RENTON, Wash., March 19, 2008 (PRIME NEWSWIRE) -- First Financial Northwest, Inc. (the Company) (Nasdaq:FFNW), the holding company for First Savings Bank Northwest ("Bank"), announced today that it incurred a $10.4 million net loss for the fourth quarter ended December 31, 2007. Included in the loss was a one-time contribution to the First Financial Northwest Foundation of $16.9 million of Company stock in connection with the mutual to stock conversion. On October 9, 2007, upon completion of the mutual to stock conversion, First Financial Northwest, Inc. became the holding company for First Savings Bank of Renton which changed its name to First Savings Bank Northwest. For the period its stock was outstanding, October 9, 2007 to December 31, 2007, the Company reported a net loss of $10.7 million or a loss per share of $0.51. Mr. Victor Karpiak, Chairman of the Board and Chief Executive Officer of the Company, stated, "First Savings Bank Northwest has a long history of giving back to the Community and we feel this is one more way of carrying on that legacy." Absent this one-time contribution, the Company would have generated $636,000 in income before tax for the quarter. If the one-time contribution was not made in 2007, income before tax would have been $9.3 million for the year ended December 31, 2007. For the year ended December 31, 2007, the Company had a net loss of $4.0 million compared to net income of $7.1 million for the year ended December 31, 2006.
Net interest income for the quarter ended December 31, 2007, increased $4.3 million to $8.2 million from $3.9 million for the same period in 2006. For the year, net interest income increased $5.7 million to $23.7 million from $18.0 million in 2006 as a result of the $172.4 increase in our average loans receivable and a 29 basis point increase in yield, partially offset by a 30 basis point increase in our average cost of funds and a $63.8 million increase in the average interest-bearing liabilities. Our net loan portfolio increased $180.4 million in 2007 to $880.7 million as compared to $700.3 million at December 31, 2006. We recorded a $6.0 million provision for loan losses for the year ended December 31, 2007, an increase of $5.7 million from the comparable period in 2006. During the fourth quarter of 2007 we recorded a loan loss provision of $4.8 million. Of this increase, $4.5 million related to $30.7 million of impaired loans to one builder for projects secured by real estate in King, Pierce and Thurston counties, Washington. These loans are to a builder of entry level homes whose sales have been impacted by the current credit tightening as first time home purchasers generally have lower credit scores and a minimal amount of equity to finance the purchase. The remaining increase was attributable to growth in our loan portfolio and the peer group analysis incorporated as part of the methodology we utilize to compute the balance required for our allowance for loan loss account as a result of our lack of any historical loss experience. Mr. Karpiak commented, "We are continuing to monitor our builder relationships closely. At this time we are not aware of any other significant credit issues in our portfolio, and the Company has not been involved in any sub prime lending activities."
Noninterest income remained relatively the same for the fourth quarter and the year ended December 31, 2007 from the comparable periods in 2006.
Noninterest expense increased $17.1 million for the fourth quarter of 2007 to $20.1 million and increased $17.6 million to $26.0 million for the year ended December 31, 2007 as compared to the fourth quarter and year ended December 31, 2006, respectively. As previously mentioned, $16.9 million of this increase was related to the one-time contribution to the First Financial Northwest Foundation.
At December 31, 2007, total assets were $1.1 billion, an increase of $136.2 million as compared to December 31, 2006. Our loan portfolio, net of the loan allowance, increased $180.4 million during 2007. Loan originations totaled: $118.6 million in one-to four-family mortgages; $66.3 million and $10.0 million in commercial real estate and multi-family mortgages, respectively; and $5.9 million in consumer loans. We also originated $233.7 million in construction/land development loans through Executive House. The following table presents a breakdown of our loan portfolio:
At December 31,
----------------------------------------------
2007 2006
---------------------- ----------------------
Amount Percent Amount Percent
---------- ---------- ---------- ----------
(Dollars in Thousands)
Real Estate:
One-to four-family
residential $ 424,863 42.45% $ 373,192 48.86%
Multi-family
residential 76,039 7.60 79,701 10.44
Commercial 204,798 20.46 153,924 20.15
Construction/land
development 288,378 28.82 153,401 20.08
---------- ---------- ---------- ----------
Total real estate 994,078 99.33 760,218 99.53
---------- ---------- ---------- ----------
Consumer
Home equity 6,368 0.64 3,038 0.40
Savings account 127 0.01 296 0.03
Other 177 0.02 203 0.04
---------- ---------- ---------- ----------
Total consumer 6,672 0.67 3,537 0.47
---------- ---------- ---------- ----------
Total loans 1,000,750 100.00% 763,755 100.00%
========== ==========
Less:
Loans in process 108,939 58,731
Deferred loan fees 3,176 2,725
Allowance for loan
losses 7,971 1,971
---------- ----------
Loans receivable, net $ 880,664 $ 700,328
========== ==========
As of December 31, 2007, nonaccrual loans and loans 90 days or more past due totaled $32.3 million as a percentage of total loans was 3.22%, and as a percentage of the total assets was 2.83%. Of our nonperforming assets, $30.7 million represent loans to one builder for projects secured by real estate in King, Pierce and Thurston counties, Washington, as discussed previously.
