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First Financial Northwest, Inc. (FFNW)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered a net loss of $0.608M and $(0.07) diluted EPS, driven by a $1.575M provision for credit losses tied largely to two healthcare-related participation loans and macro model updates; net interest margin compressed to 2.46% amid persistent funding-cost pressure .
  • Deposits rose $79.2M sequentially to $1.167B, enabling a reduction of FHLB advances to $100.0M from $176.0M; nonaccrual loans improved sharply to $0.853M following payoff of a $4.1M CRE loan with no loss .
  • Capital remained strong: Tier 1 leverage 10.86%, total capital 16.68%; book value per share was $17.39 vs. $17.51 in Q2 .
  • Management emphasized strong credit quality and continued work toward closing the pending sale to Global Federal Credit Union, awaiting final NCUA approval—an ongoing catalyst for the stock as deal clarity emerges .

What Went Well and What Went Wrong

What Went Well

  • Credit quality remained strong: nonaccrual loans were only $0.853M (0.07% of loans); CEO highlighted disciplined underwriting and lending-team execution (“top‑notch lending department”) .
  • Liquidity optimization: deposits increased $79.2M, funding a $76.0M paydown of FHLB advances to $100.0M; hedged borrowings carry a weighted average fixed rate of 1.93% with ~30.8 months remaining, supporting interest-rate risk management .
  • Asset quality improvement: payoff of the $4.1M nonaccrual CRE loan incurred no loss, materially reducing nonaccruals q/q .

What Went Wrong

  • Earnings pressure: net loss of $0.608M from a $1.575M provision for credit losses; NIM fell 20 bps q/q to 2.46% due to higher funding costs and a 7 bps decline in average asset yield .
  • Interest expense increased to $10.961M (+$0.614M q/q), driven by higher borrowings and deposit costs (interest-bearing deposits cost rose to 3.80%) .
  • Noninterest expense rose to $8.488M (+$0.547M q/q), with salaries/benefits up $0.789M as deferred loan cost accruals fell (loan-mod activity normalizing post Q2), partially offset by a $0.411M defined-benefit plan refund .

Financial Results

MetricQ1 2024Q2 2024Q3 2024
Net interest income ($USD Millions)$8.900 $8.970 $8.454
Total interest income ($USD Millions)$19.643 $19.317 $19.415
Total interest expense ($USD Millions)$10.743 $10.347 $10.961
Noninterest income ($USD Millions)$0.787 $0.673 $0.677
Noninterest expense ($USD Millions)$11.331 $7.941 $8.488
Provision (recapture) for credit losses ($USD Millions)$(0.175) $(0.200) $1.575
Net income (loss) ($USD Millions)$(1.076) $1.555 $(0.608)
Diluted EPS ($USD)$(0.12) $0.17 $(0.07)

Margins and Ratios

MetricQ1 2024Q2 2024Q3 2024
Net interest margin (%)2.55% 2.66% 2.46%
ROA (%)-0.29% 0.43% -0.17%
ROE (%)-2.67% 3.88% -1.50%
Efficiency ratio (%)116.97% 82.35% 92.96%
Avg yield on interest-earning assets (%)5.62% 5.73% 5.66%
Cost of interest-bearing liabilities (%)3.58% 3.59% 3.72%

Balance Sheet and Asset Quality KPIs

MetricQ1 2024Q2 2024Q3 2024
Total deposits ($USD Millions)$1,166.896 $1,088.174 $1,167.355
FHLB advances ($USD Millions)$115.0 $176.0 $100.0
Net loans receivable ($USD Millions)$1,142.909 $1,135.067 $1,126.146
Nonaccrual loans ($USD Millions)$0.201 $4.700 $0.853
ACL as % of total loans (%)1.30% 1.29% 1.42%
Book value per share ($)$17.46 $17.51 $17.39
Tier 1 leverage ratio (%)10.41% 10.91% 10.86%
Total capital ratio (%)16.24% 16.64% 16.68%

Loan Portfolio Mix (Amounts, % of total loans)

CategoryQ1 2024Q2 2024Q3 2024
One-to-four family residential total$506.700M; 43.8% $508.939M; 44.3% $500.871M; 43.9%
Non-residential CRE total$367.374M; 31.7% $365.480M; 31.8% $363.089M; 31.8%
Construction/Land total$57.007M; 4.9% $55.786M; 4.8% $60.221M; 5.2%
Consumer total$72.014M; 6.2% $70.293M; 6.1% $71.020M; 6.2%
Business total$20.424M; 1.8% $15.063M; 1.3% $14.399M; 1.3%
Multifamily residential$134.386M; 11.6% $134.302M; 11.7% $132.811M; 11.6%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per share (quarterly)Q3 2024$0.13 declared/paid in prior quarter Not disclosed in Q3 press release Not discussed
Global Federal Credit Union transaction statusQ3 2024Pending regulatory approvals; integration work ongoing Awaiting final NCUA approval; preparing for closing Maintained narrative
FHLB cash-flow hedge programQ3 2024$115.0M hedged; 1.87% fixed; 29.6 months remaining (Q2) $100.0M hedged; 1.93% fixed; 30.8 months remaining Maintained; modest rate uptick

Note: No formal quantitative revenue, margin, OpEx, OI&E, or tax-rate guidance was provided in Q3 materials .

