GlobeNewswire Inc | Jan 27, 2022 09:15AM EST

January 27, 2022

RENTON, Wash., Jan. 27, 2022 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc. (the Company) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the Bank), today reported net income for the quarter ended December31, 2021, of $2.7million, or $0.29 per diluted share, compared to $3.2million, or $0.34 per diluted share, for the quarter ended September 30, 2021, and $2.6million, or $0.28 per diluted share, for the quarter ended December31, 2020. For the year ended December31, 2021, net income was $12.2million, or $1.29per diluted share, compared to net income of $8.6million, or $0.88 per diluted share, for the year ended December31, 2020.

The final quarter of 2021 showed continued improvement in our funding base, with our average cost of funds declining to 0.55% from 0.64% in the quarter ended September 30, 2021, and 1.07% in the quarter ended December 31, 2020, stated Joseph W. Kiley, III, President and CEO. If market interest rates remain low, we expect this decline to continue as we have approximately $145.3 million in retail certificates of deposit at a weighted average rate of 0.99% maturing in the next 12 months, and an additional $96.0 million maturing in the subsequent 12 to 24 months, at a weighted average rate of 1.72%. In the event that the Federal Reserve raises interest rates, the impact of repricing maturing CDs may be less significant than in the current low rate environment, but still favorable to our interest expense on CDs, although, as previously disclosed, the Banks interest rate profile is slightly asset sensitive and currently not anticipated to change, continued Kiley.

I was pleased to see continued loan growth despite $11.5 million in Paycheck Protection Program loan repayments and forgiveness. In addition, for the second consecutive quarter we had no nonperforming assets, concluded Kiley.

Changes in the provision for loan losses were the primary contributors to the change in net income for the quarter ended December 31, 2021, compared to the quarter ended September 30, 2021. The Company recorded a $600,000 provision for loan losses in the quarter ended December 31, 2021, compared to a $100,000 provision for loan losses in the quarter ended September 30, 2021, and a provision for loan losses of $600,000 in the quarter ended December 31, 2020. The provision for loan losses in the quarter ended December 31, 2021, was due primarily to the growth in loans receivable, excluding the reduction in Paycheck Protection Program (PPP) loan balances that do not require an allowance for loan and lease losses (ALLL) due to their government guarantees. Credit downgrades on two relationships, both relating to commercial real estate loans secured by office buildings in King County that are either experiencing or are expected to have increased vacancies, also contributed to the fluctuation in the provision. Uncertainties about the timing to fill the current and expected vacancies resulted in the downgrades for both relationships. One loan in the amount of $4.7 million was downgraded to special mention, while the second relationship with loans totaling $8.4 million was downgraded to substandard and classified as impaired. Impaired loans are reviewed individually to determine the loan loss allowance requirement. The impairment analysis indicated that the Bank does not anticipate incurring losses on this loan and funds previously allocated to this loan in the ALLL calculation were recaptured during the quarter, partially offsetting the impact from loan growth and the other loan downgrade to special mention discussed above. All payments on these downgraded loans were current as of December 31, 2021, and the loans appear to be well collateralized based on recent valuations. For the year ended December31, 2021, the provision for loan losses totaled $300,000, compared to a provision for loan losses of $1.9million for the year ended December31, 2020.

Highlights for the quarter and year ended December31, 2021:

-- Net loans receivable increased by $1.8million to $1.10billion at December31, 2021, despite a reduction in PPP loan balances totaling $11.5 million. -- Total deposits increased by $15.7million in the quarter, including a $2.4million increase in noninterest-bearing demand deposits. -- The Companys book value per share increased to $17.30 at December31, 2021, compared to $17.03 at September30, 2021, and $16.05 at December31, 2020. -- The Company repurchased 392,322 shares at an average price of $16.88 per share during the quarter for a total of 704,950 shares repurchased at an average price of $16.11 per share during the year, an amount equal to approximately 7.2% of shares outstanding at the beginning of 2021. -- The Company paid regular quarterly cash dividends to shareholders totaling $0.44 per share for the year, a 10% increase over the prior year. -- The Banks Tier 1 leverage and total capital ratios at December31, 2021, were 10.3% and 15.5%, respectively, compared to 10.2% and 15.5%, respectively, at September30, 2021, and 10.3% and 15.6%, respectively at December31, 2020. -- Based on managements evaluation of the adequacy of the ALLL including the estimated impact of the COVID-19 pandemic, the Bank recorded a $600,000 provision for loan losses during the quarter, bringing the total provision for loan losses to $300,000 for the year.

Deposits totaled $1.16billion at December31, 2021, compared to $1.14billion at September30, 2021, and $1.09billion at December31, 2020. The $27.6million increase in money market deposits and $2.4million increase in noninterest-bearing demand deposits in the quarter ended December31, 2021, more than offset the reductions in retail certificates of deposit and interest-bearing demand deposits as the Bank continues its strategy to shift the deposit composition to lower cost transaction accounts.

