Exhibit 99.1
| For more information, contact: Joseph W. Kiley III, President and Chief Executive Officer Rich Jacobson, Executive Vice President and Chief Financial Officer (425) 255-4400 |
First Financial Northwest, Inc.
Reports Second Quarter Net Income of $1.9 Million or $0.18 per Diluted Share
Renton, Washington – July 26, 2017 - First Financial Northwest, Inc. (the "Company") (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the "Bank"), today reported net income for the quarter ended June 30, 2017, of $1.9 million, or $0.18 per diluted share, compared to net income of $2.3 million, or $0.22 per diluted share, for the quarter ended March 31, 2017, and $1.4 million, or $0.11 per diluted share, for the quarter ended June 30, 2016. In the first six months of 2017, net income was $4.2 million, or $0.40 per diluted share, compared to net income of $3.3 million, or $0.26 per diluted share, for the comparable six‑month period in 2016.
The Company also announced that the Bank has received Federal Deposit Insurance Corporation and the Washington State Department of Financial Institutions approval for the acquisition of four branches located in King and Snohomish counties from Opus Bank. The transaction is scheduled to close during the third quarter of 2017, subject to customary closing conditions. In connection with the transaction, the Bank will assume approximately $102 million in deposits associated with the branches, based on deposits as of December 31, 2016, for a deposit premium of 3.125%, based on the prior 20-day average deposit balance at the time the transaction closes. Certain expenses relating to this transaction are required to be expensed as-incurred, including approximately $319,000 in data processing, legal and other conversion-related expenses recognized during the quarter ended June 30, 2017.
Net loans receivable increased to $861.7 million at June 30, 2017, from $838.8 million at March 31, 2017, and $766.0 million at June 30, 2016.
The Company recorded a $100,000 provision for loan losses in the quarter ended June 30, 2017, compared to a $200,000 provision for loan losses in the quarter ended March 31, 2017, and a $600,000 provision for loan losses in the quarter ended June 30, 2016. The provision for loan losses in the most recent quarter was primarily due to the growth in net loan receivables, offset by payoffs and credit improvements to certain adversely graded loans. The provisions in the prior periods were also primarily due to growth in net loans receivable during those quarters.
"We were pleased with our loan growth and the opening of a new office during the quarter," stated Joseph W. Kiley III, President and Chief Executive Officer. "Average balances of net loans receivable increased to $844.9 million for the quarter ended June 30, 2017, compared to $825.3 million for the quarter ended March 31, 2017, and $726.1 million for the quarter ended June 30, 2016. We are also pleased to report that our aircraft lending platform continues to gain momentum in the first half of 2017, with balances increasing to $6.2 million at June 30, 2017, compared to $2.8 million at March 31, 2017, and none at June 30, 2016," continued Kiley.
"We recently opened a new branch office in the Crossroads area of Bellevue, Washington, and have received regulatory approval for a new office at The Junction, a new, mixed use development in Bothell, Washington, scheduled to open in the fourth quarter of 2017.
Both of these offices utilize our state-of-the-art branch model implementing a smaller, efficient footprint, and are staffed with experienced local bankers," concluded Kiley.
The following table presents a breakdown of our total deposits and average cost of funds by branch office (unaudited):
| | | Three Months Ended June 30, 2017 | | | | |
| | | Period-End Balance | | | | |
| | | Noninterest- bearing demand | | | Interest- bearing demand | | | Statement savings | | | Money market | | | Certificates
of deposit, retail | | | Certificates
of deposit, brokered | | | Total | | | Average cost of deposits | |
| | | (Dollars in thousands) | |
| King County | | | | | | | | | | | | | | | | | | | | | | | | |
| Renton | | $ | 31,899 | | | $ | 17,689 | | | $ | 25,909 | | | $ | 199,682 | | | $ | 327,788 | | | $ | - | | | $ | 602,967 | | | | 0.88 | % |
| Landing | | | 426 | | | | 319 | | | | 26 | | | | 9,163 | | | | 5,898 | | | | - | | | | 15,832 | | | | 1.12 | |
| Crossroads | | | 8 | | | | 4 | | | | - | | | | 1,731 | | | | 25 | | | | - | | | | 1,768 | | | | 1.03 | |
| Total King County | | | 32,333 | | | | 18,012 | | | | 25,935 | | | | 210,576 | | | | 333,711 | | | | - | | | | 620,567 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Snohomish County | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mill Creek | | | 1,557 | | | | 1,694 | | | | 699 | | | | 10,319 | | | | 5,413 | | | | - | | | | 19,682 | | | | 0.90 | |
| Edmonds | | | 1,236 | | | | 1,353 | | | | 34 | | | | 11,311 | | | | 5,904 | | | | - | | | | 19,838 | | | | 1.01 | |
| Total Snohomish County | | | 2,793 | | | | 3,047 | | | | 733 | | | | 21,630 | | | | 11,317 | | | | - | | | | 39,520 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total retail deposits | | | 35,126 | | | | 21,059 | | | | 26,668 | | | | 232,206 | | | | 345,028 | | | | - | | | | 660,087 | | | | 1.09 | |
| Brokered deposits | | | - | | | | - | | | | - | | | | - | | | | - | | | | 75,488 | | | | 75,488 | | | | 1.67 | |
| Total deposits | | $ | 35,126 | | | $ | 21,059 | | | $ | 26,668 | | | $ | 232,206 | | | $ | 345,028 | | | $ | 75,488 | | | $ | 735,575 | | | | 0.98 | % |
As noted earlier, the Bank is expanding its footprint with the purchase of four branches from Opus Bank. These branches are located in Woodinville, Snohomish, Lake Stevens, and Arlington, Washington. As of December 31, 2016, the deposits in these locations totaled approximately $102 million and consisted of approximately 32% checking accounts, 51% savings and money market accounts, and 17% in certificates of deposit, carrying an aggregate cost of funds of approximately 0.56%. The final deposit composition and aggregate cost of funds will vary based on the composition of deposits acquired at the closing of the transaction.