Total liabilities declined $69.1 million to $831.6 million at December 31, 2007 from 2006. This decline was primarily the result of decreases in deposits and advances from the Federal Home Loan Bank of Seattle (FHLB). Deposits decreased $21.2 million which mainly resulted from withdrawals to fund stock purchases in connection with our stock conversion. Advances from the FHLB totaled $96.0 million at the end of December 31, 2007 compared to $147.0 million at December 31, 2006, a $51.0 million or 34.69% reduction. The Bank utilized part of the funds received from the Company, in the mutual to stock conversion, to reduce FHLB advances.
Total equity of the Company increased $205.3 million or 197.4% to $309.3 million at December 31, 2007 from $104.0 million at December 31, 2006. This increase was primarily the result of $224.4 million related to our mutual to stock conversion, which was offset by the purchase of Employee Stock Ownership Plan shares of $16.9 million and a net loss of $4.0 million for the year ended December 31, 2007.
First Financial Northwest, Inc. is a Washington corporation headquartered in Renton, Washington. It is the parent company of First Savings Bank Northwest; a Washington chartered stock savings bank that was originally organized in 1923. The Company serves the Puget Sound Region of Washington that includes King, Snohomish and Pierce Counties, through its full-service banking office. The Company is part of the America's Community Bankers NASDAQ Index. For additional information about the Company and the Bank, please visit our website at www.fsbnw.com and click on the "Investor Relations" section.
Forward-looking statements:
Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Company's mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. The Company's actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to, interest rate fluctuations; economic conditions in the Company's primary market area; demand for construction/land development, residential, commercial real estate, consumer, and other types of loans; success of new products; competitive conditions between banks and non-bank financial service providers; regulatory and accounting changes; technological factors affecting operations; pricing of products and services; and other risks detailed in the Company's reports filed with the Securities and Exchange Commission. Accordingly, these factors should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. The Company undertakes no responsibility to update or revise any forward-looking statement.
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(Dollars in thousands, except share data)
(Unaudited)
December 31,
------------------------
Assets 2007 2006
----------- -----------
Cash on hand and in banks $ 3,675 12,135
Interest-bearing deposits 787 7,238
Federal funds sold 7,115 7,290
Investments available for sale 119,837 149,051
Investments held to maturity (fair value
of $81,545 and $87,724) 80,410 86,786
Loans receivable, net of allowance of $7,971
and $1,971 880,664 700,328
Premises and equipment, net 13,339 13,737
Federal Home Loan Bank stock, at cost 4,671 4,671
Accrued interest receivable 5,194 4,710
Mortgage servicing rights 1,126 1,560
Federal income tax receivable -- 636
Deferred tax assets, net 7,093 --
Goodwill 14,206 14,206
Prepaid expenses and other assets 2,771 2,363
----------- -----------
Total assets $ 1,140,888 1,004,711
=========== ===========
Liabilities and Stockholders' Equity
Liabilities
Deposits $ 729,494 750,710
Advances from Federal Home Loan Bank 96,000 147,000
Advance payments from borrowers for taxes
and insurance 2,092 1,105
Accrued interest payable 132 176
Federal income tax payable 726 --
Deferred tax liabilities, net -- 56
Other liabilities 3,158 1,622
----------- -----------
Total liabilities 831,602 900,669
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.01 par value;
authorized 10,000,000 shares, no shares
issued or outstanding -- --
Common stock, $0.01 par value; authorized
90,000,000 shares; issued and outstanding
22,852,800 and -0- in 2007 and 2006,
respectively 229 --
Additional paid-in capital 224,181 --
Retained earnings, substantially restricted 102,769 106,753
Accumulated other comprehensive loss, net (1,180) (2,711)
Unearned Employee Stock Ownership Plan
(ESOP) shares (16,713) --
----------- -----------
Total stockholders' equity 309,286 104,042
----------- -----------
Total liabilities and stockholders'
equity $ 1,140,888 1,004,711
