First Financial Northwest, Inc. Reports Net Income of $2.8 million or $0.31 per Diluted Share for the Second Quarter Ended June 30, 2022

Jul 28th, 2022 9:10 EST

RENTON, Wash., July 28, 2022 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the “Company”) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported net income for the quarter ended June 30, 2022, of $2.8 million, or $0.31 per diluted share, compared to $3.3 million, or $0.36 per diluted share, for the quarter ended March 31, 2022, and $3.8 million, or $0.40 per diluted share, for the quarter ended June 30, 2021. For the six months ended June 30, 2022, net income was $6.1 million, or $0.66 per diluted share, compared to net income of $6.3 million, or $0.66 per diluted share, for the comparable six-month period in 2021.

The difference in the provision for loan losses was the primary contributor to the change in net income for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022. As a result of the quarterly analysis of our loan portfolio, the Company did not record a provision or recognize a recapture of provision for loan losses for the quarter ended June 30, 2022, compared to a $500,000 recapture of provision for loan losses for the quarter ended March 31, 2022. The recapture in the prior quarter was primarily attributable to the net impact of changes in the loan portfolio mix, loan downgrades and changes in impairment status.

“Our one-to-four family residential lending team carried their momentum from the first quarter well into the second quarter of the year,” stated Joseph W. Kiley, III, President and CEO. “The purchase housing market remained robust in our markets during the quarter, and I am very pleased one-to-four family residential balances grew by $24.5 million in the quarter, bringing year-to-date growth to $51.6 million in that portfolio,” continued Kiley.

“During the quarter, we also increased our portfolio of investment securities, predominantly consisting of short-term U.S. Treasuries and mortgage-backed securities,” continued Kiley. “To accommodate our balance sheet growth, we acquired brokered deposits, as we’ve done in the past when those rates and terms were deemed most appropriate to satisfy our funding needs,” continued Kiley. “Finally, I am also pleased to see continued growth in our balances of demand deposits which increased by $4.9 million during the quarter,” concluded Kiley.

Highlights for the quarter ended June 30, 2022:

  • Net loans receivable remained stable at $1.12 billion at June 30, 2022, as new loan originations kept pace with loan repayments, including reductions in Paycheck Protection Program (“PPP”) loan balances.
  • Total deposits increased $39.4 million to $1.18 billion at June 30, 2022, as the Bank utilized brokered deposits to offset the reduction in money market and retail certificates of deposits and fund growth in the quarter.
  • The Company’s book value per share decreased to $17.26 at June 30, 2022, compared to $17.32 at March 31, 2022, and $16.75 at June 30, 2021.
  • The Company repurchased 16,927 shares at an average price of $16.65 per share under its current board-authorized share repurchase plan.
  • The Company paid a regular quarterly cash dividend of $0.12 per share to shareholders.
  • The Bank’s Tier 1 leverage and total capital ratios at June 30, 2022, were 10.5% and 15.5%, respectively, compared to 10.5% and 15.3%, respectively, at March 31, 2022, and 10.2% and 15.7%, respectively at June 30, 2021.
  • Based on management’s evaluation of the adequacy of the allowance for loan and lease losses (“ALLL”), the Bank did not record a provision or recognize a recapture of provision for loan losses for the quarter.

Deposits totaled $1.18 billion at June 30, 2022, compared to $1.14 billion at March 31, 2022, and $1.13 billion at June 30, 2021. The $53.3 million increase in brokered deposits more than offset the $13.9 million decrease in retail deposits, led by reductions in money market balances and retail certificates of deposits in the quarter ended June 30, 2022. Management continues to consider multiple alternatives to increase deposits to fund its anticipated asset growth in addition to its efforts through its branch network, including wholesale markets, brokered deposits, and the national deposit market. In the quarter ended June 30, 2022, brokered deposits were deemed to be the most appropriate source of supplemental funds based on the rates and terms available compared to other sources.

