• First Financial Northwest, Inc. Reports First Quarter Net Income of $2.5 Million or $0.26 per Diluted Share

    Source: Nasdaq GlobeNewswire / 27 Apr 2021 09:15:01   America/New_York

    RENTON, Wash., April 27, 2021 (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 March 31, 2021, of $2.5 million, or $0.26 per diluted share, compared to net income of $2.6 million, or $0.28 per diluted share, for the quarter ended December 31, 2020, and $1.7 million, or $0.17 per diluted share, for the quarter ended March 31, 2020.

    “This quarter we continued to see accelerated success of our strategy to diversify the liability side of our balance sheet and reduce our cost of funds,” stated Joseph W. Kiley III, President and CEO. “During the quarter, deposits increased $40.0 million, with over half of the growth coming in the form of noninterest bearing demand deposits. In addition, higher cost certificate of deposit balances declined by $25.5 million in the quarter. This resulted in a further reduction in our cost of funds, with the average cost of deposits decreasing to 0.85% in the quarter ended March 31, 2021, compared to 1.03% in the quarter ended December 31, 2020, and 1.72% in the quarter ended March 31, 2020,” continued Kiley. “If market interest rates remain low, we expect this trend to continue as we have approximately $219.9 million in certificates of deposit maturing in the next 12 months at a weighted average rate of 1.69%. In addition, we have $83.0 million of certificates of deposit maturing in the subsequent 12 months at a weighted average rate of 1.58%,” continued Kiley.

    “We opened our 15th office in Issaquah, Washington on March 1, 2021, and now intend to pause our expansion with a focus on growing relationships and improving efficiency throughout our existing branch network. Our strategy remains focused on improving the Bank’s deposit composition from a reliance on certificates of deposit to a more balanced deposit mix, and expanding our network for lending opportunities,” stated Kiley.

    “Our lending teams continue to assist borrowers that may require additional support or closer monitoring due to the COVID-19 pandemic. As a result of our quarterly analysis of our loan portfolio, we downgraded to special mention $10.5 million of $12.2 million in total loans made to a single lending relationship. These downgrades offset improvements to economic environmental factors related to the COVID-19 pandemic used to calculate our allowance for loan losses, resulting in a provision for loan losses of $300,000 during the quarter, compared to a provision for loan losses of $600,000 in the quarter ended December 31, 2020,” concluded Kiley.

    Highlights for the quarter ended March 31, 2021:

    • Total deposits increased $40.0 million to $1.13 billion, including a $23.2 million increase in noninterest bearing demand deposits.
    • The Company’s book value per share was $16.35, compared to $16.05 at December 31, 2020, and $15.03 at March 31, 2020.
    • The Company repurchased 89,019 shares at an average price of $13.03 per share.
    • The Company increased its regular quarterly cash dividend to shareholders to $0.11 per share from $0.10 per share.
    • The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 15.6%, respectively, at March 31, 2021, compared to 10.3% and 15.6%, respectively, at December 31, 2020, and 10.3% and 14.7% at March 31, 2020.
    • The Bank recorded a $300,000 provision for loan losses based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”) including the estimated future impact of the COVID-19 pandemic.

    Total deposits increased $40.0 million to $1.13 billion at March 31, 2021, from $1.09 billion at December 31, 2020, and increased $133.7 million from $1.00 billion at March 31, 2020. Demand deposits increased $29.1 million, while retail certificates of deposit decreased $25.5 million during the quarter. Retail deposits increased $159.1 million year over year, partially offset by the repayment of $25.5 million in brokered certificates of deposit over the same period.

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

     Mar 31,
    2021    		 Dec 31,
    2020    		 Mar 31,
    2020    		 Three
    Month
    Change    		 One
    Year
    Change
              
    Deposits:(Dollars in thousands) 
    Noninterest-bearing demand$114,437 $91,285 $53,519 $23,152  $60,918 
    Interest-bearing demand 114,098  108,182  68,803  5,916   45,295 
    Statement savings 20,470  19,221  17,040  1,249   3,430 
    Money market 500,619  465,369  397,489  35,250   103,130 
    Certificates of deposit, retail (1) 384,031  409,576  437,676  (25,545)  (53,645)
    Certificates of deposit, brokered –  –  25,457  –   (25,457)
    Total deposits$1,133,655 $1,093,633 $999,984 $40,022   133,671 

    (1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $10,000 at March 31, 2021, $12,000 at December 31, 2020, and $22,000 at March 31, 2020.


