EX-99.1 2 ffnw8k12821hexh991.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.
Reports Net Income of $2.6 Million or $0.28 per Diluted Share for the Fourth Quarter and
$8.6 Million or $0.88 per Diluted Share for the Year Ended December 31, 2020

Renton, Washington – January 28, 2021 - 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, 2020, of $2.6 million, or $0.28 per diluted share, compared to net income of $2.1 million, or $0.21 per diluted share, for the quarter ended September 30, 2020, and $2.6 million, or $0.26 per diluted share, for the quarter ended December 31, 2019. For the year ended December 31, 2020, net income was $8.6 million, or $0.88 per diluted share, compared to net income of $10.4 million, or $1.03 per diluted share, for the year ended December 31, 2019.

“While 2020 certainly presented significant challenges, it also created many opportunities,” stated Joseph W. Kiley III, President and CEO. “We were able to keep all our offices open and available to our customers throughout the year. Thanks to the efforts of our fantastic team of employees, balances in checking accounts increased by $80.7 million in 2020, allowing us to decrease our balance of higher cost certificates of deposit. Due in large part to our improved deposit mix and the impact of the current low interest rate environment, our cost of funds declined to 1.07% in the quarter ended December 31, 2020, from 1.19% in the quarter ended September 30, 2020, and 1.82% in the quarter ended December 31, 2019. If interest rates remain low, we expect this trend to continue as we have approximately $266 million in certificates of deposit maturing in the next 12 months at a weighted average rate of 1.87%,” continued Kiley.

“In the third quarter of 2015, we embarked on a branch expansion strategy, focused on leasing small, efficient office spaces that provide a presence for our teams of community bankers in each market we serve, with many of these offices staffed with just two to three employees and equipped with cash recycling machines to assist with handling traditional teller work. We have now grown from a single office thrift institution in 2015 to a multi-branch, full-service community bank. We will open our 15th office in Issaquah, Washington, in the first quarter of 2021 and then pause our expansion with a focus on growing relationships and improving efficiency throughout our branch network. As an example of how the Bank has changed, checking account balances now total $199.5 million compared to $38.6 million at June 30, 2015, just prior to the beginning of our branch expansion efforts.  Our strategy remains focused on improving the Bank’s deposit composition from a reliance on certificates of deposit to a more balanced deposit mix, and expanding our network for lending opportunities,” stated Kiley.

“Our lending teams are working closely with our customers and continue to assist borrowers that may require additional support or closer monitoring due to the COVID-19 pandemic. In the fourth quarter, borrowers that had requested an additional COVID-19 related loan deferral or concession were evaluated, ultimately resulting in downgrades in loan classifications on 16 loans totaling approximately



$34.2 million. While these loans remain classified as ‘pass’ credits and the Bank still expects to receive full payment on the loans, including the deferred interest, these downgrades were the primary reason for our provision for loan losses of $600,000 in the quarter ended December 31, 2020, bringing the total provision for the year to $1.9 million, an increase of $2.2 million from the prior year. Nonetheless, our pre-tax, pre-provision income(1) was $12.4 million for the year ended December 31, 2020, a slight change from $12.6 million in 2019, despite the challenges presented in 2020,” concluded Kiley.
(1) Pre-tax, pre-provision income is a non-GAAP financial measure. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalent.

Highlights for the quarter and year ended December 31, 2020:
Demand deposits increased $80.7 million for the year ended December 31, 2020.
The strong growth in retail deposits allowed the Bank to reduce its brokered certificates of deposit by $94.5 million in 2020 to none at December 31, 2020.
The Company’s book value per share was $16.05 at December 31, 2020, compared to $15.62 at September 30, 2020, and $15.25 at December 31, 2019.
The Company repurchased 544,626 shares during the year at an average price of $10.44 per share, an amount equal to approximately 5.3% of shares outstanding at the beginning of 2020.
The Company paid regular quarterly cash dividends to shareholders totaling $0.40 per share for the year.
The Bank’s Tier 1 leverage and total capital ratios at December 31, 2020, were 10.3% and 15.6%, respectively, compared to 10.0% and 15.3%, at September 30, 2020, and 10.3% and 14.4% at December 31, 2019.
Based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”) and taking into account the estimated future impact of the COVID-19 pandemic, the Bank recorded a $600,000 provision for loan losses during the quarter, bringing the total provision for loan losses to $1.9 million for the year.

Total deposits increased $24.0 million to $1.09 billion at December 31, 2020, from $ 1.07 billion at September 30, 2020, and increased $60.1 million from $1.03 billion at December 31, 2019. Demand deposits increased $6.2 million and certificates of deposit decreased $19.1 million during the quarter, including a $10 million reduction in brokered deposits.

