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 Third Quarter Net Income of $2.8 Million or $0.27 per Diluted Share

Renton, Washington – October 25, 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 September 30, 2018, of $2.8 million, or $0.27 per diluted share, compared to net income of $3.1 million, or $0.30 per diluted share, for the quarter ended June 30, 2018, and $1.9 million, or $0.18 per diluted share, for the quarter ended September 30, 2017. For the nine months ended September 30, 2018, net income was $12.7 million, or $1.22 per diluted share, compared to net income of $6.1 million, or $0.58 per diluted share, for the comparable nine‑month period in 2017.

"Deposit growth was a significant focus during the quarter. We elected to aggressively attract deposits at current rates in advance of potentially higher rates in the future, since market expectations indicate a likelihood that the Federal Open Market Committee ("FOMC") will continue to increase short term interest rates," stated Joseph W. Kiley III, President and Chief Executive Officer. "Deposits increased $83.5 million, or 10 percent, from the second quarter to $916.3 million at September 30, 2018, with nearly all our branches achieving an increase in local deposits," continued Kiley. "We supplemented the increase in local deposits with $26.6 million in additional funds through national brokered certificates of deposit during the quarter. Of the brokered certificates of deposits received during the quarter, $22.6 million have call options, providing us the opportunity to return the deposits without penalty in the future, when it is in our best interest to do so," continued Kiley. "We also have plans to open a new branch in the next several months at Kent Station, a contemporary, open air urban village located eight miles south of our main Renton office, as we continue to look for opportunities to expand our presence in the region," concluded Kiley.

Net loans receivable totaled $995.6 million at September 30, 2018, compared to $989.3 million at June 30, 2018, and $931.9 million at September 30, 2017.  The average balance of net loans receivable totaled $993.3 million for the quarter ended September 30, 2018, compared to $997.1 million for the quarter ended June 30, 2018, and $879.1 million for the quarter ended September 30, 2017.

The Company recorded a $200,000 provision for loan losses in the quarter ended September 30, 2018, compared to a $400,000 recapture of provision for loan losses in the quarter ended June 30, 2018, and a $500,000 provision for loan losses in the quarter ended September 30, 2017. The provision for loan losses in the most recent quarter was primarily due to growth in loans receivable, reduced by recoveries received on loans previously charged off. The recapture of provision in the quarter ended June 30, 2018, was due primarily to a reduction in balances in construction loans outstanding, while the provision for loan losses in the quarter ended September 30, 2017, was primarily due to growth in net loans receivable, partially offset by recoveries received on loans previously charged off.

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

		September 30, 2018
		Noninterest- bearing demand				Interest- bearing demand				Statement savings				Money market				Certificates of deposit, retail				Certificates of deposit, brokered				Total
										(Dollars in thousands)
King County:
Renton		$	31,796			$	19,998			$	20,508			$	213,882			$	317,126			$	-			$	603,310
The Landing			2,458				772				58				17,796				8,944				-				30,028
Woodinville (1)			1,535				3,874				538				20,335				6,813				-				33,095
Bothell			48				103				8				2,435				1,684				-				4,278
Crossroads			1,249				4,797				84				21,846				9,339				-				37,315
Total King County			37,086				29,544				21,196				276,294				343,906				-				708,026
Snohomish County:
Mill Creek			1,437				2,952				571				11,287				8,779				-				25,026
Edmonds			4,416				2,033				45				16,452				11,007				-				33,953
Clearview (1)			4,187				3,058				1,037				7,101				2,272				-				17,655
Lake Stevens (1)			2,434				2,452				483				3,901				2,576				-				11,846
Smokey Point (1)			1,620				1,915				774				7,990				5,391				-				17,690
Total Snohomish County			14,094				12,410				2,910				46,731				30,025				-				106,170
Total retail deposits			51,180				41,954				24,106				323,025				373,931				-				814,196
Brokered deposits			-				-				-				-				-				102,083				102,083
Total deposits		$	51,180			$	41,954			$	24,106			$	323,025			$	373,931			$	102,083			$	916,279

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

		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.

 

 

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

·	Net loans receivable increased to $995.6 million at September 30, 2018, from $989.3 million at June 30, 2018, and from $931.9 million at September 30, 2017.

