First Financial Northwest, Inc. Reports Net Income of $2.6 Million or $0.16 Per Share for the Third Quarter of 2013

RENTON, Wash., Oct. 24, 2013 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the "Company") (Nasdaq:FFNW), the holding company for First Savings Bank Northwest (the "Bank"), today reported net income for the quarter ended September 30, 2013 of $2.6 million or $0.16 per diluted share, compared to net income of $16.4 million, or $0.95 per diluted share for the quarter ended June 30, 2013 and a net loss of $791,000, or $0.04 per diluted share for the comparable quarter in 2012. For the nine months ended September 30, 2013, net income was $20.5 million or $1.21 per diluted share, compared to $1.2 million or $0.07 per diluted share for the comparable period in 2012.

As reported previously, during the quarter ended June 30, 2013, the Company reversed most of the valuation allowance on its deferred tax asset ("DTA") reflecting its return to profitability and its expectations of sustainable profitability for future periods. The reversal of the DTA valuation allowance, combined with the Company's pre-tax income of $2.6 million, resulted in a net tax benefit of $13.8 million. During the quarter ended September 30, 2013, the Company reversed an additional $135,000 of its DTA valuation allowance and expects to reverse the small remainder of its DTA valuation allowance in the final quarter of 2013.

"During the quarter, we continued to see improvement in our credit quality metrics, with nonperforming assets declining to $22.0 million at September 30, 2013 from $28.8 million at June 30, 2013 and $42.8 million at September 30, 2012. We are pleased to report continued success disposing of our other real estate owned ("OREO"), which decreased to $12.6 million at September 30, 2013 compared to $19.2 million at September 30, 2012, a 34.4% decline over the past 12 months," stated Joseph W. Kiley III, President and Chief Executive Officer.

Highlights for the quarter ended September 30, 2013 included:

  • Loan originations for the quarter were $36.7 million, compared to $54.2 million and $30.6 million for the quarters ended June 30, 2013 and September 30, 2012, respectively;
  • Nonperforming assets at September 30, 2013 decreased $6.8 million, or 23.4% to $22.0 million from $28.8 million at June 30, 2013 and decreased $20.8 million, or 48.5% from $42.8 million at September 30, 2012;
  • Net OREO related expenses increased $279,000 to a net loss of $123,000 for the quarter, compared to a net gain of $156,000 for the quarter ended June 30, 2013 and a net loss of $1.6 million for the comparable quarter of 2012;
  • Sales of OREO generated net gains on sales of $35,000 for the quarter, compared to net gains of $383,000 and $78,000 for the quarters ended June 30, 2013 and September 30, 2012, respectively;
  • The Company's book value per share increased to $11.05 at September 30, 2013, from $10.88 at June 30, 2013 and $9.84 at September 30, 2012;
  • Under the stock repurchase plan ("Plan") approved by the Board of Directors in August 2013, the Company was authorized to purchase 848,271 shares of its common stock, of which 276,620 shares were purchased at an average price per share of $10.70 during the quarter. Earlier in the year, the Company repurchased 1,879,747 shares at an average price of $10.06 per share under the Plan approved in May 2013.
  • The Bank's Tier 1 and total risk-based capital ratios at September 30, 2013 were 18.51% and 28.14%, respectively.

There was no provision for loan losses recorded in the third quarter based on management's evaluation of the adequacy of the allowance for loan and lease losses ("ALLL"). This compares to $100,000 for the prior quarter and a $700,000 provision for the comparable quarter one year ago. The following items were considered in evaluating the loan loss provision for the quarter ended September 30, 2013:

  • Delinquent loans (loans over 30 days past due) were $5.5 million at September 30, 2013, decreasing $2.6 million and $19.1 million from June 30, 2013 and September 30, 2012, respectively;
  • Nonperforming loans were $9.4 million at September 30, 2013 decreasing $5.1 million and $14.1 million from June 30, 2013 and September 30, 2012, respectively;
  • Nonperforming loans as a percent of total loans was 1.4% at September 30, 2013, compared to 2.2% at June 30, 2013 and 3.5% at September 30, 2012, continuing the trend of improvement within the loan portfolio.

The ALLL represented 130.1% of nonperforming loans and 1.8% of total loans at September 30, 2013, compared to 84.6% and 1.8%, respectively, at June 30, 2013.

