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First Financial Northwest, Inc. Reports Net Income of $3.9 million or $0.43 per Diluted Share for the Third Quarter Ended September 30, 2022
ソース: Nasdaq GlobeNewswire / 27 10 2022 09:10:01 America/New_York
RENTON, Wash., Oct. 27, 2022 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the “Company”) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported net income for the quarter ended September 30, 2022, of $3.9 million, or $0.43 per diluted share, compared to $2.8 million, or $0.31 per diluted share for the quarter ended June 30, 2022, and $3.2 million, or $0.34 per diluted share, for the quarter ended September 30, 2021. For the nine months ended September 30, 2022, net income was $10.0 million, or $1.10 per diluted share, compared to net income of $9.5 million, or $0.99 per diluted share, for the comparable nine-month period in 2021.
“I am pleased with continued expansion of our net interest margin to 3.65% in the quarter, compared to 3.53% in the quarter ended June 30, 2022, and 3.33% in the quarter ended September 30, 2021,” noted Joseph W. Kiley III, President and CEO. “While our cost of funds is coming under pressure like many of our peers, our efforts in recent years to increase the balance of variable rate assets and to lock in a portion of our funding costs with $95 million of pay-fixed/receive floating interest rate swaps helped to enhance our net interest margin and partially offset the adverse impact of rising interest rates on our comprehensive income from decreases in the market value of our available-for-sale investment portfolio. While many institutions have seen material, double-digit percentage declines in their book value per share in 2022, I am pleased to report that our book value per share is unchanged at September 30, 2022, from its value of $17.30 at December 31, 2021,” continued Kiley.
“As a result of our quarterly analysis of our loan portfolio, we downgraded to substandard a $6.2 million loan where we are a participant lender. This loan is secured by a senior housing/assisted living facility that was previously downgraded to special mention in the quarter ended March 31, 2022. We analyzed this loan for impairment and concluded that no losses are anticipated, resulting in a recapture of provision for loan losses previously allocated to this loan. Changes in the mix of our loan portfolio also impacted the allowance for loan and lease losses, with growth in consumer, construction and land development, and one-to-four family residential loans impacting the analysis. This loan growth partially offset the recapture from the substandard loan downgrade, resulting in a $400,000 recapture of provision for loan losses for the quarter, compared to no provision for loan losses in the quarter ended June 30, 2022,” concluded Kiley.
Highlights for the quarter ended September 30, 2022:
- Net loans receivable increased by $23.6 million to $1.14 billion at September 30, 2022, as continued strength in one-to-four family lending and an increase in construction/land lending helped outpace loan repayments in the quarter.
- The Company’s book value per share increased to $17.30 at September 30, 2022, compared to $17.26 at June 30, 2022, and $17.03 at September 30, 2021.
- The Company repurchased 27,270 shares in the quarter at an average price of $15.46 per share under its board-authorized stock repurchase plan that expired on September 16, 2022.
- The Board of Directors approved a new stock repurchase plan authorizing the repurchase of up to 5% of the Company’s outstanding common stock, or approximately 456,000 shares, which will commence on or about October 31, 2022, and expire no later than March 17, 2023.
- The Company paid a regular quarterly cash dividend of $0.12 per share to shareholders.
- The Bank’s Tier 1 leverage and total capital ratios at September 30, 2022, were 10.4% and 15.5%, respectively, compared to 10.5% and 15.5%, respectively, at June 30, 2022, and 10.2% and 15.5%, respectively at September 30, 2021.
- Credit quality remains strong as nonperforming assets remained low at $232,000, or 0.02% of total assets, and $406,000 in past due loans represented just 0.04% of total loans receivable.
- Based on management’s evaluation of the adequacy of the allowance for loan and lease losses (“ALLL”), the Bank recognized a recapture of provision for loan losses of $400,000 for the quarter.
Deposits totaled $1.15 billion at September 30, 2022, compared to $1.18 billion at June 30, 2022, and $1.14 billion at September 30, 2021. The $30.0 million decline in total deposits for the quarter ended September 30, 2022, compared to the quarter ended June 30, 2022, reflects decreases across nearly all deposit categories, particularly money market and interest-bearing demand deposits, partially offset by an increase in brokered deposits. Management continues to consider multiple alternatives to increase deposits to fund its anticipated asset growth in addition to its efforts through its branch network, including wholesale markets, brokered deposits, and the national deposit market.
