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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

First Financial Northwest, Inc.
·24-min read

RENTON, Wash., Jan. 28, 2021 (GLOBE NEWSWIRE) -- 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.

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(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.


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.


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.

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 COVID19 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 interestbearing 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.

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 interestbearing 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 interestbearing liabilities during the quarter to 1.15%, compared to 1.27% in the quarter ended September 30, 2020. The 10basis 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. 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 COVID19 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:

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 COVID19
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:

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 COVID19 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 ...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 o...ther 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.



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

%




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




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

2,822

2,031

1,392

38.9

102.7

OREO related expenses, net

9

34

7

(73.5

)

28.6

Regulatory assessments

547

307

502

78.2

9.0

Insurance and bond premiums

445

375

443

18.7

0.5

Marketing

197

339

344

(41.9

)

(42.7

)

Other general and administrative

2,510

2,335

2,650

7.5

(5.3

)

Total noninterest expense

32,513

30,418

29,461

6.9

10.4

Income before federal income tax provision

10,498

12,931

18,592

(18.8

)

(43.5

)

Federal income tax provision

1,942

2,562

3,693

(24.2

)

(47.4

)

Net income

$

8,556

$

10,369

$

14,899

(17.5

)%

(42.6

)%

Basic earnings per share

$

0.88

$

1.04

$

1.44

Diluted earnings per share

$

0.88

$

1.03

$

1.43

Weighted average number of common
shares outstanding

9,734,493

9,976,056

10,306,835

Weighted average number of diluted
shares outstanding

9,758,644

10,075,906

10,424,187




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

December 31, 2020

September 30, 2020

December 31, 2019

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Commercial real estate:

Residential:

Micro-unit apartments

$

11,366

1.0

%

$

11,422

1.0

%

$

13,809

1.2

%

Other multifamily

125,328

11.2

131,197

11.4

159,106

14.2

Total multifamily residential

136,694

12.2

142,619

12.4

172,915

15.4

Non-residential:

Office

84,311

7.5

81,566

7.1

100,744

9.0

Retail

114,117

10.2

121,338

10.6

133,094

11.8

Mobile home park

28,094

2.5

25,510

2.2

26,099

2.3

Hotel / motel

69,304

6.2

69,157

6.0

42,971

3.8

Nursing Home

12,868

1.2

12,868

1.1

11,831

1.1

Warehouse

17,484

1.6

17,512

1.5

17,595

1.6

Storage

33,671

3.0

36,093

3.1

37,190

3.3

Other non-residential

25,416

2.3

25,724

2.3

25,628

2.3

Total non-residential

385,265

34.5

389,768

33.9

395,152

35.2

Construction/land:

One-to-four family residential

33,396

3.0

45,231

4.0

44,491

4.0

Multifamily

51,215

4.6

47,547

4.1

40,954

3.6

Commercial

5,783

0.5

5,475

0.5

19,550

1.7

Land development

1,813

0.2

1,345

0.1

8,670

0.8

Total construction/land

92,207

8.3

99,598

8.7

113,665

10.1

One-to-four family residential:

Permanent owner occupied

206,323

18.5

214,250

18.6

210,898

18.8

Permanent non-owner occupied

175,637

15.7

177,621

15.4

161,630

14.4

Total one-to-four family residential

381,960

34.2

391,871

34.0

372,528

33.2

Business

Aircraft

10,811

0.9

11,735

1.0

14,012

1.3

Small Business Administration ("SBA")

928

0.1

819

0.1

362

0.0

Paycheck Protection Plan ("PPP")

41,251

3.7

52,045

4.5

-

0.0

Other business

27,673

2.5

21,181

1.8

23,405

2.1

Total business

80,663

7.2

85,780

7.4

37,779

3.4

Consumer

Classic/collectible auto

29,359

2.6

27,784

2.4

18,454

1.7

Other consumer

11,262

1.0

13,061

1.2

11,745

1.0

Total consumer

40,621

3.6

40,845

3.6

30,199

2.7

Total loans

1,117,410

100.0

%

1,150,481

100.0

%

1,122,238

100.0

%

Less:

Deferred loan fees, net

1,654

1,929

558

ALLL

15,174

14,568

13,218

Loans receivable, net

$

1,100,582

$

1,133,984

$

1,108,462

Concentrations of credit: (1)

Construction loans as % of total capital

61.6

%

68.4

%

81.9

%

Total non-owner occupied commercial
real estate as % of total capital

390.1

%

407.1

%

449.7

%

(1) Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC regulatory guidelines.




