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 First Quarter Net Income of $2.5 Million or $0.26 per Diluted Share

Renton, Washington – April 27, 2021 - 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 March 31, 2021, of $2.5 million, or $0.26 per diluted share, compared to net income of $2.6 million, or $0.28 per diluted share, for the quarter ended December 31, 2020, and $1.7 million, or $0.17 per diluted share, for the quarter ended March 31, 2020.

“This quarter we continued to see accelerated success of our strategy to diversify the liability side of our balance sheet and reduce our cost of funds,” stated Joseph W. Kiley III, President and CEO. “During the quarter, deposits increased $40.0 million, with over half of the growth coming in the form of noninterest bearing demand deposits. In addition, higher cost certificate of deposit balances declined by $25.5 million in the quarter. This resulted in a further reduction in our cost of funds, with the average cost of deposits decreasing to 0.85% in the quarter ended March 31, 2021, compared to 1.03% in the quarter ended December 31, 2020, and 1.72% in the quarter ended March 31, 2020,” continued Kiley. “If market interest rates remain low, we expect this trend to continue as we have approximately $219.9 million in certificates of deposit maturing in the next 12 months at a weighted average rate of 1.69%. In addition, we have $83.0 million of certificates of deposit maturing in the subsequent 12 months at a weighted average rate of 1.58%,” continued Kiley.

“We opened our 15th office in Issaquah, Washington on March 1, 2021, and now intend to pause our expansion with a focus on growing relationships and improving efficiency throughout our existing branch network. Our strategy remains focused on improving the Bank’s deposit composition from a reliance on certificates of deposit to a more balanced deposit mix, and expanding our network for lending opportunities,” stated Kiley.

“Our lending teams continue to assist borrowers that may require additional support or closer monitoring due to the COVID-19 pandemic. As a result of our quarterly analysis of our loan portfolio, we downgraded to special mention $10.5 million of $12.2 million in total loans made to a single lending relationship. These downgrades offset improvements to economic environmental factors related to the COVID-19 pandemic used to calculate our allowance for loan losses, resulting in a provision for loan losses of $300,000 during the quarter, compared to a provision for loan losses of $600,000 in the quarter ended December 31, 2020,” concluded Kiley.

Highlights for the quarter ended March 31, 2021:

•	Total deposits increased $40.0 million to $1.13 billion, including a $23.2 million increase in noninterest bearing demand deposits.

•	The Company’s book value per share was $16.35, compared to $16.05 at December 31, 2020, and $15.03 at March 31, 2020.

•	The Company repurchased 89,019 shares at an average price of $13.03 per share.

•	The Company increased its regular quarterly cash dividend to shareholders to $0.11 per share from $0.10 per share.

•	The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 15.6%, respectively, at March 31, 2021, compared to 10.3% and 15.6%, respectively, at December 31, 2020, and 10.3% and 14.7% at March 31, 2020.

•	The Bank recorded a $300,000 provision for loan losses based on management’s evaluation of the adequacy of the Allowance for Loan and Lease Losses (“ALLL”) including the estimated future impact of the COVID-19 pandemic.

Total deposits increased $40.0 million to $1.13 billion at March 31, 2021, from $1.09 billion at December 31, 2020, and increased $133.7 million from $1.00 billion at March 31, 2020. Demand deposits increased $29.1 million, while retail certificates of deposit decreased $25.5 million during the quarter. Retail deposits increased $159.1 million year over year, partially offset by the repayment of $25.5 million in brokered certificates of deposit over the same period.

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

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

⁽¹⁾ Issaquah opened March 1, 2021.

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Net loans receivable totaled $1.10 billion at both March 31, 2021 and December 31, 2020, respectively, compared to $1.09 billion at March 31, 2020. The average balance of net loans receivable totaled $1.10 billion for the quarter ended March 31, 2021, compared to $1.13 billion for the quarter ended December 31, 2020, and $1.10 billion for the quarter ended March 31, 2020.

The Company recorded a $300,000 provision for loan losses in the quarter ended March 31, 2021, compared to a $600,000 provision for loan losses in the quarter ended December 31, 2020, and a $300,000 provision for loan losses in the quarter ended March 31, 2020. The provision in the quarter ended March 31, 2021, was primarily due to downgrades on $10.5 million of $12.2 million in total loans made to a single lending relationship secured by a bowling, roller skating and restaurant location, and a separate hostel business that continue to be adversely impacted by government-imposed restrictions due to the pandemic. Partially offsetting these downgrades were improvements to qualitative economic factors utilized to calculate our general reserves for the ALLL related to the COVID-19 pandemic based upon the improving financial conditions and economic outlook that existed as of March 31, 2021. The provision in the quarter ended December 31, 2020, was primarily due to risk rating downgrades on $34.2 million in commercial real estate loans, as any relationship that requested an additional loan payment deferral and demonstrated other weaknesses received additional scrutiny. The provision in the quarter ended March 31, 2020, was due primarily to COVID-19 related deterioration to the qualitative economic factors considered in calculating the general reserves for the ALLL.

