• First Financial Northwest, Inc. Reports Third Quarter Net Income of $3.2 Million or $0.34 per Diluted Share

    Source: Nasdaq GlobeNewswire / 28 Oct 2021 09:15:01   America/New_York

    RENTON, Wash., Oct. 28, 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 September 30, 2021, of $3.2 million, or $0.34 per diluted share, compared to net income of $3.8 million, or $0.40 per diluted share, for the quarter ended June 30, 2021, and $2.1 million, or $0.21 per diluted share, for the quarter ended September 30, 2020. For the nine months ended September 30, 2021, net income was $9.5 million, or $0.99 per diluted share, compared to net income of $5.9 million, or $0.60 per diluted share, for the comparable nine-month period in 2020.

    “I am pleased to report that net loans increased $20.0 million to $1.10 billion in the quarter, primarily as a result of a $24.4 million commercial real estate loan purchase from a third-party bank, as organic loan growth remains challenging in the current environment because of loan repayments and Paycheck Protection Program loan forgiveness,” stated Joseph W. Kiley III, President and CEO. “These purchased loans, with balances ranging between $747,000 and $5.5 million meet all of our underwriting standards and are secured by commercial properties located outside of Washington, predominantly in Texas, California and Alabama, and which are under long-term leases by national tenants,” continued Kiley.

    “In addition, we achieved a further reduction in our cost of funds, with the average cost of deposits decreasing to 0.56% in the quarter ended September 30, 2021, compared to 0.68% in the quarter ended June 30, 2021, and 1.18% in the quarter ended September 30, 2020. If market interest rates remain low, we expect this decline to continue as we have approximately $159.9 million in retail certificates of deposit at a weighted average rate of 1.15% maturing in the next 12 months, and an additional $78.7 million maturing in the subsequent 12 to 24 months, at a weighted average rate of 1.88%,” continued Kiley.

    “Finally, I am happy to report that we had no nonperforming assets at quarter end as we sold our other real estate owned properties during the quarter. While this sale resulted in the recognition of a net loss of $207,000, we are pleased that we no longer have this distraction,” concluded Kiley.

    Highlights for the quarter ended September 30, 2021:

    • Net loans receivable increased by $20.0 million to $1.10 billion at the end of the quarter.
    • Total deposits increased by $7.4 million in the quarter, including a $4.1 million increase in noninterest-bearing demand deposits.
    • The Company’s book value per share increased to $17.03, compared to $16.75 at June 30, 2021, and $15.62 at September 30, 2020.
    • The Company repurchased 180,179 shares at an average price of $16.44 per share during the quarter.
    • The Company paid a regular quarterly cash dividend of $0.11 to shareholders.
    • The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 15.5%, respectively, compared to 10.2% and 15.7%, respectively, at June 30, 2021, and 10.0% and 15.3%, respectively, at September 30, 2020.
    • The Bank recorded a $100,000 provision for loan losses based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”) including the estimated impact of the COVID-19 pandemic.

    Deposits totaled $1.14 billion at September 30, 2021, compared to $1.13 billion at June 30, 2021, and $1.07 billion at September 30, 2020. The $43.9 million increase in money market deposits in the quarter ended September 30, 2021, more than offset the reduction in retail certificates of deposit as the Bank continues its strategy to shift the deposit composition to lower cost transaction accounts. Noninterest-bearing demand deposits also increased $4.1 million in the quarter ended September 30, 2021, from last quarter, and increased $32.9 million as compared to the quarter ended September 30, 2020.

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

     Sep 30,
    2021    		 Jun 30,
    2021    		 Sep 30,
    2020    		 Three
    Month
    Change    		 One
    Year
    Change
    Deposits:(Dollars in thousands) 
    Noninterest-bearing demand$115,311 $111,240 $82,376 $              4,071  $32,935 
    Interest-bearing demand 104,761  110,338  110,856  (5,577)  (6,095)
    Statement savings 23,024  21,281  19,292  1,743   3,732 
    Money market 596,911  552,964  428,512  43,947   168,399 
    Certificates of deposit, retail 301,729  338,479  418,646  (36,750)  (116,917)
    Certificates of deposit, brokered –  –  10,000  –   (10,000)
    Total deposits$1,141,736 $1,134,302 $1,069,682 $7,434  $72,054 


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

    September 30, 2021
     Noninterest-
    bearing
    demand     		Interest-
    bearing
    demand    		Statement
    savings     		Money
    market     		Certificates
    of deposit,
    retail    		Total
    (Dollars in thousands)
    King County            
    Renton$        42,332$         44,237$        14,585$     315,592$      256,310$      673,056
    Landing 8,918 3,448 229 25,029 4,718 42,342
    Woodinville 3,769 7,020 813 19,829 5,141 36,572
    Bothell 3,122 2,412 102 7,905 1,359 14,900
    Crossroads 10,161 7,598 63 67,111 4,790 89,723
    Kent 6,494 8,827 2 20,544 298 36,165
    Kirkland 6,206 393 6 6,278 25 12,908
    Issaquah 842 857 26 4,247 100 6,072
    Total King County 81,844 74,792 15,826 466,535 272,741 911,738
           
