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First Financial Northwest, Inc. Reports First Quarter Net Income of $6.8 Million or $0.66 per Diluted Share

RENTON, Wash., April 26, 2018 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the “Company”) (NASDAQ:FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported net income for the quarter ended March 31, 2018, of $6.8 million, or $0.66 per diluted share, compared to net income of $2.4 million, or $0.23 per diluted share, for the quarter ended December 31, 2017, and $2.3 million, or $0.22 per diluted share, for the quarter ended March 31, 2017.

Net loans receivable increased to $991.1 million at March 31, 2018, compared to $988.7 million at December 31, 2017, and $838.8 million at March 31, 2017. Internal loan growth in the first quarter was partially offset by a $20.0 million repayment received on a $22.0 million construction/land development loan. The average balance of net loans receivable totaled $985.8 million for the quarter ended March 31, 2018, compared to $963.1 million for the quarter ended December 31, 2017, and $825.3 million for the quarter ended March 31, 2017.

The Company had a $4.0 million recapture of provision for loan losses in the quarter ended March 31, 2018, compared to a recapture of provision for loan losses of $1.2 million in the quarter ended December 31, 2017, and a provision for loan losses of $200,000 in the quarter ended March 31, 2017. The recapture of provision in the quarter ended March 31, 2018, was due primarily to $4.3 million in recoveries received during that quarter of loans previously charged off, while the recapture of provision for loan losses in the quarter ended December 31, 2017, was due primarily to $2.0 million in recoveries during the quarter of loans previously charged off. The provision recaptures were partially offset by increases to the allowance for loan losses related to higher loan balances. The provision for loan losses in the quarter ended March 31, 2017, was primarily due to the increase in net loans receivable during the quarter.

“As a result of strategies we employed to encourage certain borrowers to repay us for amounts previously charged off, we are off to a great start to 2018. These amounts were charged off during the downturn in our economy as a result of the financial crisis, and I am pleased that we were able to negotiate repayment of these debts during this time of economic strength in the region,” stated Joseph W. Kiley III, President and Chief Executive Officer. “In addition, I am very pleased to report that our deposit base grew by $23.7 million during the current quarter, including a $5.3 million increase in checking account deposits. This is an area of extensive focus as we work to transform the Bank from a traditional savings bank to a full service community bank. If you have not visited one of our offices to see the technology we have deployed and meet our team of talented bankers, I encourage you to stop in to enjoy this new bank branch experience for yourself.  I am also happy to report that we opened our tenth branch office in a development known as ‘The Junction’ in Bothell. This new branch office is a continuation of our strategy to expand our network, augmenting our efforts to grow our franchise and meet the deposit and lending needs of our communities.”

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

  March 31, 2018
  Noninterest-
bearing
demand
  Interest-
bearing
demand
  Statement
savings
   Money
market
  Certificates
of deposit,
retail
  Certificates
of deposit,
brokered
  Total  
          (Dollars in thousands)          
King County:                            
Renton $ 31,945   $ 19,620   $ 22,637   $ 228,134   $ 294,434   $ -   $ 596,770  
The Landing   3,176     980     59     11,571     8,096     -     23,822  
Woodinville (1)   1,617     3,431     711     19,744     8,112     -     33,615  
Bothell   31     -     -     -     -     -     31  
Crossroads   1,074     6,388     82     25,104     7,006     -     39,654  
Total King County   37,843     30,419     23,489     284,553     317,648     -     693,952  
                             
Snohomish County:                            
Mill Creek   1,395     2,314     710     14,814     6,313     -     25,546  
Edmonds   1,632     1,305     45     17,619     5,747     -     26,348  
Clearview (1)   3,881     3,225     1,080     7,408     1,734     -     17,328  
Lake Stevens (1)   1,517     1,359     517     3,131     2,645     -     9,169  
Smokey Point (1)   1,867     2,182     547     6,983     3,819     -     15,398  
Total Snohomish County   10,292     10,385     2,899     49,955     20,258     -     93,789  
                             
Total retail deposits   48,135     40,804     26,388     334,508     337,906     -     787,741  
Brokered deposits   -     -     -     -     -     75,488     75,488  
Total deposits $ 48,135   $ 40,804   $ 26,388   $ 334,508   $ 337,906   $ 75,488   $ 863,229  

(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $93,000.

