Exhibit 99.1

 

 

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

 

First Financial Northwest, Inc.

Reports Second Quarter Net Income of $3.1 Million or $0.30 per Diluted Share

Renton, Washington – July 26, 2018 - 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, 2018, of $3.1 million, or $0.30 per diluted share, compared to net income of $6.8 million, or $0.66 per diluted share, for the quarter ended March 31, 2018, and $1.9 million, or $0.18 per diluted share, for the quarter ended June 30, 2017. For the six months ended June 30, 2018, net income was $9.9 million, or $0.96 per diluted share, compared to net income of $4.2 million, or $0.40 per diluted share, for the comparable six‑month period in 2017. The quarter ended March 31, 2018, benefited from the impact of $4.3 million in recoveries during the quarter, primarily relating to payment in full of loan balances previously charged off from two customers, including an additional $1.0 million in loan interest income, and the recognition of a $4.0 million recapture of provision for loan loss.

Net loans receivable totaled $989.3 million at June 30, 2018, compared to $991.1 million at March 31, 2018, and $861.7 million at June 30, 2017.  The average balance of net loans receivable totaled $997.1 million for the quarter ended June 30, 2018, compared to $985.8 million for the quarter ended March 31, 2018, and $844.9 million for the quarter ended June 30, 2017.

The Company recorded a $400,000 recapture of provision for loan losses in the quarter ended June 30, 2018, compared to a $4.0 million recapture of provision for loan losses in the quarter ended March 31, 2018, and a $100,000 provision for loan losses in the quarter ended June 30, 2017. The recapture of provision for loan losses in the most recent quarter was primarily due to a reduction in balances in construction loans outstanding. The recapture of provision in the quarter ended March 31, 2018, was due primarily to $4.3 million in recoveries received during that quarter of loans previously charged off, while the provision in the same quarter last year was primarily due to growth in net loans receivable, offset by payoffs and credit improvements to certain adversely graded loans.

"Loan paydowns slightly outpaced our loan origination activity during the quarter, slowing down our pace of growth for the year," stated Joseph W. Kiley III, President and Chief Executive Officer. "Average balances of loans outstanding were higher, however, helping to support our interest income in the quarter. Competition for loans and deposits remains strong and I am pleased with the efforts of our employees to expand relationships throughout the markets we serve," continued Kiley. "We opened our tenth branch office in April 2018 at The Junction in Bothell, which exceeded $500,000 in deposits at June 30, 2018. Also worth highlighting is the success of our Crossroads office in Bellevue that opened in June 2017. Our employees in this office have exceeded our expectations, growing deposit balances to $37 million in just twelve months of operations," concluded Kiley.

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

		June 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		$	33,117			$	17,899			$	22,678			$	201,264			$	292,394			$	-			$	567,352
The Landing			2,161				777				56				11,667				7,924				-				22,585
Woodinville (1)			1,495				3,484				618				22,015				5,837				-				33,449
Bothell			44				45				1				502				-				-				592
Crossroads			964				5,352				91				23,492				7,552				-				37,451
Total King County			37,781				27,557				23,444				258,940				313,707				-				661,429
Snohomish County:
Mill Creek			1,499				2,800				909				12,282				6,788				-				24,278
Edmonds			5,189				2,231				42				15,393				6,210				-				29,065
Clearview (1)			3,690				3,138				1,134				7,127				1,682				-				16,771
Lake Stevens (1)			1,786				1,384				552				3,409				2,546				-				9,677
Smokey Point (1)			1,509				2,121				516				7,391				4,507				-				16,044
Total Snohomish County			13,673				11,674				3,153				45,602				21,733				-				95,835
Total retail deposits			51,454				39,231				26,597				304,542				335,440				-				757,264
Brokered deposits			-				-				-				-				-				75,488				75,488
Total deposits		$	51,454			$	39,231			$	26,597			$	304,542			$	335,440			$	75,488			$	832,752

⁽¹⁾ Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $80,000.