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

   
Dec 31,
2020
   
Sep 30,
2020
   
Dec 31,
2019
   
Three
Month
Change
   
One
Year
Change
 
Deposits:
 
(Dollars in thousands)
       
Noninterest-bearing demand
 
$
91,285
   
$
82,376
   
$
52,849
   
$
8,909
   
$
38,436
 
Interest-bearing demand
   
108,182
     
110,856
     
65,897
     
(2,674
)
   
42,285
 
Statement savings
   
19,221
     
19,292
     
17,447
     
(71
)
   
1,774
 
Money market
   
465,369
     
428,512
     
377,766
     
36,857
     
87,603
 
Certificates of deposit, retail (1)
   
409,576
     
418,646
     
425,103
     
(9,070
)
   
(15,527
)
Certificates of deposit, brokered
   
     
10,000
     
94,472
     
(10,000
)
   
(94,472
)
Total deposits
 
$
1,093,633
   
$
1,069,682
   
$
1,033,534
   
$
23,951
   
$
60,099
 
(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $12,000 at December 31, 2020, $14,000 at September 30, 2020, and $28,000 at December 31, 2019.

2


The following tables present an analysis of total deposits by branch office (unaudited):
December 31, 2020
 
   
Noninterest-bearing
demand
   
Interest-
bearing
demand
   
Statement
savings
   
Money
market
   
Certificates
of deposit,
retail
   
Certificates
of deposit, brokered
   
Total
 
   
(Dollars in thousands)
 
King County
                                         
Renton
 
$
36,932
   
$
47,964
   
$
13,696
   
$
243,940
   
$
325,803
   
$
   
$
668,335
 
Landing
   
5,300
     
3,199
     
22
     
14,024
     
8,108
     
     
30,653
 
Woodinville
   
3,054
     
7,040
     
688
     
14,270
     
9,790
     
     
34,842
 
Bothell
   
2,153
     
1,760
     
53
     
5,502
     
3,233
     
     
12,701
 
Crossroads
   
6,719
     
5,249
     
58
     
56,836
     
10,994
     
     
79,856
 
Kent (1)
   
5,047
     
8,607
     
     
23,052
     
1,077
     
     
37,783
 
Kirkland (1)
   
5,205
     
113
     
30
     
3,757
     
     
     
9,105
 
Total King County
   
64,410
     
73,932
     
14,547
     
361,381
     
359,005
     
     
873,275
 
                                                         
Snohomish County
                                                       
Mill Creek
   
3,176
     
2,765
     
1,411
     
14,823
     
9,289
     
     
31,464
 
Edmonds
   
12,074
     
13,735
     
351
     
30,807
     
19,989
     
     
76,956
 
Clearview
   
5,367
     
6,690
     
1,012
     
17,902
     
5,346
     
     
36,317
 
Lake Stevens
   
3,057
     
7,419
     
835
     
14,593
     
4,669
     
     
30,573
 
Smokey Point
   
2,788
     
3,237
     
1,005
     
21,575
     
11,278
     
     
39,883
 
Total Snohomish County
   
26,462
     
33,846
     
4,614
     
99,700
     
50,571
     
     
215,193
 
                                                         
Pierce County
                                                       
University Place
   
377
     
215
     
15
     
1,578
     
     
     
2,185
 
Gig Harbor
   
36
     
189
     
45
     
2,710
     
     
     
2,980
 
Total Pierce County
   
413
     
404
     
60
     
4,288
     
     
     
5,165
 
                                                         
Total retail deposits
   
91,285
     
108,182
     
19,221
     
465,369
     
409,576
     
     
1,093,633
 
Brokered deposits
   
     
     
     
     
     
     
 
Total deposits
 
$
91,285
   
$
108,182
   
$
19,221
   
$
465,369
   
$
409,576
     
   
$
1,093,633
 
(1) Kent opened January 31, 2019; Kirkland, November 12, 2019; University Place, March 2, 2020; and Gig Harbor, October 5, 2020.
September 30, 2020
 
   
Noninterest-bearing
demand
   
Interest-
bearing
demand
   
Statement
savings
   
Money
market
   
Certificates
of deposit,
retail
   
Certificates
of deposit, brokered
   
Total
 
   
(Dollars in thousands)
 
King County
                                         
Renton
 
$
35,066
   
$
47,957
   
$
14,677
   
$
235,680
   
$
335,675
   
$
   
$
669,055
 
Landing
   
3,209
     
3,193
     
37
     
16,398
     
8,251
     
     
31,088
 
Woodinville
   
3,086
     
6,608
     
703
     
12,589
     
8,514
     
     
31,500
 
Bothell
   
2,270
     
2,104
     
54
     
4,675
     
3,290
     
     
12,393
 
Crossroads
   
6,755
     
8,085
     
48
     
50,304
     
11,076
     
     
76,268
 
Kent (1)
   
5,452
     
8,277
     
     
13,802
     
1,070
     
     
28,601
 
Kirkland (1)
   