  December 31, 2017
  Noninterest-
bearing
demand
  Interest-
bearing
demand
  Statement
savings
   Money
market
  Certificates
of deposit,
retail
  Certificates
of deposit,
brokered
  Total  
          (Dollars in thousands)          
King County:                            
Renton $ 30,005   $ 18,099   $ 25,095   $ 225,714   $ 298,819   $ -   $ 597,732  
The Landing   2,634     405     44     11,555     7,807     -     22,445  
Woodinville (1)   1,904     3,124     685     20,527     7,072     -     33,312  
Crossroads   606     5,413     81     13,831     945     -     20,876  
Total King County   35,149     27,041     25,905     271,627     314,643     -     674,365  
                             
Snohomish County:                            
Mill Creek   1,721     2,931     355     14,325     5,652     -     24,984  
Edmonds   1,300     1,119     30     17,576     4,932     -     24,957  
Clearview (1)   3,960     3,631     1,247     7,009     1,724     -     17,571  
Lake Stevens (1)   1,466     1,266     475     2,829     2,608     -     8,644  
Smokey Point (1)   1,838     2,236     444     5,270     3,705     -     13,493  
Total Snohomish County   10,285     11,183     2,551     47,009     18,621     -     89,649  
                             
Total retail deposits   45,434     38,224     28,456     318,636     333,264     -     764,014  
Brokered deposits   -     -     -     -     -     75,488     75,488  
Total deposits $ 45,434   $ 38,224   $ 28,456   $ 318,636   $ 333,264   $ 75,488   $ 839,502  

(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $107,000.

Additional highlights for the quarter ended March 31, 2018:

  • Net loans receivable increased to $991.1 million at March 31, 2018, compared to $988.7 million at December 31, 2017, and $838.8 million at March 31, 2017.
  • Deposits increased to $863.2 million at March 31, 2018, compared to $839.5 million at December 31, 2017, and $734.7 million at March 31, 2017. Excluding certificates of deposits, deposit balances increased $19.1 million during the quarter.
  • The Company’s book value per share was $13.80 at March 31, 2018, compared to $13.27 at December 31, 2017, and $12.84 at March 31, 2017.
  • The Bank’s Tier 1 leverage and total capital ratios at March 31, 2018, were 10.4% and 14.4%, respectively, compared to 10.2% and 13.8% at December 31, 2017, and 11.6% and 15.7% at March 31, 2017.

Based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”), there was a $4.0 million recapture of provision for loan losses during the quarter ended March 31, 2018. The following items contributed to the recapture of provision during the quarter:

  • The Bank received a $20.0 million payment on its largest loan that had a balance of $22.0 million at December 31, 2017.
  • The Company received $4.3 million in recoveries during the quarter, primarily relating to balances from two customers, representing payment in full of loan balances previously charged off.
  • The Company’s net loans receivable increased modestly during the quarter to $991.1 million at March 31, 2018, from $988.7 million at December 31, 2017, and was $838.8 million at March 31, 2017.
  • Delinquent loans (loans over 30 days past due) remained low at $225,000 at March 31, 2018, compared to $101,000 at December 31, 2017, and no delinquent loans at March 31, 2017.
  • Nonperforming loans totaled $175,000 at March 31, 2018, compared to $179,000 at December 31, 2017, and $602,000 at March 31, 2017.
  • Nonperforming loans as a percentage of total loans remained low at 0.02% at both March 31, 2018, and December 31, 2017, compared to 0.07% at March 31, 2017.

The ALLL represented 1.31% of total loans receivable, net of undisbursed funds, at March 31, 2018, compared to 1.28% at December 31, 2017, and 1.31% at March 31, 2017. Nonperforming assets totaled $658,000 at March 31, 2018, compared to $662,000 at December 31, 2017, and $2.9 million at March 31, 2017. The 77.2% reduction in the Company’s nonperforming assets from the prior year was primarily due to sales of other real estate owned (“OREO”) and, to a lesser extent, a reduction in nonperforming loan balances.