Additional highlights for the quarter ended June 30, 2017:
| · | On May 22, 2017, the Company's Board of Directors authorized the repurchase of up to 1.1 million shares of the Company's common stock, or 10% of its outstanding shares, effective on May 30, 2017, and expiring on or before November 30, 2017. At June 30, 2017, the Company had repurchased 22,700 shares at an average price of $15.93 per share under this stock repurchase plan. |
| · | Money market account deposits increased to $232.2 million during the quarter ended June 30, 2017, an increase of $13.6 million, or 6.2%, from March 31, 2017, and increased $35.1 million, or 17.8%, from June 30, 2016. |
| · | Our portfolio of aircraft loans increased to $6.2 million at June 30, 2017, compared to $2.8 million at March 31, 2017. |
| · | The Company's book value per share was $13.00 at June 30, 2017, compared to $12.84 at March 31, 2017, and $12.71 at June 30, 2016. |
| · | The Bank's Tier 1 leverage and total capital ratios at June 30, 2017, were 11.5% and 15.2%, respectively, compared to 11.6% and 15.6% at March 31, 2017, and 12.0% and 15.7% at June 30, 2016. |
Based on management's evaluation of the adequacy of the Allowance for Loan and Lease Losses ("ALLL"), there was a $100,000 provision for loan losses for the quarter ended June 30, 2017. The following items contributed to this provision during the quarter:
| · | The Company's net loans receivable increased $22.9 million during the quarter to $861.7 million at June 30, 2017, from $838.8 million at March 31, 2017, and was $766.0 million at June 30, 2016. |
| · | During the quarter, the Bank received payoffs on adversely graded loans totaling $9.9 million. In addition, credit quality ratings were upgraded on loans totaling $4.3 million during the quarter, decreasing the amounts of reserve deemed necessary to set aside for those loans. |
| · | There were $85,000 in delinquent loans (loans over 30 days past due) at June 30, 2017, compared to no delinquent loans at March 31, 2017, and $720,000 at June 30, 2016. |
| · | Nonperforming loans declined to $583,000 at June 30, 2017, compared to $602,000 at March 31, 2017, and $1.1 million at June 30, 2016. |
| · | Nonperforming loans as a percentage of total loans remained low at 0.07% at both June 30, 2017, and March 31, 2017, compared to 0.14% at June 30, 2016. |
The ALLL represented 1.29% of total loans receivable, net of undisbursed funds, at June 30, 2017, compared to 1.31% at March 31, 2017, and 1.30% at June 30, 2016. Nonperforming assets totaled $2.4 million at June 30, 2017, compared to $2.9 million at March 31, 2017, and $3.4 million at June 30, 2016.
The following table presents a breakdown of our nonperforming assets (unaudited):
| | | | | | | | | | | | Three | | | | |
| | | Jun 30, | | | Mar 31, | | | Jun 30, | | | Month | | | One Year | |
| | | 2017 | | | 2017 | | | 2016 | | | Change | | | Change | |
| | | (Dollars in thousands) | |
| Nonperforming loans: | | | | | | | | | | | | | | | |
| One-to-four family residential | | $ | 528 | | | $ | 545 | | | $ | 1,019 | | | $ | (17 | ) | | $ | (491 | ) |
| Consumer | | | 55 | | | | 57 | | | | 64 | | | | (2 | ) | | | (9 | ) |
| Total nonperforming loans | | | 583 | | | | 602 | | | | 1,083 | | | | (19 | ) | | | (500 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| OREO | | | 1,825 | | | | 2,281 | | | | 2,331 | | | | (456 | ) | | | (506 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Total nonperforming assets (1) | | $ | 2,408 | | | $ | 2,883 | | | $ | 3,414 | | | $ | (475 | ) | | $ | (1,006 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming assets as a | | | | | | | | | | | | | | | | | | | | |
| percent of total assets | | | 0.22 | % | | | 0.27 | % | | | 0.34 | % | | | | | | | | |
(1) The difference between nonperforming assets reported above, and the totals reported by other industry sources, is due to their inclusion of all Troubled Debt Restructured Loans ("TDRs") as nonperforming loans, although 99.6% of our TDRs were performing in accordance with their restructured terms at June 30, 2017. The remaining 0.4% of TDRs that were nonperforming at June 30, 2017, are reported above as nonperforming loans.
OREO totaled $1.8 million at June 30, 2017, compared to $2.3 million at both March 31, 2017, and June 30, 2016, with the declining balance attributable to sales of properties and market value adjustments of OREO. We continue to actively market our OREO properties in an effort to minimize holding costs.
In circumstances where a customer is experiencing significant financial difficulties, the Company may elect to restructure the loan so the customer can continue to make payments while minimizing the potential loss to the Company. Such restructures must be classified as TDRs.
