 | $ | 13.72 | |||
Granted | — | — | ||||
Vested | — | — | ||||
Forfeited | (4,000 | ) | 16.07 | |||
Non-vested at June 30, 2019 | 286,600 | 13.69 | ||||
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Six Months Ended | ||||||
June 30, 2019 | ||||||
Shares | Weighted-Average Grant Date Fair Value | |||||
Non-vested at January 1, 2019 | 290,600 | $ | 13.72 | |||
Granted | — | — | ||||
Vested | — | — | ||||
Canceled (1) | — | — | ||||
Forfeited | (4,000 | ) | 16.07 | |||
Non-vested at June 30, 2019 | 286,600 | 13.69 | ||||
(1) A surrender of vested stock awards by a participant surrendering the number of shares valued at the current stock price at the vesting date to cover the total cost of the vested shares. The surrendered shares are canceled and are unavailable for reissue. |
As of June 30, 2019,2020, there was $2.9$3.1 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards. The cost is expected to be recognized over the remaining weighted-average vesting period of approximately 2.843.42 years.
Note 9 - Fair Value Accounting and Measurement
Fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants in the Company’s principal market. The Company has established and documented its process for determining the fair values of its assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, management determines the fair value of the Company’s assets and liabilities using valuation models or third-partythird-party pricing services, both of which rely on market-based parameters when available, such as interest rate yield curves, option volatilities and credit spreads, or unobservable inputs. Unobservable inputs may be based on management’s judgment, assumptions, and estimates related to credit quality, liquidity, interest rates, and other relevant inputs.
Any changes to valuation methodologies are reviewed by management to ensure they are relevant and justified. Valuation methodologies are refined as more market-based data becomes available.
A three-levelthree-level valuation hierarchy is used in determining fair value that is based on the transparency of the inputs used in the valuation process. The inputs used in determining fair value in each of the three levels of the hierarchy are as follows:
Level 1
- Quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2
- Either: (i) quoted prices for similar assets or liabilities; (ii) observable inputs, such as interest rates or yield curves; or (iii) inputs derived principally from or corroborated by observable market data.Level 3
- Unobservable inputs.The hierarchy gives the highest ranking to Level 1 inputs and the lowest ranking to Level 3 inputs. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the overall fair value measurement.
Qualitative disclosures of valuation techniques
-Securities available for sale: where quoted prices are available in an active market, securities are classified as Level 1. Level 1 instruments include highly liquid government bonds, securities issued by the U.S. Treasury, and exchange-traded equity securities.If quoted prices are not available, management determines fair value using pricing models, quoted prices of similar securities, which are considered Level 2, or discounted cash flows. In certain cases, where there is limited activity in the market for a particularan instrument, assumptions must be made to determine their fair value. Such instruments are classified as Level 3.
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Assets and liabilities measured at fair value on a recurring basis - Assets and liabilities are considered to be valued on a recurring basis if fair value is measured regularly (i.e., daily, weekly, monthly, or quarterly). The following tables show the Company’s assets measured at fair value on a recurring basis at the dates indicated:
June 30, 2019 | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(In thousands) | |||||||||||||||
Securities available-for-sale | |||||||||||||||
Municipal bonds | $ | — | $ | 932 | $ | — | $ | 932 | |||||||
ABS agency | — | 25,436 | — | 25,436 | |||||||||||
ABS corporate | — | 37,210 | — | 37,210 | |||||||||||
Corporate debt | — | 9,482 | — | 9,482 | |||||||||||
SBA | — | 31,975 | — | 31,975 | |||||||||||
MBS agency | — | 135,239 | — | 135,239 | |||||||||||
MBS corporate | — | 9,777 | — | 9,777 | |||||||||||
$ | — | $ | 250,051 | $ | — | $ | 250,051 | ||||||||
December 31, 2018 | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
(In thousands) | |||||||||||||||
Securities available-for-sale | |||||||||||||||
Municipal bonds | $ | — | $ | 869 | $ | — | $ | 869 | |||||||
ABS agency | — | 25,752 | — | 25,752 | |||||||||||
ABS corporate | — | 36,723 | — | 36,723 | |||||||||||
Corporate debt | — | 9,888 | — | 9,888 | |||||||||||
SBA | — | 35,670 | — | 35,670 | |||||||||||
MBS agency | — | 143,455 | — | 143,455 | |||||||||||
MBS corporate | — | 10,610 | — | 10,610 | |||||||||||
$ | — | $ | 262,967 | $ | — | $ | 262,967 |
June 30, 2020 | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Securities available-for-sale | ||||||||||||||||
Municipal bonds | $ | — | $ | 107,610 | $ | — | $ | 107,610 | ||||||||
ABS agency | — | 60,819 | — | 60,819 | ||||||||||||
ABS corporate | — | 39,804 | — | 39,804 | ||||||||||||
Corporate debt | — | 22,428 | — | 22,428 | ||||||||||||
SBA | — | 23,547 | — | 23,547 | ||||||||||||
MBS agency | — | 102,647 | — | 102,647 | ||||||||||||
MBS corporate | — | 7,418 | — | 7,418 | ||||||||||||
$ | — | $ | 364,273 | $ | — | $ | 364,273 |
December 31, 2019 | ||||||||||||||||
Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Securities available-for-sale | ||||||||||||||||
Municipal bonds | $ | — | $ | 39,282 | $ | — | $ | 39,282 | ||||||||
ABS agency | — | 28,858 | — | 28,858 | ||||||||||||
ABS corporate | — | 40,855 | — | 40,855 | ||||||||||||
Corporate debt | — | 9,643 | — | 9,643 | ||||||||||||
SBA | — | 28,459 | — | 28,459 | ||||||||||||
MBS agency | — | 160,167 | — | 160,167 | ||||||||||||
MBS corporate | — | 8,316 | — | 8,316 | ||||||||||||
$ | — | $ | 315,580 | $ | — | $ | 315,580 |
Assets and liabilities measured at fair value on a nonrecurring basis
- Assets are considered to be valued on a nonrecurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the consolidated balance sheets. Generally, nonrecurring valuation is the result of the application of other accounting pronouncements that require assets or liabilities to be assessed for impairment or recorded at the lower of cost or fair value.FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the Company’s assets measured at fair value on a nonrecurring basis at the dates indicated:
June 30, 2019 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
(In thousands) | |||||||||||||||
Impaired loans | $ | — | $ | — | $ | 6,052 | $ | 6,052 | |||||||
December 31, 2018 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
(In thousands) | |||||||||||||||
Impaired loans | $ | — | $ | — | $ | 6,558 | $ | 6,558 |
June 30, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Impaired loans | $ | — | $ | — | $ | 6,862 | $ | 6,862 |
December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(In thousands) | ||||||||||||||||
Impaired loans | $ | — | $ | — | $ | 6,389 | $ | 6,389 |
At June 30, 20192020 and December 31, 2018,2019, there were no0 impaired loans with discounts to appraisal disposition value or other unobservable inputs.
The following tables present the carrying value and estimated fair value of financial instruments at the dates indicated:
June 30, 2020 | ||||||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||||||
Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Financial assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 16,346 | $ | 16,346 | $ | 16,346 | $ | — | $ | — | ||||||||||
Investment securities available for sale | 364,273 | 364,273 | — | 364,273 | — | |||||||||||||||
Loans held for sale | 3,111 | 3,111 | — | 3,111 | — | |||||||||||||||
Loans receivable, net | 986,351 | 975,116 | — | — | 975,116 | |||||||||||||||
FHLB stock | 6,074 | 6,074 | — | 6,074 | — | |||||||||||||||
Accrued interest receivable | 5,360 | 5,360 | — | 5,360 | — | |||||||||||||||
Mortgage servicing rights, net | 1,098 | 1,467 | — | — | 1,467 | |||||||||||||||
Financial liabilities | ||||||||||||||||||||
Demand deposits | $ | 845,161 | $ | 845,161 | $ | 845,161 | $ | — | $ | — | ||||||||||
Time deposits | 325,164 | 328,123 | — | 328,123 | — | |||||||||||||||
Borrowings | 112,379 | 113,919 | — | 113,919 | — | |||||||||||||||
Accrued interest payable | 253 | 253 | — | 253 | — |
June 30, 2019 | |||||||||||||||||||
Carrying Amount | Estimated Fair Value | Fair Value Measurements Using: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||
(In thousands) | |||||||||||||||||||
Financial assets | |||||||||||||||||||
Cash and cash equivalents | $ | 28,822 | $ | 28,822 | $ | 28,822 | $ | — | $ | — | |||||||||
Investment securities available for sale | 250,051 | 250,051 | — | 250,051 | — | ||||||||||||||
Investment securities held to maturity | 37,990 | 38,675 | — | 38,675 | — | ||||||||||||||
Loans held for sale | 2,516 | 2,516 | — | 2,516 | — | ||||||||||||||
Loans receivable, net | 873,958 | 856,059 | — | — | 856,059 | ||||||||||||||
FHLB stock | 6,773 | 6,773 | — | 6,773 | — | ||||||||||||||
Accrued interest receivable | 4,094 | 4,094 | — | 4,094 | — | ||||||||||||||
Mortgage servicing rights, net | 955 | 1,934 | — | — | 1,934 | ||||||||||||||
Financial liabilities | |||||||||||||||||||
Demand deposits | $ | 675,893 | $ | 675,893 | $ | 675,893 | $ | — | $ | — | |||||||||
Time deposits | 257,372 | 257,629 | — | 257,629 | — | ||||||||||||||
Borrowings | 131,337 | 132,099 | — | 132,099 | — | ||||||||||||||
Accrued interest payable | 389 | 389 | — | 389 | — |
FIRST NORTHWEST BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2018 | |||||||||||||||||||
Carrying Amount | Estimated Fair Value | Fair Value Measurements Using: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||
(In thousands) | |||||||||||||||||||
Financial assets | |||||||||||||||||||
Cash and cash equivalents | $ | 26,323 | $ | 26,323 | $ | 26,323 | $ | — | $ | — | |||||||||
Investment securities available for sale | 262,967 | 262,967 | — | 262,967 | — | ||||||||||||||
Investment securities held to maturity | 43,503 | 42,990 | — | 42,990 | — | ||||||||||||||
Loans receivable, net | 863,852 | 840,861 | — | — | 840,861 | ||||||||||||||
FHLB stock | 6,927 | 6,927 | — | 6,927 | — | ||||||||||||||
Accrued interest receivable | 4,048 | 4,048 | — | 4,048 | — | ||||||||||||||
Mortgage servicing rights, net | 1,044 | 1,479 | — | — | 1,479 | ||||||||||||||
Financial liabilities | |||||||||||||||||||
Demand deposits | $ | 678,908 | $ | 678,908 | $ | 678,908 | $ | — | $ | — | |||||||||
Time deposits | 261,352 | 259,549 | — | 259,549 | — | ||||||||||||||
Borrowings | 136,552 | 137,153 | — | 137,153 | — | ||||||||||||||
Accrued interest payable | 521 | 521 | — | 521 | — |
December 31, 2019 | ||||||||||||||||||||
Fair Value Measurements Using: | ||||||||||||||||||||
Carrying Amount | Estimated Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Financial assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 48,739 | $ | 48,739 | $ | 48,739 | $ | — | $ | — | ||||||||||
Investment securities available for sale | 315,580 | 315,580 | — | 315,580 | — | |||||||||||||||
Loans held for sale | 503 | 503 | — | 503 | — | |||||||||||||||
Loans receivable, net | 878,437 | 858,101 | — | — | 858,101 | |||||||||||||||
FHLB stock | 6,034 | 6,034 | — | 6,034 | — | |||||||||||||||
Accrued interest receivable | 3,931 | 3,931 | — | 3,931 | — | |||||||||||||||
Mortgage servicing rights, net | 871 | 1,486 | — | — | 1,486 | |||||||||||||||
Financial liabilities | ||||||||||||||||||||
Demand deposits | $ | 693,565 | $ | 693,565 | $ | 693,565 | $ | — | $ | — | ||||||||||
Time deposits | 308,080 | 308,819 | — | 308,819 | — | |||||||||||||||
Borrowings | 112,930 | 113,076 | — | 113,076 | — | |||||||||||||||
Accrued interest payable | 373 | 373 | — | 373 | — |
Financial assets and liabilities other than investment securities are not traded in active markets. Estimated fair values require subjective judgments and are approximate. The estimates of fair value in the previous table are not necessarily representative of amounts that could be realized in actual market transactions, or of the underlying value of the Company. The methods and assumptions used by the Company in estimating fair values of financial instruments as set forth below in accordance with ASC Topic 825,
Financial Instruments, as amended by ASUSecurities
- Fair values for investment securities are primarily measured using information from aLoans receivable, net
- At June 30,Mortgage servicing rights, net
- The estimated fair value of mortgage servicing rights is based on market prices for comparable mortgage servicing contracts when available. If no comparable contract is available, the estimated fair value is based on a valuation model that calculates the present value of estimated future net servicing income.Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In thousands) | |||||||||||||||
Noninterest income: | |||||||||||||||
Loan fees (1) | $ | 482 | $ | 132 | $ | 721 | $ | 257 | |||||||
Deposit fees | 463 | 369 | 910 | 761 | |||||||||||
Debit interchange income | 27 | 37 | 49 | 69 | |||||||||||
Credit card interchange income | 457 | 447 | 859 | 853 | |||||||||||
Investment securities gain (loss), net (1) | 57 | 13 | 57 | 135 | |||||||||||
Gain on loan sales, net (1) | 88 | 150 | 175 | 317 | |||||||||||
Increase in cash surrender value of BOLI (1) | 145 | 149 | 288 | 298 | |||||||||||
Other income: | |||||||||||||||
Investment services revenue | 60 | 83 | 108 | 157 | |||||||||||
Gain or loss on subsidiary (1) | 18 | 18 | 32 | 32 | |||||||||||
Remaining other income | 6 | 7 | 15 | 8 | |||||||||||
Total other income | 84 | 108 | 155 | 197 | |||||||||||
Total noninterest income | $ | 1,803 | $ | 1,405 | $ | 3,214 | $ | 2,887 | |||||||
(1) Not within scope of Topic 606 |
Forward-Looking Statements
Certain matters discussed in this Quarterly Report on Form 10-Q constitute forward‑lookingforward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by the use of words such as “believes,” “expects,” “anticipates,” “estimates” or similar expressions. Forward‑lookingForward-looking statements include, but are not limited to:
• | statements of our goals, intentions and expectations; |
• | statements regarding our business plans, prospects, growth and operating strategies; |
• | statements regarding the quality of our loan and investment portfolios; |
• | estimates of our risks and future costs and benefits; and |
• | statements concerning the potential effects of the COVID-19 pandemic on the Bank's business and financial results and conditions. |
These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:
• | developments and changes in Federal and state laws and regulations, such as the recently enacted Coronavirus Aid Relief and Economic Security Act (“CARES Act”) addressing the economic effects of the COVID-19 pandemic and increased regulation of the banking industry through legislative action and revised rules and standards applied by the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Washington Department of Financial Institutions; |
• | changes in general economic conditions, either nationally or in our market area, that are worse than expected; |
• | changes in policy and regulation as it pertains to the Small Business Administration’s Paycheck Protection Program (“PPP”) and the bank’s participation as a lender in the PPP and similar program and its effect on the Bank’s liquidity, financial results, business and customers, including the availability of program funds and the ability of customers to comply with the requirements and otherwise perform with respect to loans obtained under such programs. |
• | the credit risks of our lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; |
• | fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market area; |
• | a decrease in the secondary market demand for loans that we originate for sale; |
• | management’s assumptions in determining the adequacy of the allowance for loan losses; |
• | our ability to control operating costs and expenses; |
• | whether our management team can implement our operational strategy, including but not limited to our loan growth; |
• | our ability to successfully execute on merger and/or acquisition strategies and integrate any newly acquired assets, liabilities, customers, systems, and management personnel into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; |
• | staffing needs and associated expenses in response to product demand or the implementation of corporate strategies, including our growth strategies related to the home lending center and new branches; |
• | the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; |
• | changes in the levels of general interest rates, and the relative differences between short and long-term interest rates, deposit interest rates, our net interest margin and funding sources; |
• | increased competitive pressures among financial services companies; |
• | our ability to attract and retain deposits; |
• | our ability to retain key members of our senior management team; |
• | changes in consumer spending, borrowing and savings habits; |
• | our ability to successfully manage our growth in compliance with regulatory requirements; |
• | results of examinations of us by the Washington State Department of Financial Institutions, Department of Banks, the Federal Deposit Insurance Corporation, the Federal Reserve Bank of San Francisco, or other regulatory authorities, which could result in restrictions that may adversely affect our liquidity and earnings; |
• | changes in accounting policies and practices, as may be adopted by the financial institutions regulatory agencies, the Public Company Accounting Oversight Board or the Financial Accounting Standards Board; |
• | disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; |
• | inability of key third-party vendors to perform their obligations to us; and |
• | other economic, competitive, governmental, regulatory and technical factors affecting our operations, pricing, products and services and other risks described elsewhere in our filings with the Securities and Exchange Commission, including this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2019. |
Further, statements about the potential effects of the COVID-19 pandemic on the Bank’s businesses and financial results and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Bank’s control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to product demand or the implementation of corporate strategies, including our growth strategies related to the home lending center and new branches;
Any of the forward lookingforward-looking statements that we make in this report and in other public statements we make may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee.anticipate or predict. Any forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light ofDue to these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur, and you should not put undue reliance on any forward-looking statements.
General
First Northwest Bancorp (the "Company") is a bank holding company which primarily engages in the business activity of its subsidiary, First Federal Savings and Loan Association of Port Angeles ("First Federal" or the "Bank").Federal. First Federal is a community-oriented financial institution serving Western Washington. Our thirteen locations includeClallam, Jefferson, Kitsap, Whatcom, and King counties in Washington, through its Seattle lending center and ten full-service banking offices, two locations primarily serving our customers through the use of Interactive Teller Machines ("ITM"), and a Home Lending Center ("HLC"), which is focused on the origination of loans secured by one- to four-family residential properties.branches. Our business and operating strategy is focused on diversifying our loan portfoliobuilding sustainable earnings through hiring experienced bankers, geographic expansion, and diversifying our loan product mix, expanding our deposit product offerings by upgradingthat deliver value-added solutions, enhancing existing services and use of technology,digital service delivery channels, and enhancing our infrastructure to support our changing lending and deposit capabilities in order to meet the changing needs and expectations of our customers.
We offer a wide range of products and services focused on the lending and depository needs of the communities we serve.Western Washington. While we have a large concentration of first lien one- to four-family mortgage loans, we have increasedcontinue to increase our origination and portfolio balances of commercial real estate and multi-family real estate,estate. We have also increased our auto and constructionconsumer loans, as well as engaging inthrough indirect auto lending and purchased auto loan purchase programs, in order to diversify our asset portfolio and increase interest income. We continue to originate one- to four-family residential mortgage loans and mayregularly sell conforming loans into the secondary market to increase noninterest income and improve ourmanage interest rate risk, or we mayrisk. We also retain one- to four-family first and second lien loans in our portfolio to enhancegenerate interest income. We offer traditional consumer and business deposit products, including transaction accounts, savings and money market accounts, and certificates of deposit for individuals, businesses, and nonprofit organizations. Deposits are our primary source of funds for our lending and investing activities. We also borrow funds, typically from the Federal Home Loan Bank of Des Moines, to provide additional funding and interest rate risk management tools.
First FederalNorthwest is significantly affected by prevailing economic conditions as well as government policies and regulations concerning, among other things, monetary and fiscal affairs, housing and financial institutions. Deposit flows are influenced by a number ofseveral factors, including interest rates paid on competing time deposits, alternative investment options available alternative investments,to our customers, account maturities, the number and quality of our deposit originators, digital delivery systems, marketing and promotion, and the overall level of personal income and savings. Lending activities are influenced by the demand for funds, our credit policies, the number and quality of our lenders and credit underwriters, digital delivery systems, and regional economic cycles.
Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income earned on our loans and investments and interest expense paid on our deposits and borrowings. Changes in levels of interest rates and cash flows from existing assets and liabilities affect our net interest income. A secondary source of income is noninterest income, which includes revenue we receive from providing products and services, including service charges on deposit accounts, mortgage banking income, earnings from bank-owned life insurance, investment services income, and gains and losses from sales of securities.
An offset to net interest income is the provision for loan losses, which represents the periodic charge to operations which is required to adequately provide for probable losses inherent in our loan portfolio.portfolio through our allowance for loan losses. As credit metrics improve, such as a loan's risk rating, improves, property values increase, or recoveries of amounts previously charged off are received, a recapture of previously recognized provision for loan losses may be added to net interest income.
Noninterest expenses we incur in operating our business consist of salaries and employee benefits and expenses,benefit costs, occupancy and equipment expenses, federal deposit insurance premiums and regulatory assessments, data processing expenses, advertising and promotion expenses, marketing and promotion expenses, expenses related to real estate and personal property owned and other miscellaneous expenses.
COVID-19 Pandemic. In late 2019 and early 2020, the COVID-19 pandemic manifested its impact on individuals, companies, and governmental entities around the world. It significantly impacted the global economy and created a challenging operating environment. As economic conditions deteriorated in mid-March 2020 as a result of the COVID-19 pandemic, we responded in several ways. Some of the key adjustments and developments include the following:
• | For our employees: |
◦ | Enhanced the ability of our employees to work remotely, adjusting branch operating hours and restricting lobby access in most cases. |
◦ | Provided significant support to employees by granting an increase in flexibility with paid leave, temporarily adjusting vacation policies, and increasing the cleaning of facilities to enable a safer environment for those employees that are not able to work from home. |
◦ | Increased compensation for hourly employees and providing additional compensation for exempt employees below the level of Senior Vice President. |
• | For our customers and communities: |
◦ | Offering short-term loan payment and fee forbearance programs. Many borrowers requested and received temporary forbearance from obligations to assist them with the expected shortage in their near-term cash flow. |
◦ | Facilitating government programs like the Small Business Administration's Paycheck Protection Program ("SBA PPP") and Main Street Lending Program ("MSLP") established by the Federal Reserve. |
◦ | Investing in our communities. We plan to use a portion of the proceeds received from the SBA PPP loans and invest in the communities we serve. |
• | For our shareholders and regulators: |
◦ | Maintained our capital ratios at strong levels and materially increased our provision for loan losses to $2.8 million for the first half of 2020, compared to $669,000 for all of 2019. | |
◦ | Increasing on balance sheet liquidity, specifically Cash and Cash Equivalents increased by $849,000, a 1.7% increase over December 31, 2019. The investment portfolio, a secondary source of liquidity, increased by $48.7 million, or 16%, as well. |
On March 23, 2020, the State of Washington announced the Stay Home, Stay Healthy order for all residents, resulting in the closing of businesses or a substantial reduction in business activity. Conditions have since improved in most of the counties within our footprint allowing many businesses to expand services or reopen under current guidelines. The sectors that continue to be most heavily impacted include hospitality; restaurant and food services; and lessors of commercial real estate to hospitality, restaurant, and retail establishments. At June 30, 2020, the Company’s exposure as a percent of the total loan portfolio to these industries was 5.1%, 0.2%, and 4.9%, respectively.
The Company has worked with loan customers on loan deferral and forbearance plans. As of June 30, 2020, the Company had granted payment deferral plans on 297 loans totaling $128.4 million compared to 23 loans totaling $1.4 million as of March 31, 2020. These modifications were not classified as TDRs at June 30, 2020, in accordance with the guidance of the CARES Act and related regulatory guidance. The Company is continuing to work on forbearance plans with customers impacted by the COVID-19 pandemic. For additional information on COVID-19 deferrals, see Note 3 of the Notes to Consolidated Financial Statements contained in "Item 1, Financial Statements."
During the quarter ended June 30, 2020, we provided assistance to many small businesses through the SBA's Paycheck Protection Program. This program provides small businesses with funds to pay up to eight weeks of payroll costs including benefits. A portion of the funds can also be used to pay interest on mortgages, rent, and utilities. On June 5, 2020, the Paycheck Protection Program Flexibility Act ("PPPFA") was enacted. Main provisions of the PPPFA extended the repayment period from two to five years, extended the covered expense period from eight to 24 weeks, and lowered the percent of forgiveness amount required to be used for eligible payroll costs to 60%. The PPPFA also extends the repayment start date until after the SBA makes a decision on the application for loan forgiveness.
We processed approximately $30.6 million of loans for 440 customers through the SBA PPP program as of June 30, 2020. The average loan amount approved was approximately $69,000. Payments by borrowers on these loans begin six months after the note date, and interest, at 1%, will continue to accrue during the six-month deferment. Loans can be forgiven in whole or part (up to full principal and any accrued interest). We partnered with StreetShares to assist our borrowers with the loan forgiveness application process.
Loan processing fees paid to the Bank from the SBA of 5% on loans of $350,000 or less, 3% on loans of more than $350,000 but less than $2.0 million, and 1% for loans of $2.0 million or more are accounted for as loan origination fees. Net deferred fees are recognized over the life of the loan, or two years, as a yield adjustment on the loans. As of June 30, 2020, the Company had received $1.3 million in processing fees. If a loan is paid off or forgiven by the SBA prior to its maturity date, the remaining unamortized deferred fees will be recognized in interest income at that time. At such time that any of these loans are forgiven or repaid before the scheduled maturity, we expect an increase in interest income and the net interest margin during that period.
