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First Financial Northwest, Inc. Reports Second Quarter Net Income of $1.9 Million or $0.18 per Diluted Share

RENTON, Wash., July 26, 2017 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the “Company”) (NASDAQ:FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported net income for the quarter ended June 30, 2017, of $1.9 million, or $0.18 per diluted share, compared to net income of $2.3 million, or $0.22 per diluted share, for the quarter ended March 31, 2017, and $1.4 million, or $0.11 per diluted share, for the quarter ended June 30, 2016. In the first six months of 2017, net income was $4.2 million, or $0.40 per diluted share, compared to net income of $3.3 million, or $0.26 per diluted share, for the comparable six‑month period in 2016.

The Company also announced that the Bank has received Federal Deposit Insurance Corporation and Washington State Department of Financial Institutions approval for the acquisition of four branches located in King and Snohomish counties from Opus Bank. The transaction is scheduled to close during the third quarter of 2017, subject to customary closing conditions. In connection with the transaction, the Bank will assume approximately $102 million in deposits associated with the branches, based on deposits as of December 31, 2016, for a deposit premium of 3.125%, based on the prior 20-day average deposit balance at the time the transaction closes. Certain expenses relating to this transaction are required to be expensed as-incurred, including approximately $319,000 in data processing, legal and other conversion-related expenses recognized during the quarter ended June 30, 2017.

Net loans receivable increased to $861.7 million at June 30, 2017, from $838.8 million at March 31, 2017, and $766.0 million at June 30, 2016.

The Company recorded a $100,000 provision for loan losses in the quarter ended June 30, 2017, compared to a $200,000 provision for loan losses in the quarter ended March 31, 2017, and a $600,000 provision for loan losses in the quarter ended June 30, 2016. The provision for loan losses in the most recent quarter was primarily due to the growth in net loan receivables, offset by payoffs and credit improvements to certain adversely graded loans. The provisions in the prior periods were also primarily due to growth in net loans receivable during those quarters.

“We were pleased with our loan growth and the opening of a new office during the quarter,” stated Joseph W. Kiley III, President and Chief Executive Officer. “Average balances of net loans receivable increased to $844.9 million for the quarter ended June 30, 2017, compared to $825.3 million for the quarter ended March 31, 2017, and $726.1 million for the quarter ended June 30, 2016. We are also pleased to report that our aircraft lending platform continues to gain momentum in the first half of 2017, with balances increasing to $6.2 million at June 30, 2017, compared to $2.8 million at March 31, 2017, and none at June 30, 2016,” continued Kiley.

“We recently opened a new branch office in the Crossroads area of Bellevue, Washington, and have received regulatory approval for a new office at The Junction, a new, mixed use development in Bothell, Washington, scheduled to open in the fourth quarter of 2017. Both of these offices utilize our state-of-the-art branch model implementing a smaller, efficient footprint, and are staffed with experienced local bankers,” concluded Kiley.

The following table presents a breakdown of our total deposits and average cost of funds by branch office (unaudited):

Three Months Ended June 30, 2017
Period-End Balance
Noninterest-bearing demand Interest-bearing demand Statement savings Money market Certificates
of deposit, retail
Certificates
of deposit, brokered
Total Average cost of deposits
(Dollars in thousands)
King County
Renton$ 31,899 $ 17,689 $ 25,909 $ 199,682 $ 327,788 $ - $ 602,967 0.88%
Landing 426 319 26 9,163 5,898 - 15,832 1.12
Crossroads 8 4 - 1,731 25 - 1,768 1.03
Total King County 32,333 18,012 25,935 210,576 333,711 - 620,567
Snohomish County
Mill Creek 1,557 1,694 699 10,319 5,413 - 19,682 0.90
Edmonds 1,236 1,353 34 11,311 5,904 - 19,838 1.01
Total Snohomish County 2,793 3,047 733 21,630 11,317 - 39,520
Total retail deposits 35,126 21,059 26,668 232,206 345,028 - 660,087 1.09
Brokered deposits - - - - - 75,488 75,488 1.67
Total deposits$ 35,126 $ 21,059 $ 26,668 $ 232,206 $ 345,028 $ 75,488 $ 735,575 0.98%

As noted earlier, the Bank is expanding its footprint with the purchase of four branches from Opus Bank. These branches are located in Woodinville, Snohomish, Lake Stevens, and Arlington, Washington. As of December 31, 2016, the deposits in these locations totaled approximately $102 million and consisted of approximately 32% checking accounts, 51% savings and money market accounts, and 17% in certificates of deposit, carrying an aggregate cost of funds of approximately 0.56%. The final deposit composition and aggregate cost of funds will vary based on the composition of deposits acquired at the closing of the transaction.