The following table presents a breakdown of our nonperforming assets:

Three Month One Year
September 30, June 30, September 30, Increase/ Increase/
2013 2013 2012 (Decrease) (Decrease)
(in thousands)
Nonperforming loans:
One-to-four family residential $ 3,003 $ 5,709 $ 8,447 $ (2,706) $ (5,444)
Multifamily 238 244 4,711 (6) (4,473)
Commercial real estate 1,204 3,520 2,287 (2,316) (1,083)
Construction/land development 4,328 4,369 7,997 (41) (3,669)
Consumer 662 717 141 (55) 521
Total nonperforming loans 9,435 14,559 23,583 (5,124) (14,148)
OREO 12,600 14,226 19,209 (1,626) (6,609)
Total nonperforming assets $ 22,035 $ 28,785 $ 42,792 $ (6,750) $ (20,757)
Nonperforming assets as a percent of total assets 2.47% 3.19% 4.40%

The following table presents a breakdown of our OREO by county and property type at September 30, 2013:

County Number of Percent of
King Pierce Kitsap All Other Total OREO Properties Total OREO
(dollars in thousands)
OREO:
One-to-four family residential $ 1,077 $ 719 $ -- $ -- $ 1,796 10 14.3%
Commercial real estate (1) 546 7,870 920 912 10,248 13 81.3%
Construction/land development -- 223 -- 333 556 2 4.4%
Total OREO $ 1,623 $ 8,812 $ 920 $ 1,245 $ 12,600 25 100.0%
(1) Of the 13 properties classified as commercial real estate, eight are office/retail buildings, two are mixed-use buildings and three are undeveloped lots.

OREO decreased $1.6 million, or 11.3% to $12.6 million at September 30, 2013, from $14.2 million at June 30, 2013, as sales and write-downs of OREO exceeded transfers of loans into OREO during the quarter. We sold $2.5 million of OREO during the third quarter of 2013, generating net gains of $35,000. Our largest OREO property is an office/retail building valued at $3.4 million, located in Pierce County. We are currently in the process of leasing up the building and preparing it for sale. As a result of our quarterly evaluation of our OREO, we expensed $135,000 related to the decline in the market values of properties in our portfolio during the current quarter, compared to $76,000 for the second quarter of 2013. We incurred additional OREO expenses of $23,000 during the quarter ended September 30, 2013, compared to $151,000 for the quarter ended June 30, 2013. We continue to actively market our OREO properties in an effort to minimize the amount of our holding costs and to convert these nonperforming assets into performing assets.

The following table presents a breakdown of our troubled debt restructured ("TDR") loans:

Three Month One Year
September 30, June 30, September 30, Increase/ Increase/
2013 2013 2012 (Decrease) (Decrease)
(in thousands)
Nonperforming TDRs:
One-to-four family residential $ 783 $ 2,858 $ 3,907 $ (2,075) $ (3,124)
Multifamily -- -- 1,058 -- (1,058)
Consumer 45 46 48 (1) (3)
Total nonperforming TDRs 828 2,904 5,013 (2,076) (4,185)
Performing TDRs:
One-to-four family residential 48,512 47,756 52,467 756 (3,955)
Multifamily 2,218 1,229 1,243 989 975
Commercial real estate 12,158 12,204 11,058 (46) 1,100
Total performing TDRs 62,888 61,189 64,768 1,699 (1,880)
Total TDRs $ 63,716 $ 64,093 $ 69,781 $ (377) $ (6,065)

During the third quarter of 2013, TDRs decreased $377,000 to $63.7 million, compared to $64.1 million at June 30, 2013. At September 30, 2013, $62.9 million or 98.7% of TDRs were performing in accordance with their repayment terms.

Net interest income for the third quarter of 2013 decreased $60,000 to $7.7 million, compared to the second quarter of 2013, and increased $534,000 from the same quarter in 2012. Net interest income for the nine months ended September 30, 2013 increased $757,000 to $22.9 million, compared to $22.2 million for the same period in 2012.

Interest income for the third quarter of 2013 decreased $608,000 compared to the same quarter in 2012, due in part to the decline in yields on the loan portfolio during this sustained low interest rate environment resulting in a significant number of loans refinancing at lower rates.