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

  Mar 31,   Dec 31,   Mar 31,   Three
Month
  One
Year
  2018
  2017
  2017
  Change   Change
  (Dollars in thousands)
Nonperforming loans:                  
One-to-four family residential $ 125     $ 128     $ 545     $ (3 )   $ (420 )
Consumer   50       51       57       (1 )     (7 )
Total nonperforming loans   175       179       602       (4 )     (427 )
                   
OREO   483       483       2,281       -       (1,798 )
                   
Total nonperforming assets (1) $ 658     $ 662     $ 2,883     $ (4 )   $ (2,225 )
                   
Nonperforming assets as a                  
percent of total assets   0.05 %     0.05 %     0.27 %        

(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 our TDRs were performing in accordance with their restructured terms at March 31, 2018.

OREO totaled $483,000 at March 31, 2018, and December 31, 2017, down from $2.3 million at March 31, 2017, due to sales of properties. The Bank continues to actively market its two remaining OREO properties in an effort to minimize holding costs.

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

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

  Mar 31,
2018
  Dec 31,
2017
  Mar 31,
2017
  Three
Month
Change
  One
Year
Change
  (Dollars in thousands)
Nonperforming TDRs:                  
One-to-four family residential $   $   $ 109   $     $ (109 )
Total nonperforming TDRs           109           (109 )
                   
Performing TDRs:                  
One-to-four family residential   11,904     13,434     21,790     (1,530 )     (9,886 )
Multifamily   1,128     1,134     1,152     (6 )     (24 )
Commercial real estate   3,173     3,194     3,683     (21 )     (510 )
Consumer   43     43     43     (0 )     (0 )
Total performing TDRs   16,248     17,805     26,668     (1,557 )     (10,420 )
                   
Total TDRs $ 16,248   $ 17,805   $ 26,777   $ (1,557 )   $ (10,529 )

Net interest income for the quarter ended March 31, 2018, increased to $11.0 million, compared to $10.4 million for the quarter ended December 31, 2017, and $8.9 million for the quarter ended March 31, 2017, due in part to the growth in the average balance of net loans outstanding between periods, partially offset by increased interest expense due to higher deposit balances and increasing short term interest rates.

Total interest income increased to $14.1 million during the quarter ended March 31, 2018, compared to $13.3 million in the quarter ended December 31, 2017, and $11.0 million in the quarter ended March 31, 2017. These increases were due in part to the growth in the average balance of net loans receivable to $985.8 million for the quarter ended March 31, 2018, compared to $963.1 million for the quarter ended December 31, 2017, and $825.3 million for the quarter ended March 31, 2017. Interest income was also impacted by the recognition of $1.0 million in interest income during the quarter ended March 31, 2018, related to payments discussed above from two borrowers for the interest owed on the balances of previously charged off loans, compared to $436,000 in the quarter ended December 31, 2017. There was no such additional interest income recognized in the quarter ended March 31, 2017.

Total interest expense increased to $3.1 million for the quarter ended March 31, 2018, compared to $2.9 million for the quarter ended December 31, 2017, and $2.1 million for the quarter ended March 31, 2017. The higher level of interest expense in the quarter ended March 31, 2018, was due primarily to increases in the average balances of interest-bearing liabilities, in particular deposits, and increases in short term market interest rates. Advances from the Federal Home Loan Bank (“FHLB”) totaled $200.0 million at March 31, 2018, compared to $216.0 million at December 31, 2017, and $171.5 million at March 31, 2017. The Bank borrows from the FHLB to supplement its deposit gathering efforts when needed to support asset growth. The average cost of FHLB advances was 1.66% for the quarter ended March 31, 2018, compared to 1.46% for the quarter ended December 31, 2017, and 1.05% for the quarter ended March 31, 2017. The balance of brokered certificates of deposits was unchanged at $75.5 million at March 31, 2018, December 31, 2017, and March 31, 2017.