4,534
     
56
     
1
     
2,627
     
     
     
7,218
 
Total King County
   
60,372
     
76,280
     
15,520
     
336,075
     
367,876
     
     
856,123
 
                                                         
Snohomish County
                                                       
Mill Creek
   
3,713
     
3,236
     
856
     
14,695
     
10,675
     
     
33,175
 
Edmonds
   
5,853
     
13,865
     
485
     
28,229
     
19,300
     
     
67,732
 
Clearview
   
6,102
     
6,478
     
853
     
18,014
     
4,881
     
     
36,328
 
Lake Stevens
   
3,264
     
7,346
     
703
     
13,520
     
4,356
     
     
29,189
 
Smokey Point
   
2,733
     
3,137
     
875
     
16,173
     
11,558
     
     
34,476
 
Total Snohomish County
   
21,665
     
34,062
     
3,772
     
90,631
     
50,770
     
     
200,900
 
                                                         
Pierce County
                                                       
University Place (1)
   
339
     
514
     
     
1,806
     
     
     
2,659
 
Total Pierce County
   
339
     
514
     
     
1,806
     
     
     
2,659
 
                                                         
Total retail deposits
   
82,376
     
110,856
     
19,292
     
428,512
     
418,646
     
     
1,059,682
 
Brokered deposits
   
     
     
     
     
     
10,000
     
10,000
 
Total deposits
 
$
82,376
   
$
110,856
   
$
19,292
   
$
428,512
   
$
418,646
   
$
10,000
   
$
1,069,682
 
(1) Kent opened January 31, 2019; Kirkland, November 12, 2019; and University Place, March 2, 2020.
3

Net loans receivable totaled $1.10 billion at December 31, 2020, compared to $1.13 billion at September 30, 2020, and $1.11 billion at December 31, 2019. New commercial loan activity remains muted as many borrowers are focused on maintaining their existing loans in lieu of seeking out new opportunities. The average balance of net loans receivable totaled $1.13 billion for the quarter ended December 31, 2020, compared to $1.14 billion for the quarter ended September 30, 2020, and $1.09 billion for the quarter ended December 31, 2019. For the year ended December 31, 2020, the average balance of net loans receivable was $1.12 billion, compared to $1.06 billion for the year ended December 31, 2019.

The Company recorded a $600,000 provision for loan losses in the quarter ended December 31, 2020, compared to a $700,000 provision for loan losses in the quarter ended September 30, 2020, and no provision for loan losses in the quarter ended December 31, 2019. The provision in the quarter ended December 31, 2020, was primarily due to risk rating downgrades on $34.2 million in commercial real estate loans, as any relationship that requested an additional loan payment deferral and demonstrated other weaknesses received additional scrutiny. Somewhat offsetting this impact, net loans receivable declined by $33.4 million during the quarter. The provision in the quarter ended September 30, 2020, was primarily attributed to loan downgrades during the quarter, including the downgrade of $26.8 million in commercial real estate loans. Strong loan portfolio quality metrics and credit upgrades for certain loan relationships resulted in no provision for loan losses in the quarter ended December 31, 2019. For the year ended December 31, 2020, the provision for loan losses totaled $1.9 million, compared to a recapture of provision for loan losses of $300,000 for the year ended December 31, 2019.

The ALLL represented 1.36% of total loans receivable at December 31, 2020, compared to 1.27% of total loans receivable at September 30, 2020, and 1.18% of total loans receivable at December 31, 2019. Excluding Paycheck Protection Program (“PPP”) loan balances, which are 100% guaranteed by the Small Business Administration (“SBA”), the ALLL represented 1.41% of total loans receivable at December 31, 2020, compared to 1.33% of total loans receivable at September 30, 2020. The ALLL as a percent of total loans excluding PPP loans is a non-GAAP financial measure. See Non-GAAP Financial Measures at the end of this press release for a reconciliation to its nearest GAAP equivalent. Nonperforming loans are comprised of a single $2.1 million multifamily loan in foreclosure at both December 31, 2020, and September 30, 2020, and were $95,000 at December 31, 2019. Based on an impairment analysis and ongoing monitoring, the Company does not expect to incur a loss on this multifamily loan. OREO also remained unchanged at $454,000 at December 31, 2020, September 30, 2020, and December 31, 2019.




