First Financial Northwest 8K Results of Operations and Financial Condition | FFNW 29 Jan 16

Exhibit 99.1

**For Immediate Release**

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

First Financial Northwest, Inc.

Reports Fourth Quarter Net Income of $2.1 Million or $0.16 Per Diluted Share and

$9.2 Million or $0.67 Per Diluted Share for the Year Ended December 31, 2015

Renton, Washington – January 28, 2016 - 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 December 31, 2015, of $2.1 million, or $0.16 per diluted share, compared to net income of $2.4 million, or $0.18 per diluted share, for the quarter ended September 30, 2015, and $2.9 million, or $0.20 per diluted share, for the fourth quarter in 2014. For the year ended December 31, 2015, net income was $9.2 million or $0.67 per diluted share, compared to $10.7 million or $0.71 per diluted share for the year ended December 31, 2014.

A recapture of the provision for loan losses continued to contribute significantly to net income. Specifically, the Company recognized a $900,000 recapture of provision for loan losses in the quarter ended December 31, 2015, compared to a recapture of $700,000 in the quarter ended September 30, 2015, and a recapture of $1.2 million in the quarter ended December 31, 2014. For the year ended December 31, 2015, the recapture of the provision for loan losses totaled $2.2 million compared to $2.1 million in the prior year. These recaptures were due primarily to the continued credit quality improvement of the Company’s loan portfolio and recoveries of amounts previously charged-off received during the past two years.

“The improvement in the credit quality of the Company’s loan portfolio continued in 2015, with nonperforming assets as a percentage of total assets declining to 0.48% at December 31, 2015, from 1.13% one year earlier and nonperforming loans as a percentage of total loans, net of undisbursed funds, declining to 0.16% at December 31, 2015, from 0.20% at December 31, 2014. With these improvements, the Company’s Allowance for Loan and Lease Losses as a percent of total loans, net of undisbursed funds, declined to 1.36% at December 31, 2015, from 1.55% at December 31, 2014,” stated Joseph W. Kiley III, President and Chief Executive Officer.

“In addition to these credit quality improvements, we were able to grow the balance sheet in 2015, with net loans receivable increasing to $685.1 million at December 31, 2015, compared to $663.9 million at December 31, 2014. On the liability side of the balance sheet, interest bearing deposits increased to $646.0 million and noninterest bearing deposits increased 105% to $29.4 million at December 31, 2015, compared to $599.8 million and $14.4 million, respectively, at December 31, 2014,” continued Kiley.

“We previously reported additional significant accomplishments in 2015, including our conversion to an improved core data processor, changing the Bank’s name to First Financial Northwest Bank and the opening of our first branch office in Mill Creek, Washington. I am pleased to report that the Mill Creek office finished 2015 with $6.3 million in core deposits in its first four

months of operation, thanks to the efforts of our team of experienced bankers in that market. In the first quarter of 2016, we intend to continue this strategy with our plan to open an additional office in Edmonds, Washington. This new branch office will utilize the same strategy we used in our Mill Creek, Washington location, utilizing an efficient design, improved technology, and a team of experienced bankers in our effort to increase core deposits and leverage our expertise while managing expenses appropriately as we expand,” concluded Kiley.

Highlights for the quarter ended December 31, 2015:

·	We repurchased 364,054 shares of our common stock during the quarter under the share repurchase plan approved by the Board in October 2015, at an average price of $12.61 per share. The share repurchase plan authorized the repurchase of 1.4 million shares through April 27, 2016.

·	The Company’s book value per share at December 31, 2015, increased to $12.40 from $12.32 at September 30, 2015, and $11.96 at December 31, 2014.

The Bank’s Tier 1 leverage and total risk-based capital ratios at December 31, 2015, were 11.6% and 17.6%, respectively, compared to 11.7% and 17.8% at September 30, 2015, and 11.8% and 19.6% at December 31, 2014. The year over year decline was primarily related to asset growth during the year ended December 31, 2015.

Based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”), there was a $900,000 recapture of provision for loan losses for the quarter ended December 31, 2015. The following items contributed to this recapture during the quarter:

·	The Company received recoveries of amounts previously charged off totaling $217,000. These recoveries, combined with no charge-offs during the quarter, contributed to its ALLL balances.

