RENTON, Wash., Jan. 24, 2019 (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 December 31, 2018, of $2.2 million, or $0.21 per diluted share, compared to net income of $2.8 million, or $0.27 per diluted share, for the quarter ended September 30, 2018, and $2.4 million, or $0.23 per diluted share, for the quarter ended December 31, 2017. For the year ended December 31, 2018, net income was $14.9 million, or $1.43 per diluted share, compared to $8.5 million, or $0.81 per diluted share, for the year ended December 31, 2017.

“I am very pleased with how we finished the year with significant lending momentum, particularly the strong growth in one-to-four family residential lending, and continued growth in our deposits across our network,” stated Joseph W. Kiley III, President and Chief Executive Officer. “Our one-to-four residential team led our loan portfolio growth as net loans receivable increased $34.2 million during the year to exceed $1.0 billion at year end.” Kiley continued, “We grew deposits across our network, increasing deposits by $22.8 million in the fourth quarter and $99.5 million during the year, as we ended the year with $939.0 million in total deposits, compared to $839.5 million at December 31, 2017.” Kiley concluded, “I am also pleased to welcome Randy Riffle, Executive Vice President and Chief Credit Officer to lead our efforts to further modernize our credit culture by enhancing our overall customer experience thereby creating a competitive advantage for our sales teams, organically expand our business loan portfolio, including establishing an SBA lending platform in further support of our growth and loan and deposit portfolio diversification goals. Our focus on expanding our customer base and building deposits continues and our eleventh branch location is set to open at Kent Station in the first quarter of 2019.”

Net loans receivable increased $34.2 million to $1.02 billion for the year ended December 31, 2018, from $988.7 million at December 31, 2017, and $27.3 million from $995.6 million at September 30, 2018. One-to-four family residential lending increased $63.3 million during the year to $342.0 million at December 31, 2018, more than offsetting the $57.8 million combined reduction in our multifamily real estate and construction/land development loan portfolios. The average balance of net loans receivable totaled $1.01 billion for the quarter ended December 31, 2018, compared to $993.3 million for the quarter ended September 30, 2018, and $963.1 million for the quarter ended December 31, 2017. For the year ended December 31, 2018, the average balance of net loans receivable was $995.8 million, compared to $878.4 million for the year ended December 31, 2017.

The Company recorded a $200,000 provision for loan losses for both the quarters ended December 31, 2018, and September 30, 2018, compared to a $1.2 million recapture of provision in the quarter ended December 31, 2017. The provision during the quarter ended December 31, 2018, was due to growth in net loans receivable and a change in loan mix, while the provision in the third quarter of 2018, was due primarily to growth in net loans receivable. The recapture of provision in the quarter ended December 31, 2017, was due primarily to $2.0 million in recoveries during the quarter, reduced by the provision for loan losses required to increase the Allowance for Loan and Lease Losses (“ALLL”), as a result of the growth in net loans receivable. For the year ended December 31, 2018, the recapture of provision for loan losses totaled $4.0 million, which included $4.5 million in recoveries, compared to a recapture of provision for loan losses of $400,000 recorded for the year ended December 31, 2017, which included $2.3 million in recoveries.

As previously reported, the Bank expanded its geographic footprint during the year with the opening of a new branch at The Junction in Bothell, King County, in the second quarter of 2018. The Bank plans to open its eleventh branch location at Kent Station, located about eight miles south of its Renton headquarters, in the first quarter of 2019.

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

	December 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	$	29,355	$	18,896	$	20,694	$	228,475	$	318,705	$	–	$	616,125
Landing		2,453		495		256		17,853		10,480		–		31,537
Woodinville (1)		1,362		3,771		549		19,024		7,217		–		31,923
Bothell		198		97		100		2,636		3,066		–		6,097
Crossroads		2,530		3,199		83		24,383		11,474		–		41,669
Total King County		35,898		26,458		21,682		292,371		350,942		–		727,351
Snohomish County
Mill Creek		1,485		3,226		658		12,272		10,524		–		28,165
Edmonds		2,698		2,532		157		15,175		16,123		–		36,685
Clearview (1)		3,496		3,968		1,283		6,743		2,489		–		17,979
Lake Stevens (1)		1,415		1,702		428		3,926		3,644		–		11,115
Smokey Point (1)		1,116		2,193		591		8,560		7,452		–		19,912
Total Snohomish County		10,210		13,621		3,117		46,676		40,232		–		113,856
Total retail deposits		46,108		40,079		24,799		339,047		391,174		–		841,207
Brokered deposits		–		–		–		–		–		97,825		97,825
Total deposits	$	46,108	$	40,079	$	24,799	$	339,047	$	391,174	$	97,825	$	939,032

⁽¹⁾ Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $58,000.

