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 of $1.6 million, or $0.17 per diluted share, for the quarter ended June 30, 2024, compared to a net loss of $1.1 million, or $(0.12) per diluted share, for the quarter ended March 31, 2024, and net income of $1.5 million, or $0.16 per diluted share, for the quarter ended June 30, 2023. For the six months ended June 30, 2024, net income was $480,000, or $0.05 per diluted share, compared to net income of $3.6 million, or $0.39 per diluted share, for the comparable period in 2023.

“During the second quarter, our financial results were positively impacted by the successful completion of a project to modify a large number of loans relating to our previously announced sale of the Bank to Global Federal Credit Union. Specifically, our balance sheet contained over $250 million of loans that are ineligible for a federally chartered credit union like Global to hold due to various aspects, primarily an original term greater than 15 years for non-owner occupied residential and commercial loans. As part of our Purchase and Assumption Agreement with Global, the Bank agreed to use its good faith efforts to modify or refinance these loans. I am very pleased that the outstanding efforts of our employees resulted in the modification or refinance of over $130 million of this portfolio,” stated Joseph W. Kiley III, President and CEO.

“As previously reported, our first quarter earnings were adversely impacted by the purchase of a single premium group annuity to satisfy the Company’s obligations to current and former employees covered by a legacy defined benefit plan. Extinguishing this liability at a pretax cost of $1.2 million was a strategic move considered to be an appropriate use of capital in light of the elevated rate environment. We also recognized $767,000 in pretax transaction related expenses in the first quarter of 2024, further adversely impacting our first quarter earnings. During the quarter ended June 30, 2024, we recognized $284,000 in pretax transaction expenses,” continued Kiley.

“While nonaccrual loans increased $4.5 million during the quarter ended June 30, 2024, overall credit quality remained strong, with only $4.7 million of nonaccrual loans relative to our $1.15 billion total loan portfolio. The increase in nonaccrual loans was due primarily to a $4.1 million commercial real estate loan moving to nonaccrual in the quarter. The loan is secured by a well-collateralized mixed-use property, and as such, we do not expect to incur a loss related to this credit. The property is currently under contract to sell, and we are in the early stages of working with the purchaser to potentially allow an assumption of the existing loan. Finally, we performed an analysis of the allowance for credit losses, which considered various factors including declines in loan balances, shifts in the composition of the loan portfolio, and credit grade changes. After careful consideration, our analysis concluded that a $200,000 recapture of provision for credit losses was appropriate,” concluded Kiley.

Highlights for the quarter ended June 30, 2024:

• Net loans receivable totaled $1.14 billion at June 30, 2024, down $7.8 million from the prior quarter end.
• Book value per share was $17.51 at June 30, 2024, compared to $17.46 at March 31, 2024, and $17.35 at June 30, 2023.
• Paid a quarterly cash dividend to shareholders of $0.13 per share.
• The Bank’s Tier 1 leverage and total capital ratios were 10.9% and 16.6% at June 30, 2024, compared to 10.4% and 16.2% at March 31, 2024, and 10.0% and 15.8% at June 30, 2023, respectively.
• Credit quality remained strong with nonaccrual loans totaling $4.7 million, or 0.41% of total loans.
• Recorded a $200,000 net recapture of provision for credit losses in the current quarter, compared to a $175,000 net recapture of provision for credit losses in the prior quarter and a $247,000 net recapture of provision for credit losses in the comparable quarter in 2023.

Deposits totaled $1.09 billion at June 30, 2024, compared to $1.17 billion at March 31, 2024, and $1.22 billion at June 30, 2023. The $78.7 million decline in deposits at June 30, 2024, compared to March 31, 2024, was due predominantly to a $38.2 million decrease in money market balances, $10.2 million reduction in brokered certificates of deposit and a $25.1 million decline in brokered deposits through the IntraFi Network, which was consistent with management’s strategy to reduce these higher cost deposits.