·	Delinquent loans (loans over 30 days past due) decreased to $1.3 million at December 31, 2015, compared to $3.5 million at September 30, 2015, and $4.4 million at December 31, 2014.

·	Nonperforming loans decreased to $1.1 million at December 31, 2015, compared to $2.4 million at September 30, 2015, and $1.3 million at December 31, 2014.

·	Nonperforming loans as a percentage of total loans remained low at 0.16% at December 31, 2015, compared to 0.35% at September 30, 2015, and 0.20 % at December 31, 2014.

The ALLL represented 872% of nonperforming loans and 1.36% of total loans receivable, net of undisbursed funds, at December 31, 2015, compared to 418% and 1.48%, respectively, at September 30, 2015, and 784% and 1.55%, respectively, at December 31, 2014.

Nonperforming assets totaled $4.7 million at December 31, 2015, compared to $6.7 million at September 30, 2015, and $10.6 million at December 31, 2014. The decline in the Company’s nonperforming assets during these periods was primarily due to sales of Other Real Estate Owned (“OREO”) along with payoffs of nonperforming loans received during the year.

The following table presents a breakdown of our nonperforming assets:

	Dec 31,			Sep 30,			Dec 31,			Three Month			One Year
	2015			2015			2014			Change			Change
	(Dollars in thousands)
Nonperforming loans:
One-to-four family residential	$	996		$	655		$	830		$	341		$	166
Multifamily		-			1,683			-			(1,683	)		-
Commercial real estate		-			-			434			-			(434	)
Consumer		89			91			75			(2	)		14
Total nonperforming loans		1,085			2,429			1,339			(1,344	)		(254	)

OREO		3,663			4,235			9,283			(572	)		(5,620	)
							��
Total nonperforming assets (1)	$	4,748		$	6,664		$	10,622		$	(1,916	)	$	(5,874	)

Nonperforming assets as a
percent of total assets		0.48	%		0.68	%		1.13	%

(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 99.7% of our TDRs were performing in accordance with their restructured terms at December 31, 2015. The remaining 0.3% of TDRs that were nonperforming at December 31, 2015, are reported above as nonperforming loans. For the quarters ended September 30, 2015 and December 31, 2014, all of our TDRs were performing in accordance with their restructured terms.

The following table presents a breakdown of our OREO by county and property type at December 31, 2015:

	County						Total		Number of		Percent of
	Pierce		Kitsap		All Other		OREO		Properties		Total OREO
					(Dollars in thousands)
OREO:
Commercial real estate (1)	$	2,048	$	755	$	687	$	3,490		6		95.3	%
Construction/land development		173		-		-		173		1		4.7

Total OREO	$	2,221	$	755	$	687	$	3,663		7		100.0	%

(1) Of the six properties classified as commercial real estate, three are office/retail buildings, and three are undeveloped lots.

OREO decreased to $3.7 million at December 31, 2015, compared to $4.2 million at September 30, 2015, and $9.3 million at December 31, 2014, as sales and write-downs of OREO exceeded transfers of properties into OREO during the quarter and the preceding 12 months. We continue to actively market our OREO properties in an effort to minimize holding costs.

In circumstances where a customer is experiencing significant financial difficulties, the Bank may elect to restructure the loan so the customer can continue to make payments while minimizing the potential loss to the Bank. Such restructures must often be classified as TDRs.

The following table presents a breakdown of our TDRs:

	Dec 31, 2015			Sep 30, 2015			Dec 31, 2014			Three Month Change			One Year Change
	(Dollars in thousands)
Nonperforming TDRs:
One-to-four family residential	$	131		$	-		$	-		$	131		$	131

Total nonperforming TDRs	$	131		$	-		$	-		$	131		$	131

Performing TDRs:
One-to-four family residential	$	35,099		$	37,221		$	42,908		$	(2,122	)	$	(7,809	)
Multifamily		1,594			1,602			2,172			(8	)		(578	)
Commercial real estate		5,392			7,740			9,118			(2,348	)		(3,726	)
Consumer		43			43			43			-			-

Total performing TDRs		42,128			46,606			54,241			(4,478	)		(12,113	)

