----

| Washington                                                                       |   |    __     26-0610707___  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
| (State or other jurisdiction of incorporation or organization)                                                                                                                                                                                                                                                                                                                                                                  |   | (I.R.S. Employer Identification Number)                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |
| 201 Wells Avenue South, Renton, Washington      _                                                                                                                                                                                                                                                                                                                                                 |   |  98057                                                      |
| (Address of principal executive offices)                                                                                                                                                                                                                                                                                                                                                                                                  |   | (Zip Code)                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |
| Registrant’s telephone number, including area code:                                                                                                                                                                                                                                                                                                                                                                  |   | ____(425) 255-4400___                                            |

| Large accelerated filer [ ]  | Accelerated filer [X]  |  Non-accelerated filer [ ]  | Smaller reporting company [ ]  |
|-----------------------------------|-----------------------------|---------------------------------------|-------------------------------------|

----

| PART 1 -               | FINANCIAL INFORMATION                                                                            |     |
|------------------------|--------------------------------------------------------------------------------------------------|----------|
|                   |                                                                                             |     |
| Item 1 -          | Financial Statements                                                                   |  3  |
|                   |                                                                                             |     |
| Item 2 -          | Management’s Discussion and Analysis of Financial Conditionand Results of Operations  |  36 |
|                   |                                                                                             |     |
| Item 3 -     | Quantitative and Qualitative Disclosures About Market Risk                                  |  54 |
|                   |                                                                                             |     |
| Item 4 -          | Controls and Procedures                                                                |  57 |
|                   |                                                                                             |     |
| PART II -              | OTHER INFORMATION                                                                                |     |
|                   |                                                                                             |     |
| Item 1 -     | Legal Proceedings                                                                      |  58 |
|                   |                                                                                             |     |
| Item 1A -         | Risk Factors                                                                                |  58 |
|                   |                                                                                             |     |
| Item 2 -          | Unregistered Sales of Equity Securities and Use of Proceeds                                 |  58 |
|                   |                                                                                             |     |
| Item 3 -          | Defaults upon Senior Securities                                                        |  58 |
|                   |                                                                                             |     |
| Item 4 -          | Mine Safety Disclosures                                                                |  58 |
|                   |                                                                                             |     |
| Item 5 -     | Other Information                                                                      |  58 |
|                   |                                                                                             |     |
|  Item 6 -    | Exhibits                                                                               |  58 |
|                   |                                                                                             |     |
| SIGNATURES   |  60                                                                                         |
|                   |                                                                                             |     |

----

|                                                            |   |     |    |   |         |   |
|-----------------------------------------------------------------|--------|----------|---------|--------|--------------|--------|
|                                                            |   | June 30, |    |   | December 31, |   |
| Assets                                                          |   | 2012     |    |   | 2011         |   |
|                                                            |   |     |    |   |         |   |
| Cash on hand and in banks                                       |   | $        | 4,670   |   |         | $      | 4,620 |   |
| Interest-bearing deposits                                       |   |     | 155,327 |   |         |   | 160,141 |   |
| Investments available-for-sale, at fair value                   |   |     | 130,483 |   |         |   | 129,002 |   |
| Loans receivable, net of allowance of $14,450 and $16,559       |   |     | 649,965 |   |         |   | 703,288 |   |
| Premises and equipment, net                                     |   |     | 18,448  |   |         |   | 18,922 |   |
| Federal Home Loan Bank stock, at cost                           |   |     | 7,413   |   |         |   | 7,413 |   |
| Accrued interest receivable                                     |   |     | 3,665   |   |         |   | 3,856 |   |
| Federal income tax receivable                                   |   |     | 1,072   |   |         |   | 1,060 |   |
| Deferred tax assets                                             |   |     | 1,000   |   |         |   | - |   |
| Other real estate owned ("OREO")                                |   |     | 22,206  |   |         |   | 26,044 |   |
| Prepaid expenses and other assets                               |   |     | 4,429   |   |         |   | 5,044 |   |
| Total assets                                                    |   | $        | 998,678 |   |         | $      | 1,059,390 |   |
|                                                            |   |     |    |   |         |   |   |   |
| Liabilities and Stockholders' Equity                            |   |     |    |   |         |   |   |   |
|                                                            |   |     |    |   |         |   |   |   |
| Interest-bearing deposits                                       |   | $        | 719,035 |   |         | $      | 782,652 |   |
| Noninterest-bearing deposits                                    |   |     | 5,828   |   |         |   | 6,013 |   |
| Advances from the Federal Home Loan Bank                        |   |     | 83,066  |   |         |   | 83,066 |   |
| Advance payments from borrowers for taxes and insurance         |   |     | 2,459   |   |         |   | 2,093 |   |
| Accrued interest payable                                        |   |     | 180     |   |         |   | 184 |   |
| Other liabilities                                               |   |     | 3,938   |   |         |   | 4,062 |   |
| Total liabilities                                               |   |     | 814,506 |   |         |   | 878,070 |   |
|                                                            |   |     |    |   |         |   |   |   |
| Commitments and contingencies                                   |   |     |    |   |         |   |   |   |
|                                                            |   |     |    |   |         |   |   |   |
| Stockholders' Equity                                            |   |     |    |   |         |   |   |   |
| Preferred stock, $0.01 par value; authorized 10,000,000 shares, |   |     |    |   |         |   |   |   |
| no shares issued or outstanding                                 |   |     | -       |   |         |   | - |   |
| Common stock, $0.01 par value; authorized 90,000,000 shares;    |   |     |    |   |         |   |   |   |
| issued and outstanding 18,805,168 shares at June 30, 2012       |   |     |    |   |         |   |   |   |
| and December 31, 2011                                           |   |     | 188     |   |         |   | 188 |   |
| Additional paid-in capital                                      |   |     | 189,602 |   |         |   | 188,816 |   |
| Retained earnings, substantially restricted                     |   |     | 5,930   |   |         |   | 3,937 |   |
| Accumulated other comprehensive income, net of tax              |   |     | 20      |   |         |   | 511 |   |
| Unearned Employee Stock Ownership Plan ("ESOP") shares          |   |     | (11,568 | )      |         |   | (12,132 | ) |
| Total stockholders' equity                                      |   |     | 184,172 |   |         |   | 181,320 |   |
| Total liabilities and stockholders' equity                      |   | $        | 998,678 |   |         | $      | 1,059,390 |   |
|                                                            |   |     |    |   |         |   |   |   |
| See accompanying notes to consolidated financial statements.    |