    Snohomish County      
    Mill Creek 5,844 2,697 1,305 19,005 7,213 36,064
    Edmonds 14,724 7,311 1,226 39,765 9,076 72,102
    Clearview 5,031 6,268 1,321 21,254 1,721 35,595
    Lake Stevens 3,185 8,913 2,110 22,961 4,775 41,944
    Smokey Point 3,072 3,908 1,198 25,752 6,201 40,131
    Total Snohomish County 31,856 29,097 7,160 128,737 28,986 225,836
           
    Pierce County      
    University Place 1,204 31 12 362 2 1,611
    Gig Harbor 407 841 26 1,277 - 2,551
    Total Pierce County 1,611 872 38 1,639 2 4,162
           
    Total deposits$      115,311$       104,761$        23,024$     596,911$      301,729$   1,141,736


    June 30, 2021
     Noninterest-
    bearing
    demand     		Interest-
    bearing
    demand    		Statement
    savings     		Money
    market     		Certificates
    of deposit,
    retail    		Total
    (Dollars in thousands)
    King County      
    Renton$41,247$46,092$14,611$296,292$285,563$683,805
    Landing 6,324 3,827 177 22,677 5,905 38,910
    Woodinville 4,546 7,115 729 18,631 5,230 36,251
    Bothell 2,565 2,314 110 7,450 1,481 13,920
    Crossroads 10,952 9,504 85 53,510 4,911 78,962
    Kent 6,311 8,131 1 23,699 296 38,438
    Kirkland 6,577 354 2 5,199 25 12,157
    Issaquah 480 18 3 1,299 100 1,900
    Total King County 79,002 77,355 15,718 428,757 303,511 904,343
           
    Snohomish County      
    Mill Creek 5,275 3,343 1,288 16,616 7,954 34,476
    Edmonds 12,962 9,983 688 38,773 13,439 75,845
    Clearview 5,662 5,676 1,456 21,899 1,796 36,489
    Lake Stevens 3,106 9,613 937 19,874 4,561 38,091
    Smokey Point 3,834 3,874 1,135 24,999 7,216 41,058
    Total Snohomish County 30,839 32,489 5,504 122,161 34,966 225,959
           
    Pierce County      
    University Place 1,007 164 28 484 2 1,685
    Gig Harbor 392 330 31 1,562 – 2,315
    Total Pierce County 1,399 494 59 2,046 2 4,000
           
    Total deposits$111,240$110,338$21,281$552,964$338,479$1,134,302


    Net loans receivable totaled $1.10 billion at September 30, 2021, compared to $1.08 billion at June 30, 2021, and $1.13 billion at September 30, 2020. During the quarter ended September 30, 2021, the Bank purchased 12 commercial real estate loans totaling $24.4 million from another commercial bank, including $7.0 million, $5.5 million, and $4.8 million secured by properties located in Texas, California, and Alabama, respectively. Each of these loans, with balances ranging between $747,000 and $5.5 million, is secured by a commercial property under a long-term lease by a national tenant. This loan purchase, along with new loan originations, more than offset the amount of loan repayments in the quarter and loan forgiveness of Paycheck Protection Program (“PPP”) loans totaling $8.4 million. The average balance of net loans receivable totaled $1.09 billion for both the quarters ended September 30, 2021, and June 30, 2021, compared to $1.14 billion for the quarter ended September 30, 2020.

    The Company recorded a $100,000 provision for loan losses in the quarter ended September 30, 2021, compared to a $700,000 recapture of provision for loan losses in the quarter ended June 30, 2021, and a $700,000 provision for loan losses in the quarter ended September 30, 2020. During the quarter ended September 30, 2021, management evaluated the adequacy of the ALLL and concluded that a $100,000 provision for loan losses was appropriate. This provision was primarily attributed to the growth in net loans receivable, partially offset by recoveries received during the quarter, and reflects modest changes in the composition of the loan portfolio during the quarter including a slight decline in construction and development loans. There were no significant loan grade changes during the quarter ended September 30, 2021, that materially impacted the ALLL analysis.

    The ALLL represented 1.35% of total loans receivable at both September 30, 2021, and June 30, 2021, compared to 1.27% of total loans receivable at September 30, 2020. Excluding PPP loan balances, which are 100% guaranteed by the Small Business Administration (“SBA”), the ALLL represented 1.38% of total loans receivable at September 30, 2021, compared to 1.39% of total loans receivable at June 30, 2021, and 1.33% of total loans receivable at September 30, 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.