·

Despite continued strong competition for deposits in the Bank's markets, total deposits increased $83.5 million to $916.3 million at September 30, 2018, compared to $832.8 million at June 30, 2018, and $815.7 million at September 30, 2017. Retail branch deposits were up $56.9 million to $814.2 million, from $757.3 million at June 30, 2018. To supplement the increase in local deposits, the Company generated a net increase of $26.6 million in additional funds through national brokered certificates of deposit in the current quarter. At September 30, 2018, $102.1 million of total deposits were brokered deposits, compared to $75.5 million at June 30, 2018, and September 30, 2017.

·	The Company's book value per share was $14.17 at September 30, 2018, compared to $13.97 at June 30, 2018, and $13.08 at September 30, 2017. Tangible book value per share was $13.99 at September 30, 2018, compared to $13.78 at June 30, 2018, and $12.86 at September 30, 2017.

·	The Bank's Tier 1 leverage and total capital ratios at September 30, 2018, were 10.4% and 14.8%, respectively, compared to 10.2% and 14.5% at June 30, 2018, and 10.8% and 14.2% at September 30, 2017.

Based on management's evaluation of the adequacy of the Allowance for Loan and Lease Losses ("ALLL"), there was a $200,000 provision for loan losses for the quarter ended September 30, 2018. The following items contributed to this provision during the quarter:

·	The Company's total loans outstanding, net of LIP, increased during the quarter to $1.01 billion at September 30, 2018, from $1.00 billion at June 30, 2018.

·

Construction/land development loans outstanding, net of LIP, increased to $103.0 million at September 30, 2018, from $98.2 million at June 30, 2018, and business loans grew by $7.5 million to $29.7 million. The higher levels of construction and business loans increased the amounts necessary in the ALLL, as the Company maintains a higher ALLL allocation for these types of loans.

·	The Company received $162,000 in recoveries on loans previously charged off, reducing the amount that would otherwise need to be added to the ALLL through the provision for loan losses.

·	Nonperforming loans increased to $484,000 at September 30, 2018, compared to $164,000 at June 30, 2018, and $185,000 at September 30, 2017.

·	Nonperforming loans as a percentage of total loans increased slightly to 0.05% at September 30, 2018, compared to 0.02% at both June 30, 2018, and September 30, 2017.

The ALLL represented 1.30% of total loans receivable, net of undisbursed funds, at September 30, 2018, compared to 1.27% at June 30, 2018, and 1.28% at September 30, 2017. Nonperforming assets rose to $967,000 at September 30, 2108, compared to $647,000 at June 30, 2018, but decreased compared to $2.0 million at September 30, 2017. During the quarter, one commercial real estate loan totaling $325,000 moved into nonaccrual status.

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

		Sep 30,				Jun 30,				Sep 30,				Three Month				One Year
		2018				2018				2017				Change				Change
		(Dollars in thousands)
Nonperforming loans:
One-to-four family residential		$	113			$	116			$	132			$	(3	)		$	(19	)
Commercial real estate			325				-				-				325				325
Consumer			46				48				53				(2	)			(7	)
Total nonperforming loans			484				164				185				320				299
Other real estate owned ("OREO")			483				483				1,825				-				(1,342	)
Total nonperforming assets (1)		$	967			$	647			$	2,010			$	320			$	(1,043	)
Nonperforming assets as a
percent of total assets			0.08	%			0.05	%			0.17	%

⁽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 for all periods presented.

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 $821,000 in delinquent loans (loans over 30 days past due) at September 30, 2018, compared to $532,000 in delinquent loans at June 30, 2018, and $84,000 at September 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, all of which were performing in accordance with their restructured terms at the dates indicated (unaudited):

		Sep 30, 2018				Jun 30, 2018				Sep 30, 2017				Three Month Change				One Year Change
		(Dollars in thousands)
Performing TDRs:
One-to-four family residential		$	9,458			$	9,990			$	15,174			$	(532	)		$	(5,716	)
Multifamily			1,116				1,122				1,140				(6	)			(24	)
Commercial real estate			2,601				2,624				3,216				(23	)			(615	)
Consumer			43				43				43				–				–
Total TDRs		$	13,218			$	13,779			$	19,573			$	(561	)		$	(6,355	)

Net interest income for the quarter ended September 30, 2018, remained relatively stable at $10.1 million, down $70,000 from the quarter ended June 30, 2018, but up from $9.4 million in the quarter ended September 30, 2017. Total interest income was $13.9 million for the quarter ended September 30, 2018, compared to $13.6 million for the quarter ended June 30, 2018, and $12.0 million for the quarter ended September 30, 2017. The increase from the quarter ended June 30, 2018, was due to an increase in average yields on both loans and investment securities, while the increase in total interest income from the third quarter of 2017 was due primarily to an increase in average balances in interest earning assets, along with increased average asset yields.