Critical Accounting Policies
There are no material changes to the critical accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Comparison of Financial Condition at June 30, 20192020 and December 31, 2018
Assets
. Total assetsTotal loans, excluding loans held for sale, increased $9.3$112.6 million to $879.1$996.4 million at June 30, 2019,2020, from $869.7$883.8 million at December 31, 2018, a result of new loan originations and loan purchases partially offset by loan sales and repayment activity. Growth in auto and other consumer and construction and land loans of $25.2 million and $9.6 million, respectfully, was partially offset by decreases in multi-family,2019. During the six months ended June 30, 2020, one- to four-family residential commercial business, commercialloans increased $19.3 million, as we purchased a $28.0 million mortgage loan pool. Multi-family loans increased $7.2 million, as we continued to build this part of the loan portfolio. Commercial real estate loans increased by $11.5 million as we continue to build our lending presence in King and home equityWhatcom Counties as well as in our legacy markets. Commercial business loans increased $57.9 million as we funded PPP loans and increased balances generated through the Northpointe Bank Mortgage Participation Program which provides interim financing to mortgage originators based on the contractual sale agreement of $13.9 million, $4.4 million, $3.8 million, $3.0 million, and $435,000, respectively. Loan growth was muteda mortgage loan during the most recent quarter with some unexpected early repayments withinfirst half of 2020. Auto and other consumer loans decreased $2.9 million as we scaled back funding in our multi-familyspecialty auto loan portfolio coupled with strong competitionportfolio. Competition for quality commercial credits remains; however, impacts of the COVID-19 pandemic effect both the supply and our continuing efforts to originatedemand for credit. An increase in refinance activity of one- to-four family residential loans for sale.
Construction and land loans increased 17.7%$21.0, or 56.4%, to $63.7$58.2 million at June 30, 2019,2020, from $54.1$37.2 million at December 31, 2018.2019. The majority of our construction loans are geographically disburseddispersed throughout the Puget Sound region and, as a result, these loans are susceptible to risks that may be differentvary depending on the nature and location of the project. We manage all of our construction lending by utilizing a licensed third partythird-party vendor to assist us in monitoring our construction projects.
We monitor real estate values and general economic conditions in our market areas, in addition to assessing the strength of our borrowers, in order to prudently underwrite construction loans. We have seen a slowingFor the majority of 2019, we decreased our construction lending, which has resulted in a decline in construction balances at the end of the year compared to 2018. In the fourth quarter of 2019 and land loan commitments. Whilethe first quarter of 2020, we continue to focus onincreased production in construction loan origination activity, we may see a decline in outstanding construction loan balances over time if we are unable to source quality construction loans to replace completed projects.lending and our commitments increased accordingly. We continually assess our lending strategies across all product lines and markets within which we do business in order to improve our earnings potential over time while also prudently managing credit risk.
The following tables show our construction commitments by type and geographic concentrations at the dates indicated:
June 30, 2020 | North Olympic Peninsula (1) | Puget Sound Region (2) | Other Washington | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Construction Commitment | ||||||||||||||||
One- to four-family residential | $ | 17,475 | $ | 24,670 | $ | 405 | $ | 42,550 | ||||||||
Multi-family residential | — | 44,966 | — | 44,966 | ||||||||||||
Commercial real estate | 7,430 | 21,692 | 2,801 | 31,923 | ||||||||||||
Total commitment | $ | 24,905 | $ | 91,328 | $ | 3,206 | $ | 119,439 | ||||||||
Construction Funds Disbursed | ||||||||||||||||
One- to four-family residential | $ | 6,226 | $ | 12,432 | $ | 235 | $ | 18,893 | ||||||||
Multi-family residential | — | 20,492 | — | 20,492 | ||||||||||||
Commercial real estate | 6,810 | 4,814 | 54 | 11,678 | ||||||||||||
Total disbursed | $ | 13,036 | $ | 37,738 | $ | 289 | $ | 51,063 | ||||||||
Undisbursed Commitment | ||||||||||||||||
One- to four-family residential | $ | 11,249 | $ | 12,238 | $ | 170 | $ | 23,657 | ||||||||
Multi-family residential | — | 24,474 | — | 24,474 | ||||||||||||
Commercial real estate | 620 | 16,878 | 2,747 | 20,245 | ||||||||||||
Total undisbursed | $ | 11,869 | $ | 53,590 | $ | 2,917 | $ | 68,376 | ||||||||
Land Funds Disbursed | ||||||||||||||||
One- to four-family residential | $ | 4,677 | $ | 2,062 | $ | 351 | $ | 7,090 | ||||||||
Commercial real estate | — | — | — | — | ||||||||||||
Total disbursed for land | $ | 4,677 | $ | 2,062 | $ | 351 | $ | 7,090 |
(1) Includes Clallam and Jefferson counties. | ||||||||||||
(2) Includes Kitsap, Mason, Thurston, Pierce, King, Snohomish, Skagit, Whatcom, and Island counties. |
December 31, 2019 | North Olympic Peninsula | Puget Sound Region | Other Washington | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Construction Commitment | ||||||||||||||||
One- to four-family residential | $ | 14,915 | $ | 23,969 | $ | 496 | $ | 39,380 | ||||||||
Multi-family residential | — | 27,241 | — | 27,241 | ||||||||||||
Commercial real estate | 6,381 | 563 | 3,120 | 10,064 | ||||||||||||
Total Commitment | $ | 21,296 | $ | 51,773 | $ | 3,616 | $ | 76,685 | ||||||||
Construction Funds Disbursed | ||||||||||||||||
One- to four-family residential | $ | 5,242 | $ | 10,734 | $ | 151 | $ | 16,127 | ||||||||
Multi-family residential | — | 10,465 | — | 10,465 | ||||||||||||
Commercial real estate | 2,704 | 563 | 58 | 3,325 | ||||||||||||
Total disbursed | $ | 7,946 | $ | 21,762 | $ | 209 | $ | 29,917 | ||||||||
Undisbursed Commitment | ||||||||||||||||
One- to four-family residential | $ | 9,673 | $ | 13,235 | $ | 345 | $ | 23,253 | ||||||||
Multi-family residential | — | 16,776 | — | 16,776 | ||||||||||||
Commercial real estate | 3,677 | — | 3,062 | 6,739 | ||||||||||||
Total undisbursed | $ | 13,350 | $ | 30,011 | $ | 3,407 | $ | 46,768 | ||||||||
Land Funds Disbursed | ||||||||||||||||
One- to four-family residential | $ | 4,904 | $ | 1,343 | $ | — | $ | 6,247 | ||||||||
Commercial real estate | 1,023 | — | — | 1,023 | ||||||||||||
Total disbursed for land | $ | 5,927 | $ | 1,343 | $ | — | $ | 7,270 |
June 30, 2019 | North Olympic Peninsula (1) | Puget Sound Region (2) | Other Washington | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Construction Commitment | ||||||||||||||||
One- to four-family residential | $ | 12,814 | $ | 18,938 | $ | 406 | $ | 32,158 | ||||||||
Multi-family residential | — | 43,958 | — | 43,958 | ||||||||||||
Commercial real estate | 7,717 | 10,915 | — | 18,632 | ||||||||||||
Total commitment | $ | 20,531 | $ | 73,811 | $ | 406 | $ | 94,748 | ||||||||
Construction Funds Disbursed | ||||||||||||||||
One- to four-family residential | $ | 6,053 | $ | 7,197 | $ | 55 | $ | 13,305 | ||||||||
Multi-family residential | — | 31,877 | — | 31,877 | ||||||||||||
Commercial real estate | 2,143 | 8,675 | — | 10,818 | ||||||||||||
Total disbursed | $ | 8,196 | $ | 47,749 | $ | 55 | $ | 56,000 | ||||||||
Undisbursed Commitment | ||||||||||||||||
One- to four-family residential | $ | 6,761 | $ | 11,741 | $ | 351 | $ | 18,853 | ||||||||
Multi-family residential | — | 12,081 | — | 12,081 | ||||||||||||
Commercial real estate | 5,574 | 2,240 | — | 7,814 | ||||||||||||
Total undisbursed | $ | 12,335 | $ | 26,062 | $ | 351 | $ | 38,748 | ||||||||
Land Funds Disbursed | ||||||||||||||||
One- to four-family residential | $ | 5,331 | $ | 2,130 | $ | — | $ | 7,461 | ||||||||
Commercial real estate | — | 280 | — | 280 | ||||||||||||
Total disbursed for land | $ | 5,331 | $ | 2,410 | $ | — | $ | 7,741 | ||||||||
(1) Includes Clallam and Jefferson counties. | ||||||||||||||||
(2) Includes Kitsap, Mason, Thurston, Pierce, King, Snohomish, Skagit, Whatcom, and Island counties. |
December 31, 2018 | North Olympic Peninsula | Puget Sound Region | Other Washington | Total | ||||||||||||
(In thousands) | ||||||||||||||||
Construction Commitment | ||||||||||||||||
One- to four-family residential | $ | 16,814 | $ | 18,550 | $ | — | $ | 35,364 | ||||||||
Multi-family residential | — | 45,313 | — | 45,313 | ||||||||||||
Commercial real estate | 1,868 | 20,147 | — | 22,015 | ||||||||||||
Total Commitment | $ | 18,682 | $ | 84,010 | $ | — | $ | 102,692 | ||||||||
Construction Funds Disbursed | ||||||||||||||||
One- to four-family residential | $ | 8,321 | $ | 8,998 | $ | — | $ | 17,319 | ||||||||
Multi-family residential | — | 17,348 | — | 17,348 | ||||||||||||
Commercial real estate | 1,584 | 9,424 | — | 11,008 | ||||||||||||
Total disbursed | $ | 9,905 | $ | 35,770 | $ | — | $ | 45,675 | ||||||||
Undisbursed Commitment | ||||||||||||||||
One- to four-family residential | $ | 8,493 | $ | 9,552 | $ | — | $ | 18,045 | ||||||||
Multi-family residential | — | 27,965 | — | 27,965 | ||||||||||||
Commercial real estate | 284 | 10,723 | — | 11,007 | ||||||||||||
Total undisbursed | $ | 8,777 | $ | 48,240 | $ | — | $ | 57,017 | ||||||||
Land Funds Disbursed | ||||||||||||||||
One- to four-family residential | $ | 6,124 | $ | 2,023 | $ | — | $ | 8,147 | ||||||||
Commercial real estate | — | 280 | — | 280 | ||||||||||||
Total disbursed for land | $ | 6,124 | $ | 2,303 | $ | — | $ | 8,427 |
During the six months ended June 30, 2019,2020, the Company originated $70.6$276.3 million of loans, of which $32.5$145.1 million, or 46.0%52.5%, were originated in the Puget Sound region, of Washington, $36.0$115.7 million, or 50.9%41.9%, in the North Olympic Peninsula, and $2.2$11.9 million, or 3.1%4.3%, in other areas throughout Washington State, and $3.7 million, or 1.3%, in Washington.Oregon. The Company purchased an additional $34.6$28.0 million in one- to four-family loans mainlyand $15.9 million in specialty auto loans, of $28.4 million, during the six months ended June 30, 2019.
Our allowance for loan losses increased $198,000,$2.5 million, or 2.1%25.8%, to $9.7$12.1 million at June 30, 2019,2020, from $9.5$9.6 million at December 31, 2018, mainly2019. The increase was due to a $2.8 million loan loss provision, offset by net charge-offs of $285,000 for the six- month period. The provision is largely attributed to qualitative factor adjustments made in response to the economic impact of the COVID-19 pandemic, as a result ofwell as to account for growth in the loan growth.portfolio. The allowance for loan losses as a percentage of total loans remained at 1.1% at both June 30, 20192020 and December 31, 2018
Nonperforming loans decreased $432,000,increased $1.6 million, or 25.1%86.9%, to $1.3$3.4 million at June 30, 2019,2020, from $1.7$1.8 million at December 31, 2018,2019, mainly attributable to a decreasesan increase in nonperforming home equityone- to four-family loans of $221,000$845,000, multi-family loans of $297,000, construction and land loans of $108,000, and commercial business loans of $143,000.$308,000, partially offset by a decrease in commercial real estate loans of $74,000. Nonperforming loans to total loans decreasedincreased to 0.1%0.3% at June 30, 20192020, from 0.2% at December 31, 2018.2019. The allowance for loan losses as a percentage of nonperforming loans increaseddecreased to 753.8%360.8% at June 30, 2019,2020, from 553.3%536.1% at December 31, 2018, and classified loans decreased $236,000 to $3.1 million at June 30, 2019, from $3.4 million at December 31, 2018.