Additional highlights for the quarter ended June 30, 2017:

  • On May 22, 2017, the Company’s Board of Directors authorized the repurchase of up to 1.1 million shares of the Company’s common stock, or 10% of its outstanding shares, effective on May 30, 2017, and expiring on or before November 30, 2017. At June 30, 2017, the Company had repurchased 22,700 shares at an average price of $15.93 per share under this stock repurchase plan.
  • Money market account deposits increased to $232.2 million during the quarter ended June 30, 2017, an increase of $13.6 million, or 6.2%, from March 31, 2017, and increased $35.1 million, or 17.8%, from June 30, 2016.
  • Our portfolio of aircraft loans increased to $6.2 million at June 30, 2017, compared to $2.8 million at March 31, 2017.
  • The Company’s book value per share was $13.00 at June 30, 2017, compared to $12.84 at March 31, 2017, and $12.71 at June 30, 2016.
  • The Bank’s Tier 1 leverage and total capital ratios at June 30, 2017, were 11.5% and 15.2%, respectively, compared to 11.6% and 15.6% at March 31, 2017, and 12.0% and 15.7% at June 30, 2016.

Based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”), there was a $100,000 provision for loan losses for the quarter ended June 30, 2017. The following items contributed to this provision during the quarter:

  • The Company’s net loans receivable increased $22.9 million during the quarter to $861.7 million at June 30, 2017, from $838.8 million at March 31, 2017, and was $766.0 million at June 30, 2016.
  • During the quarter, the Bank received payoffs on adversely graded loans totaling $9.9 million. In addition, credit quality ratings were upgraded on loans totaling $4.3 million during the quarter, decreasing the amounts of reserve deemed necessary to set aside for those loans.
  • There were $85,000 in delinquent loans (loans over 30 days past due) at June 30, 2017, compared to no delinquent loans at March 31, 2017, and $720,000 at June 30, 2016.
  • Nonperforming loans declined to $583,000 at June 30, 2017, compared to $602,000 at March 31, 2017, and $1.1 million at June 30, 2016.
  • Nonperforming loans as a percentage of total loans remained low at 0.07% at both June 30, 2017, and March 31, 2017, compared to 0.14% at June 30, 2016.

The ALLL represented 1.29% of total loans receivable, net of undisbursed funds, at June 30, 2017, compared to 1.31% at March 31, 2017, and 1.30% at June 30, 2016. Nonperforming assets totaled $2.4 million at June 30, 2017, compared to $2.9 million at March 31, 2017, and $3.4 million at June 30, 2016.

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

Three
Jun 30, Mar 31, Jun 30, Month One Year
2017 2017 2016 Change Change
(Dollars in thousands)
Nonperforming loans:
One-to-four family residential$ 528 $ 545 $ 1,019 $ (17) $ (491)
Consumer 55 57 64 (2) (9)
Total nonperforming loans 583 602 1,083 (19) (500)
OREO 1,825 2,281 2,331 (456) (506)
Total nonperforming assets (1)$ 2,408 $ 2,883 $ 3,414 $ (475) $ (1,006)
Nonperforming assets as a percent of total assets 0.22% 0.27% 0.34%

(1) The difference between nonperforming assets reported above, and the totals reported by other industry sources, is due to their inclusion of all Troubled Debt Restructured Loans (“TDRs”) as nonperforming loans, although 99.6% of our TDRs were performing in accordance with their restructured terms at June 30, 2017. The remaining 0.4% of TDRs that were nonperforming at June 30, 2017, are reported above as nonperforming loans.

OREO totaled $1.8 million at June 30, 2017, compared to $2.3 million at both March 31, 2017, and June 30, 2016, with the declining balance attributable to sales of properties and market value adjustments of OREO. We continue to actively market our OREO properties in an effort to minimize holding costs.

