First Financial Northwest 8K Results of Operations and Financial Condition | FFNW 27 Apr 23

Exhibit 99.1

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
Net Income of $2.1 Million or $0.23 per Diluted Share for the First Quarter Ended March 31, 2023

Renton, Washington – April 27, 2023 - 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, 2023, of $2.1 million, or $0.23 per diluted share, compared to $3.2 million, or $0.35 per diluted share, for the quarter ended December 31, 2022, and $3.3 million, or $0.36 per diluted share, for the quarter ended March 31, 2022.

President and CEO Joseph W. Kiley III stated, “While there was significant turmoil in the banking industry in the quarter, I am pleased to report that our liquidity, capital and credit quality metrics remain very strong. I sincerely appreciate our loyal customers who recognize how differently our community bank operates compared to the large banks that failed during the quarter. Our liquidity continues to be a strength, with total available liquidity from cash, investment securities and our line of credit at the Federal Home Loan Bank totaling over $600 million at quarter end.”

“Credit quality remained strong, with nonperforming assets under $200,000 and additional loan delinquencies under $30,000 on total loans receivable of $1.2 billion,” noted Kiley. “During the quarter, we adopted the current expected credit loss accounting standard, which resulted in a one-time $500,000 increase to our allowance for credit losses and a corresponding net of tax adjustment of $395,000 to retained earnings. At quarter end, with an increase in loans receivable and an increase in the forecast for Washington State unemployment rates in future quarters, we also recognized a $300,000 provision for credit losses, increasing our allowance for credit losses on loans to $16.0 million compared to $15.2 million at year end,” continued Kiley.

“With the volatility in the banking industry following the failures of two large regional banks, deposit customers looked for options to insure more of their deposits across the industry. Accordingly, we saw the level of uninsured deposits improve to 23.6% of deposits as of quarter-end from 27.4% at the end of 2022. I am proud of the efforts of our employees to help customers maximize their insured deposits and communicate to them how we are different from the larger banks in the news,” concluded Kiley.

Highlights for the quarter ended March 31, 2023:

•	Net loans receivable increased by $17.7 million in the quarter to $1.18 billion at March 31, 2023.

•	The Company increased its regular quarterly cash dividend to shareholders by 8.3% to $0.13 per share from $0.12 per share.

•	The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 15.6% at March 31, 2023, compared to 10.3% and 15.6% at December 31, 2022, and 10.5% and 15.3% at March 31, 2022, respectively.

•	Credit quality remained strong with nonperforming assets of $193,000, or 0.01% of total assets, and only $28,000 in additional loans over 30 days past due at March 31, 2023.

•

Based on management’s evaluation of the adequacy of the Allowance for Credit Losses (“ACL”) at March 31, 2023, the Bank recorded a $300,000 provision for credit losses during the quarter. This is in addition to the $500,000 that was added to the ACL upon the adoption of the Current Expected Credit Loss (“CECL”) accounting standard.

Deposits totaled $1.23 billion at March 31, 2023, compared to $1.17 billion at December 31, 2022, and $1.14 billion at March 31, 2022. Total deposits increased $57.1 million for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, primarily due to a $66.5 million increase in brokered deposits. Due in large part to certificate of deposit promotions during the quarter, money market balances declined by $58.4 million, while retail certificate of deposit balances increased by $70.4 million. During the quarter, management elected to obtain additional funding in the wholesale markets due to the considerable volatility in the banking industry. At March 31, 2023, the Company held $71.0 million in interest-earning deposits that can be used to reduce brokered deposits and/or other wholesale liabilities in future periods, compared to $16.6 million at December 31, 2022, and $19.6 million at March 31, 2022.

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

	Mar 31, 2023		Dec 31, 2022		Mar 31, 2022		Three Month Change			One Year Change
	(Dollars in thousands)
Deposits:
Noninterest-bearing demand	$	110,780	$	119,944	$	130,596	$	(9,164	)	$	(19,816	)
Interest-bearing demand		86,183		96,632		99,794		(10,449	)		(13,611	)
Savings		21,871		23,636		23,441		(1,765	)		(1,570	)
Money market		483,945		542,388		609,080		(58,443	)		(125,135	)
Certificates of deposit, retail		332,935		262,554		277,190		70,381			55,745
Brokered deposits		191,414		124,886		-		66,528			191,414
Total deposits		1,227,128	$	1,170,040	$	1,140,101	$	57,088		$	87,027