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

	Jun 30,2024			Mar 31,2024			June 30,2023			ThreeMonthChange				One Year Change
Deposits:	(Dollars in thousands)
Noninterest-bearing demand	$	99,842		$	100,846		$	111,768		$	(1,004	)		$	(11,926	)
Interest-bearing demand		57,033			58,489			89,080			(1,456	)			(32,047	)
Savings		17,423			19,314			20,364			(1,891	)			(2,941	)
Money market		497,345			535,594			467,411			(38,249	)			29,934
Certificates of deposit, retail		365,527			366,507			359,919			(980	)			5,608
Brokered deposits		51,004			86,146			176,422			(35,142	)			(125,418	)
Total deposits	$	1,088,174		$	1,166,896		$	1,224,964		$	(78,722	)		$	(136,790	)

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

June 30, 2024
	Noninterest-bearing demand		Interest-bearing demand		Savings		Money market		Certificates of deposit, retail		Brokered deposits		Total
	(Dollars in thousands)
King County
Renton	$	30,336	$	14,380	$	11,186	$	306,176	$	246,076	$	-	$	608,154
Landing		2,079		566		113		7,895		9,881		-		20,534
Woodinville		1,953		2,949		987		10,931		10,845		-		27,665
Bothell		3,336		847		398		1,595		6,055		-		12,231
Crossroads		13,585		2,858		28		25,599		17,748		-		59,818
Kent		7,729		8,142		42		14,525		7,448		-		37,886
Kirkland		8,326		1,789		210		15,007		1,752		-		27,084
Issaquah		1,287		232		22		3,971		6,202		-		11,714
Total King County		68,631		31,763		12,986		385,699		306,007		-		805,086
Snohomish County
Mill Creek		5,823		2,306		420		15,209		9,578		-		33,336
Edmonds		10,418		9,470		402		20,255		12,753		-		53,298
Clearview		4,810		4,888		1,444		18,695		9,504		-		39,341
Lake Stevens		4,111		4,445		1,171		22,618		14,090		-		46,435
Smokey Point		2,700		3,152		982		31,808		10,435		-		49,077
Total Snohomish County		27,862		24,261		4,419		108,585		56,360		-		221,487
Pierce County
University Place		2,385		41		2		1,819		1,503		-		5,750
Gig Harbor		964		968		16		1,242		1,657		-		4,847
Total Pierce County		3,349		1,009		18		3,061		3,160		-		10,597
Brokered deposits		-		-		-		-		-		51,004		51,004
Total deposits	$	99,842	$	57,033	$	17,423	$	497,345	$	365,527	$	51,004	$	1,088,174

March 31, 2024
	Noninterest-bearing demand		Interest-bearing demand		Savings		Money market		Certificates of deposit, retail		Brokered deposits		Total
	(Dollars in thousands)
King County
Renton	$	34,134	$	17,394	$	12,802	$	328,526	$	249,288	$	-	$	642,144
Landing		3,759		767		98		7,019		9,571		-		21,214
Woodinville		2,137		2,207		1,011		10,707		10,866		-		26,928
Bothell		3,025		947		32		1,835		5,158		-		10,997
Crossroads		12,007		3,320		35		25,107		17,689		-		58,158
Kent		5,875		5,579		6		15,046		7,207		-		33,713
Kirkland		8,804		1,861		155		14,339		2,055		-		27,214
Issaquah		1,435		373		113		2,781		6,053		-		10,755
Total King County		71,176		32,448		14,252		405,360		307,887		-		831,123
Snohomish County
Mill Creek		5,241		2,327		685		12,600		8,426		-		29,279
Edmonds		9,838		9,487		576		29,314		13,054		-		62,269
Clearview		4,802		4,646		1,452		17,701		9,076		-		37,677
Lake Stevens		3,841		4,134		1,165		22,557		14,043		-		45,740
Smokey Point		2,661		4,415		1,167		45,123		10,800		-		64,166
Total Snohomish County		26,383		25,009		5,045		127,295		55,399		-		239,131
Pierce County
University Place		2,034		63		1		1,748		1,487		-		5,333
Gig Harbor		1,253		969		16		1,191		1,734		-		5,163
Total Pierce County		3,287		1,032		17		2,939		3,221		-		10,496
Brokered deposits		-		-		-		-		-		86,146		86,146
Total deposits	$	100,846	$	58,489	$	19,314	$	535,594	$	366,507	$	86,146	$	1,166,896

