FFNW First Financial Northwest Inc

First Financial Northwest, Inc. (the “Company”) (NASDAQ GS: FFNW), the holding company for First Financial Northwest Bank (the “Bank”), today reported net income for the quarter ended December 31, 2023, of $1.2 million, or $0.13 per diluted share, compared to $1.5 million, or $0.16 per diluted share, for the quarter ended September 30, 2023, and $3.2 million, or $0.35 per diluted share, for the quarter ended December 31, 2022. For the year ended December 31, 2023, net income was $6.3 million, or $0.69 per diluted share, compared to net income of $13.2 million, or $1.45 per diluted share, for the year ended December 31, 2022.

“Credit quality remained strong as of year-end with nonperforming assets of $220,000 on a $1.2 billion total loan portfolio. Our analysis of the allowance for credit losses was influenced by various factors during the quarter, including shifts in the balances and composition of the loan portfolio, a credit downgrade from “pass” to “watch” involving a $12.8 million lending relationship secured by mixed-use commercial real estate, and improvements in the unemployment rate forecast. After careful consideration, our analysis concluded that no provision for credit losses was necessary for the quarter,” stated Joseph W. Kiley III, President and CEO.

“Persistently elevated short term interest rates and intense competition have continued to place pressure on deposit rates, impacting our net interest income. Despite these challenges, we continue to actively manage these expenses to the extent possible, while prioritizing maintaining deposit balances and meeting our customers’ needs,” continued Kiley.

“Throughout the fourth quarter of 2023, our focus on cost reduction and operational efficiency yielded a decrease in noninterest expenses. We previously reported that we were in search of a senior C&I lending credit officer. However, in light of the announcement that we have entered into a Purchase and Assumption Agreement with Global Federal Credit Union pursuant to which Global will acquire substantially all of the assets and assume substantially all of the liabilities of the Bank, those hiring plans are currently on hold as we pursue regulatory approval for the sale,” concluded Kiley.

Highlights for the quarter and year ended December 31, 2023:

• Net loans receivable increased by $7.8 million in the quarter to $1.18 billion at December 31, 2023, on continued strength in our construction/land and one-to-four family residential portfolios, along with modest growth observed in other business and consumer loans.
• Book value per share was $17.61 at December 31, 2023, compared to $17.35 and $17.57 for September 30, 2023 and December 31, 2022, respectively.
• Paid regular quarterly cash dividends to shareholders totaling $0.52 per share for the year, an 8.3% increase over the prior year.
• The Bank’s Tier 1 leverage and total capital ratios were 10.2% and 16.2% at December 31, 2023, compared to 10.3% and 16.0% at September 30, 2023, and 10.3% and 15.6% at December 31, 2022, respectively.
• Credit quality remained strong with nonperforming assets totaling $220,000, or 0.01% of total assets, and an additional $1.2 million in loans over 30 days past due at December 31, 2023.
• Based on management’s evaluation of the adequacy of the allowance for credit losses (“ACL”) at December 31, 2023, the Company did not record a provision for credit losses during the quarter, resulting in a net recapture of provision for credit losses of $208,000 for the year. The Company recorded a $434,000 recapture of provision for credit losses for the year ended December 31, 2022.

Deposits totaled $1.19 billion at December 31, 2023, compared to $1.21 billion at September 30, 2023, and $1.17 billion at December 31, 2022. Total deposits decreased $16.3 million for the quarter ended December 31, 2023, compared to the quarter ended September 30, 2023, primarily due to a $45.2 million decrease in brokered deposits and a $7.1 million decrease in demand deposits, partially offset by a $28.2 million increase in money market balances and a $7.7 million increase in retail certificates of deposit. Management continues to consider various sources of funds, including wholesale markets, brokered deposits and the national deposit market to fund its growth. Total deposits were up $24.1 million at December 31, 2023, compared to $1.17 billion at December 31, 2022.

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

	Dec 31,2023				Sep 30,2023				Dec 31,2022				ThreeMonthChange				One Year Change
Deposits:	(Dollars in thousands)
Noninterest-bearing demand	$	100,899			$	104,164			$	119,944			$	(3,265	)		$	(19,045	)
Interest-bearing demand		56,968				60,816				96,632				(3,848	)			(39,664	)
Savings		18,886				18,844				23,636				42				(4,750	)
Money market		529,411				501,168				542,388				28,243				(12,977	)
Certificates of deposit, retail		357,153				349,446				262,554				7,707				94,599
Brokered deposits		130,790				175,972				124,886				(45,182	)			5,904
Total deposits	$	1,194,107			$	1,210,410			$	1,170,040			$	(16,303	)		$	24,067

