First Financial Northwest, Inc. Reports Net Income of $2.8 million or $0.31 per Diluted Share for the Second Quarter Ended June 30, 2022

Rhea-AI Summary

First Financial Northwest reported a net income of $2.8 million for Q2 2022, down from $3.3 million in Q1 2022 and $3.8 million in Q2 2021. Year-to-date net income is $6.1 million, consistent with last year's $6.3 million. The company did not record a provision for loan losses this quarter, contrasting with a $500,000 recapture in the previous quarter. One-to-four family residential loans grew by $24.5 million, while total deposits rose by $39.4 million to $1.18 billion. The book value per share decreased slightly to $17.26.

Positive

• One-to-four family residential loan balances increased by $24.5 million in Q2 2022.
• Total deposits rose by $39.4 million to $1.18 billion.
• Net interest income improved to $11.8 million, up from $11.4 million in Q1 2022.

Negative

• Net income decreased to $2.8 million in Q2 2022 from $3.8 million in Q2 2021.
• Book value per share declined to $17.26 from $17.32 in Q1 2022.
• Noninterest expense rose to $9.3 million, up from $8.6 million in the previous quarter.

RENTON, Wash., July 28, 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 June 30, 2022, of $2.8 million, or $0.31 per diluted share, compared to $3.3 million, or $0.36 per diluted share, for the quarter ended March 31, 2022, and $3.8 million, or $0.40 per diluted share, for the quarter ended June 30, 2021. For the six months ended June 30, 2022, net income was $6.1 million, or $0.66 per diluted share, compared to net income of $6.3 million, or $0.66 per diluted share, for the comparable six-month period in 2021.

The difference in the provision for loan losses was the primary contributor to the change in net income for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022. As a result of the quarterly analysis of our loan portfolio, the Company did not record a provision or recognize a recapture of provision for loan losses for the quarter ended June 30, 2022, compared to a $500,000 recapture of provision for loan losses for the quarter ended March 31, 2022. The recapture in the prior quarter was primarily attributable to the net impact of changes in the loan portfolio mix, loan downgrades and changes in impairment status.

“Our one-to-four family residential lending team carried their momentum from the first quarter well into the second quarter of the year,” stated Joseph W. Kiley, III, President and CEO. “The purchase housing market remained robust in our markets during the quarter, and I am very pleased one-to-four family residential balances grew by $24.5 million in the quarter, bringing year-to-date growth to $51.6 million in that portfolio,” continued Kiley.

“During the quarter, we also increased our portfolio of investment securities, predominantly consisting of short-term U.S. Treasuries and mortgage-backed securities,” continued Kiley. “To accommodate our balance sheet growth, we acquired brokered deposits, as we’ve done in the past when those rates and terms were deemed most appropriate to satisfy our funding needs,” continued Kiley. “Finally, I am also pleased to see continued growth in our balances of demand deposits which increased by $4.9 million during the quarter,” concluded Kiley.

Highlights for the quarter ended June 30, 2022:

• Net loans receivable remained stable at $1.12 billion at June 30, 2022, as new loan originations kept pace with loan repayments, including reductions in Paycheck Protection Program (“PPP”) loan balances.
• Total deposits increased $39.4 million to $1.18 billion at June 30, 2022, as the Bank utilized brokered deposits to offset the reduction in money market and retail certificates of deposits and fund growth in the quarter.
• The Company’s book value per share decreased to $17.26 at June 30, 2022, compared to $17.32 at March 31, 2022, and $16.75 at June 30, 2021.
• The Company repurchased 16,927 shares at an average price of $16.65 per share under its current board-authorized share repurchase plan.
• The Company paid a regular quarterly cash dividend of $0.12 per share to shareholders.
• The Bank’s Tier 1 leverage and total capital ratios at June 30, 2022, were 10.5% and 15.5%, respectively, compared to 10.5% and 15.3%, respectively, at March 31, 2022, and 10.2% and 15.7%, respectively at June 30, 2021.
• Based on management’s evaluation of the adequacy of the allowance for loan and lease losses (“ALLL”), the Bank did not record a provision or recognize a recapture of provision for loan losses for the quarter.
  