In circumstances where a customer is experiencing significant financial difficulties, the Company may elect to restructure the loan so the customer can continue to make payments while minimizing the potential loss to the Company. Such restructures must be classified as TDRs.

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

Jun 30,
2017
Mar 31,
2017
Jun 30,
2016
Three
Month
Change
One Year
Change
(Dollars in thousands)
Nonperforming TDRs:
One-to-four family residential$ 106 $ 109 $ 189 $ (3) $ (83)
Total nonperforming TDRs 106 109 189 (3) (83)
Performing TDRs:
One-to-four family residential 19,152 21,790 30,116 (2,638) (10,964)
Multifamily 1,146 1,152 1,580 (6) (434)
Commercial real estate 3,660 3,683 4,941 (23) (1,281)
Consumer 43 43 43 - -
Total performing TDRs 24,001 26,668 36,680 (2,667) (12,679)
Total TDRs$ 24,107 $ 26,777 $ 36,869 $ (2,670) $ (12,762)

Net interest income for the second quarter of 2017 increased to $9.0 million, compared to $8.9 million for the first quarter of 2017, and $8.2 million in the second quarter of 2016, due primarily to the growth in average balances of loans outstanding.

Total interest income increased to $11.3 million during the quarter ended June 30, 2017, compared to $11.0 million during the quarter ended March 31, 2017, and $9.9 million in the quarter ended June 30, 2016. The increase related primarily to growth in average balances in loans receivable, including continued growth in higher yielding construction and commercial real estate loans.

Total interest expense was $2.3 million for the quarter ended June 30, 2017, compared to $2.1 million for the quarter ended March 31, 2017, and $1.7 million for the quarter ended June 30, 2016. The higher level of interest expense in the most recent two quarters compared to the quarter ended June 30, 2016, was the result of higher average deposit balances and Federal Home Loan Bank (“FHLB”) advances that were utilized primarily to fund the growth in net loans receivable, along with increased costs as a result of a higher interest rate environment. Average balances outstanding for FHLB advances were $184.4 million for the quarter ended June 30, 2017, compared to $171.5 million for the quarter ended March 31, 2017, and $123.1 million for the quarter ended June 30, 2016. A portion of this borrowing growth included the addition of $50 million in short term FHLB advances, concurrent with an interest rate swap for the same amount entered into in October 2016. Under the terms of the interest rate swap, the Bank committed to pay a fixed rate of 1.34% for five years on a notional amount of $50 million, and in exchange, will receive a floating rate of return paid quarterly, based on three-month LIBOR for the five-year term of the agreement. At June 30, 2017, the value of this interest rate swap was $1.1 million. The Bank entered into this arrangement in its efforts to manage its interest risk, providing protection in a rising rate environment. The average cost of FHLB advances and other borrowings was 1.24% for the quarter ended June 30, 2017, compared to 1.05% for the quarter ended March 31, 2017, and 0.89% for the quarter ended June 30, 2016. Brokered certificates of deposit totaled $75.5 million at June 30, 2017, and March 31, 2017, and $65.6 million at June 30, 2016.

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

Jun 30,
2017
Mar 31,
2017
Jun 30,
2016
Three
Month
Change
One Year
Change
Deposits: (Dollars in thousands)
Noninterest-bearing$ 35,126 $ 36,190 $ 25,137 $ (1,064) $ 9,989
Interest-bearing demand 21,059 21,584 17,062 (525) 3,997
Statement savings 26,668 27,415 31,143 (747) (4,475)
Money market 232,206 218,578 197,129 13,628 35,077
Certificates of deposit, retail 345,028 355,452 324,127 (10,424) 20,901
Certificates of deposit, brokered 75,488 75,488 65,612 - 9,876
Total deposits$ 735,575 $ 734,707 $ 660,210 $ 868 $ 75,365

Our net interest margin was 3.60% for the quarter ended June 30, 2017, compared to 3.64% for the quarter ended March 31, 2017, and 3.63% for the quarter ended June 30, 2016. The change between quarters is primarily attributed to increased costs associated with interest-bearing liabilities due to the recent increases in short term interest rates.