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

At or For the Quarter Ended

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

2020

2020

2020

2020

2019

(Dollars in thousands, except per share data)

Performance Ratios: (1)

Return on assets

0.77

%

0.60

%

0.63

%

0.51

%

0.79

%

Return on equity

6.76

5.34

5.59

4.30

6.64

Dividend payout ratio

35.71

45.45

45.45

58.82

34.62

Equity-to-assets ratio

11.26

11.34

10.86

11.50

11.65

Tangible equity ratio (2)

11.15

11.22

10.74

11.38

11.53

Net interest margin

3.29

3.07

3.12

3.11

3.09

Average interest-earning assets to average
interest-bearing liabilities

116.42

116.08

115.96

113.78

113.50

Efficiency ratio

68.55

70.88

73.18

77.60

71.04

Noninterest expense as a percent of average
total assets

2.46

2.26

2.33

2.51

2.40

Book value per common share

$

16.05

$

15.62

$

15.32

$

15.03

$

15.25

Tangible book value per share

15.88

15.44

15.14

14.85

15.07

Capital Ratios: (3)

Tier 1 leverage ratio

10.29

%

10.03

%

10.02

%

10.25

%

10.27

%

Common equity tier 1 capital ratio

14.32

14.01

13.70

13.42

13.13

Tier 1 capital ratio

14.32

14.01

13.70

13.42

13.13

Total capital ratio

15.57

15.26

14.95

14.67

14.38

Asset Quality Ratios:

Nonperforming loans as a percent of total loans

0.19

%

0.18

%

0.19

%

0.20

%

0.01

%

Nonperforming assets as a percent of total assets

0.18

0.19

0.19

0.20

0.04

ALLL as a percent of total loans

1.36

1.27

1.20

1.22

1.18

Net (recoveries) charge-offs to average loans
receivable, net

(0.00

)

(0.00

)

(0.00

)

(0.00

)

(0.01

)

Allowance for Loan Losses:

ALLL, beginning of the quarter

$

14,568

$

13,836

$

13,530

$

13,218

$

13,161

Provision (Recapture of provision)

600

700

300

300

-

Charge-offs

(2

)

-

-

-

-

Recoveries

8

32

6

12

57

ALLL, end of the quarter

$

15,174

$

14,568

$

13,836

$

13,530

$

13,218

(1) Performance ratios are calculated on an annualized basis.
(2) Tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.
(3) Capital ratios are for First Financial Northwest Bank only.




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

At or For the Quarter Ended

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

2020

2020

2020

2020

2019

(Dollars in thousands)

Yields and Costs: (1)

Yield on loans

4.61

%

4.49

%

4.72

%

4.94

%

5.05

%

Yield on investments available-for-sale

2.21

2.32

2.41

2.72

2.85

Yield on investments held-to-maturity

0.99

0.99

1.52

0.00

0.00

Yield on interest-earning deposits

0.11

0.10

0.10

1.18

1.61

Yield on FHLB stock

4.99

4.95

4.84

4.62

4.84

Yield on interest-earning assets

4.26

%

4.16

%

4.37

%

4.67

%

4.78

%

Cost of interest-bearing deposits

1.12

%

1.27

%

1.49

%

1.81

%

1.94

%

Cost of borrowings

1.40

1.28

1.08

1.48

1.66

Cost of interest-bearing liabilities

1.15

%

1.27

%

1.44

%

1.77

%

1.91

%

Cost of total deposits

1.03

%

1.18

%

1.38

%

1.72

%

1.84

%

Cost of funds

1.07

1.19

1.34

1.69

1.82

Average Balances:

Loans

$

1,126,554

$

1,137,742

$

1,122,913

$

1,096,091

$

1,087,558

Investments available-for-sale

127,456

128,885

133,038

135,765

138,331

Investments held-to-maturity

2,410

2,399

2,378

2,061

-

Interest-earning deposits

26,092

32,701

30,989

10,555

11,572

FHLB stock

6,459

6,592

6,736

6,615

5,897

Total interest-earning assets

$

1,288,971

$

1,308,319

$

1,296,054

$

1,251,087

$

1,243,358

Interest-bearing deposits

$

985,945

$

1,002,518

$

989,549

$

970,062

$

985,532

Borrowings

121,218

124,543

128,154

127,707

109,895

Total interest-bearing liabilities

1,107,163

1,127,061

1,117,703

1,097,769

1,095,427

Noninterest-bearing deposits

83,719

81,694

82,750

53,199

50,951

Total deposits and borrowings

$

1,190,882

$

1,208,755

$

1,200,453

$

1,150,968

$

1,146,378

Average assets

$

1,366,061

$

1,383,736

$

1,371,269

$

1,324,845

$

1,317,586

Average stockholders' equity

155,765

154,988

154,115

157,492

156,147

(1) Yields and costs are annualized.