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

    March 31, 2021
     Noninterest-
    bearing
    demand     		Interest-
    bearing
    demand    		Statement
    savings     		Money
    market     		Certificates
    of deposit,
    retail    		Total
    (Dollars in thousands)
    King County      
    Renton$41,934$48,476$14,070$255,917$318,113$678,510
    Landing 8,425 2,904 133 16,165 6,912 34,539
    Woodinville 4,351
    		 7,350 757 18,530 6,076 37,064
    Bothell 3,056 1,160 55 6,286 2,646 13,203
    Crossroads 10,515 13,881 72 59,995 6,023 90,486
    Kent 6,752 7,508 1 22,924 346 37,531
    Kirkland 8,144 157 18 4,400 – 12,719
    Issaquah (1) 361 – 1 325 – 687
    Total King County 83,538 81,436 15,107 384,542 340,116 904,739
           
    Snohomish County      
    Mill Creek 4,811 4,258 1,414 14,553 8,286 33,322
    Edmonds 13,210 8,672 615 37,765 17,910 78,172
    Clearview 4,814 5,615 1,217 20,309 3,257 35,212
    Lake Stevens 3,352 9,974 922 18,005 4,726 36,979
    Smokey Point 3,418 3,690 1,098 22,330 9,736 40,272
    Total Snohomish County 29,605 32,209 5,266 112,962 43,915 223,957
           
    Pierce County      
    University Place 940 174 24 670 – 1,808
    Gig Harbor 354 279 73 2,445 – 3,151
    Total Pierce County 1,294 453 97 3,115 – 4,959
           
    Total retail deposits 114,437 114,098 20,470 500,619 384,031 1,133,655
    Total deposits$114,437$114,098$20,470$500,619$384,031$1,133,655

    (1) Issaquah opened March 1, 2021.


    December 31, 2020
     Noninterest-
    bearing
    demand     		Interest-
    bearing
    demand    		Statement
    savings     		Money
    market     		Certificates
    of deposit,
    retail    		Total
    (Dollars in thousands)
    King County      
    Renton$36,932$47,964$13,696$243,940$325,803$668,335
    Landing 5,300 3,199 22 14,024 8,108 30,653
    Woodinville 3,054
    		 7,040 688 14,270 9,790 34,842
    Bothell 2,153 1,760 53 5,502 3,233 12,701
    Crossroads 6,719 5,249 58 56,836 10,994 79,856
    Kent 5,047 8,607 – 23,052 1,077 37,783
    Kirkland 5,205 113 30 3,757 – 9,105
    Total King County 64,410 73,932 14,547 361,381 359,005 873,275
           
    Snohomish County      
    Mill Creek 3,176 2,765 1,411 14,823 9,289 31,464
    Edmonds 12,074 13,735 351 30,807 19,989 76,956
    Clearview 5,367 6,690 1,012 17,902 5,346 36,317
    Lake Stevens 3,057 7,419 835 14,593 4,669 30,573
    Smokey Point 2,788 3,237 1,005 21,575 11,278 39,883
    Total Snohomish County 26,462 33,846 4,614 99,700 50,571 215,193
           
    Pierce County      
    University Place 377 215 15 1,578 – 2,185
    Gig Harbor 36 189 45 2,710 – 2,980
    Total Pierce County 413 404 60 4,288 – 5,165
           
    Total retail deposits 91,285 108,182 19,221 465,369 409,576 1,093,633
    Total deposits$91,285$108,182$19,221$465,369$409,576$1,093,633


    Net loans receivable totaled $1.10 billion at both March 31, 2021 and December 31, 2020, respectively, compared to $1.09 billion at March 31, 2020. The average balance of net loans receivable totaled $1.10 billion for the quarter ended March 31, 2021, compared to $1.13 billion for the quarter ended December 31, 2020, and $1.10 billion for the quarter ended March 31, 2020.

    The Company recorded a $300,000 provision for loan losses in the quarter ended March 31, 2021, compared to a $600,000 provision for loan losses in the quarter ended December 31, 2020, and a $300,000 provision for loan losses in the quarter ended March 31, 2020. The provision in the quarter ended March 31, 2021, was primarily due to downgrades on $10.5 million of $12.2 million in total loans made to a single lending relationship secured by a bowling, roller skating and restaurant location, and a separate hostel business that continue to be adversely impacted by government-imposed restrictions due to the pandemic. Partially offsetting these downgrades were improvements to qualitative economic factors utilized to calculate our general reserves for the ALLL related to the COVID-19 pandemic based upon the improving financial conditions and economic outlook that existed as of March 31, 2021. The provision in the quarter ended December 31, 2020, was primarily due to risk rating downgrades on $34.2 million in commercial real estate loans, as any relationship that requested an additional loan payment deferral and demonstrated other weaknesses received additional scrutiny. The provision in the quarter ended March 31, 2020, was due primarily to COVID-19 related deterioration to the qualitative economic factors considered in calculating the general reserves for the ALLL.