Deposits totaled $1.18 billion at June 30, 2022, compared to $1.14 billion at March 31, 2022, and $1.13 billion at June 30, 2021. The $53.3 million increase in brokered deposits more than offset the $13.9 million decrease in retail deposits, led by reductions in money market balances and retail certificates of deposits in the quarter ended June 30, 2022. Management continues to consider multiple alternatives to increase deposits to fund its anticipated asset growth in addition to its efforts through its branch network, including wholesale markets, brokered deposits, and the national deposit market. In the quarter ended June 30, 2022, brokered deposits were deemed to be the most appropriate source of supplemental funds based on the rates and terms available compared to other sources.

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

	Jun 30, 2022			Mar 31, 2022			Jun 30, 2021			Three Month Change				One Year Change
Deposits:	(Dollars in thousands)
Noninterest-bearing demand	$	127,808		$	130,596		$	111,240		$	(2,788	)		$	16,568
Interest-bearing demand		107,478			99,794			110,338			7,684				(2,860	)
Savings		23,525			23,441			21,281			84				2,244
Money market		596,515			609,080			552,964			(12,565	)			43,551
Certificates of deposit, retail		270,866			277,190			338,479			(6,324	)			(67,613	)
Brokered deposits		53,277			-			-			53,277				53,277
Total deposits	$	1,179,469		$	1,140,101		$	1,134,302		$	39,368			$	45,167

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

June 30, 2022
	Noninterest-bearing demand		Interest-bearing demand		Savings		Money market		Certificates of deposit, retail		Brokered deposits		Total
	(Dollars in thousands)
King County
Renton	$	37,688	$	43,985	$	15,160	$	311,528	$	225,799	$	-	$	634,160
Landing		4,925		2,504		178		21,802		2,988		-		32,397
Woodinville		3,235		7,776		1,141		19,202		5,167		-		36,521
Bothell		3,734		1,258		63		7,286		1,488		-		13,829
Crossroads		16,004		4,930		356		52,277		5,896		-		79,463
Kent		5,834		11,353		18		17,459		716		-		35,380
Kirkland		9,332		319		22		7,299		25		-		16,997
Issaquah		4,541		1,265		62		7,033		406		-		13,307
Total King County		85,293		73,390		17,000		443,886		242,485		-		862,054
Snohomish County
Mill Creek		6,290		3,445		837		21,716		6,082		-		38,370
Edmonds		19,892		13,627		1,060		39,220		8,714		-		82,513
Clearview		6,307		4,650		1,364		26,613		1,526		-		40,460
Lake Stevens		4,631		7,241		1,554		34,406		5,018		-		52,850
Smokey Point		3,252		4,501		1,581		24,917		6,735		-		40,986
Total Snohomish County		40,372		33,464		6,396		146,872		28,075		-		255,179
Pierce County
University Place		1,032		95		2		4,052		306		-		5,487
Gig Harbor		1,111		529		127		1,705		-		-		3,472
Total Pierce County		2,143		624		129		5,757		306		-		8,959
Brokered deposits		-		-		-		-		-		53,277		53,277
Total deposits	$	127,808	$	107,478	$	23,525	$	596,515	$	270,866	$	53,277	$	1,179,469

March 31, 2022
	Noninterest-bearing demand		Interest-bearing demand		Savings		Money market		Certificates of deposit, retail		Total
	(Dollars in thousands)
King County
Renton	$	41,009	$	46,467	$	15,242	$	327,054	$	236,637	$	666,409
Landing		5,105		2,328		182		23,720		3,297		34,632
Woodinville		3,379		6,863		1,004		18,426		4,706		34,378
Bothell		3,301		1,359		65		8,274		1,164		14,163
Crossroads		19,127		6,449		58		53,827		4,638		84,099
Kent		6,706		8,077		27		15,927		273		31,010
Kirkland		7,587		358		19		8,114		25		16,103
Issaquah		2,865		371		25		3,759		200		7,220
Total King County		89,079		72,272		16,622		459,101		250,940		888,014
Snohomish County
Mill Creek		6,479		2,515		1,144		20,807		6,769		37,714
Edmonds		20,054		7,814		913		41,399		8,332		78,512
Clearview		5,781		4,598		1,348		25,563		1,242		38,532
Lake Stevens		4,176		7,163		1,684		30,239		4,504		47,766
Smokey Point		3,199		4,827		1,676		27,809		5,393		42,904
Total Snohomish County		39,689		26,917		6,765		145,817		26,240		245,428
Pierce County
University Place		1,345		59		22		2,541		10		3,977
Gig Harbor		483		546		32		1,621		-		2,682
Total Pierce County		1,828		605		54		4,162		10		6,659
Total deposits	$	130,596	$	99,794	$	23,441	$	609,080	$	277,190	$	1,140,101