The following table presents a breakdown of our TDRs (unaudited):
| | | Jun 30,
2017 | | | Mar 31,
2017 | | | Jun 30,
2016 | | | Three Month Change | | | One Year
Change | |
| | | (Dollars in thousands) | |
| Nonperforming TDRs: | | | | | | | | | | | | | | | |
| One-to-four family residential | | $ | 106 | | | $ | 109 | | | $ | 189 | | | $ | (3 | ) | | $ | (83 | ) |
| Total nonperforming TDRs | | | 106 | | | | 109 | | | | 189 | | | | (3 | ) | | | (83 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Performing TDRs: | | | | | | | | | | | | | | | | | | | | |
| One-to-four family residential | | | 19,152 | | | | 21,790 | | | | 30,116 | | | | (2,638 | ) | | | (10,964 | ) |
| Multifamily | | | 1,146 | | | | 1,152 | | | | 1,580 | | | | (6 | ) | | | (434 | ) |
| Commercial real estate | | | 3,660 | | | | 3,683 | | | | 4,941 | | | | (23 | ) | | | (1,281 | ) |
| Consumer | | | 43 | | | | 43 | | | | 43 | | | | - | | | | - | |
| Total performing TDRs | | | 24,001 | | | | 26,668 | | | | 36,680 | | | | (2,667 | ) | | | (12,679 | ) |
| Total TDRs | | $ | 24,107 | | | $ | 26,777 | | | $ | 36,869 | | | $ | (2,670 | ) | | $ | (12,762 | ) |
Net interest income for the second quarter of 2017 increased to $9.0 million, compared to $8.9 million for the first quarter of 2017, and $8.2 million in the second quarter of 2016, due primarily to the growth in average balances of loans outstanding.
Total interest income increased to $11.3 million during the quarter ended June 30, 2017, compared to $11.0 million during the quarter ended March 31, 2017, and $9.9 million in the quarter ended June 30, 2016. The increase related primarily to growth in average balances in loans receivable, including continued growth in higher yielding construction and commercial real estate loans.
Total interest expense was $2.3 million for the quarter ended June 30, 2017, compared to $2.1 million for the quarter ended March 31, 2017, and $1.7 million for the quarter ended June 30, 2016. The higher level of interest expense in the most recent two quarters compared to the quarter ended June 30, 2016, was the result of higher average deposit balances and Federal Home Loan Bank ("FHLB") advances that were utilized primarily to fund the growth in net loans receivable, along with increased costs as a result of a higher interest rate environment. Average balances outstanding for FHLB advances were $184.4 million for the quarter ended June 30, 2017, compared to $171.5 million for the quarter ended March 31, 2017, and $123.1 million for the quarter ended June 30, 2016. A portion of this borrowing growth included the addition of $50 million in short term FHLB advances, concurrent with an interest rate swap for the same amount entered into in October 2016. Under the terms of the interest rate swap, the Bank committed to pay a fixed rate of 1.34% for five years on a notional amount of $50 million, and in exchange, will receive a floating rate of return paid quarterly, based on three-month LIBOR for the five-year term of the agreement. At June 30, 2017, the value of this interest rate swap was $1.1 million. The Bank entered into this arrangement in its efforts to manage its interest risk, providing protection in a rising rate environment. The average cost of FHLB advances and other borrowings was 1.24% for the quarter ended June 30, 2017, compared to 1.05% for the quarter ended March 31, 2017, and 0.89% for the quarter ended June 30, 2016. Brokered certificates of deposit totaled $75.5 million at June 30, 2017, and March 31, 2017, and $65.6 million at June 30, 2016.
The following table presents a breakdown of our total deposits (unaudited):
| | | Jun 30,
2017 | | | Mar 31,
2017 | | | Jun 30,
2016 | | | Three
Month
Change | | | One Year Change | |
| Deposits: | | (Dollars in thousands) | | | | |
| Noninterest-bearing | | $ | 35,126 | | | $ | 36,190 | | | $ | 25,137 | | | $ | (1,064 | ) | | $ | 9,989 | |
| Interest-bearing demand | | | 21,059 | | | | 21,584 | | | | 17,062 | | | | (525 | ) | | | 3,997 | |
| Statement savings | | | 26,668 | | | | 27,415 | | | | 31,143 | | | | (747 | ) | | | (4,475 | ) |
| Money market | | | 232,206 | | | | 218,578 | | | | 197,129 | | | | 13,628 | | | | 35,077 | |
| Certificates of deposit, retail | | | 345,028 | | | | 355,452 | | | | 324,127 | | | | (10,424 | ) | | | 20,901 | |
| Certificates of deposit, brokered | | | 75,488 | | | | 75,488 | | | | 65,612 | | | | - | | | | 9,876 | |
| Total deposits | | $ | 735,575 | | | $ | 734,707 | | | $ | 660,210 | | | $ | 868 | | | $ | 75,365 | |
Our net interest margin was 3.60% for the quarter ended June 30, 2017, compared to 3.64% for the quarter ended March 31, 2017, and 3.63% for the quarter ended June 30, 2016. The change between quarters is primarily attributed to increased costs associated with interest-bearing liabilities due to the recent increases in short term interest rates.
Noninterest income for the quarter ended June 30, 2017, totaled $731,000 compared to $535,000 for the quarter ended March 31, 2017, and $708,000 for the quarter ended June 30, 2016. The most recent quarterly change was due primarily to an increase in wealth management revenue to $307,000 for the quarter ended June 30, 2017, compared to $140,000 for the quarter ended March 31, 2017, and $281,000 for the quarter ended June 30, 2016. Loan related fees, a component of other noninterest income, increased to $120,000 in the quarter ended June 30, 2017, compared to $35,000 in the quarter ended March 31, 2017, and $81,000 in the quarter ended June 30, 2016, primarily due to higher levels of prepayment penalties in the second quarter of 2017. Net gain on sales of investments also increased to $56,000 in the quarter ended June 30, 2017, compared to no gain for either the quarter ended March 31, 2017, or the quarter ended June 30, 2016.