    There were no nonperforming loans at both September 30, 2021, and June 30, 2021, compared to $2.1 million at September 30, 2020. The $2.1 million in nonperforming loans consisted of a single multifamily loan in foreclosure that was repaid in full in the quarter ended June 30, 2021. During the quarter ended September 30, 2021, two undeveloped commercial lots located in Pierce County that comprised the $454,000 balance of other real estate owned (“OREO”) at both June 30, 2021, and September 30, 2020, were sold, resulting in a net loss on sale of OREO of $207,000 recorded in OREO related expenses.


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

     Sep 30, Jun 30, Sep 30, Three
    Month    		 One
    Year
     2021  2021   2020  Change Change
     (Dollars in thousands)
    Nonperforming loans:         
    Multifamily$ ─   $  ─    $2,104 $─   $(2,104)
    Total nonperforming loans─   ─    2,104 ─    (2,104)
              
    OREO─    454  454  (454)  (454)
              
    Total nonperforming assets (1)$ ─   $454 $2,558 $(454) $(2,558)
              
    Nonperforming assets as a percent         
    of total assets0.00%  0.03%  0.19%    

    (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 September 30, 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 September 30, 2021, TDRs totaled $2.4 million, compared to $3.6 million at June 30, 2021, and $4.1 million at September 30, 2020. During the quarter ended September 30, 2021, a $1.2 million TDR secured by commercial real estate in King County was refinanced at market rate and terms and, therefore, is no longer classified as a TDR. 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 $11.4 million for the quarter ended September 30, 2021, compared to $11.3 million for the quarter ended June 30, 2021, and $10.1 million for the quarter ended September 30, 2020. The improvement was primarily due to lower deposit-related interest expense and relatively stable interest income with the growth in the combined average balance of loans receivable and investment securities in the quarter offsetting lower average yields.

    Total interest income was $13.4 million for the quarter ended September 30, 2021, compared to $13.6 million for the quarter ended June 30, 2021, and $13.7 million for the quarter ended September 30, 2020. The decrease in the current quarter compared to the quarter ended June 30, 2021, was primarily attributable to the receipt of $394,000 in interest and late charges from the payoff of a $2.0 million nonperforming loan in the prior quarter, with no similar transaction in the current quarter. The decrease from the quarter ended September 30, 2020, is primarily due to the decline in average balance of loans receivable between periods.

    Total interest expense was $2.0 million for the quarter ended September 30, 2021, compared to $2.3 million for the quarter ended June 30, 2021, and $3.6 million for the quarter ended September 30, 2020. The average cost of interest-bearing deposits declined to 0.63% for the quarter ended September 30, 2021, from 0.75% for the quarter ended June 30, 2021, and 1.27% for the quarter ended September 30, 2020. The decline from the quarter ended June 30, 2021, was due primarily to the repricing of maturing certificates of deposits to a lower interest rate and a reduction in the average balance of higher cost certificates of deposit. Advances from the FHLB remained unchanged at $120.0 million at September 30, 2021, June 30, 2021, and September 30, 2020. 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. The average cost of borrowings was 1.42% for the quarter ended September 30, 2021, compared to 1.37% for the quarter ended June 30, 2021, and 1.28% for the quarter ended September 30, 2020. The Bank has entered into two forward starting interest rate swaps beginning October 25, 2021, totaling $25.0 million with a weighted average rate of 0.80% and weighted term of 7.4 years to partially replace a $50.0 million interest rate swap carrying an interest rate of 1.34% maturing on that date.

    The net interest margin was 3.33% for the quarter ended September 30, 2021, compared to 3.36% for the quarter ended June 30, 2021, and 3.07% for the quarter ended September 30, 2020. The reduction in the net interest margin during the quarter is due to a number of factors, including a 13 basis point reduction in the average yield on interest-earning assets to 3.93% from 4.06% for the quarter ended June 30, 2021, partially offset by an 11 basis point reduction in the Company’s average cost of interest-bearing liabilities during the quarter to 0.71% from 0.82% for the quarter ended June 30, 2021. The recognition of $394,000 in fees and late charges from the payoff of a $2.0 million nonperforming loan increased the interest income and the yield on interest earning assets for the quarter ended June 30, 2021. The increase in net interest margin for the quarter ended September 30, 2021, compared to quarter ended September 30, 2020, was due primarily to the 56 basis point reduction in the average cost of interest-bearing liabilities from 1.27% for the year ago quarter, partially offset by a 23 basis point reduction in the average yield on interest-earning assets from 4.16% in the quarter ended September 30, 2020. Asset yields continue to be impacted by the net deferred fee recognition on PPP loans, primarily the recognition of previously unamortized deferred fees and costs on forgiven PPP loans, which totaled $354,000 in the quarter ended September 30, 2021, and $512,000 in the quarter ended June 30, 2021. At September 30, 2021, the balance of net deferred fees relating to PPP loans to be recognized in future periods totaled $719,000.