----

|                                                         |   |               |        |   |             |   |        |   |   |   |        |   |
|--------------------------------------------------------------|--------|--------------------|-------------|--------|------------------|--------|-------------|--------|--------|--------|-------------|--------|
|                                                         |   | Three Months Ended |        |   | Six Months Ended |   |
|                                                         |   | June 30,           |        |   | June 30,         |   |
|                                                         |   | 2012               |        |   | 2011             |   |        | 2012   |   |   | 2011        |   |
| Interest income                                              |   |               |        |   |             |   |        |   |   |   |        |   |
| Loans, including fees                                        |   | $                  | 9,802       |   |             | $      | 11,891      |   |   | $      | 20,274      |   |   | $ | 24,319 |   |
| Investments available-for-sale                               |   |               | 500         |   |             |   | 1,262       |   |   |   | 1,093       |   |   |   | 2,467 |   |
| Interest-bearing deposits                                    |   |               | 97          |   |             |   | 94          |   |   |   | 194         |   |   |   | 170 |   |
| Total interest income                                        |   | $                  | 10,399      |   |             | $      | 13,247      |   |   | $      | 21,561      |   |   | $ | 26,956 |   |
| Interest expense                                             |   |               |        |   |             |   |        |   |   |   |        |   |   |   |   |   |
| Deposits                                                     |   |               |  2,627 |   |             |   |  4,220 |   |   |   |  5,568 |   |   |   |  8,733 |   |
| Federal Home Loan Bank advances                              |   |               | 511         |   |             |   | 583         |   |   |   | 1,022       |   |   |   | 1,159 |   |
| Total interest expense                                       |   | $                  | 3,138       |   |             | $      | 4,803       |   |   | $      | 6,590       |   |   | $ | 9,892 |   |
| Net interest income                                          |   |               | 7,261       |   |             |   | 8,444       |   |   |   | 14,971      |   |   |   | 17,064 |   |
| Provision for loan losses                                    |   |               | 650         |   |             |   | 1,600       |   |   |   | 2,350       |   |   |   | 2,800 |   |
| Net interest income after provision for loan losses          |   | $                  | 6,611       |   |             | $      | 6,844       |   |   | $      | 12,621      |   |   | $ | 14,264 |   |
| Noninterest income                                           |   |               |        |   |             |   |        |   |   |   |        |   |   |   |   |   |
| Net gain on sale of investments                              |   |               | 94          |   |             |   | 751         |   |   |   | 288         |   |   |   | 1,262 |   |
| Other                                                        |   |               |  236   |   |             |   |  75    |   |   |   |  323   |   |   |   |  160 |   |
| Total noninterest income                                     |   | $                  | 330         |   |             | $      | 826         |   |   | $      | 611         |   |   | $ | 1,422 |   |
|                                                         |   |               |        |   |             |   |        |   |   |   |        |   |   |   |   |   |
| Noninterest expense                                          |   |               |        |   |             |   |        |   |   |   |        |   |   |   |   |   |
| Compensation and employee benefits                           |   |               | 3,451       |   |             |   | 3,214       |   |   |   | 6,878       |   |   |   | 6,503 |   |
| Occupancy and equipment                                      |   |               | 395         |   |             |   | 395         |   |   |   | 800         |   |   |   | 797 |   |
| Professional fees                                            |   |               | 468         |   |             |   | 502         |   |   |   | 941         |   |   |   | 982 |   |
| Data processing                                              |   |               | 185         |   |             |   | 183         |   |   |   | 366         |   |   |   | 392 |   |
| Gain on sale of OREO property, net                           |   |               | (128        | )      |             |   | (508        | )      |   |   | (349        | )      |   |   | (1,134 | ) |
| OREO market value adjustments                                |   |               | 235         |   |             |   | 289         |   |   |   | 545         |   |   |   | 917 |   |
| OREO related expenses, net                                   |   |               | 446         |   |             |   | 986         |   |   |   | 935         |   |   |   | 1,836 |   |
| Regulatory assessments                                       |   |               | 314         |   |             |   | 612         |   |   |   | 411         |   |   |   | 1,322 |   |
| Insurance and bond premiums                                  |   |               | 100         |   |             |   | 248         |   |   |   | 200         |   |   |   | 495 |   |
| Proxy contest and related litigation                         |   |               | 604         |   |             |   | -           |   |   |   | 604         |   |   |   | - |   |
| Marketing                                                    |   |               |  61    |   |             |   |  50    |   |   |   |  113   |   |   |   |  111 |   |
| Other general and administrative                             |   |               | 438         |   |             |   | 441         |   |   |   | 746         |   |   |   | 773 |   |
| Total noninterest expense                                    |   | $                  | 6,569       |   |             | $      | 6,412       |   |   | $      | 12,190      |   |   | $ | 12,994 |   |
| Income before federal income tax benefit                     |   |               | 372         |   |             |   | 1,258       |   |   |   | 1,042       |   |   |   | 2,692 |   |
| Federal income tax benefit                                   |   |               | (999        | )      |             |   | -           |   |   |   | (951        | )      |   |   | - |   |
| Net income                                                   |   | $                  | 1,371       |   |             | $      | 1,258       |   |   | $      | 1,993       |   |   | $ | 2,692 |   |
|                                                         |   |               |        |   |             |   |        |   |   |   |        |   |   |   |   |   |
| Basic earnings per share                                     |   | $                  | 0.08        |   |             | $      | 0.07        |   |   | $      | 0.11        |   |   | $ | 0.15 |   |
| Diluted earnings per share                                   |   | $                  | 0.08        |   |             | $      | 0.07        |   |   | $      | 0.11        |   |   | $ | 0.15 |   |
|                                                         |   |               |        |   |             |   |        |   |   |   |        |   |   |   |   |   |
| See accompanying notes to consolidated financial statements. |   |

----

|                                                               |   | Three Months Ended |   |   | Six Months Ended |   |
|--------------------------------------------------------------------|--------|--------------------|--------|--------|------------------|--------|
|                                                               |   | June 30,           |   |   | June 30,         |   |
|                                                               |   | 2012               |   |   | 2011             |   |   | 2012 |   |   | 2011 |   |
|                                                               |   |               |   |   |             |   |   |   |   |   |   |   |
| Net Income                                                         |   | $                  | 1,371  |   |             | $      | 1,258 |   |   | $ | 1,993 |   |   | $ | 2,692 |   |
|                                                               |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income, before tax                             |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized holding gains (losses) on available-for-sale securities |   |               | (455   | )      |             |   | 1,592 |   |   |   | (203 | ) |   |   | 1,658 |   |
| Reclassification adjustment for net gains realized in income       |   |               | (94    | )      |             |   | (751 | ) |   |   | (288 | ) |   |   | (1,262 | ) |
| Other comprehensive income (loss), before tax                      |   |               | (549   | )      |             |   | 841 |   |   |   | (491 | ) |   |   | 396 |   |
| Income tax benefit related to items of other comprehensive income  |   |               | -      |   |             |   | - |   |   |   | - |   |   |   | (430 | ) |
| Other comprehensive income (loss), net of tax                      |   | $                  | (549   | )      |             | $      | 841 |   |   | $ | (491 | ) |   | $ | 826 |   |
| Total comprehensive income                                         |   | $                  | 822    |   |             | $      | 2,099 |   |   | $ | 1,502 |   |   | $ | 3,518 |   |
|                                                               |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.       |