At June 30, 2019,2020, there were $3.7$2.5 million in restructured loans, of which $3.6$2.4 million were performing in accordance with their modified payment terms and returned to accrual status.
Asset quality remains strongconsistent with netDecember 31, 2019. Net loan charge-offs are concentrated mainly in our auto loan portfolio. We haverecently adjusted our indirect auto loan product offerings in an effortand underwriting criteria to improve credit quality and reduce future charge-off activity. We continue to monitor and make changes to the indirect auto loan program in order to prudently balance risk and return within the auto loan portfolio. We believe that our allowance for loan losses wasis adequate to absorb the known and inherent risks of loss in the loan portfolio as of June 30, 2019.
Loans receivable, excluding loans held for sale, consisted of the following at the dates indicated
:June 30, 2020 | December 31, 2019 | |||||||
(In thousands) | ||||||||
Real Estate: | ||||||||
One-to-four family | $ | 325,349 | $ | 306,014 | ||||
Multi-family | 103,279 | 96,098 | ||||||
Commercial real estate | 267,233 | 255,722 | ||||||
Construction and land | 58,153 | 37,187 | ||||||
Total real estate loans | 754,014 | 695,021 | ||||||
Consumer: | ||||||||
Home equity | 33,696 | 35,046 | ||||||
Auto and other consumer | 109,214 | 112,119 | ||||||
Total consumer loans | 142,910 | 147,165 | ||||||
Commercial business loans | 99,477 | 41,571 | ||||||
Total loans | 996,401 | 883,757 | ||||||
Less: | ||||||||
Net deferred loan fees | 1,842 | 206 | ||||||
Premium on purchased loans, net | (3,901 | ) | (4,514 | ) | ||||
Allowance for loan losses | 12,109 | 9,628 | ||||||
Loans receivable, net | $ | 986,351 | $ | 878,437 |
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
Real Estate: | |||||||
One-to-four family | $ | 331,748 | $ | 336,178 | |||
Multi-family | 68,440 | 82,331 | |||||
Commercial real estate | 250,250 | 253,235 | |||||
Construction and land | 63,741 | 54,102 | |||||
Total real estate loans | 714,179 | 725,846 | |||||
Consumer: | |||||||
Home equity | 37,194 | 37,629 | |||||
Auto and other consumer | 112,583 | 87,357 | |||||
Total consumer loans | 149,777 | 124,986 | |||||
Commercial business loans | 15,098 | 18,898 | |||||
Total loans | 879,054 | 869,730 | |||||
Less: | |||||||
Net deferred loan fees | 103 | 292 | |||||
Premium on purchased loans, net | (4,738 | ) | (3,947 | ) | |||
Allowance for loan losses | 9,731 | 9,533 | |||||
Loans receivable, net | $ | 873,958 | $ | 863,852 |
June 30, 2019 | December 31, 2018 | ||||||
(In thousands) | |||||||
Nonperforming loans: | |||||||
Real estate loans: | |||||||
One- to four-family | $ | 685 | $ | 759 | |||
Commercial real estate | 123 | 133 | |||||
Construction and land | 65 | 44 | |||||
Total real estate loans | 873 | 936 | |||||
Consumer loans: | |||||||
Home equity | 148 | 369 | |||||
Other | 240 | 245 | |||||
Total consumer loans | 388 | 614 | |||||
Commercial business | 30 | 173 | |||||
Total nonperforming loans | 1,291 | 1,723 | |||||
Real estate owned: | |||||||
Land | 72 | 72 | |||||
Total real estate owned | 72 | 72 | |||||
Repossessed assets | 19 | 52 | |||||
Total nonperforming assets | $ | 1,382 | $ | 1,847 | |||
Nonaccrual and 90 days or more past due loans as a percentage of total loans | 0.1 | % | 0.2 | % |
June 30, 2020 | December 31, 2019 | |||||||
(In thousands) | ||||||||
Nonperforming loans: | ||||||||
Real estate loans: | ||||||||
One- to four-family | $ | 1,543 | $ | 698 | ||||
Multi-family | 297 | — | ||||||
Commercial real estate | 35 | 109 | ||||||
Construction and land | 137 | 29 | ||||||
Total real estate loans | 2,012 | 836 | ||||||
Consumer loans: | ||||||||
Home equity | 140 | 112 | ||||||
Auto and other consumer | 896 | 848 | ||||||
Total consumer loans | 1,036 | 960 | ||||||
Commercial business | 308 | — | ||||||
Total nonperforming loans | 3,356 | 1,796 | ||||||
Real estate owned: | ||||||||
Land | 62 | 62 | ||||||
Total real estate owned | 62 | 62 | ||||||
Repossessed assets | 134 | 92 | ||||||
Total nonperforming assets | $ | 3,552 | $ | 1,950 | ||||
Nonaccrual and 90 days or more past due loans as a percentage of total loans | 0.3 | % | 0.2 | % |
Investment securities decreased $18.4increased $48.7 million, or 6.0%15.4%, to $288.0$364.3 million at June 30, 2019,2020, from $306.5$315.6 million at December 31, 2018,2019, due to sales, calls,the purchase and sale of securities, normal repayment activity.payments and prepayment activity, and an increase in the market value of the portfolio. Mortgage-backed securities represent the largest portion of our investment securities portfolio and totaled $175.8$110.1 million at June 30, 2019,2020, or 61.0%30.2% of the investment securities portfolio, a decrease during the year of $9.5$58.4 million, or 5.2%34.7%, from $185.3$168.5 million at December 31, 2018.2019. Other investment securities, including municipal bonds and other asset-backed securities, were $112.3$254.2 million at June 30, 2019,2020, or 39.0%69.8% of the investment securities portfolio, a decreasean increase of $8.9$107.1 million from $121.1$147.1 million at December 31, 2018.2019. The investment portfolio, including mortgage-backed securities, had an estimated projected average life of 4.66.7 years as of June 30, 2019,2020, and 5.0 years as of December 31, 2018,2019, and had an estimated average repricing term of 3.34.8 years as of June 30, 2019,2020, and 3.7 years as of December 31, 2018,2019, based on the interest rate environment at those times.
The investment portfolio was comprised of 92.4%58.9% in amortizing securities at June 30, 20192020 and 91.6%81.8% at December 31, 2018. As a result, the2019. The projected average life of our securities may vary due to prepayment activity, which, particularly in the mortgage-backed securities portfolio, is generally affectedimpacted by changingprevailing mortgage interest rates. Management continues tomaintains a focus on improvingenhancing the mix of earning assets by originating loans and decreasing securities as a percentage of earning assets; however, we maycontinue to purchase investment securities as a source of additional interest income and also in lieu of carrying higher cash balances at nominal interest rates.income. For additional information, see
Liabilities. Total liabilities increased $5.2$172.1 million to $1.08$1.30 billion at June 30, 2019,2020, from $1.09$1.13 billion at December 31, 2018,2019, primarily the resultdue to an increase in deposits of growth in the deposit account$168.7 million.
Deposit balances and accrued expenses and other liabilities. FHLB borrowings decreased by $5.3 million,increased 16.8%, to $131.3 million$1.17 billion at June 30, 2019, as strong deposit growth alleviated the need to borrow. We may continue to utilize both FHLB short-term advances and FHLB overnight borrowings to manage liquidity.
Equity
. Total shareholders' equityComparison of Results of Operations for the Three Months Ended June 30, 20192020 and 2018
General.
Net incomeNet Interest Income. Net interest income increased $437,000 to $10.1 million for the three months ended June 30, 2018. The increase in net income was primarily due2020., compared to an increase in noninterest income from early prepayment fees on loans.
The yield on average interest-earning assets increased 18cost of interest-bearing liabilities decreased 44 basis points to 4.14%0.89% for the three months ended June 30, 2020, compared to 1.33% for the same period last year. The decrease was due in part to a reduction in the level and cost of borrowings given the prepayment of higher costing FHLB borrowings in the first quarter of 2020. As a result, our average cost of FHLB borrowings decreased to 1.13% in the first quarter of 2020 compared to 2.99% for the same period one year prior. The cost of interest-bearing deposits decreased by 17 basis points to 0.87% compared to 1.04% for the three months ended June 30, 2019, compared to 3.96% for the same period in the prior year, due primarily to an increase in the average balance of loans receivable coupled with a decrease in the average balance of investment securities. We continued to increase our concentration of loans receivable as a percentage of interest-earning assets.
Due to the average cost of interest-bearing liabilities increasingyield on interest-earning assets decreasing at a faster pace than our interest-earning assets,interest-bearing liabilities, the net interest margin decreased twelve13 basis points to 3.10% for the three months ended June 30, 2019,2020, from 3.22%3.23% for the same period in 2018.
Interest Income. Totalinterest income during the three months ended June 30, 2019, compared to the three months ended June 30, 2018, was due to a combination of an increase of $724,000 as a result of an increase in volume, and a decrease of $587,000 due to changes in rates. The increase in loans receivable was the main contributor to the increase in net interest income with $810,000 due to an increase in average volumes and $331,000 due to increases in rates; however, this increase was mostly offset by a $1.0 million increase in the cost of interest-bearing liabilities attributable to increased rates. The cost of savings and certificates of deposits were the main drivers of the increase in interest expense, contributing and increase of $328,000 and $466,000, respectively, due to rates. Management has expanded its use of funding sources during the most recent quarter to include brokered CDs, and continues to focus on expanding its net interest margin. While establishing a stronger pricing discipline over loans and deposits is one of our strategies, we expect margin compression to continue as a result of economic conditions affecting our business, such as a continued flat yield curve and low interest rate environment.
Interest income on investment securities increased $347,000 to $1.3 million for the three months ended June 30, 2018, due primarily to an increase in the average balance of net loans receivable of $73.5 million2020, compared to the prior year. Average loan yields increased 15 basis points to 4.57%$1.0 million for the three months ended June 30, 2019, compared to the three months ended June 30, 2018, as we continued to increase our balance of higher yielding loans, including auto and consumer lending through our indirect and purchased auto loan programs. We also benefited from increases in short-term interest rates on our adjustable rate loans, such as construction, commercial business, and home equity lines of credit.