The ALLL represented 1.39% of total loans receivable at March 31, 2021, compared to 1.36% of total loans receivable at December 31, 2020, and 1.22% of total loans receivable at March 31, 2020. Excluding Paycheck Protection Program (“PPP”) loan balances, which are 100% guaranteed by the Small Business Administration (“SBA”), the ALLL represented 1.45% of total loans receivable at March 31, 2021, compared to 1.41% of total loans receivable at December 31, 2020. The ALLL as a percent of total loans excluding PPP loans is a non-GAAP financial measure. See Non-GAAP Financial Measures at the end of this press release for a reconciliation to its nearest GAAP equivalent. As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, we are awaiting financial information relating to $5.4 million in commercial real estate participation loans that were downgraded by the lead lender. To date, the Company has not received sufficient information to make a final determination, and accordingly, the risk rating on these loans have not been further downgraded. The Company estimates that further downgrade from the current watch status to “special mention” could impact the ALLL for the quarter ending June 30, 2021, by an amount between $400,000 and $500,000, which may result in an increase in the provision for loan losses next quarter.

Nonperforming loans totaled $2.0 million at March 31, 2021, down from $2.1 million at December 31, 2020, and $2.2 million at March 31, 2020. The balance, consisting of a single multifamily loan in foreclosure, declined in the quarter due to the release of approximately $74,000 in rents paid on the property previously held in receivership, which were applied against payments and late fees owed on the outstanding loan. The receiver has multiple offers on the property and the Company currently anticipates that this matter will be resolved in the second quarter without incurring a loss. OREO remained unchanged at $454,000 at March 31, 2021, December 31, 2020, and March 31, 2020.

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

⁽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 March 31, 2021.

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. At March 31, 2021, TDRs totaled $3.8 million, compared to $3.9 million at December 31, 2020, and $5.0 million at March 31, 2020. All TDRs were performing according to their modified repayment terms for the periods presented. As discussed below, The Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), signed into law on March 27, 2020, provided guidance on the modification of loans due to the COVID‑19 pandemic, and outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. The Consolidated Appropriations Act, 2021 (“CAA”), signed into law on December 27, 2020, provided additional COVID relief and extended TDR relief to the earlier of 60 days after the national emergency termination date or January 1, 2022.

Net interest income totaled $10.7 million for both the quarters ended March 31, 2021 and December 31, 2020, compared to $9.7 million for the quarter ended March 31, 2020. The improvement from the year ago quarter was primarily due to lower deposit-related interest expense that more than offset the decline in interest income earned on loans, including fees.

Total interest income was $13.5 million for the quarter ended March 31, 2021, compared to $13.8 million for the quarter ended December 31, 2020, and $14.5 million for the quarter ended March 31, 2020. The decrease in the current quarter compared to the quarter ended December 31, 2020, was primarily due to lower interest income on loans, including fees, as yields on loans continue to decline as loans either adjust downward or are refinanced in this low interest rate environment. In addition, rates on new loans and investments are lower than the average yield on existing interest-earning assets, further adversely impacting interest income. The average balance and composition of the loan portfolio was relatively unchanged during the quarter as loan demand remained muted.

Total interest expense was $2.7 million for the quarter ended March 31, 2021, compared to $3.2 million for the quarter ended December 31, 2020, and $4.8 million for the quarter ended March 31, 2020. The average cost of interest-bearing deposits declined to 0.94% for the quarter ended March 31, 2021, compared to 1.12% for the quarter ended December 31, 2020, and 1.81% for the quarter ended March 31, 2020. The decline from the quarter ended December 31, 2020, was due primarily to the repricing of maturing

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certificates of deposits to a lower interest rate, growth in noninterest bearing deposits, and reduction in the average balance of higher cost certificates of deposit. Advances from the FHLB remained unchanged at $120.0 million at both March 31, 2021 and December 31, 2020, but were down from $160.0 million at March 31, 2020. The FHLB advances are tied to cash flow hedge agreements utilized to assist in the Bank’s interest rate risk management efforts. The average cost of borrowings was 1.41% for the quarter ended March 31, 2021, compared to 1.40% for the quarter ended December 31, 2020, and 1.48% for the quarter ended March 31, 2020.

The net interest margin was 3.31% for the quarter ended March 31, 2021, compared to 3.29% for the quarter ended December 31, 2020, and 3.11% for the quarter ended March 31, 2020. The expansion in the net interest margin is due primarily to the 16 basis point reduction in the Company’s average cost of interest‑bearing liabilities during the quarter to 0.99% from 1.15% in the quarter ended December 31, 2020, and a 78 basis point reduction from 1.77% for the quarter ended March 31, 2020. Offsetting this improvement was an 11 basis point reduction in the average yield on interest-earning assets to 4.15% for the quarter ended March 31, 2021, from 4.26% in the quarter ended December 31, 2020, and a 51 basis point reduction from 4.66% in the quarter ended March 31, 2020. These asset yields were impacted favorably by net deferred fee recognition on PPP loans, with the recognition of previously unamortized deferred fees on forgiven PPP loans totaling $718,000 in the quarter ended March 31, 2021, and $420,000 in the quarter ended December 31, 2020. At March 31, 2021, the balance of net deferred fees relating to PPP loans totaled $1.5 million, which will be recognized in future periods.

