FFNW First Financial Northwest Inc

First Financial Northwest, Inc. (the “Company”) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported net income for the quarter ended September 30, 2023, of $1.5 million, or $0.16 per diluted share, compared to $1.5 million, or $0.16 per diluted share, for the quarter ended June 30, 2023, and $3.9 million, or $0.43 per diluted share, for the quarter ended September 30, 2022. For the nine months ended September 30, 2023, net income was $5.1 million, or $0.56 per diluted share, compared to net income of $10.0 million, or $1.10 per diluted share, for the comparable nine-month period in 2022.

“The actions of the Federal Reserve’s Open Market Committee to continue increasing short-term interest rates is adversely impacting our profitability via reduced loan demand and a higher cost of funds, negatively impacting our net interest margin in recent quarters. Fortunately, however, the impact on profitability, albeit still challenging, was less severe this quarter than the previous two. I am pleased with the efforts of our employees as they continue to navigate a very competitive and challenging environment to attract and retain deposits and generate loans,” stated Joseph W. Kiley III, President and CEO.

“Credit quality at September 30, 2023 remained strong, with nonperforming assets of $201,000 and additional loan delinquencies of $1.0 million on a total loan portfolio of $1.18 billion. We also recorded a $300,000 recapture of the provision for credit losses during the quarter as a result of a reduction in loans receivable which included the payoff of a $4.6 million commercial real estate loan that carried a higher credit risk rating and a credit upgrade of an $8.7 million commercial real estate loan,” continued Kiley.

“While we are always striving to operate very efficiently, the focus is even greater in this environment. During the quarter, we reduced our staffing by approximately 6%. This reduction is anticipated to save the Company approximately $215,000 in noninterest expense per quarter going forward. We also initiated a search during the quarter for a senior C&I lending credit officer. This is being pursued in large part due to the lower-cost deposit opportunities associated with a C&I division, and we believe it prudent to start down this path by hiring a qualified individual to create appropriate credit expectations before taking the next step of building out the rest of the team,” concluded Kiley.

Highlights for the quarter ended September 30, 2023:

• The Company paid a regular quarterly cash dividend to shareholders of $0.13 per share.
• The Bank’s Tier 1 leverage and total capital ratios were 10.3% and 16.0% at September 30, 2023, compared to 10.0% and 15.8% at June 30, 2023, and 10.4% and 15.5% at September 30, 2022, respectively.
• Credit quality remained strong with nonperforming assets of $201,000, or 0.01% of total assets at September 30, 2023.
• Based on management’s evaluation of the adequacy of the Allowance for Credit Losses (“ACL”) at September 30, 2023, the Company recognized a $300,000 recapture of provision for credit losses during the quarter.

Deposits totaled $1.21 billion at September 30, 2023, compared to $1.22 billion at June 30, 2023, and $1.15 billion at September 30, 2022. Total deposits decreased $14.6 million in the quarter ended September 30, 2023, compared to the quarter ended June 30, 2023, including a $7.6 million decrease in noninterest-bearing demand deposits. Interest-bearing demand deposits decreased $28.3 million as several large deposit relationships shifted funds into higher-earning money market accounts which contributed to a $33.8 million increase in that category. Retail certificate of deposit balances declined by $10.5 million during the quarter. At September 30, 2023, the Company held $49.6 million in interest-earning deposits that can be used to fund loan growth or reduce brokered deposits and/or other wholesale liabilities in future periods, compared to $43.0 million at June 30, 2023, and $15.2 million at September 30, 2022. Total deposits were up $61.0 million in the quarter ended September 30, 2023, compared to the same quarter a year ago.

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

	Sep 30,2023				Jun 30,2023				Sep 30,2022				ThreeMonthChange				One Year Change
	(Dollars in thousands)
Deposits:
Noninterest-bearing demand	$	104,164			$	111,768			$	118,842			$	(7,604	)		$	(14,678	)
Interest-bearing demand		60,816				89,080				95,767				(28,264	)			(34,951	)
Savings		18,844				20,364				24,625				(1,520	)			(5,781	)
Money market		501,168				467,411				572,137				33,757				(70,969	)
Certificates of deposit, retail		349,446				359,919				268,528				(10,473	)			80,918
Brokered deposits		175,972				176,422				69,537				(450	)			106,435
Total deposits	$	1,210,410			$	1,224,964			$	1,149,436			$	(14,554	)		$	60,974