Total TDRs	$	42,259		$	46,606		$	54,241		$	(4,347	)	$	(11,982	)

% TDRs classified as performing		99.7	%		100.0	%		100.0	%

Net interest income remained relatively unchanged at $7.7 million for both the fourth and third quarters of 2015, compared to $8.0 million in the fourth quarter of 2014. Net interest income for the year ended December 31, 2015, was $30.4 million compared to $32.4 million in 2014. These decreases were largely due to a decline in the yield on our loan portfolio as loans originated in this low-interest rate environment were at rates lower than the rates on loans being repaid; excess liquidity in the form of low yielding interest-earning deposits; and increased interest expenses due to an increase in interest-bearing deposits and higher interest costs associated with acquiring longer term brokered deposits as part of our interest rate risk management efforts.

Interest income totaled $9.5 million during the quarter ended December 31, 2015, compared to $9.4 million in the quarter ended September 30, 2015, and $9.6 million in the quarter ended December 31, 2014. The increase in the quarter ended December 31, 2015, compared to the quarter ended September 30, 2015, related to growth in average balances in loans outstanding, including continued growth in construction lending, and an increase in balances in the Bank’s investment securities portfolio. For the year ended December 31, 2015, interest income totaled $37.2 million compared to $38.7 million in 2014. This decline was due in large part to repayments received on higher yielding loans throughout 2015, resulting in a decline in the Company’s average balances of loans receivable and a decline in our loan portfolio yield compared to the prior year.

Interest expense increased to $1.8 million for the quarter ended December 31, 2015, compared to $1.7 million for the quarter ended September 30, 2015, and $1.6 million for the quarter ended December 31, 2014. These quarterly increases are primarily the result of increasing levels of average interest bearing liabilities outstanding each quarter, compared to the prior quarters. Interest expense for the year ended December 31, 2015, totaled $6.8 million, compared to $6.2 million in 2014. Brokered deposits averaged $64.9 million during 2015, versus $15.9 million during 2014. This higher level of brokered deposits contributed to the increase interest expense in each quarter of 2015. These brokered deposits were obtained with maturities ranging from three to six years in an effort

to help mitigate the Bank’s interest rate risk in a rising rate environment. This interest rate risk protection comes at a cost to current earnings as the rates paid on these longer term deposits are higher than shorter term deposit rates.

Our net interest margin was 3.33% for the quarter ended December 31, 2015, compared to 3.38% for the quarter ended September 30, 2015, and 3.61% for the quarter ended December 31, 2014. For the year ended December 31, 2015, net interest margin was 3.38% compared to 3.77% in 2014. These declines, as discussed above, were due in large part to repayments received on higher yielding loans, the acquisition of higher cost brokered deposits, and the low yields received from the large amount of interest earning deposits we hold. Repayments on loans were higher than anticipated during the year ended December 31, 2015, resulting in a relatively high balance of interest earning deposits throughout the year.

Noninterest income for the quarter ended December 31, 2015, totaled $384,000, compared to $447,000 in the quarter ended September 30, 2015, and $156,000 in the quarter ended December 31, 2014. The decline in the quarter ended December 31, 2015, compared to the quarter ended September 30, 2015, related to higher levels of net gains on sales of investments and increased income on legacy Bank Owned Life Insurance (“BOLI”) policies in the previous quarter. These declines were partially offset by an increase in other noninterest income, including an increase in income from our wealth management services to $119,000 in the quarter ended December 31, 2015, compared to $42,000 in the quarter ended September 30, 2015. For the year ended December 31, 2015, noninterest income totaled $1.3 million, compared to $498,000 in 2014. The primary contributor to the increase in noninterest income in the year ended December 31, 2015, compared to the year ended December 31, 2014, was the increased income relating to the purchase of $20.0 million in BOLI in April 2015, along with the introduction of the wealth management services during the second quarter of 2015.

