FIRST FINANCIAL NORTHWEST

Corporate Overview2007

Our Mission Statement Our Founding Principals Letter to Shareholders Board of Directors SeniorManagement&Officers A Historical View Corporate Information Annual Meeting

FIRST SAVINGS BANK NORTHWESTFIRST FINANCIAL DIVERSFIED

Table of Contents

FIRST FINANCIAL NORTHWEST

To embrace innovation, but never lose sight of the value of customer-centered relationships; where ideas can be expressed, opportunities personalized and possibilities made into successful investments.

Honesty, Respect & Integrity Quality Customer Service Commitment to our Community

Letter to ShareholdersThank you for giving me the opportunity to write you this letter on behalf of First Financial Northwest. By choosing to invest in FFNW stock, you have supported FFNW’s transition from a mutually held company to a publically held one. Your support was reflected in the sale of all of FFNW’s shares of common stock that were offered in our stock offering, which was completed in October 2007. This transition to a public company has provided First Savings Bank Northwest, a wholly owned subsidiary of First Financial Northwest Inc., with many opportunities to grow, reduce debt, and to explore new ways to generate income. These opportunities are turning into realities that add to shareholder value. I am confident that FFNW stock will become a primary part of your investment portfolio in the coming years.

Shortly after FFNW stock began trading, the sub-prime mortgage crisis became front page news causing great uncertainty in the financial services industry. As did every large or small financial institution, we experienced a drop in our stock price as depressed trading reflected the growing economic mood of the country. We believe, however, that this setback is temporary because of the relative strength of the Pacific Northwest region’s economy and housing market, which, although has experienced a decline, is still outperforming the national averages.

In the fourth quarter, as new home sales began to decline, we assessed our construction lending portfolio, identified a potential problem, and in the customary nature of this organization took a proactive approach to the situation. This resulted in the recognition of an impairment within our loan portfolio, causing us to increase our provision for loan losses.

The fourth quarter also provided us with the opportunity to fund the First Financial Northwest Foundation, which was established in connection with our conversion to a public company. Although this one time contribution had a substantial impact to earnings, its charitable focus will provide long lasting benefits, as it promotes the spirit of our organization, which has a long history of giving back to the community. First Savings Bank Northwest’s roots are planted in community based involvement and this is one more way of carrying on that legacy as a public company.

Our institution is known for the strong relationship we have with our customers. This intangible asset has been the cornerstone of our growth, success and generational loyalty. Combined with strong leadership of our Directors, an effective management team and highly trained staff, we have been able to expand our footprint, develop creative products and undertake new ventures, such as becoming a public company.

As your Chief Executive, I value the confidence you have placed in our corporate team and pledge that our priority will be to successfully blend the expectations of our shareholders with that of our traditional banking environment, and to grow the value of your investment in FFNW.

Respectfully submitted,

Our Mission Statement

Our Founding Principals

Victor Karpiak,Chief Exectutive Officer

Our Board of DirectorsVictor Karpiak, Chairman of the BoardVictor Karpiak is Chairman of the Board, President, Chief Executive Officer and Chief Financial Officer of First Financial Northwest, positions held since the company was formed in 2007 as part of the mutual to stock conversion of First Financial Holdings, M.H.C. Mr. Karpiak also serves as Chairman of the Board, Chief Executive Officer, and President of First Savings Bank Northwest, formerly known as First Savings Bank of Renton. Prior to the conversion, Mr. Karpiak served as Chairman of the Board, Chief Executive Officer, President and Chief Financial Officer of First Financial Holdings, M.H.C., and its subsidiaries, First Financial of Renton, Inc. and First Savings Bank of Renton. Before his appointment as President of First Savings Bank of Renton in 1999, he served as Executive Vice President and Chief Financial Officer. Mr. Karpiak served as President and Chief Financial Officer of First Financial Holdings, M.H.C. and First Financial of Renton since they were established in 2002. In January 2005, he was appointed Chairman of the Board and Chief Executive Officer of First Financial Holdings, M.H.C., First Financial of Renton and First Savings Bank of Renton. He has been with First Savings Bank for 30 years. Mr. Karpiak is a past Director of the Renton Community Foundation, a past Director and Chairman of the Greater Renton Chamber of Commerce, a past Director and Resource Development Chairman of Renton River Days, a Director and Secretary of the Senior Housing Assistance Group, a member of the Renton Rotary Club, and a member and past President of the Kiwanis Club of Renton.