4

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

   
Dec 31,
   
Sep 30,
   
Dec 31,
 

Three   
Month  
 
One
Year
 
   
2020
   
2020
   
2019
 

Change
 
Change
 
   
(Dollars in thousands)
 
Nonperforming loans:
                             
One-to-four family residential
 
$  
 ─    
$

   
$
95
 
$

 
$
(95
)
Multifamily
   
2,104
     
2,104
   
 
 
   
2,104
 
Total nonperforming loans
   
2,104
     
2,104
     
95
 
 
   
2,009
 
                         
           
Other real estate owned (“OREO”)
   
454
     
454
     
454
 
 
 
 
                         
           
Total nonperforming assets (1)
 
$
2,558
   
$
2,558
   
$
549
 
$

 
$
2,009
 
                                       
Nonperforming assets as a
                                     
percent of total assets
   
0.18
%
   
0.19
%
   
0.04
%
             
(1) The difference between nonperforming assets reported above, and the totals reported by other industry sources, is due to their inclusion of all Troubled Debt Restructured Loans ("TDRs") as nonperforming loans, although 100% of the Bank’s TDRs were performing in accordance with their restructured terms at December 31, 2020.

The Company accounts for certain loan modifications or restructurings as TDRs. In general, the modification or restructuring of a debt is considered a TDR if, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. At December 31, 2020, TDRs totaled $3.9 million, compared to $4.1 million at September 30, 2020, and $5.2 million at December 31, 2019. All TDRs were performing according to their modified repayment terms for the periods presented. As discussed further below, The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), signed into law on March 27, 2020, provided guidance around the modification of loans as a result of the COVID‑19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. The recently enacted Consolidated Appropriations Act, 2021 provides additional COVID relief, including, among other things, additional PPP funding of $284.5 billion and extends TDR relief to the earlier of 60 days after the national emergency termination date or January 1, 2022.

Net interest income totaled $10.7 million for the quarter ended December 31, 2020, compared to $10.1 million for the quarter ended September 30, 2020, and $9.7 million for the quarter ended December 31, 2019. The $562,000 increase in the quarter ended December 31, 2020, was due primarily to higher loan related fees including a $187,000 increase in net deferred fee recognition relating to the forgiveness of PPP loans.  For the year ended December 31, 2020, net interest income totaled $40.5 million, compared to $38.9 million for the year ended December 31, 2019, due to changes in the average balances in net loans receivable to $1.12 million in 2020 compared to $1.06 million in 2019, and reductions in the cost of interest‑bearing liabilities that declined to 1.41% for the year ended December 31, 2020, from 1.92% for the year ended December 31, 2019.

Total interest income was $13.8 million for the quarter ended December 31, 2020, compared to $13.7 million for the quarter ended September 30, 2020, and $15.0 million for the quarter ended December 31, 2019. For the year ended December 31, 2020, interest income totaled $56.1 million, compared to $59.6 million for the prior year. The increase in the current quarter compared to the quarter ended September 30, 2020, was primarily due to the recognition of deferred fees on PPP loans, as noted above.

5

Total interest expense was $3.2 million for the quarter ended December 31, 2020, compared to $3.6 million for the quarter ended September 30, 2020, and $5.3 million for the quarter ended December 31, 2019. The average cost of interest-bearing deposits declined to 1.12% for the quarter ended December 31, 2020, compared to 1.27% for the quarter ended September 30, 2020, and 1.94% for the quarter ended December 31, 2019. The decline from the quarter ended September 30, 2020, was due primarily to a reduced level of brokered deposits and retail certificates of deposits, along with lower rates paid on the Bank’s other interest‑bearing deposit balances. During the quarter ended December 31, 2020, the Bank redeemed its remaining $10.0 million in callable brokered certificates of deposit with an average coupon of 1.475%, resulting in the recognition of $60,000 in unamortized fees in the quarter, compared to $20,000 in unamortized fees related to a $5.0 million redemption in the quarter ended September 30, 2020. Advances from the FHLB remained unchanged at $120.0 million at December 31, 2020 and September 30, 2020, compared to $137.7 million at December 31, 2019, and were comprised of short-term FHLB advances tied to cash flow hedge agreements utilized to assist in the Bank’s interest rate risk management efforts. The average cost of borrowings was 1.40% for the quarter ended December 31, 2020, compared to 1.28% for the quarter ended September 30, 2020, and 1.66% for the quarter ended December 31, 2019. For the year ended December 31, 2020, total interest expense declined to $15.6 million, compared to $20.7 million for the year ended December 31, 2019, due to the significant reduction in short term interest rates following decreases in the federal funds target rates in 2020 in response to COVID-19.

The net interest margin was 3.29% for the quarter ended December 31, 2020, compared to 3.07% for the quarter ended September 30, 2020, and 3.09% for the quarter ended December 31, 2019. The expansion in the net interest margin is due primarily to the 12 basis point reduction in the Company’s cost of interest‑bearing liabilities during the quarter to 1.15%, compared to 1.27% in the quarter ended September 30, 2020. The 10‑basis point increase in the yield on interest earning assets to 4.26% in the quarter ended December 31, 2020, from 4.16% in the quarter ended September 30, 2020, was impacted favorably by the quarter over quarter increase in net deferred fee recognition on PPP loans, with deferred fees totaling $420,000 recognized in the quarter ended December 31, 2020, compared to $232,000 in the quarter ended September 30, 2020. At December 31, 2020, the net balance of deferred fees relating to PPP loans totaled $1.0 million, which will be recognized in future periods.

