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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  April 30, 2024

          First Financial Northwest, Inc.         
(Exact name of registrant as specified in its charter)

Washington
 
001-33652
 
26-0610707
State or other jurisdiction of
Incorporation
 
Commission
File Number
 
(I.R.S. Employer
Identification No.)
         
201 Wells Avenue South, Renton, Washington
 
98057
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number (including area code) (425) 255-4400

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.


Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)


Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)


Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))


Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4 (c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading
Symbol(s)
 
Name of each exchange on
which registered
Common Stock, par value $0.01 per share
 
FFNW
 
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]



Item 2.02 Results of Operations and Financial Condition

On April 30, 2024, First Financial Northwest, Inc. (the “Company”) issued its release on first quarter 2024 operating results for the quarter ended March 31, 2024. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits

(d)        Exhibits

99.1              First Financial Northwest, Inc.’s press release on first quarter 2024 operating results dated April 30, 2024
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

















SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 
FIRST FINANCIAL NORTHWEST, INC.
 
 
 
 
DATE: April 30, 2024
By:  /s/ Joseph W. Kiley III                       
 
       Joseph W. Kiley III
       President and Chief Executive Officer

       











EX-99.1 2 ffnw8k43024exh991.htm
Exhibit 99.1



 
For more information, contact:
Joseph W. Kiley III, President and Chief Executive Officer
Rich Jacobson, Executive Vice President and Chief Financial Officer
(425) 255-4400



First Financial Northwest, Inc. Announces First Quarter 2024 Results;
Reports Withdrawal from Legacy Defined Benefit Plan and Purchase of Single Premium Group Annuity

Renton, Washington – April 30, 2024 - First Financial Northwest, Inc. (the “Company”) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported a net loss of $1.1 million, or $0.12 per diluted share, for the quarter ended March 31, 2024, compared to net income of $1.2 million, or $0.13 per diluted share, for the quarter ended December 31, 2023, and net income of $2.1 million, or $0.23 per diluted share, for the quarter ended March 31, 2023.

“Our first quarter results were impacted by the purchase of a single premium group annuity to satisfy the Company’s obligations to current and former employees covered by a legacy defined benefit plan. The plan was frozen on March 31, 2013, however the liability continued for all vested participants. Extinguishing this liability at a cost of $1.2 million was a strategic move considered to be an appropriate use of capital in light of the elevated rate environment. We also recognized $767,000 in pretax expenses in the quarter relating to our previously announced sale to Global Federal Credit Union. We continue to work with the employees and management of Global on a variety of matters to facilitate the planned integration of our two institutions, while the regulatory agencies work through the processing of our applications,” stated Joseph W. Kiley III, President and CEO.

“Credit quality remained strong, with nonaccrual loans remaining low at $201,000 relative to our $1.2 billion total loan portfolio. Our analysis of the allowance for credit losses was influenced by various factors during the quarter, including declines in loan balances and shifts in the composition of the loan portfolio, credit grade changes, and improvements in the unemployment rate forecast. After careful consideration, our analysis concluded that a $175,000 recapture of provision for credit losses was appropriate inclusive of a $125,000 provision for credit losses on unfunded commitments, due to their increased balances,” stated Kiley.

“Persistently elevated short term interest rates and strong competition for deposits continued to place pressure on deposit rates. As a result, despite an uptick in loan yields during the quarter, our net interest margin was little changed, increasing to 2.55% for the current quarter from 2.54% in the quarter ended December 31, 2023,” concluded Kiley.




Highlights for the quarter ended March 31, 2024:
Net loans receivable totaled $1.14 billion at March 31, 2024, down $33.0 million from the prior quarter end.
Book value per share was $17.46 at March 31, 2024, compared to $17.61 at December 31, 2023, and $17.45 at March 31, 2023.
Incurred a net loss of $1.1 million for the quarter ended March 31, 2024, compared to net income of $1.2 million and $2.1 million for the quarters ended December 31, 2023, and March 31, 2023, respectively.
Paid a quarterly cash dividend to shareholders of $0.13 per share.
The Bank’s Tier 1 leverage and total capital ratios were 10.4% and 16.2% at March 31, 2024, compared to 10.2% and 16.2% at December 31, 2023, and 10.2% and 15.6% at March 31, 2023, respectively.
Credit quality remained strong with nonaccrual loans totaling $201,000, or 0.02% of total loans.
Recorded a $175,000 recapture of provision for credit losses in the current quarter, compared to no provision for credit losses in the prior quarter and a $338,000 provision for credit losses in the comparable quarter in 2023.
Deposits totaled $1.17 billion at March 31, 2024, compared to $1.19 billion at December 31, 2023, and $1.23 billion at March 31, 2023. The $27.2 million decrease in deposits at March 31, 2024, compared to December 31, 2023, was due predominantly to a $44.6 million decrease in brokered deposits, which was consistent with management’s strategy to reduce these higher cost deposits, partially offset by a $9.4 million increase in retail certificates of deposit, a $6.2 million increase in money market balances, and a $1.5 million increase in interest-bearing demand deposits.
The following table presents a breakdown of our total deposits (unaudited):