The following table presents a breakdown of our total deposits (unaudited):

 Jun 30,2022 Mar 31,2022 Jun 30,2021 ThreeMonthChange OneYearChange
Deposits:(Dollars in thousands)
Noninterest-bearing demand$127,808 $130,596 $111,240 $(2,788) $16,568 
Interest-bearing demand 107,478  99,794  110,338  7,684   (2,860)
Savings 23,525  23,441  21,281  84   2,244 
Money market 596,515  609,080  552,964  (12,565)  43,551 
Certificates of deposit, retail 270,866  277,190  338,479  (6,324)  (67,613)
Brokered deposits 53,277  -  -  53,277   53,277 
Total deposits$1,179,469 $1,140,101 $1,134,302 $39,368  $45,167 

The following tables present an analysis of total deposits by branch office (unaudited):

June 30, 2022
 Noninterest-bearing demandInterest-bearing demandSavingsMoney marketCertificates of deposit, retailBrokered depositsTotal
 (Dollars in thousands)
King County       
Renton$37,688$43,985$15,160$311,528$225,799$-$634,160
Landing 4,925 2,504 178 21,802 2,988 - 32,397
Woodinville 3,235 7,776 1,141 19,202 5,167 - 36,521
Bothell 3,734 1,258 63 7,286 1,488 - 13,829
Crossroads 16,004 4,930 356 52,277 5,896 - 79,463
Kent 5,834 11,353 18 17,459 716 - 35,380
Kirkland 9,332 319 22 7,299 25 - 16,997
Issaquah 4,541 1,265 62 7,033 406 - 13,307
Total King County 85,293 73,390 17,000 443,886 242,485 - 862,054
        
Snohomish County       
Mill Creek 6,290 3,445 837 21,716 6,082 - 38,370
Edmonds 19,892 13,627 1,060 39,220 8,714 - 82,513
Clearview 6,307 4,650 1,364 26,613 1,526 - 40,460
Lake Stevens 4,631 7,241 1,554 34,406 5,018 - 52,850
Smokey Point 3,252 4,501 1,581 24,917 6,735 - 40,986
Total Snohomish County 40,372 33,464 6,396 146,872 28,075 - 255,179
        
Pierce County       
University Place 1,032 95 2 4,052 306 - 5,487
Gig Harbor 1,111 529 127 1,705 - - 3,472
Total Pierce County 2,143 624 129 5,757 306 - 8,959
        
Brokered deposits - - - - - 53,277 53,277
        
Total deposits$127,808$107,478$23,525$596,515$270,866$53,277$1,179,469

March 31, 2022
 Noninterest-bearing demandInterest-bearing demandSavingsMoney marketCertificates of deposit, retailTotal
 (Dollars in thousands)
King County      
Renton$41,009$46,467$15,242$327,054$236,637$666,409
Landing 5,105 2,328 182 23,720 3,297 34,632
Woodinville 3,379 6,863 1,004 18,426 4,706 34,378
Bothell 3,301 1,359 65 8,274 1,164 14,163
Crossroads 19,127 6,449 58 53,827 4,638 84,099
Kent 6,706 8,077 27 15,927 273 31,010
Kirkland 7,587 358 19 8,114 25 16,103
Issaquah 2,865 371 25 3,759 200 7,220
Total King County 89,079 72,272 16,622 459,101 250,940 888,014
       
Snohomish County      
Mill Creek 6,479 2,515 1,144 20,807 6,769 37,714
Edmonds 20,054 7,814 913 41,399 8,332 78,512
Clearview 5,781 4,598 1,348 25,563 1,242 38,532
Lake Stevens 4,176 7,163 1,684 30,239 4,504 47,766
Smokey Point 3,199 4,827 1,676 27,809 5,393 42,904
Total Snohomish County 39,689 26,917 6,765 145,817 26,240 245,428
       
Pierce County      
University Place 1,345 59 22 2,541 10 3,977
Gig Harbor 483 546 32 1,621 - 2,682
Total Pierce County 1,828 605 54 4,162 10 6,659
       
Total deposits$130,596$99,794$23,441$609,080$277,190$1,140,101

Net loans receivable totaled $1.12 billion at both June 30, 2022, and March 31, 2022, compared to $1.08 billion at June 30, 2021. During the quarter ended June 30, 2022, new originations of one-to-four family residential loans, business, and classic, collectible and other auto loans largely kept pace with loan repayments in the quarter, including PPP loan repayments and forgiveness. The average balance of net loans receivable totaled $1.12 billion for both the quarters ended June 30, 2022, and March 31, 2022, compared to $1.09 billion for the quarter ended June 30, 2021.