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

Dec 31, Sep 30, Dec 31, Three One 2021 2021 2020 Month Year Change ChangeDeposits: (Dollars in thousands) Noninterest-bearing $ 117,751 $ 115,311 $ 91,285 $ 2,440 $ 26,466 demandInterest-bearing 97,907 104,761 108,182 (6,854 ) (10,275 )demandSavings 23,146 23,024 19,221 122 3,925 Money market 624,543 596,911 465,369 27,632 159,174 Certificates of 294,127 301,729 409,576 (7,602 ) (115,449 )deposit, retailTotal deposits $ 1,157,474 $ 1,141,736 $ 1,093,633 $ 15,738 $ 63,841

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

December 31, 2021 Noninterest-bearing Interest-bearing Money Certificates demand demand Savings market of deposit, Total retail(Dollars in thousands)King County Renton $ 44,550 $ 46,485 $ 14,948 $ 316,781 $ 251,860 $ 674,624Landing 6,060 3,218 180 24,056 3,620 37,134Woodinville 3,625 6,814 1,017 19,585 4,974 36,015Bothell 2,590 1,726 86 8,453 1,158 14,013Crossroads 14,094 4,129 45 69,687 4,622 92,577Kent 6,022 8,148 2 20,268 282 34,722Kirkland 5,449 333 12 6,834 25 12,653Issaquah 1,326 367 17 4,532 100 6,342Total King 83,716 71,220 16,307 470,196 266,641 908,080County Snohomish CountyMill Creek 5,854 3,559 694 18,781 7,101 35,989Edmonds 13,839 6,809 1,103 41,513 8,954 72,218Clearview 5,799 4,610 1,380 24,925 1,290 38,004Lake 3,552 6,878 1,904 33,122 4,500 49,956StevensSmokey 3,476 4,205 1,727 33,550 5,639 48,597PointTotalSnohomish 32,520 26,061 6,808 151,891 27,484 244,764County Pierce CountyUniversity 1,058 51 8 481 2 1,600PlaceGig Harbor 457 575 23 1,975 - 3,030TotalPierce 1,515 626 31 2,456 2 4,630County Total $ 117,751 $ 97,907 $ 23,146 $ 624,543 $ 294,127 $ 1,157,474deposits

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

Net loans receivable totaled $1.10billion at December31, 2021, September30, 2021, and December31, 2020. During the quarter ended December31, 2021, new originations of non-residential commercial real estate loans, land development, classic, collectible and other auto, and one-to-four family residential loans, more than offset the amount of loan repayments in the quarter, including PPP loan repayments and forgiveness. The average balance of net loans receivable totaled $1.11billion for the quarter ended December31, 2021, compared to 1.09billion for the quarter ended September30, 2021, and $1.13billion for the quarter ended December31, 2020. For the year ended December31, 2021, the average balance of net loans receivable was $1.10billion, compared to $1.12billion for the year ended December31, 2020, with balances of PPP loans declining by $30.4 million in the year ended December 31, 2021.

The ALLL represented 1.40% of total loans receivable at December31, 2021, compared to 1.35% of total loans receivable at September30, 2021, and 1.36% of total loans receivable at December31, 2020.

There were no nonperforming loans or other real estate owned (OREO) at both December31, 2021, and September30, 2021, compared to $2.1million and $454,000, respectively, at December31, 2020. The $2.1 million multifamily loan in foreclosure at December31, 2020, was repaid in full in the quarter ended June30, 2021, while two undeveloped commercial lots that comprised the $454,000 OREO balance were sold during the quarter ended September30, 2021.

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

Dec 31, Sep 30, Dec 31, Three One Month Year 2021 2021 2020 Change Change (Dollars in thousands)Nonperforming loans: $ $ $ Multifamily $ 2,104 $ (2,104 ) Totalnonperforming 2,104 (2,104 )loans OREO 454 (454 ) Total $ $ $ nonperforming $ 2,558 $ (2,558 )assets ^(1) Nonperformingassets as a percentof total assets 0.00% 0.00% 0.18%

(1) The difference between nonperforming assets reported above, and the totals reported by other industry sources, is due to their inclusion of all Troubled Debt Restructured Loans ("TDRs") as nonperforming loans, although 100% of the Banks TDRs were performing in accordance with their restructured terms at December 31, 2021.

The Company accounts for certain loan modifications or restructurings as TDRs. In general, the modification or restructuring of a debt is considered a TDR if, for economic or legal reasons related to the borrowers financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. At December31, 2021, TDRs totaled $2.1million, compared to $2.4million at September30, 2021, and $3.9million at December31, 2020. All TDRs were performing according to their modified repayment terms for the periods presented.

Net interest income totaled $11.6million for the quarter ended December31, 2021, compared to $11.4million for the quarter ended September30, 2021, and $10.7 million for the quarter ended December31, 2020. The improvement was primarily due to lower interest expense on deposits, FHLB advances and other borrowings. For the year ended December31, 2021, net interest income totaled $45.0million, compared to $40.5million for the year ended December 31, 2020, as the reductions in total interest expense outpaced the decline in total interest income in this historically low interest rate environment.

Total interest income was $13.3million for the quarter ended December 31, 2021, compared to $13.4million for the quarter ended September30, 2021, and $13.8million for the quarter ended December31, 2020. The decrease in the current quarter compared to the quarter ended September 30, 2021, was primarily due to a reduction in average loan yields to 4.44% from 4.54% in the prior quarter. The decrease from the quarter ended December 31, 2020, is primarily due to a decline in average loan yields to 4.44% from 4.61% combined with a $17.7 million decline in average balance of loans receivable between periods. The reduction in average loan yields primarily reflects loans originated or refinanced at lower rates in this continued low interest rate environment.