   
Mar 31,
2024
   
Dec 31,
2023
   
Mar 31,
2023
   
Three
Month
Change
   
One
Year
Change
 
Deposits:
 
(Dollars in thousands)
 
Noninterest-bearing demand
 
$
100,846
   
$
100,899
   
$
110,780
   
$
(53
)
 
$
(9,934
)
Interest-bearing demand
   
58,489
     
56,968
     
86,183
     
1,521
     
(27,694
)
Savings
   
19,314
     
18,886
     
21,871
     
428
     
(2,557
)
Money market
   
535,594
     
529,411
     
483,945
     
6,183
     
51,649
 
Certificates of deposit, retail
   
366,507
     
357,153
     
332,935
     
9,354
     
33,572
 
Brokered deposits
   
86,146
     
130,790
     
191,414
     
(44,644
)
   
(105,268
)
Total deposits
 
$
1,166,896
   
$
1,194,107
   
$
1,227,128
   
$
(27,211
)
 
$
(60,232
)





2
The following tables present an analysis of total deposits by branch office (unaudited):
March 31, 2024
 
   
Noninterest-
bearing
demand
   
Interest-
bearing
demand
   
Savings
   
Money
market
   
Certificates
of deposit,
retail
   
Brokered
deposits
   
Total
 
   
(Dollars in thousands)
 
King County
                                         
Renton
 
$
34,134
   
$
17,394
   
$
12,802
   
$
263,834
   
$
249,288
   
$
-
   
$
577,452
 
Landing
   
3,759
     
767
     
98
     
7,019
     
9,571
     
-
     
21,214
 
Woodinville
   
2,137
     
2,207
     
1,011
     
10,707
     
10,866
     
-
     
26,928
 
Bothell
   
3,025
     
947
     
32
     
1,835
     
5,158
     
-
     
10,997
 
Crossroads
   
12,007
     
3,320
     
35
     
25,107
     
17,689
     
-
     
58,158
 
Kent
   
5,875
     
5,579
     
6
     
25,543
     
7,207
     
-
     
44,210
 
Kirkland
   
8,804
     
1,861
     
155
     
65,870
     
2,055
     
-
     
78,745
 
Issaquah
   
1,435
     
373
     
113
     
2,781
     
6,053
     
-
     
10,755
 
Total King County
   
71,176
     
32,448
     
14,252
     
402,696
     
307,887
     
-
     
828,459
 
Snohomish County
                                                       
Mill Creek
   
5,241
     
2,327
     
685
     
12,600
     
8,426
     
-
     
29,279
 
Edmonds
   
9,838
     
9,487
     
576
     
29,314
     
13,054
     
-
     
62,269
 
Clearview
   
4,802
     
4,646
     
1,452
     
39,865
     
9,076
     
-
     
59,841
 
Lake Stevens
   
3,841
     
4,134
     
1,165
     
18,769
     
14,043
     
-
     
41,952
 
Smokey Point
   
2,661
     
4,415
     
1,167
     
29,411
     
10,800
     
-
     
48,454
 
Total Snohomish County
   
26,383
     
25,009
     
5,045
     
129,959
     
55,399
     
-
     
241,795
 
Pierce County
                                                       
University Place
   
2,034
     
63
     
1
     
1,748
     
1,487
     
-
     
5,333
 
Gig Harbor
   
1,253
     
969
     
16
     
1,191
     
1,734
     
-
     
5,163
 
Total Pierce County
   
3,287
     
1,032
     
17
     
2,939
     
3,221
     
-
     
10,496
 
                                                         
Brokered deposits
   
-
     
-
     
-
     
-
     
-
     
86,146
     
86,146
 
                                                         
Total deposits
 
$
100,846
   
$
58,489
   
$
19,314
   
$
535,594
   
$
366,507
   
$
86,146
   
$
1,166,896
 

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
 


3
Net loans receivable totaled $1.14 billion at March 31, 2024, compared to $1.18 billion at both December 31, 2023, and March 31, 2023. During the quarter ended March 31, 2024, loan repayments outpaced new originations. The average balance of net loans receivable totaled $1.16 billion for the quarter ended March 31, 2024, compared to $1.17 billion for both the quarter ended December 31, 2023, and March 31, 2023.