		March 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		$	31,945			$	19,620			$	22,637			$	228,134			$	294,434			$	-			$	596,770
The Landing			3,176				980				59				11,571				8,096				-				23,822
Woodinville (1)			1,617				3,431				711				19,744				8,112				-				33,615
Bothell			31				-				-				-				-				-				31
Crossroads			1,074				6,388				82				25,104				7,006				-				39,654
Total King County			37,843				30,419				23,489				284,553				317,648				-				693,952
Snohomish County:
Mill Creek			1,395				2,314				710				14,814				6,313				-				25,546
Edmonds			1,632				1,305				45				17,619				5,747				-				26,348
Clearview (1)			3,881				3,225				1,080				7,408				1,734				-				17,328
Lake Stevens (1)			1,517				1,359				517				3,131				2,645				-				9,169
Smokey Point (1)			1,867				2,182				547				6,983				3,819				-				15,398
Total Snohomish County			10,292				10,385				2,899				49,955				20,258				-				93,789
Total retail deposits			48,135				40,804				26,388				334,508				337,906				-				787,741
Brokered deposits			-				-				-				-				-				75,488				75,488
Total deposits		$	48,135			$	40,804			$	26,388			$	334,508			$	337,906			$	75,488			$	863,229

⁽¹⁾ Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $93,000.

 

Additional noteworthy items for the quarter ended June 30, 2018:

·	Net loans receivable decreased slightly to $989.3 million at June 30, 2018, from $991.1 million at March 31, 2018, but up from $861.7 million at June 30, 2017.

·

Deposits were $832.8 million at June 30, 2018, compared to $863.2 million at March 31, 2018, and $735.6 million at June 30, 2017. With reduced loan growth due primarily to higher than usual payoffs, certain higher cost deposits were allowed to run off in the most recent quarter. Checking deposits, however, increased to $90.7 million at June 30, 2018, compared to $88.9 million at March 31, 2018, and $56.2 million at June 30, 2017. Competition for deposits in our markets remained strong.

·	The Company's book value per share was $13.97 at June 30, 2018, compared to $13.80 at March 31, 2018, and $13.00 at June 30, 2017. Tangible book value per share was $13.78 at June 30, 2018, compared to $13.60 at March 31, 2018, and $13.00 at June 30, 2017.

·	The Bank's Tier 1 leverage and total capital ratios at June 30, 2018, were 10.2% and 14.5%, respectively, compared to 10.4% and 14.4% at March 31, 2018, and 11.5% and 15.2% at June 30, 2017.

Based on management's evaluation of the adequacy of the Allowance for Loan and Lease Losses ("ALLL"), there was a $400,000 recapture of provision for loan losses for the quarter ended June 30, 2018. The following items contributed to this recapture of provision during the quarter:

·	The Company's net loans receivable decreased slightly during the quarter to $989.3 million at June 30, 2018, from $991.1 million at March 31, 2018.

·	Construction/land development loans outstanding, net of LIP, declined to $98.2 million at June 30, 2018, compared to $117.6 million at March 31, 2018, reducing the amounts necessary in the ALLL, as there is a higher ALLL allocation to this segment of loans.

·	Nonperforming loans declined to $164,000 at June 30, 2018, compared to $175,000 at March 31, 2018, and $583,000 at June 30, 2017.

·	Nonperforming loans as a percentage of total loans remained low at 0.02% at both June 30, 2018, and March 31, 2018, compared to 0.07% at June 30, 2017.

The ALLL represented 1.27% of total loans receivable, net of undisbursed funds, at June 30, 2018, compared to 1.31% at March 31, 2018, and 1.29% at June 30, 2017.