Total interest expense was $1.7million for the quarter ended December31, 2021, compared to $2.0million for the quarter ended September30, 2021, and $3.2million for the quarter ended December31, 2020. The average cost of interest-bearing deposits declined to 0.53% for the quarter ended December31, 2021, compared to 0.63% for the quarter ended September30, 2021, and 1.12% for the quarter ended December31, 2020. The decline from the quarter ended September30, 2021, was due primarily to the continued repricing of maturing certificates of deposit to lower interest rates combined with a reduction in the average balance of higher cost certificates of deposit. Advances from the FHLB were $95.0million at December31, 2021, compared to $120.0million at both September30, 2021, and December31, 2020. The FHLB advances are tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Banks interest rate risk management efforts. The average cost of borrowings was 1.33% for the quarter ended December31, 2021, compared to 1.42% for the quarter ended September30, 2021, and 1.40% for the quarter ended December31, 2020. The Bank previously entered into two forward starting interest rate swaps beginning October25, 2021, totaling $25.0million with a weighted average rate of 0.80% and weighted term of 7.4years to partially replace a $50.0million interest rate swap carrying an interest rate of 1.34% that matured on that date. The resulting decline in balances and reduction in rates combined for the improvement in both the average and total cost of borrowings for the quarter ended December 31, 2021.

The net interest margin was 3.40% for the quarter ended December31, 2021, compared to 3.33% for the quarter ended September30, 2021, and 3.29% for the quarter ended December31, 2020. The increase in the net interest margin for the quarter ended December31, 2021, compared to the quarter ended September30, 2021, is due to several factors, including a 10 basis point reduction in the average cost of interest-bearing liabilities to 0.61% from 0.71%, partially offset by a two basis point reduction in the Companys average yield on interest-earning assets during the quarter to 3.91% from 3.93%. The increase in net interest margin for the quarter ended December31, 2021, compared to the quarter ended December 31, 2020, was due primarily to the 54 basis point reduction in the average cost of interest-bearing liabilities to 0.61% from 1.15%, partially offset by a 35 basis point reduction in the average yield on interest-earning assets to 3.91% from 4.26%. Asset yields continue to be impacted by the net deferred loan fee recognition on PPP loans, primarily the recognition of previously unamortized net deferred loan fees and costs related to forgiven PPP loans, which totaled $461,000 in the quarter ended December31, 2021, compared to $354,000 in the quarter ended September30, 2021, and $420,000 in the quarter ended December31, 2020. During the year ended December31, 2021, a total of $2.0million was recognized in previously unamortized net deferred loan fees related to PPP loans. At December31, 2021, the balance of net deferred loan fees relating to PPP loans to be recognized in future periods totaled $258,000.

Noninterest income for the quarter ended December31, 2021, totaled $1.1million, compared to $999,000 for the quarter ended September30, 2021, and $1.7million for the quarter ended December31, 2020. The increase in noninterest income for the quarter ended December31, 2021, compared to the quarter ended September30, 2021, was primarily due to an increase in loan related fees, predominantly from a $322,000 increase in prepayment penalties in the quarter. These increases in noninterest income were partially offset by lower BOLI income due to $161,000 in death benefit proceeds received last quarter. For the year ended December31, 2021, noninterest income declined $580,000 to $3.9million, from $4.4million for the year ended December31, 2020, due primarily to lower loan related fees and wealth management revenue.

Noninterest expense totaled $8.7million for the quarter ended December31, 2021, compared to $8.3million for the quarter ended September30, 2021, and $8.4million for the quarter ended December31, 2020. Salaries and benefits for the quarter ended December31, 2021, increased $518,000 to $5.4million, compared to $4.9million for the quarter ended September30, 2021, due primarily to success in filling vacant positions during the quarter ended December 31, 2021, and final year-end accruals for employee incentives and commissions earned in 2021. Noninterest expense totaled $33.4million for the year ended December31, 2021, an increase of 2.6% from $32.5million for the year ended December31, 2020. The increase year over year was due primarily to increases in occupancy and equipment, other general and administrative, and OREO related expenses, partially offset by lower data processing expenses, regulatory assessments, and marketing expenses.

COVID-19 Related InformationThe Bank is committed to assisting its customers and communities in response to the COVID-19 pandemic, including having provided certain short-term loan modifications and participating in the PPP as a Small Business Administration (SBA) lender. The Bank continues to work with its loan customers and manage its portfolio through the ongoing uncertainty surrounding the impact, duration, and government response to the crisis.

Paycheck Protection ProgramThe SBA helped small businesses impacted by COVID-19 through the PPP, which was designed to provide near-term relief to help small businesses sustain operations. The SBA deadline for the final round of PPP loan applications was May31, 2021. As of December31, 2021, there were 67 PPP loans outstanding totaling $10.8million, compared to 198 PPP loans totaling $22.4million outstanding as of September30, 2021, and 372 PPP loans totaling $41.3million as of December 31, 2020. As of December31, 2021, 39 PPP loans have an outstanding balance of $150,000 or less, totaling $2.0million, or 18.3% of total PPP loans outstanding, including 24 loans representing $484,000 with an outstanding balance of $50,000 or less. As of December31, 2021, 661 PPP loans totaling $66.6million had been approved for forgiveness and repaid under the PPP loan program.