The allowance for credit losses (“ACL”) represented 1.30% of total loans receivable at March 31, 2024, compared to 1.28% at December 31, 2023, and 1.33% at March 31, 2023.

Nonaccrual loans totaled $201,000 at March 31, 2024, compared to $220,000 at December 31, 2023, and $201,000 at March 31, 2023. There was no other real estate owned (“OREO”) at March 31, 2024, December 31, 2023, or March 31, 2023.

Net interest income totaled $8.9 million for the quarter ended March 31, 2024, compared to $9.3 million for the quarter ended December 31, 2023, and $11.3 million for the quarter ended March 31, 2023. The decrease in the current quarter was primarily due to lower levels of interest-earning assets and interest-bearing liabilities compared to the quarter ended December 31, 2023.

Total interest income was $19.6 million for the quarter ended March 31, 2024, compared to $20.3 million for the quarter ended December 31, 2023, and $18.5 million for the quarter ended March 31, 2023, with average interest-earning asset balances declining by $40.6 million and $11.6 million, respectively, compared to the prior periods. Yield on loans increased to 5.88% during the recent quarter, compared to 5.83% and 5.56% for the quarters ended December 31, 2023, and March 31, 2023, respectively. Yield on investments was unchanged at 4.11% for the current quarter, and the quarter ended December 31, 2023, an increase from 3.88% for the quarter ended March 31, 2023.

Total interest expense was $10.7 million for the quarter ended March 31, 2024, compared to $11.0 million for the quarter ended December 31, 2023, and $7.2 million for the quarter ended March 31, 2023. The decline from the quarter ended December 31, 2023, was due primarily to lower levels of deposits, particularly the managed decrease in brokered deposits, offset slightly by an increase in the cost of interest-bearing liabilities. The average cost of interest-bearing deposits was 3.69% for the quarter ended March 31, 2024, compared to 3.62% and 2.41% for the quarters ended December 31, 2023 and March 31, 2023, respectively. Advances from the FHLB totaled $115.0 million at March 31, 2024, down from $125.0 million at December 31, 2023 and $160.0 million at March 31, 2023. At March 31, 2024, all $115.0 million of our 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 32.6 months and a weighted average fixed interest rate of 1.87% as of March 31, 2024. The average cost of borrowings was 2.65% for the quarter ended March 31, 2024, compared to 2.40% and 2.69% for the quarters ended December 31, 2023, and March 31, 2023, respectively.

Net interest margin was 2.55% for the quarter ended March 31, 2024, up slightly from 2.54% for the quarter ended December 31, 2023, but down from 3.22% for the quarter ended March 31, 2023. The slight increase compared to the quarter ended December 31, 2023, was due primarily to the higher level of interest-earning assets. The average yield on interest-earning assets increased six basis points to 5.62% during the first quarter of 2024, from 5.56% during the quarter ended December 31, 2023, and increased 33 basis points from 5.29% during the quarter ended March 31, 2023. The average cost of interest-bearing liabilities increased eight basis points to 3.58% during the quarter, from 3.50% during the quarter ended December 31, 2023, and increased 114 basis points from 2.44% during the quarter ended March 31, 2023. The net interest margin for the month of March 2024 was 2.50%.

4
Noninterest income for the quarter ended March 31, 2024, totaled $787,000, up from $633,000 and $665,000 for the quarters ended December 31, 2023, and March 31, 2023, respectively. The increase compared to the quarter ended December 31, 2023, was primarily due to a $96,000 increase in BOLI income, a $38,000 increase in other noninterest income related to our fintech focused venture capital investment and a $35,000 increase in wealth management revenue, partially offset by a combined decrease of $15,000 in lower deposit and loan related fees. The increase in the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, primarily reflects an increase in other noninterest income, wealth management revenue and BOLI income, partially offset by lower loan and deposit related fees.