The following table presents a breakdown of our total deposits (unaudited):
Sep 30,
2022Jun 30,
2022Sep 30,
2021Three
Month
ChangeOne
Year
ChangeDeposits: (Dollars in thousands) Noninterest-bearing demand $ 118,842 $ 127,808 $ 115,311 $ (8,966 ) $ 3,531 Interest-bearing demand 95,767 107,478 104,761 (11,711 ) (8,994 ) Savings 24,625 23,525 23,024 1,100 1,601 Money market 572,137 596,515 596,911 (24,378 ) (24,774 ) Certificates of deposit, retail 268,528 270,866 301,729 (2,338 ) (33,201 ) Brokered deposits 69,537 53,277 – 16,260 69,537 Total deposits $ 1,149,436 $ 1,179,469 $ 1,141,736 $ (30,033 ) $ 7,700
The following tables present an analysis of total deposits by branch office (unaudited):September 30, 2022 Noninterest-bearing demand Interest-bearing demand Savings Money market Certificates of deposit, retail Brokered deposits Total (Dollars in thousands) King County Renton $ 36,797 $ 43,129 $ 16,483 $ 301,912 $ 209,504 $ - $ 607,825 Landing 4,345 2,586 155 20,301 4,089 - 31,476 Woodinville 3,033 3,714 1,208 19,514 9,799 - 37,268 Bothell 3,287 1,045 54 7,307 1,694 - 13,387 Crossroads 13,047 4,225 49 38,668 9,228 - 65,217 Kent 6,323 13,945 4 19,843 1,499 - 41,614 Kirkland 9,101 365 42 7,297 25 - 16,830 Issaquah 3,396 1,480 60 3,037 2,295 - 10,268 Total King County 79,329 70,489 18,055 417,879 238,133 - 823,885 Snohomish County Mill Creek 7,153 2,727 904 23,527 5,626 - 39,937 Edmonds 16,209 6,284 901 34,719 8,935 - 67,048 Clearview 5,143 5,957 1,662 26,923 2,873 - 42,558 Lake Stevens 4,977 5,233 1,471 40,297 4,975 - 56,953 Smokey Point 3,430 4,452 1,422 23,527 7,066 - 39,897 Total Snohomish County 36,912 24,653 6,360 148,993 29,475 - 246,393 Pierce County University Place 1,879 108 2 3,883 670 - 6,542 Gig Harbor 722 517 208 1,382 250 - 3,079 Total Pierce County 2,601 625 210 5,265 920 - 9,621 Brokered deposits - - - - - 69,537 69,537 Total deposits $ 118,842 $ 95,767 $ 24,625 $ 572,137 $ 268,528 $ 69,537 $ 1,149,436 June 30, 2022 Noninterest-bearing demand Interest-bearing demand Savings Money market Certificates of deposit, retail Brokered deposits Total (Dollars in thousands) King County Renton $ 37,688 $ 43,985 $ 15,160 $ 311,528 $ 225,799 $ - $ 634,160 Landing 4,925 2,504 178 21,802 2,988 - 32,397 Woodinville 3,235 7,776 1,141 19,202 5,167 - 36,521 Bothell 3,734 1,258 63 7,286 1,488 - 13,829 Crossroads 16,004 4,930 356 52,277 5,896 - 79,463 Kent 5,834 11,353 18 17,459 716 - 35,380 Kirkland 9,332 319 22 7,299 25 - 16,997 Issaquah 4,541 1,265 62 7,033 406 - 13,307 Total King County 85,293 73,390 17,000 443,886 242,485 - 862,054 Snohomish County Mill Creek 6,290 3,445 837 21,716 6,082 - 38,370 Edmonds 19,892 13,627 1,060 39,220 8,714 - 82,513 Clearview 6,307 4,650 1,364 26,613 1,526 - 40,460 Lake Stevens 4,631 7,241 1,554 34,406 5,018 - 52,850 Smokey Point 3,252 4,501 1,581 24,917 6,735 - 40,986 Total Snohomish County 40,372 33,464 6,396 146,872 28,075 - 255,179 Pierce County University Place 1,032 95 2 4,052 306 - 5,487 Gig Harbor 1,111 529 127 1,705 - - 3,472 Total Pierce County 2,143 624 129 5,757 306 - 8,959 Brokered deposits - - - - - 53,277 53,277 Total deposits $ 127,808 $ 107,478 $ 23,525 $ 596,515 $ 270,866 $ 53,277 $ 1,179,469 Net loans receivable totaled $1.14 billion at September 30, 2022, compared to $1.12 billion at June 30, 2022, and $1.10 billion at September 30, 2021. During the quarter ended September 30, 2022, new originations of one-to-four family residential loans, construction/land and classic, collectible and other auto loans outpaced loan repayments in the quarter. The average balance of net loans receivable totaled $1.13 billion for the quarter ended September 30, 2022, compared to $1.12 billion for the quarter ended June 30, 2022, and $1.09 billion for the quarter ended September 30, 2021.