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

September 30, 2023
	Noninterest-bearingdemand			Interest-bearingdemand			Savings			Moneymarket			Certificatesof deposit,retail			Brokereddeposits			Total
	(Dollars in thousands)
King County
Renton	$	32,025		$	15,316		$	12,140		$	284,433		$	239,940		$	-		$	583,854
Landing		3,036			1,689			91			16,606			8,934			-			30,356
Woodinville		2,377			2,425			981			9,016			10,453			-			25,252
Bothell		3,798			751			35			4,363			2,365			-			11,312
Crossroads		10,589			4,067			77			28,773			14,460			-			57,966
Kent		6,665			7,397			4			13,310			7,839			-			35,215
Kirkland		10,385			1,765			148			12,277			1,174			-			25,749
Issaquah		1,476			1,966			30			3,719			6,170			-			13,361
Total King County		70,351			35,376			13,506			372,497			291,335			-			783,065
Snohomish County
Mill Creek		5,126			3,474			639			14,069			7,910			-			31,218
Edmonds		11,817			6,735			950			24,681			14,848			-			59,031
Clearview		5,497			5,468			1,495			18,896			9,132			-			40,488
Lake Stevens		3,740			4,567			964			23,657			12,126			-			45,054
Smokey Point		3,568			3,877			1,272			42,544			11,835			-			63,096
Total Snohomish County		29,748			24,121			5,320			123,847			55,851			-			238,887
Pierce County
University Place		3,176			99			3			3,279			996			-			7,553
Gig Harbor		889			1,220			15			1,545			1,264			-			4,933
Total Pierce County		4,065			1,319			18			4,824			2,260			-			12,486
Brokered deposits		-			-			-			-			-			175,972			175,972
Total deposits	$	104,164		$	60,816		$	18,844		$	501,168		$	349,446		$	175,972		$	1,210,410

June 30, 2023
	Noninterest-bearingdemand			Interest-bearingdemand			Savings			Moneymarket			Certificatesof deposit,retail			Brokereddeposits			Total
	(Dollars in thousands)
King County
Renton	$	31,802		$	41,857		$	12,952		$	237,814		$	254,016		$	-		$	578,441
Landing		2,773			1,831			137			15,120			8,657			-			28,518
Woodinville		2,440			2,653			1,032			10,077			14,647			-			30,849
Bothell		4,047			765			39			4,917			2,187			-			11,955
Crossroads		17,108			4,619			87			27,370			13,599			-			62,783
Kent		11,237			9,841			4			15,500			7,097			-			43,679
Kirkland		7,656			1,356			149			11,137			1,160			-			21,458
Issaquah		2,116			1,681			102			3,070			5,594			-			12,563
Total King County		79,179			64,603			14,502			325,005			306,957			-			790,246
Snohomish County
Mill Creek		5,797			2,638			591			15,209			7,140			-			31,375
Edmonds		12,384			7,659			895			28,177			12,871			-			61,986
Clearview		4,888			4,490			1,576			19,928			7,872			-			38,754
Lake Stevens		3,465			4,038			1,071			30,899			10,802			-			50,275
Smokey Point		2,953			4,619			1,715			42,192			11,846			-			63,325
Total Snohomish County		29,487			23,444			5,848			136,405			50,531			-			245,715
Pierce County
University Place		2,428			83			3			3,817			926			-			7,257
Gig Harbor		674			950			11			2,184			1,505			-			5,324
Total Pierce County		3,102			1,033			14			6,001			2,431			-			12,581
Brokered deposits		-			-			-			-			-			176,422			176,422
Total deposits	$	111,768		$	89,080		$	20,364		$	467,411		$	359,919		$	176,422		$	1,224,964

Net loans receivable totaled $1.17 billion at both September 30, 2023 and June 30, 2023, compared to $1.14 billion at September 30, 2022. At September 30, 2023, loan totals were down across all categories except for an $11.6 million increase in one-to-four family residential and a $548,000 increase in business loans. The average balance of net loans receivable totaled $1.17 billion for the quarter ended September 30, 2023, compared to $1.18 billion for the quarter ended June 30, 2023, and $1.13 billion for the quarter ended September 30, 2022.