Net loans receivable totaled $1.12 billion at both June 30, 2022, and March 31, 2022, compared to $1.08 billion at June 30, 2021. During the quarter ended June 30, 2022, new originations of one-to-four family residential loans, business, and classic, collectible and other auto loans largely kept pace with loan repayments in the quarter, including PPP loan repayments and forgiveness. The average balance of net loans receivable totaled $1.12 billion for both the quarters ended June 30, 2022, and March 31, 2022, compared to $1.09 billion for the quarter ended June 30, 2021.

The ALLL represented 1.33% of total loans receivable at both June 30, 2022, and March 31, 2022, compared to 1.35% of total loans receivable at June 30, 2021.

There were no nonperforming loans at both June 30, 2022, and June 30, 2021. The collateral for the single nonperforming consumer loan of $179,000 at March 31, 2022, was repossessed and sold in the quarter ended June 30, 2022, contributing to net loan charge-offs totaling $34,000. There was no other real estate owned (“OREO”) at both June 30, 2022, and March 31, 2022, compared to $454,000 at June 30, 2021.

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

	Jun 30,			Mar 31,				Jun 30,				Three Month				One Year
	2022			2022				2021				Change				Change
	(Dollars in thousands)
Nonperforming loans:
Consumer	$	─		$	179			$	─			$	(179	)		$	─
Total nonperforming loans	─				179			─					(179	)			─
OREO	─			─					454				─				(454	)
Total nonperforming assets(1)	$	─		$	179			$	454			$	(179	)		$	(454	)
Nonperforming assets as a percent of total assets	0.00%			0.01%				0.03%

⁽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 Bank’s TDRs were performing in accordance with their restructured terms at June 30, 2022.

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 borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. TDRs totaled $2.1 million at both June 30, 2022, and March 31, 2022, compared to $3.6 million at June 30, 2021. All TDRs were performing according to their modified repayment terms for the periods presented.

Net interest income totaled $11.8 million for the quarter ended June 30, 2022, compared to $11.4 million for the quarter ended March 31, 2022, and $11.3 million for the quarter ended June 30, 2021. The increase in the current quarter compared to the quarter ended March 31, 2022, was primarily due to higher interest income on investment securities and loans, including fees, partially offset by higher interest expense on deposits and other borrowings, primarily reflecting the increase in market interest rates as a result of the recent increases to the targeted federal funds rate.

Total interest income was $13.5 million for the quarter ended June 30, 2022, compared to $12.9 million for the quarter ended March 31, 2022, and $13.6 million for the quarter ended June 30, 2021. The increase in the current quarter compared to the quarter ended March 31, 2022, was primarily due to an improvement in average loan yields to 4.41% from 4.36% in the prior quarter. The decrease from the quarter ended June 30, 2021, is primarily due to a decline in average loan yields to 4.41% from 4.64%, partially offset by an $18.7 million increase in the average balance of investment securities and an increase in yields on investment securities to 2.33% in the quarter ended June 30, 2022, compared to 1.90% in the quarter ended June 30, 2021. The decrease in average loan yields as compared to the same quarter last year was primarily due to the decline in the acceleration of the recognition of deferred loan fee income due to reduced loan repayments from PPP loan forgiveness.