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

At or For the Year Ended December 31,

2020

2019

2018

2017

2016

(Dollars in thousands, except per share data)

Performance Ratios:

Return on assets

0.63

%

0.80

%

1.21

%

0.76

%

0.88

%

Return on equity

5.50

6.73

9.86

5.94

5.55

Dividend payout ratio

45.45

33.65

21.53

32.93

32.02

Equity-to-assets

11.26

11.65

12.28

11.79

13.31

Tangible equity ratio (1)

11.15

11.53

12.13

11.63

13.31

Net interest margin

3.15

3.19

3.56

3.60

3.60

Average interest-earning assets to average
interest-bearing liabilities

115.62

113.44

114.28

114.07

117.11

Efficiency ratio

72.39

70.66

66.88

67.31

62.27

Noninterest expense as a percent of average
total assets

2.39

2.35

2.40

2.42

2.27

Book value per common share

$

16.05

$

15.25

$

14.35

$

13.27

$

12.63

Tangible book value per share (1)

15.88

15.07

14.17

13.07

12.63

Capital Ratios: (2)

Tier 1 leverage ratio

10.29

%

10.27

%

10.37

%

10.20

%

11.17

%

Common equity tier 1 capital ratio

14.32

13.13

13.43

12.52

14.38

Tier 1 capital ratio

14.32

13.13

13.43

12.52

14.38

Total capital ratio

15.57

14.38

14.68

13.77

15.63

Asset Quality Ratios:

Nonperforming loans as a percent of total loans,
net of undisbursed funds

0.19

%

0.01

%

0.07

%

0.02

%

0.10

%

Nonperforming assets as a percent of total assets

0.18

0.04

0.10

0.05

0.31

ALLL as a percent of total loans, net of
undisbursed funds

1.36

1.18

1.29

1.28

1.32

Net charge-offs (recoveries) to average loans
receivable, net

(0.00

)

(0.02

)

(0.45

)

(0.27

)

(0.02

)

Allowance for Loan Losses:

ALLL, beginning of the year

$

13,218

$

13,347

$

12,882

$

10,951

$

9,463

Provision (recapture of provision)

1,900

(300

)

(4,000

)

(400

)

1,300

Charge-offs

(2

)

-

-

-

(83

)

Recoveries

58

171

4,465

2,331

271

ALLL, end of the year

$

15,174

$

13,218

$

13,347

$

12,882

$

10,951

(1) Tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.
(2) Capital ratios are for First Financial Northwest Bank only.




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

At or For the Year Ended December 31,

2020

2019

2018

2017

2016

(Dollars in thousands)

Yields and Costs:

Yield on loans

4.69

%

5.15

%

5.13

%

4.96

%

4.99

%

Yield on investments available-for-sale

2.42

3.11

2.92

2.61

2.31

Yield on investments held-to-maturity

0.99

0.00

0.00

0.00

0.00

Yield on interest-earning deposits

0.21

2.15

1.74

1.07

0.52

Yield on FHLB stock

4.85

5.42

5.24

3.32

2.62

Yield on interest-earning assets

4.36

%

4.88

%

4.83

%

4.57

%

4.39

%

Cost of deposits

1.42

%

1.90

%

1.35

%

1.04

%

0.94

%

Cost of borrowings

1.31

2.09

1.92

1.30

0.86

Cost of interest-bearing liabilities

1.41

%

1.92

%

1.46

%

1.10

%

0.92

%

Cost of total deposits

1.32

%

1.81

%

1.28

%

0.99

%

0.90

%

Cost of funds

1.32

1.84

1.39

1.05

0.89

Average Balances:

Loans

$

1,120,889

$

1,061,367

$

995,810

$

878,449

$

765,948

Investments available-for-sale

131,272

139,354

141,100

134,105

132,372

Investments held-to-maturity

2,312

-

-

-

-

Interest-earning deposits

25,108

13,634

11,628

22,194

45,125

FHLB stock

6,600

6,684

8,748

8,914

7,714

Total interest-earning assets

$

1,286,181

$

1,221,039

$

1,157,286

$

1,043,662

$

951,159

Deposits

$

987,069

$

946,484

$

828,965

$

722,666

$

648,324

Borrowings

125,392

129,899

183,667

192,227

163,893

Total interest-bearing liabilities

1,112,461

1,076,383

1,012,632

914,893

812,217

Noninterest-bearing deposits

75,388

48,434

49,461

39,127

27,596

Total deposits and borrowings

$

1,187,849

$

1,124,817

$

1,062,093

$

954,020

$

839,813

Average assets

$

1,361,604

$

1,294,164

$

1,227,396

$

1,108,656

$

1,010,243

Average stockholders' equity

155,587

154,092

151,145

142,647

160,192


Non-GAAP Financial Measures

In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains non-GAAP financial measures that include: pre-tax, pre-provision income; tangible assets; tangible book value per share; tangible equity to tangible assets ratio; and ALLL as a percent of total loans excluding PPP loans. The Company believes that these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors.

