RENTON, Wash., July 22, 2016 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the “Company”) (NASDAQ: FFNW ), the holding company for First Financial Northwest Bank (the “Bank”), today reported net income for the quarter ended June 30, 2016, of $1.4 million, or $0.11 per diluted share, compared to net income of $1.8 million, or $0.14 per diluted share, for the quarter ended March 31, 2016, and $2.4 million, or $0.17 per diluted share, for the quarter ended June 30, 2015. In the first six months of 2016, net income was $3.3 million, or $0.26 per diluted share, compared to net income of $4.6 million, or $0.33 per diluted share, for the comparable period in 2015.
Changes in the provision for loan losses contributed significantly to the differences in net income between periods. Specifically, the Company recorded a $600,000 provision for loan losses in the quarter ended June 30, 2016, compared to a recapture of provision of $100,000 in the quarter ended March 31, 2016, and a recapture of provision of $500,000 in the quarter ended June 30, 2015. The provision in the quarter ended June 30, 2016 was related to growth in the Company’s balances of net loans receivable. The recaptures in the prior periods were due primarily to the continued credit quality improvement of the Company’s loan portfolio and recoveries of amounts previously charged off.
Net loans receivable increased $48.5 million to $766.0 million at June 30, 2016, compared to $717.5 million at March 31, 2016, and were $685.1 million at December 31, 2015, and $659.3 million at June 30, 2015.
“This is the first quarter in three years that we have recorded a provision for loan losses. This provision related solely to the growth in our loan portfolio and did not reflect a deterioration in asset quality, as our loan delinquencies and other asset quality metrics continued to remain low during the first half of the year. We are pleased with the year-to-date growth of $81.0 million in loans receivable and the provision for loan losses was deemed appropriate in conjunction with the loan growth,” stated Joseph W. Kiley III, President and Chief Executive Officer. “This growth was achieved through internal loan origination channels and through external purchases of loans. Specifically, we supplemented our loan growth by purchasing $49.8 million in commercial real estate loans originated by others during the first two quarters of 2016, consisting of a $30.0 million purchase of eight loans in the quarter ended March 31, 2016, and $19.8 million purchase of five loans in the quarter ended June 30, 2016. A total of $40.2 million of these commercial real estate loan purchases were secured by properties located in Arizona, California, Colorado, Oregon, and Utah, in our efforts to geographically diversify our portfolio while meeting our investment and credit quality objectives,” continued Kiley.
“In addition, I am pleased to update you on the success of our recent expansion efforts. Our Mill Creek office opened in September 2015 and its deposit base totaled $10.1 million at June 30, 2016. Our Edmonds office opened on March 21, 2016, and its deposit base had $8.6 million in deposits at June 30, 2016. An additional office in Renton opened on July 11, 2016, in the area known as The Landing, near the Boeing 737 plant at the south end of Lake Washington, utilizing the same successful design elements as our Mill Creek and Edmonds offices. I look forward to reporting on the growth of each of these offices in future quarters,” concluded Kiley.
Highlights for the quarter ended June 30, 2016:
- We repurchased 122,058 shares of our common stock during the quarter under the share repurchase plan approved by the Board of Directors in October 2015, at an average price of $13.38 per share. From October 29, 2015, through April 27, 2016, we repurchased a total of 800,199 shares under the plan at an average price of $13.02 per share. The share repurchase plan authorized the repurchase of 1.4 million shares and expired on April 27, 2016.
- The Company’s book value per share at June 30, 2016, increased to $12.71 from $12.52 at March 31, 2016, and $12.20 at June 30, 2015.
- The Bank’s Tier 1 leverage and total capital ratios at June 30, 2016, were 12.0% and 15.7%, respectively, compared to 11.8% and 16.8% at March 31, 2016, and 11.7% and 18.5% at June 30, 2015.
Based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”), there was a $600,000 provision for loan losses for the quarter ended June 30, 2016. The following items contributed to this provision during the quarter:
- The Company’s net loans receivable increased $48.5 million during the quarter to $766.0 million at June 30, 2016, compared to $717.5 million at March 31, 2016, and $659.3 million at June 30, 2015.