Total interest expense was $1.7 million for the quarter ended June 30, 2022, compared to $1.6 million for the quarter ended March 31, 2022, and $2.3 million for the quarter ended June 30, 2021. The average cost of interest-bearing deposits was 0.55% for the quarter ended June 30, 2022, compared to 0.50% for the quarter ended March 31, 2022, and 0.75% for the quarter ended June 30, 2021. The increase from the quarter ended March 31, 2022, was due primarily to increased interest expense on money market balances and the renewed use of brokered deposits in the quarter to fund asset growth. This was partially offset by the continued repricing in particular, during the beginning of the quarter prior to the recent increases in the targeted federal funds rate of maturing certificates of deposit to lower interest rates combined with a reduction in the average balance of higher cost certificates of deposit. As of June 30, 2022, there were approximately $130.0 million in retail certificates of deposit at a weighted average rate of 1.05% maturing in the next 12 months, and an additional $107.0 million maturing in the subsequent 12 to 24 months, at a weighted average rate of 1.70%. Advances from the FHLB were $95.0 million at both June 30, 2022, and March 31, 2022, compared to $120.0 million at June 30, 2021. 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 Bank’s interest rate risk management efforts. These cash flow hedge agreements have a weighted average remaining term of 53 months and a weighted average fixed rate of 1.05%. The average cost of borrowings was 1.21% for the quarter ended June 30, 2022, compared to 1.28% for the quarter ended March 31, 2022, and 1.37% for the quarter ended June 30, 2021.

The net interest margin was 3.53% for the quarter ended June 30, 2022, compared to 3.43% for the quarter ended March 31, 2022, and 3.36% for the quarter ended June 30, 2021. The increase in the net interest margin for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022, is due to several factors, primarily a 14-basis point improvement in the Company’s average yield on interest-earning assets during the quarter to 4.04% from 3.90%, partially offset by a five-basis point increase in the average cost of interest-bearing liabilities to 0.61% from 0.56%. The increase in net interest margin for the quarter ended June 30, 2022, compared to the quarter ended June 30, 2021, was due primarily to the 21-basis point reduction in the average cost of interest-bearing liabilities to 0.61% from 0.82%, partially offset by a two-basis point reduction in the average yield on interest-earning assets to 4.04% from 4.06%.

Noninterest income for the quarter ended June 30, 2022, totaled $961,000, compared to $789,000 for the quarter ended March 31, 2022, and $973,000 for the quarter ended June 30, 2021. The increase in noninterest income for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022, was primarily due to higher loan related fees, including a $127,000 increase in prepayment penalties, and to a lesser extent higher deposit related fees and wealth management revenue, partially offset by lower bank owned life insurance (“BOLI”) income.

Noninterest expense totaled $9.3 million for the quarter ended June 30, 2022, compared to $8.6 million for the quarter ended March 31, 2022, and $8.2 million for the quarter ended June 30, 2021. The increase in noninterest expense for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022, was primarily due to $279,000 in higher professional fees primarily relating to regulatory examination fees and fees paid to recruit employees, and a $217,000 increase in salaries and employee benefits as 25 open positions were filled during the quarter and incentive commissions were higher, primarily due to the increase in one-to-four family loan originations. Other general and administrative expense was also higher due to expenses relating to our annual meeting of shareholders, with postage and shareholder related expenses increasing by $71,000 compared to the previous quarter, and an increase of $23,000 in the reserve for unfunded commitments.

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 COVID-19 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 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 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 SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)