The following table compares average earning asset balances, associated yields, and resulting changes in interest income for the periods shown:
Three Months Ended June 30, | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Average Balance Outstanding | Yield | Average Balance Outstanding | Yield | Increase (Decrease) in Interest Income | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Loans receivable, net | $ | 931,344 | 4.40 | % | $ | 883,290 | 4.74 | % | $ | (237 | ) | |||||||||
Investment securities | 213,141 | 2.47 | 116,496 | 3.33 | 347 | |||||||||||||||
Mortgage-backed securities | 135,604 | 2.18 | 178,878 | 2.67 | (452 | ) | ||||||||||||||
FHLB stock | 4,426 | 4.97 | 7,066 | 4.98 | (33 | ) | ||||||||||||||
Interest-bearing deposits in banks | 20,922 | 0.15 | 13,118 | 1.77 | (50 | ) | ||||||||||||||
Total interest-earning assets | $ | 1,305,437 | 3.79 | % | $ | 1,198,848 | 4.26 | % | $ | (425 | ) |
Three Months Ended June 30, | |||||||||||||||||
2019 | 2018 | Increase (Decrease) in Interest Income | |||||||||||||||
Average Balance Outstanding | Yield | Average Balance Outstanding | Yield | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||
Loans receivable, net | $ | 883,290 | 4.57 | % | $ | 809,839 | 4.42 | % | $ | 1,141 | |||||||
Investment securities | 116,496 | 3.33 | 125,442 | 3.10 | (4 | ) | |||||||||||
Mortgage-backed securities | 178,878 | 2.67 | 186,385 | 2.65 | (45 | ) | |||||||||||
FHLB stock | 7,066 | 4.98 | 7,605 | 4.10 | 10 | ||||||||||||
Interest-bearing deposits in banks | 13,118 | 1.77 | 9,111 | 1.80 | 17 | ||||||||||||
Total interest-earning assets | $ | 1,198,848 | 4.14 | $ | 1,138,382 | 3.96 | $ | 1,119 |
Interest Expense. Total interest expense increased $982,000,decreased $862,000, or 46.3%27.8%, to $2.2 million for the three months ended June 30, 2020, compared to $3.1 million for the three months ended June 30, 2019, comparedmainly due to $2.1an 80.6% decrease in interest paid on borrowings. Interest expense on deposits decreased slightly for the three months ended June 30, 2020, due to lower rates offsetting the impact of increased balances. The average balance of interest-bearing deposits increased $141.2 million, or 17.7%, to $937.0 million for the three months ended June 30, 2018, due to an 83.8% increase in deposit costs, and a 3.9% increase in borrowing costs. Deposit costs increased for the three months ended June 30, 2019, due to increased interest rates and customers transferring deposits into higher-yielding accounts. The average balance of interest-bearing deposits increased $62.6 million, or 8.5%, to2020, from $795.8 million for the three months ended June 30, 2019, from $733.1 million for the three months ended June 30, 2018, as we continued to target deposit growth in deposits in new and existing market areas.areas as well as the industry-wide impact of surge deposits during the pandemic. During the three months ended June 30, 2019,2020, the average balance and related cost of savings accounts increased $58.0$9.7 million and 80the related weighted-average cost decreased 29 basis points respectfully, compared to the same period in 2018, the result of a savings promotion targeting growth in newer markets. During the same
The following table details average balances, cost of funds and the change in interest expense for the periods shown:
Three Months Ended June 30, | |||||||||||||||||
2019 | 2018 | Increase (Decrease) in Interest Expense | |||||||||||||||
Average Balance Outstanding | Rate | Average Balance Outstanding | Rate | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||
Savings accounts | $ | 163,106 | 0.91 | % | $ | 105,067 | 0.11 | % | $ | 344 | |||||||
Transaction accounts | 115,914 | 0.12 | 113,666 | 0.03 | 27 | ||||||||||||
Money market accounts | 257,548 | 0.49 | 277,186 | 0.41 | 31 | ||||||||||||
Certificates of deposit | 259,203 | 2.08 | 237,216 | 1.36 | 541 | ||||||||||||
Borrowings | 138,643 | 2.99 | 153,362 | 2.60 | 39 | ||||||||||||
Total interest-bearing liabilities | $ | 934,414 | 1.33 | $ | 886,497 | 0.96 | $ | 982 |
Three Months Ended June 30, | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Average Balance Outstanding | Rate | Average Balance Outstanding | Rate | Increase (Decrease) in Interest Expense | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Savings accounts | $ | 172,833 | 0.62 | % | $ | 163,106 | 0.91 | % | $ | (103 | ) | |||||||||
Transaction accounts | 122,951 | 0.01 | 115,914 | 0.12 | (32 | ) | ||||||||||||||
Money market accounts | 291,526 | 0.55 | 257,548 | 0.49 | 87 | |||||||||||||||
Certificates of deposit | 349,658 | 1.57 | 259,203 | 2.08 | 21 | |||||||||||||||
Borrowings | 71,170 | 1.13 | 138,643 | 2.99 | (835 | ) | ||||||||||||||
Total interest-bearing liabilities | $ | 1,008,138 | 0.89 | % | $ | 934,414 | 1.33 | % | $ | (862 | ) |
Provision for Loan Losses.
The provision for loan losses wasThe following table details activity and information related to the allowance for loan losses for the periods shown:
Three Months Ended June 30, | |||||||
2019 | 2018 | ||||||
(Dollars in thousands) | |||||||
Provision for loan losses | $ | 255 | $ | 395 | |||
Net charge-offs | (283 | ) | (97 | ) | |||
Allowance for loan losses | 9,731 | 9,282 | |||||
Allowance for losses as a percentage of total gross loans receivable at the end of this period | 1.1 | % | 1.1 | % | |||
Total nonaccruing loans | 1,291 | 2,062 | |||||
Allowance for loan losses as a percentage of nonaccrual loans at end of period | 753.8 | % | 450.1 | % | |||
Nonaccrual and 90 days or more past due loans as a percentage of total loans | 0.1 | % | 0.2 | % | |||
Total loans | $ | 879,054 | $ | 828,229 |
Three Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Provision for loan losses | $ | 1,500 | $ | 255 | ||||
Net charge-offs | (221 | ) | (283 | ) | ||||
Allowance for loan losses | 12,109 | 9,731 | ||||||
Allowance for losses as a percentage of total gross loans receivable at the end of this period | 1.2 | % | 1.1 | % | ||||
Total nonaccrual loans | 3,356 | 1,291 | ||||||
Allowance for loan losses as a percentage of nonaccrual loans at end of period | 360.8 | % | 753.8 | % | ||||
Nonaccrual and 90 days or more past due loans as a percentage of total loans | 0.3 | % | 0.1 | % | ||||
Total loans | $ | 996,401 | $ | 879,054 |
Noninterest Income.
Noninterest income increasedThe following table provides a detailed analysis of the changes in the components of noninterest income for the periods shown:
Three Months Ended June 30, | Increase (Decrease) | |||||||||||||||
2020 | 2019 | Amount | Percent | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Loan and deposit service fees | $ | 765 | $ | 995 | $ | (230 | ) | (23.1 | )% | |||||||
Mortgage servicing fees, net of amortization | (172 | ) | 54 | (226 | ) | (418.5 | ) | |||||||||
Net gain on sale of loans | 2,001 | 88 | 1,913 | 2,173.9 | ||||||||||||
Net gain on sale of investment securities | 661 | 57 | 604 | 1,059.6 | ||||||||||||
Increase in cash surrender value of bank-owned life insurance | 627 | 145 | 482 | 332.4 | ||||||||||||
Other income | 227 | 84 | 143 | 170.2 | ||||||||||||
Total noninterest income | $ | 4,109 | $ | 1,423 | $ | 2,686 | 188.8 | % |
Three Months Ended June 30, | Increase (Decrease) | |||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
(Dollars in thousands) | ||||||||||||||
Loan and deposit service fees | $ | 1,375 | $ | 915 | $ | 460 | 50.3 | % | ||||||
Mortgage servicing fees, net of amortization | 54 | 70 | (16 | ) | (22.9 | ) | ||||||||
Net gain on sale of loans | 88 | 150 | (62 | ) | (41.3 | ) | ||||||||
Net gain on sale of investment securities | 57 | 13 | 44 | 338.5 | ||||||||||
Increase in cash surrender value of bank-owned life insurance | 145 | 149 | (4 | ) | (2.7 | ) | ||||||||
Other income | 84 | 108 | (24 | ) | (22.2 | ) | ||||||||
Total noninterest income | $ | 1,803 | $ | 1,405 | $ | 398 | 28.3 | % |
Noninterest Expense. Noninterest expense decreased slightlyincreased $2.0 million or 24.3% during the three months ended June 30, 2019,2020, compared to the three months ended June 30, 2018, as we continued2019, mainly due to strive for better efficienciesa 25.5% increase in compensation and cost management in the absence of new branching initiatives.
The following table provides an analysis of the changes in the components of noninterest expense for the periods shown:
Three Months Ended June 30, | Increase (Decrease) | |||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
(Dollars in thousands) | ||||||||||||||
Compensation and benefits | $ | 4,753 | $ | 4,745 | $ | 8 | 0.2 | % | ||||||
Data processing | 667 | 677 | (10 | ) | (1.5 | ) | ||||||||
Occupancy and equipment | 1,140 | 1,127 | 13 | 1.2 | ||||||||||
Supplies, postage, and telephone | 242 | 243 | (1 | ) | (0.4 | ) | ||||||||
Regulatory assessments and state taxes | 195 | 155 | 40 | 25.8 | ||||||||||
Advertising | 229 | 290 | (61 | ) | (21.0 | ) | ||||||||
Professional fees | 331 | 458 | (127 | ) | (27.7 | ) | ||||||||
FDIC insurance premium | 77 | 79 | (2 | ) | (2.5 | ) | ||||||||
Other | 638 | 524 | 114 | 21.8 | ||||||||||
Total | $ | 8,272 | $ | 8,298 | $ | (26 | ) | (0.3 | )% |
Three Months Ended June 30, | Increase (Decrease) | |||||||||||||||
2020 | 2019 | Amount | Percent | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Compensation and benefits | $ | 5,966 | $ | 4,753 | $ | 1,213 | 25.5 | % | ||||||||
Data processing | 769 | 667 | 102 | 15.3 | ||||||||||||
Occupancy and equipment | 1,345 | 1,140 | 205 | 18.0 | ||||||||||||
Supplies, postage, and telephone | 284 | 242 | 42 | 17.4 | ||||||||||||
Regulatory assessments and state taxes | 223 | 195 | 28 | 14.4 | ||||||||||||
Advertising | 377 | 229 | 148 | 64.6 | ||||||||||||
Professional fees | 354 | 331 | 23 | 6.9 | ||||||||||||
FDIC insurance premium | 70 | 77 | (7 | ) | (9.1 | ) | ||||||||||
Other | 894 | 638 | 256 | 40.1 | ||||||||||||
Total | $ | 10,282 | $ | 8,272 | $ | 2,010 | 24.3 | % |
Provision for Income Tax.
Comparison of Results of Operations for the Six Months Ended June 30, 20192020 and 2018
General.
Net incomeNet Interest Income. Net interest income of $3.0increased $244,000 to $19.5 million for the six months ended June 30, 2018, primarily due to an increase in net interest income coupled with a decrease in noninterest expenses.
The yield on average interest-earning assets increased 25net interest margin decreased 11 basis points to 4.14%3.11% for the six months ended June 30, 2019, compared to 3.89%2020, from 3.22% for the same period in the prior year.
The $244,000 increase in net interest income during the six months ended June 30, 2019,2020, compared to the six months ended June 30, 2018, $1.5 million2019, was the result of a $1.1 million decrease in interest expense driven by an increaseimprovement in volume,the cost of interest-bearing liabilities which was partially offset by $867,000 due to changesa decrease in rates.interest income. The increasedecrease in loans receivableinterest expense of borrowings of $1.4 million was the main contributor to the increase in net interest income with $1.7 million due to an increase in average volumes and $786,000 due to increases in rates for a total of $2.5 million.
The average cost of interest-bearing liabilities increaseddecreased to 1.29%0.99% for the six months ended June 30, 2019,2020, compared to 0.90%1.29% for the same period last year, due primarily to promotionaldecreases in borrowing volume of $905,000 and decreases attributable to rates on, and increasesof $486,000.
Interest Income. Totalinterest income decreased $960,000, or 3.8%, to $24.3 million for the six months ended June 30, 2020, from $25.3 million for the comparable period in 2019, primarily due to a decrease in the average balance of, savings accountsyields on interest-earning assets. Interest and certificates of deposit usedfees on loans receivable decreased $493,000, to attract and retain deposits.
Total interest income from securities decreased $344,000 to increase our$4.1 million for the six months ended June 30, 2020 from $4.4 million for the same period in 2019. While the average balance of higher yielding loans, such as auto, commercial real estate and multi-family. We also benefited from increases in short-term interest rates on our adjustable rate loans, such as commercial business and home equity lines of credit.
The following table compares average earning asset balances, associated yields, and resulting changes in interest income for the periods shown:
Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | Increase (Decrease) in Interest Income | |||||||||||||
Average Balance Outstanding | Yield | Average Balance Outstanding | Yield | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Loans receivable, net | $ | 877,095 | 4.57% | $ | 799,288 | 4.39% | $ | 2,490 | |||||||
Investment securities | 118,423 | 3.34 | 128,963 | 2.85 | 144 | ||||||||||
Mortgage-backed securities | 181,297 | 2.70 | 192,645 | 2.63 | (85 | ) | |||||||||
FHLB stock | 6,955 | 5.06 | 7,419 | 3.69 | 39 | ||||||||||
Interest-bearing deposits in banks | 12,495 | 2.00 | 10,123 | 1.70 | 39 | ||||||||||
Total interest-earning assets | $ | 1,196,265 | 4.14 | $ | 1,138,438 | 3.89 | $ | 2,627 |
Six Months Ended June 30, | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Average Balance Outstanding | Yield | Average Balance Outstanding | Yield | Increase (Decrease) in Interest Income | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Loans receivable, net | $ | 901,116 | 4.45 | % | $ | 877,095 | 4.69 | % | $ | (493 | ) | |||||||||
Investment securities | 181,586 | 2.63 | 118,423 | 3.34 | 406 | |||||||||||||||
Mortgage-backed securities | 148,593 | 2.29 | 181,297 | 2.70 | (750 | ) | ||||||||||||||
FHLB stock | 4,573 | 4.46 | 6,955 | 5.06 | (74 | ) | ||||||||||||||
Interest-bearing deposits in banks | 21,110 | 0.72 | 12,495 | 2.00 | (49 | ) | ||||||||||||||
Total interest-earning assets | $ | 1,256,978 | 3.87 | % | $ | 1,196,265 | 4.23 | % | $ | (960 | ) |
Interest Expense.