 

 

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

		Jun 30,				Mar 31,				Jun 30,				Three Month				One Year
		2018				2018				2017				Change				Change
		(Dollars in thousands)
Nonperforming loans:
One-to-four family residential		$	116			$	125			$	528			$	(9	)		$	(412	)
Consumer			48				50				55				(2	)			(7	)
Total nonperforming loans			164				175				583				(11	)			(419	)
Other real estate owned ("OREO")			483				483				1,825				-				(1,342	)
Total nonperforming assets (1)		$	647			$	658			$	2,408			$	(11	)		$	(1,761	)
Nonperforming assets as a
percent of total assets			0.05	%			0.05	%			0.22	%

⁽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 June 30, 2018.

The decrease in OREO over the past year, as shown in the table above, is primarily due to the Bank's continued efforts to actively market its OREO properties in an effort to minimize holding costs. There were $532,000 in delinquent loans (loans over 30 days past due) at June 30, 2018, compared to $225,000 in delinquent loans at March 31, 2018, and $85,000 at June 30, 2017.

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):

		Jun 30, 2018				Mar 31, 2018				Jun 30, 2017				Three Month Change				One Year Change
		(Dollars in thousands)
Nonperforming TDRs:
One-to-four family residential		$	–			$	–			$	106			$	–			$	(106	)
Total nonperforming TDRs			–				–				106				–				(106	)
Performing TDRs:
One-to-four family residential			9,990				11,904				19,152				(1,914	)			(9,162	)
Multifamily			1,122				1,128				1,146				(6	)			(24	)
Commercial real estate			2,624				3,173				3,660				(549	)			(1,036	)
Consumer			43				43				43				–				–
Total performing TDRs			13,779				16,248				24,001				(2,469	)			(10,222	)
Total TDRs		$	13,779			$	16,248			$	24,107			$	(2,469	)		$	(10,328	)

Net interest income for the quarter ended June 30, 2018, was $10.1 million, compared to $11.0 million for the quarter ended March 31, 2018, and $9.0 million in the quarter ended June 30, 2017. The decline in net interest income from the first quarter of 2018, was due primarily to the decline in total interest income, as discussed below, while the increase compared to the quarter ended June 30, 2017, was due primarily to the Company's growth in loans receivable, partially offset by higher balances of interest-bearing liabilities and a higher cost of funds.

Total interest income was $13.6 million for the quarter ended June 30, 2018, compared to $14.1 million for the quarter ended March 31, 2018, and $11.3 million for the quarter ended June 30, 2017. The decrease from the previous quarter was due to the recognition of $1.0 million in interest income related to payments received on interest owed on the balances of previously charged off loans during the first quarter of 2018, partially offset by an increase during the current quarter in average loan receivables to $997.1 million from $985.8 million for the quarter ended March 31, 2018. The increase in total interest income from the second quarter of 2017 was due primarily to the growth in average loan balances from $844.9 million last year.

Total interest expense was $3.5 million for the quarter ended June 30, 2018, compared to $3.1 million for the quarter ended March 31, 2018, and $2.3 million for the quarter ended June 30, 2017. The higher level of interest expense in the most recent two quarters compared to the quarter ended June 30, 2017, was the result of higher short term market interest rates as a result of actions taken by the Federal Open Market Committee ("FOMC") that adversely impacted our cost of deposits and cost of borrowings. Advances from the Federal Home Loan Bank ("FHLB") totaled $224.0 million at June 30, 2018, compared to $200.0 million at March 31, 2018, and $191.5 million at June 30, 2017. The Bank borrows from the FHLB primarily to supplement its deposit gathering efforts when needed to support asset growth. The average cost of FHLB advances and other borrowings was 1.92% for the quarter ended June 30, 2018, compared to 1.66% for the quarter ended March 31, 2018, and 1.24% for the quarter ended June 30, 2017. Brokered certificates of deposit totaled $75.5 million at June 30, 2018, March 31, 2018, and June 30, 2017.