    The ALLL represented 1.39% of total loans receivable at March 31, 2021, compared to 1.36% of total loans receivable at December 31, 2020, and 1.22% of total loans receivable at March 31, 2020. Excluding Paycheck Protection Program (“PPP”) loan balances, which are 100% guaranteed by the Small Business Administration (“SBA”), the ALLL represented 1.45% of total loans receivable at March 31, 2021, compared to 1.41% of total loans receivable at December 31, 2020. The ALLL as a percent of total loans excluding PPP loans is a non-GAAP financial measure. See Non-GAAP Financial Measures at the end of this press release for a reconciliation to its nearest GAAP equivalent. As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, we are awaiting financial information relating to $5.4 million in commercial real estate participation loans that were downgraded by the lead lender. To date, the Company has not received sufficient information to make a final determination, and accordingly, the risk rating on these loans have not been further downgraded. The Company estimates that further downgrade from the current watch status to “special mention” could impact the ALLL for the quarter ending June 30, 2021, by an amount between $400,000 and $500,000, which may result in an increase in the provision for loan losses next quarter.

    Nonperforming loans totaled $2.0 million at March 31, 2021, down from $2.1 million at December 31, 2020, and $2.2 million at March 31, 2020. The balance, consisting of a single multifamily loan in foreclosure, declined in the quarter due to the release of approximately $74,000 in rents paid on the property previously held in receivership, which were applied against payments and late fees owed on the outstanding loan. The receiver has multiple offers on the property and the Company currently anticipates that this matter will be resolved in the second quarter without incurring a loss. OREO remained unchanged at $454,000 at March 31, 2021, December 31, 2020, and March 31, 2020.

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

     Mar 31, Dec 31, Mar 31, Three
    Month    		 One
    Year
      2021   2020   2020  Change Change
                    
     (Dollars in thousands)
    Nonperforming loans:                   
    One-to-four family residential$─  $─  $91  $─  $(91)
    Multifamily 2,036   2,104   2,104   (68)  (68)
    Total nonperforming loans 2,036   2,104   2,195   (68)  (159)
                        
    Other real estate owned (“OREO”) 454   454   454   ─     
                        
    Total nonperforming assets (1)$2,490  $2,558  $2,649  $(68) $(159)
                        
    Nonperforming assets as a                   
    percent of total assets 0.17%  0.18%  0.20%        

    (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 March 31, 2021.

    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. At March 31, 2021, TDRs totaled $3.8 million, compared to $3.9 million at December 31, 2020, and $5.0 million at March 31, 2020. All TDRs were performing according to their modified repayment terms for the periods presented. As discussed below, The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), signed into law on March 27, 2020, provided guidance on the modification of loans due to the COVID-19 pandemic, and outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. The Consolidated Appropriations Act, 2021 (“CAA”), signed into law on December 27, 2020, provided additional COVID relief and extended TDR relief to the earlier of 60 days after the national emergency termination date or January 1, 2022.

    Net interest income totaled $10.7 million for both the quarters ended March 31, 2021 and December 31, 2020, compared to $9.7 million for the quarter ended March 31, 2020. The improvement from the year ago quarter was primarily due to lower deposit-related interest expense that more than offset the decline in interest income earned on loans, including fees.

    Total interest income was $13.5 million for the quarter ended March 31, 2021, compared to $13.8 million for the quarter ended December 31, 2020, and $14.5 million for the quarter ended March 31, 2020. The decrease in the current quarter compared to the quarter ended December 31, 2020, was primarily due to lower interest income on loans, including fees, as yields on loans continue to decline as loans either adjust downward or are refinanced in this low interest rate environment. In addition, rates on new loans and investments are lower than the average yield on existing interest-earning assets, further adversely impacting interest income. The average balance and composition of the loan portfolio was relatively unchanged during the quarter as loan demand remained muted.

    Total interest expense was $2.7 million for the quarter ended March 31, 2021, compared to $3.2 million for the quarter ended December 31, 2020, and $4.8 million for the quarter ended March 31, 2020. The average cost of interest-bearing deposits declined to 0.94% for the quarter ended March 31, 2021, compared to 1.12% for the quarter ended December 31, 2020, and 1.81% for the quarter ended March 31, 2020. The decline from the quarter ended December 31, 2020, was due primarily to the repricing of maturing certificates of deposits to a lower interest rate, growth in noninterest bearing deposits, and reduction in the average balance of higher cost certificates of deposit. Advances from the FHLB remained unchanged at $120.0 million at both March 31, 2021 and December 31, 2020, but were down from $160.0 million at March 31, 2020. The FHLB advances are tied to cash flow hedge agreements utilized to assist in the Bank’s interest rate risk management efforts. The average cost of borrowings was 1.41% for the quarter ended March 31, 2021, compared to 1.40% for the quarter ended December 31, 2020, and 1.48% for the quarter ended March 31, 2020.