Interest expense decreased $1.1 million compared to the same quarter in 2012 primarily due to decreases in the average balance of both certificates of deposit and Federal Home Loan Bank of Seattle ("FHLB") advances, and a lower cost of funds. The average balance of our certificates of deposit and FHLB advances decreased $80.9 million and $9.1 million, respectively, during the third quarter of 2013 compared to the third quarter of 2012. The change in the average balances of certificates of deposit between these periods accounted for $368,000 of the decrease in interest expense, while $362,000 of the decline was due to the repricing of the certificates at lower market rates. We have priced our certificate of deposit accounts to reflect the lower interest rate environment, which has contributed to the decrease in the average balance as some of our customers have elected to withdraw their funds to invest in higher yielding non-deposit investment products. Interest expense on FHLB advances increased slightly compared to the quarter ended June 30, 2013 due to the change in the average balance outstanding. The decrease in interest expense for FHLB advances during the quarter compared to the third quarter one year ago was due to a $57,000 decrease in the average balance for FHLB advances and a $311,000 decrease in the average cost resulting from the refinance and prepayment of certain advances during the first quarter of 2013.

Our net interest margin for both quarters ended September 30, 2013 and June 30, 2013, was 3.71%, an improvement from 3.08% for the quarter ended September 30, 2012. Our ratio of average interest-earning assets to average interest-bearing liabilities grew to 121.31% at September 30, 2013, from 118.96% at September 30, 2012, reflecting our efforts to convert nonearning assets to earnings assets, resulting in a more efficient balance sheet.

Noninterest income for the quarter ended September 30, 2013 decreased $35,000 to $120,000 compared to the quarter ended June 30, 2013, and increased $13,000 compared to the same quarter in 2012. We incurred a loss of $39,000 on investment sales during the quarter ended September 30, 2013, compared to a gain of $1,000 in the quarter ended June 30, 2013, and no sales of investments during the quarter ended September 30, 2012.

Noninterest expense for the quarter ended September 30, 2013 increased $82,000 compared to the second quarter of 2013 due primarily to one-time compensation expenses relating to the previously reported departure of three executive officers during the quarter. Noninterest expense for the quarter ended September 30, 2013 decreased $2.1 million compared to the same quarter in 2012. The decrease from the comparable quarter in 2012 was due in large part to a decrease in net OREO related expenses of $1.4 million. In addition, proxy contest and related litigation expenses decreased $263,000 between periods. Our efficiency ratio was 68.5% during the quarter ended September 30, 2013, compared to 66.7% for the quarter ended June 30, 2013 and 101.9% for the comparable period one year ago.

First Financial Northwest, Inc. is the parent company of First Savings Bank Northwest, a Washington chartered stock savings bank headquartered in Renton, Washington, serving the Puget Sound Region through its full-service banking office. We are a part of the ABA NASDAQ Community Bank Index as well as the Russell 2000 and 3000 Indices. For additional information about us, please visit our website at www.fsbnw.com and click on the "Investor Relations" section.

Forward-looking statements:

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, 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 upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs that may be impacted by deterioration in the housing and commercial real estate markets and may lead to increased losses and nonperforming assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Board of Governors of the Federal Reserve System ("Federal Reserve") and our bank subsidiary by the Federal Deposit Insurance Corporation ("FDIC"), the Washington State Department of Financial Institutions, Division of Banks ("Washington DFI") or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, institute enforcement actions against the Company or the Bank, to take additional corrective action and refrain from unsafe and unsound practices, which may also require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; our ability to continue to pay dividends on or repurchase our common stock; our ability to attract and retain deposits; further increases in premiums for deposit insurance; our ability to control operating costs and expenses; 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; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our work force and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our branch expansion strategy; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; our ability to manage loan delinquency rates; increased competitive pressures among financial services companies; changes in consumer spending, borrowing and savings habits; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, including the interpretation of regulatory capital or other rules or as a result of Basel III; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; the economic impact of war or any terrorist activities; other economic, competitive, governmental, regulatory, and technological factors affecting our operations; pricing, products and services; and other risks detailed in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2012. Any of the forward-looking statements that we make in this Press Release and in the other public statements we make 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. Because of these and other uncertainties, our actual future results may be materially different from those expressed in any forward-looking statements made by or on our behalf. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We undertake no responsibility to update or revise any forward-looking statements.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
Nine Month One Year
September 30, December 31, September 30, Increase/ Increase/
Assets 2013 2012 2012 (Decrease) (Decrease)
Cash on hand and in banks $ 5,118 $ 4,289 $ 5,265 19.3% (2.8)%
Interest-bearing deposits 17,486 83,452 103,968 (79.0) (83.2)
Investments available-for-sale, at fair value 151,344 152,262 158,959 (0.6) (4.8)
Loans receivable, net of allowance of $12,271, $12,542 and $14,168 652,593 650,468 650,348 0.3 0.3
Premises and equipment, net 17,491 18,073 18,259 (3.2) (4.2)
FHLB stock, at cost 7,083 7,281 7,347 (2.7) (3.6)
Accrued interest receivable 3,650 3,484 3,730 4.8 (2.1)
Investment trades receivable 4,982 -- -- n/a n/a
Deferred tax assets, net 14,842 1,000 1,000 1,384.2 1,384.2
OREO 12,600 17,347 19,209 (27.4) (34.4)
Prepaid expenses and other assets 4,471 4,999 4,968 (10.6) (10.0)
Total assets $ 891,660 $ 942,655 $ 973,053 (5.4) (8.4)
Liabilities and Stockholders' Equity
Interest-bearing deposits $ 609,738 $ 659,643 $ 689,950 (7.6) (11.6)
Noninterest-bearing deposits 9,455 6,154 6,147 53.6 53.8
Advances from the FHLB 74,000 83,066 83,066 (10.9) (10.9)
Advance payments from borrowers for taxes and insurance 2,989 2,186 4,164 36.7 (28.2)
Accrued interest payable 62 179 187 (65.4) (66.8)
Investment trade payable 5,125 -- -- n/a n/a
Other liabilities 4,680 4,310 4,577 8.6 2.3
Total liabilities 706,049 755,538 788,091 (6.6) (10.4)
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding -- -- -- -- --
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding 16,789,790 shares at September 30, 2013, and 18,805,168 at December 31, 2012 and September, 30, 2012 168 188 188 (10.6) (10.6)