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

December 31, 2023
	Noninterest-bearing demand			Interest-bearing demand			Savings			Money market			Certificates of deposit, retail			Brokered deposits			Total
	(Dollars in thousands)
King County
Renton	$	32,707		$	16,280		$	12,637		$	317,003		$	241,983		$	-		$	620,610
Landing		2,789			1,658			104			12,447			9,842			-			26,840
Woodinville		1,909			2,292			1,000			9,491			10,671			-			25,363
Bothell		3,380			840			33			1,892			4,738			-			10,883
Crossroads		11,075			3,873			45			27,564			14,958			-			57,515
Kent		7,267			5,086			4			16,424			7,706			-			36,487
Kirkland		9,341			1,989			137			12,233			2,032			-			25,732
Issaquah		1,646			1,696			57			2,417			6,213			-			12,029
Total King County		70,114			33,714			14,017			399,471			298,143			-			815,459
Snohomish County
Mill Creek		4,985			2,333			850			13,672			8,309			-			30,149
Edmonds		11,455			5,386			460			26,458			14,375			-			58,134
Clearview		4,614			4,964			1,541			17,597			9,243			-			37,959
Lake Stevens		3,849			4,919			940			24,009			12,633			-			46,350
Smokey Point		2,665			4,333			1,060			44,484			11,750			-			64,292
Total Snohomish County		27,568			21,935			4,851			126,220			56,310			-			236,884
Pierce County
University Place		2,205			67			3			2,496			1,172			-			5,943
Gig Harbor		1,012			1,252			15			1,224			1,528			-			5,031
Total Pierce County		3,217			1,319			18			3,720			2,700			-			10,974
Brokered deposits		-			-			-			-			-			130,790			130,790
Total deposits	$	100,899		$	56,968		$	18,886		$	529,411		$	357,153		$	130,790		$	1,194,107

September 30, 2023
	Noninterest-bearing demand			Interest-bearing demand			Savings			Money market			Certificates of deposit, retail			Brokered deposits			Total
	(Dollars in thousands)
King County
Renton	$	32,025		$	15,316		$	12,140		$	284,433		$	239,940		$	-		$	583,854
Landing		3,036			1,689			91			16,606			8,934			-			30,356
Woodinville		2,377			2,425			981			9,016			10,453			-			25,252
Bothell		3,798			751			35			4,363			2,365			-			11,312
Crossroads		10,589			4,067			77			28,773			14,460			-			57,966
Kent		6,665			7,397			4			13,310			7,839			-			35,215
Kirkland		10,385			1,765			148			12,277			1,174			-			25,749
Issaquah		1,476			1,966			30			3,719			6,170			-			13,361
Total King County		70,351			35,376			13,506			372,497			291,335			-			783,065
Snohomish County
Mill Creek		5,126			3,474			639			14,069			7,910			-			31,218
Edmonds		11,817			6,735			950			24,681			14,848			-			59,031
Clearview		5,497			5,468			1,495			18,896			9,132			-			40,488
Lake Stevens		3,740			4,567			964			23,657			12,126			-			45,054
Smokey Point		3,568			3,877			1,272			42,544			11,835			-			63,096
Total Snohomish County		29,748			24,121			5,320			123,847			55,851			-			238,887
Pierce County
University Place		3,176			99			3			3,279			996			-			7,553
Gig Harbor		889			1,220			15			1,545			1,264			-			4,933
Total Pierce County		4,065			1,319			18			4,824			2,260			-			12,486
Brokered deposits		-			-			-			-			-			175,972			175,972
Total deposits	$	104,164		$	60,816		$	18,844		$	501,168		$	349,446		$	175,972		$	1,210,410

Net loans receivable totaled $1.18 billion at December 31, 2023, compared to $1.17 billion at both September 30, 2023 and December 31, 2022. During the quarter ended December 31, 2023, new originations of primarily construction/land and one-to-four family residential loans outpaced total loan repayments in the quarter. The average balance of net loans receivable totaled $1.17 billion for both the quarter ended December 31, 2023 and September 30, 2023, compared to $1.15 billion for the quarter ended December 31, 2022. For the year ended December 31, 2023, the average balance of net loans receivable was $1.17 billion, compared to $1.13 billion for the year ended December 31, 2022.

The allowance for credit losses (“ACL”) represented 1.28% of total loans receivable at December 31, 2023, compared to 1.29% at both September 30, 2023 and December 31, 2022.

Nonperforming loans totaled $220,000 at December 31, 2023, compared to $201,000 at September 30, 2023, and $193,000 at December 31, 2022. There was no other real estate owned (“OREO”) at December 31, 2023, September 30, 2023, or December 31, 2022.

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

	Dec 31,				Sep 30,				Dec 31,				Three Month				One Year
		2023				2023				2022			Change				Change
	(Dollars in thousands)
Nonperforming loans:
Consumer	$	220			$	201			$	193			$	19			$	27
Total nonperforming loans		220				201				193				19				27
OREO		–				–			─					–				–
Total nonperforming assets	$	220			$	201			$	193			$	19			$	27
Nonperforming assets as a percent
of total assets		0.01	%			0.01	%			0.01	%

Net interest income totaled $9.3 million for the quarter ended December 31, 2023, down from $9.7 million and $12.4 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease in the current quarter compared to the quarter ended September 30, 2023, was primarily due to higher interest expense on deposits, reflecting the sustained high levels of short-term interest rates and intense competition for deposits. Since March 2022, the Federal Open Market Committee of the Federal Reserve System has increased the target range for the federal funds rate by 525 basis points to a range of 5.25% to 5.50%. For the year ended December 31, 2023, net interest income totaled $40.5 million, compared to $48.4 million for the year ended December 31, 2022, as the increase in interest expense on liabilities outpaced the increase in interest income on loans and investments.