Assets	Jun 30, 2022				Mar 31, 2022				Jun 30, 2021				Three Month Change			One Year Change
Cash on hand and in banks	$	9,458			$	7,979			$	7,518			18.5	%		25.8	%
Interest-earning deposits with banks		26,194				19,633				72,045			33.4			(63.6	)
Investments available-for-sale, at fair value		210,826				180,212				187,873			17.0			12.2
Investments held-to-maturity, at amortized cost		2,432				2,426				2,419			0.2			0.5
Loans receivable, net of allowance of $15,125, $15,159, and $14,878 respectively		1,119,795				1,121,382				1,081,640			(0.1	)		3.5
Federal Home Loan Bank ("FHLB") stock, at cost		5,512				5,512				6,465			0.0			(14.7	)
Accrued interest receivable		5,738				5,590				5,498			2.6			4.4
Deferred tax assets, net		1,840				1,069				688			72.1			167.4
Other real estate owned ("OREO")		-				-				454			n/a			(100.0	)
Premises and equipment, net		21,855				22,254				22,567			(1.8	)		(3.2	)
Bank owned life insurance ("BOLI"), net		35,819				35,552				35,536			0.8			0.8
Prepaid expenses and other assets		10,493				8,451				2,332			24.2			350.0
Right of use asset ("ROU"), net		3,301				3,455				4,025			(4.5	)		(18.0	)
Goodwill		889				889				889			0.0			0.0
Core deposit intangible, net		616				650				754			(5.2	)		(18.3	)
Total assets	$	1,454,768			$	1,415,054			$	1,430,703			2.8	%		1.7
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits	$	127,808			$	130,596			$	111,240			(2.1	)%		14.9	%
Interest-bearing deposits		1,051,661				1,009,505				1,023,062			4.2			2.8
Total deposits		1,179,469				1,140,101				1,134,302			3.5			4.0
Advances from the FHLB		95,000				95,000				120,000			0.0			(20.8	)
Advance payments from borrowers for taxes and insurance		2,670				5,299				2,616			(49.6	)		2.1
Lease liability, net		3,482				3,617				4,176			(3.7	)		(16.6	)
Accrued interest payable		115				112				193			2.7			(40.4	)
Other liabilities		17,136				13,168				7,795			30.1			119.8
Total liabilities		1,297,872				1,257,297				1,269,082			3.2			2.3
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding		-				-				-			n/a			n/a
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding 9,091,533 shares at June 30, 2022, 9,107,977 shares at March 31, 2022, and 9,651,180 shares at June 30, 2021		91				91				97			0.0			(6.2	)
Additional paid-in capital		71,835				71,780				80,770			0.1			(11.1	)
Retained earnings		90,066				88,339				82,224			2.0			9.5
Accumulated other comprehensive loss, net of tax		(4,814	)			(1,889	)			(59	)		154.8			8,059.3
Unearned Employee Stock Ownership Plan ("ESOP") shares		(282	)			(564	)			(1,411	)		(50.0	)		(80.0	)
Total stockholders' equity		156,896				157,757				161,621			(0.5	)		(2.9	)
Total liabilities and stockholders' equity	$	1,454,768			$	1,415,054			$	1,430,703			2.8	%		1.7	%

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

	Quarter Ended
	Jun 30, 2022			Mar 31, 2022				Jun 30, 2021				Three Month Change			One Year Change
Interest income
Loans, including fees	$	12,273		$	12,001			$	12,641			2.3	%		(2.9	)%
Investment securities		1,156			831				854			39.1			35.4
Interest-earning deposits with banks		37			19				16			94.7			117.6
Dividends on FHLB Stock		71			74				83			(4.1	)		(14.5	)
Total interest income		13,537			12,925				13,594			4.7			(0.4	)
Interest expense
Deposits		1,398			1,257				1,915			11.2			(27.0	)
Other borrowings		315			300				413			5.0			(23.7	)
Total interest expense		1,713			1,557				2,328			10.0			(26.4	)
Net interest income		11,824			11,368				11,266			4.0			4.9
Recapture of provision for loan losses		-			(500	)			(700	)		(100.0	)		(100.0	)
Net interest income after recapture of provision for loan losses		11,824			11,868				11,966			(0.4	)		(1.2	)
Noninterest income
BOLI income		251			288				246			(12.8	)		2.0
Wealth management revenue		104			82				167			26.8			(37.7	)
Deposit related fees		246			215				227			14.4			8.4
Loan related fees		354			199				281			77.9			26.0
Other		6			5				52			20.0			(88.2	)
Total noninterest income		961			789				973			21.8			(1.1	)
Noninterest expense
Salaries and employee benefits		5,478			5,261				5,062			4.1			8.2
Occupancy and equipment		1,205			1,228				1,187			(1.9	)		1.5
Professional fees		731			452				389			61.7			87.9
Data processing		692			677				680			2.2			1.8
Regulatory assessments		90			101				113			(10.9	)		(20.4	)
Insurance and bond premiums		113			129				111			(12.4	)		1.8
Marketing		96			37				23			159.5			317.4
Other general and administrative		880			741				625			18.8			40.8
Total noninterest expense		9,285			8,626				8,190			7.6			13.4
Income before federal income tax provision		3,500			4,031				4,749			(13.2	)		(26.3	)
Federal income tax provision		692			771				939			(10.2	)		(26.3	)
Net income	$	2,808		$	3,260			$	3,810			(13.9	)%		(26.3	)%
Basic earnings per share	$	0.31		$	0.36			$	0.40
Diluted earnings per share	$	0.31		$	0.36			$	0.40
Weighted average number of common shares outstanding		8,982,969			8,987,482				9,434,004
Weighted average number of diluted shares outstanding		9,085,913			9,117,432				9,528,623