Noninterest expense for the quarter ended June 30, 2017, increased to $6.8 million from $6.1 million in the quarters ended March 31, 2017, and June 30, 2016. The increase in noninterest expense in the current quarter compared to the prior quarter was due primarily to higher expenses incurred to support the Company's growth initiatives, including legal and data processing expenses related to the branch acquisitions discussed above, and as compared to the quarter ended June 30, 2016, higher salaries and employee benefits as a result of new hires and annual wage increases. Changes to the Company's unfunded commitment reserve, which is included in other general and administrative expenses, also contributed to the increase in noninterest expense from the quarter ended March 31, 2017, with an expense of $98,000 in the quarter ended June 30, 2017, compared to a $41,000 recovery in the quarter ended March 31, 2017, but was down from the $153,000 expense in the quarter ended June 30, 2016. The increase in our construction lending activity was the primary reason for the greater increase to the unfunded commitment reserve in the quarter ended June 30, 2016. This unfunded commitment reserve expense can vary significantly each quarter, based on the amount believed by management to be sufficient to absorb estimated probable losses related to unfunded credit facilities, and reflects changes in the amounts that the Company has committed to fund but has not yet disbursed.
The Company's federal income tax provision also experienced significant variances during the periods presented. Specifically, in the quarter ended March 31, 2017, stock option exercises resulted in a significantly lower federal income tax provision as compared to the quarters ended June 30, 2017, and June 30, 2016, since similar stock option exercise activity did not occur in those two periods. These
stock option exercises occurred at prices higher than originally estimated, resulting in higher allowable expense recognition for tax purposes.
First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; a Washington State chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through its five full-service banking offices, including its newest office in Bellevue, Washington. We are a part of the ABA NASDAQ Community Bank Index and the Russell 3000 Index. For additional information about us, please visit our website at ffnwb.com and click on the "Investor Relations" link at the bottom of the page.
Forward-looking statements:
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the "SEC"), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "will," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "plans," or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include, but are not limited to, the following: increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Company's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC's website at www.sec.gov.
Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2017 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance.
| FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES | |
| Consolidated Balance Sheets | |
| (Dollars in thousands, except share data) | |
| (Unaudited) | |
| | | | | | | | | | | | | | | | |
| Assets | | Jun 30, 2017 | | | Mar 31, 2017 | | | Jun 30, 2016 | | | Three Month Change | | | One Year Change | |
| | | | | | | | | | | | | | | | |
| Cash on hand and in banks | | $ | 7,418 | | | $ | 6,066 | | | $ | 6,051 | | | | 22.3 | % | | | 22.6 | % |
| Interest-earning deposits with banks | | | 10,996 | | | | 20,007 | | | | 31,454 | | | | (45.0 | ) | | | (65.0 | ) |
| Investments available-for-sale, at fair value | | | 133,951 | | | | 129,662 | | | | 136,028 | | | | 3.3 | | | | (1.5 | ) |
Loans receivable, net of allowance of $11,285, $11,158, and $10,134, respectively | | | 861,672 | | | | 838,768 | | | | 766,046 | | | | 2.7 | | | | 12.5 | |
| Premises and equipment, net | | | 19,501 | | | | 18,912 | | | | 18,206 | | | | 3.1 | | | | 7.1 | |
| Federal Home Loan Bank ("FHLB") stock, at cost | | | 8,902 | | | | 8,102 | | | | 7,631 | | | | 9.9 | | | | 16.7 | |
| Accrued interest receivable | | | 3,165 | | | | 3,389 | | | | 3,158 | | | | (6.6 | ) | | | 0.2 | |
| Deferred tax assets, net | | | 2,620 | | | | 2,907 | | | | 3,438 | | | | (9.9 | ) | | | (23.8 | ) |
| Other real estate owned ("OREO") | | | 1,825 | | | | 2,281 | | | | 2,331 | | | | (20.0 | ) | | | (21.7 | ) |
| Bank owned life insurance ("BOLI"), net | | | 28,721 | | | | 27,534 | | | | 23,700 | | | | 4.3 | | | | 21.2 | |
| Prepaid expenses and other assets | | | 2,937 | | | | 2,892 | | | | 1,193 | | | | 1.6 | | | | 146.2 | |
| Total assets | | $ | 1,081,708 | | | $ | 1,060,520 | | | $ | 999,236 | | | | 2.0 | % | | | 8.3 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | | | | | | | | | | | | | | | | | |
| Noninterest-bearing deposits | | $ | 35,126 | | | $ | 36,190 | | | $ | 25,137 | | | | (2.9 | )% | | | 39.7 | % |
| Interest-bearing deposits | | | 700,449 | | | | 698,517 | | | | 635,073 | | | | 0.3 | | | | 10.3 | |
| Total Deposits | | | 735,575 | | | | 734,707 | | | | 660,210 | | | | 0.1 | | | | 11.4 | |
| Advances from the FHLB | | | 191,500 | | | | 171,500 | | | | 161,500 | | | | 11.7 | | | | 18.6 | |
Advance payments from borrowers for taxes and insurance | | | 2,183 | | | | 4,092 | | | | 2,144 | | | | (46.7 | ) | | | 1.8 | |
| Accrued interest payable | | | 286 | | | | 237 | | | | 114 | | | | 20.7 | | | | 150.9 | |
| Other liabilities | | | 8,650 | | | | 8,235 | | | | 5,813 | | | | 5.0 | | | | 48.8 | |
| Total liabilities | | | 938,194 | | | | 918,771 | | | | 829,781 | | | | 2.1 | | | | 13.1 | |
| | | | | | | | | | | | | | | | | | | | | |
| Commitments and contingencies | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Stockholders' Equity | | | | | | | | | | | | | | | | | | | | |
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or | | | | | | | | | | | | | | | | | | | | |
| outstanding | | $ | - | | | $ | - | | | $ | - | | | | n/a | | | | n/a | |
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding | | | | | | | | | | | | | | | | | | | | |
11,041,865 shares at June 30, 2017, 11,035,791 at March 31, 2017, and | | | | | | | | | | | | | | | | | | | | |
| 13,327,916 shares at June 30, 2016 | | | 110 | | | | 110 | | | | 133 | | | | 0.0 | % | | | (17.3 | )% |
| Additional paid-in capital | | | 98,469 | | | | 98,186 | | | | 131,312 | | | | 0.3 | | | | (25.0 | ) |
| Retained earnings, substantially restricted | | | 51,844 | | | | 50,702 | | | | 44,640 | | | | 2.3 | | | | 16.1 | |
| Accumulated other comprehensive loss, net of tax | | | (984 | ) | | | (1,042 | ) | | | 423 | | | | (5.6 | ) | | | (332.6 | ) |
Unearned Employee Stock Ownership Plan ("ESOP") shares | | | (5,925 | ) | | | (6,207 | ) | | | (7,053 | ) | | | (4.5 | ) | | | (16.0 | ) |
| Total stockholders' equity | | | 143,514 | | | | 141,749 | | | | 169,455 | | | | 1.2 | | | | (15.3 | ) |
| Total liabilities and stockholders' equity | | $ | 1,081,708 | | | $ | 1,060,520 | | | $ | 999,236 | | | | 2.0 | % | | | 8.3 | % |
| FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES | |
| Consolidated Income Statements | |
| (Dollars in thousands, except share data) | |
| (Unaudited) | |
| | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | | | | | |
| | | Jun 30,
2017 | | | Mar 31, 2017 | | | Jun 30, 2016 | | | Three Month Change | | | One Year Change | |
| Interest income | | | | | | | | | | | | | | | |
| Loans, including fees | | $ | 10,352 | | | $ | 10,027 | | | $ | 9,048 | | | | 3.2 | % | | | 14.4 | % |
| Investments available-for-sale | | | 887 | | | | 845 | | | | 757 | | | | 5.0 | | | | 17.2 | |
| Interest-earning deposits with banks | | | 42 | | | | 44 | | | | 47 | | | | (4.5 | ) | | | (10.6 | ) |
| Dividends on FHLB Stock | | | 62 | | | | 82 | | | | 44 | | | | (24.4 | ) | | | 40.9 | |
| Total interest income | | | 11,343 | | | | 10,998 | | | | 9,896 | | | | 3.1 | | | | 14.6 | |
| Interest expense | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 1,776 | | | | 1,691 | | | | 1,441 | | | | 5.0 | | | | 23.2 | |
| FHLB advances and other borrowings | | | 570 | | | | 445 | | | | 272 | | | | 28.1 | | | | 109.6 | |
| Total interest expense | | | 2,346 | | | | 2,136 | | | | 1,713 | | | | 9.8 | | | | 37.0 | |
| Net interest income | | | 8,997 | | | | 8,862 | | | | 8,183 | | | | 1.5 | | | | 9.9 | |
| Provision for loan losses | | | 100 | | | | 200 | | | | 600 | | | | (50.0 | ) | | | (83.3 | ) |
| Net interest income after provision for loan losses | | | 8,897 | | | | 8,662 | | | | 7,583 | | | | 2.7 | | | | 17.3 | |
| | | | | | | | | | | | | | | | | | | | | |
| Noninterest income | | | | | | | | | | | | | | | | | | | | |
| Net gain on sale of investments | | | 56 | | | | - | | | | - | | | | n/a | | | | n/a | |
| BOLI income | | | 116 | | | | 201 | | | | 225 | | | | (42.3 | ) | | | (48.4 | ) |
| Wealth management revenue | | | 307 | | | | 140 | | | | 281 | | | | 119.3 | | | | 9.3 | |
| Other | | | 252 | | | | 194 | | | | 202 | | | | 29.9 | | | | 24.8 | |
| Total noninterest income | | | 731 | | | | 535 | | | | 708 | | | | 36.6 | | | | 3.2 | |
| | | | | | | | | | | | | | | | | | | | | |
| Noninterest expense | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 4,409 | | | | 4,285 | | | | 3,841 | | | | 2.9 | | | | 14.8 | |
| Occupancy and equipment | | | 579 | | | | 480 | | | | 488 | | | | 20.6 | | | | 18.6 | |
| Professional fees | | | 482 | | | | 439 | | | | 561 | | | | 9.8 | | | | (14.1 | ) |
| Data processing | | | 519 | | | | 240 | | | | 251 | | | | 116.3 | | | | 106.8 | |
| Net (gain) loss on sale of OREO property | | | (5 | ) | | | - | | | | 89 | | | | n/a | | | | (105.6 | ) |
