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FFNW First Financial Northwest

Filed: 28 Jan 21, 11:19am
Exhibit 99.1




 
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



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

Renton, Washington – January 28, 2021 - 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.

2


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.
3

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.




4

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 COVID‑19 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 interest‑bearing 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.

5

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 interest‑bearing 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 interest‑bearing liabilities during the quarter to 1.15%, compared to 1.27% in the quarter ended September 30, 2020. The 10‑basis 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.

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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 COVID‑19 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:





7

  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 COVID‑19
  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:

8

  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 COVID‑19 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.


9

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%


10

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         

11

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         

12

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.

13

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.



14

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.





15


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.




16

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 






17

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 


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 




19