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

	Six Months Ended
	June 30,
		2022				2021			One Year Change
Interest income
Loans, including fees	$	24,274			$	25,265			(3.9	)%
Investment securities		1,987				1,602			24.0
Interest-earning deposits with banks		56				28			93.1
Dividends on FHLB Stock		145				162			(10.5	)
Total interest income		26,462				27,057			(2.2	)
Interest expense
Deposits		2,655				4,213			(37.0	)
Other borrowings		615				832			(26.1	)
Total interest expense		3,270				5,045			(35.2	)
Net interest income		23,192				22,012			5.4
Recapture of provision for loan losses		(500	)			(400	)		25.0
Net interest income after recapture of provision for loan losses		23,692				22,412			5.7
Noninterest income
BOLI income		539				515			4.7
Wealth management revenue		187				327			(42.8	)
Deposit related fees		460				426			8.0
Loan related fees		553				413			33.9
Other		11				56			(80.0	)
Total noninterest income		1,750				1,737			0.8
Noninterest expense
Salaries and employee benefits		10,738				10,007			7.3
Occupancy and equipment		2,433				2,286			6.4
Professional fees		1,183				921			28.4
Data processing		1,369				1,377			(0.6	)
Regulatory assessments		191				235			(18.7	)
Insurance and bond premiums		242				235			3.0
Marketing		133				53			150.9
Other general and administrative		1,622				1,205			34.6
Total noninterest expense		17,911				16,319			9.8
Income before federal income tax provision		7,531				7,830			(3.8	)
Federal income tax provision		1,463				1,523			(3.9	)
Net income	$	6,068			$	6,307			(3.8	)%
Basic earnings per share	$	0.67			$	0.66
Diluted earnings per share	$	0.66			$	0.66
Weighted average number of common shares outstanding		8,985,213				9,461,876
Weighted average number of diluted shares outstanding		9,100,079				9,546,784

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

	June 30, 2022							March 31, 2022							June 30, 2021
	Amount				Percent			Amount				Percent			Amount				Percent
	(Dollars in thousands)
Commercial real estate:
Residential:
Micro-unit apartments	$	-			0.0	%		$	-			0.0	%		$	11,652			1.1	%
Other multifamily		135,961			12.0				152,855			13.4				131,229			11.9
Total multifamily residential		135,961			12.0				152,855			13.4				142,881			13.0
Non-residential:
Office		84,905			7.5				87,394			7.7				83,120			7.6
Retail		138,892			12.2				142,725			12.6				103,175			9.4
Mobile home park		22,387			2.0				20,409			1.8				26,894			2.4
Hotel / motel		57,285			5.0				58,406			5.1				65,446			6.0
Nursing Home		12,535			1.1				12,622			1.1				12,818			1.2
Warehouse		18,943			1.7				21,103			1.9				17,217			1.6
Storage		34,261			3.0				34,442			3.0				33,332			3.0
Other non-residential		43,485			3.8				39,887			3.5				28,704			2.5
Total non-residential		412,693			36.3				416,988			36.7				370,706			33.7
Construction/land:
One-to-four family residential		34,932			3.1				35,953			3.2				36,123			3.3
Multifamily		15,500			1.4				17,196			1.5				56,090			5.1
Commercial		-			0.0				6,189			0.5				6,056			0.6
Land development		13,915			1.2				15,359			1.4				6,653			0.6
Total construction/land		64,347			5.7				74,697			6.6				104,922			9.6
One-to-four family residential:
Permanent owner occupied		212,364			18.7				197,447			17.4				191,906			17.5
Permanent non-owner occupied		224,390			19.8				214,784			18.9				179,029			16.3
Total one-to-four family residential		436,754			38.5				412,231			36.3				370,935			33.8
Business
Aircraft		3,130			0.3				4,647			0.4				9,315			0.8
Small Business Administration ("SBA")		532			0.1				816			0.1				884			0.1
Paycheck Protection Plan ("PPP")		1,528			0.1				5,181			0.5				30,823			2.8
Other business		28,502			2.5				19,902			1.7				26,409			2.4
Total business		33,692			3.0				30,546			2.7				67,431			6.1
Consumer
Classic, collectible and other auto		42,009			3.7				38,781			3.4				30,593			2.8
Other consumer		9,594			0.8				10,650			0.9				10,752			1.0
Total consumer		51,603			4.5				49,431			4.3				41,345			3.8
Total loans		1,135,050			100.0	%			1,136,748			100.0	%			1,098,220			100.0	%
Less:
Deferred loan fees, net		130							207							1,702
ALLL		15,125							15,159							14,878
Loans receivable, net	$	1,119,795						$	1,121,382						$	1,081,640
Concentrations of credit:(1)
Construction loans as % of total capital		45.2	%						51.9	%						69.3	%
Total non-owner occupied commercial real estate as % of total capital		360.0	%						379.6	%						384.4	%