Net loans receivable totaled $1.14 billion at both June 30, 2024, and March 31, 2024, down from $1.17 billion at June 30, 2023. During the quarter ended June 30, 2024, loan repayments outpaced new originations across all loan categories except one-to-four family residential. The average balance of net loans receivable totaled $1.14 billion for the quarter ended June 30, 2024, compared to $1.16 billion for the quarter ended March 31, 2024, and $1.18 billion for the quarter ended June 30, 2023.

The allowance for credit losses (“ACL”) represented 1.29% of total loans receivable at June 30, 2024, compared to 1.30% at March 31, 2024, and 1.31% at June 30, 2023.

Nonaccrual loans totaled $4.7 million at June 30, 2024, compared to $201,000 at both March 31, 2024, and June 30, 2023. The increase in nonaccrual loans during the quarter was due primarily to the previously mentioned $4.1 million commercial real estate loan and an additional $400,000 in consumer loans moving to nonaccrual. The commercial real estate loan is well collateralized, and no losses are anticipated on this credit. There was no other real estate owned (“OREO”) at June 30, 2024, March 31, 2024, or June 30, 2023.

Net interest income totaled $9.0 million for the quarter ended June 30, 2024, compared to $8.9 million for the quarter ended March 31, 2024, and $10.3 million for the quarter ended June 30, 2023.

Total interest income was $19.3 million for the quarter ended June 30, 2024, compared to $19.6 million for the quarter ended March 31, 2024, and $19.7 million for the quarter ended June 30, 2023. The decline in total interest income during the current quarter was due to average interest-earning asset balances declining by $50.1 million and $99.8 million, respectively, compared to the prior periods. Yield on loans increased to 5.93% during the recent quarter, compared to 5.88% and 5.71% for the quarters ended March 31, 2024, and June 30, 2023, respectively. During the quarter ended June 30, 2024, the Bank modified over $130 million in loans in accordance with terms in its Purchase and Assumption Agreement (the “Agreement”) with Global Federal Credit Union (“Global”). Net deferred loan fees and costs recognition increased $214,000 compared to the quarter ended March 31, 2024, due in large part to this activity, which positively impacted the yield on loans in the current quarter. Yield on investment securities was 4.38% for the current quarter, up from 4.11% and 3.93% for the quarters ended March 31, 2024, and June 30, 2023, respectively, while the average balances of investment securities declined $29.0 million from the prior quarter, primarily due to the maturity of low yielding securities in recent months.

Total interest expense was $10.3 million for the quarter ended June 30, 2024, compared to $10.7 million for the quarter ended March 31, 2024, and $9.4 million for the quarter ended June 30, 2023. The decline from the quarter ended March 31, 2024, was due primarily to lower levels of deposits, particularly the managed decrease in brokered deposits, offset slightly by an increase in the cost of interest-bearing liabilities. The average cost of interest-bearing deposits was 3.71% for the quarter ended June 30, 2024, up from 3.69% and 3.06% for the quarters ended March 31, 2024 and June 30, 2023, respectively. Advances from the FHLB totaled $176.0 million at June 30, 2024, compared to $115.0 million at March 31, 2024, and $120.0 million at June 30, 2023. The increase in FHLB advances during the current quarter was to replace the decrease in money market deposits and management’s intentional reduction in brokered deposits. At June 30, 2024, $115.0 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 29.6 months and a weighted average fixed interest rate of 1.87% as of June 30, 2024. The average cost of borrowings was 2.64% for the quarter ended June 30, 2024, compared to 2.65% for the quarter ended March 31, 2024, and 2.55% for the quarter ended June 30, 2023.