Total interest expenseDuring the six months ended June 30, 2019, the cost of savings accounts increased mainly due to an increase in average balance of $51.8 million and an increase in the average rate paid of 79 basis points, and the2020, interest expense on cost of certificates of deposit increased due to an increase in average balance of $20.1$73.9 million and an increasepartially offset by a decrease in the average rate paid of 7133 basis points, compared to the six months ended June 30, 2018.2019. During the same period, the average balancebalances of savings, transaction, and money market accounts declined $10.2increased $11.0 million, while the average balance of transaction accounts remained relatively stable with a modest $1.4$3.6 million increase.and $9.3 million, respectively. The average cost of all deposit products increaseddecreased to 0.94% for the six months ended June 30, 2020, from 1.00% for the six months ended June 30, 2019, from 0.58% for2019. Borrowing costs decreased as higher rate long term advances were prepaid during the six months ended June 30, 2018. Borrowing costs increased primarily due to a 48 basis point increase in average rates paid, partially offset by a decrease in the average balance of $14.7 million.
The following table details average balances, cost of funds and the change in interest expense for the periods shown:
Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | Increase (Decrease) in Interest Expense | |||||||||||||
Average Balance Outstanding | Rate | Average Balance Outstanding | Rate | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Savings accounts | $ | 158,398 | 0.87% | $ | 106,610 | 0.08% | $ | 644 | |||||||
Transaction accounts | 115,358 | 0.12 | 113,933 | 0.02 | 59 | ||||||||||
Money market accounts | 262,747 | 0.48 | 272,991 | 0.36 | 136 | ||||||||||
Certificates of deposit | 258,737 | 2.01 | 238,687 | 1.30 | 1,043 | ||||||||||
Borrowings | 136,545 | 2.97 | 151,243 | 2.49 | 140 | ||||||||||
Total interest-bearing liabilities | $ | 931,785 | 1.29 | $ | 883,464 | 0.90 | $ | 2,022 |
Six Months Ended June 30, | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Average Balance Outstanding | Rate | Average Balance Outstanding | Rate | Increase (Decrease) in Interest Expense | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Savings accounts | $ | 169,371 | 0.72 | % | $ | 158,398 | 0.87 | % | $ | (79 | ) | |||||||||
Transaction accounts | 118,963 | 0.04 | 115,358 | 0.12 | (49 | ) | ||||||||||||||
Money market accounts | 272,030 | 0.56 | 262,747 | 0.48 | 123 | |||||||||||||||
Certificates of deposit | 332,674 | 1.68 | 258,737 | 2.01 | 192 | |||||||||||||||
Borrowings | 75,574 | 1.68 | 136,545 | 2.97 | (1,391 | ) | ||||||||||||||
Total interest-bearing liabilities | $ | 968,612 | 0.99 | % | $ | 931,785 | 1.29 | % | $ | (1,204 | ) |
Provision for Loan Losses.
The provision for loan losses was $2.8 million during the six months ended June 30, 2020, primarily due to the uncertainty in economic conditions created by the ongoing COVID-19 pandemic and growth in the loan portfolio, and was $590,000The following table details activity and information related to the allowance for loan losses for the periods shown:
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Provision for loan losses | $ | 2,766 | $ | 590 | ||||
Net charge-offs | (285 | ) | (392 | ) | ||||
Allowance for loan losses | 12,109 | 9,731 | ||||||
Allowance for losses as a percentage of total gross loans receivable at the end of this period | 1.2 | % | 1.1 | % | ||||
Total nonaccrual loans | 3,356 | 1,291 | ||||||
Allowance for loan losses as a percentage of nonaccrual loans at end of period | 360.8 | % | 753.8 | % | ||||
Nonaccrual and 90 days or more past due loans as a percentage of total loans | 0.3 | % | 0.1 | % | ||||
Total loans | $ | 996,401 | $ | 879,054 |
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
(Dollars in thousands) | |||||||
Provision for loan losses | $ | 590 | $ | 705 | |||
Net charge-offs | (392 | ) | (183 | ) | |||
Allowance for loan losses | 9,731 | 9,282 | |||||
Allowance for losses as a percentage of total gross loans receivable at the end of this period | 1.1 | % | 1.1 | % | |||
Total nonaccruing loans | 1,291 | 2,062 | |||||
Allowance for loan losses as a percentage of nonaccrual loans at end of period | 753.8 | % | 450.1 | % | |||
Nonaccrual and 90 days or more past due loans as a percentage of total loans | 0.1 | % | 0.2 | % | |||
Total loans | $ | 879,054 | $ | 828,229 |
Noninterest Income. Noninterest income increased $327,000,$3.7 million, or 11.3%140.4%, to $3.2$6.4 million for the six months ended June 30, 2020, from $2.7 million for the six months ended June 30, 2019, from $2.9 millionmainly due to an increase in gain on sale of mortgage loans of $2.2 million. Gain on sale of investments for the six months ended June 30, 2018, mainly2020, totaled $1.2 million compared to $57,000 recognized in the resultfirst six months of an increase2019. The cash surrender value of bank-owned life insurance increased $667,000 in loan and deposit service fees relatedthe first six months of 2020 due to the early prepaymenta BOLI restructure that resulted in recognition of commercial and multi-family real estate loansmarket gains as well as an increaseadditional investment in deposit fees related to changes in our account offerings.
The following table provides a detailed analysis of the changes in the components of noninterest income for the periods shown:
Six Months Ended June 30, | Increase (Decrease) | |||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
(Dollars in thousands) | ||||||||||||||
Loan and deposit service fees | $ | 2,440 | $ | 1,808 | $ | 632 | 35.0 | % | ||||||
Mortgage servicing fees, net of amortization | 99 | 132 | (33 | ) | (25.0 | ) | ||||||||
Net gain on sale of loans | 175 | 317 | (142 | ) | (44.8 | ) | ||||||||
Net gain on sale of investment securities | 57 | 135 | (78 | ) | (57.8 | ) | ||||||||
Increase in cash surrender value of bank-owned life insurance | 288 | 298 | (10 | ) | (3.4 | ) | ||||||||
Other income | 155 | 197 | (42 | ) | (21.3 | ) | ||||||||
Total noninterest income | $ | 3,214 | $ | 2,887 | $ | 327 | 11.3 | % |
Six Months Ended June 30, | Increase (Decrease) | |||||||||||||||
2020 | 2019 | Amount | Percent | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Loan and deposit service fees | $ | 1,646 | $ | 1,900 | $ | (254 | ) | (13.4 | )% | |||||||
Mortgage servicing fees, net of amortization | (157 | ) | 99 | (256 | ) | (258.6 | ) | |||||||||
Net gain on sale of loans | 2,384 | 175 | 2,209 | 1,262.3 | ||||||||||||
Net gain on sale of investment securities | 1,266 | 57 | 1,209 | 2,121.1 | ||||||||||||
Increase in cash surrender value of bank-owned life insurance | 955 | 288 | 667 | 231.6 | ||||||||||||
Other income | 333 | 155 | 178 | 114.8 | ||||||||||||
Total noninterest income | $ | 6,427 | $ | 2,674 | $ | 3,753 | 140.4 | % |
Noninterest Expense.
Noninterest expenseThe following table provides an analysis of the changes in the components of noninterest expense for the periods shown:
Six Months Ended June 30, | Increase (Decrease) | |||||||||||||
2019 | 2018 | Amount | Percent | |||||||||||
(Dollars in thousands) | ||||||||||||||
Compensation and benefits | $ | 9,326 | $ | 9,556 | $ | (230 | ) | (2.4 | )% | |||||
Data processing | 1,298 | 1,305 | (7 | ) | (0.5 | ) | ||||||||
Occupancy and equipment | 2,248 | 2,229 | 19 | 0.9 | ||||||||||
Supplies, postage, and telephone | 470 | 474 | (4 | ) | (0.8 | ) | ||||||||
Regulatory assessments and state taxes | 364 | 281 | 83 | 29.5 | ||||||||||
Advertising | 372 | 614 | (242 | ) | (39.4 | ) | ||||||||
Professional fees | 629 | 780 | (151 | ) | (19.4 | ) | ||||||||
FDIC insurance premium | 154 | 155 | (1 | ) | (0.6 | ) | ||||||||
Other | 1,211 | 1,179 | 32 | 2.7 | ||||||||||
Total | $ | 16,072 | $ | 16,573 | $ | (501 | ) | (3.0 | )% |
Six Months Ended June 30, | Increase (Decrease) | |||||||||||||||
2020 | 2019 | Amount | Percent | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Compensation and benefits | $ | 11,327 | $ | 9,326 | $ | 2,001 | 21.5 | % | ||||||||
Data processing | 1,459 | 1,298 | 161 | 12.4 | ||||||||||||
Occupancy and equipment | 2,696 | 2,248 | 448 | 19.9 | ||||||||||||
Supplies, postage, and telephone | 495 | 470 | 25 | 5.3 | ||||||||||||
Regulatory assessments and state taxes | 397 | 364 | 33 | 9.1 | ||||||||||||
Advertising | 649 | 372 | 277 | 74.5 | ||||||||||||
Professional fees | 754 | 629 | 125 | 19.9 | ||||||||||||
FDIC insurance premium | 70 | 154 | (84 | ) | (54.5 | ) | ||||||||||
FHLB prepayment penalty | 210 | — | 210 | 100.0 | ||||||||||||
Other | 1,607 | 1,211 | 396 | 32.7 | ||||||||||||
Total | $ | 19,664 | $ | 16,072 | $ | 3,592 | 22.3 | % |
Provision for Income Tax.