Noninterest expense for the quarter ended December 31, 2015, decreased to $5.3 million from $5.4 million in the quarter ended September 30, 2015, compared to $4.8 million during the quarter ended December 31, 2014. Increases in salaries and employee benefits, occupancy expenses related to the Bank’s growth strategy, the opening of a new branch office in Mill Creek, Washington, and expenses related to the conversion to an improved core data processor, were largely offset by decreases in most other noninterest expenses, including other general and administrative expenses due to a reduction in the reserve for unfunded commitments during the fourth quarter. For the year ended December 31, 2015, noninterest expense totaled $19.9 million, compared to $18.5 million in the prior year. Significant contributing factors to the increased expenses during the year included costs relating to the core data processor conversion, the opening of the Mill Creek, Washington branch office, name change related expenses, and increased compensation expense relating to the growth of the Company. These increased expenses were partially offset by net gains relating to OREO totaling $484,000, compared to net expenses relating to OREO of $669,000 for the prior year.

First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; a Washington State chartered stock savings bank headquartered in Renton, Washington, serving the Puget Sound Region through its two full-service banking offices. During the third quarter of 2015, the Bank changed its name from First Savings Bank Northwest in an effort to communicate that it is more than just a ‘savings’ bank. We are a part of the ABA NASDAQ Community Bank Index. For additional information about us, please visit our website at www.ffnwb.com and click on the “Investor Relations” section.

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: increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; 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 - which 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 2016 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	Dec 31, 2015			Sep 30, 2015			Dec 31, 2014			Three Month Change			One Year Change

Cash on hand and in banks	$	5,713		$	5,435		$	5,920			5.1	%		(3.5	)%
Interest-earning deposits		99,998			116,919			98,129			(14.5	)		1.9
Investments available-for-sale, at fair value		129,565			125,897			120,374			2.9			7.6
Loans receivable, net of allowance of $9,463, $10,146, and $10,491, respectively		685,072			674,820			663,938			1.5			3.2
Premises and equipment, net		17,707			17,515			16,734			1.1			5.8
Federal Home Loan Bank ("FHLB") stock, at cost		6,137			6,537			6,745			(6.1	)		(9.0	)
Accrued interest receivable		2,968			3,072			3,265			(3.4	)		(9.1	)
Deferred tax assets, net		4,556			5,216			8,338			(12.7	)		(45.4	)
Other real estate owned ("OREO")		3,663			4,235			9,283			(13.5	)		(60.5	)
Bank owned life insurance ("BOLI"), net		23,309			23,145			2,776			0.7			739.7
Prepaid expenses and other assets		1,225			1,278			1,495			(4.1	)		(18.1	)
Total assets	$	979,913		$	984,069		$	936,997			(0.4	)%		4.6	%

Liabilities and Stockholders' Equity

Deposits
Noninterest-bearing deposits	$	29,392		$	30,081		$	14,354			(2.3	)%		104.8	%
Interest-bearing deposits		646,015			634,986			599,773			1.7			7.7
Total deposits		675,407			665,067			614,127			1.6			10.0
Advances from the FHLB		125,500			135,500			135,500			(7.4	)		(7.4	)
Advance escrow payments from borrowers		1,794			2,939			1,707			(39.0	)		5.1
Accrued interest payable		135			142			142			(4.9	)		(4.9	)
Other liabilities		6,404			5,466			4,109			17.2			55.9
Total liabilities	$	809,240		$	809,114		$	755,585			0.0	%		7.1	%

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 13,768,814 shares at Dec 31, 2015; 14,199,677 at Sep 30, 2015; and15,167,381 at Dec 31, 2014		138			142			151			(2.8	)%		(8.6	)%
Additional paid-in capital		136,338			141,625			153,395			(3.7	)		(11.1	)
Retained earnings, substantially restricted		42,892			41,543			36,969			3.2			16.0
Accumulated other comprehensive loss, net of tax		(1,077	)		(455	)		(357	)		136.7			201.7
Unearned Employee Stock Ownership Plan ("ESOP") shares		(7,618	)		(7,900	)		(8,746	)		(3.6	)		(12.9	)
Total stockholders' equity		170,673			174,955			181,412			(2.4	)		(5.9	)
Total liabilities and stockholders' equity	$	979,913		$	984,069		$	936,997			(0.4	)%		4.6	%

