Executive Summary

Q1 2024 results were impacted by one-time items, driving a net loss of $1.1 million (-$0.12 diluted EPS) versus net income of $1.2 million ($0.13) in Q4 2023 and $2.1 million ($0.23) in Q1 2023; net interest margin was essentially flat sequentially at 2.55% (vs. 2.54% in Q4) but down from 3.22% YoY .
Noninterest expense rose to $11.3 million due primarily to a $1.2 million single premium group annuity purchase to extinguish a legacy defined benefit liability and $0.767 million of pretax expenses related to the pending sale to Global Federal Credit Union; management also recaptured $175,000 of provision for credit losses given strong credit metrics .
Deposit costs remain elevated due to competition; deposits fell $27.2 million QoQ (brokered deposits down $44.6 million) in line with strategy, partially offset by growth in retail CDs and money market balances; credit quality remained strong with nonaccrual loans at $201,000 (0.02% of total loans) .
Catalysts ahead: regulatory approval and closing of the sale to Global FCU; normalization of expenses post one-time items; continued reduction of higher-cost brokered deposits could support cost of funds and margin, though rate environment and competition remain headwinds .

What Went Well and What Went Wrong

What Went Well

Credit quality remained strong: nonaccrual loans at $201,000 on $1.16 billion average loan balances, ACL at 1.30% of total loans; management recorded a $175,000 recapture of provision for credit losses .
Strategic deposit mix shift: brokered deposits reduced by $44.6 million QoQ, offset by increases in retail CDs (+$9.4 million), money market (+$6.2 million), and interest-bearing demand (+$1.5 million), reinforcing funding strategy .
Net interest margin stabilized sequentially at 2.55% (vs. 2.54% in Q4), supported by higher average yields on interest-earning assets (5.62% vs. 5.56% in Q4) despite rising liability costs .

Management quote: “Credit quality remained strong... After careful consideration, our analysis concluded that a $175,000 recapture of provision for credit losses was appropriate... Persistently elevated short term interest rates and strong competition for deposits continued to place pressure... our net interest margin was little changed, increasing to 2.55%” .

What Went Wrong

One-time items drove the loss: $1.2 million annuity purchase to extinguish a legacy pension liability and $767,000 pretax transaction costs related to the pending sale materially increased noninterest expense to $11.3 million .
Deposit costs stayed elevated, with average cost of interest-bearing deposits rising to 3.69% (from 3.62% in Q4 and 2.41% in Q1 2023), pressuring net interest income (down to $8.9 million vs. $9.3 million in Q4 and $11.3 million in Q1 2023) .
Total deposits declined $27.2 million QoQ (and $60.2 million YoY), reflecting strategic runoff in higher-cost brokered deposits amid competitive markets, which can weigh on balance sheet scale and fee generation .

Financial Results

Metric	Q1 2023	Q4 2023	Q1 2024
Total interest income ($USD Millions)	$18.50	$20.29	$19.64
Noninterest income ($USD Millions)	$0.67	$0.63	$0.79
Revenue (interest income + noninterest income) ($USD Millions)	$19.17	$20.92	$20.43
Total interest expense ($USD Millions)	$7.24	$11.01	$10.74
Net interest income ($USD Millions)	$11.26	$9.28	$8.90
Net (loss) income ($USD Millions)	$2.12	$1.19	$(1.08)
Diluted EPS ($USD)	$0.23	$0.13	$(0.12)
Net interest margin (%)	3.22%	2.54%	2.55%

Deposits mix

Category ($USD Millions)	Mar 31, 2023	Dec 31, 2023	Mar 31, 2024
Noninterest-bearing demand	$110.78	$100.90	$100.85
Interest-bearing demand	$86.18	$56.97	$58.49
Savings	$21.87	$18.89	$19.31
Money market	$483.95	$529.41	$535.59
Certificates of deposit (retail)	$332.94	$357.15	$366.51
Brokered deposits	$191.41	$130.79	$86.15
Total deposits	$1,227.13	$1,194.11	$1,166.90

Loan portfolio summary (amounts)

Category ($USD Millions)	Mar 31, 2023	Dec 31, 2023	Mar 31, 2024
One-to-four family residential (total)	$482.66	$513.22	$506.70
Commercial real estate – non-residential (total)	$408.91	$377.86	$367.37
Construction/land (total)	$63.60	$60.92	$57.01
Business (total)	$31.66	$29.08	$20.42
Consumer (total)	$70.62	$72.00	$72.01
Total loans	$1,200.78	$1,191.23	$1,157.91
Loans receivable, net	$1,184.75	$1,175.93	$1,142.91