    The net interest margin was 3.31% for the quarter ended March 31, 2021, compared to 3.29% for the quarter ended December 31, 2020, and 3.11% for the quarter ended March 31, 2020. The expansion in the net interest margin is due primarily to the 16 basis point reduction in the Company’s average cost of interest-bearing liabilities during the quarter to 0.99% from 1.15% in the quarter ended December 31, 2020, and a 78 basis point reduction from 1.77% for the quarter ended March 31, 2020. Offsetting this improvement was an 11 basis point reduction in the average yield on interest-earning assets to 4.15% for the quarter ended March 31, 2021, from 4.26% in the quarter ended December 31, 2020, and a 51 basis point reduction from 4.66% in the quarter ended March 31, 2020. These asset yields were impacted favorably by net deferred fee recognition on PPP loans, with the recognition of previously unamortized deferred fees on forgiven PPP loans totaling $718,000 in the quarter ended March 31, 2021, and $420,000 in the quarter ended December 31, 2020. At March 31, 2021, the balance of net deferred fees relating to PPP loans totaled $1.5 million, which will be recognized in future periods.

    Noninterest income for the quarter ended March 31, 2021, totaled $764,000, compared to $1.7 million for the quarter ended December 31, 2020, and $990,000 for the quarter ended March 31, 2020. The decrease in noninterest income for the quarter ended March 31, 2021, compared to the quarter ended December 31, 2020, was primarily due to a $950,000 decrease in loan related fees as these fees were abnormally high with approximately $954,000 in loan prepayment penalties and loan swap fee income recognized in the prior quarter, compared to $94,000 in the current quarter.

    Noninterest expense totaled $8.1 million for the quarter ended March 31, 2021, compared to $8.4 million for the quarter ended December 31, 2020, and $8.3 million for the quarter ended March 31, 2020. Salaries and employee benefits for the quarter ended March 31, 2021, decreased $201,000 compared to the quarter ended December 31, 2020, due primarily to lower employee incentive accruals.

    COVID-19 Related Information

    The Bank is committed to assisting its customers and communities in response to the COVID-19 pandemic, including providing certain short-term loan modifications. In addition, the Bank is participating in the PPP as an SBA lender. The Bank continues to take the steps necessary while working with its loan customers to effectively manage the portfolio through the ongoing uncertainty surrounding the duration, impact and government response to the crisis.

    Paycheck Protection Program
    The SBA provides assistance to small businesses impacted by COVID-19 through the PPP, which was designed to provide near-term relief to help small businesses sustain operations. The SBA deadline for the first round of PPP loan applications under the CARES Act was August 8, 2020. The CAA, among other things, authorized an additional $284.5 billion in PPP funding for eligible small businesses and nonprofits with an initial application deadline of March 31, 2021. The deadline for this second round of PPP was recently extended to May 31, 2021. As of March 31, 2021, there were 324 PPP loans outstanding totaling $45.2 million as compared to 372 PPP loans totaling $41.3 million at December 31, 2020. At March 31, 2021, 234 PPP loans have an outstanding balance of $150,000 or less, totaling $11.4 million, or 25.2% of total PPP loans outstanding, including 145 loans representing $3.3 million with an outstanding balance of $50,000 or less. As of March 31, 2021, 374 PPP loans totaling $29.4 million had received forgiveness under the PPP loan program.

    Modifications
    The primary method of relief is to allow the borrower to defer their loan payments for three to six months, while certain borrowers are allowed to pay interest only or have payment deferrals for periods longer than six months depending upon their specific circumstances. The CARES Act and regulatory guidelines suspend the determination of certain loan modifications related to the COVID-19 pandemic from being treated as TDRs. Recent legislation extended this accounting treatment through the earlier of 60 days after the national emergency termination date or January 1, 2022. The following table provides detail on the balance of loans remaining on deferral status as of March 31, 2021:

     As of March 31, 2021
     Balance of
    loans with
    modifications
    of 4-6 months    		 Balance of
    loans with
    modifications
    of greater
    than 6 months    		 Total balance
    of loans with
    modifications
    granted    		 Total loans
    		 Modifications
    as % of total
    loans in each
    category
              
     (Dollars in thousands)  
    One-to-four family residential$462 $1,589 $2,051 $379,246 0.5%
    Multifamily -  2,347  2,347  140,068 1.7 
              
    Commercial real estate:         
    Office 7,153  -  7,153  83,176 8.6 
    Retail -  7,811  7,811  110,843 7.0 
    Mobile home park -  -  -  29,708 - 
    Hotel/motel -  30,869  30,869  65,475 47.1 
    Nursing home -  6,368  6,368  12,852 49.5 
    Warehouse -  -  -  17,435 - 
    Storage -  -  -  33,498 - 
    Other non-residential -  -  -  32,483 - 
    Total commercial real estate 7,153  45,048  52,201  385,470 13.5 
              
    Construction/land -  -  -  94,545 - 
              
    Business:         
    Aircraft -  -  -  9,512 - 
    SBA -  -  -  906 - 
    PPP -  -  -  45,220 - 
    Other business -  -  -  22,656 - 
    Total business -  -  -  78,294 - 
              
