First Financial Northwest, Inc. to Write-Off Goodwill in Second Quarter, Company...

First Financial Northwest, Inc. to Write-Off Goodwill in Second Quarter, Company
Remains Very Well Capitalized

RENTON, Wash., July 10, 2009 (GLOBE NEWSWIRE) -- First Financial Northwest, Inc.
(the "Company") (Nasdaq:FFNW), the holding company for First Savings Bank
Northwest ("Bank"), announced today it will record a $14.2 million non-cash
impairment charge to write-off all of the goodwill recorded from a prior
acquisition. The write-off of goodwill does not impact tangible capital,
liquidity, operations or the Bank's regulatory capital ratios. As previously
announced on June 5, 2009, the Company also expects to record a provision for
loan losses of approximately $18 million. As a result of these actions,
management expects a loss per diluted common share of approximately $1.40 for
the second quarter of 2009. Despite the loss, the Company's expected ratio of
tangible common equity to tangible assets of approximately 20% at June 30, 2009,
makes it one of the best capitalized financial institutions in the Pacific
Northwest region. The Bank will continue to have regulatory capital ratios in
excess of the requirement to be considered "well capitalized" in accordance with
regulatory standards.

The Company's decision to increase its provision for loan losses was prompted by
a number of factors. These included the completion of the independent stress
analysis of the loan portfolio previously announced June 5, 2009, along with a
continuing decline in the value of real estate in the primary markets we serve
and elevated amounts of nonperforming loans reflecting the weak economy. The
increase in the loan loss provision will increase the Company's allowance for
loan losses to approximately $33 million or 3% of total loans, net of
undisbursed funds, at June 30, 2009. Nonperforming loans are expected to
increase by approximately $49 million to an estimated $129 million at June 30,
2009. This represents a projected 12% of total loans, net of undisbursed funds.
The vast majority of the nonperforming loans continue to be residential
construction and land development loans.

"With our strong capital position and operating revenues we believe increasing
our provision for loan losses is a prudent course of action in this difficult
economy," stated Victor Karpiak, Chairman, President and CEO of First Financial
Northwest, Inc. "We believe that by strengthening our allowance for loan losses
we are well positioned to actively manage our nonperforming loans and diligently
address our credit challenges.

"This challenging environment in the Pacific Northwest also caused us to conduct
a mid-year review of the carrying value of goodwill on our balance sheet that
was a result of an acquisition prior to our conversion to a publicly held
company. We have concluded it was appropriate to record a non-cash write-off of
this entire asset," stated Mr. Karpiak. A number of factors were used in
determining the write-off of the goodwill. These included the protracted decline
in stock prices for financial service companies, particularly in the Pacific
Northwest, the lack of merger transactions and the uncertainty of valuing
intangible assets, such as goodwill, in a recessionary economy. "The non-cash
write-off of our goodwill does not impact our regulatory capital ratios, our
tangible equity capital, liquidity or operations. This write-off of goodwill
will also align our Company's book value and tangible book value, which we
estimate will be approximately $12.50 per diluted share at June 30, 2009."

First Financial Northwest, Inc. is a Washington corporation headquartered in
Renton, Washington. It is the parent company of First Savings Bank Northwest, a
Washington chartered stock savings bank that was originally organized in 1923.
The Company serves the Puget Sound Region of Washington that includes King,
Snohomish, Pierce and Kitsap Counties, through its full-service banking office.
The Company is part of the ABA NASDAQ Community Bank Index (ABAQ) as well as the
Russell 3000 Index. For additional information about the Company and the Bank,
please visit our website at www.fsbnw.com and click on the "Investor Relations"
section.

Forward-looking statements:

This press release contains statements that the Company believes are
"forward-looking statements." These statements relate to the Company's financial
condition, results of operations, plans, objectives, future performance or
business. You should not place undue reliance on these statements, as they are
subject to risks and uncertainties. When considering these forward-looking
statements, you should keep in mind these risks and uncertainties, as well as
any cautionary statements the Company may make. Moreover, you should treat these
statements as speaking only as of the date they are made and based only on
information then actually known to the Company. There are a number of important
factors that could cause future results to differ materially from historical
performance and these forward-looking statements. Factors which could cause
actual results to differ materially include, but are not limited to, the credit
risks of lending activities, including changes in the level and trend of loan
delinquencies and write-offs; changes in general economic conditions, either
nationally or in our market areas; changes in the levels of general interest
rates, deposit interest rates, our net interest margin and funding sources;
fluctuations in the demand for construction/land development, residential,
commercial real estate, consumer and other types of loans, the number of unsold
homes and other properties and fluctuations in real estate values in our market
areas; results of examinations of us by the Office of Thrift Supervision and our
bank subsidiary by the Federal Deposit Insurance Corporation, the Washington
State Department of Financial Institutions, Division of Banks or other
regulatory authorities, including the possibility that any such regulatory
authority may, among other things, require us to increase our reserve for loan
losses or to write-down assets; our ability to control operating costs and
expenses; our ability to manage loan delinquency rates; our ability to retain
key members of our senior management team; costs and effects of litigation,
including settlements and judgments; increased competitive pressures among
financial services companies; changes in consumer spending, borrowing and
savings habits; legislative or regulatory changes that adversely affect our
business; adverse changes in the securities markets; inability of key
third-party providers to perform their obligations to us; changes in accounting
policies and practices, as may be adopted by the financial institution
regulatory agencies or the Financial Accounting Standards Board; war or
terrorist activities; other economic, competitive, governmental, regulatory, and
technological factors affecting our operations, pricing, products and services
and other risks detailed in the Company's reports filed with the Securities and
Exchange Commission, including its Annual Report on Form 10-K for the fiscal
year ended December 31, 2008.

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CONTACT: First Financial Northwest, Inc.
Victor Karpiak
(425) 255-4400