Noninterest expense totaled $11.3 million for the quarter ended March 31, 2024, compared to $8.4 million for the quarter ended December 31, 2023, and $9.0 million for the quarter ended March 31, 2023. The increase compared to the quarter ended December 31, 2023, was primarily due to a $1.9 million increase in salaries and employee benefits and a $869,000 increase in professional fees. The increase in salaries and employee benefits consisted primarily of a $1.2 million expense related to the defined benefit plan liability, an incentive accrual of $151,000 compared to a reversal of $250,000 in the previous quarter ended December 31, 2023, a $201,000 increase in salaries due to annual salary increases taking effect January 1, 2024, and $101,000 related to the seasonal increase in payroll taxes. The increase in professional fees consisted primarily of $767,000 in pretax expenses related to the pending sale of the Bank’s assets to Global Federal Credit Union. The increase compared to the quarter ended March 31, 2023, was primarily due to the purchase of a single premium group annuity to satisfy the defined benefit liability and transaction-related expenses mentioned previously, along with increases in data processing fees, occupancy and equipment expenses and regulatory assessments.

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.





5
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. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, our pending transaction with Global Federal Credit Union (“Global”) whereby Global, pursuant to the definitive purchase and assumption agreement (the “P&A Agreement”), will acquire substantially all of the assets and assume substantially all of the liabilities of the Bank, expectations of the business environment in which we operate, projections of future performance or financial items, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based on current management expectations and may, therefore, involve risks and uncertainties. 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: the occurrence of any event, change or other circumstances that could give rise to the right of one or all of the parties to terminate the P&A Agreement; delays in completing the P&A Agreement; the failure to obtain necessary regulatory approvals and shareholder approvals or to satisfy any of the other conditions to the Global transaction, including the P&A Agreement, on a timely basis or at all; delays or other circumstances arising from the dissolution of the Bank and the Company following completion of the P&A Agreement; diversion of management’s attention from ongoing business operations and opportunities during the pending Global transaction; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement of the Global transaction; 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 estimates in determining the 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.








6
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)

Assets
 
Mar 31,
2024
   
Dec 31,
2023
   
Mar 31,
2023
   
Three
Month
Change
   
One
Year
Change
 
                               
Cash on hand and in banks
 
$
8,789
   
$
8,391
   
$
9,618
     
4.7
%
   
(8.6
)%
Interest-earning deposits with banks
   
40,272
     
22,138
     
70,998
     
81.9
     
(43.3
)
Investments available-for-sale, at fair value
   
180,376
     
207,915
     
214,948
     
(13.2
)
   
(16.1
)
Investments held-to-maturity, at amortized cost
   
2,451
     
2,456
     
2,439
     
(0.2
)
   
0.5
 
Loans receivable, net of allowance of $14,996,
  $15,306, and $16,028 respectively
   
1,142,909
     
1,175,925
     
1,184,750
     
(2.8
)
   
(3.5
)
Federal Home Loan Bank ("FHLB") stock, at cost
   
6,078
     
6,527
     
8,203
     
(6.9
)
   
(25.9
)
Accrued interest receivable
   
7,176
     
7,359
     
7,011
     
(2.5
)
   
2.4
 
Deferred tax assets, net
   
2,399
     
2,648
     
2,990
     
(9.4
)
   
(19.8
)
Premises and equipment, net
   
19,323
     
19,667
     
20,732
     
(1.7
)
   
(6.8
)
Bank owned life insurance ("BOLI"), net
   
38,058
     
37,653
     
36,647
     
1.1
     
3.9
 
Prepaid expenses and other assets
   
16,827
     
10,478
     
11,336
     
60.6
     
48.4
 
Right of use asset ("ROU"), net
   
2,415
     
2,617
     
3,194
     
(7.7
)
   
(24.4
)
Goodwill
   
889
     
889
     
889
     
0.0
     
0.0
 
Core deposit intangible, net
   
388
     
419
     
516
     
(7.4
)
   
(24.8
)
Total assets
 
$
1,468,350
   
$
1,505,082
   
$
1,574,271
     
(2.4
)
   
(6.7
)
                                         
Liabilities and Stockholders' Equity
                                       
                                         
Deposits
                                       
Noninterest-bearing deposits
 
$
100,846
   
$
100,899
   
$
110,780
     
(0.1
)
   
(9.0
)
Interest-bearing deposits
   
1,066,050
     
1,093,208
     
1,116,348
     
(2.5
)
   
(4.5
)
Total deposits
   
1,166,896
     
1,194,107
     
1,227,128
     
(2.3
)
   
(4.9
)
Advances from the FHLB
   
115,000
     
125,000
     
160,000
     
(8.0
)
   
(28.1
)
Advance payments from borrowers for taxes and
  insurance
   
5,649
     
2,952
     
5,447
     
91.4
     
3.7
 
Lease liability, net
   
2,598
     
2,806
     
3,374
     
(7.4
)
   
(23.0
)
Accrued interest payable
   
1,134
     
2,739
     
749
     
(58.6
)
   