Noninterest income for the quarter ended June 30, 2017, totaled $731,000 compared to $535,000 for the quarter ended March 31, 2017, and $708,000 for the quarter ended June 30, 2016. The most recent quarterly change was due primarily to an increase in wealth management revenue to $307,000 for the quarter ended June 30, 2017, compared to $140,000 for the quarter ended March 31, 2017, and $281,000 for the quarter ended June 30, 2016. Loan related fees, a component of other noninterest income, increased to $120,000 in the quarter ended June 30, 2017, compared to $35,000 in the quarter ended March 31, 2017, and $81,000 in the quarter ended June 30, 2016, primarily due to higher levels of prepayment penalties in the second quarter of 2017. Net gain on sales of investments also increased to $56,000 in the quarter ended June 30, 2017, compared to no gain for either the quarter ended March 31, 2017, or the quarter ended June 30, 2016.

Noninterest expense for the quarter ended June 30, 2017, increased to $6.8 million from $6.1 million in the quarters ended March 31, 2017, and June 30, 2016. The increase in noninterest expense in the current quarter compared to the prior quarter was due primarily to higher expenses incurred to support the Company’s growth initiatives, including legal and data processing expenses related to the branch acquisitions discussed above, and as compared to the quarter ended June 30, 2016, higher salaries and employee benefits as a result of new hires and annual wage increases. Changes to the Company’s unfunded commitment reserve, which is included in other general and administrative expenses, also contributed to the increase in noninterest expense from the quarter ended March 31, 2017, with an expense of $98,000 in the quarter ended June 30, 2017, compared to a $41,000 recovery in the quarter ended March 31, 2017, but was down from the $153,000 expense in the quarter ended June 30, 2016. The increase in our construction lending activity was the primary reason for the greater increase to the unfunded commitment reserve in the quarter ended June 30, 2016. This unfunded commitment reserve expense can vary significantly each quarter, based on the amount believed by management to be sufficient to absorb estimated probable losses related to unfunded credit facilities, and reflects changes in the amounts that the Company has committed to fund but has not yet disbursed.

The Company’s federal income tax provision also experienced significant variances during the periods presented. Specifically, in the quarter ended March 31, 2017, stock option exercises resulted in a significantly lower federal income tax provision as compared to the quarters ended June 30, 2017, and June 30, 2016, since similar stock option exercise activity did not occur in those two periods. These stock option exercises occurred at prices higher than originally estimated, resulting in higher allowable expense recognition for tax purposes.

First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; a Washington State chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through its five full-service banking offices, including its newest office in Bellevue, Washington. We are a part of the ABA NASDAQ Community Bank Index and the Russell 3000 Index. For additional information about us, please visit our website at ffnwb.com and click on the “Investor Relations” link at the bottom of the page.

Forward-looking statements:
When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include, but are not limited to, the following: increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Company’s latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC's website at www.sec.gov.

Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2017 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
Assets Jun 30, 2017 Mar 31, 2017 Jun 30, 2016 Three
Month
Change
One
Year
Change
Cash on hand and in banks$ 7,418 $ 6,066 $ 6,051 22.3% 22.6%
Interest-earning deposits with banks 10,996 20,007 31,454 (45.0) (65.0)
Investments available-for-sale, at fair value 133,951 129,662 136,028 3.3 (1.5)
Loans receivable, net of allowance of $11,285, $11,158, and $10,134, respectively 861,672 838,768 766,046 2.7 12.5
Premises and equipment, net 19,501 18,912 18,206 3.1 7.1
Federal Home Loan Bank ("FHLB") stock, at cost 8,902 8,102 7,631 9.9 16.7
Accrued interest receivable 3,165 3,389 3,158 (6.6) 0.2
Deferred tax assets, net 2,620 2,907 3,438 (9.9) (23.8)
Other real estate owned ("OREO") 1,825 2,281 2,331 (20.0) (21.7)
Bank owned life insurance ("BOLI"), net 28,721 27,534 23,700 4.3 21.2
Prepaid expenses and other assets 2,937 2,892 1,193 1.6 146.2
Total assets$1,081,708 $1,060,520 $ 999,236 2.0% 8.3%
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits$ 35,126 $ 36,190 $ 25,137 (2.9)% 39.7%
Interest-bearing deposits 700,449 698,517 635,073 0.3 10.3
Total Deposits 735,575 734,707 660,210 0.1 11.4
Advances from the FHLB 191,500 171,500 161,500 11.7 18.6
Advance payments from borrowers for taxes and insurance 2,183 4,092 2,144 (46.7) 1.8
Accrued interest payable 286 237 114 20.7 150.9
Other liabilities 8,650 8,235 5,813 5.0 48.8
Total liabilities 938,194 918,771 829,781 2.1 13.1
Commitments and Contingencies
Stockholders' Equity
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or
outstanding$ - $ - $ - n/a n/a
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding
11,041,865 shares at June 30, 2017, 11,035,791 at March 31, 2017, and
13,327,916 shares at June 30, 2016 110 110 133 0.0% (17.3)%
Additional paid-in capital 98,469 98,186 131,312 0.3 (25.0)
Retained earnings, substantially restricted 51,844 50,702 44,640 2.3 16.1
Accumulated other comprehensive loss, net of tax (984) (1,042) 423 (5.6) (332.6)
Unearned Employee Stock Ownership Plan ("ESOP") shares (5,925) (6,207) (7,053) (4.5) (16.0)
Total stockholders' equity 143,514 141,749 169,455 1.2 (15.3)
Total liabilities and stockholders' equity$1,081,708 $ 1,060,520 $ 999,236 2.0% 8.3%


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
Quarter Ended
Jun 30,
2017
Mar 31, 2017 Jun 30, 2016 Three
Month
Change
One
Year
Change
Interest income
Loans, including fees$ 10,352 $ 10,027 $ 9,048 3.2% 14.4%
Investments available-for-sale 887 845 757 5.0 17.2
Interest-earning deposits with banks 42 44 47 (4.5) (10.6)
Dividends on FHLB Stock 62 82 44 (24.4) 40.9
Total interest income 11,343 10,998 9,896 3.1 14.6
Interest expense
Deposits 1,776 1,691 1,441 5.0 23.2
FHLB advances and other borrowings 570 445 272 28.1 109.6
Total interest expense 2,346 2,136 1,713 9.8 37.0
Net interest income 8,997 8,862 8,183 1.5 9.9
Provision for loan losses 100 200 600 (50.0) (83.3)
Net interest income after provision for loan losses 8,897 8,662 7,583 2.7 17.3
Noninterest income
Net gain on sale of investments 56 - - n/a n/a
BOLI income 116 201 225 (42.3) (48.4)
Wealth management revenue 307 140 281 119.3 9.3
Other 252 194 202 29.9 24.8
Total noninterest income 731 535 708 36.6 3.2
Noninterest expense
Salaries and employee benefits 4,409 4,285 3,841 2.9 14.8
Occupancy and equipment 579 480 488 20.6 18.6
Professional fees 482 439 561 9.8 (14.1)
Data processing 519 240 251 116.3 106.8
Net (gain) loss on sale of OREO property (5) - 89 n/a (105.6)
OREO market value adjustments - 50 - (100.0) n/a
OREO related (reimbursements) expenses, net (15) (10) (14) 50.0 7.1
Regulatory assessments 112 96 117 16.7 (4.3)
Insurance and bond premiums 98 99 86 (1.0) 14.0
Marketing 52 48 40 8.3 30.0
Other general and administrative 605 341 613 77.4 (1.3)
Total noninterest expense 6,836 6,068 6,072 12.7 12.6
Income before federal income tax provision 2,792 3,129 2,219 (10.8) 25.8
Federal income tax provision 924 785 779 17.7 18.6
Net income$ 1,868 $ 2,344 $ 1,440 (20.3)% 29.7%
Basic earnings per share$ 0.18 $ 0.23 $ 0.12
Diluted earnings per share$ 0.18 $ 0.22 $ 0.11
Weighted average number of common shares outstanding 10,363,345 10,319,722 12,390,234
Weighted average number of diluted shares outstanding 10,500,829 10,504,046 12,530,720