    Noninterest income for the quarter ended September 30, 2021, totaled $999,000, compared to $973,000 for the quarter ended June 30, 2021, and $1.0 million for the quarter ended September 30, 2020. The increase in noninterest income for the quarter ended September 30, 2021, compared to the quarter ended June 30, 2021, was primarily due to higher BOLI income that included $161,000 in death benefit proceeds, partially offset by lower wealth management revenue.

    Noninterest expense totaled $8.3 million for the quarter ended September 30, 2021, compared to $8.2 million for the quarter ended June 30, 2021, and $7.9 million for the quarter ended September 30, 2020. The increase in the quarter ended September 30, 2021, compared to the quarter ended June 30, 2021, was primarily due to the $207,000 loss on sale of OREO discussed above which, along with higher professional fees and other general administrative, more than offset the lower salaries and employee benefits and occupancy and equipment expense in the quarter.

    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 and participating in the PPP as an SBA lender. The Bank continues to work with its loan customers and manage its portfolio through the ongoing uncertainty surrounding the impact, duration and government response to the crisis.

    Paycheck Protection Program
    The SBA provided 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 final round of PPP loan applications was May 31, 2021. As of September 30, 2021, there were 198 PPP loans outstanding totaling $22.4 million, compared to 275 PPP loans totaling $30.8 million outstanding as of June 30, 2021, 324 PPP loans outstanding totaling $45.2 million as of March 31, 2021, and 372 PPP loans totaling $41.3 million as of December 31, 2020. As of September 30, 2021, 149 PPP loans have an outstanding balance of $150,000 or less, totaling $7.3 million, or 32.7% of total PPP loans outstanding, including 93 loans representing $2.0 million with an outstanding balance of $50,000 or less. As of September 30, 2021, 531 PPP loans totaling $55.1 million were approved for forgiveness and repaid under the PPP loan program.

    Modifications
    The primary method of relief is to allow borrowers to defer their loan payments for three to six months, while certain borrowers are allowed to pay interest only or were granted 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 September 30, 2021:

     As of September 30, 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$             - $                - $                - $          382,676 - 
    Multifamily -                   -                      -                143,806 - 
              
    Commercial real estate:         
    Office                  -                   7,153                      7,153                  89,622 8.0%
    Retail -            -            -             124,439 - 
    Mobile home park -  -  -               20,838 - 
    Hotel/motel -                 6,614                 6,614               65,210 10.1 
    Nursing home -                   6,368                   6,368               12,784 49.8 
    Warehouse -  -  -               16,999 - 
    Storage -  -  -               33,163 - 
    Other non-residential -  -  -               29,301 - 
    Total commercial real estate       -                    20,135                 20,135             392,356 5.1 
              
    Construction/land -  -  -              101,288 - 
              
    Business:         
    Aircraft -  -  -                 6,322 - 
    SBA -  -  -                    862 - 
    PPP -  -  -               22,379 - 
    Other business -  -  -               25,185 - 
    Total business -  -  -               54,748 - 
              
    Consumer:         
    Classic/collectible auto -                    -                    -                32,803 - 
    Other consumer -  -  -                9,681 - 
    Total consumer -                          -                             -                   42,484 - 
              
    Total loans with COVID-19 pandemic modifications$- $20,135 $20,135 $1,117,358 1.8%

    Total loans with modifications granted declined to $20.1 million, or 1.8% of total outstanding at September 30, 2021, from $35.2 million, or 3.2% of total loans outstanding at June 30, 2021, and $65.5 million, or 5.7% of total loans outstanding at September 30, 2020. The decline in the current quarter is due to additional customers returning to regular scheduled payments and continued improvement in economic conditions in our market areas. As of September 30, 2021, all of the remaining modified loans had been granted modifications of greater than six months.

    Additional Loan Portfolio Details
    The Bank is monitoring its loan portfolio for potentially delinquent loans that have not requested a loan modification in accordance with the CARES Act or regulatory guidance. The following table presents the loan to value (“LTV”) ratios of select segments of its loan portfolio at September 30, 2021, that may be more likely to 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 September 30, 2021
     LTV 0-60% LTV 61-75% LTV 76%+ Total Average LTV
    Category: (1)(Dollars in thousands)
    One-to-four family$         266,058 $            135,700 $              17,131 $            418,889 49.25%
    Church 1,340  -  -  1,340 45.22 
    Classic/collectible auto 7,061  13,022  12,720  32,803 95.65 
    Gas station 3,439  -  495  3,934 49.96 
    Hotel/motel 53,831  11,379  -  65,210 59.18 
    Marina 7,740  -  -  7,740 37.63 
    Mobile home park 18,638  2,200  -  20,838 38.56 
    Nursing home 12,784  -  -  12,784 24.54 
    Office 44,528  44,976  4,218  93,722 40.56 
    Other non-residential 14,066  2,221  -  16,287 46.60 
    Retail 84,436  40,003  -  124,439 50.03 
    Storage 24,218  11,034  -  35,252 43.58 
    Warehouse 16,758  241  -  16,999 34.35 