----

|                                                         |   |   |       |   |    |   |    |       |   |     |    |   |       | Accumulated   |   |   |     |   |          |   |   |
|--------------------------------------------------------------|--------|--------|------------|--------|---------|--------|---------|------------|--------|----------|---------|--------|------------|---------------|--------|--------|----------|--------|---------------|--------|--------|
|                                                         |   |   |       |   |    |   |    |       |   |     |    |   |       | Other         |   |   |     |   |          |   |   |
|                                                         |   |   |       |   |    |   |    | Additional |   |     |    |   |       | Comprehensive |   |   | Unearned |   |          | Total  |   |
|                                                         |   |   |       | Common |    |   | Paid-in |       |   | Retained |    |   | Income,    |          |   | ESOP   |     |   | Stockholders' |   |
|                                                         |   | Shares |       | Stock  |    |   | Capital |       |   | Earnings |    |   | Net of Tax |          |   | Shares |     |   | Equity        |   |
| Balances at December 31, 2011                                |   |   | 18,805,168 |   | $  |   | 188     |       |   | $        | 188,816 |   |       | $             | 3,937  |   |     | $      | 511           |   |   | $ | (12,132 | ) |   | $ | 181,320 |   |
| Comprehensive income:                                        |   |   |       |   |    |   |    |       |   |     |    |   |       |          |   |   |     |   |          |   |   |   |   |   |   |   |   |   |
| Net income                                                   |   |   | -          |   |    |   | -       |       |   |     | -       |   |       |          | 1,993  |   |     |   | -             |   |   |   | - |   |   |   | 1,993 |   |
| Change in fair value of investments                          |   |   |       |   |    |   |    |       |   |     |    |   |       |          |   |   |     |   |          |   |   |   |   |   |   |   |
| available-for-sale                                           | -      |   |       |   | -       |   |    |       | -      |     |    |   | -          |          |   |   | (491     | )      |          |   | -      |   |   |   | (491 | ) |
| Total comprehensive income                                   |   |   |       |   |    |   |    |       |   |     |    |   |       |          |   |   |     |   |          |   |   |   |   |   |   |   | 1,502 |   |
| Compensation related to stock options                        |   |   |       |   |    |   |    |       |   |     |    |   |       |          |   |   |     |   |          |   |   |   |   |   |   |   |
| and restricted stock awards                                  | -      |   |       |   | -       |   |    |       | 932    |     |    |   | -          |          |   |   | -        |   |          |   | -      |   |   |   | 932 |   |
| Allocation of 56,426 ESOP shares                             |   |   | -          |   |    |   | -       |       |   |     | (146    | )      |       |          | -      |   |     |   | -             |   |   |   | 564 |   |   |   | 418 |   |
| Balances at June 30, 2012                                    |   |   | 18,805,168 |   | $  |   | 188     |       |   | $        | 189,602 |   |       | $             | 5,930  |   |     | $      | 20            |   |   | $ | (11,568 | ) |   | $ | 184,172 |   |
|                                                         |   |   |       |   |    |   |    |       |   |     |    |   |       |          |   |   |     |   |          |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements. |

----

|                                                                              |   | Six Months Ended June 30, |    |
|-----------------------------------------------------------------------------------|--------|---------------------------|---------|
|                                                                              |   | 2012                      |    |   | 2011 |   |
| Cash flows from operating activities:                                             |   |                      |    |   |   |   |
|  Net income                                                                  |   | $                    | 1,993   |   |   | $  |  2,692 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                      |    |   |   |   |   |   |
| Provision for loan losses                                                         |   |                      | 2,350   |   |   |   | 2,800 |   |
| OREO market value adjustments                                                     |   |                      | 545     |   |   |   | 917 |   |
| Gain on sale of OREO property, net                                                |   |                      | (349    | ) |   |   | (1,134 | ) |
| Depreciation of premises and equipment                                            |   |                      | 524     |   |   |   | 532 |   |
| Net amortization of premiums and discounts on investments                         |   |                      | 884     |   |   |   | 1,275 |   |
| ESOP expense                                                                      |   |                      | 418     |   |   |   | 307 |   |
| Compensation expense related to stock options and restricted stock awards         |   |                      | 932     |   |   |   | 950 |   |
| Net realized gain on investments available-for-sale                               |   |                      | (288    | ) |   |   | (1,262 | ) |
| Loss from disposal of premises and equipment                                      |   |                      | 6       |   |   |   | - |   |
| Deferred federal income taxes                                                     |   |                      | (998    | ) |   |   | 430 |   |
| Changes in operating assets and liabilities:                                      |   |                      |    |   |   |   |   |   |
| Prepaid expenses and other assets                                                 |   |                      | 615     |   |   |   | 1,182 |   |
| Federal income tax receivable                                                     |   |                      | (12     | ) |   |   | (430 | ) |
| Accrued interest receivable                                                       |   |                      | 191     |   |   |   | 554 |   |
| Accrued interest payable                                                          |   |                      | (4      | ) |   |   | 3 |   |
| Other liabilities                                                                 |   |                      | (124    | ) |   |   | (79 | ) |
| Net cash provided by operating activities                                         |   | $                         | 6,683   |   |   | $ | 8,737 |   |
|                                                                              |   |                      |    |   |   |   |   |   |
| Cash flows from investing activities:                                             |   |                      |    |   |   |   |   |   |
| Proceeds from sales or calls of investments                                       |   |                      | 23,199  |   |   |   | 31,035 |   |
| Capitalized improvements in OREO                                                  |   |                      | -       |   |   |   | (90 | ) |
| Proceeds from sales of OREO properties                                            |   |                      | 11,664  |   |   |   | 20,380 |   |
| Principal repayments on investments                                               |   |                      | 11,023  |   |   |   | 17,570 |   |
| Purchases of investments                                                          |   |                      | (36,792 | ) |   |   | (25,451 | ) |
| Net decrease in loans receivable                                                  |   |                      | 42,951  |   |   |   | 85,072 |   |
| Purchases of premises and equipment                                               |   |                      | (56     | ) |   |   | (31 | ) |
| Net cash provided by investing activities                                         |   | $                         | 51,989  |   |   | $ | 128,485 |   |
|                                                                              |   |                      |    |   |   |   |   |   |
| Balance, carried forward                                                          |   | $                         | 58,672  |   |   | $ | 137,222 |   |
|                                                                              |   |                      |    |   |   |   |   |   |

----

|                                                                                |   | Six Months Ended June 30, |        |
|-------------------------------------------------------------------------------------|--------|---------------------------|-------------|
|                                                                                |   | 2012                      |        |   | 2011 |   |
| Balance, brought forward                                                            |   | $                         | 58,672      |   |   | $ | 137,222 |   |
| Cash flows from financing activities:                                               |   |                      |        |   |   |   |   |   |
| Net decrease in deposits                                                            |   |                      | (63,802     | ) |   |   | (46,529 | ) |
| Advances from the Federal Home Loan Bank                                            |   |                      | 110         |   |   |   | - |   |
| Repayments of advances from the Federal Home Loan Bank                              |   |                      | (110        | ) |   |   | - |   |
| Net increase (decrease) in advance payments from borrowers for taxes and insurance  |   |                      | 366         |   |   |   | (308 | ) |
| Net cash used by financing activities                                               |   | $                         | (63,436     | ) |   | $ | (46,837 | ) |
|                                                                                |   |                      |        |   |   |   |   |   |
| Net increase (decrease) in cash                                                     |   |                      | (4,764      | ) |   |   | 90,385 |   |
| Cash and cash equivalents:                                                          |   |                      |        |   |   |   |   |   |
| Beginning of period                                                                 |   |                      | 164,761     |   |   |   | 98,427 |   |
| End of period                                                                       |   | $                         | 159,997     |   |   | $ | 188,812 |   |
|                                                                                |   |                      |        |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                  |   |                      |        |   |   |   |   |   |
| Cash paid during the period for:                                                    |   |                      |        |   |   |   |   |   |
| Interest                                                                            |   | $                    |  6,594 |   |   | $  |  9,889 |   |
| Federal income taxes                                                                |   | $                         | 60          |   |   | $ | - |   |
| Noncash transactions:                                                               |   |                      |        |   |   |   |   |   |
| Loans, net of deferred loan fees and allowance for loan losses, transferred to OREO |   | $                         | 8,022       |   |   | $ | 15,950 |   |
|                                                                                |   |                      |        |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                        |