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

  Mar 31,
2018
  Dec 31,
2017
  Mar 31, 
2017
  Three
Month
Change
  One Year
Change
Deposits: (Dollars in thousands)  
Noninterest-bearing $ 48,135   $ 45,434   $ 36,190   $ 2,701     $ 11,945  
Interest-bearing demand   40,804     38,224     21,584     2,580       19,220  
Statement savings   26,388     28,456     27,415     (2,068 )     (1,027 )
Money market   334,508     318,636     218,578     15,872       115,930  
Certificates of deposit, retail (1)   337,906     333,264     355,452     4,642       (17,546 )
Certificates of deposit, brokered   75,488     75,488     75,488     -       -  
Total deposits $ 863,229   $ 839,502   $ 734,707   $ 23,727     $ 128,522  

(1) Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $93,000 at March 31, 2018, and $107,000 at December 31, 2017.

Our net interest margin was 3.88% for the quarter ended March 31, 2018, compared to 3.65% for the quarter ended December 31, 2017, and 3.64% for the quarter ended March 31, 2017. The increase in the quarter ended March 31, 2018, from the prior quarter, was the result of payments received on amounts previously charged off. The Company recorded $1.0 million in additional interest related to these recoveries in the quarter ended March 31, 2018, compared to $436,000 in the quarter ended December 31, 2017.

Noninterest income for the quarter ended March 31, 2018, totaled $646,000, compared to $211,000 in the quarter ended December 31, 2017, and $535,000 in the quarter ended March 31, 2017. The amount recorded in the quarter ended December 31, 2017, was impacted by the $670,000 loss on sale of investments due to our investment portfolio restructuring at year end, undertaken primarily to reduce interest rate risk and to take advantage of the higher income tax rates for 2017 compared to 2018 following the passage of the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”). Specifically, the Company sold approximately $37 million in fixed rate securities, with the proceeds reinvested primarily into adjustable rate securities.

Noninterest expense for the quarter ended March 31, 2018, declined slightly to $7.0 million, from $7.1 million in the quarter ended December 31, 2017, and increased from $6.1 million in the quarter ended March 31, 2017. The increase from the prior year period was due primarily to growth in the Bank’s number of locations in the past year, including the opening of a new office in the Crossroads neighborhood of Bellevue in June 2017, and the acquisition of four branch offices in August 2017.

The Company’s federal income tax provision was $1.8 million for the quarter ended March 31, 2018, compared to $2.3 million in the quarter ended December 31, 2017, and $785,000 in the quarter ended March 31, 2017. The quarter ended December 31, 2017, included a charge of $807,000 relating to changes in the Company’s deferred tax asset valuation following passage of the Tax Act.

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 10 full-service banking offices. We are a part of the ABA NASDAQ Community Bank Index and the Russell 2000 Index. 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: 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 – 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 2018 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  Mar 31,
2018
   Dec 31,
2017
   Mar 31,
2017
  Three
Month
Change
  One
Year
Change
                   
Cash on hand and in banks $ 6,595     $ 9,189     $ 6,066     (28.2 )%   8.7 %
Interest-earning deposits   13,954       6,942       20,007     101.0     (30.3 )
Investments available-for-sale, at fair value   142,872       132,242       129,662     8.0     10.2  
Loans receivable, net of allowance of $13,136, $12,882 and $11,158 respectively   991,138       988,662       838,768     0.3     18.2  
Federal Home Loan Bank ("FHLB") stock, at cost   9,450       9,882       8,102     (4.4 )   16.6  
Accrued interest receivable   3,981       4,084       3,389     (2.5 )   17.5  
Deferred tax assets, net   1,362       1,211       2,907     12.5     (53.1 )
Other real estate owned ("OREO")   483       483       2,281     0.0     (78.8 )
Premises and equipment, net   21,208       20,614       18,912     2.9     12.1  
Bank owned life insurance ("BOLI"), net   29,276       29,027       27,534     0.9     6.3  
Prepaid expenses and other assets   3,922       5,738       2,892     (31.6 )   35.6  
Goodwill   889       889       -     0.0     n/a  
Core deposit intangible   1,228       1,266       -     (3.0 )   n/a  
Total assets $ 1,226,358     $ 1,210,229     $ 1,060,520     1.3 %   15.6 %
                   