The ALLL represented 1.27% of total loans receivable at September 30, 2022, compared to 1.33% at June 30, 2022, and 1.35% of total loans receivable at September 30, 2021.
There was $232,000 in nonperforming loans at September 30, 2022, compared to none at June 30, 2022, and September 30, 2021. There was no other real estate owned (“OREO”) at September 30, 2022, June 30, 2022, or September 30, 2021.
The following table presents a breakdown of our nonperforming assets (unaudited):
Sep 30, Jun 30, Sep 30, Three
MonthOne
Year2022 2022 2021 Change Change (Dollars in thousands) Nonperforming loans: One-to-four family residential $ 39 $ ─ $ ─ $ 39 $ 39 Consumer 193 ─ ─ 193 193 Total nonperforming loans 232 ─ ─ 232 232 OREO ─ ─ ─ ─ ─ Total nonperforming assets(1) $ 232 $ ─ $ ─ $ 232 $ 232 Nonperforming assets as a percent of total assets 0.02 % 0.00 % 0.00 % (1) The difference between nonperforming assets reported above, and the totals reported by other industry sources, is due to their inclusion of all Troubled Debt Restructured Loans ("TDRs") as nonperforming loans, although 100% of the Bank’s TDRs were performing in accordance with their restructured terms at September 30, 2022.
The Company accounts for certain loan modifications or restructurings as TDRs. In general, the modification or restructuring of a debt is considered a TDR if, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. TDRs totaled $1.8 million at September 30, 2022, compared to $2.1 million at June 30, 2022, and $2.4 million at September 30, 2021. All TDRs were performing according to their modified repayment terms for the periods presented.
Net interest income totaled $12.7 million for the quarter ended September 30, 2022, compared to $11.8 million for the quarter ended June 30, 2022, and $11.4 million for the quarter ended September 30, 2021. The increase in the current quarter compared to the quarter ended June 30, 2022, was primarily due to higher interest income on loans, including fees, and investment securities, partially offset by higher interest expense on deposits and other borrowings, primarily reflecting the increase in market interest rates due to the recent increases to the targeted federal funds rate and increased competition for deposits.
Total interest income was $15.4 million for the quarter ended September 30, 2022, compared to $13.5 million for the quarter ended June 30, 2022, and $13.4 million for the quarter ended September 30, 2021. The increase in the current quarter compared to the prior quarters was primarily due to an improvement in the average loan yield to 4.77% from 4.41% and 4.54% for the quarters ended June 30, 2022, and September 30, 2021, respectively, due in large part to recent increases in short term interest rates that increased our returns from LIBOR and Prime based variable rate loans and variable rate investment securities.