Key KPIs

KPI	Q1 2023	Q4 2023	Q1 2024
Yield on loans (%)	5.56	5.83	5.88
Cost of interest-bearing deposits (%)	2.41	3.62	3.69
Cost of borrowings (%)	2.69	2.40	2.65
Net interest margin (%)	3.22	2.54	2.55
ROA (%)	0.57	0.31	(0.29)
ROE (%)	5.31	2.97	(2.67)
Efficiency ratio (%)	75.12	85.17	116.97
ACL as % of total loans	1.33%	1.28%	1.30%
Nonaccrual loans ($USD Millions)	$0.20	$0.22	$0.20
FHLB advances ($USD Millions)	$160.00	$125.00	$115.00
FHLB hedge weighted avg fixed rate (%)	—	1.87	1.87

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share (quarterly)	Q1 2024	$0.13 (Q3 2023 paid)	$0.13 paid	Maintained
Revenue	Q1 2024	Not provided	Not provided	Maintained
Net interest margin	Q1 2024	Not provided	Not provided	Maintained
Noninterest expense	Q1 2024	Not provided	Not provided (one-time items disclosed)	N/A
Tax rate	Q1 2024	Not provided	Not provided	N/A
Segment-specific guidance	Q1 2024	Not provided	Not provided	N/A

No formal quantitative guidance ranges were provided; management disclosed ongoing expense items and strategic updates related to the Global FCU transaction .

Earnings Call Themes & Trends

Note: No Q1 2024 earnings call transcript was identified in our document set.

Topic	Previous Mentions (Q3 2023 and Q4 2023)	Current Period (Q1 2024)	Trend
Rate environment & deposit competition	Elevated rates and intense competition pressured deposit costs and margin	Competition remained strong; NIM essentially flat; cost of liabilities increased	Persistent headwind
Credit quality	Strong credit metrics; recapture of provision due to payoffs/upgrades	Nonaccruals remain very low; $175k recapture of provision	Stable/strong
Expense management	Staff reductions (~6%) to lower run-rate expenses; efficiency focus	One-time annuity purchase; transaction costs elevated noninterest expense	Near-term elevated due to one-time items
Strategic transaction (Global FCU)	Hiring plans on hold; pursuing regulatory approval for sale	Transaction integration planning continues; $767k pretax expenses	Progressing; awaiting approvals
Deposit mix strategy	Shift from interest-bearing demand to money market and retail CDs; brokered deposits used tactically	Brokered deposits reduced materially; retail CDs and money market up	Mix optimization ongoing

Management Commentary

“Extinguishing this [defined benefit plan] liability at a cost of $1.2 million was a strategic move considered to be an appropriate use of capital in light of the elevated rate environment.” – Joseph W. Kiley III, President & CEO .
“We also recognized $767,000 in pretax expenses in the quarter relating to our previously announced sale to Global Federal Credit Union.” – Joseph W. Kiley III .
“Credit quality remained strong, with nonaccrual loans remaining low at $201,000... our analysis concluded that a $175,000 recapture of provision for credit losses was appropriate...” – Joseph W. Kiley III .
“Persistently elevated short term interest rates and strong competition for deposits continued to place pressure on deposit rates... our net interest margin was little changed, increasing to 2.55%...” – Joseph W. Kiley III .

Q&A Highlights

No earnings call transcript located for Q1 2024 in our document set; therefore, no Q&A highlights or clarifications available.

Estimates Context

Wall Street consensus (S&P Global) for FFNW Q1 2024 was unavailable due to missing CIQ mapping in our SPGI dataset; as a result, estimate comparisons and beat/miss analysis could not be performed this quarter. Values retrieved from S&P Global.*

Key Takeaways for Investors

The quarter’s loss was driven by identifiable one-time items (legacy pension annuity $1.2 million; transaction expenses $0.767 million); absent these, expense run-rate would have been lower, suggesting potential normalization in forward periods post-transaction .
Margin dynamics are stabilizing sequentially (NIM 2.55% vs. 2.54% in Q4) with asset yields rising, but liability costs continue to trend higher; watch deposit repricing pace and funding mix as brokered deposits are reduced .
Strong credit quality provides cushion (nonaccruals 0.02% of loans; ACL 1.30%); ongoing recapture underscores benign credit trends despite macro uncertainty .
Funding strategy is shifting away from higher-cost brokered deposits toward retail CDs and money markets; near-term balance sheet contraction is a trade-off for better long-term cost of funds .
FHLB advances remain fully hedged with fixed pay/variable receive swaps at ~1.87% average fixed rate, supporting funding cost management amid rate volatility .
Dividend continuity ($0.13) reflects capital strength (Tier 1 leverage 10.41%; total capital 16.24%), but transaction-related expenses and rate headwinds could influence payout considerations during the transition period .
Potential trading catalyst: regulatory milestones and closing dynamics of the Global FCU sale; clarity on timing and any updated transaction disclosures could drive stock reaction .

Additional Relevant Press Releases for Q1 2024

Shareholder investigation announcements referencing the proposed sale to Global Federal Credit Union (law firm releases; not company guidance): Halper Sadeh (Apr 23, 2024) and Kahn Swick & Foti (Jun 14, 2024) .

First Financial Northwest, Inc. (FFNW)·Q1 2024 Earnings Summary