Net interest margin was 2.66% for the quarter ended June 30, 2024, compared to 2.55% for the quarter ended March 31, 2024, and 2.84% for the quarter ended June 30, 2023. The increase in the quarter ended June 30, 2024, was due primarily to the increase in net deferred loan fee recognition compared to the quarter ended March 31, 2024. This activity contributed to an increase in the average yield on interest-earning assets of 11 basis points to 5.73% during the second quarter of 2024, from 5.62% during the first quarter of 2024, and increased 30 basis points from 5.43% during the quarter ended June 30, 2023. The average cost of interest-bearing liabilities increased one basis point to 3.59% during the quarter, from 3.58% during the quarter ended March 31, 2024, and increased 58 basis points from 3.01% during the quarter ended June 30, 2023. The net interest margin for the month of June 2024 was 2.66%.

Noninterest income for the quarter ended June 30, 2024, totaled $673,000, down from $787,000 and $798,000 for the quarters ended March 31, 2024, and June 30, 2023, respectively. The decrease compared to the quarter ended March 31, 2024, was primarily due to fluctuations related to our fintech focused venture capital investment, a $41,000 decrease in wealth management revenue, and a $41,000 decrease in BOLI income due to timing differences, partially offset by a combined $58,000 increase in loan and deposit related fees.

Noninterest expense totaled $7.9 million for the quarter ended June 30, 2024, compared to $11.3 million for the quarter ended March 31, 2024, and $9.5 million for the quarter ended June 30, 2023. The decrease compared to the quarter ended March 31, 2024, was primarily due to a $2.9 million decrease in salaries and employee benefits, of which $1.4 million was related to the purchase of a single premium group annuity and accelerated amortization of related prepaid expense to satisfy the defined benefit liability, with no such expense in the current quarter. In addition, the aforementioned loan modification activity in the current quarter resulted in a $939,000 increase in deferred loan costs, which further decreased salaries and employee benefits expenses in the current period, along with reductions in estimates for profitability relative to targets causing in a $151,000 reduction in profit sharing contributions between quarters. Payroll taxes declined by $94,000 in the current quarter compared to the quarter ended March 31, 2024, as seasonal annual limits were reached during the second quarter. Professional fees declined by $551,000 during the current quarter compared to the March 31, 2024 quarter, due mostly to a $489,000 decrease in professional services related to our pending transaction with Global, since the signing of the Agreement with Global and related filings occurred during the first quarter of 2024. Also contributing to the decline in professional fees was an $83,000 reduction in external audit and accounting fees in the current quarter compared to the quarter ended March 31, 2024. The decrease compared to the quarter ended June 30, 2023, was primarily due to a $1.2 million decrease in salaries and employee benefits, a $243,000 decrease in other general and administrative expense, a $138,000 decrease in professional fees, a $97,000 decline in regulatory assessments and a $51,000 decrease in marketing expense, partially offset by higher data processing and occupancy and equipment expense.

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. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, our pending transaction with Global Federal Credit Union (“Global”) whereby Global, pursuant to the definitive purchase and assumption agreement (the “P&A Agreement”), will acquire substantially all of the assets and assume substantially all of the liabilities of the Bank, expectations of the business environment in which we operate, projections of future performance or financial items, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based on current management expectations and may, therefore, involve risks and uncertainties. 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: the occurrence of any event, change or other circumstances that could give rise to the right of one or all of the parties to terminate the P&A Agreement; delays in completing the P&A Agreement; the failure to obtain necessary regulatory approvals or to satisfy any of the other conditions to the Global transaction, including the P&A Agreement, on a timely basis or at all; delays or other circumstances arising from the dissolution of the Bank and the Company following completion of the P&A Agreement; diversion of management’s attention from ongoing business operations and opportunities during the pending Global transaction; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement of the Global transaction; 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 estimates in determining the 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.