The ACL to total loans was 1.29% and 1.31% at September 30, 2023 and June 30, 2023, respectively, compared to an allowance for loan and lease losses (“ALLL”) to total loans receivable of 1.27% at September 30, 2022.

There were $201,000 in nonperforming loans at both September 30, 2023 and June 30, 2023, compared to $232,000 at September 30, 2022. There was no other real estate owned (“OREO”) at September 30, 2023, June 30, 2023, and September 30, 2022.

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

	Sep 30,				Jun 30,				Sep 30,				Three Month				One Year
		2023				2023				2022			Change				Change
	(Dollars in thousands)
Nonperforming loans:
One-to-four family residential	$	–			$	–			$	39			$	‒			$	(39	)
Consumer		201				201				193				‒				8
Total nonperforming loans		201				201				232								(31	)
OREO		–				–				–				–				–
Total nonperforming assets	$	201			$	201			$	232			$	‒			$	(31	)
Nonperforming assets as a percent
of total assets		0.01%				0.01%				0.02%

Net interest income totaled $9.7 million for the quarter ended September 30, 2023, compared to $10.3 million for the quarter ended June 30, 2023, and $12.7 million for the quarter ended September 30, 2022. The decrease in the current quarter compared to the quarter ended June 30, 2023, was primarily due to higher interest expense on deposits, 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. Since March 2022, the Federal Open Market Committee of the Federal Reserve System has increased the target range for the federal funds rate by 525 basis points, including 25 basis points during the third quarter of 2023, to a range of 5.25% to 5.50%.

Total interest income was $19.7 million for both the quarters ended September 30, 2023 and June 30, 2023, compared to $15.4 million for the quarter ended September 30, 2022. Loan yield increased to 5.73% during the recent quarter, compared to 5.71% and 4.77% for the quarters ended June 30, 2023 and September 30, 2022, respectively. Yield on investments increased to 3.98% during the current quarter, compared to 3.93% and 2.90% for the quarters ended June 30, 2023 and September 30, 2022, respectively.

Total interest expense was $10.0 million for the quarter ended September 30, 2023, compared to $9.4 million for the quarter ended June 30, 2023, and $2.7 million for the quarter ended September 30, 2022. The average cost of interest-bearing deposits was 3.33% for the quarter ended September 30, 2023, compared to 3.06% for the quarter ended June 30, 2023, and 0.87% for the quarter ended September 30, 2022. The increase from the quarter ended June 30, 2023, was due primarily to increased interest expense on money market and certificate of deposit balances in a highly competitive marketplace for deposits. Advances from the FHLB totaled $125.0 million at September 30, 2023, compared to $120.0 million at June 30, 2023, and $150.0 million at September 30, 2022. At September 30, 2023, all $125.0 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 36 months and a weighted average fixed interest rate of 1.84% as of September 30, 2023. The average cost of borrowings was 2.42% for the quarter ended September 30, 2023, compared to 2.55% for the quarter ended June 30, 2023, and 1.48% for the quarter ended September 30, 2022.

Net interest margin was 2.69% for the quarter ended September 30, 2023, compared to 2.84% for the quarter ended June 30, 2023, and 3.65% for the quarter ended September 30, 2022. The decrease in net interest margin for the quarter ended September 30, 2023, compared to the quarter ended June 30, 2023, was due primarily to the cost of interest-bearing liabilities increasing more than the yields on interest-earnings assets, with a 23-basis point increase in the Company’s average cost of interest-bearing liabilities to 3.24% from 3.01%, partially offset by a three basis point increase in the average yield on interest-earning assets to 5.46% from 5.43%. The 15-basis point decline in the net interest margin in the current quarter was less severe than the 38-basis point decline in the previous quarter and the 30-basis point decline in the quarter ended March 31, 2023, from the quarter ended December 31, 2022. The net interest margin for the month of September 2023 was 2.71%.

Noninterest income for the quarter ended September 30, 2023, totaled $677,000, compared to $798,000 for the quarter ended June 30, 2023, and $778,000 for the quarter ended September 30, 2022. The $121,000 decrease in noninterest income for the quarter ended September 30, 2023, compared to the quarter ended June 30, 2023, was primarily due to a $79,000 decrease in other noninterest income related to our fintech focused venture capital investment, a $42,000 decrease in wealth management revenue and a $30,000 decrease in BOLI income, partially offset by a $35,000 increase in loan related fee income. The decrease for the quarter ended September 30, 2023, compared to the prior year quarter, primarily reflects lower loan related fee income and wealth management revenue, partially offset by an increase in other noninterest income.