=========== ===========
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Statement of Income
(Dollars in thousands, except share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
-------- -------- -------- --------
Interest income
Loans, including fees $ 15,250 11,572 56,123 43,416
Investments available
for sale 1,392 1,657 5,950 7,234
Investments held to
maturity 115 56 334 225
Tax-exempt investments
held to maturity 849 904 3,474 3,593
Federal funds sold and
interest bearing
deposits with banks 122 150 660 787
Dividends on Federal
Home Loan Bank stock 9 5 28 5
-------- -------- -------- --------
Total interest income 17,737 14,344 66,569 55,260
-------- -------- -------- --------
Interest expense
Deposits 8,405 8,529 34,825 30,982
Federal Home Loan Bank
advances 1,172 1,913 8,023 6,266
-------- -------- -------- --------
Total interest expense 9,577 10,442 42,848 37,248
-------- -------- -------- --------
Net interest income 8,160 3,902 23,721 18,012
Provision for loan losses 4,800 -- 6,000 320
-------- -------- -------- --------
Net interest income
after provision for
loan losses 3,360 3,902 17,721 17,692
-------- -------- -------- --------
Noninterest income
(expense)
Net gain (loss) on sale
of investments -- -- -- (3)
Other 453 (46) 589 (89)
-------- -------- -------- --------
Total noninterest
income (expense) 453 (46) 589 (92)
-------- -------- -------- --------
Noninterest expense
Salaries and employee
benefits 1,903 2,180 5,383 5,331
Occupancy and equipment 298 269 1,060 1,092
Contribution to First
Financial Northwest
Foundation 16,928 -- 16,928 --
Other general and
administrative 976 531 2,598 1,961
-------- -------- -------- --------
Total noninterest
expense 20,105 2,980 25,969 8,384
-------- -------- -------- --------
Income (loss) before
federal income taxes (16,292) 876 (7,659) 9,216
Federal income tax
(benefit) expense (5,891) 74 (3,675) 2,128
-------- -------- -------- --------
Net income (loss) $(10,401) 802 (3,984) 7,088
======== ======== ======== ========
Basic loss per share (1) $ (0.51) N/A (0.51) N/A
======== ======== ======== ========
Diluted loss per share
(1) $ (0.51) N/A (0.51) N/A
======== ======== ======== ========
---------------------
(1) Loss per share is calculated for the period from October 9, 2007
to December 31, 2007 the period for which the Company was
publicly-owned.
FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Ratios
(Unaudited)
At or For the
Twelve Months Ended
December 31,
---------------------
2007 2006
-------- --------
Performance Ratios:
Return on assets (1) (0.37)% 0.75 %
Return on equity (2) (2.59) 6.86
Equity-to-assets ratio (3) 14.37 10.89
Interest rate spread (4) 1.75 1.76
Net interest margin (5) 2.30 2.01
Tangible equity to tangible assets (6) 26.19 9.07
Average interest-earning assets to
average interest-bearing liabilities 113.48 106.05
Efficiency ratio (7) 106.82 46.79
Noninterest expense as a percent of
average total assets (8) 2.42 0.88
Capital Ratios (9):
Tier 1 leverage 16.62 8.61
Tier 1 risk-based 24.84 14.23
Total risk-based 25.91 14.56
Asset Quality Ratios:
Nonaccrual and 90 days or more past
due loans as a percent of total loans 3.22 0.02
Nonperforming assets as a percent
of total assets 2.83 0.02
Allowance for losses as a percent of
total loans receivable 0.80 0.26
Allowance for losses as a percent of
nonperforming loans 24.71 1,279.87
Net charge-offs to average loans
receivable, net -- --
------------------------------------
1) Net income divided by average total assets
2) Net income divided by average equity.
3) Average equity divided by average total assets.
4) Difference between weighted average yield on interest-earning
assets and weighted average cost on interest-bearing liabilities.
5) Net interest margin, otherwise known as net yield on interest-
earning assets, is calculated as net interest income divided by
average interest-earning assets.
6) Tangible equity is equity less goodwill and other intangible
assets.
7) The efficiency ratio represents the ratio of noninterest expense
divided by the sum of net interest income and noninterest
income (expense).
8) Noninterest expense in 2007 included a one-time expense for the
establishment of the First Financial Northwest Foundation of
$16.9 million. Without this one-time expense, the efficiency ratio
for the year ended December 31, 2007 would have been 37.19% and
noninterest expense as a percent of average total assets for the
same period would have been 0.84%.
9) Capital ratios are for the Bank only.