An income tax expense ofAverage Balances, Interest and Average Yields/Cost
The following table set forth, for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest‑earninginterest-earning assets and interest expense on average interest‑bearinginterest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest‑earninginterest-earning assets), and the ratio of average interest‑earninginterest-earning assets to average interest-bearing liabilities. Also presented is the weighted average yield on interest-earning assets, rates paid on interest-bearing liabilities and the resultant spread at June 30, 20192020 and 2018.2019. Income and all average balances are monthly average balances, which management deems to be not materially different than daily averages. NonaccruingNonaccrual loans have been included in the table as loans carrying a zero yield.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||
At June 30, 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||
Average | Interest | Average | Interest | Average | Interest | Average | Interest | ||||||||||||||||||||||||||||||||||||||||
Yield/ | Balance | Earned/ | Yield/ | Balance | Earned/ | Yield/ | Balance | Earned/ | Yield/ | Balance | Earned/ | Yield/ | |||||||||||||||||||||||||||||||||||
Rate | Outstanding | Paid | Rate | Outstanding | Paid | Rate | Outstanding | Paid | Rate | Outstanding | Paid | Rate | |||||||||||||||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Loans receivable, net (1) | 4.38 | % | $ | 931,344 | $ | 10,236 | 4.40 | % | $ | 883,290 | $ | 10,473 | 4.74 | % | $ | 901,116 | $ | 20,072 | 4.45 | % | $ | 877,095 | $ | 20,565 | 4.69 | % | |||||||||||||||||||||
Investment securities | 2.69 | 213,141 | 1,316 | 2.47 | 116,496 | 969 | 3.33 | 181,586 | 2,385 | 2.63 | 118,423 | 1,979 | 3.34 | ||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 2.10 | 135,604 | 740 | 2.18 | 178,878 | 1,192 | 2.67 | 148,593 | 1,699 | 2.29 | 181,297 | 2,449 | 2.70 | ||||||||||||||||||||||||||||||||||
FHLB dividends | 4.87 | 4,426 | 55 | 4.97 | 7,066 | 88 | 4.98 | 4,573 | 102 | 4.46 | 6,955 | 176 | 5.06 | ||||||||||||||||||||||||||||||||||
Interest-bearing deposits in banks | 0.11 | 20,922 | 8 | 0.15 | 13,118 | 58 | 1.77 | 21,110 | 76 | 0.72 | 12,495 | 125 | 2.00 | ||||||||||||||||||||||||||||||||||
Total interest-earning assets (2) | 3.79 | 1,305,437 | 12,355 | 3.79 | 1,198,848 | 12,780 | 4.26 | 1,256,978 | 24,334 | 3.87 | 1,196,265 | 25,294 | 4.23 | ||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
Savings accounts | 0.53 | $ | 172,833 | $ | 269 | 0.62 | $ | 163,106 | $ | 372 | 0.91 | $ | 169,371 | $ | 609 | 0.72 | $ | 158,398 | $ | 688 | 0.87 | ||||||||||||||||||||||||||
Transaction accounts | 0.01 | 122,951 | 4 | 0.01 | 115,914 | 36 | 0.12 | 118,963 | 23 | 0.04 | 115,358 | 72 | 0.12 | ||||||||||||||||||||||||||||||||||
Money market accounts | 0.44 | 291,526 | 400 | 0.55 | 257,548 | 313 | 0.49 | 272,030 | 756 | 0.56 | 262,747 | 633 | 0.48 | ||||||||||||||||||||||||||||||||||
Certificates of deposit | 1.57 | 349,658 | 1,368 | 1.57 | 259,203 | 1,347 | 2.08 | 332,674 | 2,791 | 1.68 | 258,737 | 2,599 | 2.01 | ||||||||||||||||||||||||||||||||||
Total deposits | 0.64 | 936,968 | 2,041 | 0.87 | 795,771 | 2,068 | 1.04 | 893,038 | 4,179 | 0.94 | 795,240 | 3,992 | 1.00 | ||||||||||||||||||||||||||||||||||
Borrowings | 0.73 | 71,170 | 201 | 1.13 | 138,643 | 1,036 | 2.99 | 75,574 | 635 | 1.68 | 136,545 | 2,026 | 2.97 | ||||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 0.65 | 1,008,138 | 2,242 | 0.89 | 934,414 | 3,104 | 1.33 | 968,612 | 4,814 | 0.99 | 931,785 | 6,018 | 1.29 | ||||||||||||||||||||||||||||||||||
Net interest income | $ | 10,113 | $ | 9,676 | $ | 19,520 | $ | 19,276 | |||||||||||||||||||||||||||||||||||||||
Net interest rate spread | 0.03 | 2.90 | 2.94 | 2.88 | 2.94 | ||||||||||||||||||||||||||||||||||||||||||
Net earning assets | $ | 297,299 | $ | 264,434 | $ | 288,366 | $ | 264,480 | |||||||||||||||||||||||||||||||||||||||
Net interest margin (3) | 3.10 | 3.23 | 3.11 | 3.22 | |||||||||||||||||||||||||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 129.5 | % | 128.3 | % | 129.8 | % | 128.4 | % |
(1) The average loans receivable, net balances include nonaccrual loans. (2) Includes interest-bearing deposits (cash) at other financial institutions. (3) Net interest income divided by average interest-earning assets. |
At June 30, 2019 | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||||||||||||||||
Yield/ Rate | Average Balance Outstanding | Interest Earned/ Paid | Yield/ Rate | Average Balance Outstanding | Interest Earned/ Paid | Yield/ Rate | Average Balance Outstanding | Interest Earned/ Paid | Yield/ Rate | Average Balance Outstanding | Interest Earned/ Paid | Yield/ Rate | ||||||||||||||||||||||||||||||||||
Interest-earning assets: | (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||
Loans receivable, net (1) | 4.72 | % | $ | 883,290 | $ | 10,093 | 4.57 | % | $ | 809,839 | $ | 8,952 | 4.42 | % | $ | 877,095 | $ | 20,025 | 4.57 | % | $ | 799,288 | $ | 17,535 | 4.39 | % | ||||||||||||||||||||
Investment securities | 4.38 | 116,496 | 969 | 3.33 | 125,442 | 973 | 3.10 | 118,423 | 1,979 | 3.34 | 128,963 | 1,835 | 2.85 | |||||||||||||||||||||||||||||||||
Mortgage-backed securities | 2.61 | 178,878 | 1,192 | 2.67 | 186,385 | 1,237 | 2.65 | 181,297 | 2,449 | 2.70 | 192,645 | 2,534 | 2.63 | |||||||||||||||||||||||||||||||||
FHLB dividends | 5.20 | 7,066 | 88 | 4.98 | 7,605 | 78 | 4.10 | 6,955 | 176 | 5.06 | 7,419 | 137 | 3.69 | |||||||||||||||||||||||||||||||||
Interest-bearing deposits in banks | 1.79 | 13,118 | 58 | 1.77 | 9,111 | 41 | 1.80 | 12,495 | 125 | 2.00 | 10,123 | 86 | 1.70 | |||||||||||||||||||||||||||||||||
Total interest-earning assets (2) | 4.32 | 1,198,848 | 12,400 | 4.14 | 1,138,382 | 11,281 | 3.96 | 1,196,265 | 24,754 | 4.14 | 1,138,438 | 22,127 | 3.89 | |||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||
Savings accounts | 0.94 | $ | 163,106 | $ | 372 | 0.91 | $ | 105,067 | 28 | 0.11 | $ | 158,398 | $ | 688 | 0.87 | $ | 106,610 | 44 | 0.08 | |||||||||||||||||||||||||||
Transaction accounts | 0.06 | 115,914 | 36 | 0.12 | 113,666 | 9 | 0.03 | 115,358 | 72 | 0.12 | 113,933 | 13 | 0.02 | |||||||||||||||||||||||||||||||||
Money market accounts | 0.43 | 257,548 | 313 | 0.49 | 277,186 | 282 | 0.41 | 262,747 | 633 | 0.48 | 272,991 | 497 | 0.36 | |||||||||||||||||||||||||||||||||
Certificates of deposit | 2.11 | 259,203 | 1,347 | 2.08 | 237,216 | 806 | 1.36 | 258,737 | 2,599 | 2.01 | 238,687 | 1,556 | 1.30 | |||||||||||||||||||||||||||||||||
Total deposits | 0.88 | 795,771 | 2,068 | 1.04 | 733,135 | 1,125 | 0.61 | 795,240 | 3,992 | 1.00 | 732,221 | 2,110 | 0.58 | |||||||||||||||||||||||||||||||||
Borrowings | 2.84 | 138,643 | 1,036 | 2.99 | 153,362 | 997 | 2.60 | 136,545 | 2,026 | 2.97 | 151,243 | 1,886 | 2.49 | |||||||||||||||||||||||||||||||||
Total interest-bearing liabilities | 1.12 | 934,414 | 3,104 | 1.33 | 886,497 | 2,122 | 0.96 | 931,785 | 6,018 | 1.29 | 883,464 | 3,996 | 0.90 | |||||||||||||||||||||||||||||||||
Net interest income | $ | 9,296 | $ | 9,159 | $ | 18,736 | $ | 18,131 | ||||||||||||||||||||||||||||||||||||||
Net interest rate spread | 3.20 | 2.81 | 3.00 | 2.85 | 2.99 | |||||||||||||||||||||||||||||||||||||||||
Net earning assets | $ | 264,434 | $ | 251,885 | $ | 264,480 | $ | 254,974 | ||||||||||||||||||||||||||||||||||||||
Net interest margin (3) | 3.10 | 3.22 | 3.13 | 3.19 | ||||||||||||||||||||||||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 128.3 | % | 128.4 | % | 128.4 | % | 128.9 | % | ||||||||||||||||||||||||||||||||||||||
(1) The average loans receivable, net balances include nonaccruing loans. (2) Includes interest-bearing deposits (cash) at other financial institutions. (3) Net interest income divided by average interest-earning assets. |
The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
June 30, 2019 vs. 2018 | June 30, 2019 vs. 2018 | ||||||||||||||||||||||
Increase (Decrease) Due to | Total Increase (Decrease) | Increase (Decrease) Due to | Total Increase (Decrease) | ||||||||||||||||||||
Volume | Rate | Volume | Rate | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Interest earning assets: | |||||||||||||||||||||||
Loans receivable, net | $ | 810 | $ | 331 | $ | 1,141 | $ | 1,704 | $ | 786 | $ | 2,490 | |||||||||||
Investments | (123 | ) | 74 | (49 | ) | (298 | ) | 357 | 59 | ||||||||||||||
FHLB stock | (6 | ) | 16 | 10 | (9 | ) | 48 | 39 | |||||||||||||||
Other(1) | 18 | (1 | ) | 17 | 20 | 19 | 39 | ||||||||||||||||
Total interest-earning assets | $ | 699 | $ | 420 | $ | 1,119 | $ | 1,417 | $ | 1,210 | $ | 2,627 | |||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||
Savings accounts | $ | 16 | $ | 328 | $ | 344 | $ | 21 | $ | 623 | $ | 644 | |||||||||||
Interest-bearing transaction accounts | — | 27 | 27 | — | 59 | 59 | |||||||||||||||||
Money market accounts | (20 | ) | 51 | 31 | (20 | ) | 156 | 136 | |||||||||||||||
Certificates of deposit | 75 | 466 | 541 | 127 | 916 | 1,043 | |||||||||||||||||
Borrowings | (96 | ) | 135 | 39 | (183 | ) | 323 | 140 | |||||||||||||||
Total interest-bearing liabilities | $ | (25 | ) | $ | 1,007 | $ | 982 | $ | (55 | ) | $ | 2,077 | $ | 2,022 | |||||||||
Net change in interest income | $ | 724 | $ | (587 | ) | $ | 137 | $ | 1,472 | $ | (867 | ) | $ | 605 | |||||||||
(1) Includes interest-bearing deposits (cash) at other financial institutions. |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, 2020 vs. 2019 | June 30, 2020 vs. 2019 | |||||||||||||||||||||||
Increase (Decrease) Due to | Increase (Decrease) Due to | |||||||||||||||||||||||
Volume | Rate | Total Increase (Decrease) | Volume | Rate | Total Increase (Decrease) | |||||||||||||||||||
(In thousands) | (In thousands) | |||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||
Loans receivable, net | $ | 562 | $ | (799 | ) | $ | (237 | ) | $ | 575 | $ | (1,068 | ) | $ | (493 | ) | ||||||||
Investments | 516 | (621 | ) | (105 | ) | 614 | (958 | ) | (344 | ) | ||||||||||||||
FHLB stock | (33 | ) | — | (33 | ) | (60 | ) | (14 | ) | (74 | ) | |||||||||||||
Other(1) | 35 | (85 | ) | (50 | ) | 86 | (135 | ) | (49 | ) | ||||||||||||||
Total interest-earning assets | $ | 1,080 | $ | (1,505 | ) | $ | (425 | ) | $ | 1,215 | $ | (2,175 | ) | $ | (960 | ) | ||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Savings accounts | $ | 22 | $ | (125 | ) | $ | (103 | ) | $ | 48 | $ | (127 | ) | $ | (79 | ) | ||||||||
Interest-bearing transaction accounts | 2 | (34 | ) | (32 | ) | 2 | (51 | ) | (49 | ) | ||||||||||||||
Money market accounts | 41 | 46 | 87 | 22 | 101 | 123 | ||||||||||||||||||
Certificates of deposit | 470 | (449 | ) | 21 | 743 | (551 | ) | 192 | ||||||||||||||||
Borrowings | (504 | ) | (331 | ) | (835 | ) | (905 | ) | (486 | ) | (1,391 | ) | ||||||||||||
Total interest-bearing liabilities | $ | 31 | $ | (893 | ) | $ | (862 | ) | $ | (90 | ) | $ | (1,114 | ) | $ | (1,204 | ) | |||||||
Net change in interest income | $ | 1,049 | $ | (612 | ) | $ | 437 | $ | 1,305 | $ | (1,061 | ) | $ | 244 |
(1) Includes interest-bearing deposits (cash) at other financial institutions. |
Off-Balance Sheet Activities
In the normal course of operations, First Federal engages in a variety of financial transactions that are not recorded in the financial statements. These transactions involve varying degrees of off-balance sheet credit, interest rate and liquidity risks. These transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For the six months ended June 30, 20192020 and the year ended December 31, 2018,2019, we engaged in no off-balance sheet transactions likely to have a material effect on our financial condition, results of operations or cash flows.