Total interest income was $20.3 million for the quarter ended December 31, 2023, compared to $19.7 million and $17.3 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. Yield on loans increased to 5.83% during the recent quarter, compared to 5.73% and 5.19% for the quarters ended September 30, 2023, and December 31, 2022, respectively. Yield on investments increased to 4.11% during the current quarter, compared to 3.98% and 3.60% for the quarters ended September 30, 2023, and December 31, 2022, respectively.

Total interest expense was $11.0 million for the quarter ended December 31, 2023, up from $10.0 million and $4.9 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The average cost of interest-bearing deposits was 3.62% for the quarter ended December 31, 2023, compared to 3.33% and 1.51% for the quarters ended September 30, 2023 and December 31, 2022, respectively. The increase from the quarter ended September 30, 2023, was due primarily to increased interest expense on money market and certificate of deposit balances along with the maturity of brokered deposits with lower rates that were entered into during a lower rate environment. Advances from the FHLB totaled $125.0 million at both December 31, 2023 and September 30, 2023, compared to $145.0 million at December 31, 2022. At December 31, 2023, $115.0 million of our $125.0 million of FHLB advances were tied to cash flow hedge agreements where the Bank pays a fixed rate and receives a variable rate in return to assist in the Bank’s interest rate risk management efforts. These cash flow hedge agreements had a weighted average remaining term of 36 months and a weighted average fixed interest rate of 1.87% as of December 31, 2023. The average cost of borrowings was 2.40% for the quarter ended December 31, 2023, compared to 2.42% and 2.46% for the quarters ended September 30, 2023 and December 31, 2022, respectively.

The net interest margin was 2.54% for the quarter ended December 31, 2023, down from 2.69% and 3.52% for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was due primarily to the increase in the cost of interest-bearing liabilities outpacing the yields on interest-earnings assets. The average cost of interest-bearing liabilities increased 26 basis points to 3.50% during the quarter, from 3.24% during the quarter ended September 30, 2023, and increased 187 basis points from 1.63% during the quarter ended December 31, 2022, while the average yield on interest-earning assets increased 10 basis points to 5.56% during the fourth quarter of 2023, from 5.46% during the quarter ended September 30, 2023, and increased 66 basis points from 4.90% during the quarter ended December 31, 2022. The decline in the net interest margin in the current quarter was due in large part to the maturity of lower cost retail and brokered certificates of deposit, repricing in a higher interest rate environment. The net interest margin for the month of December 2023 was 2.52%.

Noninterest income for the quarter ended December 31, 2023, totaled $633,000, down from $677,000 and $720,000 for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was primarily due to a $30,000 decrease in other noninterest income related to our fintech focused venture capital investment and lower loan and deposit related fees, partially offset by increases in wealth management revenue and BOLI income. The decrease in the quarter ended December 31, 2023, as compared to the quarter ended December 31, 2022, primarily reflects reduced loan related fees and the absence of a net gain on sale of investments, partially offset by higher BOLI income and wealth management revenue. Noninterest income declined $474,000 to $2.8 million for the year ended December 31, 2023, from $3.2 million for the year ended December 31, 2022, due primarily to a $644,000 decline in loan related fees due largely to a $495,000 decline in loan prepayment penalties, along with a $59,000 decline in wealth management revenue, partially offset by increases in other noninterest and BOLI income.

Noninterest expense totaled $8.4 million for the quarter ended December 31, 2023, down from $8.8 million and $8.7 million for the quarters ended September 30, 2023 and December 31, 2022, respectively. The decrease compared to the quarter ended September 30, 2023, was primarily due to decreases of $196,000 in salaries and employee benefits and $122,000 in professional fees. The decline in salaries and employee benefit expenses was due primarily to the reversal of $250,000 in incentive accruals following an analysis of the metrics impacting employee incentives for the year, compared to no incentive accrual activity in the quarter ended September 30, 2023. The decrease compared to the quarter ended December 31, 2022, was primarily due to decreases of $176,000 in professional fees, $155,000 in salaries and employee benefits and $153,000 in other general and administrative expenses, partially offset by increases of $88,000 in regulatory assessments, $84,000 in data processing and $76,000 in occupancy and equipment expenses. Noninterest expense totaled $35.7 million for the year ended December 31, 2023, compared to $35.6 million for the year ended December 31, 2022. The moderate increase year over was due primarily to an increase in regulatory assessments and other general and administrative expenses, partially offset by declines in salaries and employee benefits and professional fees.