51.4
 
Other liabilities
   
16,890
     
15,818
     
17,928
     
6.8
     
(5.8
)
Total liabilities
   
1,308,167
     
1,343,422
     
1,414,626
     
(2.6
)
   
(7.5
)
                                         
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
  9,174,425 shares at March 31 2024,
  9,179,510 shares at December 31 2023, and
  9,148,086 shares at March 31 2023
   
92
     
92
     
92
     
0.0
     
0.0
 
Additional paid-in capital
   
72,871
     
73,035
     
72,445
     
(0.2
)
   
0.6
 
Retained earnings
   
93,938
     
96,206
     
95,597
     
(2.4
)
   
(1.7
)
Accumulated other comprehensive loss, net of tax
   
(6,718
)
   
(7,673
)
   
(8,489
)
   
(12.4
)
   
(20.9
)
Total stockholders' equity
   
160,183
     
161,660
     
159,645
     
(0.9
)
   
0.3
 
Total liabilities and stockholders' equity
 
$
1,468,350
   
$
1,505,082
   
$
1,574,271
     
(2.4
)%
   
(6.7
)%


7
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except per share data)
(Unaudited)

   
Quarter Ended
             
   
Mar 31,
2024
   
Dec 31,
2023
   
Mar 31,
2023
   
Three
Month
Change
   
One
Year
Change
 
Interest income
                             
Loans, including fees
 
$
16,966
   
$
17,143
   
$
16,029
     
(1.0
)%
   
5.8
%
Investments
   
2,064
     
2,143
     
2,105
     
(3.7
)
   
(1.9
)
Interest-earning deposits with banks
   
486
     
880
     
236
     
(44.8
)
   
105.9
 
Dividends on FHLB Stock
   
127
     
121
     
130
     
5.0
     
(2.3
)
Total interest income
   
19,643
     
20,287
     
18,500
     
(3.2
)
   
6.2
 
Interest expense
                                       
Deposits
   
9,916
     
10,281
     
6,332
     
(3.6
)
   
56.6
 
FHLB advances and other borrowings
   
827
     
731
     
912
     
13.1
     
(9.3
)
Total interest expense
   
10,743
     
11,012
     
7,244
     
(2.4
)
   
48.3
 
Net interest income
   
8,900
     
9,275
     
11,256
     
(4.0
)
   
(20.9
)
(Recapture of provision) provision for credit losses
   
(175
)
   
-
     
338
     
n/a
     
(151.8
)
Net interest income after (recapture of provision)
  provision for credit losses
   
9,075
     
9,275
     
10,918
     
(2.2
)
   
(16.9
)
                                         
Noninterest income
                                       
BOLI income
   
351
     
255
     
308
     
37.6
     
14.0
 
Wealth management revenue
   
95
     
60
     
45
     
58.3
     
111.1
 
Deposit related fees
   
221
     
234
     
223
     
(5.6
)
   
(0.9
)
Loan related fees
   
58
     
60
     
91
     
(3.3
)
   
(36.3
)
Other
   
62
     
24
     
(2
)
   
158.3
   
NM
 
Total noninterest income
   
787
     
633
     
665
     
24.3
     
18.3
 
                                         
Noninterest expense
                                       
Salaries and employee benefits
   
6,763
     
4,822
     
5,461
     
40.3
     
23.8
 
Occupancy and equipment
   
1,226
     
1,231
     
1,165
     
(0.4
)
   
5.2
 
Professional fees
   
1,300
     
431
     
417
     
201.6
     
211.8
 
Data processing
   
786
     
718
     
686
     
9.5
     
14.6
 
Regulatory assessments
   
166
     
196
     
101
     
(15.3
)
   
64.4
 
Insurance and bond premiums
   
132
     
113
     
130
     
16.8
     
1.5
 
Marketing
   
64
     
70
     
77
     
(8.6
)
   
(16.9
)
Other general and administrative
   
894
     
858
     
918
     
4.2
     
(2.6
)
Total noninterest expense
   
11,331
     
8,439
     
8,955
     
34.3
     
26.5
 
(Loss) income before federal income tax (benefit)
  provision
   
(1,469
)
   
1,469
     
2,628
     
(200.0
)
   
(155.9
)
Federal income tax (benefit) provision
   
(393
)
   
275
     
506
     
(242.9
)
   
(177.7
)
Net (loss) income
 
$
(1,076
)
 
$
1,194
   
$
2,122
     
(190.1
)%
   
(150.7
)%
                                         
Basic (loss) earnings per share
 
$
(0.12
)
 
