CORRECTING and REPLACING – First Financial Northwest, Inc. Reports Net Income of $1.2 Million or $0.13 per Diluted Share for the Fourth Quarter and $6.3 Million or $0.69 per Diluted Share for the Year Ended December 31, 2023

RENTON, Wash., Jan. 26, 2024 (GLOBE NEWSWIRE) — First Financial Northwest, Inc. (the “Company”) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the “Bank”), announced corrections to its press release issued on Thursday, January 25, 2024. Specifically, the loan portfolio table of the press release presented transposed totals and percentages for permanent owner occupied and permanent non-owner occupied one-to-four family residential loans for the quarter ended December 31, 2023. The complete, corrected release follows:

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 December 31, 2023, of $1.2 million, or $0.13 per diluted share, compared to $1.5 million, or $0.16 per diluted share, for the quarter ended September 30, 2023, and $3.2 million, or $0.35 per diluted share, for the quarter ended December 31, 2022. For the year ended December 31, 2023, net income was $6.3 million, or $0.69 per diluted share, compared to net income of $13.2 million, or $1.45 per diluted share, for the year ended December 31, 2022.

“Credit quality remained strong as of year-end with nonperforming assets of $220,000 on a $1.2 billion total loan portfolio. Our analysis of the allowance for credit losses was influenced by various factors during the quarter, including shifts in the balances and composition of the loan portfolio, a credit downgrade from “pass” to “watch” involving a $12.8 million lending relationship secured by mixed-use commercial real estate, and improvements in the unemployment rate forecast. After careful consideration, our analysis concluded that no provision for credit losses was necessary for the quarter,” stated Joseph W. Kiley III, President and CEO.

“Persistently elevated short term interest rates and intense competition have continued to place pressure on deposit rates, impacting our net interest income. Despite these challenges, we continue to actively manage these expenses to the extent possible, while prioritizing maintaining deposit balances and meeting our customers’ needs,” continued Kiley.

“Throughout the fourth quarter of 2023, our focus on cost reduction and operational efficiency yielded a decrease in noninterest expenses. We previously reported that we were in search of a senior C&I lending credit officer. However, in light of the announcement that we have entered into a Purchase and Assumption Agreement with Global Federal Credit Union pursuant to which Global will acquire substantially all of the assets and assume substantially all of the liabilities of the Bank, those hiring plans are currently on hold as we pursue regulatory approval for the sale,” concluded Kiley.

Highlights for the quarter and year ended December 31, 2023:

  • Net loans receivable increased by $7.8 million in the quarter to $1.18 billion at December 31, 2023, on continued strength in our construction/land and one-to-four family residential portfolios, along with modest growth observed in other business and consumer loans.
  • Book value per share was $17.61 at December 31, 2023, compared to $17.35 and $17.57 for September 30, 2023 and December 31, 2022, respectively.
  • Paid regular quarterly cash dividends to shareholders totaling $0.52 per share for the year, an 8.3% increase over the prior year.
  • The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 16.2% at December 31, 2023, compared to 10.3% and 16.0% at September 30, 2023, and 10.3% and 15.6% at December 31, 2022, respectively.
  • Credit quality remained strong with nonperforming assets totaling $220,000, or 0.01% of total assets, and an additional $1.2 million in loans over 30 days past due at December 31, 2023.
  • Based on management’s evaluation of the adequacy of the allowance for credit losses (“ACL”) at December 31, 2023, the Company did not record a provision for credit losses during the quarter, resulting in a net recapture of provision for credit losses of $208,000 for the year. The Company recorded a $434,000 recapture of provision for credit losses for the year ended December 31, 2022.

Deposits totaled $1.19 billion at December 31, 2023, compared to $1.21 billion at September 30, 2023, and $1.17 billion at December 31, 2022. Total deposits decreased $16.3 million for the quarter ended December 31, 2023, compared to the quarter ended September 30, 2023, primarily due to a $45.2 million decrease in brokered deposits and a $7.1 million decrease in demand deposits, partially offset by a $28.2 million increase in money market balances and a $7.7 million increase in retail certificates of deposit. Management continues to consider various sources of funds, including wholesale markets, brokered deposits and the national deposit market to fund its growth. Total deposits were up $24.1 million at December 31, 2023, compared to $1.17 billion at December 31, 2022.

