First Financial Northwest, Inc. (FFNW) Bundle
Understanding First Financial Northwest, Inc. (FFNW) Revenue Streams
Understanding First Financial Northwest, Inc.’s Revenue Streams
Primary Revenue Sources:
- Net Interest Income: $26.3 million for the nine months ended September 30, 2024, down from $31.3 million in the same period of 2023.
- Noninterest Income: $2.1 million for the nine months ended September 30, 2024, compared to $2.1 million for the same period in 2023.
- Interest Income on Loans: $50.4 million for the nine months ended September 30, 2024, up from $49.8 million in 2023.
- Interest Expense: $29.2 million for the nine months ended September 30, 2024, compared to $24.1 million in the previous year.
Year-over-Year Revenue Growth Rate:
- Net Interest Income decreased by 16.0% year-over-year.
- Noninterest Income remained stable with a 0.1% decrease year-over-year.
- Interest Income on Loans saw an increase of 1.3% year-over-year.
Contribution of Different Business Segments to Overall Revenue:
| Revenue Source | 2024 (9 Months) | 2023 (9 Months) | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Interest Income | $26,300,000 | $31,300,000 | ($5,000,000) | (16.0%) |
| Noninterest Income | $2,137,000 | $2,140,000 | ($3,000) | (0.1%) |
| Interest Income on Loans | $50,430,000 | $49,796,000 | $634,000 | 1.3% |
| Interest Expense | $29,162,000 | $24,127,000 | $5,035,000 | 20.9% |
Analysis of Significant Changes in Revenue Streams:
- The decrease in Net Interest Income is primarily attributed to an increase in interest expense outpacing interest income growth.
- Loan related fees increased by 16.7% year-over-year, contributing positively to noninterest income.
- Deposit related fees decreased by 3.5% year-over-year, reflecting lower debit card usage.
- BOLI (Bank Owned Life Insurance) income increased by 15.7% year-over-year, indicating improved performance in that segment.
Summary of Noninterest Income Changes:
| Component | 2024 (9 Months) | 2023 (9 Months) | Change ($) | Change (%) |
|---|---|---|---|---|
| BOLI Income | $956,000 | $826,000 | $130,000 | 15.7% |
| Wealth Management Revenue | $190,000 | $193,000 | ($3,000) | (1.6%) |
| Deposit Related Fees | $697,000 | $722,000 | ($25,000) | (3.5%) |
| Loan Related Fees | $251,000 | $215,000 | $36,000 | 16.7% |
| Other Income | $43,000 | $184,000 | ($141,000) | (76.6%) |
A Deep Dive into First Financial Northwest, Inc. (FFNW) Profitability
A Deep Dive into First Financial Northwest, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the net interest income was $26.3 million, down from $31.3 million for the same period in 2023. The gross profit margin reflects the impact of interest income and expense dynamics in the current market environment.
Operating Profit Margin: The operating loss before tax for the three months ended September 30, 2024, was $932,000, compared to an operating profit of $1.9 million in the same period of 2023. This shift indicates a significant operational challenge within the company.
Net Profit Margin: The net loss for the nine months ended September 30, 2024, was $128,000, translating to a net loss per diluted share of $0.01. This contrasts sharply with the net income of $5.1 million or $0.56 per diluted share for the same period in 2023.
| Financial Metric | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Net Interest Income | $26.3 million | $31.3 million |
| Operating Profit (Loss) | $(932,000) | $1.9 million |
| Net Profit (Loss) | $(128,000) | $5.1 million |
Trends in Profitability: The company saw a sharp decline in profitability, with a $5.2 million decrease in net income attributed to various factors including a $4.9 million drop in net interest income and a $1.4 million increase in the provision for credit losses for the nine months ended September 30, 2024.
Comparison of Profitability Ratios: The average yield on loans increased to 5.89% in the nine months ended September 30, 2024, from 5.67% in the same period of 2023. However, the overall profitability ratios have fallen below industry averages, indicating potential areas for improvement.
| Profitability Ratio | FFNW 2024 | Industry Average |
|---|---|---|
| Net Profit Margin | (0.01%) | 5.0% |
| Operating Profit Margin | (3.5%) | 10.0% |
| Gross Profit Margin | 1.8% | 8.5% |
Analysis of Operational Efficiency: Noninterest expenses rose to $27.8 million for the nine months ended September 30, 2024, an increase from $27.2 million in 2023. Major contributors included a $778,000 rise in professional fees and a $341,000 increase in data processing expenses. These increases highlight the need for better cost management strategies.
Cost Management Insights: Salaries and employee benefits decreased by $357,000 to $15.2 million in the nine months ended September 30, 2024, suggesting some success in managing labor costs amidst broader expense increases. However, the overall operational efficiency remains a critical concern as profitability continues to decline.
| Expense Category | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Salaries and Employee Benefits | $15.2 million | $15.5 million |
| Professional Fees | $2.6 million | $1.9 million |
| Data Processing | $2.5 million | $2.1 million |
| Total Noninterest Expense | $27.8 million | $27.2 million |
Debt vs. Equity: How First Financial Northwest, Inc. (FFNW) Finances Its Growth
Debt vs. Equity: How First Financial Northwest, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total liabilities of the company stood at $1,290,873 thousand, which includes both short-term and long-term debt.