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

March 31, 2023
	Noninterest- bearing demand		Interest- bearing demand		Savings		Money market		Certificates of deposit, retail		Brokered deposits		Total
	(Dollars in thousands)
King County
Renton	$	33,227	$	44,884	$	14,033	$	238,966	$	244,560	$	-	$	575,670
Landing		2,721		1,407		184		15,056		6,411		-		25,779
Woodinville		3,084		2,438		1,116		10,971		14,101		-		31,710
Bothell		4,066		659		60		5,263		2,067		-		12,115
Crossroads		11,766		2,956		95		35,242		11,956		-		62,015
Kent		9,505		9,305		4		18,415		3,449		-		40,678
Kirkland		7,318		1,282		99		10,643		627		-		19,969
Issaquah		2,128		1,189		27		3,825		4,627		-		11,796
Total King County		73,815		64,120		15,618		338,381		287,798		-		779,732
Snohomish County
Mill Creek		7,001		3,089		617		12,487		6,190		-		29,384
Edmonds		15,282		6,247		884		26,726		13,183		-		62,322
Clearview		4,933		4,485		1,640		19,490		6,999		-		37,547
Lake Stevens		4,177		3,577		1,355		33,824		9,197		-		52,130
Smokey Point		2,836		4,287		1,745		46,825		7,782		-		63,475
Total Snohomish County		34,229		21,685		6,241		139,352		43,351		-		244,858
Pierce County
University Place		2,189		82		3		3,999		946		-		7,219
Gig Harbor		547		296		9		2,213		840		-		3,905
Total Pierce County		2,736		378		12		6,212		1,786		-		11,124

Brokered deposits		-		-		-		-		-		191,414		191,414

Total deposits	$	110,780	$	86,183	$	21,871	$	483,945	$	332,935	$	191,414	$	1,227,128

December 31, 2022
	Noninterest- bearing demand		Interest- bearing demand		Savings		Money market		Certificates of deposit, retail		Brokered deposits		Total
	(Dollars in thousands)
King County
Renton	$	35,123	$	45,575	$	15,515	$	279,392	$	203,463	$	-	$	579,068
Landing		3,781		1,720		143		18,153		3,771		-		27,568
Woodinville		2,925		3,315		1,181		15,648		10,428		-		33,497
Bothell		3,363		1,041		49		6,485		942		-		11,880
Crossroads		14,455		3,082		226		30,969		11,667		-		60,399
Kent		8,162		11,660		2		19,549		1,023		-		40,396
Kirkland		10,618		506		62		8,310		25		-		19,521
Issaquah		3,342		1,171		134		2,474		3,408		-		10,529
Total King County		81,769		68,070		17,312		380,980		234,727		-		782,858
Snohomish County
Mill Creek		6,594		4,005		911		15,445		5,443		-		32,398
Edmonds		16,619		6,191		766		33,904		7,768		-		65,248
Clearview		5,456		6,317		1,653		23,322		2,906		-		39,654
Lake Stevens		3,936		5,213		1,390		36,842		4,674		-		52,055
Smokey Point		2,617		6,330		1,391		46,486		6,012		-		62,836
Total Snohomish County		35,222		28,056		6,111		155,999		26,803		-		252,191
Pierce County
University Place		2,192		96		1		3,953		672		-		6,914
Gig Harbor		761		410		212		1,456		352		-		3,191
Total Pierce County		2,953		506		213		5,409		1,024		-		10,105

Brokered deposits		-		-		-		-		-		124,886		124,886

Total deposits	$	119,944	$	96,632	$	23,636	$	542,388	$	262,554	$	124,886	$	1,170,040

Net loans receivable totaled $1.18 billion at March 31, 2023, compared to $1.17 billion at December 31, 2022, and $1.12 billion at March 31, 2022. During the quarter ended March 31, 2023, multifamily loans increased $16.5 million, one-to-four family residential loans increased $8.4 million, and consumer loans increased $6.1 million, which included an increase of $4.0 million in classic, collectible and other auto loans, partially offset by a $14.1 million decline in construction and land development loans. The average balance of net loans receivable totaled $1.17 billion for the quarter ended March 31, 2023, compared to $1.15 billion for the quarter ended December 31, 2022, and $1.12 billion for the quarter ended March 31, 2022.