Noninterest income for the quarter ended December 31, 2020, totaled $1.7 million, compared to $1.0 million for the quarter ended September 30, 2020, and $1.5 million for the quarter ended December 31, 2019. The increase in noninterest income for the quarter ended December 31, 2020, compared to the quarter ended September 30, 2020, was primarily due to a $706,000 increase in loan related fees, including an increase of $411,000 in swap related fees and an increase of $202,000 in prepayment penalty income. For the year ended December 31, 2020, noninterest income increased to $4.4 million, from $4.1 million for the year ended December 31, 2019, due primarily to an increase in loan related fees.

Noninterest expense totaled $8.4 million for the quarter ended December 31, 2020, compared to $7.9 million for the quarter ended September 30, 2020, and $8.0 million in the quarter ended December 31, 2019. Salaries and employee benefits for the quarter ended December 31, 2020, increased $266,000 compared to the quarter ended September 30, 2020, due primarily to accruals for employee incentives, based in large part on successful deposit growth, earned in 2020. Occupancy and equipment expenses increased $160,000 in the quarter ended December 31, 2020, compared to the quarter ended September 30, 2020, due primarily to expenses relating to our branch expansion efforts. Noninterest expense totaled $32.5 million for the year ended December 31, 2020, compared to $30.4 million in 2019. The increase in noninterest expense year over year was due primarily to increases in salaries and employee benefits, occupancy and equipment, and data processing expenses relating to the Company’s growth.

6


As a result of ongoing efforts to identify operational efficiencies and to align with near-term growth expectations, the Bank eliminated eight full-time positions in mid-January 2021, representing approximately 6% of its employee base.

COVID-19 Related Information

The Bank is committed to assisting its customers and communities in response to the COVID-19 pandemic, including providing certain short-term loan modifications. In addition, the Bank is participating in the PPP as an SBA lender. The Bank continues to take the steps necessary while working with its loan customers to effectively manage the portfolio through the ongoing uncertainty surrounding the duration, impact and government response to the crisis.

Paycheck Protection Program
The SBA provides assistance to small businesses impacted by COVID-19 through the PPP, which was designed to provide near-term relief to help small businesses sustain operations. The deadline for PPP loan applications to the SBA under the original PPP was August 8, 2020. Under this program, as of December 31, 2020, there were 372 PPP loans outstanding totaling $41.3 million, down from 462 PPP loans totaling $52.0 million as of September 30, 2020, and $51.7 million representing 455 loans as of June 30, 2020. A total of 307, or more than 82%, of the remaining loans at December 31, 2020, are for loan amounts of $150,000 or less and represent $13.5 million of the total, of which 199 loans, representing $3.6 million, are for loan amounts of $50,000 or less. As of December 31, 2020, a total of 146 PPP loans totaling $11.2 million had been approved for forgiveness under the SBA program. Recent legislation reopened the PPP through March 31, 2021, by authorizing $284.5 billion in funding for eligible small businesses and nonprofits. In January, the Bank began accepting and processing loan applications under this second PPP program.

Modifications
The primary method of relief is to allow the borrower to defer their loan payments for three to six months, while certain borrowers are allowed to pay interest only or have payment deferrals for periods longer than six months depending upon their specific circumstances. The CARES Act and regulatory guidelines suspend the determination of certain loan modifications related to the COVID‑19 pandemic from being treated as TDRs. Recent legislation extended this accounting treatment through the earlier of 60 days after the national emergency termination date or January 1, 2022. The following table provides detail on the balance of loans remaining on deferral status as of December 31, 2020:





7

   
As of December 31, 2020
 
   
Balance of
loans with modifications
of 4-6 months
   
Balance of
loans with modifications
of greater
than 6 months
   
Total balance
of loans with modifications granted
   
Total loans
   
Modifications
as % of total
loans in each category
 
   
(Dollars in thousands)
       
One-to-four family residential
 
$
745
   
$
1,027
   
$
1,772
   
$
381,960
     
0.5
%
Multifamily
   
-
     
2,347
     
2,347
     
136,694
     
1.7
 
                                         
Commercial real estate:
                                       
Office
   
-
     
-
     
-
     
84,311
     
-
 
Retail
   
-
     
3,972
     
3,972
     
114,117
     
3.5
 
Mobile home park
   
-
     
-
     
-
     
28,094
     
-
 
Hotel/motel
   
-
     
30,501
     
30,501
     
69,304
     
44.0
 
Nursing home
   
-
     
6,368
     
6,368
     
12,868
     
49.5
 
Warehouse
   
-
     
-
     
-
     
17,484
     
-
 
Storage
   
-
     
-
     
-
     
33,671
     
-
 
Other non-residential
   
-
     
-
     
-
     
25,416
     
-
 
Total commercial real estate
   
-
     
40,841
     
40,841
     
385,265
     
10.6
 
                                         
Construction/land
   
-
     
-
     
-
     
92,207
     
-
 
                                         
Business:
                                       