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
Six Months Ended
June 30,
2017 2016 One Year Change
Interest income
Loans, including fees$ 20,379 $ 17,775 14.6%
Investments available-for-sale 1,732 1,432 20.9
Interest-earning deposits with banks 86 160 (46.3)
Dividends on FHLB Stock 144 91 58.2
Total interest income 22,341 19,458 14.8
Interest expense
Deposits 3,467 2,924 18.6
FHLB advances and other borrowings 1,015 570 78.1
Total interest expense 4,482 3,494 28.3
Net interest income 17,859 15,964 11.9
Provision for loan losses 300 500 (40.0)
Net interest income after provision for loan losses 17,559 15,464 13.5
Noninterest income
Net gain on sale of investments 56 - n/a
BOLI 317 391 (18.9)
Wealth management revenue 447 491 (9.0)
Other 446 306 45.8
Total noninterest income 1,266 1,188 6.6
Noninterest expense
Salaries and employee benefits 8,694 7,615 14.2
Occupancy and equipment 1,059 996 6.3
Professional fees 921 1,029 (10.5)
Data processing 759 441 72.1
Net (gain) loss on sale of OREO property (5) 87 (105.7)
OREO market value adjustments 50 257 (80.5)
OREO related (reimbursements) expenses, net (25) (34) (26.5)
Regulatory assessments 208 237 (12.2)
Insurance and bond premiums 197 174 13.2
Marketing 100 78 28.2
Other general and administrative 946 965 (2.0)
Total noninterest expense 12,904 11,845 8.9
Income before federal income tax provision 5,921 4,807 23.2
Federal income tax provision 1,709 1,542 10.8
Net income$ 4,212 $ 3,265 29.0%
Basic earnings per share$ 0.41 $ 0.26
Diluted earnings per share$ 0.40 $ 0.26
Weighted average number of common shares outstanding 10,341,654 12,567,464
Weighted average number of diluted shares outstanding 10,503,023 12,718,155

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

June 30, 2017 March 31, 2017 June 30, 2016
Amount Percent Amount Percent Amount Percent
(Dollars in thousands)
Commercial real estate:
Residential:
Micro-unit apartments$ 5,580 0.6% $ 7,841 0.8% $26,416 3.1%
Other multifamily 120,304 12.5 113,877 12.5 105,773 12.5
Total multifamily 125,884 13.1 121,718 13.3 132,189 15.6
Non-residential:
Office 95,256 9.9 101,369 11.1 97,375 11.5
Retail 99,482 10.3 105,233 11.5 95,649 11.3
Mobile home park 21,851 2.3 20,519 2.2 23,290 2.7
Warehouse 21,491 2.2 21,575 2.4 15,479 1.8
Storage 35,121 3.6 35,290 3.9 38,130 4.5
Other non-residential 44,017 4.6 33,733 3.7 15,526 1.8
Total non-residential 317,218 32.9 317,719 34.8 285,448 33.7
Construction/land development:
One-to-four family residential 76,404 7.9 58,447 6.4 64,312 7.6
Multifamily 123,497 12.8 108,801 11.9 77,281 9.1
Commercial 1,100 0.1 - 0.0 - 0.0
Land development 39,012 4.1 39,687 4.3 22,595 2.7
Total construction/land development 240,013 24.9 206,935 22.6 164,188 19.4
One-to-four family residential:
Permanent owner occupied 137,816 14.3 135,743 14.9 146,762 17.3
Permanent non-owner occupied 118,816 12.3 113,476 12.4 104,970 12.4
Total one-to-four family residential 256,632 26.6 249,219 27.3 251,732 29.7
Business:
Aircraft 6,235 0.7 2,760 0.3 - 0.0
Other business 8,971 0.9 7,610 0.8 7,208 0.9
Total business 15,206 1.6 10,370 1.1 7,208 0.9
Consumer 9,031 0.9 7,878 0.9 6,333 0.7
Total loans 963,984 100.0% 913,839 100.0% 847,099 100.0%
Less:
Loans in Process ("LIP") 88,475 61,735 68,979
Deferred loan fees, net 2,552 2,178 1,940
ALLL 11,285 11,158 10,134
Loans receivable, net$ 861,672 $838,768 $766,046
Concentrations of credit: (1)
Construction loans as % of total capital 115.3% 111.7% 76.0%
Total non-owner occupied commercial real estate as % of total capital 443.0% 441.2% 407.3%
(1) Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC guidelines.