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

		Jun 30, 2018				Mar 31, 2018				Jun 30, 2017				Three  Month Change				One Year Change
Deposits:		(Dollars in thousands)
Noninterest-bearing		$	51,454			$	48,135			$	35,126			$	3,319			$	16,328
Interest-bearing demand			39,231				40,804				21,059				(1,573	)			18,172
Statement savings			26,597				26,388				26,668				209				(71	)
Money market			304,542				334,508				232,206				(29,966	)			72,336
Certificates of deposit, retail (1)			335,440				337,906				345,028				(2,466	)			(9,588	)
Certificates of deposit, brokered			75,488				75,488				75,488				-				-
Total deposits		$	832,752			$	863,229			$	735,575			$	(30,477	)		$	97,177

⁽¹⁾ Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $80,000 at June 30, 2018, and $93,000 at March 31, 2018.

Our net interest margin was 3.50% for the quarter ended June 30, 2018, compared to 3.88% for the quarter ended March 31, 2018, and 3.60% for the quarter ended June 30, 2017. The change between quarters was primarily attributed to the additional $1.0 million in interest income from previously charged-off loans recognized in the quarter ended March 31, 2018, as discussed above. The decrease from the year ago period relates to a narrowing of our net interest margin between periods, primarily due to a 15.8% growth in average interest-bearing liabilities and an increase in the average cost of interest-bearing liabilities to 1.37% from 1.07%.

Noninterest income for the quarter ended June 30, 2018, totaled $663,000 compared to $646,000 for the quarter ended March 31, 2018, and $731,000 for the quarter ended June 30, 2017. The increase from the first quarter of 2018 was due primarily to an increase in wealth management revenue and deposit related fees, partially offset by a decline in income from bank owned life insurance ("BOLI") and loan related fees. Noninterest income for the quarter ended June 30, 2018, was also impacted by a $21,000 net loss on sale of investments as we elected to sell certain securities and replace them with investments that are expected to perform better in a rising rate environment.

 

 

Noninterest expense for the quarter ended June 30, 2018, increased to $7.5 million from $7.0 million in the quarter ended March 31, 2018, and $6.8 million in the quarter ended June 30, 2017. The increase in noninterest expense in the current quarter compared to the prior quarter was due primarily to higher salaries and employee benefits expense (including accruals for incentive compensation), professional fees, and occupancy and equipment, partially offset by lower regulatory assessments and marketing expense. The increase from the prior year period was due primarily to growth in the Bank's number of locations in the past year.

The Company's federal income tax provision was $603,000 for the quarter ended June 30, 2018, compared to $1.8 million for the quarter ended March 31, 2018, and $924,000 for the quarter ended June 30, 2017. Both the June 30, 2018, and June 30, 2017, periods benefited from stock option exercises that resulted in significantly lower federal income tax provisions than the quarter ended March 31, 2018, when no such stock option exercise activity occurred. The stock option exercises occurred at prices higher than originally estimated, resulting in higher allowable expense recognition for tax purposes in both the current and year ago quarterly periods. The Company's federal income tax provision during 2018 also benefitted from the impact of the Tax Cuts and Jobs Act enacted December 31, 2017, which lowered the corporate income tax rate from 35% to 21%.