ModificationsThe primary method of relief was to allow borrowers to defer their loan payments for three to six month periods, while certain borrowers were allowed to pay interest only or were granted payment deferrals for periods longer than six months depending upon their specific circumstances. The CARES Act and regulatory guidelines suspended the determination of certain loan modifications related to the COVID19 pandemic from being treated as TDRs. Subsequent legislation extended this accounting treatment through the earlier of 60days after the national emergency termination date or January1, 2022. As of December 31, 2021, there were no loans on active deferral, compared to $20.1million, or 1.8% of total loans outstanding at September30, 2021, and $45.2million, or 4.0% of total loans outstanding at December31, 2020. All loans that had previously been granted modifications have returned to regular scheduled payments.

First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; an FDIC insured Washington State-chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through 15 full-service banking offices. For additional information about us, please visit our website at ffnwb.com and click on the Investor Relations link at the bottom of the page.

Forward-looking statements:When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the SEC), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases believe, will, will likely result, are expected to, will continue, is anticipated, estimate, project, plans, or similar expressions are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include, but are not limited to, the following: the effect of the COVID-19 pandemic, including on our credit quality and business operations, as well as its impact on general economic and financial market conditions and other uncertainties resulting from the COVID19 pandemic, such as the extent and duration of the impact on public health, the U.S. and global economies, and consumer and corporate customers, including economic activity, employment levels and market liquidity; increased competitive pressures; changes in the interest rate environment; legislative and regulatory changes; and other factors described in the Companys 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 2022 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 SUBSIDIARIESConsolidated Balance Sheets(Dollars in thousands, except share data)(Unaudited)

Dec 31, Sep 30, Dec 31, Three OneAssets 2021 2021 2020 Month Year Change ChangeCash on hand and in $ 7,246 $ 7,243 $ 7,995 0.0 % (9.4 )%banksInterest-earning 66,145 71,869 72,494 (8.0 ) (8.8 )deposits with banksInvestmentsavailable-for-sale, 168,948 178,061 127,551 (5.1 ) 32.5 at fair valueAnnuity 2,432 2,425 2,418 0.3 0.6 held-to-maturityLoans receivable,net of allowance of$15,657, $15,057, 1,103,461 1,101,669 1,100,582 0.2 0.3 and $15,174respectivelyFederal Home LoanBank ("FHLB") 5,465 6,465 6,410 (15.5 ) (14.7 )stock, at costAccrued interest 5,285 5,681 5,508 (7.0 ) (4.0 )receivableDeferred tax 850 746 1,641 13.9 (48.2 )assets, netOther real estate - - 454 n/a (100.0 )owned ("OREO")Premises and 22,440 22,628 22,579 (0.8 ) (0.6 )equipment, netBank owned lifeinsurance ("BOLI"), 35,210 34,994 33,034 0.6 6.6 netPrepaid expenses 3,628 2,975 1,643 21.9 120.8 and other assetsRight of use asset 3,646 3,838 3,647 (5.0 ) (0.0 )("ROU"), netGoodwill 889 889 889 0.0 0.0 Core deposit 684 719 824 (4.9 ) (17.0 )intangible, netTotal assets $ 1,426,329 $ 1,440,202 $ 1,387,669 (1.0 ) 2.8 Liabilities andStockholders' Equity Deposits Noninterest-bearing $ 117,751 $ 115,311 $ 91,285 2.1 % 29.0 %depositsInterest-bearing 1,039,723 1,026,425 1,002,348 1.3 3.7 depositsTotal deposits 1,157,474 1,141,736 1,093,633 1.4 5.8 Advances from the 95,000 120,000 120,000 (20.8 ) (20.8 )FHLBAdvance paymentsfrom borrowers for 2,909 5,075 2,498 (42.7 ) 16.5 taxes and insuranceLease liability, 3,805 3,994 3,783 (4.7 ) 0.6 netAccrued interest 112 206 211 (45.6 ) (46.9 )payableOther liabilities 9,150 7,735 11,242 18.3 (18.6 )Total liabilities 1,268,450 1,278,746 1,231,367 (0.8 ) 3.0 Commitments and contingencies Stockholders' EquityPreferred stock,$0.01 par value;authorized - - - n/a n/a 10,000,000 shares;no shares issued oroutstandingCommon stock, $0.01par value;authorized90,000,000 shares;issued andoutstanding9,125,759 shares at 91 95 97 (4.2 ) (6.2 )December 31, 2021,9,483,081 shares atSeptember 30, 2021,and 9,736,875shares at December31, 2020Additional paid-in 72,298 78,311 82,095 (7.7 ) (11.9 )capitalRetained earnings 86,162 84,402 78,003 2.1 10.5 Accumulated othercomprehensive 174 (223 ) (1,918 ) (178.0 ) (109.1 )income (loss), netof taxUnearned EmployeeStock Ownership (846 ) (1,129 ) (1,975 ) (25.1 ) (57.2 )Plan ("ESOP")sharesTotal stockholders' 157,879 161,456 156,302 (2.2 ) 1.0 equityTotal liabilitiesand stockholders' $ 1,426,329 $ 1,440,202 $ 1,387,669 (1.0 )% 2.8 %equity