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

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Balance Sheets(Dollars in thousands)(Unaudited)

Assets	Jun 30,2024				Mar 31,2024				Jun 30, 2023				ThreeMonthChange			OneYearChange
Cash on hand and in banks	$	10,811			$	8,789			$	10,621			23.0	%		1.8	%
Interest-earning deposits with banks		48,173				40,272				42,956			19.6			12.1
Investments available-for-sale, at fair value		160,693				180,376				208,927			(10.9	)		(23.1	)
Investments held-to-maturity, at amortized cost		2,456				2,451				2,444			0.2			0.5
Loans receivable, net of allowance of $14,796, $14,996, and $15,606 respectively		1,135,067				1,142,909				1,171,916			(0.7	)		(3.1	)
Federal Home Loan Bank ("FHLB") stock, at cost		8,823				6,078				6,603			45.2			33.6
Accrued interest receivable		6,632				7,176				6,690			(7.6	)		(0.9	)
Deferred tax assets, net		2,360				2,399				3,275			(1.6	)		(27.9	)
Premises and equipment, net		19,007				19,323				20,283			(1.6	)		(6.3	)
Bank owned life insurance ("BOLI"), net		38,368				38,058				36,922			0.8			3.9
Prepaid expenses and other assets		11,447				16,827				13,051			(32.0	)		(12.3	)
Right of use asset ("ROU"), net		2,670				2,415				3,018			10.6			(11.5	)
Goodwill		889				889				889			0.0			0.0
Core deposit intangible, net		357				388				484			(8.0	)		(26.2	)
Total assets	$	1,447,753			$	1,468,350			$	1,528,079			(1.4	)		(5.3	)
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits	$	99,842			$	100,846			$	111,768			(1.0	)		(10.7	)
Interest-bearing deposits		988,332				1,066,050				1,113,196			(7.3	)		(11.2	)
Total deposits		1,088,174				1,166,896				1,224,964			(6.7	)		(11.2	)
Advances from the FHLB		176,000				115,000				120,000			53.0			46.7
Advance payments from borrowers for taxes and insurance		2,764				5,649				2,524			(51.1	)		9.5
Lease liability, net		2,866				2,598				3,213			10.3			(10.8	)
Accrued interest payable		1,117				1,134				2,045			(1.5	)		(45.4	)
Other liabilities		16,139				16,890				16,618			(4.4	)		(2.9	)
Total liabilities		1,287,060				1,308,167				1,369,364			(1.6	)		(6.0	)
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 9,179,825 shares at June 30 2024, 9,174,425 shares at March 31 2024, and 9,148,086 shares at June 30 2023		92				92				92			0.0			0.0
Additional paid-in capital		72,953				72,871				72,544			0.1			0.6
Retained earnings		94,300				93,938				95,896			0.4			(1.7	)
Accumulated other comprehensive loss, net of tax		(6,652	)			(6,718	)			(9,817	)		(1.0	)		(32.2	)
Total stockholders' equity		160,693				160,183				158,715			0.3			1.2
Total liabilities and stockholders' equity	$	1,447,753			$	1,468,350			$	1,528,079			(1.4	)		(5.3	)