    Consumer:         
    Classic/collectible auto -  85  85  26,488 0.3 
    Other consumer -  -  -  12,280 - 
    Total consumer -  85  85  38,768 0.2 
              
    Total loans with COVID-19 pandemic modifications$7,615 $49,069 $56,684 $1,116,391 5.1%


    Total loans with modifications granted were $56.7 million, or 5.1% of total loans outstanding, at March 31, 2021, an increase from $45.2 million, or 4.0% of total loans outstanding at December 31, 2020. The increase in the quarter ended March 31, 2021, was primarily due to new modifications granted on loans related to an office building and a private tennis club. At September 30, 2020, total loans with modifications granted were $65.5 million, or 5.7% of total loans outstanding, compared to $132.1 million, or 11.4% of total loans outstanding at June 30, 2020. As of March 31, 2021, $49.1 million in loans had been granted modifications of greater than six months, of which $30.9 million were for loans secured by hotel/motel asset class.

    Additional Loan Portfolio Details
    The Bank is monitoring its loan portfolio for potentially delinquent loans that have not requested a loan modification qualifying under the CARES Act or regulatory guidance. The following table presents the loan to value (“LTV”) ratios of select segments of our loan portfolio at March 31, 2021, that may more likely be impacted by COVID-19 pandemic considerations. The LTV ratio is derived by dividing the current loan balance by the lower of the original appraised value or purchase price of the real estate or other collateral:

     As of March 31, 2021
     LTV 0-60% LTV 61-75% LTV 76%+ Total Average LTV
              
    Category: (1)(Dollars in thousands)
    One-to-four family$234,829 $146,909 $25,325 $407,063 42.70%
    Church 1,361  -  -  1,361 46.00 
    Classic auto 5,216  11,118  10,154  26,488 65.26 
    Gas station 3,484  -  504  3,988 50.66 
    Hotel / motel 54,449  11,026  -  65,475 59.67 
    Marina 7,767  -  -  7,767 37.80 
    Mobile home park 21,668  7,665  375  29,708 40.75 
    Nursing home 12,852  -  -  12,852 24.61 
    Office 58,888  23,968  4,273  87,129 44.63 
    Other non-residential 17,109  2,258  -  19,367 41.76 
    Retail 75,635  35,208  -  110,843 48.39 
    Storage 24,259  11,123  -  35,382 43.89 
    Warehouse 15,282  2,153  -  17,435 45.62 

    (1) Represents select segments of loans that may include construction loans; classifications may differ from those used elsewhere in this release because they are based on collateral type rather than loan category.


    First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; an FDIC insured Washington State-chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through 15 full-service banking offices. For additional information about us, please visit our website at ffnwb.com and click on the “Investor Relations” link at the bottom of the page.

    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 2021 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 SUBSIDIARIES
    Consolidated Balance Sheets
    (Dollars in thousands, except share data)
    (Unaudited)

    AssetsMar 31,
    2021    		 Dec 31,
    2020    		 Mar 31,
    2020    		 Three
    Month Change    		 One
    Year
    Change
              
    Cash on hand and in banks$7,211  $7,995  $6,453  (9.8)% 11.7%
    Interest-earning deposits with banks 75,023   72,494   22,063  3.5  240.0 
    Investments available-for-sale, at fair value 168,042   127,551   132,159  31.7  27.2 
    Annuity held-to-maturity 2,413   2,418   2,371  (0.2) 1.8 
    Loans receivable, net of allowance of $15,502, $15,174, and $13,530 respectively 1,098,832   1,100,582   1,092,128  (0.2) 0.6 
    Federal Home Loan Bank ("FHLB") stock, at cost 6,465   6,410   8,010  0.9  (19.3)
    Accrued interest receivable 5,702   5,508   4,302  3.5  32.5 
    Deferred tax assets, net 1,163   1,641   2,227  (29.1) (47.8)
    Other real estate owned ("OREO") 454   454   454  0.0  0.0 
    Premises and equipment, net 22,512   22,579   22,591  (0.3) (0.3)
    Bank owned life insurance ("BOLI") 33,357   33,034   32,290  1.0  3.3 
    Prepaid expenses and other assets 3,398   1,643   1,898  106.8  79.0 
    Right of use asset ("ROU"), net 3,976   3,647   2,446  9.0  62.6 
    Goodwill 889   889   889  0.0  0.0 
    Core deposit intangible, net 789   824   932  (4.2) (15.3)
    Total assets$1,430,226  $1,387,669  $1,331,213  3.1  7.4 
              