The ALLL represented 1.33% of total loans receivable at both June 30, 2022, and March 31, 2022, compared to 1.35% of total loans receivable at June 30, 2021.

There were no nonperforming loans at both June 30, 2022, and June 30, 2021. The collateral for the single nonperforming consumer loan of $179,000 at March 31, 2022, was repossessed and sold in the quarter ended June 30, 2022, contributing to net loan charge-offs totaling $34,000. There was no other real estate owned (“OREO”) at both June 30, 2022, and March 31, 2022, compared to $454,000 at June 30, 2021.

The following table presents a breakdown of our nonperforming assets (unaudited):

 Jun 30, Mar 31, Jun 30, ThreeMonth OneYear
 2022 2022 2021 Change Change
 (Dollars in thousands)
Nonperforming loans:         
Consumer$ $179 $ $(179) $ 
Total nonperforming loans  179   (179)   
          
OREO   454     (454)
          
Total nonperforming assets(1)$ $179 $454 $(179) $(454)
          
Nonperforming assets as a percent of total assets0.00% 0.01% 0.03%    

(1) The difference between nonperforming assets reported above, and the totals reported by other industry sources, is due to their inclusion of all Troubled Debt Restructured Loans ("TDRs") as nonperforming loans, although 100% of the Bank’s TDRs were performing in accordance with their restructured terms at June 30, 2022.

The Company accounts for certain loan modifications or restructurings as TDRs. In general, the modification or restructuring of a debt is considered a TDR if, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. TDRs totaled $2.1 million at both June 30, 2022, and March 31, 2022, compared to $3.6 million at June 30, 2021. All TDRs were performing according to their modified repayment terms for the periods presented.

Net interest income totaled $11.8 million for the quarter ended June 30, 2022, compared to $11.4 million for the quarter ended March 31, 2022, and $11.3 million for the quarter ended June 30, 2021. The increase in the current quarter compared to the quarter ended March 31, 2022, was primarily due to higher interest income on investment securities and loans, including fees, partially offset by higher interest expense on deposits and other borrowings, primarily reflecting the increase in market interest rates as a result of the recent increases to the targeted federal funds rate.

Total interest income was $13.5 million for the quarter ended June 30, 2022, compared to $12.9 million for the quarter ended March 31, 2022, and $13.6 million for the quarter ended June 30, 2021. The increase in the current quarter compared to the quarter ended March 31, 2022, was primarily due to an improvement in average loan yields to 4.41% from 4.36% in the prior quarter. The decrease from the quarter ended June 30, 2021, is primarily due to a decline in average loan yields to 4.41% from 4.64%, partially offset by an $18.7 million increase in the average balance of investment securities and an increase in yields on investment securities to 2.33% in the quarter ended June 30, 2022, compared to 1.90% in the quarter ended June 30, 2021. The decrease in average loan yields as compared to the same quarter last year was primarily due to the decline in the acceleration of the recognition of deferred loan fee income due to reduced loan repayments from PPP loan forgiveness.

Total interest expense was $1.7 million for the quarter ended June 30, 2022, compared to $1.6 million for the quarter ended March 31, 2022, and $2.3 million for the quarter ended June 30, 2021. The average cost of interest-bearing deposits was 0.55% for the quarter ended June 30, 2022, compared to 0.50% for the quarter ended March 31, 2022, and 0.75% for the quarter ended June 30, 2021. The increase from the quarter ended March 31, 2022, was due primarily to increased interest expense on money market balances and the renewed use of brokered deposits in the quarter to fund asset growth. This was partially offset by the continued repricing in particular, during the beginning of the quarter prior to the recent increases in the targeted federal funds rate of maturing certificates of deposit to lower interest rates combined with a reduction in the average balance of higher cost certificates of deposit. As of June 30, 2022, there were approximately $130.0 million in retail certificates of deposit at a weighted average rate of 1.05% maturing in the next 12 months, and an additional $107.0 million maturing in the subsequent 12 to 24 months, at a weighted average rate of 1.70%. Advances from the FHLB were $95.0 million at both June 30, 2022, and March 31, 2022, compared to $120.0 million at June 30, 2021. The FHLB advances are tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Bank’s interest rate risk management efforts. These cash flow hedge agreements have a weighted average remaining term of 53 months and a weighted average fixed rate of 1.05%. The average cost of borrowings was 1.21% for the quarter ended June 30, 2022, compared to 1.28% for the quarter ended March 31, 2022, and 1.37% for the quarter ended June 30, 2021.