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

	Quarter Ended
	Jun 30, 2024				Mar 31,2024				Jun 30, 2023				ThreeMonthChange			OneYearChange
Interest income
Loans, including fees	$	16,805			$	16,966			$	16,849			(0.9	)%		(0.3	)%
Investments		1,886				2,064				2,108			(8.6	)		(10.5	)
Interest-earning deposits with banks		482				486				620			(0.8	)		(22.3	)
Dividends on FHLB Stock		144				127				120			13.4			20.0
Total interest income		19,317				19,643				19,697			(1.7	)		(1.9	)
Interest expense
Deposits		9,498				9,916				8,590			(4.2	)		10.6
Other borrowings		849				827				798			2.7			6.4
Total interest expense		10,347				10,743				9,388			(3.7	)		10.2
Net interest income		8,970				8,900				10,309			0.8			(13.0	)
Recapture of provision for credit losses		(200	)			(175	)			(247	)		14.3			(19.0	)
Net interest income after recapture of provision for credit losses		9,170				9,075				10,556			1.0			(13.1	)
Noninterest income
BOLI income		310				351				274			(11.7	)		13.1
Wealth management revenue		54				95				95			(43.2	)		(43.2	)
Deposit related fees		240				221				252			8.6			(4.8	)
Loan related fees		97				58				44			67.2			120.5
Other (expense) income, net		(28	)			62				133			(145.2	)		(121.1	)
Total noninterest income		673				787				798			(14.5	)		(15.7	)
Noninterest expense
Salaries and employee benefits		3,817				6,763				5,064			(43.6	)		(24.6	)
Occupancy and equipment		1,225				1,226				1,160			(0.1	)		5.6
Professional fees		749				1,300				887			(42.4	)		(15.6	)
Data processing		856				786				711			8.9			20.4
Regulatory assessments		170				166				267			2.4			(36.3	)
Insurance and bond premiums		118				132				115			(10.6	)		2.6
Marketing		47				64				98			(26.6	)		(52.0	)
Other general and administrative		959				894				1,202			7.3			(20.2	)
Total noninterest expense		7,941				11,331				9,504			(29.9	)		(16.4	)
Income (loss) before federal income tax provision (benefit)		1,902				(1,469	)			1,850			(229.5	)		2.8
Federal income tax provision (benefit)		347				(393	)			362			(188.3	)		(4.1	)
Net income (loss)	$	1,555			$	(1,076	)		$	1,488			(244.5	)		4.5
Basic earnings (loss) per share	$	0.17			$	(0.12	)		$	0.16
Diluted earnings (loss) per share	$	0.17			$	(0.12	)		$	0.16
Weighted average number of common shares outstanding		9,168,414				9,159,339				9,120,468
Weighted average number of diluted shares outstanding		9,235,446				9,159,339				9,124,227

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

	June 30, 2024							March 31, 2024							June 30, 2023
	Amount				Percent			Amount				Percent			Amount				Percent
	(Dollars in thousands)
Commercial real estate:
Residential:
Multifamily	$	134,302			11.7	%		$	134,386			11.6	%		$	141,413			11.9	%
Total residential		134,302			11.7				134,386			11.6				141,413			11.9
Non-residential:
Retail		118,154			10.4				118,958			10.4				131,877			11.1
Office		74,032			6.4				72,303			6.2				79,338			6.7
Hotel / motel		55,018			4.8				57,263			4.9				64,297			5.4
Storage		32,636			2.8				32,834			2.8				33,418			2.8
Mobile home park		23,159			2.0				23,351			2.0				22,798			1.9
Warehouse		18,868			1.6				19,086			1.6				19,557			1.6
Nursing Home		11,474			1.0				11,538			1.0				11,739			1.0
Other non-residential		32,139			2.8				32,041			2.8				43,332			3.7
Total non-residential		365,480			31.8				367,374			31.7				406,356			34.2
Construction/land:
One-to-four family residential		39,908			3.5				43,411			3.7				47,168			4.0
Multifamily		6,078			0.5				5,266			0.5				547			0.0
Land development		9,800			0.8				8,330			0.7				10,113			0.9
Total construction/land		55,786			4.8				57,007			4.9				57,828			4.9
One-to-four family residential:
Permanent owner occupied		283,516			24.7				283,398			24.5				246,585			20.8
Permanent non-owner occupied		225,423			19.6				223,302			19.3				235,008			19.8
Total one-to-four family residential		508,939			44.3				506,700			43.8				481,593			40.6
Business:
Aircraft		-			0.0				1,907			0.2				2,017			0.2
Small Business Administration ("SBA")		1,763			0.2				1,778			0.2				1,824			0.2
Paycheck Protection Plan ("PPP")		316			0.0				395			0.0				629			0.1
Other business		12,984			1.1				16,344			1.4				22,957			1.8
Total business		15,063			1.3				20,424			1.8				27,427			2.3
Consumer:
Classic, collectible and other auto		56,758			4.9				58,003			5.0				61,611			5.1
Other consumer		13,535			1.2				14,011			1.2				11,294			1.0
Total consumer		70,293			6.1				72,014			6.2				72,905			6.1
Total loans		1,149,863			100.0	%			1,157,905			100.0	%			1,187,522			100.0	%
Less:
ACL		14,796							14,996							15,606
Loans receivable, net	$	1,135,067						$	1,142,909						$	1,171,916
Concentrations of credit: (1)
Construction loans as % of total capital		34.8	%						36.3	%						40.0	%
Total non-owner occupied commercial real estate as % of total capital		298.8	%						307.2	%						336.8	%