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. We are a part of the ABA NASDAQ Community Bank Index and the Russell 2000 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 2018 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, 2018				Mar 31, 2018				Jun 30, 2017				Three Month Change				One Year Change
Cash on hand and in banks		$	9,017			$	6,595			$	7,418				36.7	%			21.6	%
Interest-earning deposits			14,056				13,954				10,996				0.7				27.8
Investments available-for-sale, at fair value			138,055				142,872				133,951				(3.4	)			3.1
Loans receivable, net of allowance of $12,754,      $13,136, and $11,285, respectively			989,256				991,138				861,672				(0.2	)			14.8
Federal Home Loan Bank ("FHLB") stock, at cost			10,410				9,450				8,902				10.2				16.9
Accrued interest receivable			4,084				3,981				3,165				2.6				29.0
Deferred tax assets, net			1,296				1,362				2,620				(4.8	)			(50.5	)
Other real estate owned ("OREO")			483				483				1,825				0.0				(73.5	)
Premises and equipment, net			21,436				21,208				19,501				1.1				9.9
Bank owned life insurance ("BOLI")			29,501				29,276				28,721				0.8				2.7
Prepaid expenses and other assets			4,391				3,922				2,937				12.0				49.5
Goodwill			889				889				-				0.0				n/a
Core deposit intangible			1,191				1,228				-				(3.0	)			n/a
Total assets		$	1,224,065			$	1,226,358			$	1,081,708				(0.2	)%			13.2	%
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits		$	51,454			$	48,135			$	35,126				6.9	%			46.5	%
Interest-bearing deposits			781,298				815,094				700,449				(4.1	)			11.5
Total Deposits			832,752				863,229				735,575				(3.5	)			13.2
Advances from the FHLB			224,000				200,000				191,500				12.0				17.0
Advance payments from borrowers for taxes and insurance			2,545				4,478				2,183				(43.2	)			16.6
Accrued interest payable			570				270				286				111.1				99.3
Other liabilities			11,644				9,626				8,650				21.0				34.6
Total liabilities			1,071,511				1,077,603				938,194				(0.6	)			14.2
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
shares 10,916,556 at June 30, 2018,  10,779,424 at March 31, 2018, and
11,041,865 shares at June 30, 2017			109				108				110				0.9	%			(0.9	)%
Additional paid-in capital			96,344				94,527				98,469				1.9				(2.2	)
Retained earnings, substantially restricted			63,042				60,767				51,844				3.7				21.6
Accumulated other comprehensive loss, net of tax			(2,145	)			(1,568	)			(984	)			36.8				118.0
Unearned Employee Stock Ownership Plan      ("ESOP") shares			(4,796	)			(5,079	)			(5,925	)			(5.6	)			(19.1	)
Total stockholders' equity			152,554				148,755				143,514				2.6				6.3
Total liabilities and stockholders' equity		$	1,224,065			$	1,226,358			$	1,081,708				(0.2	)%			13.2	%

 

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
		Quarter Ended
		Jun 30, 2018				Mar 31, 2018				Jun 30, 2017				Three Month Change				One Year Change
Interest income
Loans, including fees		$	12,429			$	13,042			$	10,352				(4.7	)%			20.1	%
Investments available-for-sale			1,010				929				887				8.7				13.9
Interest-earning deposits with banks			44				38				42				15.8				4.8
Dividends on FHLB Stock			105				104				62				1.0				69.4
Total interest income			13,588				14,113				11,343				(3.7	)			19.8
Interest expense
Deposits			2,435				2,276				1,776				7.0				37.1
FHLB advances and other borrowings			1,024				853				570				20.0				79.6
Total interest expense			3,459				3,129				2,346				10.5				47.4
Net interest income			10,129				10,984				8,997				(7.8	)			12.6
(Recapture of provision) provision for loan losses			(400	)			(4,000	)			100				(90.0	)			(500.0	)
Net interest income after (recapture of provision)      provision for loan losses			10,529				14,984				8,897				(29.7	)			18.3
Noninterest income
Net (loss) gain on sale of investments			(21	)			-				56				n/a				(137.5	)
BOLI income			224				249				116				(10.0	)			93.1
Wealth management revenue			156				99				307				57.6				(49.2	)
Deposit related fees			175				161				94				8.7				86.2
Loan related fees			126				134				155				(6.0	)			(18.7	)
Other			3				3				3				0.0				0.0
Total noninterest income			663				646				731				2.6				(9.3	)
Noninterest expense
Salaries and employee benefits			4,931				4,662				4,409				5.8				11.8
Occupancy and equipment			829				769				579				7.8				43.2
Professional fees			442				328				482				34.8				(8.3	)
Data processing			351				324				519				8.3				(32.4	)
OREO related expenses (reimbursements), net			2				1				(20	)			100.0				(110.0	)
Regulatory assessments			110				155				112				(29.0	)			(1.8	)
Insurance and bond premiums			154				106				98				45.3				57.1
Marketing			77				107				52				(28.0	)			48.1
Other general and administrative			591				575				605				2.8				(2.3	)
Total noninterest expense			7,487				7,027				6,836				6.5				9.5
Income before federal income tax  provision			3,705				8,603				2,792				(56.9	)			32.7
Federal income tax provision			603				1,761				924				(65.8	)			(34.7	)
Net income		$	3,102			$	6,842			$	1,868				(54.7	)%			66.1	%
Basic earnings per share		$	0.30			$	0.67			$	0.18
Diluted earnings per share		$	0.30			$	0.66			$	0.18
Weighted average number of common shares outstanding			10,271,432				10,210,828				10,363,345
Weighted average number of diluted shares outstanding			10,405,949				10,336,566				10,500,829