Total interest expense was $2.7 million for the quarter ended September 30, 2022, compared to $1.7 million for the quarter ended June 30, 2022, and $2.0 million for the quarter ended September 30, 2021. The average cost of interest-bearing deposits was 0.87% for the quarter ended September 30, 2022, compared to 0.55% for the quarter ended June 30, 2022, and 0.63% for the quarter ended September 30, 2021. The increase from the quarter ended June 30, 2022, was due primarily to increased interest expense on money market balances and the continued use of higher cost brokered deposits and wholesale sources to meet our funding needs. As of September 30, 2022, there were approximately $130.1 million in retail certificates of deposit at a weighted average interest rate of 1.52% maturing in the next 12 months, and an additional $104.6 million maturing in the subsequent 12 to 24 months, at a weighted average interest rate of 1.59%. Advances from the FHLB increased to $150.0 million at September 30, 2022, compared to $95.0 million at June 30, 2022, and $120.0 million at September 30, 2021, as these borrowings helped to partially fund our loan growth and the decline in total deposits. Currently, $95.0 million of our FHLB advances are tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Bank’s interest rate risk management efforts. These cash flow hedge agreements have a weighted average remaining term of 50 months and a weighted average fixed interest rate of 1.05%. The average cost of borrowings was 1.48% for the quarter ended September 30, 2022, compared to 1.21% for the quarter ended June 30, 2022, and 1.42% for the quarter ended September 30, 2021.
The net interest margin was 3.65% for the quarter ended September 30, 2022, compared to 3.53% for the quarter ended June 30, 2022, and 3.33% for the quarter ended September 30, 2021. The increase in the net interest margin for the quarter ended September 30, 2022, compared to the quarter ended June 30, 2022, is due primarily to a 39-basis point improvement in the Company’s average yield on interest-earning assets during the quarter to 4.43% from 4.04%, partially offset by a 32-basis point increase in the average cost of interest-bearing liabilities to 0.93% from 0.61%. The increase in net interest margin for the quarter ended September 30, 2022, compared to the quarter ended September 30, 2021, was similarly due primarily to a 50-basis point increase in the average yield on interest-earning assets from 3.93%, partially offset by a 22-basis point increase in the average cost of interest-bearing liabilities from 0.71%.
Noninterest income for the quarter ended September 30, 2022, totaled $778,000, compared to $961,000 for the quarter ended June 30, 2022, and $999,000 for the quarter ended September 30, 2021. The decrease in noninterest income for the quarter ended September 30, 2022, compared to the quarter ended June 30, 2022, was primarily due to lower loan related fees, including a $215,000 decline in loan prepayment penalties. As compared to the quarter ended September 30, 2021, the decrease in the current quarter likewise primarily reflects reduced loan fees, in addition to a decrease in BOLI income.
Noninterest expense totaled $9.0 million for the quarter ended September 30, 2022, compared to $9.3 million for the quarter ended June 30, 2022, and $8.3 million for the quarter ended September 30, 2021. The decrease in noninterest expense for the quarter ended September 30, 2022, compared to the quarter ended June 30, 2022, was primarily due to a $182,000 decline in professional fees due in part to $151,000 in regulatory examination fees and fees paid to human resources recruiters to fill open positions in the quarter ended June 30, 2022. The increase in noninterest expense for the quarter ended September 30, 2022, compared to the quarter ended September 30, 2021, primarily reflects a $561,000 increase in salaries and employee benefits, due primarily to 25 open positions filled last quarter.
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: potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as increasing oil prices and supply chain disruptions, and any governmental or societal responses to the COVID-19 pandemic, including the possibility of new COVID-19 variants; increased competitive pressures; changes in the interest rate environment; legislative and regulatory changes; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC's website at www.sec.gov.
Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2022 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance.