----

----

----

----

|                                            | June 30, 2012     |   |
|-------------------------------------------------|-------------------|--------|
|                                            |              |   |   | Gross |   | Gross |   |   |   |   |
|                                            | Amortized         |   | Unrealized |   | Unrealized |   |   |   |   |
|                                            | Cost              |   | Gains |   | Losses |   | Fair Value |   |
|                                            | (In thousands)    |   |
| Mortgage-backed investments:                    |              |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                                      |              | $      | 40,956 |   |   | $ | 993 |   |   | $ | (36 | ) |   | $ | 41,913 |   |
| Freddie Mac                                     |              |   | 17,835 |   |   |   | 392 |   |   |   | (37 | ) |   |   | 18,190 |   |
| Ginnie Mae                                      |              |   | 6,025 |   |   |   | 59 |   |   |   | - |   |   |   | 6,084 |   |
| Municipal bonds                                 |              |   | 2,050 |   |   |   | 26 |   |   |   | (284 | ) |   |   | 1,792 |   |
| U.S. Government sponsored entities and agencies |              |   | 62,809 |   |   |   | 23 |   |   |   | (328 | ) |   |   | 62,504 |   |
| Total                                           |              | $      | 129,675 |   |   | $ | 1,493 |   |   | $ | (685 | ) |   | $ | 130,483 |   |
|                                            |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            | December 31, 2011 |   |
|                                            |              |   |   |   | Gross |   | Gross |   |   |   |   |   |
|                                            | Amortized         |   | Unrealized |   | Unrealized |   |   |   |   |   |
|                                            | Cost              |   | Gains |   | Losses |   | Fair Value |   |
|                                            | (In thousands)    |   |
| Mortgage-backed investments:                    |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                                      |              | $      | 50,981 |   |   | $ | 1,182 |   |   | $ | - |   |   | $ | 52,163 |   |
| Freddie Mac                                     |              |   | 19,285 |   |   |   | 560 |   |   |   | - |   |   |   | 19,845 |   |
| Ginnie Mae                                      |              |   | 7,416 |   |   |   | 79 |   |   |   | - |   |   |   | 7,495 |   |
| Municipal bonds                                 |              |   | 2,085 |   |   |   | 32 |   |   |   | (270 | ) |   |   | 1,847 |   |
| U.S. Government sponsored entities and agencies |              |   | 47,934 |   |   |   | 2 |   |   |   | (284 | ) |   |   | 47,652 |   |
| Total                                           |              | $      | 127,701 |   |   | $ | 1,855 |   |   | $ | (554 | ) |   | $ | 129,002 |   |

----

|                         | June 30, 2012       |   |
|------------------------------|---------------------|--------|
|                         | Less Than 12 Months |   | 12 Months or Longer |   | Total |   |
|                         |                |   |   | Unrealized |   |   |   |   | Unrealized |   |   |   |   | Unrealized |   |
|                         | Fair Value          |   | Loss |   | Fair Value |   | Loss |   | Fair Value |   | Loss |   |
|                         | (In thousands)      |   |
| Mortgage-backed investments: |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                   |                | $      | 9,987 |   |   | $ | (36 | ) |   | $ | - |   |   | $ | - |   |   | $ | 9,987 |   |   | $ | (36 | ) |
| Freddie Mac                  |                |   | 3,153 |   |   |   | (37 | ) |   |   | - |   |   |   | - |   |   |   | 3,153 |   |   |   | (37 | ) |
| Municipal bonds              |                |   | - |   |   |   | - |   |   |   | 1,122 |   |   |   | (284 | ) |   |   | 1,122 |   |   |   | (284 | ) |
| U.S Government sponsored     |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| entities and agencies        |                |   | 50,371 |   |   |   | (328 | ) |   |   | - |   |   |   | - |   |   |   | 50,371 |   |   |   | (328 | ) |
| Total                        |                | $      | 63,511 |   |   | $ | (401 | ) |   | $ | 1,122 |   |   | $ | (284 | ) |   | $ | 64,633 |   |   | $ | (685 | ) |
|                         |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                         | December 31, 2011   |   |
|                         | Less Than 12 Months |   |   | 12 Months or Longer |   | Total |   |
|                         |                |   |   |   | Unrealized |   |   |   |   |   | Unrealized |   |   |   |   |   | Unrealized |   |
|                         | Fair Value          |   | Loss |   | Fair Value |   | Loss |   | Fair Value |   | Loss |   |
|                         | (In thousands)      |   |
| Municipal bonds              |                | $      | - |   |   | $ | - |   |   | $ | 1,137 |   |   | $ | (270 | ) |   | $ | 1,137 |   |   | $ | (270 | ) |
| U.S. Government sponsored    |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| entities and agencies        |                |   | 45,039 |   |   |   | (284 | ) |   |   | - |   |   |   | - |   |   |   | 45,039 |   |   |   | (284 | ) |
| Total                        |                | $      | 45,039 |   |   | $ | (284 | ) |   | $ | 1,137 |   |   | $ | (270 | ) |   | $ | 46,176 |   |   | $ | (554 | ) |
|                         |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                   |   | June 30, 2012  |    |
|----------------------------------------|--------|----------------|---------|
|                                   |   | Amortized Cost |    |   | Fair Value |   |
|                                   |   | (In thousands) |
| Due after one year through five years  |   | $              | 50,053  |   |   | $ | 49,841 |   |
| Due after five years through ten years |   |           | 816     |   |   |   | 829 |   |
| Due after ten years                    |   |           | 13,990  |   |   |   | 13,626 |   |
|                                   |   |           | 64,859  |   |   |   | 64,296 |   |
| Mortgage-backed investments            |   |           | 64,816  |   |   |   | 66,187 |   |
| Total                                  |   | $              | 129,675 |   |   | $ | 130,483 |   |

----

|                                |   | June 30, 2012  |         |   | December 31, 2011 |   |
|-------------------------------------|--------|----------------|--------------|--------|-------------------|--------|
|                                |   | (In thousands) |         |
| One-to-four family residential: (1) |   | $              | 318,377      |   |              | $      | 335,412 |   |
|                                |   |           |         |   |              |   |   |   |
| Multifamily:                        |   |           |         |   |              |   |   |   |
| Permanent                           |   |           | 104,431      |   |              |   | 110,148 |   |
| Construction                        |   |           | -            |   |              |   | 3,526 |   |
|                                |   |           | 104,431      |   |              |   | 113,674 |   |
| Commercial real estate:             |   |           |         |   |              |   |   |   |
| Permanent                           |   |           | 196,346      |   |              |   | 218,032 |   |
| Construction                        |   |           | 12,500       |   |              |   | 12,500 |   |
| Land                                |   |           |  1,852  |   |              |   |  1,811 |   |
|                                |   |           | 210,698      |   |              |   | 232,343 |   |
| Construction/land development (2):  |   |           |         |   |              |   |   |   |
| One-to-four family residential      |   |           | 1,301        |   |              |   | 6,194 |   |
| Multifamily                         |   |           | 806          |   |              |   | 855 |   |
| Commercial                          |   |           | 680          |   |              |   | 1,104 |   |
| Land development                    |   |           | 15,728       |   |              |   | 16,990 |   |
|                                |   |           | 18,515       |   |              |   | 25,143 |   |
|                                |   |           |         |   |              |   |   |   |
| Business                            |   |           | 3,627        |   |              |   | 3,909 |   |
| Consumer                            |   |           | 11,328       |   |              |   | 12,499 |   |
| Total loans                         |   |           | 666,976      |   |              |   | 722,980 |   |
| Less:                               |   |           |         |   |              |   |   |   |
| Loans in process                    |   |           | 845          |   |              |   | 1,372 |   |
| Deferred loan fees, net             |   |           | 1,716        |   |              |   | 1,761 |   |
| ALLL                                |   |           |  14,450 |   |              |   |  16,559 |   |
| Loans receivable, net               |   | $              | 649,965      |   |              | $      | 703,288 |   |

|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (1)       | Includes $143.9 million and $147.4 million of non-owner occupied loans at June 30, 2012 and December 31, 2011, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (2)  | Excludes construction loans that will convert to permanent loans. We consider these loans to be "rollovers" in that one loan is originated for both the construction loan and permanent financing. These loans are classified according to the underlying collateral. As a result, at June 30, 2012, we had $12.5 million, or 5.9% of our total commercial real estate portfolio and no multifamily loans in these "rollover" type of loans. At December 31, 2011, we had $12.5 milllion, or 5.4% of our total commercial real estate portfolio and $3.5 million, or 3.1% of our total multifamily loan portfolio in these "rollover" type of loans. At June 30, 2012 and December 31, 2011, $1.9 million and $1.8 million, respectively, of commercial real estate land loans were not included in the construction/land development category because we classify our buildable lots where we do not intend to finance the construction as commercial real estate land loans. |
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