The ACL represented 1.34% of total loans receivable at March 31, 2023, compared to the allowance for loan and lease losses (“ALLL”) to total loans receivable of 1.29% and 1.33% at December 31, 2022, and March 31, 2022, respectively.

There were $193,000 in nonperforming loans at both March 31, 2023, and December 31, 2022, compared to $179,000 at March 31, 2022. There was no other real estate owned (“OREO”) at March 31, 2023, December 31, 2022, or March 31, 2022.

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

	Mar 31,			Dec 31,			Mar 31,			Three Month		One Year
	2023			2022			2022			Change		Change
	(Dollars in thousands)
Nonperforming loans:
Consumer	$	193		$	193		$	179		$	–	$	14
Total nonperforming loans		193			193			179			–		14

OREO		–			–			–			–		–

Total nonperforming assets	$	193		$	193		$	179		$	–	$	14

Nonperforming assets as a percent
of total assets		0.01	%		0.01	%		0.01	%

Net interest income totaled $11.3 million for the quarter ended March 31, 2023, compared to $12.4 million for the quarter ended December 31, 2022, and $11.4 million for the quarter ended March 31, 2022. The decrease in the current quarter compared to the quarter ended December 31, 2022, was primarily due to higher interest expense on deposits and other borrowings, primarily reflecting the continued increase in market interest rates due to the ongoing increases to the targeted federal funds rate, and continued intense competition for deposits, partially offset by higher interest income on loans, including fees, and investments. Since March 2022, the Federal Open Market Committee of the Federal Reserve System has increased the target range for the federal funds rate by 475 basis points, including 50 basis points during the first quarter of 2023, to a range of 4.75% to 5.00%.

Total interest income was $18.5 million for the quarter ended March 31, 2023, compared to $17.3 million for the quarter ended December 31, 2022, and $12.9 million for the quarter ended March 31, 2022. The increase in the current quarter compared to the prior quarters was primarily due to an improvement in the average loan yield to 5.56% from 5.19% and 4.36% for the quarters ended December 31, 2022, and March 31, 2022, respectively, due in large part to recent increases in the targeted federal funds rate that increased our returns from LIBOR and Prime based variable rate loans and variable rate investment securities.

Total interest expense was $7.2 million for the quarter ended March 31, 2023, compared to $4.9 million for the quarter ended December 31, 2022, and $1.6 million for the quarter ended March 31, 2022. The average cost of interest-bearing deposits was 2.41% for the quarter ended March 31, 2023, compared to 1.51% for the quarter ended December 31, 2022, and 0.50% for the quarter ended March 31, 2022. The increase from the quarter ended December 31, 2022, was due primarily to increased interest expense on money market and certificate of deposit balances and the continued use of higher cost brokered deposits and wholesale sources to meet our funding needs. Advances from the FHLB increased to $160.0 million at March 31, 2023, compared to $145.0 million at December 31, 2022, and $95.0 million at March 31, 2022. At March 31, 2023, $95.0 million of our FHLB advances were tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Bank’s interest rate risk management efforts. These cash flow hedge agreements had a weighted average remaining term of 44 months and a weighted average fixed interest rate of 1.05% as of March 31, 2023. The average cost of borrowings was 2.69% for the quarter ended March 31, 2023, compared to 2.46% for the quarter ended December 31, 2022, and 1.28% for the quarter ended March 31, 2022.

The net interest margin was 3.22% for the quarter ended March 31, 2023, compared to 3.52% for the quarter ended December 31, 2022, and 3.43% for the quarter ended March 31, 2022. The decrease in the net interest margin for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, was due primarily to the cost of interest-bearing liabilities increasing more than the yields on interest-earnings assets, with an 81-basis point increase in the Company’s average cost of interest-bearing liabilities to 2.44% from 1.63%, partially offset by a 39-basis point increase in the average yield on interest-earning assets to 5.29% from 4.90%.

Noninterest income for the quarter ended March 31, 2023, totaled $665,000, compared to $720,000 for the quarter ended December 31, 2022, and $789,000 for the quarter ended March 31, 2022. The decrease in noninterest income for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, was primarily due to lower loan related fees and other noninterest income, partially offset by higher income on bank-owned life insurance. In addition, the prior quarter benefited from a net gain on sale of investments not duplicated in the current period. The decrease for the quarter ended March 31, 2023, compared to the prior year quarter, primarily reflects lower loan related fees and wealth management revenue.