Noninterest expense totaled $8.8 million for the quarter ended September 30, 2023, compared to $9.5 million for the quarter ended June 30, 2023, and $9.0 million for the quarter ended September 30, 2022. The decrease in noninterest expense for the quarter ended September 30, 2023, compared to the quarter ended June 30, 2023, was primarily due to decreases in other general and administrative expenses and professional fees and, to a lesser extent, regulatory assessments and salaries and employee benefits. Professional fees in the prior quarter included $419,000 in expenses related to a potential business combination which was abandoned during the quarter, while other general and administrative fees included the recognition of approximately $190,000 in one-time expenses related to the Bank’s 100-year celebration. Regulatory assessments decreased $67,000 for the third quarter of 2023, compared to the second quarter of 2023, the latter which included a year-to-date true up of expenses relating to an increase in deposit insurance assessments instituted earlier in the year. Salaries and employee benefits decreased $46,000 for the quarter ended September 30, 2023, compared to the quarter ended June 30, 2023, as the Company took steps to rein in costs by reducing staffing amid tough market conditions. Late in the quarter ended September 30, 2023, the Company eliminated approximately 6% of its full-time positions, with salaries and benefits for those positions totaling approximately $215,000 per quarter. The decrease in noninterest expense for the quarter ended September 30, 2023, compared to the year-ago quarter, was primarily due to a reduction in salaries and employee benefits, reflecting lower estimated incentive compensation and profit-sharing accruals for 2023, partially offset by higher regulatory assessments and data processing fees.First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; an FDIC insured Washington State-chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through 15 full-service banking offices. For additional information about us, please visit our website at ffnwb.com and click on the “Investor Relations” link at the bottom of the page.

Forward-looking statements:When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are not historical facts but instead represent management’s current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance. 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; changes in the interest rate environment, including the recent increases in the Federal Reserve benchmark rate and duration at which such increased interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; the impact of continuing high inflation and the current and future monetary policies of the Federal Reserve in response thereto; the effects of any federal government shutdown; increased competitive pressures; legislative and regulatory changes; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; effects of critical accounting policies and judgments, including the use of estimate in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; 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.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Balance Sheets(Dollars in thousands)(Unaudited)
Assets	Sep 30, 2023				Jun 30, 2023				Sep 30, 2022				ThreeMonthChange			OneYearChange
Cash on hand and in banks	$	8,074			$	10,621			$	9,684			(24.0	)%		(16.6	)%
Interest-earning deposits with banks		49,618				42,956				15,227			15.5			225.9
Investments available-for-sale, at fair value		204,975				208,927				221,278			(1.9	)		(7.4	)
Investments held-to-maturity, at amortized cost		2,450				2,444				2,438			0.2			0.5
Loans receivable, net of allowance of $15,306, $15,606, and $14,726, respectively		1,168,079				1,171,916				1,143,348			(0.3	)		2.2
Federal Home Loan Bank ("FHLB") stock, at cost		6,803				6,603				7,712			3.0			(11.8	)
Accrued interest receivable		7,263				6,690				6,261			8.6			16.0
Deferred tax assets, net		3,156				3,275				2,355			(3.6	)		34.0
Premises and equipment, net		19,921				20,283				21,608			(1.8	)		(7.8	)
Bank owned life insurance ("BOLI"), net		37,398				36,922				36,064			1.3			3.7
Prepaid expenses and other assets		13,673				13,051				13,605			4.8			0.5
Right of use asset ("ROU"), net		2,818				3,018				3,260			(6.6	)		(13.6	)
Goodwill		889				889				889			0.0			0.0
Core deposit intangible, net		451				484				582			(6.8	)		(22.5	)
Total assets	$	1,525,568			$	1,528,079			$	1,484,311			(0.2	)		2.8
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits	$	104,164			$	111,768			$	118,842			(6.8	)		(12.4	)
Interest-bearing deposits		1,106,246				1,113,196				1,030,594			(0.6	)		7.3
Total deposits		1,210,410				1,224,964				1,149,436			(1.2	)		5.3
Advances from the FHLB		125,000				120,000				150,000			4.2			(16.7	)
Advance payments from borrowers for taxes and insurance		4,760				2,524				5,033			88.6			(5.4	)
Lease liability, net		3,011				3,213				3,441			(6.3	)		(12.5	)
Accrued interest payable		2,646				2,045				185			29.4			1330.3
Other liabilities		20,506				16,618				18,326			23.4			11.9
Total liabilities		1,366,333				1,369,364				1,326,421			(0.2	)		3.0
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding		-				-				-			n/a			n/a
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding 9,179,510 shares at September 30 2023, 9,148,086 shares at June 30 2023, and 9,127,595 shares at September 30, 2022		92				92				91			0.0			1.1
Additional paid-in capital		72,926				72,544				72,295			0.5			0.9
Retained earnings		96,206				95,896				92,928			0.3			3.5
Accumulated other comprehensive loss, net of tax		(9,989	)			(9,817	)			(7,424	)		1.8			34.6
Total stockholders' equity		159,235				158,715				157,890			0.3			0.9
Total liabilities and stockholders' equity	$	1,525,568			$	1,528,079			$	1,484,311			(0.2	)%		2.8	%