Liabilities and Stockholders' Equity                  
                   
Deposits                  
Noninterest-bearing deposits $ 48,135     $ 45,434     $ 36,190     5.9 %   33.0 %
Interest-bearing deposits   815,094       794,068       698,517     2.6     16.7  
Total Deposits   863,229       839,502       734,707     2.8     17.5  
Advances from the FHLB   200,000       216,000       171,500     (7.4 )   16.6  
Advance payments from borrowers for taxes and insurance   4,478       2,515       4,092     78.1     9.4  
Accrued interest payable   270       326       237     (17.2 )   13.9  
Other liabilities   9,626       9,252       8,235     4.0     16.9  
Total liabilities   1,077,603       1,067,595       918,771     0.9     17.3  
                   
Commitments and contingencies                  
                   
Stockholders' Equity                  
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or                  
outstanding $ -     $ -     $ -     n/a     n/a  
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding                  
shares 10,779,424 at March 31, 2018, 10,748,437 at December 31, 2017, and                  
11,035,791 at March 31, 2017   108       107       110     0.9 %   (1.8 )%
Additional paid-in capital   94,527       94,173       98,186     0.4     (3.7 )
Retained earnings, substantially restricted   60,767       54,642       50,702     11.2     19.9  
Accumulated other comprehensive loss, net of tax   (1,568 )     (928 )     (1,042 )   69.0     50.5  
Unearned Employee Stock Ownership Plan ("ESOP") shares   (5,079 )     (5,360 )     (6,207 )   (5.2 )   (18.2 )
Total stockholders' equity   148,755       142,634       141,749     4.3     4.9  
Total liabilities and stockholders' equity $ 1,226,358     $ 1,210,229     $ 1,060,520     1.3 %   15.6 %


FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
 
  Quarter Ended        
  Mar 31,
2018
  Dec 31,
2017
  Mar 31,
2017
   Three
Month
Change
   One
Year
Change
Interest income                  
Loans, including fees $ 13,042     $ 12,269     $ 10,027   6.3 %   30.1 %
Investments available-for-sale   929       903       845   2.9     9.9  
Interest-earning deposits with banks   38       43       44   (11.6 )   (13.6 )
Dividends on FHLB Stock   104       85       82   22.4     26.8  
Total interest income   14,113       13,300       10,998   6.1     28.3  
Interest expense                  
Deposits   2,276       2,117       1,691   7.5     34.6  
FHLB advances   853       795       445   7.3     91.7  
Total interest expense   3,129       2,912       2,136   7.5     46.5  
Net interest income   10,984       10,388       8,862   5.7     23.9  
(Recapture of provision) provision for loan losses   (4,000 )     (1,200 )     200   233.3     (2,100.0 )
Net interest income after (recapture of provision) provision for loan losses   14,984       11,588       8,662   29.3     73.0  
                   
Noninterest income                  
Net loss on sale of investments   -       (670 )     -   (100.0 )   n/a  
BOLI   249       133       201   87.2     23.9  
Wealth management revenue   99       220       140   (55.0 )   (29.3 )
Deposit related fees   161       169       71   (4.7 )   126.8  
Loan related fees   134       356       120   (62.4 )   11.7  
Other   3       3       3   0.0     0.0  
Total noninterest income   646       211       535   206.2     20.7  
                   
Noninterest expense                  
Salaries and employee benefits   4,662       4,673       4,285   (0.2 )   8.8  
Occupancy and equipment   769       721       480   6.7     60.2  
Professional fees   328       430       439   (23.7 )   (25.3 )
Data processing   324       326       240   (0.6 )   35.0  
OREO related expenses (reimbursements), net   1       (81 )     40   (101.2 )   (97.5 )
Regulatory assessments   155       161       96   (3.7 )   61.5  
Insurance and bond premiums   106       97       99   9.3     7.1  
Marketing   107       68       48   57.4     122.9  
Other general and administrative   575       674       341   (14.7 )   68.6  
Total noninterest expense   7,027       7,069       6,068   (0.6 )   15.8  
Income before federal income tax  provision   8,603       4,730       3,129   81.9     174.9  
Federal income tax provision   1,761       2,324       785   (24.2 )   124.3  
Net income $ 6,842     $ 2,406     $ 2,344   184.4 %   191.9 %
                   