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
At or For the Quarter Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2017 2017 2016 2016 2016
(Dollars in thousands, except per share data)
Performance Ratios:
Return on assets 0.70% 0.91% 1.12% 1.00% 0.60%
Return on equity 5.22 6.76 8.58 6.39 3.41
Dividend payout ratio 38.89 26.09 20.62 27.38 51.81
Equity-to-assets ratio 13.27 13.37 13.31 14.06 16.96
Interest rate spread 3.47 3.51 3.53 3.51 3.49
Net interest margin 3.60 3.64 3.65 3.64 3.63
Average interest-earning assets to average interest-bearing liabilities 114.29 114.74 113.75 117.43 118.96
Efficiency ratio 70.27 64.57 57.96 54.69 68.29
Noninterest expense as a percent of average total assets 2.57 2.35 2.17 2.01 2.53
Book value per common share$ 13.00 $ 12.84 $ 12.63 $ 12.70 $ 12.71
Capital Ratios: (1)
Tier 1 leverage ratio 11.46% 11.57% 11.17% 11.37% 12.02%
Common equity tier 1 capital ratio 13.95 14.39 14.36 13.13 14.42
Tier 1 capital ratio 13.95 14.39 14.36 13.13 14.42
Total capital ratio 15.20 15.64 15.61 14.38 15.67
Asset Quality Ratios: (2)
Nonperforming loans as a percent of total loans 0.07% 0.07% 0.10% 0.12% 0.14%
Nonperforming assets as a percent of total assets 0.22 0.27 0.31 0.32 0.34
ALLL as a percent of total loans 1.29 1.31 1.32 1.28 1.30
ALLL as a percent of nonperforming loans 1,935.68 1,853.49 1,276.34 1,025.72 935.30
Net charge-offs (recoveries) to average loans receivable, net (0.00) (0.00) (0.01) 0.00 (0.01)
Allowance for Loan Losses:
ALLL, beginning of the quarter$ 11,158 $ 10,951 $ 11,006 $ 10,134 $ 9,471
Provision (Recapture of provision) 100 200 (100) 900 600
Charge-offs - - (37) (28) -
Recoveries 27 7 82 - 63
ALLL, end of the quarter$ 11,285 $ 11,158 $ 10,951 $ 11,006 $ 10,134
(1) Capital ratios are for First Financial Northwest Bank only.
(2) Loans are reported net of undisbursed funds.


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
At or For the Quarter Ended
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
2017 2017 2016 2016 2016
(Dollars in thousands)
Yields and Costs:
Yield on loans 4.91% 4.93% 4.92% 4.92% 5.00%
Yield on investments available-for-sale 2.69 2.66 2.49 2.36 2.27
Yield on interest-earning deposits 1.00 0.74 0.59 0.53 0.48
Yield on FHLB stock 2.89 4.14 2.57 2.10 2.89
Yield on interest-earning assets 4.54 4.52 4.47 4.42 4.39
Cost of deposits 1.03 1.00 0.97 0.95 0.91
Cost of FHLB borrowings 1.24 1.05 0.83 0.79 0.89
Cost of interest-bearing liabilities 1.07 1.01 0.94 0.91 0.90
Average Balances:
Loans$ 844,853 $ 825,251 $ 845,276 $ 804,014 $ 726,109
Investments available-for-sale 132,375 128,993 132,077 133,258 133,813
Interest-earning deposits with banks 16,831 24,233 25,082 28,275 39,167
FHLB stock 8,616 8,034 10,205 8,483 6,097
Total interest-earning assets$1,002,675 $ 986,511 $1,012,640 $ 974,030 $ 905,186
Deposits$ 692,922 $ 688,298 $ 664,416 $ 646,658 $ 637,781
Borrowings 184,357 171,500 225,848 182,804 123,148
Total interest-bearing liabilities$ 877,279 $ 859,798 $ 890,264 $ 829,462 $ 760,929
Average assets$1,066,477 $1,046,473 $1,071,597 $1,034,811 $ 963,188
Average stockholders' equity$ 143,643 $ 140,546 $ 139,658 $ 161,690 $ 169,177


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

Source:First Financial Northwest