Noninterest income for the quarter ended March 31, 2021, totaled $764,000, compared to $1.7 million for the quarter ended December 31, 2020, and $990,000 for the quarter ended March 31, 2020. The decrease in noninterest income for the quarter ended March 31, 2021, compared to the quarter ended December 31, 2020, was primarily due to a $950,000 decrease in loan related fees as these fees were abnormally high with approximately $954,000 in loan prepayment penalties and loan swap fee income recognized in the prior quarter, compared to $94,000 in the current quarter.

Noninterest expense totaled $8.1 million for the quarter ended March 31, 2021, compared to $8.4 million for the quarter ended December 31, 2020, and $8.3 million for the quarter ended March 31, 2020. Salaries and employee benefits for the quarter ended March 31, 2021, decreased $201,000 compared to the quarter ended December 31, 2020, due primarily to lower employee incentive accruals.

The Bank is committed to assisting its customers and communities in response to the COVID-19 pandemic, including providing certain short-term loan modifications. In addition, the Bank is participating in the PPP as an SBA lender. The Bank continues to take the steps necessary while working with its loan customers to effectively manage the portfolio through the ongoing uncertainty surrounding the duration, impact and government response to the crisis.

Paycheck Protection Program

The SBA provides assistance to small businesses impacted by COVID-19 through the PPP, which was designed to provide near-term relief to help small businesses sustain operations. The SBA deadline for the first round of  PPP loan applications under the CARES Act was August 8, 2020. The CAA, among other things, authorized an additional $284.5 billion in PPP funding for eligible small businesses and nonprofits with an initial application deadline of March 31, 2021. The deadline for this second round of PPP was recently extended to May 31, 2021. As of March 31, 2021, there were 324 PPP loans outstanding totaling $45.2 million as compared to 372 PPP loans totaling $41.3 million at December 31, 2020. At March 31, 2021, 234 PPP loans have an outstanding balance of $150,000 or less, totaling $11.4 million, or 25.2% of total PPP loans outstanding, including 145 loans representing $3.3 million with an outstanding

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balance of $50,000 or less. As of March 31, 2021, 374 PPP loans totaling $29.4 million had received forgiveness under the PPP loan program.

Modifications

The primary method of relief is to allow the borrower to defer their loan payments for three to six months, while certain borrowers are allowed to pay interest only or have payment deferrals for periods longer than six months depending upon their specific circumstances. The CARES Act and regulatory guidelines suspend the determination of certain loan modifications related to the COVID‑19 pandemic from being treated as TDRs. Recent legislation extended this accounting treatment through the earlier of 60 days after the national emergency termination date or January 1, 2022. The following table provides detail on the balance of loans remaining on deferral status as of March 31, 2021:

Total loans with modifications granted were $56.7 million, or 5.1% of total loans outstanding, at March 31, 2021, an increase from $45.2 million, or 4.0% of total loans outstanding at December 31, 2020. The increase in the quarter ended March 31, 2021, was primarily due to new modifications granted on loans related to an office building and a private tennis club. At September 30, 2020, total loans with modifications granted were $65.5 million, or 5.7% of total loans outstanding, compared to $132.1 million, or 11.4% of total loans

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outstanding at June 30, 2020. As of March 31, 2021, $49.1 million in loans had been granted modifications of greater than six months, of which $30.9 million were for loans secured by hotel/motel asset class.

Additional Loan Portfolio Details

The Bank is monitoring its loan portfolio for potentially delinquent loans that have not requested a loan modification qualifying under the CARES Act or regulatory guidance. The following table presents the loan to value (“LTV”) ratios of select segments of our loan portfolio at March 31, 2021, that may more likely be impacted by COVID-19 pandemic considerations. The LTV ratio is derived by dividing the current loan balance by the lower of the original appraised value or purchase price of the real estate or other collateral:

⁽¹⁾ Represents select segments of loans that may include construction loans; classifications may differ from those used elsewhere in this release because they are based on collateral type rather than loan category.

First Financial Northwest, Inc. is the parent company of First Financial Northwest Bank; an FDIC insured Washington State-chartered commercial bank headquartered in Renton, Washington, serving the Puget Sound Region through 15 full-service banking offices. For additional information about us, please visit our website at ffnwb.com and click on the “Investor Relations” link at the bottom of the page.

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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 2021 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.

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FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)

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FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Consolidated Income Statements

(Dollars in thousands, except share data)

(Unaudited)

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

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

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FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIES

Key Financial Measures
(Unaudited)