Non-GAAP financial measures have limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation and are not a substitute for other measures in this earnings release that are presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

The following tables provide a reconciliation between the GAAP and non-GAAP measures:

Quarter Ended

Dec 31, 2020

Sep 30, 2020

Jun 30, 2020

Mar 31, 2020

Dec 31, 2019

(Dollars in thousands, except per share data)

Tangible equity to tangible assets and tangible book value per share:

Total stockholders' equity (GAAP)

$

156,302

$

154,778

$

153,976

$

153,092

$

156,319

Less:

Goodwill

889

889

889

889

889

Core deposit intangible

824

860

896

932

968

Tangible equity (Non-GAAP)

$

154,589

$

153,029

$

152,191

$

151,271

$

154,462

Total assets (GAAP)

1,387,669

1,365,469

1,418,355

1,331,213

1,341,885

Less:

Goodwill

889

889

889

889

889

Core deposit intangible

824

860

896

932

968

Tangible assets (Non-GAAP)

$

1,385,956

$

1,363,720

$

1,416,570

$

1,329,392

$

1,340,028

Common shares outstanding
at period end

9,736,875

9,911,607

10,048,961

10,184,411

10,252,953

Equity to assets ratio

11.26

%

11.34

%

10.86

%

11.50

%

11.65

%

Tangible equity ratio

11.15

11.22

10.74

11.38

11.53

Book value per share

$

16.05

$

15.62

$

15.32

$

15.03

$

15.25

Tangible book value per share

15.88

15.44

15.14

14.85

15.07

ALLL on loans to total loans receivable, excluding PPP loans:

Allowance for loan losses

$

15,174

$

14,568

$

13,836

$

13,530

$

13,218

Total loans (GAAP)

$

1,117,410

$

1,150,481

$

1,154,132

$

1,105,959

$

1,122,238

Less:

PPP loans

41,251

52,045

51,661

-

-

Total loans excluding PPP loans
(Non-GAAP)

$

1,076,159

$

1,098,436

$

1,102,471

1,105,959

1,122,238

ALLL as a percent of total loans

1.36

%

1.27

%

1.20

%

1.22

%

1.18

%

ALLL as a percent of total loans
excluding PPP loans

1.41

%

1.33

%

1.25

1.22

1.18



Year Ended December 31,

2020

2019

2018

2017

2016

(Dollars in thousands, except per share data)

Pre-tax, pre-provision income:

Net income (GAAP)

$

8,556

$

10,369

$

14,899

$

8,479

$

8,892

Plus:

Federal income tax provision

1,942

2,562

3,693

4,942

3,712

Provision (recapture of provision)
for loan losses

1,900

(300

)

(4,000

)

(400

)

1,300

Pre-tax, pre-provision income
(Non-GAAP)

$

12,398

$

12,631

$

14,592

$

13,021

$

13,904

Tangible equity to tangible assets and tangible book value per share:

Total stockholders' equity (GAAP)

$

156,302

$

156,319

$

153,738

$

142,634

$

138,125

Less:

Goodwill

889

889

889

889

-

Core deposit intangible

824

968

1,116

1,266

-

Tangible equity (Non-GAAP)

$

154,589

$

154,462

$

151,733

$

140,479

$

138,125

Total assets (GAAP)

1,387,669

1,341,885

1,252,424

1,210,229

1,037,584

Less:

Goodwill

889

889

889

889

-

Core deposit intangible

824

968

1,116

1,266

-

Tangible assets (Non-GAAP)

$

1,385,956

$

1,340,028

$

1,250,419

$

1,208,074

$

1,037,584

Common shares outstanding
at period end

9,736,875

10,252,953

10,710,656

10,748,437

10,938,251

Equity to assets ratio

11.26

%

11.65

%

12.28

%

11.79

%

13.31

%

Tangible equity ratio

11.15

11.53

12.13

11.63

13.31

Book value per share

$

16.05

$

15.25

$

14.35

$

13.27

$

12.63

Tangible book value per share

15.88

15.07

14.17

13.07

12.63

ALLL on loans to total loans receivable, excluding PPP loans:

Allowance for loan losses

$

15,174

$

13,218

$

13,347

$

12,882

$

10,951

Total loans (GAAP)

$

1,117,410

$

1,122,238

$

1,037,429

$

1,002,694

$

828,161

Less:

PPP loans

41,251

-

-

-

-

Total loans excluding PPP loans
(Non-GAAP)

$

1,076,159

$

1,122,238

$

1,037,429

$

1,002,694

$

828,161

ALLL as a percent of total loans

1.36

%

1.18

%

1.29

%

1.28

%

1.32

%

ALLL as a percent of total loans
excluding PPP loans

1.41

%

1.18

%

1.29

1.28

1.32



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