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

  Dec 31,
2023
  Sep 30,
2023
  Dec 31,
2022
  Three
Month
Change
  One
Year
Change
Deposits: (Dollars in thousands)
Noninterest-bearing demand $ 100,899     $ 104,164     $ 119,944     $ (3,265 )   $ (19,045 )
Interest-bearing demand   56,968       60,816       96,632       (3,848 )     (39,664 )
Savings   18,886       18,844       23,636       42       (4,750 )
Money market   529,411       501,168       542,388       28,243       (12,977 )
Certificates of deposit, retail   357,153       349,446       262,554       7,707       94,599  
Brokered deposits   130,790       175,972       124,886       (45,182 )     5,904  
Total deposits $ 1,194,107     $ 1,210,410     $ 1,170,040     $ (16,303 )   $ 24,067  
 

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

December 31, 2023
  Noninterest-
bearing
demand
Interest-
bearing
demand
Savings Money
market
Certificates
of deposit,
retail
Brokered
deposits
Total
  (Dollars in thousands)
King County              
Renton $ 32,707   $ 16,280   $ 12,637   $ 317,003   $ 241,983   $   $ 620,610  
Landing   2,789     1,658     104     12,447     9,842         26,840  
Woodinville   1,909     2,292     1,000     9,491     10,671         25,363  
Bothell   3,380     840     33     1,892     4,738         10,883  
Crossroads   11,075     3,873     45     27,564     14,958         57,515  
Kent   7,267     5,086     4     16,424     7,706         36,487  
Kirkland   9,341     1,989     137     12,233     2,032         25,732  
Issaquah   1,646     1,696     57     2,417     6,213         12,029  
Total King County   70,114     33,714     14,017     399,471     298,143         815,459  
Snohomish County              
Mill Creek   4,985     2,333     850     13,672     8,309         30,149  
Edmonds   11,455     5,386     460     26,458     14,375         58,134  
Clearview   4,614     4,964     1,541     17,597     9,243         37,959  
Lake Stevens   3,849     4,919     940     24,009     12,633         46,350  
Smokey Point   2,665     4,333     1,060     44,484     11,750         64,292  
Total Snohomish County   27,568     21,935     4,851     126,220     56,310         236,884  
Pierce County              
University Place   2,205     67     3     2,496     1,172         5,943  
Gig Harbor   1,012     1,252     15     1,224     1,528         5,031  
Total Pierce County   3,217     1,319     18     3,720     2,700         10,974  
               
Brokered deposits                       130,790     130,790  
               
Total deposits $ 100,899   $ 56,968   $ 18,886   $ 529,411   $ 357,153   $ 130,790   $ 1,194,107  
 
September 30, 2023
  Noninterest-
bearing
demand
Interest-
bearing
demand
Savings Money
market
Certificates
of deposit,
retail
Brokered
deposits
Total
  (Dollars in thousands)
King County              
Renton $ 32,025   $ 15,316   $ 12,140   $ 284,433   $ 239,940   $   $ 583,854  
Landing   3,036     1,689     91     16,606     8,934         30,356  
Woodinville   2,377     2,425     981     9,016     10,453         25,252  
Bothell   3,798     751     35     4,363     2,365         11,312  
Crossroads   10,589     4,067     77     28,773     14,460         57,966  
Kent   6,665     7,397     4     13,310     7,839         35,215  
Kirkland   10,385     1,765     148     12,277     1,174         25,749  
Issaquah   1,476     1,966     30     3,719     6,170         13,361  
Total King County   70,351     35,376     13,506     372,497     291,335         783,065  
Snohomish County              
Mill Creek   5,126     3,474     639     14,069     7,910         31,218  
Edmonds   11,817     6,735     950     24,681     14,848         59,031  
Clearview   5,497     5,468     1,495     18,896     9,132         40,488  
Lake Stevens   3,740     4,567     964     23,657     12,126         45,054  
Smokey Point   3,568     3,877     1,272     42,544     11,835         63,096  
Total Snohomish County   29,748     24,121     5,320     123,847     55,851         238,887  
Pierce County              
University Place   3,176     99     3     3,279     996         7,553  
Gig Harbor   889     1,220     15     1,545     1,264         4,933  
Total Pierce County   4,065     1,319     18     4,824     2,260         12,486  
               
Brokered deposits                       175,972     175,972  
               
Total deposits $ 104,164   $ 60,816   $ 18,844   $ 501,168   $ 349,446   $ 175,972   $ 1,210,410  
 

Net loans receivable totaled $1.18 billion at December 31, 2023, compared to $1.17 billion at both September 30, 2023 and December 31, 2022. During the quarter ended December 31, 2023, new originations of primarily construction/land and one-to-four family residential loans outpaced total loan repayments in the quarter. The average balance of net loans receivable totaled $1.17 billion for both the quarter ended December 31, 2023 and September 30, 2023, compared to $1.15 billion for the quarter ended December 31, 2022. For the year ended December 31, 2023, the average balance of net loans receivable was $1.17 billion, compared to $1.13 billion for the year ended December 31, 2022.

The allowance for credit losses (“ACL”) represented 1.28% of total loans receivable at December 31, 2023, compared to 1.29% at both September 30, 2023 and December 31, 2022.

Nonperforming loans totaled $220,000 at December 31, 2023, compared to $201,000 at September 30, 2023, and $193,000 at December 31, 2022. There was no other real estate owned (“OREO”) at December 31, 2023, September 30, 2023, or December 31, 2022.