- Delinquent loans (loans over 30 days past due) decreased to $720,000 at June 30, 2016, compared to $1.4 million at March 31, 2016, and $3.6 million at June 30, 2015.
- Nonperforming loans totaled $1.1 million at both June 30, 2016, and March 31, 2016, compared with $2.4 million at June 30, 2015.
- Nonperforming loans as a percentage of total loans remained low at 0.14% at both June 30, 2016, and at March 31, 2016, compared to 0.36 % at June 30, 2015.
The ALLL represented 935% of nonperforming loans and 1.30% of total loans receivable, net of undisbursed funds, at June 30, 2016, compared to 899% and 1.30%, respectively, at March 31, 2016, and 439% and 1.58%, respectively, at June 30, 2015.
Nonperforming assets totaled $3.4 million at June 30, 2016, compared to $4.5 million at March 31, 2016, and $6.8 million at June 30, 2015. The decline in the Company’s nonperforming assets between periods was due primarily to sales and market value adjustments of Other Real Estate Owned (“OREO”).
The following table presents a breakdown of our nonperforming assets:
| Jun 30, | Mar 31, | Jun 30, | Three Month | One Year | ||||||||||||||||
| 2016 | 2016 | 2015 | Change | Change | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Nonperforming loans: | ||||||||||||||||||||
| One-to-four family residential | $ | 1,019 | $ | 985 | $ | 252 | $ | 34 | $ | 767 | ||||||||||
| Multifamily | - | - | 1,683 | - | (1,683 | ) | ||||||||||||||
| Commercial real estate | - | - | 407 | - | (407 | ) | ||||||||||||||
| Consumer | 64 | 69 | 73 | (5 | ) | (9 | ) | |||||||||||||
| Total nonperforming loans | 1,083 | 1,054 | $ | 2,415 | 29 | (1,332 | ) | |||||||||||||
| OREO | 2,331 | 3,405 | 4,416 | (1,074 | ) | (2,085 | ) | |||||||||||||
| Total nonperforming assets (1) | $ | 3,414 | $ | 4,459 | $ | 6,831 | $ | (1,045 | ) | $ | (3,417 | ) | ||||||||
| Nonperforming assets as a | ||||||||||||||||||||
| percent of total assets | 0.34 | % | 0.47 | % | 0.72 | % | ||||||||||||||
(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 99.5% of our TDRs were performing in accordance with their restructured terms at quarter end. The remaining 0.5% of TDRs that were nonperforming at quarter-end are reported above as nonperforming loans.
The following table presents a breakdown of our OREO by county and property type at June 30, 2016:
| County | ||||||||||||||||||||||
| Pierce | Kitsap | Mason | Total OREO | Number of Properties | Percent of Total OREO | |||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| OREO: | ||||||||||||||||||||||
| Commercial real estate (1) | $ | 1,320 | $ | 506 | $ | 505 | $ | 2,331 | 5 | 100.0 | % | |||||||||||
| Total OREO | $ | 1,320 | $ | 506 | $ | 505 | $ | 2,331 | 5 | 100.0 | % | |||||||||||
(1) Of the five properties classified as commercial real estate, two are office/retail buildings and three are undeveloped lots.
OREO decreased to $2.3 million at June 30, 2016, compared to $3.4 million at March 31, 2016, and $4.4 million at June 30, 2015, due to sales and write-downs of OREO during the quarter and the preceding 12 months. 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 often be classified as TDRs.
The following table presents a breakdown of our TDRs:
| Jun 30, 2016 | Mar 31, 2016 | Jun 30, 2015 | Three Month Change | One Year Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Nonperforming TDRs: | |||||||||||||||||||
| One-to-four family residential | $ | 189 | $ | 131 | $ | - | $ | 58 | $ | 189 | |||||||||
| Performing TDRs: | |||||||||||||||||||
| One-to-four family residential | 30,116 | 32,284 | 38,189 | (2,168 | ) | (8,073 | ) | ||||||||||||
| Multifamily | 1,580 | 1,587 | 1,609 | (7 | ) | (29 | ) | ||||||||||||
| Commercial real estate | 4,941 | 4,964 | 7,765 | (23 | ) | (2,824 | ) | ||||||||||||
| Consumer | 43 | 43 | 43 | - | - | ||||||||||||||
| Total performing TDRs | 36,680 | 38,878 | 47,606 | (2,198 | ) | (10,926 | ) | ||||||||||||
| Total TDRs | $ | 36,869 | $ | 39,009 | $ | 47,606 | $ | (2,140 | ) | $ | (10,737 | ) | |||||||
| % TDRs classified as performing | 99.5 | % | 99.7 | % | 100.0 | % | |||||||||||||
Net interest income for the second quarter of 2016 increased to $8.2 million, compared to $7.8 million for the first quarter of 2016, and $7.6 million in the second quarter of 2015, due primarily to increases in interest income.