Total interest expense was $3.8 million for the quarter ended September 30, 2018, compared to $3.5 million for the quarter ended June 30, 2018, and $2.6 million for the quarter ended September 30, 2017. The higher level of interest expense in the most recent two quarters compared to the quarter ended September 30, 2017, was the result of higher short term market interest rates as a result of the FOMC increasing the Federal Funds targeted rate that adversely impacted the Company's average cost of deposits and borrowings. Average balances of advances outstanding from the Federal Home Loan Bank ("FHLB") were $177.3 million during the quarter ended September 30, 2018, compared to $213.9 million in the quarter ended June 30, 2018, and $197.1 million for the quarter ended September 30, 2017, as the Bank reduced its balance of FHLB advances by $75.0 million this quarter from the increased deposits. 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 2.05% for the quarter ended September 30, 2018, compared to 1.92% for the quarter ended June 30, 2018, and 1.40% for the quarter ended September 30, 2017. The average cost of deposits was 1.40% for the quarter ended September 30, 2018, compared to 1.22% for the quarter ended June 30, 2018, and 1.05% for the quarter ended September 30, 2017.

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

		Sep 30, 2018				Jun 30, 2018				Sep 30, 2017				Three Month Change				One Year Change
Deposits:		(Dollars in thousands)
Noninterest-bearing		$	51,180			$	51,454			$	47,652			$	(274	)		$	3,528
Interest-bearing demand			41,954				39,231				31,590				2,723				10,364
Statement savings			24,106				26,597				29,425				(2,491	)			(5,319	)
Money market			323,025				304,542				285,460				18,483				37,565
Certificates of deposit, retail (1)			373,931				335,440				346,125				38,491				27,806
Certificates of deposit, brokered			102,083				75,488				75,488				26,595				26,595
Total deposits		$	916,279			$	832,752			$	815,740			$	83,527			$	100,539

⁽¹⁾ Balance of retail certificates of deposit for acquired branches are net of an aggregate fair value adjustment of $69,000 at September 30, 2018, $80,000 at June 30, 2018, and $122,000 at September 30, 2017.

Our net interest margin was 3.46% for the quarter ended September 30, 2018, compared to 3.50% for the quarter ended June 30, 2018, and 3.53% for the quarter ended September 30, 2017. The continued narrowing of the net interest margin between periods was primarily due to the cost of our interest-bearing liabilities outpacing the yield on interest-earning assets.

Noninterest income for the quarter ended September 30, 2018, totaled $841,000 compared to $663,000 for the quarter ended June 30, 2018, and $731,000 for the quarter ended September 30, 2017. The increase from the second quarter of 2018 was due primarily to an increase in income from loan-related fees and bank owned life insurance ("BOLI"), partially offset by a decline in wealth management revenue and deposit related fees. The quarter ended June 30, 2018, was also impacted by a $21,000 net loss on sale of investments as the Company elected to sell certain securities and replace them with investments that are expected to perform better in a rising interest rate environment. The increase from the year-ago period was due primarily to higher income from loan related fees, BOLI, and deposit related fees, partially offset by lower wealth management revenue and the absence of the benefit of a net gain on sale of investments, which amounted to $47,000 during the quarter ended September 30, 2017.

Noninterest expense for the quarter ended September 30, 2018, decreased to $7.2 million from $7.5 million in the quarter ended June 30, 2018, and increased from $6.8 million in the quarter ended September 30, 2017. The decrease in noninterest expense in the current quarter compared to the prior quarter was due primarily to lower salaries and employee benefits expense, professional fees, insurance

 

 

and bond premiums, and occupancy and equipment expenses, partially offset by higher regulatory assessments, marketing expense, and other general and administrative expenses. Salaries and employee benefits were lower in the quarter ended September 30, 2018, compared to the quarter ended June 30, 2018, because a higher proportion of the annual compensation paid to the Company's directors is incurred in the second quarter than the other quarters during the year, and due to payroll taxes that typically decline during the second half of the year. The increase from the prior year period was due primarily to the increase in expenses associated with the growth in the Bank's number of employees and locations during the past year.