	September 30, 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	$	31,796		$	19,998		$	20,508		$	213,882		$	317,126		$	–		$	603,310
The Landing		2,458			772			58			17,796			8,944			–			30,028
Woodinville (1)		1,535			3,874			538			20,335			6,813			–			33,095
Bothell		48			103			8			2,435			1,684			–			4,278
Crossroads		1,249			4,797			84			21,846			9,339			–			37,315
Total King County		37,086			29,544			21,196			276,294			343,906			–			708,026
Snohomish County:
Mill Creek		1,437			2,952			571			11,287			8,779			–			25,026
Edmonds		4,416			2,033			45			16,452			11,007			–			33,953
Clearview (1)		4,187			3,058			1,037			7,101			2,272			–			17,655
Lake Stevens (1)		2,434			2,452			483			3,901			2,576			–			11,846
Smokey Point (1)		1,620			1,915			774			7,990			5,391			–			17,690
Total Snohomish County		14,094			12,410			2,910			46,731			30,025			–			106,170
Total retail deposits		51,180			41,954			24,106			323,025			373,931			–			814,196
Brokered deposits		–			–			–			–			–			102,083			102,083
Total deposits	$	51,180		$	41,954		$	24,106		$	323,025		$	373,931		$	102,083		$	916,279

 ⁽¹⁾ Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $69,000.

Highlights for the quarter and the year ended December 31, 2018:

• Net loans receivable increased to $1.02 billion at December 31, 2018, from $995.6 million at September 30, 2018, and $988.7 million at December 31, 2017. The Company’s one-to-four residential loan portfolio increased to $342.0 million at December 31, 2018, compared to $327.9 million at September 30, 2018, and $278.7 million at December 31, 2017, representing a year over year growth of $63.3 million in one-to-four residential loans.
• Total deposits increased to $939.0 million at December 31, 2018, from $916.3 million at September 30, 2018, and $839.5 million at December 31, 2017.
• The Company increased the regular quarterly cash dividend to shareholders to $0.08 per share in the quarter ended June 30, 2018, from $0.07 per share previously.
• During the year ended December 31, 2018, the Company repurchased 203,900 shares of its common stock at an average price of $15.43 per share under a stock repurchase plan authorized by the Board of Directors on October 24, 2018. The plan, which commenced on November 5, 2018, and will expire no later than May 3, 2019, authorizes the repurchase of up to 550,000 shares of the Company’s common stock, or approximately 5.0% of its outstanding shares.
• The Company’s book value per share was $14.35 at December 31, 2018, compared to $14.17 at September 30, 2018, and $13.27 at December 31, 2017.
• The Bank’s Tier 1 leverage and total capital ratios at December 31, 2018, were 10.4% and 14.7%, respectively, compared to 10.4% and 14.8% at September 30, 2018, and 10.2% and 13.8% at December 31, 2017.
• Based on management’s evaluation of the adequacy of the ALLL, there was a $200,000 provision for loan losses during the quarter ended December 31, 2018.

The ALLL represented 1.29% of total loans receivable, net of undisbursed funds, at December 31, 2018, compared to 1.30% at September 30, 2018, and 1.28% at December 31, 2017. Nonperforming assets totaled $1.2 million at December 31, 2018, compared to $967,000 at September 30, 2018, and $662,000 at December 31, 2017. The increase in the Company’s nonperforming assets since December 31, 2017, was primarily due to one $325,000 nonperforming commercial real estate loan in the quarter ended September 30, 2018, and one $272,000 nonperforming one-to-four family residential loan in the quarter ended December 31, 2018. The $325,000 nonperforming commercial real estate loan was paid in full in the first quarter of 2019.

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

	Dec 31,				Sep 30,				Dec 31,				Three Month				One Year
		2018				2018				2017			Change				Change
	(Dollars in thousands)
Nonperforming loans:
One-to-four family residential	$	382			$	113			$	128			$	269			$	254
Commercial real estate		326				325				–				1				326
Consumer		44				46				51				(2	)			(7	)
Total nonperforming loans		752				484				179				268				573
Other real estate owned (“OREO”)		483				483				483				–				–
Total nonperforming assets (1)	$	1,235			$	967			$	662			$	268			$	573
Nonperforming assets as a
percent of total assets		0.10	%			0.08	%			0.05	%

⁽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 December 31, 2018.

OREO totaled $483,000 at December 31, 2018, September 30, 2018, and December 31, 2017. The Company 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):

	Dec 31, 2018			Sep 30, 2018			Dec 31, 2017			Three Month Change				One Year Change
	(Dollars in thousands)
Performing TDRs:
One-to-four family residential	$	6,941		$	9,458		$	13,434		$	(2,517	)		$	(6,493	)
Multifamily		–			1,116			1,134			(1,116	)			(1,134	)
Commercial real estate		2,415			2,601			3,194			(186	)			(779	)
Consumer		43			43			43			–				–
Total TDRs	$	9,399		$	13,218		$	17,805		$	(3,819	)		$	(8,406	)

Net interest income for the quarter ended December 31, 2018, totaled $10.0 million, compared to $10.1 million for the quarter ended September 30, 2018, and $10.4 million for the quarter ended December 31, 2017. The decline in net interest income was due primarily to increases in the cost of interest bearing liabilities that outpaced the increases in income from interest earning assets. For the year ended December 31, 2018, net interest income totaled $41.2 million, compared to $37.6 million for the year ended December 31, 2017. The primary contributor to the increase in the year ended December 31, 2018, was higher average loan balances. In addition, the Company received $1.0 million in additional interest income in the quarter ended March 31, 2018, relating to interest payments on loans previously charged off.