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

Quarter Ended Dec 31, Sep 30, Dec 31, Three One 2021 2021 2020 Month Year Change ChangeInterest income Loans, including fees $ 12,398 $ 12,508 $ 13,042 (0.9 )% (4.9 )%Investments 800 814 707 (1.7 ) 13.2 available-for-saleInvestments 4 4 6 0.0 (33.3 )held-to-maturityInterest-earning 19 24 7 (20.8 ) 171.4 deposits with banksDividends on FHLB 85 84 81 1.2 4.9 StockTotal interest 13,306 13,434 13,843 (1.0 ) (3.9 )incomeInterest expense Deposits 1,390 1,612 2,767 (13.8 ) (49.8 )FHLB advances and 340 431 426 (21.1 ) (20.2 )other borrowingsTotal interest 1,730 2,043 3,193 (15.3 ) (45.8 )expenseNet interest 11,576 11,391 10,650 1.6 8.7 incomeProvision for loan 600 100 600 500.0 0.0 lossesNet interest incomeafter provision for 10,976 11,291 10,050 (2.8 ) 9.2 loan losses Noninterest income Net gain on sale of 32 - - n/a n/a investmentsBOLI income 216 377 204 (42.7 ) 5.9 Wealth management 104 64 170 62.5 (38.8 )revenueDeposit related fees 218 228 195 (4.4 ) 11.8 Loan related fees 551 300 1,082 83.7 (49.1 )Other 5 30 3 (83.3 ) 66.7 Total noninterest 1,126 999 1,654 12.7 (31.9 )income Noninterest expenseSalaries and employee 5,374 4,856 5,146 10.7 4.4 benefitsOccupancy and 1,154 1,116 1,147 3.4 0.6 equipmentProfessional fees 477 502 450 (5.0 ) 6.0 Data processing 689 626 711 10.1 (3.1 )OREO related expenses, 1 207 1 (99.5 ) 0.0 netRegulatory assessments 100 121 142 (17.4 ) (29.6 )Insurance and bond 110 106 106 3.8 3.8 premiumsMarketing 37 64 64 (42.2 ) (42.2 )Other general and 774 735 668 5.3 15.9 administrativeTotal noninterest 8,716 8,333 8,435 4.6 3.3 expenseIncome before federal 3,386 3,957 3,269 (14.4 ) 3.6 income tax provisionFederal income tax 643 758 622 (15.2 ) 3.4 provisionNet income $ 2,743 $ 3,199 $ 2,647 (14.3 )% 3.6 % Basic earnings per $ 0.30 $ 0.34 $ 0.28 shareDiluted earnings per $ 0.29 $ 0.34 $ 0.28 shareWeighted averagenumber of common 9,129,724 9,314,456 9,573,950 shares outstandingWeighted averagenumber of diluted 9,273,502 9,446,702 9,603,493 shares outstanding

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

Year Ended December 31, One 2021 2020 Year ChangeInterest income Loans, including fees $ 50,170 $ 52,546 (4.5 )%Investments available-for-sale 3,200 3,173 0.9 Investments held-to-maturity 24 23 4.3 Interest-earning deposits with banks 72 52 38.5 Dividends on FHLB Stock 332 320 3.8 Total interest income 53,798 56,114 (4.1 )Interest expense Deposits 7,216 14,005 (48.5 )FHLB advances 1,603 1,640 (2.3 )Total interest expense 8,819 15,645 (43.6 )Net interest income 44,979 40,469 11.1 Provision for loan losses 300 1,900 (84.2 )Net interest income after provision 44,679 38,569 15.8 for loan losses Noninterest income Net gain on sale of investments 32 86 (62.8 )BOLI 1,107 982 12.7 Wealth management revenue 494 663 (25.5 )Deposit accounts related fees 872 755 15.5 Loan related fees 1,265 1,947 (35.0 )Other 92 9 922.2 Total noninterest income 3,862 4,442 (13.1 ) Noninterest expense Salaries and employee benefits 20,237 20,039 1.0 Occupancy and equipment 4,557 4,237 7.6 Professional fees 1,899 1,707 11.2 Data processing 2,692 2,822 (4.6 )OREO related expenses, net 209 9 2,222.2 Regulatory assessments 456 547 (16.6 )Insurance and bond premiums 451 445 1.3 Marketing 154 197 (21.8 )Other general and administrative 2,712 2,510 8.0 Total noninterest expense 33,367 32,513 2.6 Income before federal income tax 15,174 10,498 44.5 provisionFederal income tax provision 2,925 1,942 50.6 Net income $ 12,249 $ 8,556 43.2 % Basic earnings per share $ 1.31 $ 0.88 Diluted earnings per share $ 1.29 $ 0.88 Weighted average number of common 9,340,997 9,734,493 shares outstandingWeighted average number of diluted 9,454,495 9,758,644 shares outstanding