 

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
		Six Months Ended
		June 30,
		2018				2017				One Year Change
Interest income
Loans, including fees		$	25,472			$	20,379				25.0	%
Investments available-for-sale			1,939				1,732				12.0
Interest-earning deposits with banks			82				86				(4.7	)
Dividends on FHLB Stock			208				144				44.4
Total interest income			27,701				22,341				24.0
Interest expense
Deposits			4,711				3,467				35.9
FHLB advances and other borrowings			1,877				1,015				84.9
Total interest expense			6,588				4,482				47.0
Net interest income			21,113				17,859				18.2
(Recapture of provision) provision for loan losses			(4,400	)			300				(1,566.7	)
Net interest income after (recapture of provision) provision for loan losses			25,513				17,559				45.3
Noninterest income
Net (loss) gain on sale of investments			(21	)			56				(137.5	)
BOLI			473				317				49.2
Wealth management revenue			255				447				(43.0	)
Deposit related fees			336				165				103.6
Loan related fees			260				275				(5.5	)
Other			6				6				0.0
Total noninterest income			1,309				1,266				3.4
Noninterest expense
Salaries and employee benefits			9,593				8,694				10.3
Occupancy and equipment			1,598				1,059				50.9
Professional fees			770				921				(16.4	)
Data processing			675				759				(11.1	)
OREO related expenses, net			3				20				(85.0	)
Regulatory assessments			265				208				27.4
Insurance and bond premiums			260				197				32.0
Marketing			184				100				84.0
Other general and administrative			1,166				946				23.3
Total noninterest expense			14,514				12,904				12.5
Income before federal income tax  provision			12,308				5,921				107.9
Federal income tax provision			2,364				1,709				38.3
Net income		$	9,944			$	4,212				136.1	%
Basic earnings per share		$	0.97			$	0.41
Diluted earnings per share		$	0.96			$	0.40
Weighted average number of common shares outstanding			10,241,297				10,341,654
Weighted average number of diluted shares outstanding			10,372,474				10,503,023