Total interest income increased to $14.3 million during the quarter ended December 31, 2018, compared to $13.9 million in the quarter ended September 30, 2018, and $13.3 million in the quarter ended December 31, 2017. For the year ended December 31, 2018, total interest income increased to $55.9 million compared to $47.6 million in 2017. These increases were due primarily to the growth in the average balances of net loans receivable to $1.01 billion for the quarter ended December 31, 2018, compared to $993.3 million for the quarter ended September 30, 2018, and $963.1 million for the quarter ended December 31, 2017. For the year ended December 31, 2018, the average balance of net loans receivable was $995.8 million compared to $878.4 million for the prior year.

Total interest expense increased to $4.3 million for the quarter ended December 31, 2018, compared to $3.8 million for the quarter ended September 30, 2018, and $2.9 million for the quarter ended December 31, 2017. The higher level of interest expense in the quarter ended December 31, 2018, was due primarily to growth in total deposits along with increases in interest rates on deposits in a competitive, rising short term interest rate environment. Total deposits increased to $939.0 million at December 31, 2018, from $839.5 million at December 31, 2017. For the year ended December 31, 2018, interest expense totaled $14.7 million, compared to $10.0 million for the year ended December 31, 2017. This increase was primarily due to growth in deposit balances along with increasing short term interest rates. The Federal Reserve’s Open Market Committee continued increasing their Fed Funds target rates throughout the year, impacting the rates paid on the Company’s interest bearing liabilities. Total cost of deposits increased to 1.53% for the quarter ended December 31, 2018, from 1.31% for the quarter ended September 30, 2018, and 1.02% for the quarter ended December 31, 2017. For the year ended December 31, 2018, the total cost of deposits was 1.28% compared to 0.99% for the year ended December 31, 2017.  Advances from the FHLB totaled $146.5 million at December 31, 2018, compared to $149.0 million at September 30, 2018, and $216.0 million at December 31, 2017, as the Company’s deposit gathering success allowed for a reduction in FHLB advances. The average cost of FHLB advances was 2.12% for the quarter ended December 31, 2018, compared to 2.05% for the quarter ended September 30, 2018, and 1.46% for the quarter ended December 31, 2017. For the year ended December 31, 2018, the average cost of FHLB advances was 1.92%, compared to 1.30% for the prior year. The balance of brokered certificates of deposits was $97.8 million at December 31, 2018, compared to $102.1 million at September 30, 2018, and $75.5 million at December 31, 2017.

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

	Dec 31, 2018			Sep 30, 2018			Dec 31, 2017			Three Month Change				One Year Change
Deposits:	(Dollars in thousands)
Noninterest-bearing	$	46,108		$	51,180		$	45,434		$	(5,072	)		$	674
Interest-bearing demand		40,079			41,954			38,224			(1,875	)			1,855
Statement savings		24,799			24,106			28,456			693				(3,657	)
Money market		339,047			323,025			318,636			16,022				20,411
Certificates of deposit, retail (1)		391,174			373,931			333,264			17,243				57,910
Certificates of deposit, brokered		97,825			102,083			75,488			(4,258	)			22,337
Total deposits	$	939,032		$	916,279		$	839,502		$	22,753			$	99,530

⁽¹⁾ Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $58,000 at December 31, 2018, $69,000 at September 30, 2018, and $107,000 at December 31, 2017.

The Company’s net interest margin was 3.41% for the quarter ended December 31, 2018, compared to 3.46% for the quarter ended September 30, 2018, and 3.65% for the quarter ended December 31, 2017. The compression in net interest margin during these periods was due to interest rates paid on interest bearing liabilities increasing more rapidly than yields earned on interest earning assets. Net interest margin for the year ended December 31, 2018, was 3.56%, compared to 3.60% for the year ended December 31, 2017.

Noninterest income for the quarter ended December 31, 2018, totaled $728,000, compared to $841,000 in the quarter ended September 30, 2018, and $211,000 in the quarter ended December 31, 2017. The decline from the prior quarter was due primarily to a reduction in the amount of Bank Owned Life Insurance (“BOLI”) income recorded. For the year ended December 31, 2018, noninterest income increased to $2.9 million, from $2.2 million in 2017, due primarily to a net loss of $567,000 on the sale of investments recorded in 2017. After the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law in December 2017, the Company elected to restructure a portion of its investment portfolio and sold approximately $37 million in fixed rate securities and reinvested the proceeds, primarily into adjustable rate securities.