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

	Quarter Ended
	Dec 31, 2015			Sep 30, 2015			Dec 31, 2014			Three Month Change			One Year Change
Interest income
Loans, including fees	$	8,680		$	8,698		$	9,010			(0.2	)%		(3.7	)%
Investments available-for-sale		657			578			544			13.7			20.8
Interest-earning deposits with banks		78			67			50			16.4			56.0
Dividends on FHLB stock		49			15			2			226.7			2350.0
Total interest income		9,464			9,358			9,606			1.1			(1.5	)
Interest expense
Deposits		1,462			1,369			1,285			6.8			13.8
FHLB advances		310			325			324			(4.6	)		(4.3	)
Total interest expense		1,772			1,694			1,609			4.6			10.1
Net interest income		7,692			7,664			7,997			0.4			(3.8	)
Recapture of provision for loan losses		(900	)		(700	)		(1,200	)		28.6			(25.0	)
Net interest income after recapture of provision for loan losses		8,592			8,364			9,197			2.7			(6.6	)

Noninterest income
Net gain on sale of investments		7			85			-			(91.8	)		n/a
BOLI income		164			213			22			(23.0	)		645.5
Other		213			149			134			43.0			59.0
Total noninterest income		384			447			156			(14.1	)		146.2

Noninterest expense
Salaries and employee benefits		3,787			3,488			3,294			8.6			15.0
Occupancy and equipment		401			387			346			3.6			15.9
Professional fees		347			472			332			(26.5	)		4.5
Data processing		236			176			194			34.1			21.6
Net (gain) loss on sale of OREO property		5			-			(6	)		n/a			(183.3	)
OREO market value adjustments		36			-			45			n/a			(20.0	)
OREO related expenses (income), net		(16	)		24			2			(166.7	)		(900.0	)
Regulatory assessments		119			119			112			0.0			6.3
Insurance and bond premiums		89			89			96			0.0			(7.3	)
Marketing		21			103			20			(79.6	)		5.0
Other general and administrative		308			523			334			(41.1	)		(7.8	)
Total noninterest expense		5,333			5,381			4,769			(0.9	)		11.8
Income before federal income tax provision		3,643			3,430			4,584			6.2			(20.5	)
Federal income tax provision		1,526			984			1,644			55.1			(7.2	)
Net income	$	2,117		$	2,446		$	2,940			(13.5	)%		(28.0	)%

Basic earnings per share	$	0.16		$	0.18		$	0.20
Diluted earnings per share	$	0.16		$	0.18		$	0.20
Weighted average number of common shares outstanding		12,961,238			13,372,573			14,287,939
Weighted average number of diluted shares outstanding		13,115,562			13,528,322			14,421,592

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

	Year Ended December 31,
	2015			2014			2013
Interest income
Loans, including fees	$	34,612		$	36,280		$	36,207
Investments available-for-sale		2,242			2,287			2,250
Interest-earning deposits with banks		274			115			79
Dividends on FHLB stock		69			7			3
Total interest income		37,197			38,689			38,539
Interest expense
Deposits		5,478			5,063			6,794
FHLB advances		1,273			1,178			732
Total interest expense		6,751			6,241			7,526
Net interest income		30,446			32,448			31,013
Recapture of provision for loan losses		(2,200	)		(2,100	)		(100	)
Net interest income after recapture of provision for loan losses		32,646			34,548			31,113

Noninterest income
Net gain (loss) on sale of investments		92			(20	)		(38	)
BOLI income		533			123			140
Other		654			395			789
Total noninterest income		1,279			498			891

Noninterest expense
Salaries and employee benefits		13,940			11,987			13,966
Occupancy and equipment		1,440			1,365			1,384
Professional fees		1,631			1,540			1,619
Data processing		759			662			662
Net (gain) loss on sale of OREO property		(526	)		86			(1,112	)
OREO market value adjustments		41			393			403
OREO related expenses, net		1			190			601
Regulatory assessments		470			396			693
Insurance and bond premiums		359			401			518
Proxy contest and related litigation		-			-			106
Marketing		211			97			104
Prepayment penalty on FHLB advances		-			-			679
Other general and administrative		1,552			1,386			1,459
Total noninterest expense		19,878			18,503			21,082
Income before federal income tax provision		14,047			16,543			10,922
Federal income tax provision		4,887			5,856			(13,543	)
Net income	$	9,160		$	10,687		$	24,465