Basic earnings per share $ 0.67     $ 0.24     $ 0.23        
Diluted earnings per share $ 0.66     $ 0.23     $ 0.22        
Weighted average number of common shares outstanding   10,210,828       10,184,804       10,319,722        
Weighted average number of diluted shares outstanding   10,336,566       10,313,114       10,504,046        
                             

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

  March 31, 2018 December 31, 2017   March 31, 2017
  Amount   Percent   Amount   Percent   Amount   Percent
          (Dollars in thousands)
Commercial real estate:                      
Residential:                      
Micro-unit apartments $ 14,266     1.3 %   $ 14,331     1.3 %   $ 7,841     0.8 %
Other multifamily   176,126     16.2       170,571     15.6       113,877     12.5  
Total Multifamily   190,392     17.5       184,902     16.9       121,718     13.3  
                       
Non-residential:                      
Office   107,966     9.9       112,327     10.2       101,369     11.1  
Retail   131,978     12.1       129,875     11.9       105,233     11.5  
Mobile home park   20,783     1.9       19,970     1.8       20,519     2.2  
Warehouse   22,611     2.1       22,701     2.1       21,575     2.4  
Storage   32,031     2.9       32,201     2.9       35,290     3.9  
Other non-residential   51,405     4.7       44,768     4.1       33,733     3.7  
Total non-residential   366,774     33.6       361,842     33.0       317,719     34.8  
                       
Construction/land development:                      
One-to-four family residential   97,779     9.0       87,404     8.0       58,447     6.4  
Multifamily   85,773     7.9       108,439     9.9       108,801     11.9  
Commercial   5,735     0.5       5,325     0.5       -     0.0  
Land development   13,299     1.2       36,405     3.3       39,687     4.3  
Total construction/land development   202,586     18.6       237,573     21.7       206,935     22.6  
                       
One-to-four family residential:                      
Permanent owner occupied   162,544     14.9       148,304     13.6       135,743     14.9  
Permanent non-owner occupied   133,351     12.2       130,351     11.9       113,476     12.4  
Total one-to-four family residential   295,895     27.1       278,655     25.5       249,219     27.3  
                       
Business:                      
Aircraft   10,514     1.0       12,491     1.1       2,760     0.3  
Other business   13,723     1.2       10,596     1.0       7,610     0.8  
Total business   24,237     2.2       23,087     2.1       10,370     1.1  
                       
Consumer   11,131     1.0       9,133     0.8       7,878     0.9  
Total loans   1,091,015     100.0 %     1,095,192     100.0 %     913,839     100.0 %
Less:                      
Loans in Process ("LIP")   85,576           92,498           61,735      
Deferred loan fees, net   1,165           1,150           2,178      
ALLL   13,136           12,882           11,158      
Loans receivable, net $ 991,138         $ 988,662         $ 838,768      
                       
Concentrations of credit: (1)                      
Construction loans as % of total capital   84.9 %         108.6 %         111.7 %    
Total non-owner occupied commercial real estate as % of total capital   484.8 %         514.0 %         441.2 %    

(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
 
  At or For the Quarter Ended
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
    2018       2017       2017       2017       2017  
  (Dollars in thousands, except per share data)
Performance Ratios:                  
Return on assets   2.28 %     0.80 %     0.66 %     0.70 %     0.91 %
Return on equity   19.16       6.70       5.13       5.22       6.76  
Dividend payout ratio   10.47       29.17       38.89       38.89       26.09  
Equity-to-assets ratio   12.13       11.79       12.10       13.27       13.37  
Interest rate spread   3.73       3.51       3.38       3.47       3.51  
Net interest margin   3.88       3.65       3.53       3.60       3.64  
Average interest-earning assets to average interest-bearing liabilities   113.46       113.32       114.08       114.29       114.74  
Efficiency ratio   60.42       66.69       67.64       70.27       64.57  
Noninterest expense as a percent of average total assets   2.34       2.34       2.42       2.57       2.35  
Book value per common share $ 13.80     $ 13.27     $ 13.08     $ 13.00     $ 12.84  
                   