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)Assets Sep 30,
2022Jun 30,
2022Sep 30,
2021Three
Month
ChangeOne
Year
ChangeCash on hand and in banks $ 9,684 $ 9,458 $ 7,243 2.4 % 33.7 % Interest-earning deposits with banks 15,227 26,194 71,869 (41.9 ) (78.8 ) Investments available-for-sale, at fair value 221,278 210,826 178,061 5.0 24.3 Investments held-to-maturity, at amortized cost 2,438 2,432 2,425 0.2 0.5 Loans receivable, net of allowance of $14,726, $15,125, and $15,057 respectively 1,143,348 1,119,795 1,101,669 2.1 3.8 Federal Home Loan Bank ("FHLB") stock, at cost 7,712 5,512 6,465 39.9 19.3 Accrued interest receivable 6,261 5,738 5,681 9.1 10.2 Deferred tax assets, net 2,355 1,840 746 28.0 215.7 Premises and equipment, net 21,608 21,855 22,628 (1.1 ) (4.5 ) Bank owned life insurance ("BOLI"), net 36,064 35,819 34,994 0.7 3.1 Prepaid expenses and other assets 13,605 10,493 2,975 29.7 357.3 Right of use asset ("ROU"), net 3,260 3,301 3,838 (1.2 ) (15.1 ) Goodwill 889 889 889 0.0 0.0 Core deposit intangible, net 582 616 719 (5.5 ) (19.1 ) Total assets $ 1,484,311 $ 1,454,768 $ 1,440,202 2.0 3.1 Liabilities and Stockholders' Equity Deposits Noninterest-bearing deposits $ 118,842 $ 127,808 $ 115,311 (7.0 ) 3.1 Interest-bearing deposits 1,030,594 1,051,661 1,026,425 (2.0 ) 0.4 Total deposits 1,149,436 1,179,469 1,141,736 (2.5 ) 0.7 Advances from the FHLB 150,000 95,000 120,000 57.9 25.0 Advance payments from borrowers for taxes
and insurance5,033 2,670 5,075 88.5 (0.8 ) Lease liability, net 3,441 3,482 3,994 (1.2 ) (13.8 ) Accrued interest payable 185 115 206 60.9 (10.2 ) Other liabilities 18,326 17,136 7,735 6.9 136.9 Total liabilities 1,326,421 1,297,872 1,278,746 2.2 3.7 Commitments and contingencies Stockholders' Equity Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding - - - n/a n/a Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding 9,127,595 shares at September 30, 2022,
9,091,533 shares at June 30, 2022, and
9,483,081 shares at September 30, 202191 91 95 0.0 (4.2 ) Additional paid-in capital 72,295 71,835 78,311 0.6 (7.7 ) Retained earnings 92,928 90,066 84,402 3.2 10.1 Accumulated other comprehensive loss, net of tax (7,424 ) (4,814 ) (223 ) 54.2 3229.1 Unearned Employee Stock Ownership Plan ("ESOP") shares - (282 ) (1,129 ) (100.0 ) (100.0 ) Total stockholders' equity 157,890 156,896 161,456 0.6 (2.2 ) Total liabilities and stockholders' equity $ 1,484,311 $ 1,454,768 $ 1,440,202 2.0 3.1
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)Quarter Ended Sep 30,
2022Jun 30,
2022Sep 30,
2021Three
Month
ChangeOne
Year
ChangeInterest income Loans, including fees $ 13,618 $ 12,273 $ 12,508 11.0 % 8.9 % Investment securities 1,609 1,156 818 39.2 96.7 Interest-earning deposits with banks 125 37 24 237.8 420.8 Dividends on FHLB Stock 83 71 84 16.9 (1.2 ) Total interest income 15,435 13,537 13,434 14.0 14.9 Interest expense Deposits 2,326 1,398 1,612 66.4 44.3 Other borrowings 392 315 431 24.4 (9.0 ) Total interest expense 2,718 1,713 2,043 58.7 33.0 Net interest income 12,717 11,824 11,391 7.6 11.6 (Recapture of provision) provision for loan losses (400 ) - 100 n/a (500.0 ) Net interest income after (recapture of provision) provision for loan losses 13,117 11,824 11,291 10.9 16.2 Noninterest income BOLI income 243 251 377 (3.2 ) (35.5 ) Wealth management revenue 89 104 64 (14.4 ) 39.1 Deposit related fees 245 246 228 (0.4 ) 7.5 Loan related fees 195 354 300 (44.9 ) (35.0 ) Other 6 6 30 0.0 (80.0 ) Total noninterest income 778 961 999 (19.0 ) (22.1 ) Noninterest expense Salaries and employee benefits 5,417 5,478 4,856 (1.1 ) 11.6 Occupancy and equipment 1,188 1,205 1,116 (1.4 ) 6.5 Professional fees 549 731 502 (24.9 ) 9.4 Data processing 675 692 626 (2.5 ) 7.8 Regulatory assessments 105 90 121 16.7 (13.2 ) Insurance and bond premiums 112 113 106 (0.9 ) 5.7 Marketing 92 96 64 (4.2 ) 43.8 Other general and administrative 876 880 942 (0.5 ) (7.0 ) Total noninterest expense 9,014 9,285 8,333 (2.9 ) 8.2 Income before federal income tax provision 4,881 3,500 3,957 39.5 23.4 Federal income tax provision 935 692 758 35.1 23.4 Net income $ 3,946 $ 2,808 $ 3,199 40.5 % 23.4 % Basic earnings per share $ 0.44 $ 0.31 $ 0.34 Diluted earnings per share $ 0.43 $ 0.31 $ 0.34 Weighted average number of common shares outstanding 8,981,037 8,982,969 9,314,456 Weighted average number of diluted shares outstanding 9,068,541 9,085,913 9,446,702
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)Nine Months Ended September 30, 2022 2021 One
Year
ChangeInterest income Loans, including fees $ 37,893 $ 37,772 0.3 % Investment securities 3,595 2,420 48.6 Interest-earning deposits with banks 181 53 241.5 Dividends on FHLB Stock 228 247 (7.7 ) Total interest income 41,897 40,492 3.5 Interest expense Deposits 4,982 5,826 (14.5 ) Other borrowings 1,006 1,263 (20.3 ) Total interest expense 5,988 7,089 (15.5 ) Net interest income 35,909 33,403 7.5 Recapture of provision for loan losses (900 ) (300 ) 200.0 Net interest income after recapture of provision for loan losses 36,809 33,703 9.2 Noninterest income BOLI income 782 891 (12.2 ) Wealth management revenue 276 391 (29.4 ) Deposit related fees 705 654 7.8 Loan related fees 748 714 4.8 Other 17 86 (80.2 ) Total noninterest income 2,528 2,736 (7.6 ) Noninterest expense Salaries and employee benefits 16,156 14,863 8.7 Occupancy and equipment 3,621 3,403 6.4 Professional fees 1,732 1,423 21.7 Data processing 2,044 2,003 2.0 Regulatory assessments 295 356 (17.1 ) Insurance and bond premiums 354 341 3.8 Marketing 226 116 94.8 Other general and administrative 2,497 2,146 16.4 Total noninterest expense 26,925 24,651 9.2 Income before federal income tax provision 12,412 11,788 5.3 Federal income tax provision 2,398 2,281 5.1 Net income $ 10,014 $ 9,507 5.3 % Basic earnings per share $ 1.11 $ 1.01 Diluted earnings per share $ 1.10 $ 0.99 Weighted average number of common shares outstanding 8,983,806 9,412,196 Weighted average number of diluted shares outstanding 9,088,206 9,514,165 The following table presents a breakdown of the loan portfolio (unaudited):
September 30, 2022 June 30, 2022 September 30, 2021 Amount Percent Amount Percent Amount Percent (Dollars in thousands) Commercial real estate: Residential: Micro-unit apartments $ - 0.0 % $ - 0.0 % $ 8,220 0.7 % Other multifamily 132,755 11.4 135,961 12.0 135,586 12.2 Total multifamily residential 132,755 11.4 135,961 12.0 143,806 12.9 Non-residential: Office 84,768 7.3 84,905 7.5 89,622 8.0 Retail 137,417 11.9 138,892 12.2 124,439 11.1 Mobile home park 23,531 2.0 22,387 2.0 20,838 1.9 Hotel / motel 56,715 4.9 57,285 5.0 65,210 5.8 Nursing Home 12,452 1.2 12,535 1.1 12,784 1.1 Warehouse 19,934 1.7 18,943 1.7 16,999 1.5 Storage 34,069 2.9 34,261 3.0 33,163 3.0 Other non-residential 44,600 3.9 43,485 3.8 29,301 2.6 Total non-residential 413,486 35.8 412,693 36.3 392,356 35.0 Construction/land: One-to-four family residential 41,606 3.6 34,932 