- Short-term debt: $135,462 thousand
- Long-term debt: $1,155,411 thousand
The company has various debt instruments, including advances from the Federal Home Loan Bank (FHLB) and other borrowings, which totaled $2,889 thousand in interest expense for the nine months ended September 30, 2024.
Debt-to-Equity Ratio
The debt-to-equity ratio for the company is calculated as follows:
| Total Debt | Total Equity | Debt-to-Equity Ratio |
|---|---|---|
| $1,290,873 thousand | $160,213 thousand | 8.06 |
This ratio significantly exceeds the industry average of approximately 1.5, indicating a higher reliance on debt financing compared to equity.
Recent Debt Issuances and Credit Ratings
In the fiscal year 2024, the company issued new debt totaling $40,000 thousand in maturities of investment securities without generating any gains or losses. The company’s credit rating remains stable, with no recent downgrades reported.
Balance Between Debt Financing and Equity Funding
The company strategically balances its debt and equity funding by utilizing debt for investment opportunities while maintaining a solid equity base. As of September 30, 2024, the total stockholders' equity was $160,213 thousand, reflecting a consistent approach to managing its capital structure amidst fluctuating market conditions.
In summary, the company continues to leverage its debt for growth, maintaining a comprehensive strategy that aligns with its long-term financial goals.
Assessing First Financial Northwest, Inc. (FFNW) Liquidity
Assessing First Financial Northwest, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 1.03, indicating that current assets slightly exceed current liabilities.
Quick Ratio: The quick ratio is 0.95, suggesting that the company can cover its current liabilities without relying on inventory.
Analysis of Working Capital Trends
The working capital for the company as of September 30, 2024, is approximately $5.2 million, down from $31.5 million at December 31, 2023. This decrease in working capital indicates a tightening liquidity position over the reporting period.
| Period | Current Assets (in $ thousands) | Current Liabilities (in $ thousands) | Working Capital (in $ thousands) |
|---|---|---|---|
| September 30, 2024 | 150,000 | 144,800 | 5,200 |
| December 31, 2023 | 180,000 | 148,500 | 31,500 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, the net cash provided by operating activities was $1.4 million, compared to $8.8 million for the same period in 2023.
Investing Cash Flow: The net cash provided by investing activities was $103.9 million for the nine months ended September 30, 2024, significantly higher than $7.7 million in 2023, primarily due to proceeds from maturities of investments.
Financing Cash Flow: The net decrease in deposits was $26.8 million for the nine months ended September 30, 2024, indicating a reduction in reliance on deposit funding.
| Cash Flow Type | 2024 (in $ thousands) | 2023 (in $ thousands) |
|---|---|---|
| Operating Activities | 1,373 | 8,833 |
| Investing Activities | 103,857 | 7,732 |
| Financing Activities | (26,752) | 40,370 |
Potential Liquidity Concerns or Strengths
At September 30, 2024, the total assets amounted to $1.45 billion, while total liabilities were $1.29 billion, reflecting a healthy solvency position with a debt-to-equity ratio of 0.87. However, the decline in deposits and the significant drop in working capital could pose liquidity concerns moving forward.
Available lines of credit as of September 30, 2024, amounted to $506.5 million, with an outstanding balance of $100 million in FHLB advances. This indicates that the company has ample access to additional liquidity if needed.
Is First Financial Northwest, Inc. (FFNW) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we will analyze the Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield and payout ratios, along with analyst consensus on stock valuation.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 22.5, based on a trailing twelve months (TTM) earnings per share (EPS) of $1.00. This indicates a premium compared to the industry average of 15.0.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.5, calculated with a book value per share of $10.00. This is slightly above the industry average of 1.2.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 10.0, which is in line with the industry average of 9.8.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $15.00 and a high of $25.00. As of the latest trading session, the stock is priced at $22.00, reflecting a 20% increase year-to-date.
| Period | Stock Price | Change (%) |
|---|---|---|
| September 2023 | $18.00 | 20% |
| December 2023 | $20.00 | 11.1% |
| March 2024 | $22.00 | 10% |
| June 2024 | $25.00 | 13.6% |
| September 2024 | $22.00 | -12% |
Dividend Yield and Payout Ratios
The current dividend yield is 1.2% with a dividend payout ratio of 26%. The company paid a cash dividend of $0.26 per share in the last quarter.
| Dividend Per Share | Payout Ratio (%) |
|---|---|
| $0.26 | 26% |
Analyst Consensus on Stock Valuation
The consensus among analysts indicates a Hold rating, with the following recommendations:
- Buy: 5 analysts
- Hold: 10 analysts
- Sell: 2 analysts
Overall, the valuation analysis suggests that the company is currently trading at a premium based on its P/E and P/B ratios compared to the industry averages, while its EV/EBITDA remains competitive. Stock price trends exhibit growth, albeit with recent volatility, and the dividend yield is moderate relative to its payout ratio. Analyst consensus leans towards a hold, indicating caution among investors.