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

Forward-looking statements:When used in this press release and in other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”), in press releases or other public stockholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases “believe,” “will,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “plans,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent management’s current expectations and forecasts regarding future events many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially from those currently expected or projected in these forward-looking statements made by, or on behalf of, us and could negatively affect our operating and stock performance. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include, but are not limited to, the following: potential adverse impacts to economic conditions in our local market areas, other markets where the Company has lending relationships, or other aspects of the Company’s business operations or financial markets, including, without limitation, as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth; changes in the interest rate environment, including the recent increases in the Federal Reserve benchmark rate and duration at which such increased interest rate levels are maintained, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; the impact of continuing high inflation and the current and future monetary policies of the Federal Reserve in response thereto; the effects of any federal government shutdown; increased competitive pressures; legislative and regulatory changes; the impact of bank failures or adverse developments at other banks and related negative press about the banking industry in general on investor and depositor sentiment; disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; effects of critical accounting policies and judgments, including the use of estimate in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business; and other factors described in the Company’s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other reports filed with or furnished to the Securities and Exchange Commission – that are available on our website at www.ffnwb.com and on the SEC’s website at www.sec.gov.

Any of the forward-looking statements that we make in this Press Release and in the other public statements are based upon management’s beliefs and assumptions at the time they are made and may turn out to be wrong because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

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

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Balance Sheets(Dollars in thousands, except share data)(Unaudited)
Assets	Dec 31, 2023				Sep 30,2023				Dec 31,2022				ThreeMonthChange			OneYearChange
Cash on hand and in banks	$	8,391			$	8,074			$	7,722			3.9	%		8.7	%
Interest-earning deposits with banks		22,138				49,618				16,598			(55.4	)		33.4
Investments available-for-sale, at fair value		207,915				204,975				217,778			1.4			(4.5	)
Investments held-to-maturity, at amortized cost		2,456				2,450				2,444			0.2			0.5
Loans receivable, net of allowance of $15,306, $15,306, and $15,227 respectively		1,175,925				1,168,079				1,167,083			0.7			0.8
Federal Home Loan Bank ("FHLB") stock, at cost		6,527				6,803				7,512			(4.1	)		(13.1	)
Accrued interest receivable		7,359				7,263				6,513			1.3			13.0
Deferred tax assets, net		2,648				3,156				2,597			(16.1	)		2.0
Premises and equipment, net		19,667				19,921				21,192			(1.3	)		(7.2	)
Bank owned life insurance ("BOLI"), net		37,653				37,398				36,286			0.7			3.8
Prepaid expenses and other assets		10,478				13,673				12,479			(23.4	)		(16.0	)
Right of use asset ("ROU"), net		2,617				2,818				3,275			(7.1	)		(20.1	)
Goodwill		889				889				889			0.0			0.0
Core deposit intangible, net		419				451				548			(7.1	)		(23.5	)
Total assets	$	1,505,082			$	1,525,568			$	1,502,916			(1.3	)		0.1
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing deposits	$	100,899			$	104,164			$	119,944			(3.1	)		(15.9	)
Interest-bearing deposits		1,093,208				1,106,246				1,050,096			(1.2	)		4.1
Total deposits		1,194,107				1,210,410				1,170,040			(1.3	)		2.1
Advances from the FHLB		125,000				125,000				145,000			0.0			(13.8	)
Advance payments from borrowers for taxes and insurance		2,952				4,760				3,051			(38.0	)		(3.2	)
Lease liability, net		2,806				3,011				3,454			(6.8	)		(18.8	)
Accrued interest payable		2,739				2,646				328			3.5			735.1
Other liabilities		15,818				20,506				20,683			(22.9	)		(23.5	)
Total liabilities		1,343,422				1,366,333				1,342,556			(1.7	)		0.1
Commitments and contingencies
Stockholders' Equity
Preferred stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding		-				-				-			n/a			n/a
Common stock, $0.01 par value; authorized 90,000,000 shares; issued and outstanding 9,179,510 shares at December 31, 2023, 9,179,510 shares at September 30, 2023, and 9,127,595 shares at December 31, 2022		92				92				91			0.0			1.1
Additional paid-in capital		73,035				72,926				72,424			0.1			0.8
Retained earnings		96,206				96,206				95,059			0.0			1.2
Accumulated other comprehensive loss, net of tax		(7,673	)			(9,989	)			(7,214	)		(23.2	)		6.4
Total stockholders' equity		161,660				159,235				160,360			1.5			0.8
Total liabilities and stockholders' equity	$	1,505,082			$	1,525,568			$	1,502,916			(1.3	)%		0.1	%