3.1 36,213 3.2 Multifamily 15,500 1.3 15,500 1.4 47,549 4.3 Commercial - 0.0 - 0.0 6,189 0.6 Land development 15,518 1.3 13,915 1.2 11,337 1.0 Total construction/land 72,624 6.2 64,347 5.7 101,288 9.1 One-to-four family residential: Permanent owner occupied 221,212 19.1 212,364 18.7 184,990 16.6 Permanent non-owner occupied 228,223 19.7 224,390 19.8 197,686 17.7 Total one-to-four family residential 449,435 38.8 436,754 38.5 382,676 34.3 Business: Aircraft 2,335 0.2 3,130 0.3 6,322 0.6 Small Business Administration ("SBA") 520 0.1 532 0.1 862 0.1 Paycheck Protection Plan ("PPP") 1,209 0.1 1,528 0.1 22,379 2.0 Other business 27,990 2.4 28,502 2.5 25,185 2.2 Total business 32,054 2.8 33,692 3.0 54,748 4.9 Consumer: Classic, collectible and other auto 47,141 4.1 42,009 3.7 32,819 2.9 Other consumer 10,478 0.9 9,594 0.8 9,665 0.9 Total consumer 57,619 5.0 51,603 4.5 42,484 3.8 Total loans 1,157,973 100.0 % 1,135,050 100.0 % 1,117,358 100.0 % Less: Deferred loan fees, net (101 ) 130 632 ALLL 14,726 15,125 15,057 Loans receivable, net $ 1,143,348 $ 1,119,795 $ 1,101,669 Concentrations of credit:(1) Construction loans as % of total capital 49.1 % 45.2 % 67.1 % Total non-owner occupied commercial
real estate as % of total capital354.6 % 360.0 % 389.6 % (1) Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC regulatory guidelines.
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
(Unaudited)At or For the Quarter End Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, 2022 2022 2022 2021 2021 (Dollars in thousands, except per share data) Performance Ratios:(1) Return on assets 1.06 % 0.79 % 0.93 % 0.76 % 0.88 % Return on equity 9.88 7.11 8.33 6.79 7.84 Dividend payout ratio 27.40 38.51 33.20 36.67 32.35 Equity-to-assets ratio 10.64 10.78 11.15 11.07 11.21 Tangible equity ratio(2) 10.55 10.69 11.05 10.97 11.11 Net interest margin 3.65 3.53 3.43 3.40 3.33 Average interest-earning assets to average interest-bearing liabilities 119.08 120.21 119.59 119.08 119.35 Efficiency ratio 66.80 72.62 70.96 68.62 67.26 Noninterest expense as a percent of average total assets 2.43 2.60 2.46 2.42 2.30 Book value per common share $ 17.30 $ 17.26 $ 17.32 $ 17.30 $ 17.03 Tangible book value per share(2) 17.14 17.09 17.15 17.13 16.86 Capital Ratios:(3) Tier 1 leverage ratio 10.43 % 10.53 % 10.51 % 10.34 % 10.19 % Common equity tier 1 capital ratio 14.24 14.22 14.08 14.23 14.25 Tier 1 capital ratio 14.24 14.22 14.08 14.23 14.25 Total capital ratio 15.49 15.47 15.33 15.48 15.50 Asset Quality Ratios:(4) Nonperforming loans as a percent of total loans 0.02 0.00 0.02 0.00 0.00 Nonperforming assets as a percent of total assets 0.02 0.00 0.01 0.00 0.00 ALLL as a percent of total loans 1.27 1.33 1.33 1.40 1.35 Net (recoveries) charge-offs to average loans receivable, net (0.00 ) 0.00 (0.00 ) 0.00 (0.01 ) Allowance for Loan Losses: ALLL, beginning of the quarter $ 15,125 $ 15,159 $ 15,657 $ 15,057 $ 14,878 (Recapture of provision) provision (400 ) - (500 ) 600 100 Charge-offs - (37 ) - - - Recoveries 1 3 2 - 79 ALLL, end of the quarter $ 14,726 $ 15,125 $ 15,159 $ 15,657 $ 15,057 (1) Performance ratios are calculated on an annualized basis.
(2) Tangible equity excludes goodwill and core deposit intangible assets. Tangible assets exclude goodwill and other intangible assets. The tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.
(3) Capital ratios are for First Financial Northwest Bank only.
(4) Loans are reported net of undisbursed funds.
