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Originally published Thursday, November 29, 2007 at 12:00 AM

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Housing crunch hits local lender First Financial Northwest

The housing crunch hit Renton-based First Financial Northwest Wednesday, as the lender said it would set aside $4.5 million because one of...

Seattle Times business reporter

The housing crunch hit Renton-based First Financial Northwest Wednesday, as the lender said it would set aside $4.5 million because one of its large borrowers, a residential developer, may have trouble repaying $37.3 million in loans.

The loan-loss provision could be enough to push First Financial, which went public last month, into the red for the fourth quarter.

The company, which owns First Savings Bank Northwest (formerly First Savings Bank of Renton), described the unidentified customer as "an entry-level builder" that took out 90 separate loans for projects in King, Pierce and Thurston counties. The single-family homes in those developments sell for an average $300,000 to $400,000; the bank didn't specify how many homes are involved.

The developer, First Financial said in a statement, "has experienced a slowdown in home sales as a result of tightening credit markets, which has [sic] a greater impact on entry-level borrowers."

First Financial recorded a $2.7 million profit in the third quarter, which ended Sept. 30, and $6.4 million in the first nine months of 2007. Previously this year, the company had set aside $1.2 million to cover bad loans. The additional $4.5 million loan-loss provision equates to $2.97 million after taxes, or 13 cents per share.

First Savings Bank's Executive House subsidiary, which specializes in commercial real estate and construction lending, originated the problem loans. The company said Executive House President John Mills will retire effective Dec. 1, a month before the subsidiary is to be merged into the bank.

First Financial converted from a mutual holding company to a stock company last month, selling 21.16 million shares at $10 apiece. The shares fell 14 cents Wednesday to close at $10.45; the company issued its announcement after the close of regular Nasdaq trading.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com

Copyright © 2007 The Seattle Times Company

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