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

  Dec 31,   Sep 30,   Dec 31,   Three
Month
  One
Year
    2023       2023       2022     Change   Change
  (Dollars in thousands)
Nonperforming loans:                  
Consumer $ 220     $ 201     $ 193     $ 19     $ 27  
Total nonperforming loans   220       201       193       19       27  
                   
OREO                        
                   
Total nonperforming assets $ 220     $ 201     $ 193     $ 19     $ 27  
                   
Nonperforming assets as a percent                  
of total assets   0.01 %     0.01 %     0.01 %        
 

Net interest income totaled $9.3 million for the quarter ended December 31, 2023, down from $9.7 million and $12.4 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease in the current quarter compared to the quarter ended September 30, 2023, was primarily due to higher interest expense on deposits, reflecting the sustained high levels of short-term interest rates and intense competition for deposits. Since March 2022, the Federal Open Market Committee of the Federal Reserve System has increased the target range for the federal funds rate by 525 basis points to a range of 5.25% to 5.50%. For the year ended December 31, 2023, net interest income totaled $40.5 million, compared to $48.4 million for the year ended December 31, 2022, as the increase in interest expense on liabilities outpaced the increase in interest income on loans and investments.

Total interest income was $20.3 million for the quarter ended December 31, 2023, compared to $19.7 million and $17.3 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. Yield on loans increased to 5.83% during the recent quarter, compared to 5.73% and 5.19% for the quarters ended September 30, 2023, and December 31, 2022, respectively. Yield on investments increased to 4.11% during the current quarter, compared to 3.98% and 3.60% for the quarters ended September 30, 2023, and December 31, 2022, respectively.

Total interest expense was $11.0 million for the quarter ended December 31, 2023, up from $10.0 million and $4.9 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The average cost of interest-bearing deposits was 3.62% for the quarter ended December 31, 2023, compared to 3.33% and 1.51% for the quarters ended September 30, 2023 and December 31, 2022, respectively. The increase from the quarter ended September 30, 2023, was due primarily to increased interest expense on money market and certificate of deposit balances along with the maturity of brokered deposits with lower rates that were entered into during a lower rate environment. Advances from the FHLB totaled $125.0 million at both December 31, 2023 and September 30, 2023, compared to $145.0 million at December 31, 2022. At December 31, 2023, $115.0 million of our $125.0 million of FHLB advances were 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 had a weighted average remaining term of 36 months and a weighted average fixed interest rate of 1.87% as of December 31, 2023. The average cost of borrowings was 2.40% for the quarter ended December 31, 2023, compared to 2.42% and 2.46% for the quarters ended September 30, 2023 and December 31, 2022, respectively.

The net interest margin was 2.54% for the quarter ended December 31, 2023, down from 2.69% and 3.52% for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was due primarily to the increase in the cost of interest-bearing liabilities outpacing the yields on interest-earnings assets. The average cost of interest-bearing liabilities increased 26 basis points to 3.50% during the quarter, from 3.24% during the quarter ended September 30, 2023, and increased 187 basis points from 1.63% during the quarter ended December 31, 2022, while the average yield on interest-earning assets increased 10 basis points to 5.56% during the fourth quarter of 2023, from 5.46% during the quarter ended September 30, 2023, and increased 66 basis points from 4.90% during the quarter ended December 31, 2022. The decline in the net interest margin in the current quarter was due in large part to the maturity of lower cost retail and brokered certificates of deposit, repricing in a higher interest rate environment. The net interest margin for the month of December 2023 was 2.52%.

Noninterest income for the quarter ended December 31, 2023, totaled $633,000, down from $677,000 and $720,000 for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was primarily due to a $30,000 decrease in other noninterest income related to our fintech focused venture capital investment and lower loan and deposit related fees, partially offset by increases in wealth management revenue and BOLI income. The decrease in the quarter ended December 31, 2023, as compared to the quarter ended December 31, 2022, primarily reflects reduced loan related fees and the absence of a net gain on sale of investments, partially offset by higher BOLI income and wealth management revenue. Noninterest income declined $474,000 to $2.8 million for the year ended December 31, 2023, from $3.2 million for the year ended December 31, 2022, due primarily to a $644,000 decline in loan related fees due largely to a $495,000 decline in loan prepayment penalties, along with a $59,000 decline in wealth management revenue, partially offset by increases in other noninterest and BOLI income.

Noninterest expense totaled $8.4 million for the quarter ended December 31, 2023, down from $8.8 million and $8.7 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was primarily due to decreases of $196,000 in salaries and employee benefits and $122,000 in professional fees. The decline in salaries and employee benefit expenses was due primarily to the reversal of $250,000 in incentive accruals following an analysis of the metrics impacting employee incentives for the year, compared to no incentive accrual activity in the quarter ended September 30, 2023. The decrease compared to the quarter ended December 31, 2022, was primarily due to decreases of $176,000 in professional fees, $155,000 in salaries and employee benefits and $153,000 in other general and administrative expenses, partially offset by increases of $88,000 in regulatory assessments, $84,000 in data processing and $76,000 in occupancy and equipment expenses. Noninterest expense totaled $35.7 million for the year ended December 31, 2023, compared to $35.6 million for the year ended December 31, 2022. The moderate increase year over was due primarily to an increase in regulatory assessments and other general and administrative expenses, partially offset by declines in salaries and employee benefits and professional fees.