Noninterest expense totaled $9.0 million for the quarter ended March 31, 2023, compared to $8.7 million for the quarter ended December 31, 2022, and $8.6 million for the quarter ended March 31, 2022. The increase in noninterest expense for the quarter ended March 31, 2023, compared to the quarter ended December 31, 2022, was primarily due to a $484,000 increase in salaries and employee benefits due to annual merit-based salary increases and expenses associated with enhancements to the Bank’s 401(k) plan for all eligible employees, whereas the prior quarter benefited from the absence of compensation expense related to the Bank’s Employee Stock Ownership Plan (“ESOP”) which matured and was fully allocated during the third quarter of 2022 and averaged approximately $458,000 in expense per quarter in the first three quarters of 2022. The increase was partially offset by a $190,000 reduction in professional fees in the quarter. The increase in noninterest expense for the quarter ended March 31, 2023, compared to the quarter ended March 31, 2022, primarily reflects a $215,000 increase in other general and administrative expenses, including a $60,000 increase in reserve for unfunded commitments and a $54,000 increase in state and local taxes, a $200,000 increase in salaries and employee benefits and higher marketing expense, partially offset by lower occupancy and equipment expenses and professional fees.

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: potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as increasing prices and supply chain disruptions, and any governmental or societal responses to new COVID-19 variants; the uncertain impacts of quantitative tightening and current and future monetary policies of the Federal Reserve; 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 reports filed with or furnished to 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 2023 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)

(Unaudited)

Assets	Mar 31, 2023			Dec 31, 2022			Mar 31, 2022			Three Month Change			One Year Change
Cash on hand and in banks	$	9,618		$	7,722		$	7,979			24.6	%		20.5	%
Interest-earning deposits with banks		70,998			16,598			19,633			327.8			261.6
Investments available-for-sale, at fair value		214,948			217,778			180,212			(1.3	)		19.3
Investments held-to-maturity, at amortized cost		2,439			2,444			2,426			(0.2	)		0.5
Loans receivable, net of allowance of $16,028, $15,227, and $15,159 respectively		1,184,750			1,167,083			1,121,382			1.5			5.7
Federal Home Loan Bank ("FHLB") stock, at cost		8,203			7,512			5,512			9.2			48.8
Accrued interest receivable		7,011			6,513			5,590			7.6			25.4
Deferred tax assets, net		2,990			2,597			1,069			15.1			179.7
Premises and equipment, net		20,732			21,192			22,254			(2.2	)		(6.8	)
Bank owned life insurance ("BOLI"), net		36,647			36,286			35,552			1.0			3.1
Prepaid expenses and other assets		11,336			12,479			8,451			(9.2	)		34.1
Right of use asset ("ROU"), net		3,194			3,275			3,455			(2.5	)		(7.6	)
Goodwill		889			889			889			0.0			0.0
Core deposit intangible, net		516			548			650			(5.8	)		(20.6	)
Total assets	$	1,574,271		$	1,502,916		$	1,415,054			4.7			11.3
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits	$	110,780		$	119,944		$	130,596			(7.6	)		(15.2	)
Interest-bearing deposits		1,116,348			1,050,096			1,009,505			6.3			10.6
Total deposits		1,227,128			1,170,040			1,140,101			4.9			7.6
Advances from the FHLB		160,000			145,000			95,000			10.3			68.4
Advance payments from borrowers for taxes and insurance		5,447			3,051			5,299			78.5			2.8
Lease liability, net		3,374			3,454			3,617			(2.3	)		(6.7	)
Accrued interest payable		749			328			112			128.4			568.8
Other liabilities		17,928			20,683			13,168			(12.8	)		36.9
Total liabilities		1,414,626			1,342,556			1,257,297			5.4			12.5
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 9,148,086 shares at March 31, 2023, 9,127,595 shares at December 31, 2022, and 9,107,977 shares at March 31, 2022		92			91			91			1.1			1.1
Additional paid-in capital		72,445			72,424			71,780			0.0			0.9
Retained earnings		95,597			95,059			88,339			0.5			8.1
Accumulated other comprehensive loss, net of tax		(8,489	)		(7,214	)		(1,889	)		17.7			349.4
Unearned Employee Stock Ownership Plan ("ESOP") shares		-			-			(564	)		n/a			(100.0	)
Total stockholders' equity		159,645			160,360			157,757			(0.5	)		1.1
Total liabilities and stockholders' equity	$	1,574,271		$	1,502,916		$	1,415,054			4.7	%		11.3	%