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

December 31, 2021 September 30, 2021 December 31, 2020 Amount Percent Amount Percent Amount Percent (Dollars in thousands)Commercial real estate:Residential: Micro-unit $ - 0.0 % $ 8,220 0.7 % $ 11,366 1.0 %apartmentsOther 130,146 11.6 135,586 12.2 125,328 11.2 multifamilyTotalmultifamily 130,146 11.6 143,806 12.9 136,694 12.2 residential Non-residential: Office 90,727 8.1 89,622 8.0 84,311 7.5 Retail 138,463 12.4 124,439 11.1 114,117 10.2 Mobile home park 20,636 1.8 20,838 1.9 28,094 2.5 Hotel / motel 64,854 5.8 65,210 5.8 69,304 6.2 Nursing Home 12,713 1.1 12,784 1.1 12,868 1.2 Warehouse 17,724 1.6 16,999 1.5 17,484 1.6 Storage 32,990 2.9 33,163 3.0 33,671 3.0 Other 41,310 3.8 29,301 2.6 25,416 2.3 non-residentialTotal 419,417 37.5 392,356 35.0 385,265 34.5 non-residential Construction/ land:One-to-fourfamily 34,677 3.1 36,213 3.2 33,396 3.0 residentialMultifamily 37,194 3.3 47,549 4.3 51,215 4.6 Commercial 6,189 0.6 6,189 0.6 5,783 0.5 Land development 15,395 1.4 11,337 1.0 1,813 0.2 Totalconstruction/ 93,455 8.4 101,288 9.1 92,207 8.3 land One-to-fourfamily residential:Permanent owner 185,320 16.6 184,990 16.6 206,323 18.5 occupiedPermanentnon-owner 199,796 17.8 197,686 17.7 175,637 15.7 occupiedTotalone-to-four 385,116 34.4 382,676 34.3 381,960 34.2 familyresidential Business: Aircraft 6,079 0.5 6,322 0.6 10,811 0.9 Small BusinessAdministration 839 0.1 862 0.1 928 0.1 ("SBA")PaycheckProtection Plan 10,849 1.0 22,379 2.0 41,251 3.7 ("PPP")Other business 28,823 2.5 25,185 2.2 27,673 2.5 Total business 46,590 4.1 54,748 4.9 80,663 7.2 Consumer: Classic,collectible and 35,861 3.2 32,819 2.9 29,359 2.6 other autoOther consumer 8,951 0.8 9,665 0.9 11,262 1.0 Total consumer 44,812 4.0 42,484 3.8 40,621 3.6 Total loans 1,119,536 100.0 % 1,117,358 100.0 % 1,117,410 100.0 %Less: Deferred loan 418 632 1,654 fees, netALLL 15,657 15,057 15,174 Loans $ 1,103,461 $ 1,101,669 $ 1,100,582 receivable, net Concentrations of credit: ^(1)Constructionloans as % of 59.7 % 67.1 % 61.6 % total capitalTotal non-owneroccupiedcommercial real 384.0 % 389.6 % 390.1 % estate as % oftotal capital

(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 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, 2021 2021 2021 2021 2020 (Dollars in thousands, except per share data)Performance Ratios: ^(1)Return on assets 0.76 % 0.88 % 1.07 % 0.73 % 0.77 %Return on equity 6.79 7.84 9.54 6.42 6.76 Dividend payout 36.67 32.35 27.50 42.31 35.71 ratioEquity-to-assets 11.07 11.21 11.30 11.08 11.26 ratioTangible equity 10.97 11.11 11.19 10.97 11.15 ratio ^(2)Net interest margin 3.40 3.33 3.36 3.31 3.29 Averageinterest-earningassets to average 119.08 119.35 117.99 117.92 116.42 interest-bearingliabilitiesEfficiency ratio 68.62 67.26 66.92 70.63 68.55 Noninterest expenseas a percent of 2.42 2.30 2.31 2.36 2.46 average totalassetsBook value per $ 17.30 $ 17.03 $ 16.75 $ 16.35 $ 16.05 common shareTangible book value 17.13 16.86 16.58 16.17 15.88 per share ^(2) Capital Ratios: ^ (3)Tier 1 leverage 10.34 % 10.19 % 10.15 % 10.15 % 10.29 %ratioCommon equity tier 14.23 14.25 14.45 14.36 14.32 1 capital ratioTier 1 capital 14.23 14.25 14.45 14.36 14.32 ratioTotal capital ratio 15.48 15.50 15.70 15.62 15.57 Asset Quality Ratios:Nonperforming loansas a percent of 0.00 % 0.00 % 0.00 % 0.18 % 0.19 %total loansNonperformingassets as a percent 0.00 0.00 0.03 0.17 0.18 of total assetsALLL as a percent 1.40 1.35 1.35 1.39 1.36 of total loansNet (recoveries)charge-offs to 0.00 (0.01 ) (0.01 ) (0.00 ) (0.00 )average loansreceivable, net Allowance for Loan Losses:ALLL, beginning of $ 15,057 $ 14,878 $ 15,502 $ 15,174 $ 14,568 the quarterProvision(recapture of 600 100 (700 ) 300 600 provision)Charge-offs - - - - (2 )Recoveries - 79 76 28 8 ALLL, end of the $ 15,657 $ 15,057 $ 14,878 $ 5,502 $ 15,174 quarter