Additional paid-in capital 171,278 190,534 190,085 (10.1) (9.9)
Retained earnings, substantially restricted 25,892 6,650 5,139 289.4 403.8
Accumulated other comprehensive income (loss), net of tax (1,570) 748 835 (309.9) (288.0)
Unearned Employee Stock Ownership Plan
("ESOP") shares (10,157) (11,003) (11,285) (7.7) (10.0)
Total stockholders' equity 185,611 187,117 184,962 (0.8) 0.4
Total liabilities and stockholders' equity $ 891,660 $ 942,655 $ 973,053 (5.4) (8.4)
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
Quarter Ended Three Month One Year
September 30, June 30, September 30, Increase / Increase/
2013 2013 2012 (Decrease) (Decrease)
Interest income
Loans, including fees $ 8,995 $ 9,063 $ 9,539 (0.8)% (5.7)%
Investments available-for-sale 533 603 507 (11.6) 5.1
Interest-bearing deposits 19 18 111 5.6 (82.9)
Dividends on Federal Home Loan Bank stock 2 -- -- n/a n/a
Total interest income 9,549 9,684 10,157 (1.4) (6.0)
Interest expense
Deposits 1,655 1,763 2,429 (6.1) (31.9)
FHLB advances 149 116 517 28.4 (71.2)
Total interest expense 1,804 1,879 2,946 (4.0) (38.8)
Net interest income 7,745 7,805 7,211 (0.8) 7.4
Provision for loan losses -- 100 700 (100.0) (100.0)
Net interest income after provision for loan losses 7,745 7,705 6,511 0.5 19.0
Noninterest income
Net gain (loss) on sale of investments (39) 1 -- (4,000.0) n/a
Other 159 154 107 3.2 48.6
Total noninterest income 120 155 107 (22.6) 12.1
Noninterest expense
Salaries and employee benefits 3,822 3,755 3,680 1.8 3.9
Occupancy and equipment 339 345 391 (1.7) (13.3)
Professional fees 452 387 460 16.8 (1.7)
Data processing 175 176 174 (0.6) 0.6
Gain on sale of OREO property, net (35) (383) (78) (90.9) (55.1)
OREO market value adjustments 135 76 1,157 77.6 (88.3)
OREO related expenses, net 23 151 486 (84.8) (95.3)
Regulatory assessments 172 94 298 83.0 (42.3)
Insurance and bond premiums 109 121 100 (9.9) 9.0
Proxy contest and related litigation 1 16 264 (93.8) (99.6)
Marketing 29 42 68 (31.0) (57.4)
Other general and administrative 166 526 457 (68.4) (63.7)
Total noninterest expense 5,388 5,306 7,457 1.5 (27.7)
Income before federal income tax provision (benefit) 2,477 2,554 (839) (3.0) (395.2)
Federal income tax benefit (135) (13,809) (48) (99.0) 181.3
Net income (loss) $ 2,612 $ 16,363 $ (791) (84.0) (430.2)
Basic earnings (loss) per share $ 0.16 $ 0.96 $ (0.04) (83.3) (500.0)
Diluted earnings (loss) per share $ 0.16 $ 0.95 $ (0.04) (83.2) (500.0)
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
Nine Months Ended One Year
September 30, Increase/
2013 2012 (Decrease)
Interest income
Loans, including fees $ 27,102 $ 29,813 (9.1)%
Investments available-for-sale 1,609 1,600 0.6
Interest-bearing deposits with banks 58 305 (81.0)
Dividends on FHLB stock 2 -- n/a
Total interest income 28,771 31,718 (9.3)
Interest expense
Deposits 5,311 7,997 (33.6)
Federal Home Loan Bank advances 521 1,539 (66.1)
Total interest expense 5,832 9,536 (38.8)
Net interest income 22,939 22,182 3.4
Provision for loan losses 100 3,050 (96.7)
Net interest income after provision for loan losses 22,839 19,132 19.4
Noninterest income
Net gain (loss) on sale of investments (38) 288 (113.2)
Other 417 430 (3.0)
Total noninterest income 379 718 (47.2)
Noninterest expense
Salaries and employee benefits 11,191 10,558 6.0
Occupancy and equipment 1,038 1,191 (12.8)
Professional fees 1,195 1,401 (14.7)
Data processing 513 540 (5.0)
Gain on sale of OREO property, net (1,050) (427) 145.9
OREO market value adjustments 356 1,702 (79.1)
OREO related expenses, net 508 1,421 (64.3)
Regulatory assessments 549 709 (22.6)
Insurance and bond premiums 344 300 14.7
Proxy contest and related litigation 106 868 (87.8)
Marketing 89 181 (50.8)
Prepayment penalty on FHLB advances 679 -- n/a
Other general and administrative 1,054 1,203 (12.4)
Total noninterest expense 16,572 19,647 (15.7)
Income before federal income tax benefit 6,646 203 3,173.9
Federal income tax benefit (13,886) (999) 1,290.0
Net income $ 20,532 $ 1,202 1,608.2
Basic earnings per share $ 1.21 $ 0.07 1,628.6
Diluted earnings per share $ 1.21 $ 0.07 1628.6