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Income Statements(Dollars in thousands, except per share data)(Unaudited)
	Quarter Ended
	Sep 30, 2023				Jun 30, 2023				Sep 30, 2022				Three Month Change			One Year Change
Interest income
Loans, including fees	$	16,918			$	16,849			$	13,618			0.4	%		24.2	%
Investments		2,118				2,108				1,609			0.5			31.6
Interest-earning deposits with banks		525				620				125			(15.3	)		320.0
Dividends on FHLB Stock		113				120				83			(5.8	)		36.1
Total interest income		19,674				19,697				15,435			(0.1	)		27.5
Interest expense
Deposits		9,205				8,590				2,326			7.2			295.7
Other borrowings		766				798				392			(4.0	)		95.4
Total interest expense		9,971				9,388				2,718			6.2			266.9
Net interest income		9,703				10,309				12,717			(5.9	)		(23.7	)
Recapture of provision for credit losses		(300	)			(247	)			(400	)		21.5			(25.0	)
Net interest income after recapture of provision for credit losses		10,003				10,556				13,117			(5.2	)		(23.7	)
Noninterest income
BOLI income		244				274				243			(10.9	)		0.4
Wealth management revenue		53				95				89			(44.2	)		(40.4	)
Deposit related fees		247				252				245			(2.0	)		0.8
Loan related fees		79				44				195			79.5			(59.5	)
Other		54				133				6			(59.4	)		800.0
Total noninterest income		677				798				778			(15.2	)		(13.0	)
Noninterest expense
Salaries and employee benefits		5,018				5,064				5,417			(0.9	)		(7.4	)
Occupancy and equipment		1,193				1,160				1,188			2.8			0.4
Professional fees		553				887				549			(37.7	)		0.7
Data processing		742				711				675			4.4			9.9
Regulatory assessments		200				267				105			(25.1	)		90.5
Insurance and bond premiums		111				115				112			(3.5	)		(0.9	)
Marketing		97				98				92			(1.0	)		5.4
Other general and administrative		856				1,202				876			(28.8	)		(2.3	)
Total noninterest expense		8,770				9,504				9,014			(7.7	)		(2.7	)
Income before federal income tax provision		1,910				1,850				4,881			3.2			(60.9	)
Federal income tax provision		409				362				935			13.0			(56.3	)
Net income	$	1,501			$	1,488			$	3,946			0.9	%		(62.0	)%
Basic earnings per share	$	0.16			$	0.16			$	0.44
Diluted earnings per share	$	0.16			$	0.16			$	0.43
Weighted average number of common shares outstanding		9,127,568				9,120,468				8,981,037
Weighted average number of diluted shares outstanding		9,150,059				9,124,227				9,068,541