$
0.13
   
$
0.23
                 
Diluted (loss) earnings per share
 
$
(0.12
)
 
$
0.13
   
$
0.23
                 
Weighted average number of common shares
  outstanding
   
9,159,339
     
9,151,892
     
9,104,371
                 
Weighted average number of diluted shares
  outstanding
   
9,159,339
     
9,176,724
     
9,173,276
                 


8
The following table presents a breakdown of the loan portfolio (unaudited):
   
March 31, 2024
   
December 31, 2023
   
March 31, 2023
 
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
   
(Dollars in thousands)
 
Commercial real estate:
                                   
Residential:
                                   
Multifamily
 
$
134,386
     
11.6
%
 
$
138,149
     
11.6
%
 
$
143,332
     
11.9
%
Total multifamily residential
   
134,386
     
11.6
     
138,149
     
11.6
     
143,332
     
11.9
 
                                                 
Non-residential:
                                               
Retail
   
118,958
     
10.4
     
124,172
     
10.4
     
130,788
     
11.0
 
Office
   
72,303
     
6.2
     
72,778
     
6.1
     
79,793
     
6.6
 
Hotel / motel
   
57,263
     
4.9
     
63,597
     
5.3
     
67,165
     
5.6
 
Storage
   
32,834
     
2.8
     
33,033
     
2.8
     
33,604
     
2.8
 
Mobile home park
   
23,351
     
2.0
     
21,701
     
1.8
     
21,992
     
1.8
 
Warehouse
   
19,086
     
1.6
     
19,218
     
1.6
     
19,780
     
1.6
 
Nursing Home
   
11,538
     
1.0
     
11,610
     
1.0
     
12,260
     
1.0
 
Other non-residential
   
32,041
     
2.8
     
31,750
     
2.6
     
43,523
     
3.7
 
Total non-residential
   
367,374
     
31.7
     
377,859
     
31.6
     
408,905
     
34.1
 
                                                 
Construction/land:
                                               
One-to-four family residential
   
43,411
     
3.7
     
47,149
     
4.0
     
53,948
     
4.5
 
Multifamily
   
5,266
     
0.5
     
4,004
     
0.3
     
(131
)
   
0.0
 
Commercial
   
-
     
0.0
     
-
     
0.0
     
-
     
0.0
 
Land development
   
8,330
     
0.7
     
9,771
     
0.8
     
9,786
     
0.8
 
Total construction/land
   
57,007
     
4.9
     
60,924
     
5.1
     
63,603
     
5.3
 
                                                 
One-to-four family residential:
                                               
Permanent owner occupied
   
283,398
     
24.5
     
284,471
     
23.9
     
242,477
     
20.2
 
Permanent non-owner occupied
   
223,302
     
19.3
     
228,752
     
19.2
     
240,183
     
20.0
 
Total one-to-four family residential
   
506,700
     
43.8
     
513,223
     
43.1
     
482,660
     
40.2
 
                                                 
Business:
                                               
Aircraft
   
1,907
     
0.2
     
1,945
     
0.1
     
2,052
     
0.1
 
Small Business Administration ("SBA")
   
1,778
     
0.2
     
1,794
     
0.3
     
499
     
0.1
 
Paycheck Protection Plan ("PPP")
   
395
     
0.0
     
473
     
0.0
     
707
     
0.1
 
Other business
   
16,344
     
1.4
     
24,869
     
2.1
     
28,401
     
2.3
 
Total business
   
20,424
     
1.8
     
29,081
     
2.5
     
31,659
     
2.6
 
                                                 
Consumer:
                                               
Classic, collectible and other auto
   
58,003
     
5.0
     
58,618
     
5.0
     
59,962
     
5.0
 
Other consumer
   
14,011
     
1.2
     
13,377
     
1.1
     
10,657
     
0.9
 
Total consumer
   
72,014
     
6.2
     
71,995
     
6.1
     
70,619
     
5.9
 
                                                 
Total loans
   
1,157,905
     
100.0
%
   
1,191,231
     
100.0
%
   
1,200,778
     
100.0
%
Less:
                                               
ACL
   
14,996
             
15,306
             
16,028
         
Loans receivable, net
 
$
1,142,909
           
$
1,175,925
           
$
1,184,750
         
                                                 
Concentrations of credit: (1)
                                               
Construction loans as % of total capital
   
36.3
%
           
38.3
%
           
44.9
%
       
Total non-owner occupied commercial
real estate as % of total capital
   
307.2
%
           
316.8
%
           
347.7
%
       
 (1) Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC regulatory guidelines.

