First Financial Northwest Inc FFNW

NAS: FFNW | ISIN: US32022K1025   22/04/2024
20,37 USD (+0,05%)
(+0,05%)   22/04/2024

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

Gepubliceerd op 28 januari 2021 om 15:15

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.

(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 at www.ffnwb.com and on the SEC's website at www.sec.gov.

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



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, 2020September 30, 2020December 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


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