The Company's federal income tax provision was $707,000 for the quarter ended September 30, 2018, compared to $603,000 for the quarter ended June 30, 2018, and $909,000 for the quarter ended September 30, 2017. The federal income tax provision for June 30, 2018, benefited from stock option exercises that occurred at prices higher than originally estimated, resulting in higher allowable expense recognition for tax purposes. The Company's federal income tax provision during 2018 continued to benefit from the impact of the Tax Cuts and Jobs Act of 2017 that 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		Sep 30, 2018				Jun 30, 2018				Sep 30, 2017				Three Month Change				One Year Change
Cash on hand and in banks		$	7,167			$	9,017			$	7,910				(20.5	)%			(9.4	)%
Interest-earning deposits			19,094				14,056				14,093				35.8				35.5
Investments available-for-sale, at fair value			140,868				138,055				137,847				2.0				2.2
Loans receivable, net of allowance of $13,116,    $12,754, and $12,110, respectively			995,557				989,256				931,862				0.6				6.8
Federal Home Loan Bank ("FHLB") stock, at cost			7,410				10,410				8,902				(28.8	)			(16.8	)
Accrued interest receivable			4,664				4,084				3,709				14.2				25.7
Deferred tax assets, net			2,092				1,296				2,381				61.4				(12.1	)
Other real estate owned ("OREO")			483				483				1,825				0.0				(73.5	)
Premises and equipment, net			21,277				21,436				20,568				(0.7	)			3.4
Bank owned life insurance ("BOLI")			29,745				29,501				28,894				0.8				2.9
Prepaid expenses and other assets			4,460				4,391				3,304				1.6				35.0
Goodwill			889				889				979				0.0				(9.2	)
Core deposit intangible			1,153				1,191				1,304				(3.2	)			(11.6	)
Total assets		$	1,234,859			$	1,224,065			$	1,163,578				0.9	%			6.1	%
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits		$	51,180			$	51,454			$	47,652				(0.5	)%			7.4	%
Interest-bearing deposits			865,099				781,298				768,088				10.7				12.6
Total deposits			916,279				832,752				815,740				10.0				12.3
Advances from the FHLB			149,000				224,000				191,500				(33.5	)			(22.2	)
Advance payments from borrowers for taxes and    insurance			4,737				2,545				4,267				86.1				11.0
Accrued interest payable			541				570				280				(5.1	)			93.2
Other liabilities			9,589				11,644				11,031				(17.6	)			(13.1	)
Total liabilities			1,080,146				1,071,511				1,022,818				0.8	%			5.6	%
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
10,914,556 shares at September 30, 2018,    10,916,556 shares at June 30, 2018, and
10,763,915 shares at September 30, 2017			109				109				108				0.0	%			0.9	%
Additional paid-in capital			96,664				96,344				94,168				0.3				2.7
Retained earnings, substantially restricted			65,004				63,042				52,984				3.1				22.7
Accumulated other comprehensive loss, net of tax			(2,550	)			(2,145	)			(857	)			18.9				197.5
Unearned Employee Stock Ownership Plan    ("ESOP") shares			(4,514	)			(4,796	)			(5,643	)			(5.9	)			(20.0	)
Total stockholders' equity			154,713				152,554				140,760				1.4				9.9
Total liabilities and stockholders' equity		$	1,234,859			$	1,224,065			$	1,163,578				0.9	%			6.1	%