First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; an FDIC insured Washington State-chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through 15 full-service banking offices. For additional information about us, please visit our website at ffnwb.com and click on the “Investor Relations” link at the bottom of the page.

Forward-looking statements:
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management’s current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance. 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; changes in the interest rate environment, including the recent increases in the Federal Reserve benchmark rate and duration at which such increased interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; the impact of continuing high inflation and the current and future monetary policies of the Federal Reserve in response thereto; the effects of any federal government shutdown; increased competitive pressures; legislative and regulatory changes; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; effects of critical accounting policies and judgments, including the use of estimate in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other reports filed with or furnished to 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.

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. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
 
Assets Dec 31,
2023
  Sep 30,
2023
  Dec 31,
2022
  Three
Month
Change
  One
Year
Change
                   
Cash on hand and in banks $ 8,391     $ 8,074     $ 7,722     3.9 %   8.7 %
Interest-earning deposits with banks   22,138       49,618       16,598     (55.4 )   33.4  
Investments available-for-sale, at fair value   207,915       204,975       217,778     1.4     (4.5 )
Investments held-to-maturity, at amortized cost   2,456       2,450       2,444     0.2     0.5  
Loans receivable, net of allowance of $15,306, $15,306, and $15,227 respectively   1,175,925       1,168,079       1,167,083     0.7     0.8  
Federal Home Loan Bank (“FHLB”) stock, at cost   6,527       6,803       7,512     (4.1 )   (13.1 )
Accrued interest receivable   7,359       7,263       6,513     1.3     13.0  
Deferred tax assets, net   2,648       3,156       2,597     (16.1 )   2.0  
Premises and equipment, net   19,667       19,921       21,192     (1.3 )   (7.2 )
Bank owned life insurance (“BOLI”), net   37,653       37,398       36,286     0.7     3.8  
Prepaid expenses and other assets   10,478       13,673       12,479     (23.4 )   (16.0 )
Right of use asset (“ROU”), net   2,617       2,818       3,275     (7.1 )   (20.1 )
Goodwill   889       889       889     0.0     0.0  
Core deposit intangible, net   419       451       548     (7.1 )   (23.5 )
Total assets $ 1,505,082     $ 1,525,568     $ 1,502,916     (1.3 )   0.1  
                   
Liabilities and Stockholders’ Equity                  
                   
Deposits                  
Noninterest-bearing deposits $ 100,899     $ 104,164     $ 119,944     (3.1 )   (15.9 )
Interest-bearing deposits   1,093,208       1,106,246       1,050,096     (1.2 )   4.1  
Total deposits   1,194,107       1,210,410       1,170,040     (1.3 )   2.1  
Advances from the FHLB   125,000       125,000       145,000     0.0     (13.8 )
Advance payments from borrowers for taxes and insurance   2,952       4,760       3,051     (38.0 )   (3.2 )
Lease liability, net   2,806       3,011       3,454     (6.8 )   (18.8 )
Accrued interest payable   2,739       2,646       328     3.5     735.1  
Other liabilities   15,818       20,506       20,683     (22.9 )   (23.5 )
Total liabilities   1,343,422       1,366,333       1,342,556     (1.7 )   0.1  
                   
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 9,179,510 shares at December 31, 2023,
9,179,510 shares at September 30, 2023, and 9,127,595 shares at December 31, 2022
  92       92       91     0.0     1.1  
Additional paid-in capital   73,035       72,926       72,424     0.1     0.8  
Retained earnings   96,206       96,206       95,059     0.0     1.2  
Accumulated other comprehensive loss, net of tax   (7,673 )     (9,989 )     (7,214 )   (23.2 )   6.4  
Total stockholders’ equity   161,660       159,235       160,360     1.5     0.8  
Total liabilities and stockholders’ equity $ 1,505,082     $ 1,525,568     $ 1,502,916     (1.3 )%   0.1 %
 
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
 
  Quarter Ended        
  Dec 31,
2023
  Sep 30,
2023
  Dec 31,
2022
  Three
Month
Change
  One
Year
Change
Interest income                  
Loans, including fees $ 17,143     $ 16,918     $ 15,042     1.3 %   14.0 %
Investments   2,143       2,118       2,007     1.2     6.8  
Interest-earning deposits with banks   880       525       205     67.6     329.3  
Dividends on FHLB Stock   121       113       89     7.1     36.0  
Total interest income   20,287       19,674       17,343     3.1     17.0  
Interest expense                  
Deposits   10,281       9,205       3,972     11.7     158.8  
FHLB advances and other borrowings   731       766       928     (4.6 )   (21.2 )
Total interest expense   11,012       9,971       4,900     10.4     124.7  
Net interest income   9,275       9,703       12,443     (4.4 )   (25.5 )
(Recapture of provision) provision for credit losses         (300 )     486     (100.0 )   (100.0 )
Net interest income after (recapture of provision) provision for credit losses   9,275       10,003       11,957     (7.3 )   (22.4 )
                   