    (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)

    Assets Sep 30,
    2021    		  Jun 30,
    2021    		  Sep 30,
    2020    		 Three
    Month
    Change    		 One
    Year
    Change
    Cash on hand and in banks$7,243  $7,518  $7,440  (3.7)% (2.6)%
    Interest-earning deposits with banks 71,869   72,045   18,674  (0.2) 284.9 
    Investments available-for-sale, at fair value 178,061   187,873   126,020  (5.2) 41.3 
    Annuity held-to-maturity 2,425   2,419   2,406  0.2  0.8 
    Loans receivable, net of allowance of $15,057,
    $14,878, and $14,568 respectively    		 1,101,669   1,081,640   1,133,984  1.9  (2.8)
    Federal Home Loan Bank ("FHLB") stock, at cost 6,465   6,465   6,410  0.0  0.9 
    Accrued interest receivable 5,681   5,498   5,676  3.3  0.1 
    Deferred tax assets, net 746   688   1,879  8.4  (60.3)
    Other real estate owned ("OREO") -   454   454  (100.0) (100.0)
    Premises and equipment, net 22,628   22,567   22,409  0.3  1.0 
    Bank owned life insurance ("BOLI"), net 34,994   35,536   32,830  (1.5) 6.6 
    Prepaid expenses and other assets 2,975   2,332   1,704  27.6  74.6 
    Right of use asset ("ROU"), net 3,838   4,025   3,834  (4.6) 0.1 
    Goodwill 889   889   889  0.0  0.0 
    Core deposit intangible, net 719  $754   860  (4.6) (16.4)
    Total assets$1,440,202  $1,430,703  $1,365,469  0.7% 5.5%
              
    Liabilities and Stockholders' Equity         
              
    Deposits         
    Noninterest-bearing deposits$115,311  $111,240  $82,376  3.7% 40.0%
    Interest-bearing deposits 1,026,425   1,023,062   987,306  0.3  4.0 
    Total deposits 1,141,736   1,134,302   1,069,682  0.7  6.7 
    Advances from the FHLB 120,000   120,000   120,000  0.0  0.0 
    Advance payments from borrowers for taxes and
    insurance    		 5,075   2,616   4,742  94.0  7.0 
    Lease liability, net 3,994   4,176   3,942  (4.4) 1.3 
    Accrued interest payable 206   193   197  6.7  4.6 
    Other liabilities 7,735   7,795   12,128  (0.8) (36.2)
    Total liabilities 1,278,746   1,269,082   1,210,691  0.8  5.6 
              
    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
    9,483,081 shares at September 30, 2021,
    9,651,180 shares at June 30, 2021, and
    9,911,607 shares at September 30, 2020    		 95   97   99  (2.1) (4.0)
    Additional paid-in capital 78,311   80,770   83,839  (3.0) (6.6)
    Retained earnings 84,402   82,224   76,300  2.6  10.6 
    Accumulated other comprehensive loss, net of tax (223)  (59)  (3,203) 278.0  (93.0)
    Unearned Employee Stock Ownership Plan
    ("ESOP") shares    		 (1,129)  (1,411)  (2,257) (20.0) (50.0)
    Total stockholders' equity 161,456   161,621   154,778  (0.1) 4.3 
    Total liabilities and stockholders' equity$1,440,202  $1,430,703  $1,365,469  0.7% 5.5%


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

     Quarter Ended    
      Sep 30,
    2021     		 Jun 30,
    2021    		  Sep 30,
    2020     		  Three
    Month
    Change     		  One
    Year
    Change
    Interest income         
    Loans, including fees$12,508 $12,641  $12,847 (1.1)% (2.6)%
    Investments available-for-sale 814  850   751 (4.2) 8.4 
    Investments held-to-maturity 4  4   6 0.0  (33.3)
    Interest-earning deposits with banks                      24  16   8 50.0  200.0 
    Dividends on FHLB Stock 84  83   82 1.2  2.4 
    Total interest income 13,434  13,594   13,694 (1.2) (1.9)
    Interest expense         
    Deposits 1,612  1,915   3,206 (15.8) (49.7)
    Other borrowings 431  413   400 4.4  7.8 
    Total interest expense 2,043  2,328   3,606 (12.2) (43.3)
    Net interest income 11,391  11,266   10,088 1.1  12.9 
    Provision (recapture of provision) for
    loan losses    		 100  (700)  700 (114.3) (85.7)
    Net interest income after provision
    (recapture of provision) for loan losses    		 11,291  11,966   9,388 (5.6) 20.3 
              