Interest income totaled $9.9 million during the quarter ended June 30, 2016, compared to $9.6 million in the quarter ended March 31, 2016, and $9.2 million in the quarter ended June 30, 2015. These increases related primarily to growth in average balances in loans receivable, including continued growth in higher yielding construction and commercial real estate loans and an increase in balances in the Bank’s investment securities portfolio.
Interest expense remained relatively stable at $1.7 million for the quarter ended June 30, 2016, compared to $1.8 million for the quarter ended March 31, 2016, and $1.7 million for the quarter ended June 30, 2015. The higher level in the quarter ended March 31, 2016, was primarily the result of costs associated with redemptions of certain brokered certificates of deposit (“CDs”). Specifically, we redeemed $14.6 million in callable brokered CDs in the quarter ended March 31, 2016, and issued $14.1 million in new brokered CDs at lower interest rates. These redemptions require that the remaining unamortized fees relating to the original acquisition of the deposits be recognized at the time of redemption. These redemptions had a favorable impact in the second quarter as these redemptions were executed to decrease future interest expense on these deposits. Balances of brokered certificates of deposit were little changed between periods, totaling $65.6 million at June 30, 2016, and at March 31, 2016, compared to $66.1 million at June 30, 2015. Advances from the Federal Home Loan Bank increased $70 million to $161.5 million at June 30, 2016, compared to $91.5 million at March 31, 2016, to fund the growth in loans receivable.
Our net interest margin was 3.63% for the quarter ended June 30, 2016, compared to 3.46% for the quarter ended March 31, 2016, and 3.42% for the quarter ended June 30, 2015. The increase in the most recent quarter was primarily attributable to a $49.2 million reduction in the average balances of low-yielding interest earning deposits outstanding during the quarter ended June 30, 2016, compared to the prior quarter. These funds shifted into higher yielding loans, including growth in multi-family loans, commercial real estate loans, and construction loans and recent purchases of higher yielding investment securities. These investment security purchases increased the proportion of securities that have longer maturities and higher yields in order to enhance our interest income.
Noninterest income for the quarter ended June 30, 2016, totaled $708,000, compared to $480,000 in the quarter ended March 31, 2016, and $357,000 in the quarter ended June 30, 2015, due primarily to increased income from wealth management services and Bank Owned Life Insurance (“BOLI”). The increase in the quarter ended June 30, 2016, related to an increase in income from our wealth management services to $281,000 compared to $210,000 in the quarter ended March 31, 2016 and $23,000 in the quarter ended June 30, 2015, that represented the initial two months of offering wealth management services. During the quarter ended June 30, 2016, the Bank replaced one of its BOLI policies with a higher yielding policy that increased its income from BOLI during the quarter.
Noninterest expense for the quarter ended June 30, 2016, increased to $6.1 million from $5.8 million in the quarter ended March 31, 2016, and $4.9 million during the quarter ended June 30, 2015. For the quarter ended June 30, 2016, increases in salaries and employee benefits and occupancy and equipment expenses related to hiring staff for the new office in the Landing in Renton, and the recent opening of new offices in Edmonds and Mill Creek, along with increased professional fees, contributed to the increase in the current quarter. The quarter ended June 30, 2016, included $75,000 in OREO related expenses, compared to $237,000 in the quarter ended March 31, 2016, and a $7,000 gain in the quarter ended June 30, 2015. Changes to the Company’s unfunded commitment reserve, which is included in other general and administrative expenses, also contributed significantly to the increase in noninterest expense, with an expense of $153,000 in the quarter ended June 30, 2016, compared to a $19,000 expense in the quarter ended March 31, 2016, and $75,000 in the quarter ended June 30, 2015. 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 increase in our construction lending activity was the primary reason for the increase in the quarter ended June 30, 2016.