Noninterest income                  
Net gain on sale of investments               27     n/a     (100.0 )
BOLI income   255       244       222     4.5     14.9  
Wealth management revenue   60       53       36     13.2     66.7  
Deposit related fees   234       247       231     (5.3 )   1.3  
Loan related fees   60       79       172     (24.1 )   (65.1 )
Other   24       54       32     (55.6 )   (25.0 )
Total noninterest income   633       677       720     (6.5 )   (12.1 )
                   
Noninterest expense                  
Salaries and employee benefits   4,822       5,018       4,977     (3.9 )   (3.1 )
Occupancy and equipment   1,231       1,193       1,155     3.2     6.6  
Professional fees   431       553       607     (22.1 )   (29.0 )
Data processing   718       742       634     (3.2 )   13.2  
Regulatory assessments   196       200       108     (2.0 )   81.5  
Insurance and bond premiums   113       111       111     1.8     1.8  
Marketing   70       97       77     (27.8 )   (9.1 )
Other general and administrative   858       856       1,011     0.2     (15.1 )
Total noninterest expense   8,439       8,770       8,680     (3.8 )   (2.8 )
Income before federal income tax provision   1,469       1,910       3,997     (23.1 )   (63.2 )
Federal income tax provision   275       409       771     (32.8 )   (64.3 )
Net income $ 1,194     $ 1,501     $ 3,226     (20.5 )%   (63.0 )%
                   
Basic earnings per share $ 0.13     $ 0.16     $ 0.35          
Diluted earnings per share $ 0.13     $ 0.16     $ 0.35          

Weighted average number of common shares outstanding

  9,151,892       9,127,568       9,073,323          
Weighted average number of diluted shares outstanding   9,176,724       9,150,059       9,149,044          
                               
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
 
  Year Ended December 31,    
    2023       2022     One
Year
Change
Interest income          
Loans, including fees $ 66,938     $ 52,935     26.5 %
Investments   8,474       5,603     51.2  
Interest-earning deposits with banks   2,261       386     485.8  
Dividends on FHLB Stock   485       318     52.5  
Total interest income   78,158       59,242     31.9  
Interest expense          
Deposits   34,407       8,955     284.2  
FHLB advances   3,208       1,934     65.9  
Total interest expense   37,615       10,889     245.4  
Net interest income   40,543       48,353     (16.2 )
Recapture of provision for credit losses   (208 )     (434 )   (52.1 )
Net interest income after recapture of provision for credit losses   40,751       48,787     (16.5 )
           
Noninterest income          
Net gain on sale of investments         27     (100.0 )
BOLI   1,081       1,004     7.7  
Wealth management revenue   253       312     (18.9 )
Deposit accounts related fees   956       936     2.1  
Loan related fees   275       919     (70.1 )
Other   208       49     324.5  
Total noninterest income   2,773       3,247     (14.6 )
           
Noninterest expense          
Salaries and employee benefits   20,366       21,133     (3.6 )
Occupancy and equipment   4,748       4,776     (0.6 )
Professional fees   2,288       2,339     (2.2 )
Data processing   2,857       2,678     6.7  
Regulatory assessments   763       403     89.3  
Insurance and bond premiums   468       464     0.9  
Marketing   343       303     13.2  
Other general and administrative   3,833       3,529     8.6  
Total noninterest expense   35,666       35,625     0.1  
Income before federal income tax provision   7,858       16,409     (52.1 )
Federal income tax provision   1,553       3,169     (51.0 )
Net income $ 6,305     $ 13,240     (52.4 )%
           
Basic earnings per share $ 0.69     $ 1.47      
Diluted earnings per share $ 0.69     $ 1.45      

Weighted average number of common shares outstanding

  9,126,209       9,006,369      
Weighted average number of diluted shares outstanding   9,152,617       9,102,283      
                   

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

  December 31, 2023 September 30, 2023 December 31, 2022
  Amount   Percent   Amount   Percent   Amount   Percent
  (Dollars in thousands)
Commercial real estate:                      
Residential:                      
Multifamily $ 138,149     11.6 %   $ 140,022     11.7 %   $ 126,866     10.7 %
Total multifamily residential   138,149     11.6       140,022     11.7       126,866     10.7  
                       
Non-residential:                      
Office   72,778     6.1       72,773     6.1       84,301     7.1  
Retail   124,172     10.4       130,101     11.0       132,917     11.3  
Mobile home park   21,701     1.8       21,285     1.8       25,283     2.1  
Hotel / motel   63,597     5.3       63,954     5.4       55,408     4.7  
Nursing Home   11,610     1.0       11,676     1.0       12,348     1.0  
Warehouse   19,218     1.6       19,446     1.6       19,917     1.7  
Storage   33,033     2.8       33,229     2.8       33,797     2.9  
Other non-residential   31,750     2.6       42,227     3.7       43,933     3.7  
Total non-residential   377,859     31.6       394,691     33.4       407,904     34.5  
                       
