Bulletin Board

"The Great Recession"

Dear Shareholders, Customers and Friends:

The challenging economic times we have been dealing with since 2007 are continuing. Prolonging the crisis is the current focus on the debt of many sovereign nations and the distinct possibility of a jobless recovery. This “Great Recession” has affected most businesses, including banks, and First Savings Bank Northwest (“Bank”) is no exception.

I am writing to give you a mid-year update on how First Financial Northwest, Inc. and its wholly-owned subsidiary, First Savings Bank Northwest, are dealing with these unprecedented economic times and the continuing decline of the Pacific Northwest’s housing market. Since 1923, as a traditional thrift institution, we have successfully focused on the local housing industry lending to developers, builders and homeowners. While this approach has served us and our community well in the past, it has presented extraordinary challenges for our portfolio of residential real estate loans; particularly loans for real estate development and construction.

With the significant decline in home prices and home sales, many of our builders and developers that we have financed for decades have been unable to sell their homes or lots at anticipated prices causing the Bank to charge-off portions of these loans. In an attempt to improve our asset quality, we have been continuously reducing our exposure to the real estate construction sector. The charge-offs we have already recognized, along with the additions to loan loss reserves, will further assist us in this undertaking. Specific details on our nonperforming assets (“NPAs”) are contained in our public filings with the Securities and Exchange Commission (“SEC”) each quarter. Our primary goal over the next few quarters is to significantly reduce the level of our NPAs. We have diligently implemented an aggressive NPA reduction plan, and have allocated substantial resources to reach this goal.

We recently announced the addition of Herman “Rob” Robinson as our new Chief Lending Officer to our strong leadership team to address these challenges. Rob brings over 40 years of bank lending experience, including extensive experience in working through challenges similar to what we are facing today. We are already seeing positive results of improved credit administration and are pleased with the additional strength Rob brings to our management team. In addition, our Board of Directors consists of knowledgeable, experienced business and community leaders that have the specific expertise in the management of diverse economic cycles to guide our executive team through this difficult time. Collectively, we are committed to taking the appropriate steps towards reducing our levels of NPAs and returning to profitability.

We also want you to know that the Bank is not facing some of the additional issues that other financial institutions have encountered. For example, we did not originate sub-prime mortgage loans, nor did we invest in the risky investments that affected many balance sheets, such as collateralized debt obligations, interest rate hedges, derivatives, or trust preferred securities. Moreover, we did not accept any TARP funds from the government.

As a publicly traded company, we make available to the public a tremendous amount of detailed information. We strongly recommend that you review our earnings releases and SEC filings each quarter. These, and other information, can be found in the Investor Relations section of our website at www.fsbnw.com .

Like all previous recessions, the economy will recover. We are seeing some positive signs, but it will take time to work through the current challenging environment. We will continue to take the necessary actions to weather this economic storm. Rest assured, First Savings Bank Northwest is still the same bank with the same values that has served its customers and communities for close to a century.

Thank you very much for your continued support of First Financial Northwest, Inc. and First Savings Bank Northwest. We take pride in our history of serving our customers as a safe and sound financial institution and we look forward to being your financial partner for many years to come.

Sincerely,

Victor Karpiak
Chairman, CEO and President

By Victor Karpiak

A Statement from our CEO

With the arrival of spring, we see the changes from nature’s winter of colorless gloom, to blossoms slowly showing themselves; signaling the promise of warmer days ahead. This example from nature is relevant in our economic cycle as well.

As remnants of the economic challenges which consumed us throughout the past year linger on, there are the signals of recovery slowly appearing on the horizon. With the unemployment rate beginning to show signs that it has peaked, and the housing market stabilizing, we have become increasingly confident that the greatest of the challenges are behind us. Oh yes, there will be challenged earnings for the next few quarters, but looking beyond this season of difficulties, there is a tomorrow filled with opportunities for growth in product development, service delivery, and customer expectations. As you are aware, 2009 has been most difficult for our organization, as we addressed asset quality issues which resulted in a level of foreclosures I have never experienced in my 33 years with this great institution. Traditionally, and as was the case during this economic downturn, we have worked with our borrowers to resolve their inability to repay their obligations. Unfortunately, due to the depth of this housing crisis, where home values continued to depreciate by substantial margins, our builders have been unable to sell their product for what it cost to build. With some, we have been able to develop workout plans providing an opportunity to sell at reduced prices, but with others there was no option but to foreclose. All of these actions resulted in us setting up provisions for potential losses, or charging off principal amounts which impacted our earnings, causing a loss for the year. Although it is not uncommon for the national and local banking community to report a loss during these tough times, it nevertheless is a cause of concern for you our loyal customers, for our shareholders who have invested in us, and to our regulators who face an enormous task of issuing their report card on the strength of the banking community. I am certain they are not giving out many "A" grades.

As in nature’s transformation from the gloom of winter, to the colors of spring, so is our resurgence from the losses endured to the path of profitability. Yes, there will be a period of continued challenges before the blossoms appear, but the buds of strong capital, loyal depositors and good core earnings are in place. With some additional pruning, we are confident that we will once again stand tall among our peers, as that solid financial institution upon which you and your family have relied for generations.