Aircraft
   
-
     
-
     
-
     
10,811
     
-
 
SBA
   
-
     
-
     
-
     
928
     
-
 
PPP
   
-
     
-
     
-
     
41,251
     
-
 
Other business
   
-
     
-
     
-
     
27,673
     
-
 
Total business
   
-
     
-
     
-
     
80,663
     
-
 
                                         
Consumer:
                                       
Classic/collectible auto
   
-
     
190
     
190
     
29,359
     
0.6
 
Other consumer
   
-
     
-
     
-
     
11,262
     
-
 
Total consumer
   
-
     
190
     
190
     
40,621
     
0.5
 
                                         
Total loans with COVID‑19
  pandemic modifications
 
$
745
   
$
44,405
   
$
45,150
   
$
1,117,410
     
4.0
%

Total loans with modifications granted were $45.2 million, or 4.0% of total loans outstanding, at December 31, 2020, down from $65.5 million, or 5.7% of total loans outstanding at September 30, 2020, and $132.1 million, or 11.4% of total loans outstanding, at June 30, 2020. As of December 31, 2020, $44.4 million in loans had been granted modifications of greater than six months, of which $30.5 million were for loans in the hotel/motel category.

Additional Loan Portfolio Details
The Bank is monitoring its loan portfolio for delinquent loans that have not requested modification qualifying under the CARES Act or regulatory guidance. The following table presents the loan to value (“LTV”) ratios of select segments of our loan portfolio at December 31, 2020, that may be more likely to be impacted by COVID-19 pandemic considerations. The LTV ratio is derived by dividing the current loan balance by the lower of the original appraised value or purchase price of the real estate or other collateral:

8

   
As of December 31, 2020
 
   
LTV 0-60%
   
LTV 61-75%
   
LTV 76%+
   
Total
   
Average LTV
 
Category: (1)
 
(Dollars in thousands)
 
One-to-four family
 
$
236,286
   
$
147,465
   
$
31,605
   
$
415,356
     
40.07
%
Church
   
1,372
     
-
     
-
     
1,372
     
46.39
 
Classic/collectible auto
   
5,006
     
11,776
     
12,577
     
29,359
     
67.56
 
Gas station
   
3,507
     
-
     
508
     
4,015
     
51.02
 
Hotel / motel
   
58,532
     
10,772
     
-
     
69,304
     
59.59
 
Marina
   
7,781
     
-
     
-
     
7,781
     
37.88
 
Mobile home park
   
20,054
     
7,665
     
375
     
28,094
     
39.71
 
Nursing home
   
12,868
     
-
     
-
     
12,868
     
20.87
 
Office
   
59,808
     
24,108
     
4,303
     
88,219
     
46.81
 
Other non-residential
   
9,971
     
2,277
     
-
     
12,248
     
42.85
 
Retail
   
77,733
     
36,384
     
-
     
114,117
     
49.89
 
Storage
   
24,378
     
11,169
     
-
     
35,547
     
44.05
 
Warehouse
   
15,577
     
1,907
     
-
     
17,484
     
43.63
 
(1) Represents select segments of loans that may include construction loans; classifications may differ from those used elsewhere in this release because they are based on type of collateral rather than loan category.

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 14 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. 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 effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID‑19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; increased competitive pressures; changes in the interest rate environment; legislative and regulatory changes; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC's website at www.sec.gov.

Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2021 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance.


9

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

Assets
 
Dec 31,
2020
   
Sep 30,
2020
   
Dec 31,
2019
   
Three
Month
Change
   
One
Year
Change
 
                               
Cash on hand and in banks
 
$
7,995
   
$
7,440
   
$
10,094
     
7.5
%
   
(20.8
)%
Interest-earning deposits with banks
   
72,494
     
18,674
     
12,896
     
288.2
     
462.1
 
Investments available-for-sale, at fair value
   
127,551
     
126,020
     
136,601
     
1.2
     
(6.6
)
Annuity held-to-maturity
   
2,418
     
2,406
     
-
     
0.5
     
n/a
 
Loans receivable, net of allowance of $15,174,
$14,568, and $13,218 respectively
   
1,100,582
     
1,133,984
     
1,108,462
     
(2.9
)
   
(0.7
)
Federal Home Loan Bank ("FHLB") stock, at cost
   
6,410
     
6,410
     
7,009
     
0.0
     
(8.5
)
Accrued interest receivable
   
5,508
     
5,676
     
4,138
     
(3.0
)
   