----

|                                             | At or For the Three Months Ended June 30, 2012 |   |
|--------------------------------------------------|------------------------------------------------|--------|
|                                             | One-to-Four                                    |   |   |   |   |   |   |   | Construction/ |   |   |   |   |   |   |   |   |   |
|                                             | Family                                         |   |   |   |   | Commercial |   | Land |   |   |   |   |   |   |   |   |   |   |
|                                             | Residential                                    |   | Multifamily |   | Real Estate |   | Development |   | Business |   | Consumer |   | Total |   |
| ALLL:                                            | (In thousands)                                 |   |
| Beginning balance                                |                                           | $      | 5,813 |   |   | $ | 2,357 |   |   | $ | 5,675 |   |   | $ | 724 |   |   | $ | 35 |   |   | $ | 228 |   |   | $ | 14,832 |   |
| Charge-offs                                      |                                           |   | (619 | ) |   |   | (153 | ) |   |   | (482 | ) |   |   | (95 | ) |   |   | - |   |   |   | - |   |   |   | (1,349 | ) |
| Recoveries                                       |                                           |   | 12 |   |   |   | - |   |   |   | 301 |   |   |   | 2 |   |   |   | - |   |   |   | 2 |   |   |   | 317 |   |
| Provision                                        |                                           |   | 760 |   |   |   | (180 | ) |   |   | 140 |   |   |   | (64 | ) |   |   | - |   |   |   | (6 | ) |   |   | 650 |   |
| Ending balance                                   |                                           | $      | 5,966 |   |   | $ | 2,024 |   |   | $ | 5,634 |   |   | $ | 567 |   |   | $ | 35 |   |   | $ | 224 |   |   | $ | 14,450 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General reserve                                  |                                           | $      | 5,349 |   |   | $ | 2,024 |   |   | $ | 5,430 |   |   | $ | 567 |   |   | $ | 35 |   |   | $ | 224 |   |   | $ | 13,629 |   |
| Specific reserve                                 |                                           | $      | 617 |   |   | $ | - |   |   | $ | 204 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 821 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans: (1)                                       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Loans                                      |                                           | $      | 318,377 |   |   | $ | 104,431 |   |   | $ | 210,698 |   |   | $ | 17,670 |   |   | $ | 3,627 |   |   | $ | 11,328 |   |   | $ | 666,131 |   |
| General reserve (2)                              |                                           | $      | 259,572 |   |   | $ | 101,145 |   |   | $ | 196,414 |   |   | $ | 8,939 |   |   | $ | 3,627 |   |   | $ | 11,046 |   |   | $ | 580,743 |   |
| Specific reserve (3)                             |                                           | $      | 58,805 |   |   | $ | 3,286 |   |   | $ | 14,284 |   |   | $ | 8,731 |   |   | $ | - |   |   | $ | 282 |   |   | $ | 85,388 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Net of undisbursed funds.                    |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (2) Loans collectively evaluated for impairment. |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (3) Loans individually evaluated for impairment. |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | At or For the Six Months Ended June 30, 2012   |   |
|                                             | One-to-Four                                    |   |   |   |   |   |   |   |   |   | Construction/ |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | Family                                         |   |   |   |   |   | Commercial |   | Land |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | Residential                                    |   | Multifamily |   | Real Estate |   | Development |   | Business |   | Consumer |   | Total |   |
| ALLL:                                            |  (In thousands)                           |   |
| Beginning balance                                |                                           | $      | 5,756 |   |   | $ | 950 |   |   | $ | 6,846 |   |   | $ | 2,503 |   |   | $ | 154 |   |   | $ | 350 |   |   | $ | 16,559 |   |
| Charge-offs                                      |                                           |   | (1,337 | ) |   |   | (153 | ) |   |   | (3,096 | ) |   |   | (169 | ) |   |   | - |   |   |   | (293 | ) |   |   | (5,048 | ) |
| Recoveries                                       |                                           |   | 12 |   |   |   | - |   |   |   | 472 |   |   |   | 102 |   |   |   | - |   |   |   | 3 |   |   |   | 589 |   |
| Provision                                        |                                           |   | 1,535 |   |   |   | 1,227 |   |   |   | 1,412 |   |   |   | (1,869 | ) |   |   | (119 | ) |   |   | 164 |   |   |   | 2,350 |   |
| Ending balance                                   |                                           | $      | 5,966 |   |   | $ | 2,024 |   |   | $ | 5,634 |   |   | $ | 567 |   |   | $ | 35 |   |   | $ | 224 |   |   | $ | 14,450 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General reserve                                  |                                           | $      | 5,349 |   |   | $ | 2,024 |   |   | $ | 5,430 |   |   | $ | 567 |   |   | $ | 35 |   |   | $ | 224 |   |   | $ | 13,629 |   |
| Specific reserve                                 |                                           | $      | 617 |   |   | $ | - |   |   | $ | 204 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 821 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans: (1)                                       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Loans                                      |                                           | $      | 318,377 |   |   | $ | 104,431 |   |   | $ | 210,698 |   |   | $ | 17,670 |   |   | $ | 3,627 |   |   | $ | 11,328 |   |   | $ | 666,131 |   |
| General reserve (2)                              |                                           | $      | 259,572 |   |   | $ | 101,145 |   |   | $ | 196,414 |   |   | $ | 8,939 |   |   | $ | 3,627 |   |   | $ | 11,046 |   |   | $ | 580,743 |   |
| Specific reserve (3)                             |                                           | $      | 58,805 |   |   | $ | 3,286 |   |   | $ | 14,284 |   |   | $ | 8,731 |   |   | $ | - |   |   | $ | 282 |   |   | $ | 85,388 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Net of undisbursed funds.                    |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (2) Loans collectively evaluated for impairment. |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (3) Loans individually evaluated for impairment. |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                             | At or For the Three Months Ended June 30, 2011 |
|--------------------------------------------------|------------------------------------------------|
|                                             | One-to-Four                                    |   |   |   |   |   |   |   | Construction/ |   |   |   |   |   |   |   |   |   |
|                                             | Family                                         |   |   |   |   | Commercial |   | Land |   |   |   |   |   |   |   |   |   |   |
|                                             | Residential                                    |   | Multifamily |   | Real Estate |   | Development |   | Business |   | Consumer |   | Total |   |
| ALLL:                                            | (In thousands)                                 |
| Beginning balance                                |                                           | $ | 7,756 |   |   | $ | 1,746 |   |   | $ | 7,275 |   |   | $ | 3,067 |   |   | $ | 13 |   |   | $ | 393 |   |   | $ | 20,250 |   |
| Charge-offs                                      |                                           |   | (1,031 | ) |   |   | (62 | ) |   |   | (1,514 | ) |   |   | (2,256 | ) |   |   | - |   |   |   | (113 | ) |   |   | (4,976 | ) |
| Recoveries                                       |                                           |   | 14 |   |   |   | - |   |   |   | - |   |   |   | 101 |   |   |   | - |   |   |   | - |   |   |   | 115 |   |
| Provision                                        |                                           |   | (1,240 | ) |   |   | (700 | ) |   |   | 1,518 |   |   |   | 1,981 |   |   |   | 1 |   |   |   | 40 |   |   |   | 1,600 |   |
| Ending balance                                   |                                           | $ | 5,499 |   |   | $ | 984 |   |   | $ | 7,279 |   |   | $ | 2,893 |   |   | $ | 14 |   |   | $ | 320 |   |   | $ | 16,989 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General reserve                                  |                                           | $ | 5,097 |   |   | $ | 984 |   |   | $ | 7,220 |   |   | $ | 2,893 |   |   | $ | 14 |   |   | $ | 320 |   |   | $ | 16,528 |   |