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 four full-service banking offices. 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 2016 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, 2016 | Mar 31, 2016 | Jun 30, 2015 | Three Month Change | One Year Change | ||||||||||||||
| Cash on hand and in banks | $ | 6,051 | $ | 6,552 | $ | 5,550 | (7.6 | )% | 9.0 | % | |||||||||
| Interest-earning deposits | 31,454 | 21,706 | 101,424 | 44.9 | (69.0 | ) | |||||||||||||
| Investments available-for-sale, at fair value | 136,028 | 135,133 | 116,913 | 0.7 | 16.3 | ||||||||||||||
| Loans receivable, net of allowance of $10,134, $9,471, and $10,603, respectively | 766,046 | 717,483 | 659,273 | 6.8 | 16.2 | ||||||||||||||
| Premises and equipment, net | 18,206 | 18,166 | 16,934 | 0.2 | 7.5 | ||||||||||||||
| Federal Home Loan Bank ("FHLB") stock, at cost | 7,631 | 4,831 | 6,537 | 58.0 | 16.7 | ||||||||||||||
| Accrued interest receivable | 3,158 | 3,114 | 3,033 | 1.4 | 4.1 | ||||||||||||||
| Deferred tax assets, net | 3,438 | 3,917 | 6,195 | (12.2 | ) | (44.5 | ) | ||||||||||||
| Other real estate owned ("OREO") | 2,331 | 3,405 | 4,416 | (31.5 | ) | (47.2 | ) | ||||||||||||
| Bank owned life insurance ("BOLI") | 23,700 | 23,474 | 22,932 | 1.0 | 3.3 | ||||||||||||||
| Prepaid expenses and other assets | 1,193 | 1,462 | 1,225 | (18.4 | ) | (2.6 | ) | ||||||||||||
| Total assets | $ | 999,236 | $ | 939,243 | $ | 944,432 | 6.4 | % | 5.8 | % | |||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||
| Deposits | |||||||||||||||||||
| Noninterest-bearing deposits | $ | 25,137 | $ | 21,186 | $ | 20,531 | 18.6 | % | 22.4 | % | |||||||||
| Interest-bearing deposits | 635,073 | 647,370 | 603,177 | (1.9 | ) | 5.3 | |||||||||||||
| Total Deposits | 660,210 | 668,556 | 623,708 | (1.2 | ) | 5.9 | |||||||||||||
| Advances from the FHLB | 161,500 | 91,500 | 135,500 | 76.5 | 19.2 | ||||||||||||||
| Advance payments from borrowers for taxes and insurance | 2,144 | 3,624 | 1,581 | (40.8 | ) | 35.6 | |||||||||||||
| Accrued interest payable | 114 | 106 | 145 | 7.5 | (21.4 | ) | |||||||||||||
| Investment trade payable | - | - | 578 | n/a | (100.0 | ) | |||||||||||||
| Other liabilities | 5,813 | 6,279 | 5,349 | (7.4 | ) | 8.7 | |||||||||||||
| Total liabilities | $ | 829,781 | $ | 770,065 | $ | 766,861 | 7.8 | % | 8.2 | % | |||||||||
| 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 | |||||||||||||||||||
| 13,327,916 shares at June 30, 2016 13,510,400 shares at March 31, 2016 14,552,324 shares at June 30, 2015 | 133 | 135 | 146 | (1.5 | )% | (8.9 | )% | ||||||||||||
| Additional paid-in capital | 131,312 | 132,564 | 146,240 | (0.9 | ) | (10.2 | ) | ||||||||||||
| Retained earnings, substantially restricted | 44,640 | 43,954 | 39,900 | 1.6 | 11.9 | ||||||||||||||
| Accumulated other comprehensive income/(loss), net of tax | 423 | (140 | ) | (533 | ) | (402.1 | ) | (179.4 | ) | ||||||||||
| Unearned Employee Stock Ownership Plan ("ESOP") shares | (7,053 | ) | (7,335 | ) | (8,182 | ) | (3.8 | ) | (13.8 | ) | |||||||||