Harry A. BlencoeHarry A. Blencoe serves as a Director and Secretary of First Financial Northwest , a position held since the company was formed in 2007 as part of the mutual to stock conversion of First Financial Holdings, M.H.C. Mr. Blencoe also serves as a Director of First Savings Bank Northwest, formerly known as First Savings Bank of Renton. Prior to the conversion, Mr. Blencoe served as a Director of First Financial Holdings, M.H.C., and its subsidiaries, First Financial of Renton, Inc. and First Savings Bank of Renton. Mr. Blencoe was appointed as a Director of First Savings Bank of Renton in 1959 and served as Chairman and Chief Executive Officer from 1961 until his retirement in December 2004. He also held the position of President of First Savings Bank from 1961 until 1999. In addition, Mr. Blencoe served as Chairman of the Board and Chief Executive Officer of First Financial Holdings, M.H.C. and First Financial of Renton, Inc. since they were established in 2002 until his retirement. He has been associated with First Savings Bank since 1950. Mr. Blencoe is a past Director of the Renton Community Foundation, and a past President and current member of the Renton Rotary Club and the Mayor’s Business Executives Forum. He also serves as a Trustee of the First Financial Northwest Foundation.

Robert L. Anderson - Chairman Nomination/Corporate Governance CommitteeRobert L. Anderson serves as a Director and Chairman of the Nominating/Corporate Governance Committee of First Financial Northwest, positions held since the company was formed in 2007 as part of the mutual to stock conversion of First Financial Holdings, M.H.C. Mr. Anderson also serves as a Director and Chairman of the Nominating/Corporate Governance Committee of First Savings Bank Northwest, formerly known as First Savings Bank of Renton. Prior to the conversion, Mr. Anderson served as a Director of First Financial Holdings, M.H.C., and its subsidiaries, First Financial of Renton, Inc. and First Savings Bank of Renton. Mr. Anderson has served as a Director of First Savings Bank of Renton since 1980 and as Secretary of First Financial Diversified since it was established in 1980 as Savren Service Corporation. He is a retired attorney who, prior to his retirement in 1992, served as a senior partner in the law firm of Anderson, Jackson & Stephens. During his professional career Mr. Anderson was elected as a Director on the Renton School District’s Board of Directors and served with distinction. He is a past President of the Kiwanis Club of Renton and the South King County Bar Association. Mr. Anderson is also a past Director of the Ocean Shores Library Board and is currently a member of the Ocean Shores Kiwanis and the Associated Arts of Ocean Shores.

Gerald EdlundGerald Edlund serves as a Director of First Financial Northwest and First Savings Bank Northwest, a position held since the company was formed in 2007 as part of the mutual to stock conversion of First Financial Holdings, M.H.C. Mr. Edlund also serves as a Director of First Savings Bank Northwest, formerly known as First Savings Bank of Renton. Prior to the conversion, Mr. Edlund served as a Director of First Financial Holdings, M.H.C., and its subsidiaries, First Financial of Renton, Inc. and First Savings Bank of Renton. Mr. Edlund has served as a Director of First Savings Bank since 1985 and as Secretary of First Financial Holdings, M.H.C. since it was established in 2002. He is President of Edlund Associates, Inc., a landscape architect firm, since 1980. Mr. Edlund is a member of the New Horizon School Board, a past President and current member of the Renton Rotary Club and a member of the Allied Arts City of Renton.

Robert W. McLendonRobert W. McLendon as a Director of First Financial Northwest, a position held since the company was formed in 2007 as part of the mutual to stock conversion of First Financial Holdings, M.H.C. Mr. McLendon also serves as a Director of First Savings Bank Northwest, formerly known as First Savings Bank of Renton. Prior to the conversion, Mr. McLendon served as a Director of First Financial Holdings, M.H.C., and its subsidiaries, First Financial of Renton, Inc. and First Savings Bank of Renton. Mr. McLendon has served as a Director of First Savings Bank since 1985, and he served as Secretary of First Financial of Renton Inc. since it was established in 2002. Mr. McLendon retired from the hardware business after 50 years of service with McLendon Hardware, Inc., a seven store chain distributing retail and wholesale hardware products throughout western Washington. At retirement his position with the company was that of President and Chairman of the Board. Mr. McLendon is a business graduate of the University of Washington and is a member of the Veterans of Foreign Wars, and The American Legion.

