Regulatory Capital Requirements

12 Months Ended

Dec. 31, 2022

Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract]

Under Federal regulations, pre-conversion retained earnings are restricted for the protection of pre-conversion depositors.

The Company is a bank holding company under the supervision of the FRB. Bank holding companies are subject to capital adequacy requirements of the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve Board, except that, pursuant to the Economic Growth, Regulatory Relief and Consumer Protection Act, effective August 30, 2018, a bank holding company with consolidated assets of less than $3 billion is generally not subject to the Federal Reserve’s capital regulations, which parallel the FDIC’s capital regulations. The Bank is a federally insured institution and thereby is subject to the capital requirements established by the FDIC. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital regulations that involve quantitative measures of their assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices, and until August 30, 2018, First Financial Northwest was subject to similar capital regulations. The Company was not subject to regulatory requirements for bank holding companies at December 31, 2022, and 2021, as its assets were less than the $3.0 billion threshold.

The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table that follows) of total and Tier 1 capital to risk-weighted assets (as defined in the regulations) and of Tier 1 capital to average assets.

As of December 31, 2022, according to the most recent notification from the FDIC, the Bank was categorized as well‑capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the notification that management believes have changed the Bank’s category.

First Financial Northwest Bank’s actual capital amounts and ratios at December 31, 2022, and 2021, are presented in the following table.


									To be Well Capitalized
					For Capital Adequacy				Under Prompt Corrective
	Actual				Purposes				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
December 31, 2022:

Total risk-based capital	$	169,755	15.62	%	$	86,942	8.00	%	$	108,678	10.00	%


Tier 1 risk-based capital	156,147		14.37		65,207		6.00		86,942		8.00


Common equity tier 1 capital (“CET1”)	156,147		14.37		48,905		4.50		70,641		6.50


Tier 1 leverage capital	156,147		10.31		60,578		4.00		75,722		5.00

December 31, 2021:

Total risk-based capital	$	160,840	15.48	%	$	83,121	8.00	%	$	103,901	10.00	%



Tier 1 risk-based capital	147,816		14.23		62,340		6.00		83,121		8.00



Common equity tier 1 capital (“CET1”)	147,816		14.23		46,755		4.50		67,536		6.50



Tier 1 leverage capital	147,816		10.34		57,191		4.00		71,489		5.00

In addition to the minimum CET1, Tier 1, total capital and leverage ratios, the Bank must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. As of December 31, 2022, the Bank’s capital conservation buffer was 7.62%.