Thank you for your confidence in us; together we have made First Savings Bank Northwest an institution of which we can all be proud. Our Directors, Management and Staff collectively, appreciate the opportunity we have to serve you, and without exception, remain committed to the principles which have guided us throughout history. It is this commitment, rooted in maintaining excess capital levels, solid core earnings, providing quality customer service and preserving the reputation of this great organization, which will make us a strong leader among community banks for generations to come.

On a lighter note, if you have had the opportunity to visit our office recently, you would have noticed that our Loan Center is now complete; the drive through has been restored, and the ATM again operational. Please stop by and take a look at the improvements done in our little corner of the world, here in downtown Renton.

Once again, I thank you for your loyalty.

By Victor Karpiak

Make Savings a Family Affair

To view a pdf version of this article, press here

By First Savings Bank Northwest

A New Beginning

Visions of the proverbial crystal ball slowly gracing its way downward in Times Square along with the sounds of fireworks emanating from our own Northwest icon, the Space Needle, ushers in a new year full of promise and great expectations. What an opportunity for a new beginning, leaving the struggles of the past year behind, to focus on the possibilities ahead.

Here at First Savings Bank Northwest, 2009 was the most challenging year we have ever faced. Our history goes back to1923, and in that time we have experienced several wars, a severe depression, global terrorist activity, the ups and downs of various economic cycles, and now the greatest housing crisis in history. Throughout all of these challenges we have remained a resilient community bank; continuing to provide an environment of financial safety and personalized service. Although the challenges experienced were great, we emerged stronger, more confident and better equipped to face the opportunities of the future. The lessons of the past serve as a guiding principle establishing the cornerstone of future success.

As you are aware, so many financial institutions nationally and locally, including ourselves, have been struggling under the weight of nonperforming loans, specifically related to construction financing. During the economic growth of the past decade, the financing of new construction was not only profitable but also contributed to our mission of providing affordable housing within the communities we serve. The events of the past two years highlighted that our commitment for this activity should have been measured; a lesson which will be embedded within our corporate culture in all that we do. As in past lessons, this too will serve in making us a better organization, having an additional emphasis on balanced growth.  

To position us for what we believe will be a promising year filled with unknown opportunities and expectations, we have developed a special assets group whose focus is on prompt and efficient management of our troubled loans. A change that will allow us to move beyond the challenges of the past and into the opportunities of the future. With our strong liquidity position and a capital level which is well in excess of the regulatory requirement for being “well capitalized” we are committed to our goal of restoring earnings, minimizing troubled loans and maintaining a quality personal service image.

Your expressed confidence in us during this recessionary time has greatly contributed to our ability in weathering recognized losses, impaired loans and increased provisions. It is the collective support from each of you that caused us to grow in deposits, quality loans and solid core earnings. For this we express our sincere thanks and assure you that First Savings Bank Northwest will exit this economic cycle remaining that financial institution which you have been proud of for generations.

Happy New Year! May it be filled with all your dreams and desires. Once again, thank you for being a part of our extended family of loyal supporters

By Victor Karpiak

Our Knitten-Mitten Tree celebrates 40 Years

   

To view a pdf version of this article, press here

By First Savings Bank Northwest

A Season of Thanksgiving

The sudden crispness in the air announces the arrival of Autumn; a season of Thanksgiving which paints the landscape with brilliant colors and causes a natural shift in awareness from the carefree attitude of summer days to a renewed focus on opportunities ahead. As I peer through nature’s window of change, the portrait reveals that the discomforts of dark skies, wind and rain must be experienced before the beauty of the season may be realized. A unique event which causes us to reflect on the pleasures of the past and voice thanks for the benefits of the future.

By Victor Karpiak

Strong, Safe, Secure

These powerful words remain the descriptive voice of First Savings Bank Northwest whose roots are anchored in excess capital, solid core earnings and proven leadership. Although we are not immune to the negative force of recessionary pressures which confront our institution, we possess the required resources to withstand its challenges and exit this economic quagmire as a stronger banking franchise.

By Victor Karpiak

New changes in Regulation D and what it means to you.

The Reg D Amendments approved by the Federal Reserve Bank on May 20, 2009 are now effective. The new rules increase the permissible transactions from savings accounts that are made by check, draft, debit card or similar order and payable to third parties. These were restricted to three, prior to this change, and now may be any number of the six withdrawals allowed. 

This means to you is now you may write up to six checks a month with your money market account, or your Treasury Indexed Account.  There is a limit of 6 transfers to another account or to third parties by preauthorized, automatic, Internet, telephone, check or similar order per statement cycle.  However, there are no restrictions on the number of withdrawals that you may personally make in our office.  

Let us know if you have any questions about the new changes in this regulation.

By First Savings Bank Northwest

Here we grow again!

Approximately four years ago, First Savings Bank Northwest moved into our new facility, which we all have appreciated. From the comments received, it is apparent that as you visit our branch you have enjoyed its warmth, making your banking experience a delight. During the past month, you might have noticed the fencing and construction signs; as we are now developing the second phase of our campus by building a new loan center. Although growth causes disruptions and can be inconvenient; it is a sign of health and stability.