9
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
(Unaudited)

   
At or For the Quarter Ended
 
   
Mar 31,
   
Dec 31,
   
Sep 30,
   
Jun 30,
   
Mar 31,
 
   
2024
   
2023
   
2023
   
2023
   
2023
 
   
(Dollars in thousands, except per share data)
 
Performance Ratios: (1)
                             
Return on assets
   
(0.29
)%
   
0.31
%
   
0.39
%
   
0.39
%
   
0.57
%
Return on equity
   
(2.67
)
   
2.97
     
3.71
     
3.74
     
5.31
 
Dividend payout ratio
   
(108.33
)
   
100.00
     
79.26
     
79.90
     
56.52
 
Equity-to-assets ratio
   
10.91
     
10.74
     
10.44
     
10.39
     
10.14
 
Tangible equity ratio (2)
   
10.83
     
10.66
     
10.36
     
10.31
     
10.06
 
Net interest margin
   
2.55
     
2.54
     
2.69
     
2.84
     
3.22
 
Average interest-earning assets to average interest-
  bearing liabilities
   
116.40
     
115.84
     
116.94
     
116.27
     
117.78
 
Efficiency ratio
   
116.97
     
85.17
     
84.49
     
85.57
     
75.12
 
Noninterest expense as a percent of average total
  assets
   
3.05
     
2.18
     
2.29
     
2.50
     
2.42
 
Book value per common share
 
$
17.46
   
$
17.61
   
$
17.35
   
$
17.35
   
$
17.45
 
Tangible book value per share (2)
   
17.32
     
17.47
     
17.20
     
17.20
     
17.30
 
                                         
Capital Ratios: (3)
                                       
Tier 1 leverage ratio
   
10.41
%
   
10.18
%
   
10.25
%
   
10.02
%
   
10.24
%
Common equity tier 1 capital ratio
   
14.98
     
14.90
     
14.75
     
14.49
     
14.33
 
Tier 1 capital ratio
   
14.98
     
14.90
     
14.75
     
14.49
     
14.33
 
Total capital ratio
   
16.24
     
16.15
     
16.00
     
15.75
     
15.59
 
                                         
Asset Quality Ratios: (4)
                                       
Nonaccrual loans as a percent of total loans
   
0.02
%
   
0.02
%
   
0.02
%
   
0.02
%
   
0.02
%
ACL as a percent of total loans
   
1.30
     
1.28
     
1.29
     
1.31
     
1.33
 
Net 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
   
$
15,306
   
$
15,606
   
$
16,028
   
$
15,227
 
Beginning balance adjustment from adoption of
  Topic 326
   
-
     
-
     
-
     
-
     
500
 
(Recapture of provision) provision
   
(300
)
   
-
     
(300
)
   
(400
)
   
300
 
Charge-offs
   
(10
)
   
-
     
-
     
(22
)
   
-
 
Recoveries
   
-
     
-
     
-
     
-
     
1
 
ACL, end of the quarter
 
$
14,996
   
$
15,306
   
$
15,306
   
$
15,606
   
$
16,028
 
                                         
Allowance for unfunded commitments
                                       
Beginning balance
 
$
439
   
$
439
   
$
439
   
$
286
   
$
248
 
Provision for credit losses
   
125
     
-
     
-
     
153
     
38
 
Ending balance
 
$
564
   
$
439
   
$
439
   
$
439
   
$
286
 
                                         
Provision for credit losses
                                       
ACL - loans
 
$
(300
)
 
$
-
   
$
(300
)
 
$
(400
)
 
$
300
 
Allowance for unfunded commitments
   
125
     
-
     
-
     
153
     
38
 
Total
 
$
(175
)
 
$
-
   
$
(300
)
 
$
(247
)
 
$
338
 
(1) Performance ratios are calculated on an annualized basis.
(2) 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.

10
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
(Unaudited)

   
At or For the Quarter Ended
 
   
Mar 31,
   
Dec 31,
   
Sep 30,
   
Jun 30,
   
Mar 31,
 
   
2024
   
2023
   
2023
   
2023
   
2023
 
   
(Dollars in thousands)
 
Yields and Costs: (1)
                             