(1) Performance ratios are calculated on an annualized basis.(2) Tangible equity excludes goodwill and core deposit intangible assets. Tangible assets exclude goodwill and other intangible assets. The tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.(3) Capital ratios are for First Financial Northwest Bank only.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures (continued)(Unaudited)

At or For the Quarter Ended Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, 2021 2021 2021 2021 2020 (Dollars in thousands, except per share data)Yields and Costs: ^(1) Yield on loans 4.44 % 4.54 % 4.64 % 4.66 % 4.61 %Yield on investments 1.80 1.75 1.92 1.91 2.21 available-for-saleYield on investments 0.65 0.66 0.66 2.18 0.99 held-to-maturityYield on interest-earning 0.13 0.14 0.10 0.09 0.11 depositsYield on FHLB stock 5.89 5.15 5.13 5.00 4.99 Yield on interest-earning 3.91 % 3.93 % 4.06 % 4.15 % 4.26 %assets Cost of interest-bearing 0.53 % 0.63 % 0.75 % 0.94 % 1.12 %depositsCost of borrowings 1.33 1.42 1.37 1.41 1.40 Cost of interest-bearing 0.61 % 0.71 % 0.82 % 0.99 % 1.15 %liabilities Cost of total deposits 0.48 % 0.56 % 0.68 % 0.85 % 1.03 %Cost of funds 0.55 0.64 0.75 0.91 1.07 Average Balances: Loans $ 1,108,836 $ 1,094,124 $ 1,092,710 $ 1,099,364 $ 1,126,554 Investments 176,072 184,840 177,713 155,795 127,456 available-for-saleInvestments held-to-maturity 2,428 2,421 2,415 2,413 2,410 Interest-earning deposits 56,800 68,618 64,035 52,336 26,092 FHLB stock 5,726 6,465 6,485 6,412 6,459 Total interest-earning $ 1,349,862 $ 1,356,468 $ 1,343,358 $ 1,316,320 $ 1,288,971 assets Interest-bearing deposits $ 1,032,090 $ 1,016,540 $ 1,018,083 $ $ 996,295 985,945Borrowings 101,522 120,000 120,494 120,000 121,218 Total interest-bearing 1,133,612 1,136,540 1,138,577 1,116,295 1,107,163 liabilitiesNoninterest-bearing deposits 119,142 121,256 110,207 99,013 83,719 Total deposits and $ 1,252,754 $ 1,257,796 $ 1,248,784 $ 1,215,308 $ 1,190,882 borrowings Average assets $ 1,430,199 $ 1,436,801 $ 1,424,126 $ 1,394,213 $ 1,366,061 Average stockholders' equity 160,183 161,892 160,189 157,856 155,765

(1) Yields and costs are annualized.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures (continued)(Unaudited)

At or For the Year Ended December 31, 2021 2020 2019 2018 2017 (Dollars in thousands, except per share data) Performance Ratios:Return on assets 0.86 % 0.63 % 0.80 % 1.21 % 0.76 %Return on equity 7.65 5.50 6.73 9.86 5.94 Dividend payout 33.59 45.45 33.65 21.53 32.93 ratioEquity-to-assets 11.07 11.26 11.65 12.28 11.79 ratioTangible equity 10.97 11.15 11.53 12.13 11.63 ratio ^(1)Net interest 3.35 3.15 3.19 3.56 3.60 marginAverageinterest-earningassets to 118.59 115.62 113.44 114.28 114.07 averageinterest-bearingliabilitiesEfficiency ratio 68.32 72.39 70.66 66.88 67.31 Noninterestexpense as apercent of 2.35 2.39 2.35 2.40 2.42 average totalassetsBook value per $ 17.30 $ 16.05 $ 15.25 $ 14.35 $ 13.27 common shareTangible bookvalue per share 17.13 15.88 15.07 14.17 13.07 ^(1) Capital Ratios: ^(2)Tier 1 leverage 10.34 % 10.29 % 10.27 % 10.37 % 10.20 %ratioCommon equitytier 1 capital 14.23 14.32 13.13 13.43 12.52 ratioTier 1 capital 14.23 14.32 13.13 13.43 12.52 ratioTotal capital 15.48 15.57 14.38 14.68 13.77 ratio Asset Quality Ratios:Nonperformingloans as apercent of total 0.00 % 0.19 % 0.01 % 0.07 % 0.02 %loans, net ofundisbursedfundsNonperformingassets as a 0.00 0.18 0.04 0.10 0.05 percent of totalassetsALLL as apercent of totalloans, net of 1.40 1.36 1.18 1.29 1.28 undisbursedfundsNet charge-offs(recoveries) to (0.02 ) (0.00 ) (0.02 ) (0.45 ) (0.27 )average loansreceivable, net Allowance for Loan Losses:ALLL, beginning $ 15,174 $ 13,218 $ 13,347 $ 12,882 $ 10,951 of the yearProvision(recapture of 300 1,900 (300 ) (4,000 ) (400 )provision)Charge-offs - (2 ) - - - Recoveries 183 58 171 4,465 2,331 ALLL, end of the $ 15,657 $ 15,174 $ 13,218 $ 13,347 $ 12,882 year

(1) Tangible equity excludes goodwill and core deposit intangible assets. Tangible assets exclude goodwill and other intangible assets. The tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.(3) Capital ratios are for First Financial Northwest Bank only.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures (continued)(Unaudited)