Construction/land:                      
One-to-four family residential   47,149     4.0       43,532     3.7       52,492     4.5  
Multifamily   4,004     0.3       2,043     0.2       15,393     1.3  
Land development   9,771     0.8       9,766     0.8       9,759     0.8  
Total construction/land   60,924     5.1       55,341     4.7       77,644     6.6  
                       
One-to-four family residential:                      
Permanent owner occupied   284,471     23.9       260,970     22.1       232,869     19.7  
Permanent non-owner occupied   228,752     19.2       232,238     19.6       241,311     20.4  
Total one-to-four family residential   513,223     43.1       493,208     41.7       474,180     40.1  
                       
Business                      
Aircraft   1,945     0.1       1,981     0.2       2,087     0.2  
Small Business Administration (“SBA”)   1,794     0.3       1,810     0.3       514     0.1  
Paycheck Protection Plan (“PPP”)   473     0.0       551     0.0       783     0.1  
Other business   24,869     2.1       23,633     1.9       27,979     2.3  
Total business   29,081     2.5       27,975     2.4       31,363     2.7  
                       
Consumer                      
Classic, collectible and other auto   58,618     5.0       59,955     5.1       55,838     4.7  
Other consumer   13,377     1.1       12,193     1.0       8,515     0.7  
Total consumer   71,995     6.1       72,148     6.1       64,353     5.4  
                       
Total loans   1,191,231     100.0 %     1,183,385     100.0 %     1,182,310     100.0 %
Less:                      
ACL   15,306           15,306           15,227      
Loans receivable, net $ 1,175,925         $ 1,168,079         $ 1,167,083      
                       
Concentrations of credit: (1)                      
Construction loans as % of total capital   38.3 %         37.8 %         53.1 %    
Total non-owner occupied commercial
real estate as % of total capital
  316.8 %         328.1 %         346.9 %    
                                   
(1)Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC regulatory guidelines.
                                   
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
(Unaudited)
 
  At or For the Quarter Ended
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,
   2023     2023     2023     2023     2022 
  (Dollars in thousands, except per share data)
Performance Ratios: (1)                  
Return on assets   0.31 %     0.39 %     0.39 %     0.57 %     0.86 %
Return on equity   2.97       3.71       3.74       5.31       8.04  
Dividend payout ratio   100.00       79.26       79.90       56.52       34.29  
Equity-to-assets ratio   10.74       10.44       10.39       10.14       10.67  
Tangible equity ratio (2)   10.66       10.36       10.31       10.06       10.58  
Net interest margin   2.54       2.69       2.84       3.22       3.52  
Average interest-earning assets to average interest-bearing liabilities   115.84       116.94       116.27       117.78       117.93  
Efficiency ratio   85.17       84.49       85.57       75.12       65.94  
Noninterest expense as a percent of average total assets   2.18       2.29       2.50       2.42       2.30  
Book value per common share $ 17.61     $ 17.35     $ 17.35     $ 17.45     $ 17.57  
Tangible book value per share (2)   17.47       17.20       17.20       17.30       17.41  
                   
Capital Ratios: (3)                  
Tier 1 leverage ratio   10.18 %     10.25 %     10.02 %     10.24 %     10.31 %
Common equity tier 1 capital ratio   14.90       14.75       14.49       14.33       14.37  
Tier 1 capital ratio   14.90       14.75       14.49       14.33       14.37  
Total capital ratio   16.15       16.00       15.75       15.59       15.62  
                   
Asset Quality Ratios: (4)                  
Nonperforming loans as a percent of total loans   0.02 %     0.02 %     0.02 %     0.02 %     0.02 %
Nonperforming assets as a percent of total assets   0.01       0.01       0.01       0.01       0.01  
ACL as a percent of total loans   1.28       1.29       1.31       1.33       1.29  
Net (recoveries) charge-offs to average loans receivable, net   0.00       0.00       0.00       (0.00 )     (0.00 )
                   
Allowance for Credit Losses:                  
ACL, beginning of the quarter $ 15,306     $ 15,606     $ 16,028     $ 15,227     $ 14,726  
Beginning balance adjustment from adoption of Topic 326                     500        
(Recapture of provision) provision         (300 )     (400 )     300       500  
Charge-offs               (22 )            
Recoveries                     1       1  
ACL, end of the quarter $ 15,306     $ 15,306     $ 15,606     $ 16,028     $ 15,227  
 
(1)Performance ratios are calculated on an annualized basis.
(2)Tangible equity and tangible assets exclude goodwill and core deposit intangible assets. Tangible equity, tangible assets, 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
(Unaudited)
 
  At or For the Quarter Ended
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,
   2023     2023     2023     2023     2022 
  (Dollars in thousands)
Yields and Costs: (1)                  
Yield on loans   5.83 %     5.73 %     5.71 %     5.56 %     5.19 %
Yield on investments   4.11       3.98       3.93       3.88       3.60  
Yield on interest-earning deposits   5.32       5.18       4.91       4.40       3.31  
Yield on FHLB stock   7.29       6.57       7.06       7.30       4.58  
Yield on interest-earning assets   5.56 %     5.46 %     5.43 %     5.29 %     4.90 %
                   