    Liabilities and Stockholders' Equity         
              
    Deposits         
    Noninterest-bearing deposits$114,437  $91,285  $53,519  25.4  113.8 
    Interest-bearing deposits 1,019,218   1,002,348   946,465  1.7  7.7 
    Total deposits 1,133,655   1,093,633   999,984  3.7  13.4 
    Advances from the FHLB 120,000   120,000   160,000  0.0  (25.0)
    Advance payments from borrowers for taxes and insurance 4,813   2,498   4,960  92.7  (3.0)
    Lease liability, net 4,123   3,783   2,538  9.0  62.5 
    Accrued interest payable 197   211   236  (6.6) (16.5)
    Other liabilities 8,995   11,242   10,403  (20.0) (13.5)
    Total liabilities 1,271,783   1,231,367   1,178,121  3.3  8.0 
              
    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
       9,692,610 shares at March 31, 2021,
       9,736,875 shares at December 31, 2020,
       and 10,184,411 shares at March 31, 2020    		 97   97   102  0.0  (4.9)
    Additional paid-in capital 81,099   82,095   86,357  (1.2) (6.1)
    Retained earnings 79,455   78,003   74,017  1.9  7.3 
    Accumulated other comprehensive loss, net of tax (515)  (1,918)  (4,563) (73.1) (88.7)
    Unearned Employee Stock Ownership Plan ("ESOP") shares (1,693)  (1,975)  (2,821) (14.3) (40.0)
    Total stockholders' equity 158,443   156,302   153,092  1.4  3.5 
    Total liabilities and stockholders' equity$1,430,226  $1,387,669  $1,331,213  3.1% 7.4%


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

     Quarter Ended    
     Mar 31,
    2021    		 Dec 31,
    2020    		 Mar 31,
    2020    		 Three
    Month
    Change     		 One
    Year
    Change
    Interest income         
    Loans, including fees$12,624  $13,042  $13,474  (3.2)% (6.3)%
    Investments available-for-sale 735   707   919  4.0  (20.0)
    Investments held-to-maturity 13   6   -  116.7  n/a
    Interest-earning deposits with banks 12   7   31  71.4  (61.3)
    Dividends on FHLB Stock 79   81   76  (2.5) 3.9 
    Total interest income 13,463   13,843   14,500  (2.7) (7.2)
    Interest expense         
    Deposits 2,299   2,767   4,366  (16.9) (47.3)
    Other borrowings 418   426   470  (1.9) (11.1)
    Total interest expense 2,717   3,193   4,836  (14.9) (43.8)
    Net interest income 10,746   10,650   9,664  0.9  11.2 
    Provision for loan losses 300   600   300  (50.0) 0.0 
    Net interest income after provision for loan losses 10,446   10,050   9,364  3.9  11.6 
              
    Noninterest income         
    BOLI income 269   204   254  31.9  5.9 
    Wealth management revenue 160   170   165  (5.9) (3.0)
    Deposit related fees 200   195   176  2.6  13.6 
    Loan related fees 132   1,082   392  (87.8) (66.3)
    Other 3   3   3  0.0  0.0 
    Total noninterest income 764   1,654   990  (53.8) (22.8)
              
    Noninterest expense         
    Salaries and employee benefits 4,945   5,146   5,212  (3.9) (5.1)
    Occupancy and equipment 1,100   1,147   1,071  (4.1) 2.7 
    Professional fees 532   450   430  18.2  23.7 
    Data processing 697   711   694  (2.0) 0.4 
    OREO related expenses, net 1   1   1  0.0  0.0 
    Regulatory assessments 121   142   144  (14.8) (16.0)
    Insurance and bond premiums 124   106   120  17.0  3.3 
    Marketing 29   64   64  (54.7) (54.7)
    Other general and administrative 580   668   532  (13.2) 9.0 
    Total noninterest expense 8,129   8,435   8,268  (3.6) (1.7)
    Income before federal income tax provision 3,081   3,269   2,086  (5.8) 47.7 
    Federal income tax provision 584   622   402  (6.1) 45.3 
    Net income$2,497  $2,647  $1,684  (5.7)% 48.3%
              
    Basic earnings per share$0.26  $0.28  $0.17     
    Diluted earnings per share$0.26  $0.28  $0.17     
    Weighted average number of common shares outstanding 9,490,058   9,573,950   9,896,234     
    Weighted average number of diluted shares outstanding 9,566,671   9,603,493   9,978,060     


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

     March 31, 2021 December 31, 2020 March 31, 2020
     Amount Percent Amount Percent Amount Percent
                
     (Dollars in thousands)
    Commercial real estate:           
    Residential:           
    Micro-unit apartments$11,708  1.0% $11,366  1.0% $11,230  1.0%
    Other multifamily 128,360  11.5   125,328  11.2   158,238  14.3 
        Total multifamily residential 140,068  12.5   136,694  12.2   169,468  15.3 
                
    Non-residential:           
    Office 83,176  7.5   84,311  7.5   95,911  8.7 
    Retail 110,843  9.9   114,117  10.2   122,460  11.1 
    Mobile home park 29,708  2.7   28,094  2.5   25,370  2.3 
    Hotel / motel 65,475  5.9   69,304  6.2   52,515  4.7 
    Nursing Home 12,852  1.1   12,868  1.2   11,783  1.1 
    Warehouse 17,435  1.6   17,484  1.6   17,489  1.6 
    Storage 33,498  3.0   33,671  3.0   34,551  3.1 
    Other non-residential 32,483  2.8   25,416  2.3   25,831  2.3 
        Total non-residential 385,470  34.5   385,265  34.5   385,910  34.9 
                