    Noninterest income         
    Net gain on sale of investments -  -   18 n/a  (100.0)
    BOLI income 377  246   269 53.3  40.1 
    Wealth management revenue 64  167   145 (61.7) (55.9)
    Deposit related fees 228  227   201 0.4  13.4 
    Loan related fees 300  281   376 6.8  (20.2)
    Other                      30  52   2 (42.3) 1,400.0 
    Total noninterest income 999  973   1,011 2.7  (1.2)
              
    Noninterest expense         
    Salaries and employee benefits 4,856  5,062   4,880 (4.1) (0.5)
    Occupancy and equipment 1,116  1,187   987 (6.0) 13.1 
    Professional fees 502  389   371 29.0  35.3 
    Data processing 626  680   731 (7.9) (14.4)
    OREO related expenses, net 207  -   1 n/a  20,600.0 
    Regulatory assessments 121  113   134 7.1  (9.7)
    Insurance and bond premiums 106  111   116 (4.5) (8.6)
    Marketing 64  23   41 178.3  56.1 
    Other general and administrative 735  625   606 17.6  21.3 
    Total noninterest expense 8,333  8,190   7,867 1.7  5.9 
    Income before federal income tax
    provision    		 3,957  4,749   2,532 (16.7) 56.3 
    Federal income tax provision 758  939   450 (19.3) 68.4 
    Net income$3,199 $3,810  $2,082 (16.0)% 53.7%
              
    Basic earnings per share$0.34 $0.40  $0.22    
    Diluted earnings per share$0.34 $0.40  $0.21    
    Weighted average number of common
    shares outstanding    		 9,314,456  9,434,004   9,661,498    
    Weighted average number of diluted
    shares outstanding    		 9,446,702  9,528,623   9,675,567    


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

     Nine Months Ended
    September 30,    		  
      2021   2020  One
    Year
    Change
    Interest income     
    Loans, including fees$37,772  $39,504 (4.4)%
    Investments available-for-sale 2,400   2,466 (2.7)
    Investments held-to-maturity 20   17 17.6 
    Interest-earning deposits with banks                53   45 17.8 
    Dividends on FHLB Stock 247   240 2.9 
    Total interest income 40,492   42,272 (4.2)
    Interest expense     
    Deposits 5,826   11,238 (48.2)
    Other borrowings 1,263   1,214 4.0 
    Total interest expense 7,089   12,452 (43.1)
    Net interest income 33,403   29,820 12.0 
    (Recapture of provision) provision for loan losses (300)  1,300 (123.1)
    Net interest income after (recapture of provision) provision for loan losses 33,703   28,520 18.2 
          
    Noninterest income     
    Net gain on sale of investments -   86 (100.0)
    BOLI income 891   778 14.5 
    Wealth management revenue 391   493 (20.7)
    Deposit related fees 654   560 16.8 
    Loan related fees 714   865 (17.5)
    Other                86   7 1,128.6 
    Total noninterest income 2,736   2,789 (1.9)
          
    Noninterest expense     
    Salaries and employee benefits 14,863   14,893 (0.2)
    Occupancy and equipment 3,403   3,090 10.1 
    Professional fees 1,423   1,257 13.2 
    Data processing 2,003   2,112 (5.2)
    OREO related expenses, net 208   7 2,871.4 
    Regulatory assessments 356   405 (12.1)
    Insurance and bond premiums 341   339 0.6 
    Marketing 116   133 (12.8)
    Other general and administrative 1,938   1,843 5.2 
    Total noninterest expense 24,651   24,079 2.4 
    Income before federal income tax provision 11,788   7,230 63.0 
    Federal income tax provision 2,281   1,320 72.8 
    Net income$9,507  $5,910 60.9%
          
    Basic earnings per share$1.01  $0.60  
    Diluted earnings per share$0.99  $0.60  
    Weighted average number of common shares outstanding 9,412,196   9,788,397  
    Weighted average number of diluted shares outstanding 9,514,165   9,811,602  


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

     September 30, 2021June 30, 2021September 30, 2020
     Amount Percent Amount Percent Amount Percent
     (Dollars in thousands)
    Commercial real estate:           
    Residential:           
    Micro-unit apartments$8,220  0.7% $11,652  1.1% $11,422  1.0%
    Other multifamily 135,586  12.2%  131,229  11.9%  131,197  11.4%
    Total multifamily residential 143,806  12.9%  142,881  13.0%  142,619  12.4%
                