Yield on loans
   
5.88
%
   
5.83
%
   
5.73
%
   
5.71
%
   
5.56
%
Yield on investments
   
4.11
     
4.11
     
3.98
     
3.93
     
3.88
 
Yield on interest-earning deposits
   
5.28
     
5.32
     
5.18
     
4.91
     
4.40
 
Yield on FHLB stock
   
7.79
     
7.29
     
6.57
     
7.06
     
7.30
 
Yield on interest-earning assets
   
5.62
%
   
5.56
%
   
5.46
%
   
5.43
%
   
5.29
%
                                         
Cost of interest-bearing deposits
   
3.69
%
   
3.62
%
   
3.33
%
   
3.06
%
   
2.41
%
Cost of borrowings
   
2.65
     
2.40
     
2.42
     
2.55
     
2.69
 
Cost of interest-bearing liabilities
   
3.58
%
   
3.50
%
   
3.24
%
   
3.01
%
   
2.44
%
                                         
Cost of total deposits (2)
   
3.38
%
   
3.31
%
   
3.03
%
   
2.78
%
   
2.17
%
Cost of funds (3)
   
3.31
     
3.23
     
2.97
     
2.76
     
2.23
 
                                         
Average Balances:
                                       
Loans
 
$
1,160,156
   
$
1,167,339
   
$
1,171,483
   
$
1,182,939
   
$
1,168,539
 
Investments
   
202,106
     
206,837
     
211,291
     
215,113
     
219,969
 
Interest-earning deposits
   
37,032
     
65,680
     
40,202
     
50,691
     
21,729
 
FHLB stock
   
6,554
     
6,584
     
6,820
     
6,814
     
7,219
 
Total interest-earning assets
 
$
1,405,848
   
$
1,446,440
   
$
1,429,796
   
$
1,455,557
   
$
1,417,456
 
                                         
Interest-bearing deposits
 
$
1,082,168
   
$
1,127,690
   
$
1,097,324
   
$
1,126,598
   
$
1,065,827
 
Borrowings
   
125,604
     
120,978
     
125,402
     
125,275
     
137,600
 
Total interest-bearing liabilities
 
$
1,207,772
   
$
1,248,668
   
$
1,222,726
   
$
1,251,873
   
$
1,203,427
 
Noninterest-bearing deposits
   
99,173
     
102,869
     
109,384
     
111,365
     
115,708
 
Total deposits and borrowings
 
$
1,306,945
   
$
1,351,537
   
$
1,332,110
   
$
1,363,238
   
$
1,319,135
 
                                         
Average assets
 
$
1,495,753
   
$
1,538,955
   
$
1,522,224
   
$
1,547,321
   
$
1,509,297
 
Average stockholders' equity
   
161,823
     
159,659
     
160,299
     
159,764
     
162,016
 
(1) Yields and costs are annualized.
(2) Includes noninterest-bearing deposits.
(3) Includes total borrowings and deposits (including noninterest-bearing deposits).







11
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  
    Mar 31,
2024
    Dec 31,
2023
    Sep 30,
2023
    Jun 30,
2023
    Mar 31,
2023
 
    (Dollars in thousands, except per share data)  
                               
Tangible equity to tangible assets and tangible book value per share:
                             
   Total stockholders' equity (GAAP)
 
$
160,183
   
$
161,660
   
$
159,235
   
$
158,715
   
$
159,645
 
   Less:
                                       
   Goodwill
   
889
     
889
     
889
     
889
     
889
 
   Core deposit intangible, net
   
388
     
419
     
451
     
484
     
516
 
   Tangible equity (Non-GAAP)
 
$
158,906
   
$
160,352
   
$
157,895
   
$
157,342
   
$
158,240
 
 
                                       
   Total assets (GAAP)
 
$
1,468,350
   
$
1,505,082
   
$
1,525,568
   
$
1,528,079
   
$
1,574,271
 
   Less:
                                       
   Goodwill
   
889
     
889
     
889
     
889
     
889
 
   Core deposit intangible, net
   
388
     
419
     
451
     
484
     
516
 
   Tangible assets (Non-GAAP)
 
$
1,467,073
   
$
1,503,774
   
$
1,524,228
   
$
1,526,706
   
$
1,572,866
 
 
                                       
   Common shares outstanding at period end
   
9,174,425
     
9,179,510
     
9,179,510
     
9,148,086
     
9,148,086
 
 
                                       
   Equity-to-assets ratio (GAAP)
   
10.91
%
   
10.74
%
   
10.44
%
   
10.39
%
   
10.14
%
   Tangible equity-to-tangible assets ratio (Non‑GAAP)
   
10.83
     
10.66
     
10.36
     
10.31
     
10.06
 
   Book value per common share (GAAP)
 
$
17.46
   
$
17.61
   
$
17.35
   
$
17.35
   
$
17.45
 
   Tangible book value per share (Non-GAAP)
   
17.32
     
17.47
     
17.20
     
17.20
     
17.30
 

12