| OREO market value adjustments | | | - | | | | 50 | | | | - | | | | (100.0 | ) | | | n/a | |
| OREO related (reimbursements) expenses, net | | | (15 | ) | | | (10 | ) | | | (14 | ) | | | 50.0 | | | | 7.1 | |
| Regulatory assessments | | | 112 | | | | 96 | | | | 117 | | | | 16.7 | | | | (4.3 | ) |
| Insurance and bond premiums | | | 98 | | | | 99 | | | | 86 | | | | (1.0 | ) | | | 14.0 | |
| Marketing | | | 52 | | | | 48 | | | | 40 | | | | 8.3 | | | | 30.0 | |
| Other general and administrative | | | 605 | | | | 341 | | | | 613 | | | | 77.4 | | | | (1.3 | ) |
| Total noninterest expense | | | 6,836 | | | | 6,068 | | | | 6,072 | | | | 12.7 | | | | 12.6 | |
| Income before federal income tax provision | | | 2,792 | | | | 3,129 | | | | 2,219 | | | | (10.8 | ) | | | 25.8 | |
| Federal income tax provision | | | 924 | | | | 785 | | | | 779 | | | | 17.7 | | | | 18.6 | |
| Net income | | $ | 1,868 | | | $ | 2,344 | | | $ | 1,440 | | | | (20.3 | ) | | | 29.7 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.18 | | | $ | 0.23 | | | $ | 0.12 | | | | | | | | | |
| Diluted earnings per share | | $ | 0.18 | | | $ | 0.22 | | | $ | 0.11 | | | | | | | | | |
Weighted average number of common shares outstanding | | | 10,363,345 | | | | 10,319,722 | | | | 12,390,234 | | | | | | | | | |
Weighted average number of diluted shares outstanding | | | 10,500,829 | | | | 10,504,046 | | | | 12,530,720 | | | | | | | | | |
| FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES | |
| Consolidated Income Statements | |
| (Dollars in thousands, except share data) | |
| (Unaudited) | |
| | | | | | | | | | |
| | | Six Months Ended | | | | |
| | | June 30, | | | | |
| | | 2017 | | | 2016 | | | One Year Change | |
| Interest income | | | | | | | | | |
| Loans, including fees | | $ | 20,379 | | | $ | 17,775 | | | | 14.6 | % |
| Investments available-for-sale | | | 1,732 | | | | 1,432 | | | | 20.9 | |
| Interest-earning deposits with banks | | | 86 | | | | 160 | | | | (46.3 | ) |
| Dividends on FHLB Stock | | | 144 | | | | 91 | | | | 58.2 | |
| Total interest income | | | 22,341 | | | | 19,458 | | | | 14.8 | |
| Interest expense | | | | | | | | | | | | |
| Deposits | | | 3,467 | | | | 2,924 | | | | 18.6 | |
| FHLB advances and other borrowings | | | 1,015 | | | | 570 | | | | 78.1 | |
| Total interest expense | | | 4,482 | | | | 3,494 | | | | 28.3 | |
| Net interest income | | | 17,859 | | | | 15,964 | | | | 11.9 | |
| Provision for loan losses | | | 300 | | | | 500 | | | | (40.0 | ) |
| Net interest income after provision for loan losses | | | 17,559 | | | | 15,464 | | | | 13.5 | |
| | | | | | | | | | | | | |
| Noninterest income | | | | | | | | | | | | |
| Net gain on sale of investments | | | 56 | | | | - | | | | n/a | |
| BOLI | | | 317 | | | | 391 | | | | (18.9 | ) |
| Wealth management revenue | | | 447 | | | | 491 | | | | (9.0 | ) |
| Other | | | 446 | | | | 306 | | | | 45.8 | |
| Total noninterest income | | | 1,266 | | | | 1,188 | | | | 6.6 | |
| | | | | | | | | | | | | |
| Noninterest expense | | | | | | | | | | | | |
| Salaries and employee benefits | | | 8,694 | | | | 7,615 | | | | 14.2 | |
| Occupancy and equipment | | | 1,059 | | | | 996 | | | | 6.3 | |
| Professional fees | | | 921 | | | | 1,029 | | | | (10.5 | ) |
| Data processing | | | 759 | | | | 441 | | | | 72.1 | |
| Net (gain) loss on sale of OREO property | | | (5 | ) | | | 87 | | | | (105.7 | ) |
| OREO market value adjustments | | | 50 | | | | 257 | | | | (80.5 | ) |
| OREO related (reimbursements) expenses, net | | | (25 | ) | | | (34 | ) | | | (26.5 | ) |
| Regulatory assessments | | | 208 | | | | 237 | | | | (12.2 | ) |
| Insurance and bond premiums | | | 197 | | | | 174 | | | | 13.2 | |
| Marketing | | | 100 | | | | 78 | | | | 28.2 | |
| Other general and administrative | | | 946 | | | | 965 | | | | (2.0 | ) |
| Total noninterest expense | | | 12,904 | | | | 11,845 | | | | 8.9 | |
| Income before federal income tax provision | | | 5,921 | | | | 4,807 | | | | 23.2 | |
| Federal income tax provision | | | 1,709 | | | | 1,542 | | | | 10.8 | |
| Net income | | $ | 4,212 | | | $ | 3,265 | | | | 29.0 | % |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.41 | | | $ | 0.26 | | | | | |
| Diluted earnings per share | | $ | 0.40 | | | $ | 0.26 | | | | | |
| Weighted average number of common shares outstanding | | | 10,341,654 | | | | 12,567,464 | | | | | |
| Weighted average number of diluted shares outstanding | | | 10,503,023 | | | | 12,718,155 | | | | | |
The following table presents a breakdown of our loan portfolio (unaudited):
| | | June 30, 2017 | | | March 31, 2017 | | | June 30, 2016 | |
| | | Amount | | | Percent | | | Amount | | | Percent | | | Amount | | | Percent | |
| | | (Dollars in thousands) | |
| Commercial real estate: | | | | | | | | | | | | | | | | | | |