Noninterest expense for the quarter ended December 31, 2018, increased to $7.7 million from $7.2 million in the quarter ended September 30, 2018, and $7.1 million in the quarter ended December 31, 2017. Salaries and employee benefits increased $245,000 from the prior quarter due primarily to an increase in the number of work days in the fourth quarter. Other general and administrative expenses increased $206,000, as the Company incurred a $225,000 wire related fraud loss in the fourth quarter. The Company has filed an insurance claim for the loss and expects to receive payment on the claim in the first quarter of 2019, subject to a $100,000 deductible. Noninterest expense increased to $29.5 million for the year ended December 31, 2018, compared to $26.8 million in 2017. This increase in noninterest expense was due primarily to our branch expansion over the past year. Salaries and employee benefits expense increased due to increased staffing in support of the new branches and development of new products, as well as standard salary increases. Higher occupancy and equipment expenses reflect our recently opened branch locations, while the increase in other general and administrative expenses also reflects the growth in the Company’s operations.

The Company’s federal income tax provision was $622,000 for the quarter ended December 31, 2018, compared to $707,000 for the quarter ended September 30, 2018, and $2.3 million for the quarter ended December 31, 2017. The primary reason for the change in the 2018 periods compared to the quarter ended December 31, 2017, was the reduction in the federal corporate income tax rate from 35% to 21% in 2018 due to the Tax Act. In addition, during the quarter ended December 31, 2017, the Company recorded a charge of $807,000 through its federal income tax provision relating to changes to the Company’s net deferred tax asset valuation as a result of the Tax Act’s reduction in the federal corporate income tax rate.

 For the year ended December 31, 2018, the Company’s federal income tax provision totaled $3.7 million on income before federal income tax provision of $18.6 million, compared to $4.9 million on pretax income of $13.4 million for the year ended December 31, 2017. The Company’s federal income tax provision in 2018 benefited from the reduction in the federal corporate income tax rate, as well as from stock option exercises that occurred at prices higher than originally estimated, resulting in higher allowable expense recognition for tax purposes.

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. The Bank expects to open its eleventh branch location at Kent Station in the first quarter of 2019. We are a part of the ABA NASDAQ Community Bank Index and the Russell 3000 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 2019 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except share data) (Unaudited)
Assets	Dec 31, 2018				Sep 30, 2018				Dec 31, 2017				Three Month Change			One Year Change
Cash on hand and in banks	$	8,122			$	7,167			$	9,189			13.3	%		(11.6	)%
Interest-earning deposits		8,888				19,094				6,942			(53.5	)		28.0
Investments available-for-sale, at fair value		142,170				140,868				132,242			0.9			7.5
Loans receivable, net of allowance of $13,347, $13,116, and $12,882, respectively		1,022,904				995,557				988,662			2.7			3.5
Federal Home Loan Bank (“FHLB”) stock, at cost		7,310				7,410				9,882			(1.3	)		(26.0	)
Accrued interest receivable		4,068				4,664				4,084			(12.8	)		(0.4	)
Deferred tax assets, net		1,844				2,092				1,211			(11.9	)		52.3
Other real estate owned (“OREO”)		483				483				483			0.0			0.0
Premises and equipment, net		21,331				21,277				20,614			0.3			3.5
Bank owned life insurance (“BOLI”)		29,841				29,745				29,027			0.3			2.8
Prepaid expenses and other assets		3,458				4,460				5,738			(22.5	)		(39.7	)
Goodwill		889				889				889			0.0			0.0
Core deposit intangible		1,116				1,153				1,266			(3.2	)		(11.8	)
Total assets	$	1,252,424			$	1,234,859			$	1,210,229			1.4	%		3.5	%
Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing deposits	$	46,108			$	51,180			$	45,434			(9.9	)%		1.5	%
Interest-bearing deposits		892,924				865,099				794,068			3.2			12.4
Total deposits		939,032				916,279				839,502			2.5			11.9
Advances from the FHLB		146,500				149,000				216,000			(1.7	)		(32.2	)
Advance payments from borrowers for taxes and insurance		2,933				4,737				2,515			(38.1	)		16.6
Accrued interest payable		478				541				326			(11.6	)		46.6
Other liabilities		9,743				9,589				9,252			1.6			5.3
Total liabilities		1,098,686				1,080,146				1,067,595			1.7	%		2.9	%
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or
outstanding	$	–			$	–			$	–
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding
10,710,656 shares at December 31, 2018, 10,914,556 shares at September 30, 2018, and
10,748,437 shares at December 31, 2017		107				109				107			(1.8	)%		0.0	%
Additional paid-in capital		93,773				96,664				94,173			(3.0	)		(0.4	)
Retained earnings, substantially restricted		66,343				65,004				54,642			2.1			21.4
Accumulated other comprehensive loss, net of tax		(2,253	)			(2,550	)			(928	)		(11.6	)		142.8
Unearned Employee Stock Ownership Plan (“ESOP”) shares		(4,232	)			(4,514	)			(5,360	)		(6.2	)		(21.0	)
Total stockholders’ equity		153,738				154,713				142,634			(0.6	)		7.8
Total liabilities and stockholders’ equity	$	1,252,424			$	1,234,859			$	1,210,229			1.4	%		3.5	%