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
		Quarter Ended
		Sep 30, 2018				Jun 30, 2018				Sep 30, 2017				Three Month Change				One Year Change
Interest income
Loans, including fees		$	12,631			$	12,429			$	10,959				1.6	%			15.3	%
Investments available-for-sale			1,063				1,010				869				5.2				22.3
Interest-earning deposits with banks			59				44				108				34.1				(45.4	)
Dividends on FHLB Stock			135				105				67				28.6				101.5
Total interest income			13,888				13,588				12,003				2.2				15.7
Interest expense
Deposits			2,912				2,435				1,933				19.6				50.6
FHLB advances and other borrowings			917				1,024				695				(10.4	)			31.9
Total interest expense			3,829				3,459				2,628				10.7				45.7
Net interest income			10,059				10,129				9,375				(0.7	)			7.3
Provision (recapture of provision) for loan losses			200				(400	)			500				(150.0	)			(60.0	)
Net interest income after provision (recapture of    provision) for loan losses			9,859				10,529				8,875				(6.4	)			11.1
Noninterest income
Net gain (loss) on sale of investments			1				(21	)			47				(104.8	)			(97.9	)
BOLI income			245				224				173				9.4				41.6
Wealth management revenue			145				156				252				(7.1	)			(42.5	)
Deposit related fees			167				175				113				(4.6	)			47.8
Loan related fees			273				126				144				116.7				89.6
Other			10				3				2				233.3				400.0
Total noninterest income			841				663				731				26.8				15.0
Noninterest expense
Salaries and employee benefits			4,732				4,931				4,406				(4.0	)			7.4
Occupancy and equipment			814				829				726				(1.8	)			12.1
Professional fees			353				442				458				(20.1	)			(22.9	)
Data processing			356				351				372				1.4				(4.3	)
OREO related expenses (reimbursements), net			1				2				(6	)			(50.0	)			(116.7	)
Regulatory assessments			126				110				122				14.5				3.3
Insurance and bond premiums			95				154				105				(38.3	)			(9.5	)
Marketing			85				77				102				10.4				(16.7	)
Other general and administrative			639				591				551				8.1				16.0
Total noninterest expense			7,201				7,487				6,836				(3.8	)			5.3
Income before federal income tax provision			3,499				3,705				2,770				(5.6	)			26.3
Federal income tax provision			707				603				909				17.2				(22.2	)
Net income		$	2,792			$	3,102			$	1,861				(10.0	)%			50.0	%
Basic earnings per share		$	0.27			$	0.30			$	0.18
Diluted earnings per share		$	0.27			$	0.30			$	0.18
Weighted average number of common shares    outstanding			10,356,994				10,271,432				10,287,663
Weighted average number of diluted shares    outstanding			10,468,802				10,405,949				10,427,038

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES
Consolidated Income Statements
(Dollars in thousands, except share data)
(Unaudited)
		Nine Months Ended
		September 30,
		2018				2017				One Year Change
Interest income
Loans, including fees		$	38,103			$	31,338				21.6	%
Investments available-for-sale			3,002				2,601				15.4
Interest-earning deposits with banks			141				194				(27.3	)
Dividends on FHLB Stock			343				211				62.6
Total interest income			41,589				34,344				21.1
Interest expense
Deposits			7,623				5,400				41.2
FHLB advances and other borrowings			2,794				1,710				63.4
Total interest expense			10,417				7,110				46.5
Net interest income			31,172				27,234				14.5
(Recapture of provision) provision for loan losses			(4,200	)			800				(625.0	)
Net interest income after (recapture of provision) provision for loan losses			35,372				26,434				33.8
Noninterest income
Net (loss) gain on sale of investments			(20	)			103				(119.4	)
BOLI			718				490				46.5
Wealth management revenue			400				699				(42.8	)
Deposit related fees			503				277				81.6
Loan related fees			533				420				26.9
Other			16				8				100.0
Total noninterest income			2,150				1,997				7.7
Noninterest expense
Salaries and employee benefits			14,325				13,100				9.4
Occupancy and equipment			2,412				1,785				35.1
Professional fees			1,123				1,379				(18.6	)
Data processing			1,031				1,131				(8.8	)
OREO related expenses, net			4				14				(71.4	)
Regulatory assessments			391				330				18.5
Insurance and bond premiums			355				302				17.5
Marketing			269				202				33.2
Other general and administrative			1,805				1,497				20.6
Total noninterest expense			21,715				19,740				10.0
Income before federal income tax  provision			15,807				8,691				81.9
Federal income tax provision			3,071				2,618				17.3
Net income		$	12,736			$	6,073				109.7	%
Basic earnings per share		$	1.24			$	0.59
Diluted earnings per share		$	1.22			$	0.58
Weighted average number of common shares outstanding			10,280,287				10,323,459
Weighted average number of diluted shares outstanding			10,405,315				10,480,061

