Loan Modifications and COVID-19 Impact - The Bank has received 168 requests for loan modifications due to the COVID-19 pandemic, with modifications allowing borrowers to defer payments for three to six months[181]. - Total loans with pandemic modifications amounted to $81.1 million, representing 7.3% of total loans as of March 31, 2020[187]. - Modifications of loans as a percentage of total loans were 6.4% for one-to-four family residential loans and 2.7% for multifamily loans as of March 31, 2020[187]. - A provision for loan losses of $300,000 was recognized, primarily due to forecasted credit losses from the COVID-19 pandemic[242]. Financial Performance - Net income for the three months ended March 31, 2020, was $1.7 million, or $0.17 per diluted share, compared to $1.9 million, or $0.19 per diluted share for the same period in 2019[229]. - Net interest income decreased by $188,000 to $9.7 million for the three months ended March 31, 2020, from $9.9 million for the same period in 2019[230]. - Noninterest income rose by $290,000 to $990,000 for the quarter ended March 31, 2020, with loan-related fees increasing by $329,000[245]. - Noninterest expense increased by $559,000 to $8,268,000, driven by increases in salaries and employee benefits, occupancy and equipment, and data processing services[246]. - The federal income tax provision decreased by $96,000 to $402,000, primarily due to a $357,000 decrease in pretax net income[249]. Asset and Loan Portfolio - Total assets decreased by 0.8% to $1.33 billion as of March 31, 2020, from $1.34 billion at December 31, 2019[187]. - Loans receivable decreased by $16.3 million to $1.1 billion, with loan originations of $38.7 million and $5.3 million in loan purchases[192]. - The total loan portfolio amounted to $1,105.959 million, with $371.253 million in one-to-four family residential loans and $169.468 million in multifamily loans[200]. - The allowance for loan and lease losses (ALLL) increased to $13.5 million, representing 1.22% of total loans receivable, up from 1.18% at December 31, 2019[202]. - Nonperforming assets increased by $2.1 million during the first three months of 2020, with total nonperforming assets at $2.649 million, representing 0.20% of total assets[210]. Deposits and Funding - Total deposits decreased by $33.6 million to $1.00 billion as of March 31, 2020, a 3.2% decline from $1.03 billion at December 31, 2019[218]. - Retail deposits increased by $35.5 million during the three months ended March 31, 2020, with money market accounts up by $19.7 million and retail certificates of deposit up by $12.6 million[218]. - The Bank's portfolio of brokered certificates of deposits decreased by $69.0 million to $25.5 million at March 31, 2020[219]. - Total FHLB advances increased by $22.3 million to $160.0 million at March 31, 2020, from $137.7 million at December 31, 2019[221]. Interest Rate and Risk Management - The Company's net interest margin decreased by 26 basis points due to a decline in yield on interest-earning assets outpacing the decline in cost of interest-bearing liabilities[236]. - The net interest margin decreased to 3.11% from 3.37% in the previous year[241]. - The income simulation model predicts a net interest income change of $38.891 million (2.78% increase) with a 300 basis point rise in interest rates, while a 100 basis point decrease would result in a $38.381 million (1.43% increase) change[283]. - The company monitors interest rate sensitivity quarterly, utilizing a third-party consultant with nearly 40 years of experience in asset-liability management[275]. - The company’s interest rate risk is a primary concern, as other risks like foreign currency exchange and commodity pricing do not typically arise in its operations[287]. Capital and Equity - Total stockholders' equity decreased by $3.2 million to $153.1 million at March 31, 2020, from $156.3 million at December 31, 2019[227]. - Stockholders' equity totaled $153.1 million, representing 11.5% of total assets, with a book value per share of common stock at $15.03 as of March 31, 2020[264]. - The Bank's capital conservation buffer was 6.67% as of March 31, 2020, exceeding all regulatory capital requirements[266]. Branch Expansion and Strategic Plans - The Bank has received FDIC approval to open a new branch in Gig Harbor, Washington, expected to open in the second half of 2020[171]. - The Bank plans to achieve SBA preferred lender status in 2020, enabling faster loan decisions and increased business loan originations[173].
First Financial Northwest(FFNW) - 2020 Q1 - Quarterly Report