First Financial Northwest, Inc. Reports Net Income For The Fourth Quarter Of $1.5 Million Or $0.09 Per Share And $2.7 Million Or $0.15 Per Share For The Year Ended December 31, 2012

Noninterest expense for the twelve months ended December 31, 2012 decreased $866,000 to $25.3 million from $26.2 million, as compared to the same period in 2011. The decrease in noninterest expense during 2012 was primarily due to decreases in our FDIC deposit insurance expense of $1.4 million and a decrease of $589,000 in our insurance and bond premiums as a result of the termination of the Consent Order. These decreases were partially offset by proxy and related litigation expenses of $1.1 million, which is net of a refund receivable from our Directors and Officers' insurance incurred during 2012. There were no comparable expenses incurred during 2011.

In December 2012, First Financial Northwest, Inc. and the Stilwell Group announced that a settlement was reached regarding the litigation in which the Stilwell Group challenged the counting of votes in a contested director election at the Company's 2012 Annual Meeting of Shareholders.

In connection with the settlement, the Company entered into a Settlement Agreement and Mutual Releases on December 20, 2012, as amended on January 16, 2013, with the Stilwell Group. The original Settlement Agreement provided, among other things, that (i) Spencer L. Schneider will be given a seat on the Company's Board after the Company and Mr. Schneider obtain any required regulatory approvals, and will then be nominated by the Company at the 2013 Annual Meeting of Shareholders for a full three-year term; (ii) Victor Karpiak will resign as Chairman of the Board immediately after Mr. Schneider joins the Board, but Mr. Karpiak will remain a member of the Board until September 1, 2013, whereupon he will resign from the Board; (iii) the Company will reimburse a portion of the Stilwell Group's proxy solicitation expenses in connection with the 2012 Annual Meeting; (iv) the Stilwell Group will support the Board's nominees in the director elections to be held at the Company's 2013, 2014 and 2015 Annual Meetings of Shareholders; and (v) the litigation will be dismissed with mutual releases exchanged.

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