| Total stockholders' equity | 169,455 | 169,178 | 177,571 | 0.2 | (4.6 | ) | |||||||||||||
| Total liabilities and stockholders' equity | $ | 999,236 | $ | 939,243 | $ | 944,432 | 6.4 | % | 5.8 | % | |||||||||
| FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES | |||||||||||||||||||
| Consolidated Income Statements | |||||||||||||||||||
| (Dollars in thousands, except share data) | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| Quarter Ended | |||||||||||||||||||
| Jun 30, 2016 | Mar 31, 2016 | Jun 30, 2015 | Three Month Change | One Year Change | |||||||||||||||
| Interest income | |||||||||||||||||||
| Loans, including fees | $ | 9,048 | $ | 8,727 | $ | 8,658 | 3.7 | % | 4.5 | % | |||||||||
| Investments available-for-sale | 757 | 675 | 495 | 12.1 | 52.9 | ||||||||||||||
| Interest-earning deposits with banks | 47 | 113 | 65 | (58.4 | ) | (27.7 | ) | ||||||||||||
| Dividends on FHLB Stock | 44 | 47 | 3 | (6.4 | ) | 1,366.7 | |||||||||||||
| Total interest income | 9,896 | 9,562 | 9,221 | 3.5 | 7.3 | ||||||||||||||
| Interest expense | |||||||||||||||||||
| Deposits | 1,441 | 1,483 | 1,333 | (2.8 | ) | 8.1 | |||||||||||||
| FHLB advances | 272 | 298 | 320 | (8.7 | ) | (15.0 | ) | ||||||||||||
| Total interest expense | 1,713 | 1,781 | 1,653 | (3.8 | ) | 3.6 | |||||||||||||
| Net interest income | 8,183 | 7,781 | 7,568 | 5.2 | 8.1 | ||||||||||||||
| Provision (recapture of provision) for loan losses | 600 | (100 | ) | (500 | ) | (700.0 | ) | (220.0 | ) | ||||||||||
| Net interest income after provision (recapture of provision) for loan losses | 7,583 | 7,881 | 8,068 | (3.8 | ) | (6.0 | ) | ||||||||||||
| Noninterest income | |||||||||||||||||||
| BOLI income | 225 | 165 | 136 | 36.4 | 65.4 | ||||||||||||||
| Other | 483 | 315 | 221 | 53.3 | 118.6 | ||||||||||||||
| Total noninterest income | 708 | 480 | 357 | 47.5 | 98.3 | ||||||||||||||
| Noninterest expense | |||||||||||||||||||
| Salaries and employee benefits | 3,841 | 3,774 | 3,251 | 1.8 | 18.1 | ||||||||||||||
| Occupancy and equipment | 488 | 508 | 314 | (3.9 | ) | 55.4 | |||||||||||||
| Professional fees | 561 | 468 | 458 | 19.9 | 22.5 | ||||||||||||||
| Data processing | 251 | 190 | 188 | 32.1 | 33.5 | ||||||||||||||
| Net loss (gain) on sale of OREO property | 89 | (1 | ) | (2 | ) | (9,000.0 | ) | (4,550.0 | ) | ||||||||||
| OREO market value adjustments | - | 258 | (46 | ) | (100.0 | ) | (100.0 | ) | |||||||||||
| OREO related expenses, net | (14 | ) | (20 | ) | 41 | 30.0 | (134.1 | ) | |||||||||||
| Regulatory assessments | 117 | 120 | 116 | (2.5 | ) | 0.9 | |||||||||||||
| Insurance and bond premiums | 86 | 88 | 89 | (2.3 | ) | (3.4 | ) | ||||||||||||
| Marketing | 40 | 36 | 54 | 11.1 | (25.9 | ) | |||||||||||||
| Other general and administrative | 613 | 352 | 411 | 74.1 | 49.1 | ||||||||||||||
| Total noninterest expense | 6,072 | 5,773 | 4,874 | 5.2 | 24.6 | ||||||||||||||