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES Consolidated Income Statements (Dollars in thousands, except share data) (Unaudited)
	Quarter Ended
	Dec 31, 2018			Sep 30, 2018			Dec 31, 2017				Three Month Change			One Year Change
Interest income
Loans, including fees	$	13,024		$	12,631		$	12,269			3.1	%		6.2	%
Investments available-for-sale		1,124			1,063			903			5.7			24.5
Interest-earning deposits with banks		61			59			43			3.4			41.9
Dividends on FHLB Stock		115			135			85			(14.8	)		35.3
Total interest income		14,324			13,888			13,300			3.1			7.7
Interest expense
Deposits		3,595			2,912			2,117			23.5			69.8
FHLB advances		726			917			795			(20.8	)		(8.7	)
Total interest expense		4,321			3,829			2,912			12.8			48.4
Net interest income		10,003			10,059			10,388			(0.6	)		(3.7	)
Provision (recapture of provision) for loan losses		200			200			(1,200	)		0.0			(116.7	)
Net interest income after provision (recapture of provision) for loan losses		9,803			9,859			11,588			(0.6	)		(15.4	)
Noninterest income
Net gain (loss) on sale of investments		–			1			(670	)		(100.0	)		(100.0	)
BOLI income		96			245			133			(60.8	)		(27.8	)
Wealth management revenue		211			145			220			45.5			(4.1	)
Deposit related fees		178			167			169			6.6			5.3
Loan related fees		235			273			356			(13.9	)		(34.0	)
Other		8			10			3			(20.0	)		166.7
Total noninterest income		728			841			211			(13.4	)		245.0
Noninterest expense
Salaries and employee benefits		4,977			4,732			4,673			5.2			6.5
Occupancy and equipment		871			814			721			7.0			20.8
Professional fees		415			353			430			17.6			(3.5	)
Data processing		361			356			326			1.4			10.7
OREO related expenses (reimbursements), net		3			1			(81	)		200.0			(103.7	)
Regulatory assessments		111			126			161			(11.9	)		(31.1	)
Insurance and bond premiums		88			95			97			(7.4	)		(9.3	)
Marketing		75			85			68			(11.8	)		10.3
Other general and administrative		845			639			674			32.2			25.4
Total noninterest expense		7,746			7,201			7,069			7.6			9.6
Income before federal income tax  provision		2,785			3,499			4,730			(20.4	)		(41.1	)
Federal income tax provision		622			707			2,324			(12.0	)		(73.2	)
Net income	$	2,163		$	2,792		$	2,406			(22.5	)%		(10.1	)%
Basic earnings per share	$	0.21		$	0.27		$	0.24
Diluted earnings per share	$	0.21		$	0.27		$	0.23
Weighted average number of common shares outstanding		10,385,612			10,356,994			10,184,804
Weighted average number of diluted shares outstanding		10,484,350			10,468,802			10,313,114

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES Consolidated Income Statements (Dollars in thousands, except share data) (Unaudited)
	Year Ended December 31,
		2018				2017				2016		One Year Change			Two Year Change
Interest income
Loans, including fees	$	51,127			$	43,607			$	38,218		17.2	%		33.8	%
Investments available-for-sale		4,126				3,504				3,054		17.8			35.1
Interest-earning deposits with banks		202				237				235		(14.8	)		(14.0	)
Dividends on FHLB Stock		458				296				202		54.7			126.7
Total interest income		55,913				47,644				41,709		17.4			34.1
Interest expense
Deposits		11,218				7,517				6,101		49.2			83.9
FHLB advances		3,520				2,505				1,406		40.5			150.4
Total interest expense		14,738				10,022				7,507		47.1			96.3
Net interest income		41,175				37,622				34,202		9.4			20.4
(Recapture of provision) provision for loan losses		(4,000	)			(400	)			1,300		900.0			(407.7	)
Net interest income after (recapture of provision) provision for loan losses		45,175				38,022				32,902		18.8			37.3
Noninterest income
Net (loss) gain on sale of investments		(20	)			(567	)			50		(96.5	)		(140.0	)
BOLI		814				623				844		30.7			(3.6	)
Wealth management revenue		611				919				813		(33.5	)		(24.8	)
Deposit related fees		681				446				261		52.7			160.9
Loan related fees		768				776				671		(1.0	)		14.5
Other		24				11				12		118.2			100.0
Total noninterest income		2,878				2,208				2,651		30.3			8.6
Noninterest expense
Salaries and employee benefits		19,302				17,773				15,377		8.6			25.5
Occupancy and equipment		3,283				2,506				1,984		31.0			65.5
Professional fees		1,538				1,809				1,979		(15.0	)		(22.3	)
Data processing		1,392				1,457				911		(4.5	)		52.8
OREO related expenses (reimbursements), net		7				(67	)			294		(110.4	)		(97.6	)
Regulatory assessments		502				491				420		2.2			19.5
Insurance and bond premiums		443				399				349		11.0			26.9
Marketing		344				270				194		27.4			77.3
Other general and administrative		2,650				2,171				1,441		22.1			83.9
Total noninterest expense		29,461				26,809				22,949		9.9			28.4
Income before federal income tax  provision		18,592				13,421				12,604		38.5			47.5
Federal income tax provision		3,693				4,942				3,712		(25.3	)		(0.5	)
Net income	$	14,899			$	8,479			$	8,892		75.7	%		67.6	%
Basic earnings per share	$	1.44			$	0.82			$	0.75
Diluted earnings per share	$	1.43			$	0.81			$	0.74
Weighted average number of common shares outstanding		10,306,835				10,289,049				11,868,278
Weighted average number of diluted shares outstanding		10,424,187				10,437,449				12,028,428