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Consolidated Income Statements

(Dollars in thousands, except per share data)

(Unaudited)

	Quarter Ended
	Mar 31, 2023			Dec 31, 2022		Mar 31, 2022			Three Month Change			One Year Change
Interest income
Loans, including fees	$	16,029		$	15,042	$	12,001			6.6	%		33.6	%
Investments		2,105			2,007		831			4.9			153.3
Interest-earning deposits with banks		236			205		19			15.1			1142.1
Dividends on FHLB Stock		130			89		74			46.1			75.7
Total interest income		18,500			17,343		12,925			6.7			43.1
Interest expense
Deposits		6,332			3,972		1,257			59.4			403.7
FHLB advances and other borrowings		912			928		300			(1.7	)		204.0
Total interest expense		7,244			4,900		1,557			47.8			365.3
Net interest income		11,256			12,443		11,368			(9.5	)		(1.0	)
Provision (recapture of provision) for credit losses		300			500		(500	)		(40.0	)		(160.0	)
Net interest income after provision (recapture of provision) for credit losses		10,956			11,943		11,868			(8.3	)		(7.7	)

Noninterest income
Net gain on sale of investments		-			27		-			(100.0	)		n/a
BOLI income		308			222		288			38.7			6.9
Wealth management revenue		45			36		82			25.0			(45.1	)
Deposit related fees		223			231		215			(3.5	)		3.7
Loan related fees		91			172		199			(47.1	)		(54.3	)
Other		(2	)		32		5			(106.3	)		(140.0	)
Total noninterest income		665			720		789			(7.6	)		(15.7	)

Noninterest expense
Salaries and employee benefits		5,461			4,977		5,261			9.7			3.8
Occupancy and equipment		1,165			1,155		1,228			0.9			(5.1	)
Professional fees		417			607		452			(31.3	)		(7.7	)
Data processing		686			634		677			8.2			1.3
Regulatory assessments		101			108		101			(6.5	)		0.0
Insurance and bond premiums		130			111		129			17.1			0.8
Marketing		77			77		37			0.0			108.1
Other general and administrative		956			997		741			(4.1	)		29.0
Total noninterest expense		8,993			8,666		8,626			3.8			4.3
Income before federal income tax provision		2,628			3,997		4,031			(34.3	)		(34.8	)
Federal income tax provision		506			771		771			(34.4	)		(34.4	)
Net income	$	2,122		$	3,226	$	3,260			(34.2	)%		(34.9	)%

Basic earnings per share	$	0.23		$	0.35	$	0.36
Diluted earnings per share	$	0.23		$	0.35	$	0.36
Weighted average number of common shares outstanding		9,104,371			9,073,323		8,987,482
Weighted average number of diluted shares outstanding		9,173,276			9,149,044		9,117,432

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

	March 31, 2023						December 31, 2022						March 31, 2022
	Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)
Commercial real estate:
Residential:
Multifamily	$	143,430			11.9	%	$	126,895			10.7	%	$	152,855			13.4	%
Total multifamily residential		143,430			11.9			126,895			10.7			152,855			13.4

Non-residential:
Office		79,795			6.6			84,315			7.1			87,394			7.7
Retail		130,502			10.9			132,595			11.2			142,725			12.6
Mobile home park		22,125			1.9			25,420			2.2			20,409			1.8
Hotel / motel		67,339			5.6			55,471			4.7			58,406			5.1
Nursing home		12,275			1.0			12,365			1.0			12,622			1.1
Warehouse		19,655			1.7			19,783			1.7			21,103			1.9
Storage		33,677			2.8			33,876			2.9			34,442			3.0
Other non-residential		43,619			3.6			44,057			3.6			39,887			3.5
Total non-residential		408,987			34.1			407,882			34.4			416,988			36.7

Construction/land:
One-to-four family residential		54,191			4.5			52,836			4.5			35,953			3.2
Multifamily		-			0.0			15,501			1.3			17,196			1.5
Commercial		-			0.0			-			0.0			6,189			0.5
Land development		9,801			0.8			9,783			0.8			15,359			1.4
Total construction/land		63,992			5.3			78,120			6.6			74,697			6.6