| Specific reserve                                 |                                           | $ | 402 |   |   | $ | - |   |   | $ | 59 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 461 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans: (1)                                       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Loans                                      |                                           | $ | 359,810 |   |   | $ | 120,023 |   |   | $ | 243,393 |   |   | $ | 32,597 |   |   | $ | 1,819 |   |   | $ | 13,971 |   |   | $ | 771,613 |   |
| General reserve (2)                              |                                           | $ | 293,165 |   |   | $ | 116,865 |   |   | $ | 225,094 |   |   | $ | 16,918 |   |   | $ | 1,819 |   |   | $ | 13,856 |   |   | $ | 667,717 |   |
| Specific reserve (3)                             |                                           | $ | 66,645 |   |   | $ | 3,158 |   |   | $ | 18,299 |   |   | $ | 15,679 |   |   | $ | - |   |   | $ | 115 |   |   | $ | 103,896 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Net of undisbursed funds.                    |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (2) Loans collectively evaluated for impairment. |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (3) Loans individually evaluated for impairment. |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | At or For the Six Months Ended June 30, 2011   |   |
|                                             | One-to-Four                                    |   |   |   |   |   |   |   |   |   | Construction/ |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | Family                                         |   |   |   |   |   | Commercial |   | Land |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             | Residential                                    |   | Multifamily |   | Real Estate |   | Development |   | Business |   | Consumer |   | Total |   |
| ALLL:                                            |  (In thousands)                           |   |
| Beginning balance                                |                                           | $ | 8,302 |   |   | $ | 1,893 |   |   | $ | 6,742 |   |   | $ | 5,151 |   |   | $ | 7 |   |   | $ | 439 |   |   | $ | 22,534 |   |
| Charge-offs                                      |                                           |   | (1,616 | ) |   |   | (88 | ) |   |   | (3,594 | ) |   |   | (3,182 | ) |   |   | - |   |   |   | (171 | ) |   |   | (8,651 | ) |
| Recoveries                                       |                                           |   | 19 |   |   |   | - |   |   |   | - |   |   |   | 286 |   |   |   | - |   |   |   | 1 |   |   |   | 306 |   |
| Provision                                        |                                           |   | (1,206 | ) |   |   | (821 | ) |   |   | 4,131 |   |   |   | 638 |   |   |   | 7 |   |   |   | 51 |   |   |   | 2,800 |   |
| Ending balance                                   |                                           | $ | 5,499 |   |   | $ | 984 |   |   | $ | 7,279 |   |   | $ | 2,893 |   |   | $ | 14 |   |   | $ | 320 |   |   | $ | 16,989 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General reserve                                  |                                           | $ | 5,097 |   |   | $ | 984 |   |   | $ | 7,220 |   |   | $ | 2,893 |   |   | $ | 14 |   |   | $ | 320 |   |   | $ | 16,528 |   |
| Specific reserve                                 |                                           | $ | 402 |   |   | $ | - |   |   | $ | 59 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 461 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans: (1)                                       |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Loans                                      |                                           | $ | 359,810 |   |   | $ | 120,023 |   |   | $ | 243,393 |   |   | $ | 32,597 |   |   | $ | 1,819 |   |   | $ | 13,971 |   |   | $ | 771,613 |   |
| General reserve (2)                              |                                           | $ | 293,165 |   |   | $ | 116,865 |   |   | $ | 225,094 |   |   | $ | 16,918 |   |   | $ | 1,819 |   |   | $ | 13,856 |   |   | $ | 667,717 |   |
| Specific reserve (3)                             |                                           | $ | 66,645 |   |   | $ | 3,158 |   |   | $ | 18,299 |   |   | $ | 15,679 |   |   | $ | - |   |   | $ | 115 |   |   | $ | 103,896 |   |
|                                             |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Net of undisbursed funds.                    |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (2) Loans collectively evaluated for impairment. |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (3) Loans individually evaluated for impairment. |                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                             |                                          |   | June 30, 2012  |   |
|----------------------------------|-----------------------------------------------|--------|----------------|--------|
|                             |                                          |   |           |   |   | Unpaid |   |   |   |   |
|                             |                                          |   | Recorded       |   |   | Principal |   |   | Related |   |
|                             |                                          |   | Investment (1) |   |   | Balance (2) |   |   | Allowance |   |
|                             |                                          |   | (In thousands) |   |
| Loans with no related allowance: |                                          |   |           |   |   |   |   |   |   |
|                             | One-to-four family residential:               |   |           |   |   |   |   |   |   |   |
|                             | Owner occupied                                |   | $              | 8,131  |   |   | $ | 8,954 |   |   | $ | - |   |
|                             | Non-owner occupied                            |   |           | 36,954 |   |   |   | 37,657 |   |   |   | - |   |
|                             | Multifamily                                   |   |           | 3,286  |   |   |   | 3,443 |   |   |   | - |   |
|                             | Commercial real estate                        |   |           | 8,565  |   |   |   | 11,575 |   |   |   | - |   |
|                             | Construction/land development                 |   |           | 8,731  |   |   |   | 14,311 |   |   |   | - |   |
|                             | Consumer                                      |   |           | 282    |   |   |   | 558 |   |   |   | - |   |
|                             | Total                                         |   |           | 65,949 |   |   |   | 76,498 |   |   |   | - |   |
|                             |                                          |   |           |   |   |   |   |   |   |   |   |   |   |
| Loans with an allowance:         |                                          |   |           |   |   |   |   |   |   |   |   |   |
|                             | One-to-four family residential:               |   |           |   |   |   |   |   |   |   |   |   |   |
|                             | Owner occupied                                |   |           | 4,251  |   |   |   | 4,413 |   |   |   | 188 |   |
|                             | Non-owner occupied                            |   |           | 9,469  |   |   |   | 9,659 |   |   |   | 429 |   |
|                             | Commercial real estate                        |   |           | 5,719  |   |   |   | 5,719 |   |   |   | 204 |   |
|                             | Total                                         |   |           | 19,439 |   |   |   | 19,791 |   |   |   | 821 |   |
|                             |                                          |   |           |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans:            |                                          |   |           |   |   |   |   |   |   |   |   |   |
|                             | One-to-four family residential:               |   |           |   |   |   |   |   |   |   |   |   |   |
|                             | Owner occupied                                |   |           | 12,382 |   |   |   | 13,367 |   |   |   | 188 |   |
|                             | Non-owner occupied                            |   |           | 46,423 |   |   |   | 47,316 |   |   |   | 429 |   |
|                             | Multifamily                                   |   |           | 3,286  |   |   |   | 3,443 |   |   |   | - |   |
|                             | Commercial real estate                        |   |           | 14,284 |   |   |   | 17,294 |   |   |   | 204 |   |
|                             | Construction/land development                 |   |           | 8,731  |   |   |   | 14,311 |   |   |   | - |   |
|                             | Consumer                                      |   |           | 282    |   |   |   | 558 |   |   |   | - |   |
|                             | Total                                         |   | $              | 85,388 |   |   | $ | 96,289 |   |   | $ | 821 |   |
| __________                  |                                          |   |           |   |   |   |   |   |   |   |   |   |
| (1)                              | Represents the loan balance less charge-offs. |   |           |   |   |   |   |   |   |   |
| (2)                              | Contractual loan principal balance.           |   |           |   |   |   |   |   |   |   |   |   |   |