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

	December 31, 2018						September 30, 2018						December 31, 2017
	Amount				Percent		Amount				Percent		Amount				Percent
	(Dollars in thousands)
Commercial real estate:
Residential:
Micro-unit apartments	$	14,076			1.3	%	$	14,141			1.3	%	$	7,020			0.6	%
Other multifamily		155,279			13.8			162,380			14.7			177,882			16.3
Total multifamily		169,355			15.1			176,521			16.0			184,902			16.9
Non-residential:
Office		100,495			8.9			96,542			8.8			112,327			10.2
Retail		131,222			11.7			139,085			12.6			129,875			11.9
Mobile home park		16,003			1.4			15,649			1.4			19,970			1.8
Warehouse		25,398			2.3			22,252			2.0			22,701			2.1
Storage		32,462			2.9			32,625			3.0			32,201			2.9
Other non-residential		68,239			6.1			54,332			4.9			44,768			4.1
Total non-residential		373,819			33.3			360,485			32.7			361,842			33.0
Construction/land development:
One-to-four family residential		86,604			7.7			84,912			7.7			87,404			8.0
Multifamily		83,642			7.4			80,607			7.3			108,439			9.9
Commercial		18,300			1.6			21,385			2.0			5,325			0.5
Land		6,740			0.7			7,113			0.7			36,405			3.3
Total construction/land development		195,286			17.4			194,017			17.7			237,573			21.7
One-to-four family residential:
Permanent owner occupied		194,141			17.3			184,698			16.8			148,304			13.6
Permanent non-owner occupied		147,825			13.2			143,226			13.0			130,351			11.9
Total one-to-four family residential		341,966			30.5			327,924			29.8			278,655			25.5
Business
Aircraft		11,058			1.0			10,172			0.9			12,491			1.1
Other business		19,428			1.7			19,483			1.8			10,596			1.0
Total business		30,486			2.7			29,655			2.7			23,087			2.1
Consumer		12,970			1.0			12,419			1.1			9,133			0.8
Total loans		1,123,882			100.0	%		1,101,021			100.0	%		1,095,192			100.0	%
Less:
Loans in Process (“LIP”)		86,453						91,232						92,498
Deferred loan fees, net		1,178						1,116						1,150
ALLL		13,347						13,116						12,882
Loans receivable, net	$	1,022,904					$	995,557					$	988,662
Concentrations of credit: (1)
Construction loans as % of total capital		81.9	%					77.1	%					108.6	%
Total non-owner occupied commercial real estate as % of total capital		451.8	%					454.5	%					514.0	%