One-to-four family residential:
Permanent owner occupied		243,366			20.3			233,785			19.8			197,447			17.4
Permanent non-owner occupied		240,894			20.1			242,051			20.5			214,784			18.9
Total one-to-four family residential		484,260			40.4			475,836			40.3			412,231			36.3

Business:
Aircraft		2,051			0.1			2,086			0.1			4,647			0.4
Small Business Administration (“SBA”)		494			0.1			509			0.1			816			0.1
Paycheck Protection Plan (“PPP”)		708			0.1			785			0.1			5,181			0.5
Other business		28,415			2.3			27,991			2.4			19,902			1.7
Total business		31,668			2.6			31,371			2.7			30,546			2.7

Consumer:
Classic, collectible and other auto		57,703			4.8			53,705			4.6			38,781			3.4
Other consumer		10,469			0.9			8,350			0.7			10,650			0.9
Total consumer		68,172			5.7			62,055			5.3			49,431			4.3

Total loans		1,200,509			100.0	%		1,182,159			100.0	%		1,136,748			100.0	%
Less:
Deferred loan (costs) fees, net		(269	)					(151	)					207
ACL		16,028						15,227						15,159
Loans receivable, net	$	1,184,750					$	1,167,083					$	1,121,382

Concentrations of credit: ⁽¹⁾
Construction loans as % of total capital		44.9	%					53.1	%					51.9	%
Total non-owner occupied commercial real estate as % of total capital		347.7	%					346.9	%					379.6	%

⁽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,
	2023			2022			2022			2022			2022
	(Dollars in thousands, except per share data)
Performance Ratios: ⁽¹⁾
Return on assets		0.57	%		0.86	%		1.06	%		0.79	%		0.93	%
Return on equity		5.31			8.04			9.88			7.11			8.33
Dividend payout ratio		56.52			34.29			27.40			38.51			33.20
Equity-to-assets ratio		10.14			10.67			10.64			10.78			11.15
Tangible equity-to-tangible assets ratio ⁽²⁾		10.06			10.58			10.55			10.69			11.05
Net interest margin		3.22			3.52			3.65			3.53			3.43
Average interest-earning assets to average interest-bearing liabilities		117.78			117.93			119.08			120.21			119.59
Efficiency ratio		75.44			65.84			66.80			72.62			70.96
Noninterest expense as a percent of average total assets		2.42			2.30			2.43			2.60			2.46
Book value per common share	$	17.45		$	17.57		$	17.30		$	17.26		$	17.32
Tangible book value per common share ⁽²⁾		17.30			17.41			17.14			17.09			17.15

Capital Ratios: ⁽³⁾
Tier 1 leverage ratio		10.24	%		10.31	%		10.43	%		10.53	%		10.51	%
Common equity tier 1 capital ratio		14.33			14.37			14.24			14.22			14.08
Tier 1 capital ratio		14.33			14.37			14.24			14.22			14.08
Total capital ratio		15.59			15.62			15.49			15.47			15.33

Asset Quality Ratios: ⁽⁴⁾
Nonperforming loans as a percent of total loans		0.02	%		0.02	%		0.02	%		0.00	%		0.02	%
Nonperforming assets as a percent of total assets		0.01			0.01			0.02			0.00			0.01
ACL as a percent of total loans		1.34			1.29			1.27			1.33			1.33
Net (recoveries) charge-offs to average loans receivable, net		(0.00	)		(0.00	)		(0.00	)		0.00			(0.00	)

Allowance for Credit Losses:
ALLL, beginning of the quarter	$	15,227		$	14,726		$	15,125		$	15,159		$	15,657
Beginning balance adjustment from adoption of Topic 326		500			-			-			-			-
Provision (recapture of provision)		300			500			(400	)		-			(500	)
Charge-offs		-			-			-			(37	)		-
Recoveries		1			1			1			3			2
ACL, end of the quarter	$	16,028		$	15,227		$	14,726		$	15,125		$	15,159

⁽¹⁾ Performance ratios are calculated on an annualized basis.