The net interest margin was 3.53% for the quarter ended June 30, 2022, compared to 3.43% for the quarter ended March 31, 2022, and 3.36% for the quarter ended June 30, 2021. The increase in the net interest margin for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022, is due to several factors, primarily a 14-basis point improvement in the Company’s average yield on interest-earning assets during the quarter to 4.04% from 3.90%, partially offset by a five-basis point increase in the average cost of interest-bearing liabilities to 0.61% from 0.56%. The increase in net interest margin for the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021, was due primarily to the 21-basis point reduction in the average cost of interest-bearing liabilities to 0.61% from 0.82%, partially offset by a two-basis point reduction in the average yield on interest-earning assets to 4.04% from 4.06%.

Noninterest income for the quarter ended June 30, 2022, totaled $961,000, compared to $789,000 for the quarter ended March 31, 2022, and $973,000 for the quarter ended June 30, 2021. The increase in noninterest income for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022, was primarily due to higher loan related fees, including a $127,000 increase in prepayment penalties, and to a lesser extent higher deposit related fees and wealth management revenue, partially offset by lower bank owned life insurance (“BOLI”) income.

Noninterest expense totaled $9.3 million for the quarter ended June 30, 2022, compared to $8.6 million for the quarter ended March 31, 2022, and $8.2 million for the quarter ended June 30, 2021. The increase in noninterest expense for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022, was primarily due to $279,000 in higher professional fees primarily relating to regulatory examination fees and fees paid to recruit employees, and a $217,000 increase in salaries and employee benefits as 25 open positions were filled during the quarter and incentive commissions were higher, primarily due to the increase in one-to-four family loan originations. Other general and administrative expense was also higher due to expenses relating to our annual meeting of shareholders, with postage and shareholder related expenses increasing by $71,000 compared to the previous quarter, and an increase of $23,000 in the reserve for unfunded commitments.

Forward-looking statements:

When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include, but are not limited to, the following: the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID-19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; increased competitive pressures; changes in the interest rate environment; legislative and regulatory changes; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC's website at www.sec.gov.

Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management's beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2022 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Balance Sheets(Dollars in thousands, except share data)(Unaudited)

AssetsJun 30,2022 Mar 31,2022 Jun 30,2021 ThreeMonthChange OneYearChange
Cash on hand and in banks$9,458  $7,979  $7,518  18.5% 25.8%
Interest-earning deposits with banks 26,194   19,633   72,045  33.4  (63.6)
Investments available-for-sale, at fair value 210,826   180,212   187,873  17.0  12.2 
Investments held-to-maturity, at amortized cost 2,432   2,426   2,419  0.2  0.5 
Loans receivable, net of allowance of $15,125, $15,159, and $14,878 respectively 1,119,795   1,121,382   1,081,640  (0.1) 3.5 
Federal Home Loan Bank ("FHLB") stock, at cost 5,512   5,512   6,465  0.0  (14.7)
Accrued interest receivable 5,738   5,590   5,498  2.6  4.4 
Deferred tax assets, net 1,840   1,069   688  72.1  167.4 
Other real estate owned ("OREO") -   -   454  n/a  (100.0)
Premises and equipment, net 21,855   22,254   22,567  (1.8) (3.2)
Bank owned life insurance ("BOLI"), net 35,819   35,552   35,536  0.8  0.8 
Prepaid expenses and other assets 10,493   8,451   2,332  24.2  350.0 
Right of use asset ("ROU"), net 3,301   3,455   4,025  (4.5) (18.0)
Goodwill 889   889   889  0.0  0.0 
Core deposit intangible, net 616   650   754  (5.2) (18.3)
Total assets$1,454,768  $1,415,054  $1,430,703  2.8% 1.7 
          