    Non-residential:           
    Office 89,622  8.0%  83,120  7.6%  81,566  7.1%
    Retail 124,439  11.1%  103,175  9.4%  121,338  10.6%
    Mobile home park 20,838  1.9%  26,894  2.4%  25,510  2.2%
    Hotel / motel 65,210  5.8%  65,446  6.0%  69,157  6.0%
    Nursing Home 12,784  1.1%  12,818  1.2%  12,868  1.1%
    Warehouse 16,999  1.5%  17,217  1.6%  17,512  1.5%
    Storage 33,163  3.0%  33,332  3.0%  36,093  3.1%
    Other non-residential 29,301  2.6%  28,704  2.5%  25,724  2.3%
    Total non-residential 392,356  35.0%  370,706  33.7%  389,768  33.9%
                
    Construction/land:           
    One-to-four family residential 36,213  3.2%  36,123  3.3%  45,231  4.0%
    Multifamily 47,549  4.3%  56,090  5.1%  47,547  4.1%
    Commercial 6,189  0.6%  6,056  0.6%  5,475  0.5%
    Land development 11,337  1.0%  6,653  0.6%  1,345  0.1%
    Total construction/land 101,288  9.1%  104,922  9.6%  99,598  8.7%
                
    One-to-four family residential:           
    Permanent owner occupied 184,990  16.6%  191,906  17.5%  214,250  18.6%
    Permanent non-owner occupied 197,686  17.7%  179,029  16.3%  177,621  15.4%
    Total one-to-four family residential 382,676  34.3%  370,935  33.8%  391,871  34.0%
                
    Business:           
    Aircraft 6,322  0.6%  9,315  0.8%  11,735  1.0%
    Small Business Administration ("SBA") 862  0.1%  884  0.1%  819  0.1%
    Paycheck Protection Plan ("PPP") 22,379  2.0%  30,823  2.8%  52,045  4.5%
    Other business 25,185  2.2%  26,409  2.4%  21,181  1.8%
    Total business 54,748  4.9%  67,431  6.1%  85,780  7.4%
                
    Consumer:           
    Classic, collectible and other auto 32,819  2.9%  30,593  2.8%  27,784  2.4%
    Other consumer 9,665  0.9%  10,752  1.0%  13,061  1.2%
    Total consumer 42,484  3.8%  41,345  3.8%  40,845  3.6%
                
    Total loans 1,117,358  100.0%  1,098,220  100.0%  1,150,481  100.0%
    Less:           
    Deferred loan fees, net 632     1,702     1,929     
    ALLL 15,057     14,878     14,568   
    Loans receivable, net$1,101,669    $1,081,640    $1,133,984   
                
    Concentrations of credit: (1)           
    Construction loans as % of total capital 67.1%    69.3%    68.4%  
    Total non-owner occupied commercial
      real estate as % of total capital    		 389.6%    384.4%    407.1%  

    (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
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
      2021   2021   2021   2020   2020 
     (Dollars in thousands, except per share data)
    Performance Ratios: (1)         
    Return on assets 0.88%  1.07%  0.73%  0.77%  0.60%
    Return on equity 7.84   9.54   6.42   6.76   5.34 
    Dividend payout ratio 32.35   27.50   42.31   35.71   45.45 
    Equity-to-total assets 11.21   11.30   11.08   11.26   11.34 
    Tangible equity-to-tangible assets (2) 11.11   11.19   10.97   11.15   11.22 
    Net interest margin 3.33   3.36   3.31   3.29   3.07 
    Average interest-earning assets to average interest-bearing liabilities 119.35   117.99   117.92   116.42   116.08 
    Efficiency ratio 67.26   66.92   70.63   68.55   70.88 
    Noninterest expense as a percent of average total assets 2.30   2.31   2.36   2.46   2.26 
    Book value per common share$17.03  $16.75  $16.35  $16.05  $15.62 
    Tangible book value per share (2) 16.86   16.58   16.17   15.88   15.44 
              
    Capital Ratios: (3)         
    Tier 1 leverage ratio 10.19%  10.15%  10.15%  10.29%  10.03%
    Common equity tier 1 capital ratio 14.25   14.45   14.36   14.32   14.01 
    Tier 1 capital ratio 14.25   14.45   14.36   14.32   14.01 
    Total capital ratio 15.50   15.70   15.62   15.57   15.26 
              
    Asset Quality Ratios:         
    Nonperforming loans as a percent of total loans 0.00   0.00   0.18   0.19   0.18 
    Nonperforming assets as a percent of total assets 0.00   0.03   0.17   0.18   0.19 
    ALLL as a percent of total loans 1.35   1.35   1.39   1.36   1.27 
    Net (recoveries) charge-offs to average loans receivable, net (0.01)  (0.01)  (0.00)  (0.00)  (0.00)
              
