Safe and Sound

First Financial Northwest Bank

Renton, WA
4
Star Rating
Started in 1923, First Financial Northwest Bank is an FDIC-insured bank headquartered in Renton, WA. The bank holds equity of $123.0 million on $1.21 billion in assets, according to December 31, 2017, regulatory filings.

With 144 full-time employees in 9 offices in WA, the bank has amassed loans and leases worth $986.7 million, including real estate loans of $976.3 million. U.S. bank customers currently have $859.0 million in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, First Financial Northwest Bank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's an analysis of how the bank did on the three important criteria Bankrate used to score U.S. banks.

WHAT IS
SAFE AND SOUND?

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THE INSTITUTION'S SCORE

Capital Score

When it comes to measuring an an institution's financial resilience, capital is valuable. It acts as a cushion against losses and provides protection for depositors when a bank is experiencing economic trouble. When it comes to safety and soundness, the more capital, the better.

On our test to measure the adequacy of a bank's capital, First Financial Northwest Bank received a score of 12 out of a possible 30 points, less than the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. First Financial Northwest Bank's Tier 1 capital ratio was 12.52 percent, above the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to economic challenges.

Overall, First Financial Northwest Bank held equity amounting to 10.18 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

Having lots of these types of assets may eventually require a bank to use capital to absorb losses, decreasing its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning money, pushing down earnings and elevating the risk of a future failure.

First Financial Northwest Bank beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.02 percent of First Financial Northwest Bank's loans were noncurrent -- in other words, they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage troubled assets. First Financial Northwest Bank's loan loss allowance was 7,130.00 percent of its total noncurrent loans, exceeding the national average. All else being equal, a higher ratio of loan loss allowance to noncurrent loans is better.

Earnings score

A bank's earnings performance has an effect on its safety and soundness. Earnings can be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, likely making the bank better able to withstand financial trouble. However, banks that are losing money are less able to do those things.

On Bankrate's test of earnings, First Financial Northwest Bank scored 16 out of a possible 30, above the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important way to measure a bank's earnings. First Financial Northwest Bank's most recent annualized quarterly return on equity was 7.71 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $9.3 million on total equity of $123.0 million. The bank had an annualized return on average assets, or ROA, of 0.84 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.