⁽¹⁾ Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC guidelines

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES Key Financial Measures (Dollars in thousands, except per share data) (Unaudited)
	At or For the Quarter Ended
	Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
		2018				2018				2018				2018				2017
Performance Ratios:
Return on assets		0.69	%			0.90	%			1.01	%			2.28	%			0.80	%
Return on equity		5.54				7.17				8.28				19.16				6.70
Dividend payout ratio		38.10				29.63				26.67				10.47				29.17
Equity-to-assets ratio		12.28				12.53				12.46				12.13				11.79
Tangible equity ratio		12.13				12.38				12.31				11.98				11.63
Net interest margin		3.41				3.46				3.50				3.88				3.65
Average interest-earning assets to average interest-bearing liabilities		114.27				115.20				114.21				113.46				113.32
Efficiency ratio		72.18				66.06				69.38				60.42				66.69
Noninterest expense as a percent of average total assets		2.49				2.33				2.44				2.34				2.34
Book value per share	$	14.35			$	14.17			$	13.97			$	13.80			$	13.27
Tangible book value per share		14.17				13.99				13.78				13.60				13.07
Capital Ratios: (1)
Tier 1 leverage ratio		10.37	%			10.37	%			10.22	%			10.44	%			10.20	%
Common equity tier 1 capital ratio		13.43				13.58				13.21				13.13				12.52
Tier 1 capital ratio		13.43				13.58				13.21				13.13				12.52
Total capital ratio		14.68				14.83				14.47				14.38				13.77
Asset Quality Ratios: (2)
Nonperforming loans as a percent of total loans		0.07	%			0.05	%			0.02	%			0.02	%			0.02	%
Nonperforming assets as a percent of total assets		0.10				0.08				0.05				0.05				0.05
ALLL as a percent of total loans		1.29				1.30				1.27				1.31				1.28
Net (recoveries) charge-offs to average loans receivable, net		(0.00	)			(0.02	)			(0.00	)			(0.43	)			(0.20	)
Allowance for Loan Losses:
ALLL, beginning of the quarter	$	13,116			$	12,754			$	13,136			$	12,882			$	12,110
Provision (Recapture of provision)		200				200				(400	)			(4,000	)			(1,200	)
Charge-offs		–				–				–				–				–
Recoveries		31				162				18				4,254				1,972
ALLL, end of the quarter	$	13,347			$	13,116			$	12,754			$	13,136			$	12,882

⁽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)
(Dollars in thousands)
(Unaudited)

	At or For the Quarter Ended
	Dec 31,						Sep 30,			Jun 30,				Mar 31,					Dec 31,
		2018					2018				2018				2018					2017
Yields and Costs:
Yield on loans		5.13	%			5.05		%			5.00	%			5.37		%			5.05	%
Yield on investments available-for-sale		3.17				3.00					2.87				2.65					2.52
Yield on interest-earning deposits		2.27				1.92					1.48				1.32					1.23
Yield on FHLB stock		6.63				6.27					4.21				4.40					3.42
Yield on interest-earning assets		4.88	%			4.77		%			4.70	%			4.98		%			4.67	%
Cost of interest-bearing deposits		1.61	%			1.40		%			1.22	%			1.15		%			1.08	%
Cost of FHLB advances		2.12				2.05					1.92				1.66					1.46
Cost of interest-bearing liabilities		1.68	%			1.52		%			1.37	%			1.25		%			1.16	%
Cost of total deposits		1.53	%			1.31		%			1.15	%			1.09		%			1.02	%
Cost of funds		1.61				1.44					1.30				1.20					1.11
Average Balances:
Loans	$	1,006,905			$	993,272				$	997,059			$	985,799				$	963,097
Investments available-for-sale		140,568				140,584					141,035				142,236					141,962
Interest-earning deposits		10,653				12,223					11,927				11,717					13,843
FHLB stock		6,886				8,540					10,004				9,593					9,859
Total interest-earning assets	$	1,165,012			$	1,154,619				$	1,160,025			$	1,149,345				$	1,128,761
Interest-bearing deposits	$	883,672			$	825,055				$	801,852			$	804,451				$	780,671
FHLB advances		135,886				177,250					213,857				208,544					215,418
Total interest-bearing liabilities	$	1,019,558			$	1,002,305				$	1,015,709			$	1,012,995				$	996,089
Noninterest-bearing deposits		47,580				53,982					50,145				46,071					46,029
Total deposits and borrowings	$	1,067,138			$	1,056,287				$	1,065,854			$	1,059,066				$	1,042,118
Average assets	$	1,236,460			$	1,225,189				$	1,229,341			$	1,218,418				$	1,199,774
Average stockholders’ equity		154,958				154,444					150,243				144,786					142,390

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Key Financial Measures (continued)
(Dollars in thousands, except per share data)
(Unaudited)

	At or For the Year Ended December 31,
		2018				2017				2016				2015				2014
Performance Ratios:
Return on assets		1.21	%			0.76	%			0.88	%			0.96	%			1.17	%
Return on equity		9.86				5.94				5.55				5.15				5.85
Dividend payout ratio		21.53				32.93				32.02				35.57				27.73
Equity-to-assets		12.28				11.79				13.31				17.42				19.36
Tangible equity ratio		12.13				11.63				13.31				17.42				19.36
Net interest margin		3.56				3.60				3.60				3.38				3.77
Average interest-earning assets to average interest-bearing liabilities		114.28				114.07				117.11				120.45				121.15
Efficiency ratio		66.88				67.31				62.27				62.66				56.37
Noninterest expense as a percent of average total assets		2.40				2.42				2.27				2.07				2.03
Book value per share	$	14.35			$	13.27			$	12.63			$	12.40			$	11.96
Tangible book value per share		14.17				13.07				12.63				12.40				11.96
Capital Ratios: (1)
Tier 1 leverage ratio		10.37	%			10.20	%			11.17	%			11.61	%			11.79	%
Common equity tier 1 capital ratio		13.43				12.52				14.38				16.36			n/a
Tier 1 capital ratio		13.43				12.52				14.38				16.36				18.30
Total capital ratio		14.68				13.77				15.63				17.62				19.56
Asset Quality Ratios: (2)
Nonperforming loans as a percent of total loans		0.07	%			0.02	%			0.10	%			0.16	%			0.20	%
Nonperforming assets as a percent of total assets		0.10				0.05				0.31				0.48				1.13
ALLL as a percent of total loans		1.29				1.28				1.32				1.36				1.55
Net charge-offs (recoveries) to average loans receivable, net		(0.45	)			(0.27	)			(0.02	)			(0.18	)			0.06
Allowance for Loan Losses:
ALLL, beginning of the year	$	12,882			$	10,951			$	9,463			$	10,491			$	12,994
Provision (recapture of provision)		(4,000	)			(400	)			1,300				(2,200	)			(2,100	)
Charge-offs		–				–				(83	)			(362	)			(642	)
Recoveries		4,465				2,331				271				1,534				239
ALLL, end of the year	$	13,347			$	12,882			$	10,951			$	9,463			$	10,491

