First Financial Northwest reports Q2 EPS 17c vs. 16c last year

Book value per share was $17.51 at June 30, 2024, compared to $17.46 at March 31, 2024, and $17.35 at June 30, 2023. The Bank’s Tier 1 leverage and total capital ratios were 10.9% and 16.6% at June 30, 2024, compared to 10.4% and 16.2% at March 31, 2024, and 10.0% and 15.8% at June 30, 2023, respectively. “During the second quarter, our financial results were positively impacted by the successful completion of a project to modify a large number of loans relating to our previously announced sale of the Bank to Global Federal Credit Union. Specifically, our balance sheet contained over $250 million of loans that are ineligible for a federally chartered credit union like Global to hold due to various aspects, primarily an original term greater than 15 years for non-owner occupied residential and commercial loans. As part of our Purchase and Assumption Agreement with Global, the Bank agreed to use its good faith efforts to modify or refinance these loans. I am very pleased that the outstanding efforts of our employees resulted in the modification or refinance of over $130 million of this portfolio,” stated Joseph W. Kiley III, President and CEO. “As previously reported, our first quarter earnings were adversely impacted by the purchase of a single premium group annuity to satisfy the Company’s obligations to current and former employees covered by a legacy defined benefit plan. Extinguishing this liability at a pretax cost of $1.2 million was a strategic move considered to be an appropriate use of capital in light of the elevated rate environment. We also recognized $767,000 in pretax transaction related expenses in the first quarter of 2024, further adversely impacting our first quarter earnings. During the quarter ended June 30, 2024, we recognized $284,000 in pretax transaction expenses. While nonaccrual loans increased $4.5 million during the quarter ended June 30, 2024, overall credit quality remained strong, with only $4.7 million of nonaccrual loans relative to our $1.15 billion total loan portfolio. The increase in nonaccrual loans was due primarily to a $4.1 million commercial real estate loan moving to nonaccrual in the quarter. The loan is secured by a well-collateralized mixed-use property, and as such, we do not expect to incur a loss related to this credit. The property is currently under contract to sell, and we are in the early stages of working with the purchaser to potentially allow an assumption of the existing loan. Finally, we performed an analysis of the allowance for credit losses, which considered various factors including declines in loan balances, shifts in the composition of the loan portfolio, and credit grade changes. After careful consideration, our analysis concluded that a $200,000 recapture of provision for credit losses was appropriate.”