Earnings Call Themes & Trends

Note: No earnings call transcript was available in our document set for Q3 2024; themes below reflect press-release commentary.

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Pending sale to Global FCUQ1: Announced transaction; ongoing integration prep . Q2: Significant loan modification/refinance work completed to meet P&A terms .Awaiting final NCUA approval; emphasis on smooth customer/employee transition .Progressing toward closure; regulatory timing remains key.
Funding costs and deposit competitionQ1: Elevated short-term rates pressured deposit pricing; NIM 2.55% . Q2: Managed brokered deposit reductions; NIM improved to 2.66% .Average cost of interest-bearing liabilities up; NIM down to 2.46% .Persistent pressure; NIM volatility around deposit mix/hedges.
Credit quality/nonaccrualsQ1: Nonaccruals $0.201M; strong credit . Q2: Nonaccruals rose to $4.7M on one CRE loan (no expected loss) .Nonaccruals fell to $0.853M after payoff; strong quality asserted .Improved in Q3; mix-sensitive but resilient.
Loan modifications and deferred feesQ2: ~$130M modified/refinanced, boosting deferred fee recognition and loan yield .Deferred fees decreased $0.266M; loan yield down to 5.86% .Post-mod normalization impacted yields.
Capital strengthQ1–Q2: Bank capital ratios above regulatory targets .Tier 1 leverage 10.86%, total capital 16.68% .Stable high capital supports flexibility.

Management Commentary

  • “While we recorded a provision for credit losses during the quarter ended September 30, 2024, our credit quality remained strong, with only $853,000 in nonaccrual loans relative to our $1.14 billion total loan portfolio.” — Joseph W. Kiley III, President & CEO .
  • “We… continue to work closely with Global Federal Credit Union to prepare for the closing of the pending transaction… awaiting the final required approval from the National Credit Union Administration.” — Joseph W. Kiley III .
  • “Our balance sheet contained over $250 million of loans… ineligible for a federally chartered credit union… I am very pleased that… we resulted in the modification or refinance of over $130 million of this portfolio.” — Q2 CEO remarks .
  • “Our first quarter earnings were adversely impacted by the purchase of a single premium group annuity… Extinguishing this liability at a pretax cost of $1.2 million was a strategic move…” — Q1 CEO remarks .

Q&A Highlights

No public Q3 2024 earnings call transcript was available; no Q&A details to report.

Estimates Context

  • Wall Street consensus estimates via S&P Global for FFNW were unavailable in our dataset; as a result, comparisons vs consensus and beat/miss analysis cannot be provided. Values retrieved from S&P Global were unavailable for FFNW due to missing CIQ mapping.

Given actuals, sell-side models may need to reflect: the $1.575M provision and ACL lift to 1.42% of loans; NIM compression to 2.46% with higher cost of liabilities; and deposit-driven reduction in borrowings, which could support medium-term funding costs .

Key Takeaways for Investors

  • Credit quality resilient: nonaccruals fell to $0.853M after a $4.1M payoff with no loss; ACL increased to 1.42% to reflect specific healthcare-related participations and macro inputs .
  • NIM pressure persists: average cost of interest-bearing liabilities rose to 3.72% as deposit costs and borrowings increased; monitor deposit mix, hedges, and competitive rate dynamics .
  • Liquidity improved: $79.2M sequential deposit growth funded a $76.0M FHLB paydown; hedged advances at ~1.93% fixed mitigate rate volatility .
  • Earnings volatility tied to provisions/fees: earnings dipped to a net loss in Q3 as loan-mod-related deferred fee tailwinds normalized and provisions rose .
  • Capital strength supports flexibility: Tier 1 leverage 10.86%, total capital 16.68% provide buffer through funding-cost cycles and strategic transition .
  • Deal catalyst: pending sale to Global FCU awaits final NCUA approval; closure timeline and terms are key near-term stock catalysts .
  • Watch deposit strategy: sustained reduction in brokered CDs and growth in retail CDs/money markets affects funding costs and NIM trajectory .