Financial Performance - For the three months ended September 30, 2024, net interest margin decreased 23 basis points to 2.46%, compared to 2.69% in the same quarter last year [142]. - Net interest income for the three months ended September 30, 2024, decreased by $1.2 million to $8.5 million compared to $9.7 million for the same period in 2023 [173]. - Net interest income decreased to $26.3 million for the nine months ended September 30, 2024, down from $31.3 million for the same period in 2023, primarily due to an increase in interest expense outpacing interest income [197]. - The company's net interest margin decreased to 2.56% for the nine months ended September 30, 2024, down from 2.91% for the same period in 2023, due to rising interest expenses [202]. - The average yield on interest-earning assets increased due to rising market interest rates, while the average cost of interest-bearing liabilities also increased at a faster pace [142]. Loan Portfolio - During the first nine months of 2024, loan repayments outpaced newly funded loans, resulting in a decrease of $49.8 million in net loans receivable at September 30, 2024 [139]. - The Bank's portfolio at September 30, 2024, included $135.3 million of loans secured by properties in 47 other states and the District of Columbia, with significant concentrations in California, Oregon, Texas, Florida, and Alabama [140]. - Net loans receivable decreased by $49.8 million, or 4.2%, to $1.126 billion at September 30, 2024, reflecting decreases across all loan categories [152]. - Total loans outstanding decreased to $1,142,411 thousand as of September 30, 2024, from $1,183,385 thousand a year earlier [207]. - Approximately 62.1% of the Bank's net loans were adjustable-rate loans as of September 30, 2024 [234]. Credit Losses and Allowance - The allowance for credit losses (ACL) is an estimate of expected credit losses, which may increase as the loan portfolio grows or due to increased probable losses [143]. - The allowance for credit losses (ACL) increased by $959,000 to $16.3 million at September 30, 2024, representing 1.42% of total loans receivable, up from 1.29% at December 31, 2023 [157]. - A provision for credit losses of $1.2 million was recorded for the nine months ended September 30, 2024, compared to a recapture of $208,000 for the same period in 2023 [205]. - The provision for credit losses was $1.6 million, with $1.5 million allocated to loans and $75,000 to unfunded commitments, primarily related to two participation loans totaling $6.0 million [188]. Deposits and Assets - As of September 30, 2024, total assets decreased by $53.996 million, or 3.6%, to $1.451 billion from $1.505 billion as of December 31, 2023 [148]. - Total deposits decreased by $26.8 million to $1.17 billion as of September 30, 2024, primarily due to a $116.7 million decrease in brokered deposits, money market accounts, savings accounts, and interest-bearing demand accounts [162]. - Interest-earning deposits with banks increased by $50.746 million, or 229.2%, to $72.884 million at September 30, 2024, compared to $22.138 million at December 31, 2023 [148]. Noninterest Income and Expenses - Noninterest income is generated from various loan and deposit fees, wealth management services, and other income, which may be offset by net gains or losses on investment securities [144]. - Noninterest income remained stable at $677,000 for both the three months ended September 30, 2024, and September 30, 2023 [189]. - Noninterest expense decreased by $282,000 to $8.5 million for the three months ended September 30, 2024, compared to $8.8 million in the same period last year [192]. - Noninterest expense increased by $531,000 to $27.8 million for the nine months ended September 30, 2024, from $27.2 million in 2023 [210]. - The largest increase in noninterest expense was in professional fees, which rose by $778,000 due to acquisition-related expenses [210]. Capital and Equity - Stockholders' equity decreased to $160.2 million at September 30, 2024, from $161.7 million at December 31, 2023, due to a net loss of $128,000 and cash dividends of $2.4 million [169]. - Total stockholders' equity was $160.2 million as of September 30, 2024 [225]. - The Bank's total capital to risk-weighted assets ratio was 16.68% and Tier 1 capital to total assets was 10.86% as of September 30, 2024 [225]. - The Bank's capital conservation buffer was 8.68% as of September 30, 2024, exceeding the required minimum of 2.5% [225]. Interest Rate Risk - Interest rate risk is identified as the most significant market risk for the Bank, influenced by the maturity differences between loans and deposits [229]. - An immediate increase of 400 basis points in interest rates would result in a decrease of net interest income by $33,891 thousand, or 7.36% [239]. - The base net interest income was $36,585 thousand, with a potential increase of 1.23% if rates decreased by 100 basis points [239]. - The Bank's asset/liability management policy aims to maximize interest rate spread while maintaining acceptable levels of liquidity and capital adequacy [227]. Strategic Initiatives - The Bank is actively processing SBA loans through a partner while retaining credit decisions, aiming to become a preferred SBA lender as volumes increase [141]. - The Bank's strategic initiatives focus on diversifying the loan portfolio and broadening growth opportunities within current risk tolerance levels [140].
First Financial Northwest(FFNW) - 2024 Q3 - Quarterly Report