Recently, I had the wonderful opportunity of seeing my grandson who is now approximately one month old and I was amazed by how much he had grown in such a short period of time. With that growth he developed strength to move his arms and legs, the ability to maintain eye contact and exercise his vocal cords, all welcome confirmations that he is a healthy baby boy.

That principle of growth is also applicable in the corporate world as a measuring tool for validating the health of an organization.  As a company grows, it develops the financial strength to; expand its position by recognizing available opportunities, maintain a focus on core objectives without undue distractions, while being attentive to the demands of its customer base. Without core growth, a corporation risks being stagnate, unfocused and in need of direction.  

First Savings Bank Northwest continues to be a company which is growing to meet the challenges of today and the opportunities of tomorrow. Internal efforts have created the framework for expansion which considers the social, financial and consumer impact of any growth plans. We remain committed to a corporate culture which is mindful of current opportunities available, yet embraces the traditions of the past that have made us who we are. It is this well defined balance, which propels our growth with an emphasis on financial strength, core objectives and customer needs. Our growth has taken us from a quiet mutual institution to that of a publicly traded regional savings bank without compromising our mission of being fiscally responsible, providing personalized service and offering products customers can use.

In our quest to better serve you, we have expanded our deposit and loan products beyond those we have traditionally offered, to include a business banking platform, home equity lines of credit, merchant banking opportunities and soon, fully integrated online banking. To accommodate this growth we have stepped up our commitment to be the Northwest’s leading “user-friendly” institution by increasing our staff so that the high level of personalized service you have been accustomed to is not compromised. As a result of this expansion we have out grown our facility and are now building the addition to better accommodate our staff and customer needs. While we grow, please accept our apology for the inconvenience of the relocation of our drive-up teller to the parking garage (accessed from Williams St.) and the temporary removal of the ATM.  They will return to their normal locations upon completion.

The blueprint of our success is in the relationships built over the years and the loyalty of you, our customers, for which we thank you. Our appreciation for your support is unending and we look forward to growing together!

By Victor Karpiak

A Statement from our CEO

For the generations of families who have placed their trust in us, we thank you and assure you that you will not be disappointed in our leadership through these trying times.

To those who have not yet fully experienced the First Savings Bank Northwest tradition, we invite you to begin exploring the basics of saving with us and enjoy positive earning statements for years to come. We strive to be your first choice for personalized service.

As a member of the First Savings Bank Northwest family, I thank you for being a part of us and appreciate the confidence you have in this institution, as evidenced by the hundreds of millions of dollars in deposits placed in our trust.

Once again, we are a quality financial institution whose principles are rooted in conservative financial values and although banks around us may begin to crumble, we remain entrenched with solid footings and will be there to serve you for generations to come.

By Victor Karpiak

Teach Children to Save

Did you know that April 21, 2009 is national Teach Children to Save Day?  To celebrate this important initiative, we've compiled these tips to help your children learn how to save.  Though this article is primarily written for children, adults and adolescents may also find value.  That's the beauty of going back to the basics.  In the process, we, as adults, end up re-learning concepts we may have forgotten along the way.

Teaching children to save must first begin with showing them how money is used, and as we know, that goes beyond saving.  Only then can you expect your child to build a healthy relationship with money.  Money is to be both saved, as well as spent, hence the reason why we call checking accounts “dynamic savings.”

So whenever you can—and especially when your child is present—use cash, instead of your credit or debit cards to pay for things.  With cash, your child will see a tangible, real item that he or she can see and touch when it's here and not see when it's been spent.  When it's time to pay for items, have your child count the money with you.  Allow them to participate in the action of paying for things.  Managing money is also about good decision making.  “Do I spend all of my allowance, or do I save some of it?”

Any money that's left over should also be counted and placed in a savings vehicle.  Bring your child to the Bank and open a savings account with them, to help them learn about interest.  Show them that money doesn't only come from ATMs, by making deposits and withdrawals inside your Bank.  Encourage your child to make deposits into their new savings account, rather than buying things, and keep their relationship to money healthy by offering non-monetary rewards for good behavior. 

Do you have other, practical tips that help kids save money that you'd like to share with First Savings Bank Northwest customers? Send us an email.

By First Savings Bank Northwest

Welcome to the Bulletin Board

Hello, and welcome to the first of many Bulletin Board postings.

Naturally, you may be wondering about the kind of information you'll find here. You'll discover exclusive information and tips that help you save money and time. This is information you will actually care to know about!

Why does having savings information and tips matter? And how are we so certain you'll care about it?

First, we'd all agree that because of our country's current economic climate, money is on everyone's mind. Now more than ever, everyone benefits from knowing how to continually protect and grow their hard-earning savings.

And because we're going to continually ask you, and other members of our community, what topics you'd like us to discuss, you'll find this information invaluable and highly relevant.

As the Savings Expert, we've made it our goal to take the mystery out of money so that you can have more “ah ha” moments.

So what would you like to hear about in our next bulletin board posting? Tell us with an email.

By First Savings Bank Northwest