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

		June 30, 2018								March 31, 2018								June 30, 2017
		Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Commercial real estate:
Residential:
Micro-unit apartments		$	14,204				1.3	%		$	14,266				1.3	%		$	5,580				0.6	%
Other multifamily			180,649				16.7				176,126				16.2				120,304				12.5
Total multifamily			194,853				18.0				190,392				17.5				125,884				13.1
Non-residential:
Office			99,739				9.2				107,966				9.9				95,256				9.9
Retail			141,451				13.1				131,978				12.1				99,482				10.3
Mobile home park			15,655				1.4				20,783				1.9				21,851				2.3
Warehouse			28,185				2.6				22,611				2.1				21,491				2.2
Storage			30,383				2.8				32,031				2.9				35,121				3.6
Other non-residential			56,820				5.2				51,405				4.7				44,017				4.6
Total non-residential			372,233				34.3				366,774				33.6				317,218				32.9
Construction/land development:
One-to-four family residential			85,218				7.9				97,779				9.0				76,404				7.9
Multifamily			75,433				7.0				85,773				7.9				123,497				12.8
Commercial			5,735				0.5				5,735				0.5				1,100				0.1
Land development			12,911				1.2				13,299				1.2				39,012				4.1
Total construction/land development			179,297				16.6				202,586				18.6				240,013				24.9
One-to-four family residential:
Permanent owner occupied			169,275				15.6				162,544				14.9				137,816				14.3
Permanent non-owner occupied			134,297				12.4				133,351				12.2				118,816				12.3
Total one-to-four family residential			303,572				28.0				295,895				27.1				256,632				26.6
Business:
Aircraft			9,978				0.9				10,514				1.0				6,235				0.7
Other business			12,143				1.1				13,723				1.2				8,971				0.9
Total business			22,121				2.0				24,237				2.2				15,206				1.6
Consumer			12,329				1.1				11,131				1.0				9,031				0.9
Total loans			1,084,405				100.0	%			1,091,015				100.0	%			963,984				100.0	%
Less:
Loans in Process ("LIP")			81,616								85,576								88,475
Deferred loan fees, net			779								1,165								2,552
ALLL			12,754								13,136								11,285
Loans receivable, net		$	989,256							$	991,138							$	861,672
Concentrations of credit: (1)
Construction loans as % of total capital			73.5	%							84.9	%							115.3	%
Total non-owner occupied commercial      real estate as % of total capital			475.2	%							484.8	%							443.0	%

⁽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
		At or For the Quarter Ended
		Jun 30,				Mar 31,				Dec 31,				Sep 30,				Jun 30,
		2018				2018				2017				2017				2017
		(Dollars in thousands, except per share data)
Performance Ratios:
Return on assets			1.01	%			2.28	%			0.80	%			0.66	%			0.70	%
Return on equity			8.28				19.16				6.70				5.13				5.22
Dividend payout ratio			26.67				10.47				29.17				38.89				38.89
Equity-to-assets ratio			12.46				12.13				11.79				12.10				13.27
Tangible equity ratio			12.31				11.98				11.63				11.92				13.27
Interest rate spread			3.33				3.73				3.51				3.38				3.47
Net interest margin			3.50				3.88				3.65				3.53				3.60
Average interest-earning assets to average interest-bearing      liabilities			114.21				113.46				113.32				114.08				114.29
Efficiency ratio			69.38				60.42				66.69				67.64				70.27
Noninterest expense as a percent of average total assets			2.44				2.34				2.34				2.42				2.57
Book value per common share		$	13.97			$	13.80			$	13.27			$	13.08			$	13.00
Tangible book value per share			13.78				13.60				13.07				12.86				13.00
Capital Ratios: (1)
Tier 1 leverage ratio			10.22	%			10.44	%			10.20	%			10.80	%			11.46	%
Common equity tier 1 capital ratio			13.21				13.13				12.52				12.95				13.94
Tier 1 capital ratio			13.21				13.13				12.52				12.95				13.94
Total capital ratio			14.47				14.38				13.77				14.20				15.19
Asset Quality Ratios: (2)
Nonperforming loans as a percent of total loans			0.02	%			0.02	%			0.02	%			0.02	%			0.07	%
Nonperforming assets as a percent of total assets			0.05				0.05				0.05				0.17				0.22
ALLL as a percent of total loans			1.27				1.31				1.28				1.28				1.29
ALLL as a percent of nonperforming loans			7,776.83				7,508.90				7,196.65				6,545.95				1,935.68
Net (recoveries) charge-offs to average loans receivable, net			(0.00	)			(0.43	)			(0.20	)			(0.04	)			(0.00	)
Allowance for Loan Losses:
ALLL, beginning of the quarter		$	13,136			$	12,882			$	12,110			$	11,285			$	11,158
(Recapture of provision) provision			(400	)			(4,000	)			(1,200	)			500				100
Charge-offs			-				-				-				-				-
Recoveries			18				4,254				1,972				325				27
ALLL, end of the quarter		$	12,754			$	13,136			$	12,882			$	12,110			$	11,285