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

September 30, 2013 December 31, 2012
Amount Percent Amount Percent
(Dollars in thousands)
One-to-four family residential: (1)
Permanent $ 279,336 41.1% $ 306,851 45.5%
Construction -- -- 177 0.1
279,336 41.1 307,028 45.6
Multifamily:
Permanent 106,965 15.8 105,936 15.7
Construction 12,360 1.8 5,585 0.8
119,325 17.6 111,521 16.5
Commercial real estate:
Permanent 224,649 33.1 207,436 30.8
Construction 13,805 2.0 12,500 1.8
Land 1,957 0.3 1,942 0.3
240,411 35.4 221,878 32.9
Construction/land development: (2)
One-to-four family residential 1,795 0.3 608 0.1
Multifamily 12,741 1.9 8,375 1.2
Commercial 5,770 0.8 -- --
Land development 7,958 1.2 10,435 1.6
28,264 4.2 19,418 2.9
Business 1,795 0.3 2,968 0.4
Consumer 9,535 1.4 11,110 1.7
Total loans 678,666 100.0% 673,923 100.0%
Less:
Loans in Process ("LIP") 11,355 8,856
Deferred loan fees, net 2,447 2,057
ALLL 12,271 12,542
Loans receivable, net $ 652,593 $ 650,468
(1) Includes $121.1 million and $139.8 million of non-owner occupied loans at September 30, 2013 and December 31, 2012, respectively.
(2) Excludes construction loans that will convert to permanent loans. We consider these loans to be "rollovers" in that one loan is originated for both the construction loan and permanent financing. These loans are classified according to the underlying collateral. At September 30, 2013, we had $13.8 million, or 5.7% of our total commercial real estate portfolio and $12.4 million, or 10.4% of our total multifamily portfolio in these "rollover" type of loans. At December 31, 2012, we had $12.5 million, or 5.6% of our total commercial real estate portfolio, $5.6 million, or 5.0% of our total multifamily portfolio and $177,000, or 0.1% of our total one-to-four family loan portfolio in these rollover type of loans. At September 30, 2013 and December 31, 2012, $2.0 million and $1.9 million, respectively, of commercial real estate loans were not included in the construction/land development category because we classify raw land or buildable lots where we do not intend to finance the construction as commercial real estate land loans.
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Ratios
(Unaudited)
At or For the Quarter Ended
September 30,
2013
June 30,
2013
December 31,
2012
September 30,
2012
(Dollars in thousands, except share data)
Performance Ratios:
Return (loss) on assets (1) 1.12% 2.70% 0.63% (0.32)%
Return (loss) on equity (1) 5.37 12.94 3.25 (1.70)
Dividend payout ratio 25.00 4.17 -- --
Equity-to-assets 20.82 20.74 19.85 19.01
Interest rate spread 3.52 3.51 2.86 2.84
Net interest margin 3.71 3.71 3.09 3.08
Average interest-earning assets to average interest-bearing liabilities 121.31 122.52 119.82 118.96
Efficiency ratio 68.51 66.66 78.88 101.90
Noninterest expense as a percent of average total assets 2.41 2.39 2.35 3.01
Book value per common share $ 11.05 $ 10.88 $ 9.95 $ 9.84
Capital Ratios (2):
Tier 1 leverage 18.51% 19.24% 15.79% 15.16%
Tier 1 risk-based 26.88 27.99 26.11 26.04
Total risk-based 28.14 29.25 27.37 27.31
Asset Quality Ratios:
Nonperforming loans as a percent of total loans 1.41% 2.18% 3.42% 3.54%
Nonperforming assets as a percent of total assets 2.47 3.19 4.25 4.40
ALLL as a percent of total loans, net of undisbursed funds 1.84 1.84 1.89 2.13
ALLL as a percent of nonperforming loans, net of undisbursed funds 130.06 84.57 55.11 60.08
Net charge-offs (recoveries) to average loans receivable, net 0.01 (0.03) 0.25 0.15
Allowance for Loan Losses:
ALLL, beginning of the quarter $ 12,313 $ 12,002 $ 14,168 $ 14,450
Provision -- 100 -- 700
Charge-offs (107) (537) (2,202) (2,341)
Recoveries 65 748 576 1,359
ALLL, end of the quarter $ 12,271 $ 12,313 $ 12,542 $ 14,168
Nonperforming Assets (3):
Nonperforming loans (4):
Nonaccrual loans $ 8,607 $ 11,655 $ 18,231 $ 18,570
Nonaccrual TDRs 828 2,904 4,528 5,013
Total nonperforming loans $ 9,435 $ 14,559 $ 22,759 $ 23,583
OREO 12,600 14,226 17,347 19,209
Total nonperforming assets $ 22,035 $ 28,785 $ 40,106 $ 42,792
Performing TDRs $ 62,888 $ 61,189 $ 65,848 $ 64,768
(1) The $135,000 and $13.8 million tax benefit at September 30, 2013 and June 30, 2013, respectively were not annualized in the calculation of this ratio.
(2) Capital ratios are for First Savings Bank Northwest only.
(3) Loans are reported net of undisbursed funds.
(4) There were no loans 90 days or more past due and still accruing interest.

CONTACT: Joseph W. Kiley III, President and Chief Executive Officer Richard Jacobson, Chief Financial Officer (425) 255-4400Source:First Financial Northwest