| Residential: | | | | | | | | | | | | | | | | | | |
| Micro-unit apartments | | $ | 5,580 | | | | 0.6 | % | | $ | 7,841 | | | | 0.8 | % | | $ | 26,416 | | | | 3.1 | % |
| Other multifamily | | | 120,304 | | | | 12.5 | | | | 113,877 | | | | 12.5 | | | | 105,773 | | | | 12.5 | |
| Total multifamily | | | 125,884 | | | | 13.1 | | | | 121,718 | | | | 13.3 | | | | 132,189 | | | | 15.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-residential: | | | | | | | | | | | | | | | | | | | | | | | | |
| Office | | | 95,256 | | | | 9.9 | | | | 101,369 | | | | 11.1 | | | | 97,375 | | | | 11.5 | |
| Retail | | | 99,482 | | | | 10.3 | | | | 105,233 | | | | 11.5 | | | | 95,649 | | | | 11.3 | |
| Mobile home park | | | 21,851 | | | | 2.3 | | | | 20,519 | | | | 2.2 | | | | 23,290 | | | | 2.7 | |
| Warehouse | | | 21,491 | | | | 2.2 | | | | 21,575 | | | | 2.4 | | | | 15,479 | | | | 1.8 | |
| Storage | | | 35,121 | | | | 3.6 | | | | 35,290 | | | | 3.9 | | | | 38,130 | | | | 4.5 | |
| Other non-residential | | | 44,017 | | | | 4.6 | | | | 33,733 | | | | 3.7 | | | | 15,526 | | | | 1.8 | |
| Total non-residential | | | 317,218 | | | | 32.9 | | | | 317,719 | | | | 34.8 | | | | 285,448 | | | | 33.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Construction/land development: | | | | | | | | | | | | | | | | | | | | | | | | |
| One-to-four family residential | | | 76,404 | | | | 7.9 | | | | 58,447 | | | | 6.4 | | | | 64,312 | | | | 7.6 | |
| Multifamily | | | 123,497 | | | | 12.8 | | | | 108,801 | | | | 11.9 | | | | 77,281 | | | | 9.1 | |
| Commercial | | | 1,100 | | | | 0.1 | | | | - | | | | 0.0 | | | | - | | | | 0.0 | |
| Land development | | | 39,012 | | | | 4.1 | | | | 39,687 | | | | 4.3 | | | | 22,595 | | | | 2.7 | |
| Total construction/land development | | | 240,013 | | | | 24.9 | | | | 206,935 | | | | 22.6 | | | | 164,188 | | | | 19.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| One-to-four family residential: | | | | | | | | | | | | | | | | | | | | | | | | |
| Permanent owner occupied | | | 137,816 | | | | 14.3 | | | | 135,743 | | | | 14.9 | | | | 146,762 | | | | 17.3 | |
| Permanent non-owner occupied | | | 118,816 | | | | 12.3 | | | | 113,476 | | | | 12.4 | | | | 104,970 | | | | 12.4 | |
| Total one-to-four family residential | | | 256,632 | | | | 26.6 | | | | 249,219 | | | | 27.3 | | | | 251,732 | | | | 29.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Business: | | | | | | | | | | | | | | | | | | | | | | | | |
| Aircraft | | | 6,235 | | | | 0.7 | | | | 2,760 | | | | 0.3 | | | | - | | | | 0.0 | |
| Other business | | | 8,971 | | | | 0.9 | | | | 7,610 | | | | 0.8 | | | | 7,208 | | | | 0.9 | |
| Total business | | | 15,206 | | | | 1.6 | | | | 10,370 | | | | 1.1 | | | | 7,208 | | | | 0.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer | | | 9,031 | | | | 0.9 | | | | 7,878 | | | | 0.9 | | | | 6,333 | | | | 0.7 | |
| Total loans | | | 963,984 | | | | 100.0 | % | | | 913,839 | | | | 100.0 | % | | | 847,099 | | | | 100.0 | % |
| Less: | | | | | | | | | | | | | | | | | | | | | | | | |
| Loans in Process ("LIP") | | | 88,475 | | | | | | | | 61,735 | | | | | | | | 68,979 | | | | | |
| Deferred loan fees, net | | | 2,552 | | | | | | | | 2,178 | | | | | | | | 1,940 | | | | | |
| ALLL | | | 11,285 | | | | | | | | 11,158 | | | | | | | | 10,134 | | | | | |
| Loans receivable, net | | $ | 861,672 | | | | | | | $ | 838,768 | | | | | | | $ | 766,046 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Concentrations of credit: (1) | | | | | | | | | | | | | | | | | | | | | | | | |
| Construction loans as % of total capital | | | 115.3 | % | | | | | | | 111.7 | % | | | | | | | 76.0 | % | | | | |
| Total non-owner occupied commercial real estate as % of total capital | | | 443.0 | % | | | | | | | 441.2 | % | | | | | | | 407.3 | % | | | | |
(1) Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC guidelines.
| FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES | |
| Key Financial Measures | |
| | |
| | | At or For the Quarter Ended | |
| | | Jun 30, | | | Mar 31, | | | Dec 31, | | | Sep 30, | | | Jun 30, | |
| | | 2017 | | | 2017 | | | 2016 | | | 2016 | | | 2016 | |
| | | (Dollars in thousands, except per share data) | |
Performance Ratios: | | | | | | | | | | | | | | | |
| Return on assets | | | 0.70 | % | | | 0.91 | % | | | 1.12 | % | | | 1.00 | % | | | 0.60 | % |
| Return on equity | | | 5.22 | | | | 6.76 | | | | 8.58 | | | | 6.39 | | | | 3.41 | |
| Dividend payout ratio | | | 38.89 | | | | 26.09 | | | | 20.62 | | | | 27.38 | | | | 51.81 | |
| Equity-to-assets ratio | | | 13.27 | | | | 13.37 | | | | 13.31 | | | | 14.06 | | | | 16.96 | |
| Interest rate spread | | | 3.47 | | | | 3.51 | | | | 3.53 | | | | 3.51 | | | | 3.49 | |
| Net interest margin | | | 3.60 | | | | 3.64 | | | | 3.65 | | | | 3.64 | | | | 3.63 | |