----

|                             |                                          |   | December 31, 2011 |   |
|----------------------------------|-----------------------------------------------|--------|-------------------|--------|
|                             |                                          |   |              |   |   | Unpaid |   |   |   |   |
|                             |                                          |   | Recorded          |   |   | Principal |   |   | Related |   |
|                             |                                          |   | Investment (1)    |   |   | Balance (2) |   |   | Allowance |   |
|                             |                                          |   |              |   |   (In thousands) |   |   |   |
| Loans with no related allowance: |                                          |   |              |   |   |   |   |   |   |
|                             | One-to-four family residential:               |   |              |   |   |   |   |   |   |   |
|                             | Owner occupied                                |   | $                 | 8,007  |   |   | $ | 8,931 |   |   | $ | - |   |
|                             | Non-owner occupied                            |   |              | 40,406 |   |   |   | 42,794 |   |   |   | - |   |
|                             | Multifamily                                   |   |              | 3,453  |   |   |   | 3,578 |   |   |   | - |   |
|                             | Commercial real estate                        |   |              | 12,802 |   |   |   | 15,957 |   |   |   | - |   |
|                             | Construction/land development                 |   |              | 9,199  |   |   |   | 22,776 |   |   |   | - |   |
|                             | Consumer                                      |   |              | 70     |   |   |   | 70 |   |   |   | - |   |
|                             | Total                                         |   |              | 73,937 |   |   |   | 94,106 |   |   |   | - |   |
|                             |                                          |   |              |   |   |   |   |   |   |   |   |   |   |
| Loans with an allowance:         |                                          |   |              |   |   |   |   |   |   |   |   |   |
|                             | One-to-four family residential:               |   |              |   |   |   |   |   |   |   |   |   |   |
|                             | Owner occupied                                |   |              | 4,588  |   |   |   | 4,724 |   |   |   | 180 |   |
|                             | Non-owner occupied                            |   |              | 9,575  |   |   |   | 9,735 |   |   |   | 325 |   |
|                             | Commercial real estate                        |   |              | 1,817  |   |   |   | 1,817 |   |   |   | 59 |   |
|                             | Total                                         |   |              | 15,980 |   |   |   | 16,276 |   |   |   | 564 |   |
|                             |                                          |   |              |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans:            |                                          |   |              |   |   |   |   |   |   |   |   |   |
|                             | One-to-four family residential:               |   |              |   |   |   |   |   |   |   |   |   |   |
|                             | Owner occupied                                |   |              | 12,595 |   |   |   | 13,655 |   |   |   | 180 |   |
|                             | Non-owner occupied                            |   |              | 49,981 |   |   |   | 52,529 |   |   |   | 325 |   |
|                             | Multifamily                                   |   |              | 3,453  |   |   |   | 3,578 |   |   |   | - |   |
|                             | Commercial real estate                        |   |              | 14,619 |   |   |   | 17,774 |   |   |   | 59 |   |
|                             | Construction/land development                 |   |              | 9,199  |   |   |   | 22,776 |   |   |   | - |   |
|                             | Consumer                                      |   |              | 70     |   |   |   | 70 |   |   |   | - |   |
|                             | Total                                         |   | $                 | 89,917 |   |   | $ | 110,382 |   |   | $ | 564 |   |
| ____________                |                                          |   |              |   |   |   |   |   |   |   |   |   |
| (1)                              | Represents the loan balance less charge-offs. |   |              |   |   |   |   |   |   |   |
| (2)                              | Contractual loan principal balance.           |   |              |   |   |   |   |   |   |   |   |   |   |

----

|                             |   | Three Months Ended June 30, 2012 |   |   | Six Months Ended June 30, 2012 |   |
|----------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                             |   | Average                          |   |   | Interest                       |   |   | Average |   |   | Interest |   |
|                             |   | Recorded                         |   |   | Income                         |   |   | Recorded |   |   | Income |   |
|                             |   | Investment                       |   |   | Recognized                     |   |   | Investment |   |   | Recognized |   |
|                             |   | (In thousands)                   |   |
| Loans with no related allowance: |   |                             |   |   |                           |   |   |   |   |   |   |   |
| One-to-four family residential:  |   |                             |   |   |                           |   |   |   |   |   |   |   |
| Owner occupied                   |   | $                                | 8,405  |   |                           | $      | 63 |   |   | $ | 8,272 |   |   | $ | 112 |   |
| Non-owner occupied               |   |                             | 37,603 |   |                           |   | 526 |   |   |   | 38,537 |   |   |   | 1,057 |   |
| Multifamily                      |   |                             | 3,366  |   |                           |   | 49 |   |   |   | 3,395 |   |   |   | 91 |   |
| Commercial real estate           |   |                             | 12,597 |   |                           |   | 23 |   |   |   | 12,666 |   |   |   | 180 |   |
| Construction/land development    |   |                             | 8,861  |   |                           |   | - |   |   |   | 8,974 |   |   |   | - |   |
| Consumer                         |   |                             | 258    |   |                           |   | 1 |   |   |   | 195 |   |   |   | 2 |   |
| Total                            |   |                             | 71,090 |   |                           |   | 662 |   |   |   | 72,039 |   |   |   | 1,442 |   |
|                             |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Loans with an allowance:         |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential:  |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                   |   |                             | 4,251  |   |                           |   | 45 |   |   |   | 4,363 |   |   |   | 90 |   |
| Non-owner occupied               |   |                             | 9,310  |   |                           |   | 99 |   |   |   | 9,399 |   |   |   | 212 |   |
| Commercial real estate           |   |                             | 4,012  |   |                           |   | 69 |   |   |   | 3,280 |   |   |   | 139 |   |
| Total                            |   |                             | 17,573 |   |                           |   | 213 |   |   |   | 17,042 |   |   |   | 441 |   |
|                             |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans:            |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential:  |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                   |   |                             | 12,656 |   |                           |   | 108 |   |   |   | 12,635 |   |   |   | 202 |   |
| Non-owner occupied               |   |                             | 46,913 |   |                           |   | 625 |   |   |   | 47,936 |   |   |   | 1,269 |   |
| Multifamily                      |   |                             | 3,366  |   |                           |   | 49 |   |   |   | 3,395 |   |   |   | 91 |   |
| Commercial real estate           |   |                             | 16,609 |   |                           |   | 92 |   |   |   | 15,946 |   |   |   | 319 |   |
| Construction/land development    |   |                             | 8,861  |   |                           |   | - |   |   |   | 8,974 |   |   |   | - |   |
| Consumer                         |   |                             | 258    |   |                           |   | 1 |   |   |   | 195 |   |   |   | 2 |   |
| Total                            |   | $                                | 88,663 |   |                           | $      | 875 |   |   | $ | 89,081 |   |   | $ | 1,883 |   |