    Construction/land:           
    One-to-four family residential 27,817  2.5   33,396  3.0   43,279  3.9 
    Multifamily 58,718  5.3   51,215  4.6   35,201  3.2 
    Commercial 5,837  0.5   5,783  0.5   22,946  2.1 
    Land development 2,173  0.2   1,813  0.2   5,975  0.5 
    Total construction/land 94,545  8.5   92,207  8.3   107,401  9.7 
                
    One-to-four family residential:           
    Permanent owner occupied 199,845  17.9   206,323  18.5   203,045  18.4 
    Permanent non-owner occupied 179,401  16.1   175,637  15.7   168,208  15.2 
    Total one-to-four family residential 379,246  34.0   381,960  34.2   371,253  33.6 
                
    Business:           
    Aircraft 9,512  0.8   10,811  0.9   13,741  1.2 
    Small Business Administration ("SBA") 906  0.1   928  0.1   753  0.1 
    Paycheck Protection Plan ("PPP") 45,220  4.1   41,251  3.7   -  0.0 
    Other business 22,656  2.0   27,673  2.5   20,208  1.8 
    Total business 78,294  7.0   80,663  7.2   34,702  3.1 
                
    Consumer:           
    Classic auto 26,488  2.4   29,359  2.6   22,029  2.0 
    Other consumer 12,280  1.1   11,262  1.0   15,196  1.4 
    Total consumer 38,768  3.5   40,621  3.6   37,225  3.4 
                
    Total loans 1,116,391  100.0%  1,117,410  100.0%  1,105,959  100.0%
    Less:           
    Deferred loan fees, net 2,057     1,654     301   
    ALLL 15,502     15,174     13,530   
    Loans receivable, net$1,098,832    $1,100,582    $1,092,128   
                
    Concentrations of credit: (1)           
    Construction loans as % of total capital 64.0%    61.6%    77.6%  
    Total non-owner occupied commercial real estate as % of total capital 391.8%    390.1%    437.7%  

    (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 SUBSIDIARIES
    Key Financial Measures
    (Unaudited)

     At or For the Quarter Ended
     Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
      2021   2020   2020   2020   2020 
                        
     (Dollars in thousands, except per share data)
    Performance Ratios: (1)         
    Return on assets 0.73%  0.77%  0.60%  0.63%  0.51%
    Return on equity 6.42   6.76   5.34   5.59   4.30 
    Dividend payout ratio 42.31   35.71   45.45   45.45   58.82 
    Equity-to-total assets 11.08   11.26   11.34   10.86   11.50 
    Tangible equity-to-tangible assets (2) 10.97   11.15   11.22   10.74   11.38 
    Net interest margin 3.31   3.29   3.07   3.12   3.11 
    Average interest-earning assets to average interest-bearing liabilities 117.92   116.42   116.08   115.96   113.97 
    Efficiency ratio 70.63   68.55   70.88   73.18   77.60 
    Noninterest expense as a percent of average total assets 2.36   2.46   2.26   2.33   2.51 
    Book value per common share$16.35  $16.05  $15.62  $15.32  $15.03 
    Tangible book value per share (2) 16.17   15.88   15.44   15.14   14.85 
              
    Capital Ratios: (3)         
    Tier 1 leverage ratio 10.15%  10.29%  10.03%  10.02%  10.25%
    Common equity tier 1 capital ratio 14.36   14.32   14.01   13.70   13.42 
    Tier 1 capital ratio 14.36   14.32   14.01   13.70   13.42 
    Total capital ratio 15.62   15.57   15.26   14.95   14.67 
              
    Asset Quality Ratios:         
    Nonperforming loans as a percent of total loans 0.18%  0.19%  0.18%  0.19%  0.20%
    Nonperforming assets as a percent of total assets 0.17   0.18   0.19   0.19   0.20 
    ALLL as a percent of total loans 1.39   1.36   1.27   1.20   1.22 
    ALLL as a percent of nonperforming loans 761.39   721.20   692.40   631.49   616.40 
    Net (recoveries) charge-offs to average loans receivable, net (0.00)  (0.00)  (0.00)  (0.00)  (0.00)
              
    Allowance for Loan Losses:         
    ALLL, beginning of the quarter$15,174  $14,568  $13,836  $13,530  $13,218 
    Provision 300   600   700   300   300 
    Charge-offs -   (2)  -   -   - 
    Recoveries 28   8   32   6   12 
    ALLL, end of the quarter$15,502  $15,174  $14,568  $13,836  $13,530 


    (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-to-tangible assets 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.