Average interest-earning assets to average interest-bearing liabilities | | | 114.29 | | | | 114.74 | | | | 113.75 | | | | 117.43 | | | | 118.96 | |
| Efficiency ratio | | | 70.27 | | | | 64.57 | | | | 57.96 | | | | 54.69 | | | | 68.29 | |
Noninterest expense as a percent of average total assets | | | 2.57 | | | | 2.35 | | | | 2.17 | | | | 2.01 | | | | 2.53 | |
| Book value per common share | | $ | 13.00 | | | $ | 12.84 | | | $ | 12.63 | | | $ | 12.70 | | | $ | 12.71 | |
| | | | | | | | | | | | | | | | | | | | | |
Capital Ratios: (1) | | | | | | | | | | | | | | | | | | | | |
| Tier 1 leverage ratio | | | 11.46 | % | | | 11.57 | % | | | 11.17 | % | | | 11.37 | % | | | 12.02 | % |
| Common equity tier 1 capital ratio | | | 13.95 | | | | 14.39 | | | | 14.36 | | | | 13.13 | | | | 14.42 | |
| Tier 1 capital ratio | | | 13.95 | | | | 14.39 | | | | 14.36 | | | | 13.13 | | | | 14.42 | |
| Total capital ratio | | | 15.20 | | | | 15.64 | | | | 15.61 | | | | 14.38 | | | | 15.67 | |
| | | | | | | | | | | | | | | | | | | | | |
Asset Quality Ratios: (2) | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans as a percent of total loans | | | 0.07 | % | | | 0.07 | % | | | 0.10 | % | | | 0.12 | % | | | 0.14 | % |
| Nonperforming assets as a percent of total assets | | | 0.22 | | | | 0.27 | | | | 0.31 | | | | 0.32 | | | | 0.34 | |
| ALLL as a percent of total loans | | | 1.29 | | | | 1.31 | | | | 1.32 | | | | 1.28 | | | | 1.30 | |
| ALLL as a percent of nonperforming loans | | | 1,935.68 | | | | 1,853.49 | | | | 1,276.34 | | | | 1,025.72 | | | | 935.30 | |
| Net charge-offs (recoveries) to average loans receivable, net | | | (0.00 | ) | | | (0.00 | ) | | | (0.01 | ) | | | 0.00 | | | | (0.01 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Allowance for Loan Losses: | | | | | | | | | | | | | | | | | | | | |
| ALLL, beginning of the quarter | | $ | 11,158 | | | $ | 10,951 | | | $ | 11,006 | | | $ | 10,134 | | | $ | 9,471 | |
| Provision (Recapture of provision) | | | 100 | | | | 200 | | | | (100 | ) | | | 900 | | | | 600 | |
| Charge-offs | | | - | | | | - | | | | (37 | ) | | | (28 | ) | | | - | |
| Recoveries | | | 27 | | | | 7 | | | | 82 | | | | - | | | | 63 | |
| ALLL, end of the quarter | | $ | 11,285 | | | $ | 11,158 | | | $ | 10,951 | | | $ | 11,006 | | | $ | 10,134 | |
(1) Capital ratios are for First Financial Northwest Bank only.
(2) Loans are reported net of undisbursed funds.
| FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES | |
| Key Financial Measures | |
| | |
| | | At or For the Quarter Ended | |
| | | Jun 30, | | | Mar 31, | | | Dec 31, | | | Sep 30, | | | Jun 30, | |
| | | 2017 | | | 2017 | | | 2016 | | | 2016 | | | 2016 | |
| | | (Dollars in thousands) | |
Yields and Costs: | | | | | | | | | | | | | | | |
| Yield on loans | | | 4.91 | % | | | 4.93 | % | | | 4.92 | % | | | 4.92 | % | | | 5.00 | % |
| Yield on investments available-for-sale | | | 2.69 | | | | 2.66 | | | | 2.49 | | | | 2.36 | | | | 2.27 | |
| Yield on interest-earning deposits | | | 1.00 | | | | 0.74 | | | | 0.59 | | | | 0.53 | | | | 0.48 | |
| Yield on FHLB stock | | | 2.89 | | | | 4.14 | | | | 2.57 | | | | 2.10 | | | | 2.89 | |
| Yield on interest-earning assets | | | 4.54 | | | | 4.52 | | | | 4.47 | | | | 4.42 | | | | 4.39 | |
| | | | | | | | | | | | | | | | | | | | | |
| Cost of deposits | | | 1.03 | | | | 1.00 | | | | 0.97 | | | | 0.95 | | | | 0.91 | |
| Cost of FHLB borrowings | | | 1.24 | | | | 1.05 | | | | 0.83 | | | | 0.79 | | | | 0.89 | |
| Cost of interest-bearing liabilities | | | 1.07 | | | | 1.01 | | | | 0.94 | | | | 0.91 | | | | 0.90 | |
| | | | | | | | | | | | | | | | | | | | | |
Average Balances: | | | | | | | | | | | | | | | | | | | | |
| Loans | | $ | 844,853 | | | $ | 825,251 | | | $ | 845,276 | | | $ | 804,014 | | | $ | 726,109 | |
| Investments available-for-sale | | | 132,375 | | | | 128,993 | | | | 132,077 | | | | 133,258 | | | | 133,813 | |
| Interest-earning deposits with banks | | | 16,831 | | | | 24,233 | | | | 25,082 | | | | 28,275 | | | | 39,167 | |
| FHLB stock | | | 8,616 | | | | 8,034 | | | | 10,205 | | | | 8,483 | | | | 6,097 | |
| Total interest-earning assets | | $ | 1,002,675 | | | $ | 986,511 | | | $ | 1,012,640 | | | $ | 974,030 | | | $ | 905,186 | |
| | | | | | | | | | | | | | | | | | | | | |
| Deposits | | $ | 692,922 | | | $ | 688,298 | | | $ | 664,416 | | | $ | 646,658 | | | $ | 637,781 | |
| Borrowings | | | 184,357 | | | | 171,500 | | | | 225,848 | | | | 182,804 | | | | 123,148 | |
| Total interest-bearing liabilities | | $ | 877,279 | | | $ | 859,798 | | | $ | 890,264 | | | $ | 829,462 | | | $ | 760,929 | |
| | | | | | | | | | | | | | | | | | | | | |
| Average assets | | $ | 1,066,477 | | | $ | 1,046,473 | | | $ | 1,071,597 | | | $ | 1,034,811 | | | $ | 963,188 | |
| Average stockholders' equity | | $ | 143,643 | | | $ | 140,546 | | | $ | 139,658 | | | $ | 161,690 | | | $ | 169,177 | |
12