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

	September 30, 2023							June 30, 2023							September 30, 2022
	Amount				Percent			Amount				Percent			Amount				Percent
	(Dollars in thousands)
Commercial real estate:
Residential:
Multifamily	$	140,022			11.7	%		$	141,413			11.9	%		$	132,703			11.5	%
Total multifamily residential		140,022			11.7				141,413			11.9				132,703			11.5
Non-residential:
Office		72,773			6.1				79,338			6.7				84,739			7.3
Retail		130,101			11.0				131,877			11.1				137,908			11.9
Mobile home park		21,285			1.8				22,798			1.9				23,411			2.1
Hotel / motel		63,954			5.4				64,297			5.4				56,655			4.9
Nursing Home		11,676			1.0				11,739			1.0				12,445			1.1
Warehouse		19,446			1.6				19,557			1.6				20,180			1.7
Storage		33,229			2.8				33,418			2.8				33,982			2.9
Other non-residential		42,227			3.7				43,332			3.7				44,368			3.9
Total non-residential		394,691			33.4				406,356			34.2				413,688			35.8
Construction/land:
One-to-four family residential		43,532			3.7				47,168			4.0				41,208			3.6
Multifamily		2,043			0.2				547			0.0				15,405			1.3
Land development		9,766			0.8				10,113			0.9				15,496			1.4
Total construction/land		55,341			4.7				57,828			4.9				72,109			6.3
One-to-four family residential:
Permanent owner occupied		260,970			22.1				246,585			20.8				220,342			19.0
Permanent non-owner occupied		232,238			19.6				235,008			19.8				227,498			19.6
Total one-to-four family residential		493,208			41.7				481,593			40.6				447,840			38.6
Business:
Aircraft		1,981			0.2				2,017			0.2				2,335			0.2
Small Business Administration ("SBA")		1,810			0.3				1,824			0.2				525			0.0
Paycheck Protection Plan ("PPP")		551			0.0				629			0.1				1,201			0.1
Other business		23,633			1.9				22,957			1.8				27,978			2.4
Total business		27,975			2.4				27,427			2.3				32,039			2.7
Consumer:
Classic, collectible and other auto		59,955			5.1				61,611			5.1				49,047			4.2
Other consumer		12,193			1.0				11,294			1.0				10,648			0.9
Total consumer		72,148			6.1				72,905			6.1				59,695			5.1
Total loans		1,183,385			100.0	%			1,187,522			100.0	%			1,158,074			100.0	%
Less:
ACL		15,306							15,606							14,726
Loans receivable, net	$	1,168,079						$	1,171,916						$	1,143,348
Concentrations of credit: (1)
Construction loans as % of total capital		37.8	%						40.0	%						49.1	%
Total non-owner occupied commercial real estate as % of total capital		328.1	%						336.8	%						354.6	%

(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 SUBSIDIARIESKey Financial Measures(Unaudited)
	At or For the Quarter Ended
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
		2023				2023				2023				2022				2022
	(Dollars in thousands, except per share data)
Performance Ratios: (1)
Return on assets		0.39	%			0.39	%			0.57	%			0.86	%			1.06	%
Return on equity		3.71				3.74				5.31				8.04				9.88
Dividend payout ratio		79.26				79.90				56.52				34.29				27.40
Equity-to-assets ratio		10.44				10.39				10.14				10.67				10.64
Tangible equity-to-assets ratio (2)		10.36				10.31				10.06				10.58				10.55
Net interest margin		2.69				2.84				3.22				3.52				3.65
Average interest-earning assets to average interest-bearing liabilities		116.94				116.27				117.78				117.93				119.08
Efficiency ratio		84.49				86.95				75.44				65.84				66.80
Noninterest expense as a percent of average total assets		2.29				2.50				2.42				2.30				2.43
Book value per common share	$	17.35			$	17.35			$	17.45			$	17.57			$	17.30
Tangible book value per common share (2)		17.20				17.20				17.30				17.41				17.14
Capital Ratios: (3)
Tier 1 leverage ratio		10.25	%			10.02	%			10.24	%			10.31	%			10.43	%
Common equity tier 1 capital ratio		14.75				14.49				14.33				14.37				14.24
Tier 1 capital ratio		14.75				14.49				14.33				14.37				14.24
Total capital ratio		16.00				15.75				15.59				15.62				15.49
Asset Quality Ratios: (4)
Nonperforming loans as a percent of total loans		0.02	%			0.02	%			0.02	%			0.02	%			0.02	%
Nonperforming assets as a percent of total assets		0.01				0.01				0.01				0.01				0.02
ACL as a percent of total loans		1.29				1.31				1.33				1.29				1.27
Net (recoveries) charge-offs to average loans receivable, net		0.00				0.00				(0.00	)			(0.00	)			(0.00	)
Allowance for Credit Losses:
ACL, beginning of the quarter	$	15,606			$	16,028			$	15,227			$	14,726			$	15,125
Beginning balance adjustment from adoption of Topic 326		-				-				500				-				-
(Recapture of provision) provision		(300	)			(400	)			300				500				(400	)
Charge-offs		-				(22	)			-				-				-
Recoveries		-				-				1				1				1
ACL, end of the quarter	$	15,306			$	15,606			$	16,028			$	15,227			$	14,726