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

     At or For the Quarter Ended
     Mar 31, Dec 31, Sep 30, Jun 30, Mar 31,
      2021   2020   2020   2020   2020 
                        
     (Dollars in thousands)
    Yields and Costs: (1)         
    Yield on loans 4.66%  4.61%  4.49%  4.72%  4.94%
    Yield on investments available-for-sale 1.91   2.21   2.32   2.41   2.72 
    Yield on investments held-to-maturity 2.18   0.99   0.99   1.52   -- 
    Yield on interest-earning deposits 0.09   0.11   0.10   0.10   1.18 
    Yield on FHLB stock 5.00   4.99   4.95   4.84   4.62 
    Yield on interest-earning assets 4.15%  4.26%  4.16%  4.37%  4.66%
              
    Cost of interest-bearing deposits 0.94%  1.12%  1.27%  1.49%  1.81%
    Cost of borrowings 1.41   1.40   1.28   1.08   1.48 
    Cost of interest-bearing liabilities 0.99%  1.15%  1.27%  1.44%  1.77%
              
    Cost of total deposits 0.85%  1.03%  1.18%  1.38%  1.72%
    Cost of funds 0.91   1.07   1.19   1.34   1.69 
              
    Average Balances:         
    Loans$1,099,364  $1,126,554  $1,137,742  $1,122,913  $1,096,091 
    Investments available-for-sale 155,795   127,456   128,885   133,038   135,765 
    Investments held-to-maturity 2,413   2,410   2,399   2,378   2,061 
    Interest-earning deposits 52,336   26,092   32,701   30,989   10,555 
    FHLB stock 6,412   6,459   6,592   6,736   6,615 
    Total interest-earning assets$1,316,320  $1,288,971  $1,308,319  $1,296,054  $1,251,087 
              
    Interest-bearing deposits$996,295  $985,945  $1,002,518  $989,549  $970,062 
    Borrowings 120,000   121,218   124,543   128,154   127,707 
    Total interest-bearing liabilities$1,116,295  $1,107,163  $1,127,061  $1,117,703  $1,097,769 
    Noninterest-bearing deposits 99,013   83,719   81,694   82,750   53,199 
    Total deposits and borrowings$1,215,308  $1,190,882  $1,208,755  $1,200,453  $1,150,968 
              
    Average assets$1,394,213  $1,366,061  $1,383,736  $1,371,269  $1,324,845 
    Average stockholders' equity 157,856   155,765   154,988   154,115   157,492 

    (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; tangible equity-to-tangible assets; and ALLL as a percent of total loans excluding PPP loans. 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
      Mar 31,
    2021    		   Dec 31,
    2020    		   Sep 30,
    2020    		   Jun 30,
    2020    		   Mar 31,
    2020    		 
                        
     (Dollars in thousands, except per share data)
    Tangible equity to tangible assets and tangible book value per share:
    Total stockholders' equity (GAAP)$158,443  $156,302  $154,778  $153,976  $153,092 
    Less:         
    Goodwill 889   889   889   889   889 
    Core deposit intangible, net 789   824   860   896   932 
    Tangible equity (Non-GAAP)$156,765  $154,589  $153,029  $152,191  $151,271 
              
    Total assets (GAAP)$1,430,226  $1,387,669  $1,365,469  $1,418,355  $1,331,213 
    Less:         
    Goodwill 889   889   889   889   889 
    Core deposit intangible, net 789   824   860   896   932 
    Tangible assets (Non-GAAP)$1,428,548  $1,385,956  $1,363,720  $1,416,570  $1,329,392 
              
    Common shares outstanding at period end 9,692,610   9,736,875   9,911,607   10,048,961   10,184,411 
              
    Equity-to-total assets (GAAP) 11.08%  11.26%  11.34%  10.86%  11.50%
    Tangible equity-to-tangible assets (Non-GAAP) 10.97   11.15   11.22   10.74   11.38 
    Book value per share (GAAP)$16.35  $16.05  $15.62  $15.32  $15.03 
    Tangible book value per share (Non-GAAP) 16.17   15.88   15.44   15.14   14.85 

    ALLL on loans to total loans receivable, excluding PPP loans:

    Allowance for loan losses$15,502  $15,174  $14,568  $13,836  $13,530 
              
    Total loans (GAAP)$1,116,391  $1,117,410  $1,150,481  $1,154,132  $1,105,959 
    Less:         
    PPP loans 45,220   41,251   52,045   51,661   - 
    Total loans excluding PPP loans (Non-GAAP)$1,071,171  $1,076,159  $1,098,436  $1,102,471  $1,105,959 
              
    ALLL as a percent of total loans (GAAP) 1.39%  1.36%  1.27%  1.20%  1.22%
    ALLL as a percent of total loans excluding                   
    PPP loans (Non-GAAP) 1.45   1.41   1.33   1.25   1.22 


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


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