⁽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)
(Dollars in thousands)
(Unaudited)

	At or For the Year Ended December 31,
		2018				2017				2016				2015				2014
Yields and Costs:
Yield on loans		5.13	%			4.96	%			4.99	%			5.18	%			5.37	%
Yield on investments available-for-sale		2.92				2.61				2.31				1.84				1.74
Yield on interest-earning deposits		1.74				1.07				0.52				0.26				0.25
Yield on FHLB stock		5.24				3.32				2.62				1.06				0.10
Yield on interest-earning assets		4.83				4.57				4.39				4.13				4.50
Cost of deposits		1.35	%			1.04	%			0.94	%			0.89	%			0.87	%
Cost of FHLB advances		1.92				1.30				0.86				0.95				0.91
Cost of interest-bearing liabilities		1.46	%			1.10	%			0.92	%			0.90	%			0.88	%
Cost of total deposits		1.28	%			0.99	%			0.90	%			0.86	%			0.85	%
Cost of funds		1.39				1.05				0.89				0.88				0.87
Average Balances:
Loans	$	995,810			$	878,449			$	765,948			$	667,739			$	675,353
Investments available-for-sale		141,100				134,105				132,372				121,893				131,474
Interest-earning deposits		11,628				22,194				45,125				104,476				46,776
FHLB stock		8,748				8,914				7,714				6,527				6,899
Total interest-earning assets	$	1,157,286			$	1,043,662			$	951,159			$	900,635			$	860,502
Deposits	$	828,965			$	722,666			$	648,324			$	614,185			$	581,435
FHLB advances		183,667				192,227				163,893				133,527				128,839
Total interest-bearing liabilities	$	1,012,632			$	914,893			$	812,217			$	747,712			$	710,274
Noninterest-bearing deposits		49,461				39,127				27,596				23,509				11,022
Total deposits and borrowings	$	1,062,093			$	954,020			$	839,813			$	771,221			$	721,296
Average assets	$	1,227,396			$	1,108,656			$	1,010,243			$	958,154			$	910,448
Average stockholders’ equity		151,145				142,647				160,192				177,904				182,598

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 of the tangible equity ratio and tangible book value. The Company’s intangible assets consist of goodwill and core deposit intangible. Tangible equity is calculated by subtracting intangible assets from total stockholder’s equity. Tangible assets is calculated by subtracting intangible assets from total assets. The tangible equity ratio is tangible equity divided by tangible assets. Tangible book value per share is calculated by dividing tangible equity by the number of common shares outstanding. The Company believes that these non-GAAP measures provide a more consistent presentation of our capital and facilitate peer comparison that is desired by investors.

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. All financial measures reported for periods prior to December 31, 2017, are considered GAAP financial measures:

	Dec 31, 2018				Sep 30, 2018				Jun 30, 2018				Mar 31, 2018				Dec 31, 2017
Total stockholders’ equity	$	153,738			$	154,713			$	152,554			$	148,755			$	142,634
Less:
Goodwill		889				889				889				889				889
Core deposit intangible		1,116				1,153				1,191				1,228				1,266
Tangible equity	$	151,733			$	152,671			$	150,474			$	146,638			$	140,479
Total assets		1,252,424				1,234,859				1,224,065				1,226,358				1,210,229
Less:
Goodwill		889				889				889				889				889
Core deposit intangible		1,116				1,153				1,191				1,228				1,266
Tangible assets	$	1,250,419			$	1,232,817			$	1,221,985			$	1,224,241			$	1,208,074
Common shares outstanding at period end		10,710,656				10,914,556				10,916,556				10,779,424				10,748,437
Equity to assets ratio		12.28	%			12.53	%			12.46	%			12.13	%			11.79	%
Tangible equity ratio		12.13				12.38				12.31				11.98				11.63
Book value per share	$	14.35			$	14.17			$	13.97			$	13.80			$	13.27
Tangible book value per share		14.17				13.99				13.78				13.60				13.07

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