Basic earnings per share	$	0.67		$	0.72		$	1.47
Diluted earnings per share	$	0.67		$	0.71		$	1.46
Weighted average number of common shares outstanding		13,528,393			14,747,086			16,580,882
Weighted average number of diluted shares outstanding		13,685,982			14,887,198			16,609,867

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

	Dec 31, 2015					Dec 31, 2014
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
One-to-four family residential:
Permanent owner occupied	$	147,229		19.6	%	$	161,013		22.9	%
Permanent non-owner occupied		106,543		14.2			112,180		15.9
Construction non-owner occupied		-		-			500		0.1
		253,772		33.8			273,693		38.9

Multifamily:
Permanent		122,747		16.3			116,014		16.5
Construction		21,115		2.8			4,450		0.6
		143,862		19.1			120,464		17.1
Commercial real estate:
Permanent		244,211		32.5			239,211		34.0
Construction		-		-			6,100		0.9
Land		8,290		1.1			2,956		0.4
		252,501		33.6			248,267		35.3
Construction/land development: (1)
One-to-four family residential		52,233		7.0			19,860		2.8
Multifamily		25,551		3.4			17,902		2.5
Commercial		-		-			4,300		0.6
Land development		8,768		1.2			8,993		1.3
		86,552		11.6			51,055		7.2

Business		7,604		1.0			3,783		0.5
Consumer		6,979		0.9			7,130		1.0
Total loans		751,270		100.0	%		704,392		100.0	%
Less:
Loans in Process ("LIP")		53,854					27,359
Deferred loan fees, net		2,881					2,604
ALLL		9,463					10,491
Loans receivable, net	$	685,072				$	663,938

(1)

Excludes construction loans that will convert to permanent loans. The Company considers these loans to be "rollovers" in that one loan is originated for both the construction loan and permanent financing. These loans are classified according to the underlying collateral categories in the table above instead of in the construction/land development category. At December 31, 2015, and December 31, 2014, $8.3 million and $3.0 million, respectively, of land loans were not included in the construction/land development category because the Company classifies raw land or buildable lots (where it does not intend to finance the construction) as commercial real estate land loans.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
	At or For the Quarter Ended
	Dec 31,			Sep 30,			Jun 30,			Mar 31,			Dec 31,
	2015			2015			2015			2015			2014
	(Dollars in thousands, except per share data)
Performance Ratios:
Return on assets		0.86	%		1.01	%		1.00	%		0.96	%		1.27	%
Return on equity		4.87			5.50			5.28			4.94			6.73
Dividend payout ratio		36.86			33.33			35.29			37.97			24.42
Equity-to-assets ratio		17.42			17.78			18.80			18.93			19.36
Interest rate spread		3.18			3.22			3.26			3.23			3.46
Net interest margin		3.33			3.38			3.42			3.40			3.61
Average interest-earning assets to average interest- bearing liabilities		119.77			120.33			120.01			121.74			120.92
Efficiency ratio		66.04			66.34			61.50			56.35			58.49
Noninterest expense as a percent of average total assets		2.17			2.22			2.06			1.84			2.06
Book value per common share	$	12.40		$	12.32		$	12.20		$	12.10		$	11.96

Capital Ratios: (1)
Tier 1 leverage ratio		11.61	%		11.74	%		11.70	%		11.64	%		11.79	%
Common equity tier 1 capital ratio		16.36			16.57			17.26			17.33			n/a
Tier 1 capital ratio		16.36			16.57			17.26			17.33			18.30
Total capital ratio		17.62			17.83			18.52			18.59			19.56

Asset Quality Ratios: (2)
Nonperforming loans as a percent of total loans		0.16			0.35			0.36			0.39			0.20
Nonperforming assets as a percent of total assets		0.48			0.68			0.72			0.86			1.13
ALLL as a percent of total loans		1.36			1.48			1.58			1.54			1.55
ALLL as a percent of nonperforming loans		872.17			417.70			439.05			392.68			783.50
Net charge-offs (recoveries) to average loans receivable, net		(0.03	)		(0.04	)		(0.09	)		(0.02	)		-