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

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

	Jun 30,				Mar 31				Dec 31,				Sep 30,				Jun 30,
		2022				2022				2021				2021				2021
	(Dollars in thousands, except per share data)
Performance Ratios:(1)
Return on assets		0.79	%			0.93	%			0.76	%			0.88	%			1.07	%
Return on equity		7.11				8.33				6.79				7.84				9.54
Dividend payout ratio		38.51				33.20				36.67				32.35				27.50
Equity-to-assets ratio		10.78				11.15				11.07				11.21				11.30
Tangible equity ratio(2)		10.69				11.05				10.97				11.11				11.19
Net interest margin		3.53				3.43				3.40				3.33				3.36
Average interest-earning assets to average interest-bearing liabilities		120.21				119.59				119.08				119.35				117.99
Efficiency ratio		72.62				70.96				68.62				67.26				66.92
Noninterest expense as a percent of average total assets		2.60				2.46				2.42				2.30				2.31
Book value per common share	$	17.26			$	17.32			$	17.30			$	17.03			$	16.75
Tangible book value per share(2)		17.09				17.15				17.13				16.86				16.58
Capital Ratios:(3)
Tier 1 leverage ratio		10.53	%			10.51	%			10.34	%			10.19	%			10.15	%
Common equity tier 1 capital ratio		14.22				14.08				14.23				14.25				14.45
Tier 1 capital ratio		14.22				14.08				14.23				14.25				14.45
Total capital ratio		15.47				15.33				15.48				15.50				15.70
Asset Quality Ratios:(4)
Nonperforming loans as a percent of total loans		0.00	%			0.02	%			0.00	%			0.00	%			0.00	%
Nonperforming assets as a percent of total assets		0.00				0.01				0.00				0.00				0.03
ALLL as a percent of total loans		1.33				1.33				1.40				1.35				1.35
Net (recoveries) charge-offs to average loans receivable, net		0.00				(0.00	)			0.00				(0.01	)			(0.01	)
Allowance for Loan Losses:
ALLL, beginning of the quarter	$	15,159			$	15,657			$	15,057			$	14,878			$	15,502
(Recapture of provision) provision		-				(500	)			600				100				(700	)
Charge-offs		(37	)			-				-				-				-
Recoveries		3				2				-				79				76
ALLL, end of the quarter	$	15,125			$	15,159			$	15,657			$	15,057			$	14,878

⁽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.
⁽⁴⁾ Loans are reported net of undisbursed funds.

