First Financial Northwest Inc. of Renton, Wash., said Wednesday that it would increase its loan-loss provision by $4.5 million this quarter, because of problem residential construction loans.
As a result, the $1.1 billion-asset First Financial’s fourth-quarter net income would fall by that amount, or $2.97 million after taxes. The company earned $2.7 million last quarter.
First Financial Northwest said that the problem loans were originated by its Executive House Inc. to a developer of entry-level homes. As of Oct. 31 the developer had 90 loans for $37.3 million with Executive House, including 24 construction loans for $10.4 million in Pierce County and 46 construction loans for $17.6 million in King County.
All the loans are secured by new single-family homes, but the developer has experienced a slowdown in sales, First Financial Northwest said.
On Jan. 1 the company plans to merge Executive House into its thrift subsidiary, First Savings Bank Northwest. Executive House’s current president, John P. Mills, will retire Dec. 1, and David G. Kroeger, its executive vice president, would assume his duties until the merger is completed.