Cost of interest-bearing deposits   3.62 %     3.33 %     3.06 %     2.41 %     1.51 %
Cost of borrowings   2.40       2.42       2.55       2.69       2.46  
Cost of interest-bearing liabilities   3.50 %     3.24 %     3.01 %     2.44 %     1.63 %
                   
Cost of total deposits   3.31 %     3.03 %     2.78 %     2.17 %     1.36 %
Cost of funds   3.23       2.97       2.76       2.23       1.48  
                   
Average Balances:                  
Loans $ 1,167,339     $ 1,171,483     $ 1,182,939     $ 1,168,539     $ 1,150,181  
Investments   206,837       211,291       215,113       219,969       221,113  
Interest-earning deposits   65,680       40,202       50,691       21,729       24,608  
FHLB stock   6,584       6,820       6,814       7,219       7,710  
Total interest-earning assets $ 1,446,440     $ 1,429,796     $ 1,455,557     $ 1,417,456     $ 1,403,612  
                   
Interest-bearing deposits $ 1,127,690     $ 1,097,324     $ 1,126,598     $ 1,065,827     $ 1,040,357  
Borrowings   120,978       125,402       125,275       137,600       149,946  
Total interest-bearing liabilities $ 1,248,668     $ 1,222,726     $ 1,251,873     $ 1,203,427     $ 1,190,303  
Noninterest-bearing deposits   102,869       109,384       111,365       115,708       121,518  
Total deposits and borrowings $ 1,351,537     $ 1,332,110     $ 1,363,238     $ 1,319,135     $ 1,311,821  
                   
Average assets $ 1,538,955     $ 1,522,224     $ 1,547,321     $ 1,509,297     $ 1,496,125  
Average stockholders’ equity   159,659       160,299       159,764       162,016       159,120  
                                       
(1)Yields and costs are annualized.
                                       
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
(Unaudited)
 
  At or For the Year Ended December 31,
   2023     2022     2021     2020     2019 
      (Dollars in thousands, except per share data)  
Performance Ratios:                  
Return on assets   0.41 %     0.91 %     0.86 %     0.63 %     0.80 %
Return on equity   3.93       8.34       7.65       5.50       6.73  
Dividend payout ratio   75.36       32.65       33.59       45.45       33.65  
Equity-to-assets ratio   10.74       10.67       11.07       11.26       11.65  
Tangible equity ratio (1)   10.66       10.58       10.97       11.15       11.53  
Net interest margin   2.82       3.54       3.35       3.15       3.19  
Average interest-earning assets to average interest-bearing liabilities   116.69       119.18       118.59       115.62       113.44  
Efficiency ratio   82.34       69.04       68.32       72.39       70.66  
Noninterest expense as a percent of average total assets   2.33       2.44       2.35       2.39       2.35  
Book value per common share $ 17.61     $ 17.57     $ 17.30     $ 16.05     $ 15.25  
Tangible book value per share (1)   17.47       17.41       17.13       15.88       15.07  
                   
Capital Ratios: (2)                  
Tier 1 leverage ratio   10.18 %     10.31 %     10.34 %     10.29 %     10.27 %
Common equity tier 1 capital ratio   14.90       14.37       14.23       14.32       13.13  
Tier 1 capital ratio   14.90       14.37       14.23       14.32       13.13  
Total capital ratio   16.15       15.62       15.48       15.57       14.38  
                   
Asset Quality Ratios: (3)                  
Nonperforming loans as a percent of total loans   0.02 %     0.02 %     0.00 %     0.19 %     0.01 %
Nonperforming assets as a percent of total assets   0.01       0.01       0.00       0.18       0.04  
ACL as a percent of total loans   1.28       1.29       1.40       1.36       1.18  
Net charge-offs (recoveries) to average loans receivable, net   0.00       0.00       (0.02 )     (0.00 )     (0.02 )
                   
Allowance for Credit Losses:                  
ACL, beginning of the year $ 15,227     $ 15,657     $ 15,174     $ 13,218     $ 13,347  
Beginning balance adjustment from adoption of Topic 326   500                          
(Recapture of provision) provision   (400 )     (400 )     300       1,900       (300 )
Charge-offs   (22 )     (37 )           (2 )      
Recoveries   1       7       183       58       171  
ACL, end of the year $ 15,306     $ 15,227     $ 15,657     $ 15,174     $ 13,218  
 
(1)Tangible equity and tangible assets exclude goodwill and core deposit intangible assets. Tangible equity, tangible, 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.
(2)Capital ratios are for First Financial Northwest Bank only.
(3)Loans are reported net of undisbursed funds.
 