    Allowance for Loan Losses:         
    ALLL, beginning of the quarter$14,878  $15,502  $15,174  $14,568  $13,836 
    Provision             100   (700)  300   600   700 
    Charge-offs -   -   -   (2)  - 
    Recoveries 79   76   28   8   32 
    ALLL, end of the quarter$15,057  $14,878  $15,502  $15,174  $14,568 

    (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
     Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
      2021   2021   2021   2020   2020 
     (Dollars in thousands, except per share data)
    Yields and Costs: (1)         
    Yield on loans 4.54%  4.64%  4.66%  4.61%  4.49%
    Yield on investments available-for-sale 1.75   1.92   1.91   2.21   2.32 
    Yield on investments held-to-maturity 0.66   0.66   2.18   0.99   0.99 
    Yield on interest-earning deposits 0.14   0.10   0.09   0.11   0.10 
    Yield on FHLB stock 5.15   5.13   5.00   4.99   4.95 
    Yield on interest-earning assets 3.93%  4.06%  4.15%  4.26%  4.16%
              
    Cost of interest-bearing deposits 0.63%  0.75%  0.94%  1.12%  1.27%
    Cost of borrowings 1.42   1.37   1.41   1.40   1.28 
    Cost of interest-bearing liabilities 0.71%  0.82%  0.99%  1.15%  1.27%
              
    Cost of total deposits 0.56%  0.68%  0.85%  1.03%  1.18%
    Cost of funds 0.64   0.75   0.91   1.07   1.19 
              
    Average Balances:         
    Loans$1,094,124  $1,092,710  $1,099,364  $1,126,554  $1,137,742 
    Investments available-for-sale 184,840   177,713   155,795   127,456   128,885 
    Investments held-to-maturity 2,421   2,415   2,413   2,410   2,399 
    Interest-earning deposits 68,618   64,035   52,336   26,092   32,701 
    FHLB stock 6,465   6,485   6,412   6,459   6,592 
    Total interest-earning assets$1,356,468  $1,343,358  $1,316,320  $1,288,971  $1,308,319 
              
    Interest-bearing deposits$1,016,540  $1,018,083  $996,295  $985,945  $1,002,518 
    Borrowings 120,000   120,494   120,000   121,218   124,543 
    Total interest-bearing liabilities 1,136,540   1,138,577   1,116,295   1,107,163   1,127,061 
    Noninterest-bearing deposits 121,256   110,207   99,013   83,719   81,694 
    Total deposits and borrowings$1,257,796  $1,248,784  $1,215,308  $1,190,882  $1,208,755 
              
    Average assets$1,436,801  $1,424,126  $1,394,213  $1,366,061  $1,383,736 
    Average stockholders' equity 161,892   160,189   157,856   155,765   154,988 

    (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
     Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020
     (Dollars in thousands, except per share data)

    Tangible equity to tangible assets and tangible book value per share:

    Total stockholders' equity (GAAP)$161,456  $161,621  $158,443  $156,302  $154,778 
    Less:         
    Goodwill 889   889   889   889   889 
    Core deposit intangible, net 719   754   789   824   860 
    Tangible equity (Non-GAAP)$159,848  $159,978  $156,765  $154,589  $153,029 
              
    Total assets (GAAP)$1,440,202  $1,430,703  $1,430,226  $1,387,669  $1,365,469 
    Less:         
    Goodwill 889   889   889   889   889 
    Core deposit intangible, net 719   754   789   824   860 
    Tangible assets (Non-GAAP)$1,438,594  $1,429,060  $1,428,548  $1,385,956  $1,363,720 
              
    Common shares outstanding at period end 9,483,081   9,651,180   9,692,610   9,736,875   9,911,607 
              
    Equity-to-total assets (GAAP) 11.21%  11.30%  11.08%  11.26%  11.34%
    Tangible equity-to-tangible assets (Non-GAAP) 11.11   11.19   10.97   11.15   11.22 
    Book value per share (GAAP)$17.03  $16.75  $16.35  $16.05  $15.62 
    Tangible book value per share (Non-GAAP) 16.86   16.58   16.17   15.88   15.44 

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

    Allowance for loan losses$15,057  $14,878  $15,502  $15,174  $14,568 
              
    Total loans (GAAP)$1,117,358  $1,098,220  $1,116,391  $1,117,410  $1,150,481 
    Less:         
    PPP loans 22,379   30,823   45,220   41,251   52,045 
    Total loans excluding PPP loans (Non-GAAP)$1,094,979  $1,067,397  $1,071,171  $1,076,159  $1,098,436 
              
    ALLL as a percent of total loans (GAAP) 1.35%  1.35%  1.39%  1.36%  1.27%
    ALLL as a percent of total loans excluding
      PPP loans (Non-GAAP)    		 1.38   1.39   1.45   1.41   1.33 


    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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