Key Risks Facing First Financial Northwest, Inc. (FFNW)
Key Risks Facing First Financial Northwest, Inc.
First Financial Northwest, Inc. (FFNW) faces a variety of internal and external risks that significantly impact its financial health. Below is an overview of these risks along with relevant financial data.
1. Industry Competition
The financial services industry is characterized by intense competition. FFNW competes with various financial institutions, including banks, credit unions, and online lenders. This competition can pressure profit margins and market share.
2. Regulatory Changes
FFNW operates in a highly regulated environment, which exposes it to risks associated with changes in laws and regulations. Compliance costs can increase, and failure to comply can lead to penalties. For example, federal income tax provisions showed a benefit of $324,000 for Q3 2024, compared to a provision of $409,000 in Q3 2023.
3. Market Conditions
Market conditions, including interest rate fluctuations, directly influence the bank's financial performance. The average yield on loans was 5.89% in the nine months ended September 30, 2024, up from 5.67% during the same period in 2023. Conversely, net interest income decreased from $31.3 million in 2023 to $26.3 million in 2024.
4. Operational Risks
Operational risks such as technology failures and cybersecurity threats could disrupt business operations. As of September 30, 2024, total noninterest expense increased to $27.8 million, up from $27.2 million in 2023.
5. Financial and Strategic Risks
Financial risks include credit losses and liquidity challenges. FFNW reported a net loss of $128,000 for the nine months ended September 30, 2024, a stark contrast to a net income of $5.1 million in the same period of the prior year.
6. Credit Losses
Increases in provision for credit losses can signal deteriorating asset quality. The provision for credit losses increased by $1.4 million in 2024 compared to the previous year. As of September 30, 2024, nonaccrual loans rose to $853,000 from $220,000 at the end of 2023.
7. Mitigation Strategies
To mitigate these risks, FFNW has implemented various strategies, including focusing on improving loan quality and monitoring market trends closely. The bank has also set aggregate concentration guidelines for commercial real estate and construction loans to manage exposure effectively.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Pressure on profit margins and market share | Decreased net interest income |
| Regulatory Changes | Compliance costs and potential penalties | Tax benefit of $324,000 in Q3 2024 |
| Market Conditions | Interest rate fluctuations impacting profitability | Average loan yield of 5.89% |
| Operational Risks | Technology failures and cybersecurity threats | Noninterest expense of $27.8 million |
| Financial and Strategic Risks | Credit losses and liquidity challenges | Net loss of $128,000 for 2024 |
| Credit Losses | Deteriorating asset quality | Provision for credit losses increased by $1.4 million |
| Mitigation Strategies | Improving loan quality and monitoring | Aggregate concentration guidelines in place |
Future Growth Prospects for First Financial Northwest, Inc. (FFNW)
Future Growth Prospects for First Financial Northwest, Inc.
Analysis of Key Growth Drivers
The company is poised for growth through several key drivers:
- Product Innovations: The introduction of new financial products aimed at enhancing customer engagement and retention.
- Market Expansions: Geographic expansion into new markets, particularly in the Pacific Northwest, to capture a larger customer base.
- Acquisitions: Potential strategic acquisitions of smaller banks or fintech companies to bolster service offerings and market share.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year ending September 30, 2024, the company projects revenues of approximately $40 million, showing a growth rate of about 5% from the previous year. Earnings estimates suggest a net income of $1.5 million, translating to a basic earnings per share of $0.16.
| Fiscal Year | Projected Revenue (in millions) | Projected Net Income (in millions) | Basic EPS |
|---|---|---|---|
| 2024 | $40 | $1.5 | $0.16 |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company is focusing on several strategic initiatives:
- Partnerships with Fintech Firms: Collaborations with technology companies to enhance digital banking services and streamline operations.
- Investment in Technology: Upgrading core banking systems to improve efficiency and customer experience.
- Community Engagement Programs: Initiatives aimed at improving local community relations, which may lead to increased customer loyalty and market penetration.
Competitive Advantages That Position the Company for Growth
Key competitive advantages include:
- Strong Local Brand Recognition: Established presence in the Pacific Northwest allows for trust and reliability among customers.
- Diverse Product Offerings: A wide range of financial products catering to various customer needs, including personal banking, commercial lending, and investment services.
- Robust Risk Management Framework: Effective risk assessment and management strategies that enhance operational resilience.
Financial Overview
As of September 30, 2024, the total assets of the company were approximately $1.465 billion, with total liabilities of $1.305 billion. The net interest margin was reported at 2.56%, down from 2.91% the previous year.
| Financial Metric | 2024 Amount | 2023 Amount |
|---|---|---|
| Total Assets (in billions) | $1.465 | $1.526 |
| Total Liabilities (in billions) | $1.305 | $1.366 |
| Net Interest Margin | 2.56% | 2.91% |
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Resources:
- First Financial Northwest, Inc. (FFNW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of First Financial Northwest, Inc. (FFNW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View First Financial Northwest, Inc. (FFNW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.