At or For the Year Ended December 31, 2021 2020 2019 2018 2017 (Dollars in thousands, except per share data)Yields and Costs: Yield on loans 4.57 % 4.69 % 5.15 % 5.13 % 4.96 %Yield on investments 1.84 2.42 3.11 2.92 2.61 available-for-saleYield on investments 0.99 0.99 0.00 0.00 0.00 held-to-maturityYield oninterest-earning 0.12 0.21 2.15 1.74 1.07 depositsYield on FHLB stock 5.29 4.85 5.42 5.24 3.32 Yield oninterest-earning 4.01 % 4.36 % 4.88 % 4.83 % 4.57 %assets Cost of deposits 0.71 % 1.42 % 1.90 % 1.35 % 1.04 %Cost of borrowings 1.39 1.31 2.09 1.92 1.30 Cost ofinterest-bearing 0.78 % 1.41 % 1.92 % 1.46 % 1.10 %liabilities Cost of total 0.64 % 1.32 % 1.81 % 1.28 % 0.99 %depositsCost of funds 0.71 1.32 1.84 1.39 1.05 Average Balances: Loans $ 1,098,772 $ 1,120,889 $ 1,061,367 $ 995,810 $ 878,449 Investments 173,691 131,272 139,354 141,100 134,105 available-for-saleInvestments 2,419 2,312 - - - held-to-maturityInterest-earning 60,482 25,108 13,634 11,628 22,194 depositsFHLB stock 6,271 6,600 6,684 8,748 8,914 Totalinterest-earning $ 1,341,635 $ 1,286,181 $ 1,221,039 $ 1,157,286 $ 1,043,662 assets Deposits $ 1,015,852 $ 987,069 $ 946,484 $ 828,965 $ 722,666 Borrowings 115,466 125,392 129,899 183,667 192,227 Totalinterest-bearing 1,131,318 1,112,461 1,076,383 1,012,632 914,893 liabilitiesNoninterest-bearing 112,484 75,388 48,434 49,461 39,127 depositsTotal deposits and $ 1,243,802 $ 1,187,849 $ 1,124,817 $ 1,062,093 $ 954,020 borrowings Average assets $ 1,421,476 $ 1,361,604 $ 1,294,164 $ 1,227,396 $ 1,108,656 Average stockholders' 160,041 155,587 154,092 151,145 142,647 equity

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 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 certain items and provides an alternative view of the Companys performance over time and in comparison to the Companys 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 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, 2021 2021 2021 2021 2020 (Dollars in thousands, except per share data) Tangible equity to tangible assets and tangible book value per share: Total stockholders' $ $ $ $ $ equity (GAAP) 157,879 161,456 161,621 158,443 156,302Less: Goodwill 889 889 889 889 889 Core deposit 684 719 754 789 824 intangible, netTangible equity $ $ $ $ $ (Non-GAAP) 156,306 159,848 159,978 156,765 154,589 Total assets (GAAP) $ 1,426,329 $ $ $ $ 1,440,202 1,430,703 1,430,226 1,387,669Less: Goodwill 889 889 889 889 889 Core deposit 684 719 754 789 824 intangible, netTangible assets $ $ $ $ $ (Non-GAAP) 1,424,756 1,438,594 1,429,060 1,428,548 1,385,956 Common sharesoutstanding at period 9,125,759 9,483,081 9,651,180 9,692,610 9,736,875 end Equity-to-assets ratio 11.07 % 11.21 % 11.30 % 11.08 % 11.26 %(GAAP)Tangible equity ratio 10.97 11.11 11.19 10.97 11.15 (Non-GAAP)Book value per common $ $ $ $ $ share (GAAP) 17.30 17.03 16.75 16.35 16.05Tangible book value 17.13 16.86 16.58 16.17 15.88 per share (Non-GAAP)

Year Ended December31, 2021 2020 2019 2018 2017 (Dollars in thousands, except per share data) Tangible equity to tangible assets and tangible book value per share: Total stockholders' $ 157,879 $ 156,302 $ 156,319 $ 153,738 $ 142,634 equity (GAAP)Less: Goodwill 889 889 889 889 889Core deposit 684 824 1,116 1,266 intangible 968Tangible equity $ $ $ 154,462 $ 151,733 $ 140,479 (Non-GAAP) 156,306 154,589 Total assets 1,426,329 1,387,669 1,341,885 1,252,424 1,210,229 (GAAP)Less: Goodwill 889 889 889 889 889Core deposit 684 824 1,116 1,266 intangible 968Tangible assets $ $ $ 1,340,028 $ 1,250,419 $ 1,208,074 (Non-GAAP) 1,424,756 1,385,956 Common sharesoutstanding at 9,125,759 9,736,875 10,252,953 10,710,656 10,748,437 period end Equity-to-assets 11.07 % 11.26 % 11.65 % 12.28 % 11.79 %ratio (GAAP)Tangible equity 10.97 11.15 11.53 12.13 11.63 ratio (Non-GAAP)Book value per common share $ 17.30 $ 16.05 $ 15.25 $ 14.35 $ 13.27 (GAAP)Tangible bookvalue per share 17.13 15.88 15.07 14.17 13.07 (Non-GAAP)

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