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

		September 30, 2018								June 30, 2018								September 30, 2017
		Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Commercial real estate:
Residential:
Micro-unit apartments		$	14,141				1.3	%		$	14,204				1.3	%		$	7,053				0.7	%
Other multifamily			162,380				14.7				180,649				16.7				166,628				16.1
Total multifamily			176,521				16.0				194,853				18.0				173,681				16.8
Non-residential:
Office			96,542				8.8				99,739				9.2				99,350				9.6
Retail			139,085				12.6				141,451				13.1				101,787				9.8
Mobile home park			15,649				1.4				15,655				1.4				21,344				2.1
Warehouse			22,252				2.0				28,185				2.6				22,788				2.2
Storage			32,625				3.0				30,383				2.8				32,365				3.1
Other non-residential			54,332				4.9				56,820				5.2				42,782				4.1
Total non-residential			360,485				32.7				372,233				34.3				320,416				30.9
Construction/land development:
One-to-four family residential			84,912				7.7				85,218				7.9				85,593				8.3
Multifamily			80,607				7.3				75,433				7.0				115,345				11.1
Commercial			21,385				2.0				5,735				0.5				5,325				0.5
Land development			7,113				0.7				12,911				1.2				38,423				3.7
Total construction/land development			194,017				17.7				179,297				16.6				244,686				23.6
One-to-four family residential:
Permanent owner occupied			184,698				16.8				169,275				15.6				139,736				13.5
Permanent non-owner occupied			143,226				13.0				134,297				12.4				126,711				12.2
Total one-to-four family residential			327,924				29.8				303,572				28.0				266,447				25.7
Business
Aircraft			10,172				0.9				9,978				0.9				11,317				1.1
Other business			19,483				1.8				12,143				1.1				10,926				1.0
Total business			29,655				2.7				22,121				2.0				22,243				2.1
Consumer			12,419				1.1				12,329				1.1				9,301				0.9
Total loans			1,101,021				100.0	%			1,084,405				100.0	%			1,036,774				100.0	%
Less:
Loans in Process ("LIP")			91,232								81,616								91,316
Deferred loan fees, net			1,116								779								1,486
ALLL			13,116								12,754								12,110
Loans receivable, net		$	995,557							$	989,256							$	931,862
Concentrations of credit: (1)
Construction loans as % of total capital			77.1	%							73.5	%							114.4	%
Total non-owner occupied commercial real estate as % of total capital			454.5	%							475.2	%							478.9	%

⁽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
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
		2018				2018				2018				2017				2017
		(Dollars in thousands, except per share data)
Performance Ratios:
Return on assets			0.90	%			1.01	%			2.28	%			0.80	%			0.66	%
Return on equity			7.17				8.28				19.16				6.70				5.13
Dividend payout ratio			29.63				26.67				10.47				29.17				38.89
Equity-to-assets ratio			12.53				12.46				12.13				11.79				12.10
Tangible equity ratio			12.38				12.31				11.98				11.63				11.92
Net interest margin			3.46				3.50				3.88				3.65				3.53
Average interest-earning assets to average    interest-bearing liabilities			115.20				114.21				113.46				113.32				114.08
Efficiency ratio			66.06				69.38				60.42				66.69				67.64
Noninterest expense as a percent of average    total assets			2.33				2.44				2.34				2.34				2.42
Book value per common share		$	14.17			$	13.97			$	13.80			$	13.27			$	13.08
Tangible book value per share			13.99				13.78				13.60				13.07				12.86
Capital Ratios: (1)
Tier 1 leverage ratio			10.37	%			10.22	%			10.44	%			10.20	%			10.80	%
Common equity tier 1 capital ratio			13.58				13.21				13.13				12.52				12.95
Tier 1 capital ratio			13.58				13.21				13.13				12.52				12.95
Total capital ratio			14.83				14.47				14.38				13.77				14.20
Asset Quality Ratios: (2)
Nonperforming loans as a percent of total    loans			0.05	%			0.02	%			0.02	%			0.02	%			0.02	%
Nonperforming assets as a percent of total    assets			0.08				0.05				0.05				0.05				0.17
ALLL as a percent of total loans			1.30				1.27				1.31				1.28				1.28
Net (recoveries) charge-offs to average loans    receivable, net			(0.02	)			(0.00	)			(0.43	)			(0.20	)			(0.04	)
Allowance for Loan Losses:
ALLL, beginning of the quarter		$	12,754			$	13,136			$	12,882			$	12,110			$	11,285
Provision (Recapture of provision)			200				(400	)			(4,000	)			(1,200	)			500
Charge-offs			-				-				-				-				-
Recoveries			162				18				4,254				1,972				325
ALLL, end of the quarter		$	13,116			$	12,754			$	13,136			$	12,882			$	12,110