| Income before federal income tax provision | 2,219 | 2,588 | 3,551 | (14.3 | ) | (37.5 | ) | ||||||||||||
| Federal income tax provision | 779 | 763 | 1,183 | 2.1 | (34.2 | ) | |||||||||||||
| Net income | $ | 1,440 | $ | 1,825 | $ | 2,368 | (21.1 | )% | (39.2 | )% | |||||||||
| Basic earnings per share | $ | 0.12 | $ | 0.14 | $ | 0.17 | |||||||||||||
| Diluted earnings per share | $ | 0.11 | $ | 0.14 | $ | 0.17 | |||||||||||||
| Weighted average number of common shares outstanding | 12,390,234 | 12,744,694 | 13,756,336 | ||||||||||||||||
| Weighted average number of diluted shares outstanding | 12,530,720 | 12,905,527 | 13,916,314 | ||||||||||||||||
| FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES | |||||||||||
| Consolidated Income Statements | |||||||||||
| (Dollars in thousands, except share data) | |||||||||||
| (Unaudited) | |||||||||||
| Six Months Ended | |||||||||||
| Jun 30, | |||||||||||
| 2016 | 2015 | One Year Change | |||||||||
| Interest income | |||||||||||
| Loans, including fees | $ | 17,775 | $ | 17,234 | 3.1 | % | |||||
| Investments available-for-sale | 1,432 | 1,007 | 42.2 | ||||||||
| Interest-earning deposits with banks | 160 | 129 | 24.0 | ||||||||
| Dividends on FHLB Stock | 91 | 5 | 1,720.0 | ||||||||
| Total interest income | 19,458 | 18,375 | 5.9 | ||||||||
| Interest expense | |||||||||||
| Deposits | 2,924 | 2,647 | 10.5 | ||||||||
| FHLB advances | 570 | 638 | (10.7 | ) | |||||||
| Total interest expense | 3,494 | 3,285 | 6.4 | ||||||||
| Net interest income | 15,964 | 15,090 | 5.8 | ||||||||
| Provision (recapture of provision) for loan losses | 500 | (600 | ) | (183.3 | ) | ||||||
| Net interest income after provision (recapture of provision) for loan losses | 15,464 | 15,690 | (1.4 | ) | |||||||
| Noninterest income | |||||||||||
| BOLI | 390 | 156 | 150.0 | ||||||||
| Other | 798 | 292 | 173.3 | ||||||||
| Total noninterest income | 1,188 | 448 | 165.2 | ||||||||
| Noninterest expense | |||||||||||
| Salaries and employee benefits | 7,615 | 6,665 | 14.3 | ||||||||
| Occupancy and equipment | 996 | 652 | 52.8 | ||||||||
| Professional fees | 1,029 | 812 | 26.7 | ||||||||
| Data processing | 441 | 348 | 26.7 | ||||||||
| Loss (gain) on sale of OREO property, net | 87 | (531 | ) | (116.4 | ) | ||||||
| OREO market value adjustments | 257 | 4 | 6,325.0 | ||||||||
| OREO related expenses, net | (34 | ) | (7 | ) | 385.7 | ||||||
| Regulatory assessments | 237 | 232 | 2.2 | ||||||||
| Insurance and bond premiums | 174 | 181 | (3.9 | ) | |||||||
| Marketing | 78 | 87 | (10.3 | ) | |||||||
| Other general and administrative | 965 | 721 | 33.8 | ||||||||
| Total noninterest expense | 11,845 | 9,164 | 29.3 | ||||||||
| Income before federal income tax provision | 4,807 | 6,974 | (31.1 | ) | |||||||
| Federal income tax provision | 1,542 | 2,377 | (35.1 | ) | |||||||
| Net income | $ | 3,265 | $ | 4,597 | (29.0 | )% | |||||
| Basic earnings per share | $ | 0.26 | $ | 0.33 | |||||||
| Diluted earnings per share | $ | 0.26 | $ | 0.33 | |||||||