Allowance for Loan Losses:
ALLL, beginning of the quarter	$	10,146		$	10,603		$	10,508		$	10,491		$	11,660
Recapture of provision		(900	)		(700	)		(500	)		(100	)		(1,200	)
Charge-offs		-			(22	)		-			(340	)		-
Recoveries		217			265			595			457			31
ALLL, end of the quarter	$	9,463		$	10,146		$	10,603		$	10,508		$	10,491

Nonperforming Assets:
Nonperforming loans: (2) (3)
Nonaccrual loans	$	954		$	2,429		$	2,415		$	2,676		$	1,339
Nonaccrual TDRs		131			-			-			-			-
Total nonperforming loans		1,085			2,429			2,415			2,676			1,339
OREO		3,663			4,235			4,416			5,575			9,283
Total nonperforming assets	$	4,748		$	6,664		$	6,831		$	8,251		$	10,622

Performing TDRs	$	42,128		$	46,606		$	47,606		$	51,390		$	54,241

(1) Capital ratios are for First Financial Northwest Bank only.
(2) Loans are reported net of undisbursed funds.
(3) There were no loans 90 days or more past due and still accruing interest.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures
	At or For the Year Ended December 31,
	2015			2014			2013			2012			2011
	(Dollars in thousands, except per share data)
Performance Ratios:
Return on assets		0.96	%		1.17	%		2.73	%		0.27	%		0.37	%
Return on equity		5.15			5.85			13.12			1.47			2.36
Dividend payout ratio		35.57			27.73			8.11			0.00			0.00
Equity-to-assets		17.42			19.36			20.02			19.85			17.12
Interest rate spread		3.23			3.62			3.49			2.85			2.78
Net interest margin		3.38			3.77			3.68			3.08			3.01
Average interest-earning assets to average interest-bearing liabilities		120.45			121.15			121.77			118.12			113.33
Efficiency ratio		62.66			56.37			66.08			84.22			74.62
Noninterest expense as a percent of average total assets		2.07			2.03			2.36			2.54			2.29
Book value per common share	$	12.40		$	11.96		$	11.25		$	9.95		$	9.64

Capital Ratios: (1)
Tier 1 leverage ratio		11.61	%		11.79	%		18.60	%		15.79	%		13.54	%
Common equity tier 1 capital ratio		16.36			n/a			n/a			n/a			n/a
Tier 1 capital ratio		16.36			18.30			27.18			26.11			23.49
Total capital ratio		17.62			19.56			28.44			27.37			24.76

Asset Quality Ratios:
Nonperforming loans as a percent of total loans, net of undisbursed funds		0.16			0.20			0.59			3.42			3.28
Nonperforming assets as a percent of total assets		0.48			1.13			1.68			4.25			4.69
ALLL as a percent of total loans, net of undisbursed funds		1.36			1.55			1.91			1.89			2.29
ALLL as a percent of nonperforming loans, net of undisbursed funds		872.17			783.50			325.26			55.11			69.89
Net charge-offs (recoveries) to average loans receivable, net		(0.18	)		0.06			(0.08	)		1.07			1.39

Allowance for Loan Losses:
ALLL, beginning of the year	$	10,491		$	12,994		$	12,542		$	16,559		$	22,534
Provision (recapture of provision)		(2,200	)		(2,100	)		(100	)		3,050			4,700
Charge-offs		(362	)		(642	)		(1,596	)		(9,591	)		(11,025	)
Recoveries		1,534			239			2,148			2,524			350
ALLL, end of the year	$	9,463		$	10,491		$	12,994		$	12,542		$	16,559

Nonperforming Assets:
Nonperforming loans: (2) (3)
Nonaccrual loans	$	954		$	1,339		$	3,027		$	18,231		$	18,613
Nonaccrual TDRs		131			-			968			4,528			5,079
Total nonperforming loans		1,085			1,339			3,995			22,759			23,692
OREO		3,663			9,283			11,465			17,347			26,044
Total nonperforming assets	$	4,748		$	10,622		$	15,460		$	40,106		$	49,736

Performing TDRs	$	42,128		$	54,241		$	60,170		$	65,848		$	66,225

(1) Capital ratios are for First Financial Northwest Bank only.
(2) Loans are reported net of undisbursed funds.
(3) There were no loans 90 days or more past due and still accruing interest.

First Financial Northwest (FFNW) 8-KResults of Operations and Financial Condition