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

	At or For the Quarter Ended
	Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
		2022				2022				2021				2021				2021
	(Dollars in thousands, except per share data)
Yields and Costs:(1)
Yield on loans		4.41	%			4.36	%			4.44	%			4.54	%			4.64	%
Yield on investment securities		2.33				1.96				1.79				1.73				1.90
Yield on interest-earning deposits		0.67				0.15				0.13				0.14				0.10
Yield on FHLB stock		4.82				5.49				5.89				5.15				5.13
Yield on interest-earning assets		4.04	%			3.90	%			3.91	%			3.93	%			4.06	%
Cost of interest-bearing deposits		0.55	%			0.50	%			0.53	%			0.63	%			0.75	%
Cost of borrowings		1.21				1.28				1.33				1.42				1.37
Cost of interest-bearing liabilities		0.61	%			0.56	%			0.61	%			0.71	%			0.82	%
Cost of total deposits		0.49	%			0.44	%			0.48	%			0.56	%			0.68	%
Cost of funds		0.55				0.51				0.55				0.64				0.75
Average Balances:
Loans	$	1,117,079			$	1,115,428			$	1,108,836			$	1,094,124			$	1,092,710
Investment securities		198,819				171,685				178,500				187,261				180,128
Interest-earning deposits		22,010				49,857				56,800				68,618				64,035
FHLB stock		5,905				5,467				5,726				6,465				6,485
Total interest-earning assets	$	1,343,813			$	1,342,437			$	1,349,862			$	1,356,468			$	1,343,358
Interest-bearing deposits	$	1,013,080			$	1,027,507			$	1,032,090			$	1,016,540			$	1,018,083
Borrowings		104,835				95,000				101,522				120,000				120,494
Total interest-bearing liabilities		1,117,915				1,122,507				1,133,612				1,136,540				1,138,577
Noninterest-bearing deposits		131,415				122,175				119,142				121,256				110,207
Total deposits and borrowings	$	1,249,330			$	1,244,682			$	1,252,754			$	1,257,796			$	1,248,784
Average assets	$	1,431,003			$	1,424,054			$	1,430,199			$	1,436,801			$	1,424,126
Average stockholders' equity		158,349				158,756				160,183				161,892				160,189

⁽¹⁾ Yields and costs are annualized.

Non-GAAP Financial Measures

In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains non-GAAP financial measures that include tangible equity, tangible assets, tangible book value per share, and the tangible equity 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 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, 2022				Mar 31, 2022				Dec 31, 2021				Sep 30, 2021				Jun 30, 2021
	(Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP)	$	156,896			$	157,757			$	157,879			$	161,456			$	161,621
Less:
Goodwill		889				889				889				889				889
Core deposit intangible, net		616				650				684				719				754
Tangible equity (Non-GAAP)	$	155,391			$	156,218			$	156,306			$	159,848			$	159,978
Total assets (GAAP)	$	1,454,768			$	1,415,054			$	1,426,329			$	1,440,202			$	1,430,703
Less:
Goodwill		889				889				889				889				889
Core deposit intangible, net		616				650				684				719				754
Tangible assets (Non-GAAP)	$	1,453,263			$	1,413,515			$	1,424,756			$	1,438,594			$	1,429,060
Common shares outstanding at period end		9,091,533				9,107,977				9,125,759				9,483,081				9,651,180
Equity-to-assets ratio (GAAP)		10.78	%			11.15	%			11.07	%			11.21	%			11.30	%
Tangible equity ratio (Non-GAAP)		10.69				11.05				10.97				11.11				11.19
Book value per common share (GAAP)	$	17.26			$	17.32			$	17.30			$	17.03			$	16.75
Tangible book value per share (Non-GAAP)		17.09				17.15				17.13				16.86				16.58

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 

FAQ

What were First Financial Northwest's net income results for Q2 2022?

First Financial Northwest reported a net income of $2.8 million for Q2 2022.

How much did First Financial Northwest's deposits increase in Q2 2022?

Total deposits increased by $39.4 million to $1.18 billion in Q2 2022.

What was the book value per share for First Financial Northwest as of June 30, 2022?

The book value per share decreased to $17.26 as of June 30, 2022.

How did First Financial Northwest's net interest income change in Q2 2022?

Net interest income improved to $11.8 million in Q2 2022, up from $11.4 million in Q1 2022.