Liabilities and Stockholders' Equity         
          
Deposits         
Noninterest-bearing deposits$127,808  $130,596  $111,240  (2.1)% 14.9%
Interest-bearing deposits 1,051,661   1,009,505   1,023,062  4.2  2.8 
Total deposits 1,179,469   1,140,101   1,134,302  3.5  4.0 
Advances from the FHLB 95,000   95,000   120,000  0.0  (20.8)
Advance payments from borrowers for taxes and insurance 2,670   5,299   2,616  (49.6) 2.1 
Lease liability, net 3,482   3,617   4,176  (3.7) (16.6)
Accrued interest payable 115   112   193  2.7  (40.4)
Other liabilities 17,136   13,168   7,795  30.1  119.8 
Total liabilities 1,297,872   1,257,297   1,269,082  3.2  2.3 
          
Commitments and contingencies         
          
Stockholders' Equity         
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding -   -   -  n/a  n/a 
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding 9,091,533 shares at June 30, 2022,9,107,977 shares at March 31, 2022, and 9,651,180 shares at June 30, 2021 91   91   97  0.0  (6.2)
Additional paid-in capital 71,835   71,780   80,770  0.1  (11.1)
Retained earnings 90,066   88,339   82,224  2.0  9.5 
Accumulated other comprehensive loss, net of tax (4,814)  (1,889)  (59) 154.8  8,059.3 
Unearned Employee Stock Ownership Plan ("ESOP") shares (282)  (564)  (1,411) (50.0) (80.0)
Total stockholders' equity 156,896   157,757   161,621  (0.5) (2.9)
Total liabilities and stockholders' equity$1,454,768  $1,415,054  $1,430,703  2.8% 1.7%

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Income Statements(Dollars in thousands, except share data)(Unaudited)

 Quarter Ended    
 Jun 30,2022 Mar 31,2022 Jun 30,2021 ThreeMonthChange OneYearChange
Interest income         
Loans, including fees$12,273 $12,001  $12,641  2.3% (2.9)%
Investment securities 1,156  831   854  39.1  35.4 
Interest-earning deposits with banks 37  19   16  94.7  117.6 
Dividends on FHLB Stock 71  74   83  (4.1) (14.5)
Total interest income 13,537  12,925   13,594  4.7  (0.4)
Interest expense         
Deposits 1,398  1,257   1,915  11.2  (27.0)
Other borrowings 315  300   413  5.0  (23.7)
Total interest expense 1,713  1,557   2,328  10.0  (26.4)
Net interest income 11,824  11,368   11,266  4.0  4.9 
Recapture of provision for loan losses -  (500)  (700) (100.0) (100.0)
Net interest income after recapture of provision for loan losses 11,824  11,868   11,966  (0.4) (1.2)
          
Noninterest income         
BOLI income 251  288   246  (12.8) 2.0 
Wealth management revenue 104  82   167  26.8  (37.7)
Deposit related fees 246  215   227  14.4  8.4 
Loan related fees 354  199   281  77.9  26.0 
Other 6  5   52  20.0  (88.2)
Total noninterest income 961  789   973  21.8  (1.1)
          
Noninterest expense         
Salaries and employee benefits 5,478  5,261   5,062  4.1  8.2 
Occupancy and equipment 1,205  1,228   1,187  (1.9) 1.5 
Professional fees 731  452   389  61.7  87.9 
Data processing 692  677   680  2.2  1.8 
Regulatory assessments 90  101   113  (10.9) (20.4)
Insurance and bond premiums 113  129   111  (12.4) 1.8 
Marketing 96  37   23  159.5  317.4 
Other general and administrative 880  741   625  18.8  40.8 
Total noninterest expense 9,285  8,626   8,190  7.6  13.4 
Income before federal income tax provision 3,500  4,031   4,749  (13.2) (26.3)
Federal income tax provision 692  771   939  (10.2) (26.3)
Net income$2,808 $3,260  $3,810  (13.9)% (26.3)%
          