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Income Statements(Dollars in thousands, except share data)(Unaudited)
	Quarter Ended
	Dec 31,2023				Sep 30,2023				Dec 31,2022				ThreeMonthChange			OneYearChange
Interest income
Loans, including fees	$	17,143			$	16,918			$	15,042			1.3	%		14.0	%
Investments		2,143				2,118				2,007			1.2			6.8
Interest-earning deposits with banks		880				525				205			67.6			329.3
Dividends on FHLB Stock		121				113				89			7.1			36.0
Total interest income		20,287				19,674				17,343			3.1			17.0
Interest expense
Deposits		10,281				9,205				3,972			11.7			158.8
FHLB advances and other borrowings		731				766				928			(4.6	)		(21.2	)
Total interest expense		11,012				9,971				4,900			10.4			124.7
Net interest income		9,275				9,703				12,443			(4.4	)		(25.5	)
(Recapture of provision) provision for credit losses		-				(300	)			486			(100.0	)		(100.0	)
Net interest income after (recapture of provision) provision for credit losses		9,275				10,003				11,957			(7.3	)		(22.4	)
Noninterest income
Net gain on sale of investments		-				-				27			n/a			(100.0	)
BOLI income		255				244				222			4.5			14.9
Wealth management revenue		60				53				36			13.2			66.7
Deposit related fees		234				247				231			(5.3	)		1.3
Loan related fees		60				79				172			(24.1	)		(65.1	)
Other		24				54				32			(55.6	)		(25.0	)
Total noninterest income		633				677				720			(6.5	)		(12.1	)
Noninterest expense
Salaries and employee benefits		4,822				5,018				4,977			(3.9	)		(3.1	)
Occupancy and equipment		1,231				1,193				1,155			3.2			6.6
Professional fees		431				553				607			(22.1	)		(29.0	)
Data processing		718				742				634			(3.2	)		13.2
Regulatory assessments		196				200				108			(2.0	)		81.5
Insurance and bond premiums		113				111				111			1.8			1.8
Marketing		70				97				77			(27.8	)		(9.1	)
Other general and administrative		858				856				1,011			0.2			(15.1	)
Total noninterest expense		8,439				8,770				8,680			(3.8	)		(2.8	)
Income before federal income tax provision		1,469				1,910				3,997			(23.1	)		(63.2	)
Federal income tax provision		275				409				771			(32.8	)		(64.3	)
Net income	$	1,194			$	1,501			$	3,226			(20.5	)%		(63.0	)%
Basic earnings per share	$	0.13			$	0.16			$	0.35
Diluted earnings per share	$	0.13			$	0.16			$	0.35
Weighted average number of common shares outstanding		9,151,892				9,127,568				9,073,323
Weighted average number of diluted shares outstanding		9,176,724				9,150,059				9,149,044

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESConsolidated Income Statements(Dollars in thousands, except share data)(Unaudited)
	Year Ended December 31,
		2023				2022			OneYearChange
Interest income
Loans, including fees	$	66,938			$	52,935			26.5	%
Investments		8,474				5,603			51.2
Interest-earning deposits with banks		2,261				386			485.8
Dividends on FHLB Stock		485				318			52.5
Total interest income		78,158				59,242			31.9
Interest expense
Deposits		34,407				8,955			284.2
FHLB advances		3,208				1,934			65.9
Total interest expense		37,615				10,889			245.4
Net interest income		40,543				48,353			(16.2	)
Recapture of provision for credit losses		(208	)			(434	)		(52.1	)
Net interest income after recapture of provision for credit losses		40,751				48,787			(16.5	)
Noninterest income
Net gain on sale of investments		-				27			(100.0	)
BOLI		1,081				1,004			7.7
Wealth management revenue		253				312			(18.9	)
Deposit accounts related fees		956				936			2.1
Loan related fees		275				919			(70.1	)
Other		208				49			324.5
Total noninterest income		2,773				3,247			(14.6	)
Noninterest expense
Salaries and employee benefits		20,366				21,133			(3.6	)
Occupancy and equipment		4,748				4,776			(0.6	)
Professional fees		2,288				2,339			(2.2	)
Data processing		2,857				2,678			6.7
Regulatory assessments		763				403			89.3
Insurance and bond premiums		468				464			0.9
Marketing		343				303			13.2
Other general and administrative		3,833				3,529			8.6
Total noninterest expense		35,666				35,625			0.1
Income before federal income tax provision		7,858				16,409			(52.1	)
Federal income tax provision		1,553				3,169			(51.0	)
Net income	$	6,305			$	13,240			(52.4	)%
Basic earnings per share	$	0.69			$	1.47
Diluted earnings per share	$	0.69			$	1.45
Weighted average number of common shares outstanding		9,126,209				9,006,369
Weighted average number of diluted shares outstanding		9,152,617				9,102,283