Gary F. FaullGary F. Faull serves as a Director of First Financial Northwest, a position held since the company was formed in 2007 as part of the mutual to stock conversion of First Financial Holdings, M.H.C. Mr. Faull also serves as a Director of First Savings Bank Northwest, formerly known as First Savings Bank of Renton. Prior to the conversion, Mr. Faull served as a Director of First Financial Holdings, M.H.C., and its subsidiaries, First Financial of Renton, Inc. and First Savings Bank of Renton. Mr. Faull has served as a Director of First Savings Bank since 1999. He is an attorney and has been self-employed since 1974 in the law firm of Gary F. Faull Law Offices. Mr. Faull is a member of the Renton Rotary Club, the Greater Renton Chamber of Commerce, Veterans of Foreign Wars, a past Director of the Renton Community Foundation and a past President of the South King County Bar Association. Mr. Faull is also a Trustee of the First Financial Northwest Foundation.

Joann E. Lee, C.P.A. - Chairman Compensation CommitteeJoann E. Lee serves as a Director, and Compensation Committee Chairperson of First Financial Northwest, positions held since the company was formed in 2007 as part of the mutual to stock conversion of First Financial Holdings, M.H.C. Ms. Lee also serves as a Director and Chairman of the Compensation Committee of First Savings Bank Northwest, formerly known as First Savings Bank of Renton. Ms. Lee is also the Board’s designated Financial Expert serving on the Audit Committee. Prior to the conversion, Ms. Lee had served as a Director of First Financial Holdings, M.H.C., and its subsidiaries, First Financial of Renton, Inc. and First Savings Bank of Renton, since 2005. Ms. Lee is a certified public accountant and is the owner of Joann Lee & Associates, CPAs since 2002. Prior to that, Ms. Lee spent 11 years as a Certified Public Accountant including an eight year career with the independent public accounting firm of RSM McGladrey. She has also served as the Director of the Small Business Division, Puget Sound Region. Ms. Lee is a past President and current Board member of the Renton Rotary Club, and the Renton YMCA Board of Directors. She is also a member of the Renton Communities in Schools, Greater Renton Chamber of Commerce and a Director of the Renton Technical College Foundation. In addition Ms. Lee serves as a Trustee of the First Financial Northwest Foundation.

Dr. Gary F. Kohlwes - Chairman Audit CommitteeGary F. Kohlwes serves as a Director and Audit Committee Chairman of First Financial Northwest, positions held since the company was formed in 2007 as part of the mutual to stock conversion of First Financial Holdings, M.H.C. Dr. Kohlwes also serves as a Director and Audit Committee Chairman of First Savings Bank Northwest, formerly known as First Savings Bank of Renton. Prior to the conversion, Dr. Kohlwes served as a Director of First Financial Holdings, M.H.C., and its subsidiaries, First Financial of Renton, Inc. and First Savings Bank of Renton. He has served as a Director of First Savings Bank since 1977 and was appointed in 1982 to the board position of Secretary and Treasurer, a position he continues to hold. Dr. Kohlwes retired in 1997 after 40 years in education with the last 24 years as Superintendent of Public Schools for the Renton School District. He also was actively engaged as an owner/operator of a commercial fishing business in Naknek, Alaska since 1963, an operation he continues to oversee. Dr. Kohlwes is a past President and a current member of the Renton Rotary Club, past President and founding Director of the Renton Community Foundation and a past elected Commissioner of Valley Medical Center. In addition, Dr. Kohlwes is a Trustee of the First Financial Northwest Foundation and serves as its Executive Director.

SeniorManagement&Officers A Historical View

First Financial Northwest is a Washington corporation headquartered in Renton, Washington, and is the savings and loan holding company for First Savings Bank Northwest and First Financial Diversified. First Savings Bank was organized in 1923 as a Washington state chartered savings and loan association named “First Federal Savings and Loan Association of Renton”, converted to a federal mutual savings and loan association in 1935, and converted to a Washington state chartered mutual savings bank in 1992, with the name “First Savings Bank of Renton”.