At June 30, 2019,2020, our scheduled maturities of contractual obligations were as follows:
Within 1 Year | After 1 Year Through 3 Years | After 3 Years Through 5 Years | Beyond 5 Years | Total Balance | |||||||||||||||
(In thousands) | |||||||||||||||||||
Certificates of deposit | $ | 179,950 | $ | 64,274 | $ | 13,148 | $ | — | $ | 257,372 | |||||||||
FHLB advances | 101,337 | 30,000 | — | — | 131,337 | ||||||||||||||
Operating leases | 321 | 541 | 438 | 1,814 | 3,114 | ||||||||||||||
Borrower taxes and insurance | 1,251 | — | — | — | 1,251 | ||||||||||||||
Deferred compensation | 54 | — | 53 | 836 | 943 | ||||||||||||||
Total contractual obligations | $ | 282,913 | $ | 94,815 | $ | 13,639 | $ | 2,650 | $ | 394,017 |
Within | After 1 Year Through | After 3 Years Through | Beyond | Total | ||||||||||||||||
1 Year | 3 Years | 5 Years | 5 Years | Balance | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Certificates of deposit | $ | 240,053 | $ | 70,167 | $ | 14,944 | $ | — | $ | 325,164 | ||||||||||
FHLB advances | 62,379 | 20,000 | 30,000 | — | 112,379 | |||||||||||||||
Operating leases | 432 | 715 | 698 | 2,228 | 4,073 | |||||||||||||||
Borrower taxes and insurance | 1,403 | — | — | — | 1,403 | |||||||||||||||
Deferred compensation | 352 | 219 | 62 | 341 | 974 | |||||||||||||||
Total contractual obligations | $ | 304,619 | $ | 91,101 | $ | 45,704 | $ | 2,569 | $ | 443,993 |
Commitments and Off-Balance Sheet Arrangements
The following table summarizes our commitments and contingent liabilities with off-balance sheet risks as of June 30, 2019:2020:
Amount of Commitment Expiration | ||||||||||||||||||||
Within | After 1 Year Through | After 3 Years Through | Beyond | Total Amounts | ||||||||||||||||
1 Year | 3 Years | 5 Years | 5 Years | Committed | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Commitments to originate loans: | ||||||||||||||||||||
Fixed-rate | $ | 1,602 | $ | — | $ | — | $ | — | $ | 1,602 | ||||||||||
Variable-rate | 130 | — | — | — | 130 | |||||||||||||||
Unfunded commitments under lines of credit or existing loans | 34,204 | 27,402 | — | 58,664 | 120,270 | |||||||||||||||
Standby letters of credit | 182 | — | — | — | 182 | |||||||||||||||
Total commitments | $ | 36,118 | $ | 27,402 | $ | — | $ | 58,664 | $ | 122,184 |
Amount of Commitment Expiration | |||||||||||||||||||
Within 1 Year | After 1 Year Through 3 Years | After 3 Years Through 5 Years | Beyond 5 Years | Total Amounts Committed | |||||||||||||||
(In thousands) | |||||||||||||||||||
Commitments to originate loans: | |||||||||||||||||||
Fixed-rate | $ | 27 | $ | — | $ | — | $ | — | $ | 27 | |||||||||
Adjustable-rate | 658 | — | — | — | 658 | ||||||||||||||
Unfunded commitments under lines of credit or existing loans | 2,122 | 25,833 | 4,089 | 47,307 | 79,351 | ||||||||||||||
Standby letters of credit | — | 214 | — | — | 214 | ||||||||||||||
Total commitments | $ | 2,807 | $ | 26,047 | $ | 4,089 | $ | 47,307 | $ | 80,250 |
Liquidity Management
Liquidity is the ability to meet current and future financial obligations of a short-term and long-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of securities, and borrowings from the FHLB. While maturities and scheduled amortization of loans and securities are usually predictable sources of funds, deposit flows, calls of investment securities and borrowed funds, and prepayments on loans and investment securities are greatly influenced by general interest rates, economic conditions and competition, which can cause those sources of funds to fluctuate.
Management regularly adjusts our investments in liquid assets based upon an assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of our interest-rate risk and investment policies.
Our most liquid assets are cash and cash equivalents followed by available for sale securities. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At June 30, 2019,2020, cash and cash equivalents totaled $28.8$49.6 million, and unpledged securities classified as available-for-sale with a market value of $250.1$250.7 million provided additional sources of liquidity. We pledged collateral to support borrowings from the FHLB of $131.3$112.4 million and have an established borrowing arrangement with the Federal Reserve Bank of San Francisco, for which no collateral has beenavailable-for-sale securities with a market value of $46.2 million were pledged as of June 30, 2019.
At June 30, 2019,2020, we had $685,000$1.7 million in loan commitments outstanding, and an additional $79.6$120.5 million in undisbursed loans and standby letters of credit, including $38.7$68.4 million in undisbursed construction loan commitments.
Certificates of deposit due within one year as of June 30, 20192020 totaled $180.0$240.1 million, or 69.9%73.8% of certificates of deposit.deposit with a weighted-average rate of 1.20%. We believe the large percentage of certificates of deposit that mature within one year reflects customers' hesitancy to invest their funds for longer periods as market interest rates have begun to rise. A significant portion of our money market accounts have rolled into certificates of deposit over the past twelve months, which management believes, based on past experience, is commensurate with our customers' behavior during periods of rising interest rates.recently declined. If these maturing deposits are not renewed, however, we will be required to seek other sources of funds, including other certificates of deposit, non-maturity deposits, and borrowings. We have the ability to attract and retain deposits by adjusting the interest rates offered.offered as well as through sales and marketing efforts in the markets we serve. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on certificates of deposit. In addition, we believe that our branch network, and the general cash flows from our existing lending and investment activities, will affordprovide us sufficient foreseeablemore than adequate long-term liquidity. For additional information, see the Consolidated Statements of Cash Flows in Item 1 of this Form 10-Q.
The Company is a separate legal entity from the Bank and provides for its own liquidity to pay its operating expenses and other financial obligations. At June 30, 2019,2020, the Company (on an unconsolidated basis) had liquid assets of $20.6$12.4 million.
Capital Resources
At June 30, 2019,2020, shareholders' equity totaled $176.4$176.3 million, or 14.0%11.9% of total assets. Our book value per share of common stock was $16.15$17.07 at June 30, 2019,2020, compared to $15.42$16.48 at December 31, 2018. Consistent with our goals to operate a sound and profitable organization, our policy for First Federal is to maintain its “well-capitalized” status in accordance with regulatory standards.
At June 30, 2019,2020, the Bank exceeded all regulatory capital requirements and was considered "well capitalized" under FDIC regulatory capital guidelines.
The following table provides the capital requirements and actual results for First Federal at June 30, 2019.
Actual | Minimum Capital Requirements | Minimum Required to be Well-Capitalized | ||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Tier I leverage capital (to average assets) | $ | 145,397 | 11.6 | % | $ | 50,305 | 4.0 | % | $ | 62,881 | 5.0 | % | ||||||||
Common equity tier I (to risk-weighted assets) | 145,397 | 17.4 | 37,692 | 4.5 | 54,445 | 6.5 | ||||||||||||||
Tier I risk-based capital (to risk-weighted assets) | 145,397 | 17.4 | 50,256 | 6.0 | 67,009 | 8.0 | ||||||||||||||
Total risk-based capital (to risk-weighted assets) | 155,316 | 18.5 | 67,009 | 8.0 | 83,761 | 10.0 |
Actual | Minimum Capital Requirements | Minimum Required to be Well-Capitalized | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Tier I leverage capital (to average assets) | $ | 152,140 | 10.9 | % | $ | 55,853 | 4.0 | % | $ | 69,816 | 5.0 | % | ||||||||||||
Common equity tier I (to risk-weighted assets) | 152,140 | 15.1 | 45,231 | 4.5 | 65,333 | 6.5 | ||||||||||||||||||
Tier I risk-based capital (to risk-weighted assets) | 152,140 | 15.1 | 60,308 | 6.0 | 80,410 | 8.0 | ||||||||||||||||||
Total risk-based capital (to risk-weighted assets) | 164,532 | 16.4 | 80,410 | 8.0 | 100,513 | 10.0 |
In order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses, the Bank must maintain common equity tier 1 capital ("CET1") at an amount greater than the required minimum levels plus a capital conservation buffer. This new capital conservation buffer requirement was phased in starting in January 2016 requiring a buffer of 0.625% of risk-weighted assets and will increase each year until fully implemented to an amount of 2.5% of risk-weighted assets in January 2019. As of June 30, 2019, the conservation buffer was 2.500%.
Effect of Inflation and Changing Prices
The consolidated financial statements and related financial data presented in this report have been prepared according to generally accepted accounting principles in the United States, which require the measurement of financial and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs and the effect that general inflation may have on both short-term and long-term interest rates. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution's performance
There has not been any material change in the market risk disclosures contained in First Northwest Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2018.
(a) Evaluation of Disclosure Controls and Procedures.
An evaluation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of the Company's Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial and Accounting Officer), and other members of the Company's management team as of the end of the period covered by this quarterly report. The Company's Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2019,2020, the Company's disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in
(b) Changes in Internal Controls.
There have been no changes in the Company's internal control over financial reporting (as defined in 13a-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2019,2020, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company's business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures. The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent every error or instance of fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.
PART II - OTHER INFORMATION
From time to time, the Company is engaged in legal proceedings in the ordinary course of business, none of which are currently considered to have a material impact on the Company’s financial position or results of operations.
The disclosures below supplement the risk factors set forth inpreviously disclosed under Part I. Item 1A of the Company's Form 10-K for the year ended December 31, 2018.
The effects of the COVID-19 pandemic could adversely affect our customers future results of operations and/or the market price of our stock.
The COVID-19 pandemic continues to rapidly evolve, as do federal, state and local efforts to address it. Both the direct effects of the pandemic and the resulting United States governmental responses are of an unprecedented scope as it impacts both the health and the economy of our country and the world at large. No one can predict the extent or duration of the pandemic, or its effect on the markets that we serve. Further, the ongoing efforts and impact of the government in mitigating the health and the economic effects of the pandemic cannot currently be predicted, whether on our business or as to the economy as a whole. The pandemic has thus far resulted in significant volatility in international and United States markets, which could adversely affect the market price of our stock. To date, the pandemic has resulted in significant business disruption and volatility in the international and domestic markets, which has adversely affected the market price of our stock and stocks in general
The Company continues to manage through uncertainties and complexities created by the pandemic. As an essential business, our employees have been able to work safely in our branch locations and over 70% of our workforce has the ability to work from home. However, the economic downturn in local markets we serve could result in increased credit risk associated with the loan portfolio as customers are unable to repay loans and meet their obligations, as well as adversely impact our earnings. We believe our strong capital position will be important in managing through the unknown impact of the pandemic.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) | |
Not applicable. |
(b) | |
Not applicable. |
(c) |
The following table summarizes common stock repurchases during the three months ended June 30, 2020:
Total Number of Shares Repurchased as Part of Publicly | Maximum Number of Shares that May Yet Be Repurchased | |||||||||||||||
Period | Total Number of Shares Purchased | Average Price Paid per Share | Announced Plans (1) | Under the Plans | ||||||||||||
April 1, 2020 - April 30, 2020 | — | $ | — | — | 272,030 | |||||||||||
May 1, 2020 - May 31, 2020 | 54,181 | 12.32 | 54,181 | 217,849 | ||||||||||||
June 1, 2020 - June 30, 2020 | 76,056 | 13.16 | 76,056 | 141,793 | ||||||||||||
Total | 130,237 | $ | 12.81 | 130,237 |
(1) On December 5, 2019, the three months ended June 30, 2019:
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Repurchased as Part of Publicly Announced Plans | Maximum Number of Shares that May Yet Be Repurchased Under the Plans | |||||||||
April 1, 2019 - April 30, 2019 | 2,400 | $ | 16.27 | 2,400 | 322,809 | ||||||||
May 1, 2019 - May 31, 2019 | 39,400 | 16.18 | 39,400 | 283,409 | |||||||||
June 1, 2019 - June 30, 2019 | 21,200 | 16.24 | 21,200 | 262,209 | |||||||||
Total | 63,000 | $ | 16.20 | 63,000 |
Not applicable.
Not applicable.
COVID-19 Legislation and Regulation.
General. Governments at the federal, state, and local levels continue to take steps to address the impact of the COVID-19 emergency. On March 27, 2020 the President signed into law the historic $2
trillion federal stimulus package known as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which included $350 billion in stimulus for small businesses under the so-called “Paycheck Protection Program,” along with direct stimulus payments (i.e., “economic impact payments” or “stimulus checks”) for many eligible Americans. The initial amounts available under the Paycheck Protection Program were quickly exhausted in less than two weeks, which prompted Congress to negotiate additional funding. On April 24, 2020, the Paycheck Protection Program and Health Care Enforcement Act was signed into law to replenish funding to the Paycheck Protection Program and to provide other spending for hospitals and virus testing. Further, on July 3, 2020 the President extended the deadline for potential borrowers to apply for Paycheck Protection Program funds until August 8, 2020. The legislative and regulatory landscape surrounding COVID-19 is rapidly changing, and neither the Company nor the Bank can predict with certainty the impact it will have on our operations or business.
Exhibit No. Exhibit Description Filed Herewith Form Original Exhibit No. Filing Date SEC File No. 10.1* X 31.1 X 31.2 X 32 X 101 The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST NORTHWEST BANCORP Date: August /s/ Matthew P. Deines President, Chief Executive Officer and Director (Principal Executive Officer) Date: August /s/ Geraldine L. Bullard Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)Form of Restricted Shares Award Agreement under the First Northwest Bancorp 2020 Equity Incentive Plan ExhibitNo.Exhibit DescriptionFiledHerewith31.12019,2020, formatted in Inline Extensible Business Reporting Language (XBRL)(iXBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income ;Income; (4) Consolidated Statements of Cash Flows; and (5) Selected Notes to Consolidated Financial Statements104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Denotes a management contract or compensatory plan or arrangement. 7, 201910, 2020Laurence J. HuethMatthew P. DeinesLaurence J. Hueth 7, 201910, 2020Regina M. WoodGeraldine L. BullardRegina M. Wood57