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

	December 31, 2023							September 30, 2023							December 31, 2022
	Amount				Percent			Amount				Percent			Amount				Percent
	(Dollars in thousands)
Commercial real estate:
Residential:
Multifamily	$	138,149			11.6	%		$	140,022			11.7	%		$	126,866			10.7	%
Total multifamily residential		138,149			11.6				140,022			11.7				126,866			10.7
Non-residential:
Office		72,778			6.1				72,773			6.1				84,301			7.1
Retail		124,172			10.4				130,101			11.0				132,917			11.3
Mobile home park		21,701			1.8				21,285			1.8				25,283			2.1
Hotel / motel		63,597			5.3				63,954			5.4				55,408			4.7
Nursing Home		11,610			1.0				11,676			1.0				12,348			1.0
Warehouse		19,218			1.6				19,446			1.6				19,917			1.7
Storage		33,033			2.8				33,229			2.8				33,797			2.9
Other non-residential		31,750			2.6				42,227			3.7				43,933			3.7
Total non-residential		377,859			31.6				394,691			33.4				407,904			34.5
Construction/land:
One-to-four family residential		47,149			4.0				43,532			3.7				52,492			4.5
Multifamily		4,004			0.3				2,043			0.2				15,393			1.3
Land development		9,771			0.8				9,766			0.8				9,759			0.8
Total construction/land		60,924			5.1				55,341			4.7				77,644			6.6
One-to-four family residential:
Permanent owner occupied		228,752			19.2				260,970			22.1				232,869			19.7
Permanent non-owner occupied		284,471			23.9				232,238			19.6				241,311			20.4
Total one-to-four family residential		513,223			43.1				493,208			41.7				474,180			40.1
Business
Aircraft		1,945			0.1				1,981			0.2				2,087			0.2
Small Business Administration ("SBA")		1,794			0.3				1,810			0.3				514			0.1
Paycheck Protection Plan ("PPP")		473			0.0				551			0.0				783			0.1
Other business		24,869			2.1				23,633			1.9				27,979			2.3
Total business		29,081			2.5				27,975			2.4				31,363			2.7
Consumer
Classic, collectible and other auto		58,618			5.0				59,955			5.1				55,838			4.7
Other consumer		13,377			1.1				12,193			1.0				8,515			0.7
Total consumer		71,995			6.1				72,148			6.1				64,353			5.4
Total loans		1,191,231			100.0	%			1,183,385			100.0	%			1,182,310			100.0	%
Less:
ACL		15,306							15,306							15,227
Loans receivable, net	$	1,175,925						$	1,168,079						$	1,167,083
Concentrations of credit: (1)
Construction loans as % of total capital		38.3	%						37.8	%						53.1	%
Total non-owner occupied commercial real estate as % of total capital		316.8	%						328.1	%						346.9	%
(1) Concentrations of credit percentages are for First Financial Northwest Bank only using classifications in accordance with FDIC regulatory guidelines.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures(Unaudited)
	At or For the Quarter Ended
	Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
	2023				2023				2023				2023				2022
	(Dollars in thousands, except per share data)
Performance Ratios: (1)
Return on assets		0.31	%			0.39	%			0.39	%			0.57	%			0.86	%
Return on equity		2.97				3.71				3.74				5.31				8.04
Dividend payout ratio		100.00				79.26				79.90				56.52				34.29
Equity-to-assets ratio		10.74				10.44				10.39				10.14				10.67
Tangible equity ratio (2)		10.66				10.36				10.31				10.06				10.58
Net interest margin		2.54				2.69				2.84				3.22				3.52
Average interest-earning assets to average interest-bearing liabilities		115.84				116.94				116.27				117.78				117.93
Efficiency ratio		85.17				84.49				85.57				75.12				65.94
Noninterest expense as a percent of average total assets		2.18				2.29				2.50				2.42				2.30
Book value per common share	$	17.61			$	17.35			$	17.35			$	17.45			$	17.57
Tangible book value per share (2)		17.47				17.20				17.20				17.30				17.41
Capital Ratios: (3)
Tier 1 leverage ratio		10.18	%			10.25	%			10.02	%			10.24	%			10.31	%
Common equity tier 1 capital ratio		14.90				14.75				14.49				14.33				14.37
Tier 1 capital ratio		14.90				14.75				14.49				14.33				14.37
Total capital ratio		16.15				16.00				15.75				15.59				15.62
Asset Quality Ratios: (4)
Nonperforming loans as a percent of total loans		0.02	%			0.02	%			0.02	%			0.02	%			0.02	%
Nonperforming assets as a percent of total assets		0.01				0.01				0.01				0.01				0.01
ACL as a percent of total loans		1.28				1.29				1.31				1.33				1.29
Net (recoveries) charge-offs to average loans receivable, net		0.00				0.00				0.00				(0.00	)			(0.00	)
Allowance for Credit Losses:
ACL, beginning of the quarter	$	15,306			$	15,606			$	16,028			$	15,227			$	14,726
Beginning balance adjustment from adoption of Topic 326		-				-				-				500				-
(Recapture of provision) provision		-				(300	)			(400	)			300				500
Charge-offs		-				-				(22	)			-				-
Recoveries		-				-				-				1				1
ACL, end of the quarter	$	15,306			$	15,306			$	15,606			$	16,028			$	15,227
(1) Performance ratios are calculated on an annualized basis.
(2) Tangible equity and tangible assets exclude goodwill and core deposit intangible assets. Tangible equity, tangible assets, tangible equity ratio and tangible book value per share are non-GAAP financial measures. Refer to Non-GAAP Financial Measures at the end of this press release for a reconciliation to the nearest GAAP equivalents.
(3) Capital ratios are for First Financial Northwest Bank only.
(4) Loans are reported net of undisbursed funds.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures(Unaudited)
	At or For the Quarter Ended
	Dec 31,				Sep 30,				Jun 30,				Mar 31,				Dec 31,
	2023				2023				2023				2023				2022
	(Dollars in thousands)
Yields and Costs: (1)
Yield on loans		5.83	%			5.73	%			5.71	%			5.56	%			5.19	%
Yield on investments		4.11				3.98				3.93				3.88				3.60
Yield on interest-earning deposits		5.32				5.18				4.91				4.40				3.31
Yield on FHLB stock		7.29				6.57				7.06				7.30				4.58
Yield on interest-earning assets		5.56	%			5.46	%			5.43	%			5.29	%			4.90	%
Cost of interest-bearing deposits		3.62	%			3.33	%			3.06	%			2.41	%			1.51	%
Cost of borrowings		2.40				2.42				2.55				2.69				2.46
Cost of interest-bearing liabilities		3.50	%			3.24	%			3.01	%			2.44	%			1.63	%
Cost of total deposits		3.31	%			3.03	%			2.78	%			2.17	%			1.36	%
Cost of funds		3.23				2.97				2.76				2.23				1.48
Average Balances:
Loans	$	1,167,339			$	1,171,483			$	1,182,939			$	1,168,539			$	1,150,181
Investments		206,837				211,291				215,113				219,969				221,113
Interest-earning deposits		65,680				40,202				50,691				21,729				24,608
FHLB stock		6,584				6,820				6,814				7,219				7,710
Total interest-earning assets	$	1,446,440			$	1,429,796			$	1,455,557			$	1,417,456			$	1,403,612
Interest-bearing deposits	$	1,127,690			$	1,097,324			$	1,126,598			$	1,065,827			$	1,040,357
Borrowings		120,978				125,402				125,275				137,600				149,946
Total interest-bearing liabilities	$	1,248,668			$	1,222,726			$	1,251,873			$	1,203,427			$	1,190,303
Noninterest-bearing deposits		102,869				109,384				111,365				115,708				121,518
Total deposits and borrowings	$	1,351,537			$	1,332,110			$	1,363,238			$	1,319,135			$	1,311,821
Average assets	$	1,538,955			$	1,522,224			$	1,547,321			$	1,509,297			$	1,496,125
Average stockholders' equity		159,659				160,299				159,764				162,016				159,120
(1) Yields and costs are annualized.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures(Unaudited)
	At or For the Year Ended December 31,
	2023				2022				2021				2020				2019
					(Dollars in thousands, except per share data)
Performance Ratios:
Return on assets		0.41	%			0.91	%			0.86	%			0.63	%			0.80	%
Return on equity		3.93				8.34				7.65				5.50				6.73
Dividend payout ratio		75.36				32.65				33.59				45.45				33.65
Equity-to-assets ratio		10.74				10.67				11.07				11.26				11.65
Tangible equity ratio (1)		10.66				10.58				10.97				11.15				11.53
Net interest margin		2.82				3.54				3.35				3.15				3.19
Average interest-earning assets to average interest-bearing liabilities		116.69				119.18				118.59				115.62				113.44
Efficiency ratio		82.34				69.04				68.32				72.39				70.66
Noninterest expense as a percent of average total assets		2.33				2.44				2.35				2.39				2.35
Book value per common share	$	17.61			$	17.57			$	17.30			$	16.05			$	15.25
Tangible book value per share (1)		17.47				17.41				17.13				15.88				15.07
Capital Ratios: (2)
Tier 1 leverage ratio		10.18	%			10.31	%			10.34	%			10.29	%			10.27	%
Common equity tier 1 capital ratio		14.90				14.37				14.23				14.32				13.13
Tier 1 capital ratio		14.90				14.37				14.23				14.32				13.13
Total capital ratio		16.15				15.62				15.48				15.57				14.38
Asset Quality Ratios: (3)
Nonperforming loans as a percent of total loans		0.02	%			0.02	%			0.00	%			0.19	%			0.01	%
Nonperforming assets as a percent of total assets		0.01				0.01				0.00				0.18				0.04
ACL as a percent of total loans		1.28				1.29				1.40				1.36				1.18
Net charge-offs (recoveries) to average loans receivable, net		0.00				0.00				(0.02	)			(0.00	)			(0.02	)
Allowance for Credit Losses:
ACL, beginning of the year	$	15,227			$	15,657			$	15,174			$	13,218			$	13,347
Beginning balance adjustment from adoption of Topic 326		500				-				-				-				-
(Recapture of provision) provision		(400	)			(400	)			300				1,900				(300	)
Charge-offs		(22	)			(37	)			-				(2	)			-
Recoveries		1				7				183				58				171
ACL, end of the year	$	15,306			$	15,227			$	15,657			$	15,174			$	13,218
(1) Tangible equity and tangible assets exclude goodwill and core deposit intangible assets. Tangible equity, tangible, 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.
(2) Capital ratios are for First Financial Northwest Bank only.
(3) Loans are reported net of undisbursed funds.