(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
	Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
		2024				2024				2023				2023				2023
	(Dollars in thousands, except per share data)
Performance Ratios: (1)
Return on assets		0.43	%			(0.29	)%			0.31	%			0.39	%			0.39	%
Return on equity		3.88				(2.67	)			2.97				3.71				3.74
Dividend payout ratio		76.47				(108.33	)			100.00				79.26				79.90
Equity-to-assets ratio		11.10				10.91				10.74				10.44				10.39
Tangible equity ratio (2)		11.02				10.83				10.66				10.36				10.31
Net interest margin		2.66				2.55				2.54				2.69				2.84
Average interest-earning assets to average interest-bearing liabilities		117.01				116.40				115.84				116.94				116.27
Efficiency ratio		82.35				116.97				85.17				84.49				85.57
Noninterest expense as a percent of average total assets		2.21				3.05				2.18				2.29				2.50
Book value per common share	$	17.51			$	17.46			$	17.61			$	17.35			$	17.35
Tangible book value per share (2)		17.37				17.32				17.47				17.20				17.20
Capital Ratios: (3)
Tier 1 leverage ratio		10.91	%			10.41	%			10.18	%			10.25	%			10.02	%
Common equity tier 1 capital ratio		15.39				14.98				14.90				14.75				14.49
Tier 1 capital ratio		15.39				14.98				14.90				14.75				14.49
Total capital ratio		16.64				16.24				16.15				16.00				15.75
Asset Quality Ratios: (4)
Nonaccrual loans as a percent of total loans		0.41	%			0.02	%			0.02	%			0.02	%			0.02	%
Nonaccrual as a percent of total assets		0.32				0.01				0.01				0.01				0.01
ACL as a percent of total loans		1.29				1.30				1.28				1.29				1.31
Net charge-offs to average loans receivable, net		0.00				0.00				0.00				0.00				0.00
Allowance for Credit Losses:
ACL - loans
Beginning balance	$	14,996			$	15,306			$	15,306			$	15,606			$	16,028
Recapture of provision		(200	)			(300	)			-				(300	)			(400	)
Charge-offs		-				(10	)			-				-				(22	)
Recoveries		-				-				-				-				-
Ending balance	$	14,796			$	14,996			$	15,306			$	15,306			$	15,606
Allowance for unfunded commitments
Beginning balance	$	564			$	439			$	439			$	439			$	286
Provision for credit losses		-				125				-				-				153
Ending balance	$	564			$	564			$	439			$	439			$	439
Provision for credit losses
ACL - loans	$	(200	)		$	(300	)		$	-			$	(300	)		$	(400	)
Allowance for unfunded commitments		-				125				-				-				153
Total	$	(200	)		$	(175	)		$	-			$	(300	)		$	(247	)

(1)	Performance ratios are calculated on an annualized basis.
(2)	Tangible equity, tangible assets, 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.
(4)	Loans are reported net of undisbursed funds.