⁽²⁾ Represent non-GAAP financial measures. Tangible equity-to-tangible assets ratio is calculated by dividing tangible equity by tangible assets. Tangible book value per common share is calculated by dividing tangible equity by common shares outstanding at period end. Tangible equity and tangible assets exclude goodwill and core deposit intangible assets. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.

⁽³⁾ Capital ratios are for First Financial Northwest Bank only.

⁽⁴⁾ Loans are reported net of undisbursed funds.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Key Financial Measures
(Unaudited)

	For the Quarter Ended
	Mar 31, 2023			Dec 31, 2022			Sep 30, 2022			Jun 30, 2022			Mar 31, 2022
	(Dollars in thousands)
Yields and Costs: ⁽¹⁾
Yield on loans		5.56	%		5.19	%		4.77	%		4.41	%		4.36	%
Yield on investments		3.88			3.60			2.90			2.33			1.96
Yield on interest-earning deposits		4.40			3.31			2.02			0.67			0.15
Yield on FHLB stock		7.30			4.58			5.56			4.82			5.49
Yield on interest-earning assets		5.29	%		4.90	%		4.43	%		4.04	%		3.90	%

Cost of interest-bearing deposits		2.41	%		1.51	%		0.87	%		0.55	%		0.50	%
Cost of borrowings		2.69			2.46			1.48			1.21			1.28
Cost of interest-bearing liabilities		2.44	%		1.63	%		0.93	%		0.61	%		0.56	%

Cost of total deposits		2.17	%		1.36	%		0.78	%		0.49	%		0.44	%
Cost of funds		2.23			1.48			0.84			0.55			0.51

Average Balances:
Loans	$	1,168,539		$	1,150,181		$	1,132,233		$	1,117,079		$	1,115,428
Investments		219,969			221,113			220,244			198,819			171,685
Interest-earning deposits		21,729			24,608			24,565			22,010			49,857
FHLB stock		7,219			7,710			5,923			5,905			5,467
Total interest-earning assets	$	1,417,456		$	1,403,612		$	1,382,965		$	1,343,813		$	1,342,437

Interest-bearing deposits	$	1,065,827		$	1,040,357		$	1,056,079		$	1,013,080		$	1,027,507
Borrowings		137,600			149,946			105,272			104,835			95,000
Total interest-bearing liabilities		1,203,427			1,190,303			1,161,351			1,117,915			1,122,507
Noninterest-bearing deposits		115,708			121,518			125,561			131,415			122,175
Total deposits and borrowings	$	1,319,135		$	1,311,821		$	1,286,912		$	1,249,330		$	1,244,682

Average assets	$	1,509,297		$	1,496,125		$	1,470,816		$	1,431,003		$	1,424,054
Average stockholders' equity		162,016			159,120			158,515			158,349			158,756

⁽¹⁾Yields and costs are annualized.

Non-GAAP Financial Measures

In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains non-GAAP financial measures that include tangible equity, tangible assets, tangible book value per share, and the tangible equity ratio. The Company believes that these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of goodwill and core deposit intangible, net 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, 2023			Dec 31, 2022			Sep 30, 2022			Jun 30, 2022			Mar 31, 2022
	(Dollars in thousands, except per share data)

Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP)	$	159,645		$	160,360		$	157,890		$	156,896		$	157,757
Less:
Goodwill		889			889			889			889			889
Core deposit intangible, net		516			548			582			616			650
Tangible equity (Non-GAAP)	$	158,240		$	158,923		$	156,419		$	155,391		$	156,218

Total assets (GAAP)	$	1,574,271		$	1,502,916		$	1,484,311		$	1,454,768		$	1,415,054
Less:
Goodwill		889			889			889			889			889
Core deposit intangible, net		516			548			582			616			650
Tangible assets (Non-GAAP)	$	1,572,866		$	1,501,479		$	1,482,840		$	1,453,263		$	1,413,515

Common shares outstanding at period end		9,148,086			9,127,595			9,127,595			9,091,533			9,107,977

Equity-to-assets ratio (GAAP)		10.14	%		10.67	%		10.64	%		10.78	%		11.15	%
Tangible equity-to-tangible assets ratio (Non‑GAAP)		10.06			10.58			10.55			10.69			11.05
Book value per common share (GAAP)	$	17.45		$	17.57		$	17.30		$	17.26		$	17.32
Tangible book value per share (Non-GAAP)		17.30			17.41			17.14			17.09			17.15

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