| Weighted average number of common shares outstanding | 12,567,464 | 13,895,872 | |||||||||
| Weighted average number of diluted shares outstanding | 12,718,155 | 14,057,198 | |||||||||
The following table presents a breakdown of our loan portfolio (unaudited):
| Jun 30, 2016 | Mar 31, 2016 | Jun 30, 2015 | |||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| One-to-four family residential: | |||||||||||||||||||||||
| Permanent owner occupied | $ | 146,762 | 17.3 | % | $ | 147,912 | 18.8 | % | $ | 152,764 | 21.9 | % | |||||||||||
| Permanent non-owner occupied | 104,970 | 12.4 | 108,905 | 13.8 | 105,046 | 15.1 | |||||||||||||||||
| 251,732 | 29.7 | 256,817 | 32.6 | 257,810 | 37.0 | ||||||||||||||||||
| Multifamily: | |||||||||||||||||||||||
| Permanent | 132,189 | 15.6 | 129,553 | 16.4 | 20,758 | 17.3 | |||||||||||||||||
| Construction | 35,565 | 4.2 | 21,115 | 2.7 | 2,265 | 0.3 | |||||||||||||||||
| 167,754 | 19.8 | 150,668 | 19.1 | 23,023 | 17.6 | ||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||
| Permanent | 285,449 | 33.7 | 258,946 | 32.9 | 33,652 | 33.5 | |||||||||||||||||
| Land | 16,822 | 2.0 | 14,700 | 1.9 | 7,598 | 1.1 | |||||||||||||||||
| 302,271 | 35.7 | 273,646 | 34.8 | 41,250 | 34.6 | ||||||||||||||||||
| Construction/land development: (1) | |||||||||||||||||||||||
| One-to-four family residential | 64,312 | 7.6 | 50,770 | 6.4 | 30,448 | 4.4 | |||||||||||||||||
| Multifamily | 41,716 | 4.9 | 35,436 | 4.5 | 19,438 | 2.8 | |||||||||||||||||
| Commercial | - | - | - | - | 4,300 | 0.6 | |||||||||||||||||
| Land development | 5,773 | 0.7 | 7,513 | 1.0 | 8,013 | 1.1 | |||||||||||||||||
| 111,801 | 13.2 | 93,719 | 11.9 | 62,199 | 8.9 | ||||||||||||||||||
| Business | 7,208 | 0.9 | 6,548 | 0.8 | 6,275 | 0.9 | |||||||||||||||||
| Consumer | 6,333 | 0.7 | 5,972 | 0.8 | 7,051 | 1.0 | |||||||||||||||||
| Total loans | 847,099 | 100.0 | % | 787,370 | 100.0 | % | 697,608 | 100.0 | % | ||||||||||||||
| Less: | |||||||||||||||||||||||
| Loans in Process ("LIP") | 68,979 | 58,172 | 25,182 | ||||||||||||||||||||
| Deferred loan fees, net | 1,940 | 2,244 | 2,550 | ||||||||||||||||||||
| ALLL | 10,134 | 9,471 | 10,603 | ||||||||||||||||||||
| Loans receivable, net | $ | 766,046 | $ | 717,483 | $ | 659,273 | |||||||||||||||||
(1) Excludes construction loans that will convert to permanent loans. The Company considers these loans to be "rollovers" in that one loan is originated for both the construction loan and permanent financing. These loans are classified according to the underlying collateral categories in the table above instead of being listed in the Construction/land development category. At June 30, 2016, March 31, 2016, and June 30, 2015, $16.8 million, $14.7 million, and $7.6 million respectively, of commercial real estate loans were not included in the construction/land development category because the Company classifies raw land or buildable lots (where it does not intend to finance the construction) as commercial real estate land loans.