FIRST FINANCIAL NORTHWEST, INC. AND SUBSIDIARIESKey Financial Measures (continued)(Unaudited)
	At or For the Year Ended December 31,
		2023				2022				2021				2020				2019
	(Dollars in thousands)
Yields and Costs:
Yield on loans		5.71	%			4.69	%			4.57	%			4.69	%			5.15	%
Yield on investments		3.97				2.77				1.83				2.39				3.11
Yield on interest-earning deposits		5.06				1.28				0.12				0.21				2.15
Yield on FHLB stock		7.07				5.08				5.29				4.85				5.42
Yield on interest-earning assets		5.44	%			4.33	%			4.01	%			4.36	%			4.88	%
Cost of deposits		3.12	%			0.87	%			0.71	%			1.42	%			1.90	%
Cost of borrowings		2.52				1.70				1.39				1.31				2.09
Cost of interest-bearing liabilities		3.05	%			0.95	%			0.78	%			1.41	%			1.92	%
Cost of interest-bearing deposits		2.83	%			0.77	%			0.64	%			1.32	%			1.81	%
Cost of funds		2.80				0.86				0.71				1.32				1.84
Average Balances:
Loans	$	1,172,569			$	1,128,835			$	1,098,772			$	1,120,889			$	1,061,367
Investments		213,261				203,165				176,110				133,584				139,354
Interest-earning deposits		44,684				30,176				60,482				25,108				13,634
FHLB stock		6,857				6,256				6,271				6,600				6,684
Total interest-earning assets	$	1,437,371			$	1,368,432			$	1,341,635			$	1,286,181			$	1,221,039
Interest-bearing deposits	$	1,104,510			$	1,034,351			$	1,015,852			$	987,069			$	946,484
Borrowings		127,263				113,890				115,466				125,392				129,899
Total interest-bearing liabilities	$	1,231,773			$	1,148,241			$	1,131,318			$	1,112,461			$	1,076,383
Noninterest-bearing deposits		109,795				125,166				112,484				75,388				48,434
Total deposits and borrowings	$	1,341,568			$	1,273,407			$	1,243,802			$	1,187,849			$	1,124,817
Average assets	$	1,529,511			$	1,455,739			$	1,421,476			$	1,361,604			$	1,294,164
Average stockholders' equity		160,428				158,685				160,041				155,587				154,092