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures (continued)
(Unaudited)
 
  At or For the Year Ended December 31,
    2023       2022       2021       2020       
2019  
  (Dollars in thousands)
Yields and Costs:                  
Yield on loans   5.71 %     4.69 %     4.57 %     4.69 %     5.15 %
Yield on investments   3.97       2.77       1.83       2.39       3.11  
Yield on interest-earning deposits   5.06       1.28       0.12       0.21       2.15  
Yield on FHLB stock   7.07       5.08       5.29       4.85       5.42  
Yield on interest-earning assets   5.44 %     4.33 %     4.01 %     4.36 %     4.88 %
                   
Cost of deposits   3.12 %     0.87 %     0.71 %     1.42 %     1.90 %
Cost of borrowings   2.52       1.70       1.39       1.31       2.09  
Cost of interest-bearing liabilities   3.05 %     0.95 %     0.78 %     1.41 %     1.92 %
                   
Cost of interest-bearing deposits   2.83 %     0.77 %     0.64 %     1.32 %     1.81 %
Cost of funds   2.80       0.86       0.71       1.32       1.84  
                   
Average Balances:                  
Loans $ 1,172,569     $ 1,128,835     $ 1,098,772     $ 1,120,889     $ 1,061,367  
Investments   213,261       203,165       176,110       133,584       139,354  
Interest-earning deposits   44,684       30,176       60,482       25,108       13,634  
FHLB stock   6,857       6,256       6,271       6,600       6,684  
Total interest-earning assets $ 1,437,371     $ 1,368,432     $ 1,341,635     $ 1,286,181     $ 1,221,039  
                   
Interest-bearing deposits $ 1,104,510     $ 1,034,351     $ 1,015,852     $ 987,069     $ 946,484  
Borrowings   127,263       113,890       115,466       125,392       129,899  
Total interest-bearing liabilities $ 1,231,773     $ 1,148,241     $ 1,131,318     $ 1,112,461     $ 1,076,383  
Noninterest-bearing deposits   109,795       125,166       112,484       75,388       48,434  
Total deposits and borrowings $ 1,341,568     $ 1,273,407     $ 1,243,802     $ 1,187,849     $ 1,124,817  
                   
Average assets $ 1,529,511     $ 1,455,739     $ 1,421,476     $ 1,361,604     $ 1,294,164  
Average stockholders’ equity   160,428       158,685       160,041       155,587       154,092  
                                       

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-to-assets 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 goodwill and core deposit intangible, net 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
    Dec 31,
2023
      Sep 30,
2023
      Jun 30,
2023
      Mar 31,
2023
      Dec 31,
2022
 
  (Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
                                       
Total stockholders’ equity (GAAP) $ 161,660     $ 159,235     $ 158,715     $ 159,645     $ 160,360  
Less:                  
Goodwill   889       889       889       889       889  
Core deposit intangible, net   419       451       484       516       548  
Tangible equity (Non-GAAP) $ 160,352     $ 157,895     $ 157,342     $ 158,240     $ 158,923  
                   
Total assets (GAAP) $ 1,505,082     $ 1,525,568     $ 1,528,079     $ 1,574,271     $ 1,502,916  
Less:                  
Goodwill   889       889       889       889       889  
Core deposit intangible, net   419       451       484       516       548  
Tangible assets (Non-GAAP) $ 1,503,774     $ 1,524,228     $ 1,526,706     $ 1,572,866     $ 1,501,479  
                   
Common shares outstanding at period end   9,179,510       9,179,510       9,148,086       9,148,086       9,127,595  
                   
Equity-to-assets ratio (GAAP)   10.74 %     10.44 %     10.39 %     10.14 %     10.67 %
Tangible equity-to-tangible assets ratio (Non-GAAP)   10.66       10.36       10.31       10.06       10.58  
Book value per common share (GAAP) $ 17.61     $ 17.35     $ 17.35     $ 17.45     $ 17.57  
Tangible book value per share (Non-GAAP)   17.47       17.20       17.20       17.30       17.41  
                                       
  Year Ended December 31,
    2023       2022       2021       2020       2019  
  (Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
                                       
Total stockholders’ equity (GAAP) $ 161,660     $ 160,360     $ 157,879     $ 156,302     $ 156,319  
Less:                  
Goodwill   889       889       889       889       889  
Core deposit intangible   419       548       684       824       968  
Tangible equity (Non-GAAP) $ 160,352     $ 158,923     $ 156,306     $ 154,589     $ 154,462  
                   
Total assets (GAAP)   1,505,082       1,502,916       1,426,329       1,387,669       1,341,885  
Less:                  
Goodwill   889       889       889       889       889  
Core deposit intangible   419       548       684       824       968  
Tangible assets (Non-GAAP) $ 1,503,774     $ 1,501,479     $ 1,424,756     $ 1,385,956     $ 1,340,028  
                   
Common shares outstanding at period end   9,179,510       9,127,595       9,125,759       9,736,875       10,252,953  
                   
Equity-to-assets ratio (GAAP)   10.74 %     10.67 %     11.07 %     11.26 %     11.65 %
Tangible equity ratio (Non-GAAP)   10.66       10.58       10.97       11.15       11.53  
Book value per common share (GAAP) $ 17.61     $ 17.57     $ 17.30     $ 16.05     $ 15.25  
Tangible book value per share (Non-GAAP)   17.47       17.41       17.13       15.88       15.07  
                                       


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