Basic earnings per share$0.31 $0.36  $0.40     
Diluted earnings per share$0.31 $0.36  $0.40     
Weighted average number of common shares outstanding 8,982,969  8,987,482   9,434,004     
Weighted average number of diluted shares outstanding 9,085,913  9,117,432   9,528,623     

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Income Statements(Dollars in thousands, except share data)(Unaudited)

 Six Months Ended  
 June 30,  
  2022   2021  OneYearChange
Interest income     
Loans, including fees$24,274  $25,265  (3.9)%
Investment securities 1,987   1,602  24.0 
Interest-earning deposits with banks 56   28  93.1 
Dividends on FHLB Stock 145   162  (10.5)
Total interest income 26,462   27,057  (2.2)
Interest expense     
Deposits 2,655   4,213  (37.0)
Other borrowings 615   832  (26.1)
Total interest expense 3,270   5,045  (35.2)
Net interest income 23,192   22,012  5.4 
Recapture of provision for loan losses (500)  (400) 25.0 
Net interest income after recapture of provision for loan losses 23,692   22,412  5.7 
      
Noninterest income     
BOLI income 539   515  4.7 
Wealth management revenue 187   327  (42.8)
Deposit related fees 460   426  8.0 
Loan related fees 553   413  33.9 
Other 11   56  (80.0)
Total noninterest income 1,750   1,737  0.8 
      
Noninterest expense     
Salaries and employee benefits 10,738   10,007  7.3 
Occupancy and equipment 2,433   2,286  6.4 
Professional fees 1,183   921  28.4 
Data processing 1,369   1,377  (0.6)
Regulatory assessments 191   235  (18.7)
Insurance and bond premiums 242   235  3.0 
Marketing 133   53  150.9 
Other general and administrative 1,622   1,205  34.6 
Total noninterest expense 17,911   16,319  9.8 
Income before federal income tax provision 7,531   7,830  (3.8)
Federal income tax provision 1,463   1,523  (3.9)
Net income$6,068  $6,307  (3.8)%
      
Basic earnings per share$0.67  $0.66   
Diluted earnings per share$0.66  $0.66   
Weighted average number of common shares outstanding 8,985,213   9,461,876   
Weighted average number of diluted shares outstanding 9,100,079   9,546,784   

The following table presents a breakdown of the loan portfolio (unaudited):

 June 30, 2022March 31, 2022June 30, 2021
 Amount Percent Amount Percent Amount Percent
 (Dollars in thousands)
Commercial real estate:           
Residential:           
Micro-unit apartments$-  0.0% $-  0.0% $11,652  1.1%
Other multifamily 135,961  12.0   152,855  13.4   131,229  11.9 
Total multifamily residential 135,961  12.0   152,855  13.4   142,881  13.0 
            
Non-residential:           
Office 84,905  7.5   87,394  7.7   83,120  7.6 
Retail 138,892  12.2   142,725  12.6   103,175  9.4 
Mobile home park 22,387  2.0   20,409  1.8   26,894  2.4 
Hotel / motel 57,285  5.0   58,406  5.1   65,446  6.0 
Nursing Home 12,535  1.1   12,622  1.1   12,818  1.2 
Warehouse 18,943  1.7   21,103  1.9   17,217  1.6 
Storage 34,261  3.0   34,442  3.0   33,332  3.0 
Other non-residential 43,485  3.8   39,887  3.5   28,704  2.5 
Total non-residential 412,693  36.3   416,988  36.7   370,706  33.7 
            
Construction/land:           
One-to-four family residential 34,932  3.1   35,953  3.2   36,123  3.3 
Multifamily 15,500  1.4   17,196  1.5   56,090  5.1 
Commercial -  0.0   6,189  0.5   6,056  0.6 
Land development 13,915  1.2   15,359  1.4   6,653  0.6 
Total construction/land 64,347  5.7   74,697  6.6   104,922  9.6 
            