Capital Ratios: (1)                  
Tier 1 leverage ratio   10.44 %     10.20 %     10.80 %     11.46 %     11.57 %
Common equity tier 1 capital ratio   13.10       12.52       12.95       13.94       14.40  
Tier 1 capital ratio   13.10       12.52       12.95       13.94       14.40  
Total capital ratio   14.35       13.77       14.20       15.19       15.65  
                   
Asset Quality Ratios: (2)                  
Nonperforming loans as a percent of total loans   0.02 %     0.02 %     0.02 %     0.07 %     0.07 %
Nonperforming assets as a percent of total assets   0.05       0.05       0.17       0.22       0.27  
ALLL as a percent of total loans   1.31       1.28       1.28       1.29       1.31  
ALLL as a percent of nonperforming loans   7,508.90       7,196.65       6,545.95       1,935.68       1,853.49  
Net charge-offs (recoveries) to average loans receivable, net   (0.43 )     (0.20 )     (0.04 )     (0.00 )     (0.00 )
                   
Allowance for Loan Losses:                  
ALLL, beginning of the quarter $ 12,882     $ 12,110     $ 11,285     $ 11,158     $ 10,951  
Provision (Recapture of provision)   (4,000 )     (1,200 )     500       100       200  
Charge-offs   -       -       -       -       -  
Recoveries   4,254       1,972       325       27       7  
ALLL, end of the quarter $ 13,136     $ 12,882     $ 12,110     $ 11,285     $ 11,158  

(1) Capital ratios are for First Financial Northwest Bank only.
(2) Loans are reported net of undisbursed funds.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures (continued)
 
  At or For the Quarter Ended
  Mar 31,   Dec 31,   Sep 30,   Jun 30,   Mar 31,
    2018       2017       2017       2017       2017  
  (Dollars in thousands, except per share data)
Yields and Costs:                  
Yield on loans   5.37 %     5.05 %     4.95 %     4.91 %     4.93 %
Yield on investments available-for-sale   2.65       2.52       2.59       2.69       2.66  
Yield on interest-earning deposits   1.32       1.23       1.27       1.00       0.74  
Yield on FHLB stock   4.40       3.42       2.91       2.89       4.14  
Yield on interest-earning assets   4.98       4.67       4.51       4.54       4.52  
                   
Cost of deposits   1.15       1.08       1.05       1.03       1.00  
Cost of borrowings   1.66       1.46       1.40       1.24       1.05  
Cost of interest-bearing liabilities   1.25       1.16       1.13       1.07       1.01  
                   
Average Balances:                  
Loans $ 985,799     $ 963,097     $ 879,075     $ 844,853     $ 825,251  
Investments available-for-sale   142,236       141,962       132,959       132,375       128,993  
Interest-earning deposits   11,717       13,843       33,854       16,831       24,233  
FHLB stock   9,593       9,859       9,126       8,616       8,034  
Total interest-earning assets $ 1,149,345     $ 1,128,761     $ 1,055,014     $ 1,002,675     $ 986,511  
                   
Deposits $ 804,451     $ 780,671     $ 727,702     $ 692,922     $ 688,298  
Borrowings   208,544       215,418       197,098       184,357       171,500  
Total interest-bearing liabilities $ 1,012,995     $ 996,089     $ 924,800     $ 877,279     $ 859,798  
                   
Average assets $ 1,218,418     $ 1,199,774     $ 1,120,176     $ 1,066,477     $ 1,046,473  
Average stockholders' equity $ 144,786     $ 142,390     $ 143,975     $ 143,643     $ 140,546  
                                       

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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