Non-GAAP Financial Measures

In addition to financial results presented in accordance with generally accepted accounting principles utilized in the United States ("GAAP"), this earnings release contains non-GAAP financial measures that include tangible equity, tangible assets, tangible book value per share, and the tangible equity-to-assets ratio. The Company believes that these non-GAAP financial measures and ratios as presented are useful for both investors and management to understand the effects of goodwill and core deposit intangible, net and provides an alternative view of the Company’s performance over time and in comparison to the Company’s competitors. Non-GAAP financial measures have limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation and are not a substitute for other measures in this earnings release that are presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

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

	Quarter Ended
		Dec 31,2023				Sep 30,2023				Jun 30,2023				Mar 31,2023				Dec 31, 2022
	(Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP)	$	161,660			$	159,235			$	158,715			$	159,645			$	160,360
Less:
Goodwill		889				889				889				889				889
Core deposit intangible, net		419				451				484				516				548
Tangible equity (Non-GAAP)	$	160,352			$	157,895			$	157,342			$	158,240			$	158,923
Total assets (GAAP)	$	1,505,082			$	1,525,568			$	1,528,079			$	1,574,271			$	1,502,916
Less:
Goodwill		889				889				889				889				889
Core deposit intangible, net		419				451				484				516				548
Tangible assets (Non-GAAP)	$	1,503,774			$	1,524,228			$	1,526,706			$	1,572,866			$	1,501,479
Common shares outstanding at period end		9,179,510				9,179,510				9,148,086				9,148,086				9,127,595
Equity-to-assets ratio (GAAP)		10.74	%			10.44	%			10.39	%			10.14	%			10.67	%
Tangible equity-to-tangible assets ratio (Non-GAAP)		10.66				10.36				10.31				10.06				10.58
Book value per common share (GAAP)	$	17.61			$	17.35			$	17.35			$	17.45			$	17.57
Tangible book value per share (Non-GAAP)		17.47				17.20				17.20				17.30				17.41

	Year Ended December 31,
		2023				2022				2021				2020				2019
	(Dollars in thousands, except per share data)
Tangible equity to tangible assets and tangible book value per share:
Total stockholders' equity (GAAP)	$	161,660			$	160,360			$	157,879			$	156,302			$	156,319
Less:
Goodwill		889				889				889				889				889
Core deposit intangible		419				548				684				824				968
Tangible equity (Non-GAAP)	$	160,352			$	158,923			$	156,306			$	154,589			$	154,462
Total assets (GAAP)		1,505,082				1,502,916				1,426,329				1,387,669				1,341,885
Less:
Goodwill		889				889				889				889				889
Core deposit intangible		419				548				684				824				968
Tangible assets (Non-GAAP)	$	1,503,774			$	1,501,479			$	1,424,756			$	1,385,956			$	1,340,028
Common shares outstanding at period end		9,179,510				9,127,595				9,125,759				9,736,875				10,252,953
Equity-to-assets ratio (GAAP)		10.74	%			10.67	%			11.07	%			11.26	%			11.65	%
Tangible equity ratio (Non-GAAP)		10.66				10.58				10.97				11.15				11.53
Book value per common share (GAAP)	$	17.61			$	17.57			$	17.30			$	16.05			$	15.25
Tangible book value per share (Non-GAAP)		17.47				17.41				17.13				15.88				15.07