One-to-four family residential:           
Permanent owner occupied 212,364  18.7   197,447  17.4   191,906  17.5 
Permanent non-owner occupied 224,390  19.8   214,784  18.9   179,029  16.3 
Total one-to-four family residential 436,754  38.5   412,231  36.3   370,935  33.8 
            
Business           
Aircraft 3,130  0.3   4,647  0.4   9,315  0.8 
Small Business Administration ("SBA") 532  0.1   816  0.1   884  0.1 
Paycheck Protection Plan ("PPP") 1,528  0.1   5,181  0.5   30,823  2.8 
Other business 28,502  2.5   19,902  1.7   26,409  2.4 
Total business 33,692  3.0   30,546  2.7   67,431  6.1 
            
Consumer           
Classic, collectible and other auto 42,009  3.7   38,781  3.4   30,593  2.8 
Other consumer 9,594  0.8   10,650  0.9   10,752  1.0 
Total consumer 51,603  4.5   49,431  4.3   41,345  3.8 
            
Total loans 1,135,050  100.0%  1,136,748  100.0%  1,098,220  100.0%
Less:           
Deferred loan fees, net 130     207     1,702   
ALLL 15,125     15,159     14,878   
Loans receivable, net$1,119,795    $1,121,382    $1,081,640   
            
Concentrations of credit:(1)           
Construction loans as % of total capital 45.2%    51.9%    69.3%  
Total non-owner occupied commercial real estate as % of total capital 360.0%    379.6%    384.4%  

(1) Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC regulatory guidelines.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures(Unaudited)

 Jun 30, Mar 31 Dec 31, Sep 30, Jun 30,
  2022   2022   2021   2021   2021 
 (Dollars in thousands, except per share data)
Performance Ratios:(1)         
Return on assets 0.79%  0.93%  0.76%  0.88%  1.07%
Return on equity 7.11   8.33   6.79   7.84   9.54 
Dividend payout ratio 38.51   33.20   36.67   32.35   27.50 
Equity-to-assets ratio 10.78   11.15   11.07   11.21   11.30 
Tangible equity ratio(2) 10.69   11.05   10.97   11.11   11.19 
Net interest margin 3.53   3.43   3.40   3.33   3.36 
Average interest-earning assets to average interest-bearing liabilities 120.21   119.59   119.08   119.35   117.99 
Efficiency ratio 72.62   70.96   68.62   67.26   66.92 
Noninterest expense as a percent of average total assets 2.60   2.46   2.42   2.30   2.31 
Book value per common share$17.26  $17.32  $17.30  $17.03  $16.75 
Tangible book value per share(2) 17.09   17.15   17.13   16.86   16.58 
          
Capital Ratios:(3)         
Tier 1 leverage ratio 10.53%  10.51%  10.34%  10.19%  10.15%
Common equity tier 1 capital ratio 14.22   14.08   14.23   14.25   14.45 
Tier 1 capital ratio 14.22   14.08   14.23   14.25   14.45 
Total capital ratio 15.47   15.33   15.48   15.50   15.70 
          
Asset Quality Ratios:(4)         
Nonperforming loans as a percent of total loans 0.00%  0.02%  0.00%  0.00%  0.00%
Nonperforming assets as a percent of total assets 0.00   0.01   0.00   0.00   0.03 
ALLL as a percent of total loans 1.33   1.33   1.40   1.35   1.35 
Net (recoveries) charge-offs to average loans receivable, net 0.00   (0.00)  0.00   (0.01)  (0.01)
          
Allowance for Loan Losses:         
ALLL, beginning of the quarter$15,159  $15,657  $15,057  $14,878  $15,502 
(Recapture of provision) provision -   (500)  600   100   (700)
Charge-offs (37)  -   -   -   - 
Recoveries 3   2   -   79   76 
ALLL, end of the quarter$15,125  $15,159  $15,657  $15,057  $14,878 

(1) Performance ratios are calculated on an annualized basis.(2) Tangible equity excludes goodwill and core deposit intangible assets. Tangible assets exclude goodwill and other intangible assets. The tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.(3) Capital ratios are for First Financial Northwest Bank only.(4) Loans are reported net of undisbursed funds.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures (continued)(Unaudited)