| 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, | ||||||||||||||||
| 2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||
| Performance Ratios: | ||||||||||||||||||||
| Return on assets | 0.60 | % | 0.76 | % | 0.86 | % | 1.01 | % | 1.00 | % | ||||||||||
| Return on equity | 3.41 | 4.34 | 4.87 | 5.50 | 5.28 | |||||||||||||||
| Dividend payout ratio | 51.81 | 42.04 | 36.86 | 33.33 | 35.29 | |||||||||||||||
| Equity-to-assets ratio | 16.96 | 18.01 | 17.42 | 17.78 | 18.80 | |||||||||||||||
| Interest rate spread | 3.49 | 3.31 | 3.18 | 3.22 | 3.26 | |||||||||||||||
| Net interest margin | 3.63 | 3.46 | 3.33 | 3.38 | 3.42 | |||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities | 118.96 | 118.86 | 119.77 | 120.33 | 120.01 | |||||||||||||||
| Efficiency ratio | 68.29 | 69.88 | 66.04 | 66.34 | 61.50 | |||||||||||||||
| Noninterest expense as a percent of average total assets | 2.53 | 2.41 | 2.17 | 2.22 | 2.06 | |||||||||||||||
| Book value per common share | $ | 12.71 | $ | 12.52 | $ | 12.40 | $ | 12.32 | $ | 12.20 | ||||||||||
| Capital Ratios: (1) | ||||||||||||||||||||
| Tier 1 leverage ratio | 12.02 | % | 11.81 | % | 11.61 | % | 11.74 | % | 11.70 | % | ||||||||||
| Common equity tier 1 capital ratio | 14.42 | 15.55 | 16.36 | 16.57 | 17.26 | |||||||||||||||
| Tier 1 capital ratio | 14.42 | 15.55 | 16.36 | 16.57 | 17.26 | |||||||||||||||
| Total capital ratio | 15.67 | 16.80 | 17.62 | 17.83 | 18.52 | |||||||||||||||
| Asset Quality Ratios: (2) | ||||||||||||||||||||
| Nonperforming loans as a percent of total loans | 0.14 | 0.14 | 0.16 | 0.35 | 0.36 | |||||||||||||||
| Nonperforming assets as a percent of total assets | 0.34 | 0.47 | 0.48 | 0.68 | 0.72 | |||||||||||||||
| ALLL as a percent of total loans | 1.30 | 1.30 | 1.36 | 1.48 | 1.58 | |||||||||||||||
| ALLL as a percent of nonperforming loans | 935.30 | 898.92 | 872.17 | 417.70 | 439.05 | |||||||||||||||
| Net charge-offs (recoveries) to average loans receivable, net | (0.01 | ) | (0.02 | ) | (0.03 | ) | (0.04 | ) | (0.09 | ) | ||||||||||
| Allowance for Loan Losses: | ||||||||||||||||||||
| ALLL, beginning of the quarter | $ | 9,471 | $ | 9,463 | $ | 10,146 | $ | 10,603 | $ | 10,508 | ||||||||||
| Provision (Recapture of provision) | 600 | (100 | ) | (900 | ) | (700 | ) | (500 | ) | |||||||||||
| Charge-offs | - | (19 | ) | - | (22 | ) | - | |||||||||||||
| Recoveries | 63 | 127 | 217 | 265 | 595 | |||||||||||||||
| ALLL, end of the quarter | $ | 10,134 | $ | 9,471 | $ | 9,463 | $ | 10,146 | $ | 10,603 | ||||||||||
| Nonperforming Assets: | ||||||||||||||||||||
| Nonperforming loans: (2) (3) | ||||||||||||||||||||
| Nonaccrual loans | $ | 894 | $ | 923 | $ | 954 | $ | 2,429 | $ | 2,415 | ||||||||||
| Nonaccrual TDRs | 189 | 131 | 131 | - | - | |||||||||||||||
| Total nonperforming loans | 1,083 | 1,054 | 1,085 | 2,429 | 2,415 | |||||||||||||||
| OREO | 2,331 | 3,405 | 3,663 | 4,235 | 4,416 | |||||||||||||||
| Total nonperforming assets | $ | 3,414 | $ | 4,459 | $ | 4,748 | $ | 6,664 | $ | 6,831 | ||||||||||
| Performing TDRs | $ | 36,680 | $ | 38,878 | $ | 42,128 | $ | 46,606 | $ | 47,606 | ||||||||||
| (1) Capital ratios are for First Financial Northwest Bank only. | ||||||||||||||||||||
| (2) Loans are reported net of undisbursed funds. | ||||||||||||||||||||
| (3) There were no loans 90 days or more past due and still accruing interest. | ||||||||||||||||||||
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