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures (continued)
(Unaudited)At or For the Quarter Ended Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, 2022 2022 2022 2021 2021 (Dollars in thousands, except per share data) Average Yields and Costs:(1) Yield on loans 4.77 % 4.41 % 4.36 % 4.44 % 4.54 % Yield on investment securities 2.90 2.33 1.96 1.79 1.73 Yield on interest-earning deposits 2.02 0.67 0.15 0.13 0.14 Yield on FHLB stock 5.56 4.82 5.49 5.89 5.15 Yield on interest-earning assets 4.43 % 4.04 % 3.90 % 3.91 % 3.93 % Cost of interest-bearing deposits 0.87 % 0.55 % 0.50 % 0.53 % 0.63 % Cost of borrowings 1.48 1.21 1.28 1.33 1.42 Cost of interest-bearing liabilities 0.93 % 0.61 % 0.56 % 0.61 % 0.71 % Cost of total deposits 0.78 % 0.49 % 0.44 % 0.48 % 0.56 % Cost of funds 0.84 0.55 0.51 0.55 0.64 Average Balances: Loans $ 1,132,233 $ 1,117,079 $ 1,115,428 $ 1,108,836 $ 1,094,124 Investment securities 220,244 198,819 171,685 178,500 187,261 Interest-earning deposits 24,565 22,010 49,857 56,800 68,618 FHLB stock 5,923 5,905 5,467 5,726 6,465 Total interest-earning assets $ 1,382,965 $ 1,343,813 $ 1,342,437 $ 1,349,862 $ 1,356,468 Interest-bearing deposits $ 1,056,079 $ 1,013,080 $ 1,027,507 $ 1,032,090 $ 1,016,540 Borrowings 105,272 104,835 95,000 101,522 120,000 Total interest-bearing liabilities 1,161,351 1,117,915 1,122,507 1,133,612 1,136,540 Noninterest-bearing deposits 125,561 131,415 122,175 119,142 121,256 Total deposits and borrowings $ 1,286,912 $ 1,249,330 $ 1,244,682 $ 1,252,754 $ 1,257,796 Average assets $ 1,470,816 $ 1,431,003 $ 1,424,054 $ 1,430,199 $ 1,436,801 Average stockholders' equity 158,515 158,349 158,756 160,183 161,892 (1) Yields and costs are annualized.
Non-GAAP Financial Measures
In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains non-GAAP financial measures that include tangible equity, tangible assets, tangible book value per share, and the tangible equity ratio. The Company believes that these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors. Non-GAAP financial measures have limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation and are not a substitute for other measures in this earnings release that are presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
The following tables provide a reconciliation between the GAAP and non-GAAP measures:
Quarter Ended Sep 30,
2022Jun 30,
2022Mar 31,
2022Dec 31,
2021Sep 30,
2021(Dollars in thousands, except per share data) Tangible equity to tangible assets and tangible book value per share: Total stockholders' equity (GAAP) $ 157,890 $ 156,896 $ 157,757 $ 157,879 $ 161,456 Less: Goodwill 889 889 889 889 889 Core deposit intangible, net 582 616 650 684 719 Tangible equity (Non-GAAP) $ 156,419 $ 155,391 $ 156,218 $ 156,306 $ 159,848 Total assets (GAAP) $ 1,484,311 $ 1,454,768 $ 1,415,054 $ 1,426,329 $ 1,440,202 Less: Goodwill 889 889 889 889 889 Core deposit intangible, net 582 616 650 684 719 Tangible assets (Non-GAAP) $ 1,482,840 $ 1,453,263 $ 1,413,515 $ 1,424,756 $ 1,438,594 Common shares outstanding at period end 9,127,595 9,091,533 9,107,977 9,125,759 9,483,081 Equity-to-assets ratio (GAAP) 10.64 % 10.78 % 11.15 % 11.07 % 11.21 % Tangible equity ratio (Non-GAAP) 10.55 10.69 11.05 10.97 11.11 Book value per common share (GAAP) $ 17.30 $ 17.26 $ 17.32 $ 17.30 $ 17.03 Tangible book value per share (Non-GAAP) 17.14 17.09 17.15 17.13 16.86 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