(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 SUBSIDIARIESKey Financial Measures(Unaudited)
	At or For the Quarter Ended
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
	2023				2023				2023				2022				2022
	(Dollars in thousands)
Yields and Costs: (1)
Yield on loans		5.73	%			5.71	%			5.56	%			5.19	%			4.77	%
Yield on investments		3.98				3.93				3.88				3.60				2.90
Yield on interest-earning deposits		5.18				4.91				4.40				3.31				2.02
Yield on FHLB stock		6.57				7.06				7.30				4.58				5.56
Yield on interest-earning assets		5.46	%			5.43	%			5.29	%			4.90	%			4.43	%
Cost of interest-bearing deposits		3.33	%			3.06	%			2.41	%			1.51	%			0.87	%
Cost of borrowings		2.42				2.55				2.69				2.46				1.48
Cost of interest-bearing liabilities		3.24	%			3.01	%			2.44	%			1.63	%			0.93	%
Cost of total deposits		3.03	%			2.78	%			2.17	%			1.36	%			0.78	%
Cost of funds		2.97				2.76				2.23				1.48				0.84
Average Balances:
Loans	$	1,171,483			$	1,182,939			$	1,168,539			$	1,150,181			$	1,132,233
Investments		211,291				215,113				219,969				221,113				220,244
Interest-earning deposits		40,202				50,691				21,729				24,608				24,565
FHLB stock		6,820				6,814				7,219				7,710				5,923
Total interest-earning assets	$	1,429,796			$	1,455,557			$	1,417,456			$	1,403,612			$	1,382,965
Interest-bearing deposits	$	1,097,324			$	1,126,598			$	1,065,827			$	1,040,357			$	1,056,079
Borrowings		125,402				125,275				137,600				149,946				105,272
Total interest-bearing liabilities	$	1,222,726			$	1,251,873			$	1,203,427			$	1,190,303			$	1,161,351
Noninterest-bearing deposits		109,384				111,365				115,708				121,518				125,561
Total deposits and borrowings	$	1,332,110			$	1,363,238			$	1,319,135			$	1,311,821			$	1,286,912
Average assets	$	1,522,224			$	1,547,321			$	1,509,297			$	1,496,125			$	1,470,816
Average stockholders' equity		160,299				159,764				162,016				159,120				158,515

(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-to-assets 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 table provides a reconciliation between the GAAP and non-GAAP measures:

	Quarter Ended
	Sep 30,2023				Jun 30,2023				Mar 31,2023				Dec 31,2022				Sep 30,2022
	(Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP)	$	159,235			$	158,715			$	159,645			$	160,360			$	157,890
Less:
Goodwill		889				889				889				889				889
Core deposit intangible, net		451				484				516				548				582
Tangible equity (Non-GAAP)	$	157,895			$	157,342			$	158,240			$	158,923			$	156,419
Total assets (GAAP)	$	1,525,568			$	1,528,079			$	1,574,271			$	1,502,916			$	1,484,311
Less:
Goodwill		889				889				889				889				889
Core deposit intangible, net		451				484				516				548				582
Tangible assets (Non-GAAP)	$	1,524,228			$	1,526,706			$	1,572,866			$	1,501,479			$	1,482,840
Common shares outstanding at period end		9,179,510				9,148,086				9,148,086				9,127,595				9,127,595
Equity-to-assets ratio (GAAP)		10.44	%			10.39	%			10.14	%			10.67	%			10.64	%
Tangible equity-to-tangible assets ratio (Non-GAAP)		10.36				10.31				10.06				10.58				10.55
Book value per common share (GAAP)	$	17.35			$	17.35			$	17.45			$	17.57			$	17.30
Tangible book value per share (Non-GAAP)		17.20				17.20				17.30				17.41				17.14

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