33.1
 
Deferred tax assets, net
   
1,641
     
1,879
     
1,501
     
(12.7
)
   
9.3
 
Other real estate owned ("OREO")
   
454
     
454
     
454
     
0.0
     
0.0
 
Premises and equipment, net
   
22,579
     
22,409
     
22,466
     
0.8
     
0.5
 
Bank owned life insurance ("BOLI")
   
33,034
     
32,830
     
31,982
     
0.6
     
3.3
 
Prepaid expenses and other assets
   
1,643
     
1,704
     
2,216
     
(3.6
)
   
(25.9
)
Right of use asset ("ROU")
   
3,647
     
3,834
     
2,209
     
(4.9
)
   
65.1
 
Goodwill
   
889
     
889
     
889
     
0.0
     
0.0
 
Core deposit intangible
   
824
     
860
     
968
     
(4.2
)
   
(14.9
)
Total assets
 
$
1,387,669
   
$
1,365,469
   
$
1,341,885
     
1.6
     
3.4
 
                                         
Liabilities and Stockholders' Equity
                                       
                                         
Deposits
                                       
Noninterest-bearing deposits
   
91,285
     
82,376
     
52,849
     
10.8
     
72.7
 
Interest-bearing deposits
   
1,002,348
     
987,306
     
980,685
     
1.5
     
2.2
 
Total deposits
   
1,093,633
     
1,069,682
     
1,033,534
     
2.2
     
5.8
 
Advances from the FHLB
   
120,000
     
120,000
     
137,700
     
0.0
     
(12.9
)
Advance payments from borrowers for taxes and
insurance
   
2,498
     
4,742
     
2,921
     
(47.3
)
   
(14.5
)
Lease liability
   
3,783
     
3,942
     
2,279
     
(4.0
)
   
66.0
 
Accrued interest payable
   
211
     
197
     
285
     
7.1
     
(26.0
)
Other liabilities
   
11,242
     
12,128
     
8,847
     
(7.3
)
   
27.1
 
Total liabilities
   
1,231,367
     
1,210,691
     
1,185,566
     
1.7
     
3.9
 
                                         
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
                                       
9,736,875 shares at December 31, 2020,
9,911,607 shares at September 30, 2020,
                                       
and 10,252,953 shares at December 31, 2019
   
97
     
99
     
103
     
(2.0
)
   
(5.8
)
Additional paid-in capital
   
82,095
     
83,839
     
87,370
     
(2.1
)
   
(6.0
)
Retained earnings
   
78,003
     
76,300
     
73,321
     
2.2
     
6.4
 
Accumulated other comprehensive loss, net of tax
   
(1,918
)
   
(3,203
)
   
(1,371
)
   
(40.1
)
   
39.9
 
Unearned Employee Stock Ownership Plan
("ESOP") shares
   
(1,975
)
   
(2,257
)
   
(3,104
)
   
(12.5
)
   
(36.4
)
Total stockholders' equity
   
156,302
     
154,778
     
156,319
     
1.0
     
(0.0
)
Total liabilities and stockholders' equity
 
$
1,387,669
   
$
1,365,469
   
$
1,341,885
     
1.6
%
   
3.4
%


10

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

   
Quarter Ended
             
   
Dec 31,
2020
   
Sep 30,
2020
   
Dec 31,
2019
   
Three
Month
Change
   
One
Year
Change
 
Interest income
                             
Loans, including fees
 
$
13,042
   
$
12,847
   
$
13,852
     
1.5
%
   
(5.8
)%
Investments available-for-sale
   
707
     
751
     
995
     
(5.9
)
   
(28.9
)
Investments held-to-maturity
   
6
     
6
     
-
     
0.0
     
n/a
 
Interest-earning deposits with banks
   
7
     
8
     
47
     
(12.5
)
   
(85.1
)
Dividends on FHLB Stock
   
81
     
82
     
72
     
(1.2
)
   
12.5
 
Total interest income
   
13,843
     
13,694
     
14,966
     
1.1
     
(7.5
)
Interest expense
                                       
Deposits
   
2,767
     
3,206
     
4,807
     
(13.7
)
   
(42.4
)
FHLB advances and other borrowings
   
426
     
400
     
461
     
6.5
     
(7.6
)
Total interest expense
   
3,193
     
3,606
     
5,268
     
(11.5
)
   
(39.4
)
Net interest income
   
10,650
     
10,088
     
9,698
     
5.6
     
9.8
 
Provision for loan losses
   
600
     
700
     
-
     
(14.3
)
   
n/a
 
Net interest income after provision for loan losses
   
10,050
     
9,388
     
9,698
     
7.1
     
3.6
 
                                         
Noninterest income
                                       
Net gain on sale of investments
   
-
     
18
     
71
     
(100.0
)
   
