First Financial Reaches Agreement with Regulators

The real estate lender agreed to maintain or exceed regulatory capital levels at 10 percent tier one leverage ratio and 12 percent total risk-based ratio, which it already exceeds thanks to its board of directors' Sept. 15 directive that a portion of the company's capital be contributed to the bank. It must also take other measures to improve its financial performance.

First Financial Northwest Inc. has entered into a formal agreement with the Federal Deposit Insurance Corp. and the Washington Department of Financial Institutions with regard to improving its financial status.

The real estate lender agreed to maintain or exceed regulatory capital levels at 10 percent tier one leverage ratio and 12 percent total risk-based ratio, which it already exceeds thanks to its board of directors’ Sept. 15 directive that a portion of the company’s capital be contributed to the bank. It must also take measures to better handle loan loss allowance determination, problem loan charge-off and reduction, lending and collection policies, reducing loan concentrations, liquidity management and increasing board oversight. It must also get regulatory approval before cash dividends are paid or any senior executive officers or directors appointed.

According to First Financial president and CEO Victor Karpiak, the bank still continues to contend with challenges including the economic downturn and the steep value decline in its residential real estate collateral. However, he claimed that it has made significant progress on the issues at hand, primarily new management and restructuring of the lending and credit administration department.

When First Financial reported its second-quarter results, the financials included provision for loan losses of $26 million, loan charge-offs of $32.7 million, a $29.3 million decrease in nonperforming assets from the previous quarter to total $137.1 million, and a $9.5 million increase in deposits from the previous quarter while the cost of funds decreased 16 basis points. Additionally, Karpiak said that 30-89 day delinquent loans decreased 29 percent to $8.8 million from $12.4 million the previous quarter. If those figures are representative of the bank’s efforts to bolster their financial performance, they may yet have hope of complying with the feds’ orders.