In 2002, First Savings Bank reorganized into a two-tier mutual holding company

structure, became a stock savings bank and became the wholly owned subsidiary of First Financial of Renton, Inc. In connection with the conversion of First Financial Holdings, M.H.C. in 2007, First Savings Bank changed its name to “First Savings Bank Northwest.”

First Financial Northwest, Inc. became a publically traded company through the sale of its common stock in a stock offering that was completed on October 9, 2007. The shares of First Financial Northwest’s common stock trade on The NASDAQ Stock Market LLC’s Global Select Market, under the symbol “FFNW.”

First Financial Northwest is the Pacific Northwest Region’s home for personal service and long-

term banking and loan relationships. We believe that by holding true to our values of exceptional customer service, community responsibility and quality banking and loan products, we will best serve our customers, investors and community.

Renton’s pioneer savings institution has come a long way from its early beginnings in 1923, when it occupied a storefront location in a small town. This is an accomplishment, of which, any depositor, borrower, or individual associated with this great institution can be proud.

David G. KroegerExecutive Vice PresidentCommercial Lending

Roger ElmoreSr. Vice PresidentChief Operating Officer

Robert H. GagnierSr. Vice PresidentChief Lending Officer

Marva R. BradleyVice PresidentDeposit Operations

Robin GregorisVice PresidentLoan Servicing

Kari StenslieVice PresidentChief Financial Officer

Lorna K. ReggioVice PresidentController

Andy KranzVice PresidentInformation Services

Candace DavisAssistant Vice PresidentBuilder Relations

Lonnie MalmassariAssistant Vice PresidentDeposit Operations

Carol E. JanssenAssistant Vice PresidentMarketing

Ginger ElieAssistant Vice PresidentLoan Servicing

Linda D. DarbySenior Vice PresidentEscrow Officer

Stephanie J. BowenAssistant Vice PresidentEscrow Officer

First Savings Bank Northwest

First Financial Diversified

Ronnie ClarizaAssistant Vice PresidentCompliance

Kimberly MatthewAssistant Vice PresidentLoan Processing

Mark FehrAssistant Vice PresidentLoan Officer

Suzie SalleAssistant Vice PresidentHuman Resources

Ruth WuAssistant Vice PresidentAccounting

Mary MeltonAssistant Vice PresidentLoan Origination

201 Wells Avenue South | P.O. Box 360 | Renton, Washington 98057425.255.4400 | 866.372.1200 | www.fsbnw.com

FIRST FINANCIAL CENTER

Corporate Headquarters Common Stock

201 Wells Avenue South The Company’s common stock is traded Renton, Washington 98057 on The Nasdaq Stock Market LLC’s P: (425) 255-4400 F: (425) 228-7227 Global Select Market under the symbol: “FFNW”

Independent Auditors Investor and Shareholder Information

KPMG LLP Requests for Information by shareholders 801 Second Avenue, Suite 900 and investors interested in First Financial Seattle, Washington 98104 Northwest, Inc. may contact: P: (206) 913-4000 F: (206) 913-4444 Amy Farnham Investor Relations 201 Wells Avenue SouthGeneral Counsel Renton, Washington 98057 P: (425) 255-4400 F: (425) 228-7227 The Stephens Law Firm Email: farnhama@fsbnw.com 612 Harrison Street, Suite 201 Sumner, Washington 98390 Corporate Website and Internet Banking: P: (253) 852-8757 F: (253) 863-0629 www.fsbnw.comSpecial Securities Counsel

Breyer & Associates PC 8180 Greensboro Drive, Suite 785 McLean, Virginia 22102 P: (703) 883-1100 F: (703) 883-2511

Transfer Agent

Registrar and Transfer Company 10 Commerce Drive Cranford, New Jersey 07016 P: (908) 497-2333 F: (908)497-2314

Corporate Information

Annual Meeting

The Annual Meeting of Shareholders will be held Friday, May 23, 2008 at 9:00 a.m., local time, at the Carco Theatre located at 1717 Maple Valley Highway, Renton, Washington.