(100.0
)
BOLI income
   
204
     
269
     
301
     
(24.2
)
   
(32.2
)
Wealth management revenue
   
170
     
145
     
177
     
17.2
     
(4.0
)
Deposit related fees
   
195
     
201
     
178
     
(3.0
)
   
9.6
 
Loan related fees
   
1,082
     
376
     
782
     
187.8
     
38.4
 
Other
   
3
     
2
     
14
     
50.0
     
(78.6
)
Total noninterest income
   
1,654
     
1,011
     
1,523
     
63.6
     
8.6
 
                                         
Noninterest expense
                                       
Salaries and employee benefits
   
5,146
     
4,880
     
5,048
     
5.5
     
1.9
 
Occupancy and equipment
   
1,147
     
987
     
1,024
     
16.2
     
12.0
 
Professional fees
   
450
     
371
     
428
     
21.3
     
5.1
 
Data processing
   
711
     
731
     
638
     
(2.7
)
   
11.4
 
OREO related expenses, net
   
1
     
1
     
1
     
0.0
     
0.0
 
Regulatory assessments
   
142
     
134
     
21
     
6.0
     
576.2
 
Insurance and bond premiums
   
106
     
116
     
87
     
(8.6
)
   
21.8
 
Marketing
   
64
     
41
     
59
     
56.1
     
8.5
 
Other general and administrative
   
668
     
606
     
665
     
10.2
     
0.5
 
Total noninterest expense
   
8,435
     
7,867
     
7,971
     
7.2
     
5.8
 
Income before federal income tax provision
   
3,269
     
2,532
     
3,250
     
29.1
     
0.6
 
Federal income tax provision
   
622
     
450
     
635
     
38.2
     
(2.0
)
Net income
 
$
2,647
   
$
2,082
   
$
2,615
     
27.1
%
   
1.2
%
                                         
Basic earnings per share
 
$
0.28
   
$
0.22
   
$
0.26
                 
Diluted earnings per share
 
$
0.28
   
$
0.21
   
$
0.26
                 
Weighted average number of common shares
outstanding
   
9,573,950
     
9,661,498
     
9,934,768
                 
Weighted average number of diluted shares
outstanding
   
9,603,493
     
9,675,567
     
10,032,979
                 

11

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

   
Year Ended December 31
             
   
2020
   
2019
   
2018
   
One
Year
Change
   
Two
Year
Change
 
                               
Interest income
                             
Loans, including fees
 
$
52,546
   
$
54,636
   
$
51,127
     
(3.8
)%
   
2.8
%
Investments available-for-sale
   
3,173
     
4,329
     
4,126
     
(26.7
)
   
(23.1
)
Investments held-to-maturity
   
23
     
-
     
-
     
n/a
     
n/a
 
Interest-earning deposits with banks
   
52
     
293
     
202
     
(82.3
)
   
(74.3
)
Dividends on FHLB Stock
   
320
     
362
     
458
     
(11.6
)
   
(30.1
)
Total interest income
   
56,114
     
59,620
     
55,913
     
(5.9
)
   
0.4
 
Interest expense
                                       
Deposits
   
14,005
     
17,996
     
11,218
     
(22.2
)
   
24.8
 
FHLB advances
   
1,640
     
2,716
     
3,520
     
(39.6
)
   
(53.4
)
Total interest expense
   
15,645
     
20,712
     
14,738
     
(24.5
)
   
6.2
 
Net interest income
   
40,469
     
38,908
     
41,175
     
4.0
     
(1.7
)
Provision (recapture of provision) for loan losses
   
1,900
     
(300
)
   
(4,000
)
   
(733.3
)
   
(147.5
)
Net interest income after provision
(recapture of provision) for loan losses
   
38,569
     
39,208
     
45,175
     
(1.6
)
   
(14.6
)
                                         
Noninterest income
                                       
Net gain (loss) on sale of investments
   
86
     
151
     
(20
)
   
(43.0
)
   
(530.0
)
BOLI
   
982
     
994
     
814
     
(1.2
)
   
20.6
 
Wealth management revenue
   
663
     
879
     
611
     
(24.6
)
   
8.5
 
Deposit accounts related fees
   
755
     
733
     
681
     
3.0
     
10.9
 
Loan related fees
   
1,947
     
1,344
     
768
     
44.9
     
153.5
 
Other
   
9
     
40
     
24
     
(77.5
)
   
(62.5
)
Total noninterest income
   
4,442
     
4,141
     
2,878
     
7.3
     
54.3
 
                                         
Noninterest expense
                                       
Salaries and employee benefits
   
20,039
     
19,595
     
19,302
     
2.3
     
3.8
 
Occupancy and equipment
   
4,237
     
3,712
     
3,283
     
14.1
     
29.1
 
Professional fees
   
1,707
     
1,690
     
1,538
     
1.0
     
11.0
 
Data processing