 At or For the Quarter Ended
 Jun 30, Mar 31, Dec 31, Sep 30, Jun 30,
  2022   2022   2021   2021   2021 
 (Dollars in thousands, except per share data)
Yields and Costs:(1)         
Yield on loans 4.41%  4.36%  4.44%  4.54%  4.64%
Yield on investment securities 2.33   1.96   1.79   1.73   1.90 
Yield on interest-earning deposits 0.67   0.15   0.13   0.14   0.10 
Yield on FHLB stock 4.82   5.49   5.89   5.15   5.13 
Yield on interest-earning assets 4.04%  3.90%  3.91%  3.93%  4.06%
          
Cost of interest-bearing deposits 0.55%  0.50%  0.53%  0.63%  0.75%
Cost of borrowings 1.21   1.28   1.33   1.42   1.37 
Cost of interest-bearing liabilities 0.61%  0.56%  0.61%  0.71%  0.82%
          
Cost of total deposits 0.49%  0.44%  0.48%  0.56%  0.68%
Cost of funds 0.55   0.51   0.55   0.64   0.75 
          
Average Balances:         
Loans$1,117,079  $1,115,428  $1,108,836  $1,094,124  $1,092,710 
Investment securities 198,819   171,685   178,500   187,261   180,128 
Interest-earning deposits 22,010   49,857   56,800   68,618   64,035 
FHLB stock 5,905   5,467   5,726   6,465   6,485 
Total interest-earning assets$1,343,813  $1,342,437  $1,349,862  $1,356,468  $1,343,358 
          
Interest-bearing deposits$1,013,080  $1,027,507  $1,032,090  $1,016,540  $1,018,083 
Borrowings 104,835   95,000   101,522   120,000   120,494 
Total interest-bearing liabilities 1,117,915   1,122,507   1,133,612   1,136,540   1,138,577 
Noninterest-bearing deposits 131,415   122,175   119,142   121,256   110,207 
Total deposits and borrowings$1,249,330  $1,244,682  $1,252,754  $1,257,796  $1,248,784 
          
Average assets$1,431,003  $1,424,054  $1,430,199  $1,436,801  $1,424,126 
Average stockholders' equity 158,349   158,756   160,183   161,892   160,189 

(1) Yields and costs are annualized.

Non-GAAP Financial Measures

In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains non-GAAP financial measures that include tangible equity, tangible assets, tangible book value per share, and the tangible equity ratio. The Company believes that these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of certain items and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors. Non-GAAP financial measures have limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation and are not a substitute for other measures in this earnings release that are presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

The following tables provide a reconciliation between the GAAP and non-GAAP measures:

 Quarter Ended
  Jun 30, 2022   Mar 31, 2022   Dec 31, 2021   Sep 30, 2021   Jun 30, 2021 
 (Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share: 
Total stockholders' equity (GAAP)$156,896  $157,757  $      157,879  $161,456  $161,621 
Less:         
Goodwill 889   889   889   889   889 
Core deposit intangible, net 616   650   684   719   754 
Tangible equity (Non-GAAP)$155,391  $156,218  $      156,306  $159,848  $159,978 
          
Total assets (GAAP)$1,454,768  $1,415,054  $1,426,329  $1,440,202  $1,430,703 
Less:         
Goodwill 889   889   889   889   889 
Core deposit intangible, net 616   650   684   719   754 
Tangible assets (Non-GAAP)$1,453,263  $1,413,515  $   1,424,756  $1,438,594  $1,429,060 
          
Common shares outstanding at period end 9,091,533   9,107,977   9,125,759   9,483,081   9,651,180 
          
Equity-to-assets ratio (GAAP) 10.78%  11.15%  11.07%  11.21%  11.30%
Tangible equity ratio (Non-GAAP) 10.69   11.05   10.97   11.11   11.19 
Book value per common share (GAAP)$17.26  $17.32  $      17.30  $17.03  $16.75 
Tangible book value per share (Non-GAAP) 17.09   17.15   17.13   16.86   16.58 

For more information, contact:Joseph W. Kiley III, President and Chief Executive OfficerRich Jacobson, Executive Vice President and Chief Financial Officer(425) 255-4400 

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