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

	At or For the Quarter Ended
	Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
		2024				2024				2023				2023				2023
	(Dollars in thousands)
Yields and Costs: (1)
Yield on loans		5.93	%			5.88	%			5.83	%			5.73	%			5.71	%
Yield on investments		4.38				4.11				4.11				3.98				3.93
Yield on interest-earning deposits		5.25				5.28				5.32				5.18				4.91
Yield on FHLB stock		8.63				7.79				7.29				6.57				7.06
Yield on interest-earning assets		5.73	%			5.62	%			5.56	%			5.46	%			5.43	%
Cost of interest-bearing deposits		3.71	%			3.69	%			3.62	%			3.33	%			3.06	%
Cost of borrowings		2.64				2.65				2.40				2.42				2.55
Cost of interest-bearing liabilities		3.59	%			3.58	%			3.50	%			3.24	%			3.01	%
Cost of total deposits (2)		3.38	%			3.38	%			3.31	%			3.03	%			2.78	%
Cost of funds (3)		3.30				3.31				3.23				2.97				2.76
Average Balances:
Loans	$	1,139,017			$	1,160,156			$	1,167,339			$	1,171,483			$	1,182,939
Investments		173,102				202,106				206,837				211,291				215,113
Interest-earning deposits		36,959				37,032				65,680				40,202				50,691
FHLB stock		6,714				6,554				6,584				6,820				6,814
Total interest-earning assets	$	1,355,792			$	1,405,848			$	1,446,440			$	1,429,796			$	1,455,557
Interest-bearing deposits	$	1,029,608			$	1,082,168			$	1,127,690			$	1,097,324			$	1,126,598
Borrowings		129,126				125,604				120,978				125,402				125,275
Total interest-bearing liabilities	$	1,158,734			$	1,207,772			$	1,248,668			$	1,222,726			$	1,251,873
Noninterest-bearing deposits		101,196				99,173				102,869				109,384				111,365
Total deposits and borrowings	$	1,259,930			$	1,306,945			$	1,351,537			$	1,332,110			$	1,363,238
Average assets	$	1,446,207			$	1,495,753			$	1,538,955			$	1,522,224			$	1,547,321
Average stockholders' equity		161,057				161,823				159,659				160,299				159,764

(1) Yields and costs are annualized.(2) Includes noninterest-bearing deposits.(3) Includes total borrowings and deposits (including noninterest-bearing deposits).

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 tables provide a reconciliation between the GAAP and non-GAAP measures:

	Quarter Ended
		Jun 30,2024				Mar 31,2024				Dec 31,2023				Sep 30,2023				Jun 30,2023
	(Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP)	$	160,693			$	160,183			$	161,660			$	159,235			$	158,715
Less:
Goodwill		889				889				889				889				889
Core deposit intangible, net		357				388				419				451				484
Tangible equity (Non-GAAP)	$	159,447			$	158,906			$	160,352			$	157,895			$	157,342
Total assets (GAAP)	$	1,447,753			$	1,468,350			$	1,505,082			$	1,525,568			$	1,528,079
Less:
Goodwill		889				889				889				889				889
Core deposit intangible, net		357				388				419				451				484
Tangible assets (Non-GAAP)	$	1,446,507			$	1,467,073			$	1,503,774			$	1,524,228			$	1,526,706
Common shares outstanding at period end		9,179,825				9,174,425				9,179,510				9,179,510				9,148,086
Equity-to-assets ratio (GAAP)		11.10	%			10.91	%			10.74	%			10.44	%			10.39	%
Tangible equity-to-tangible assets ratio (Non-GAAP)		11.02				10.83				10.66				10.36				10.31
Book value per common share (GAAP)	$	17.51			$	17.46			$	17.61			$	17.35			$	17.35
Tangible book value per share (Non-GAAP)		17.37				17.32				17.47				17.20				17.20