----

|                             |   | Three Months Ended June 30, 2011 |    |   | Six Months Ended June 30, 2011 |   |
|----------------------------------|--------|----------------------------------|---------|--------|--------------------------------|--------|
|                             |   | Average                          |    |   | Interest                       |   |   | Average |   |   | Interest |   |
|                             |   | Recorded                         |    |   | Income                         |   |   | Recorded |   |   | Income |   |
|                             |   | Investment                       |    |   | Recognized                     |   |   | Investment |   |   | Recognized |   |
|                             |   | (In thousands)                   |    |
| Loans with no related allowance: |   |                             |    |   |                           |   |   |   |   |   |   |   |
| One-to-four family residential:  |   |                             |    |   |                           |   |   |   |   |   |   |   |
| Owner occupied                   |   | $                                | 6,091   |   |                           | $      | 46 |   |   | $ | 5,948 |   |   | $ | 86 |   |
| Non-owner occupied               |   |                             | 43,306  |   |                           |   | 561 |   |   |   | 43,065 |   |   |   | 1,131 |   |
| Multifamily                      |   |                             | 2,833   |   |                           |   | 42 |   |   |   | 2,727 |   |   |   | 84 |   |
| Commercial real estate           |   |                             | 11,461  |   |                           |   | 119 |   |   |   | 10,053 |   |   |   | 217 |   |
| Construction/land development    |   |                             | 14,145  |   |                           |   | - |   |   |   | 11,618 |   |   |   | - |   |
| Consumer                         |   |                             | 130     |   |                           |   | - |   |   |   | 102 |   |   |   | 1 |   |
| Total                            |   |                             | 77,966  |   |                           |   | 768 |   |   |   | 73,513 |   |   |   | 1,519 |   |
|                             |   |                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Loans with an allowance:         |   |                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential:  |   |                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                   |   |                             | 7,058   |   |                           |   | 60 |   |   |   | 7,150 |   |   |   | 136 |   |
| Non-owner occupied               |   |                             | 11,096  |   |                           |   | 93 |   |   |   | 11,515 |   |   |   | 190 |   |
| Multifamily                      |   |                             | 350     |   |                           |   | - |   |   |   | 233 |   |   |   | - |   |
| Commercial real estate           |   |                             | 8,450   |   |                           |   | 38 |   |   |   | 9,128 |   |   |   | 104 |   |
| Construction/land development    |   |                             | 5,438   |   |                           |   | - |   |   |   | 12,443 |   |   |   | - |   |
| Consumer                         |   |                             | 35      |   |                           |   | - |   |   |   | 50 |   |   |   | - |   |
| Total                            |   |                             | 32,427  |   |                           |   | 191 |   |   |   | 40,519 |   |   |   | 430 |   |
|                             |   |                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Total impaired loans:            |   |                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential:  |   |                             |    |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Owner occupied                   |   |                             | 13,149  |   |                           |   | 106 |   |   |   | 13,098 |   |   |   | 222 |   |
| Non-owner occupied               |   |                             | 54,402  |   |                           |   | 654 |   |   |   | 54,580 |   |   |   | 1,321 |   |
| Multifamily                      |   |                             | 3,183   |   |                           |   | 42 |   |   |   | 2,960 |   |   |   | 84 |   |
| Commercial real estate           |   |                             | 19,911  |   |                           |   | 157 |   |   |   | 19,181 |   |   |   | 321 |   |
| Construction/land development    |   |                             | 19,583  |   |                           |   | - |   |   |   | 24,061 |   |   |   | - |   |
| Consumer                         |   |                             | 165     |   |                           |   | - |   |   |   | 152 |   |   |   | 1 |   |
| Total                            |   | $                                | 110,393 |   |                           | $      | 959 |   |   | $ | 114,032 |   |   | $ | 1,949 |   |

----

|                                                                                                                 |   | June 30,       |         |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------|--------|----------------|--------------|--------|--------------|--------|
|                                                                                                                 |   | 2012           |         |   | 2011         |   |
|                                                                                                                 |   | (In thousands) |         |
| Nonperforming assets (1):                                                                                            |   |           |         |   |         |   |
| Nonaccrual loans                                                                                                     |   | $              | 17,853       |   |         | $      | 18,613 |   |
| Nonaccrual TDRs                                                                                                      |   |           | 4,773        |   |         |   | 5,079 |   |
| Total nonaccrual loans                                                                                               |   |           | 22,626       |   |         |   | 23,692 |    |
|        OREO                                                                            |   |           |  22,206 |   |         |   | 26,044 |   |
| Total nonperforming assets                                                                                           |   | $              | 44,832       |   |         | $      | 49,736 |   |
|                                                                                                                 |   |           |         |   |         |   |   |   |
| Performing TDRs                                                                                                      |   | $              | 62,762       |   |         | $      | 66,225 |   |
| Nonaccrual TDRs                                                                                                      |   |           | 4,773        |   |         |   | 5,079 |   |
| Total TDRs                                                                                                           |   | $              | 67,535       |   |         | $      | 71,304 |   |
| _____________                                                                                                   |   |           |         |   |         |   |   |   |
| (1) There were no loans 90 days or more past due and still accruing interest at June 30, 2012 and December 31, 2011. |   |

|                           |   | June 30,       |   |   | December 31, |   |
|--------------------------------|--------|----------------|--------|--------|--------------|--------|
|                           |   | 2012           |   |   | 2011         |   |
|                           |   | (In thousands) |   |
| One-to-four family residential |   | $              | 9,110  |   |         | $      | 9,808 |   |
| Multifamily                    |   |           | 2,039  |   |         |   | 949 |   |
| Commercial real estate         |   |           | 2,534  |   |         |   | 3,736 |   |
| Construction/land development  |   |           | 8,731  |   |         |   | 9,199 |   |
| Consumer                       |   |           | 212    |   |         |   | - |   |
| Total nonaccrual loans         |   | $              | 22,626 |   |         | $      | 23,692 |   |

----

|                                                                                               |                            |               |                                                                            |                                                                            |   | Loans Past Due at June 30, 2012                                                 |                                                                            |       |                                                                                  |                                      |   |                                                                            |
|----------------------------------------------------------------------------------------------------|---------------------------------|--------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------|-------------------------------------------|--------|---------------------------------------------------------------------------------|
|                                                                                               |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  | 90 Days                                   |   |                                                                            |   |   |   | Total Loans |
|                                                                                               |                            |               |                                                                            |                                                                            |   |     30-59 Days                                                        |                                                                            | 60-89 Days |                                                                                  | and Greater                               |   | Total                                                                           |   | Current |   | (1) (2) |
|                                                                                               |                            |               |                                                                            |                                                                            |   | (In thousands)                                                                  |
| Real estate:                                                                                       |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |
|                                                                                               | One-to-four family residential: |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |   |
|                                                                                               |                            | Owner occupied     | $                                                                               |      1,973                                             |   | $                                                                               |      1,539                                             |       | $                                                                                     |       4,253 |   | $                                                                               |      7,765 |   | $ |        166,734 |   | $ |   174,499 |
|                                                                                               |                            | Non-owner occupied |                                                                            |              - |   |                                                                            |              - |       |                                                                                  |       2,064 |   |                                                                            |      2,064 |   |   |        141,814 |   |   |   143,878 |
|                                                                                               | Multifamily                     |               |              - |                                                                            |   |              - |                                                                            |       |               - |                                      |   |              - |   |   |        104,431 |   |   |   104,431 |
|                                                                                               | Commercial real estate          |               |         129                             |                                                                            |   |              - |                                                                            |       |       2,163                                             |                                      |   |      2,292                                             |   |   |        208,406 |   |   |   210,698 |
|                                                                                               | Construction/land development   |               |              - |                                                                            |   |              - |                                                                            |       |       4,731                                             |                                      |   |      4,731                                             |   |   |          12,939 |   |   |      17,670 |
|                                                                                               |                            |               |                                                                            | Total real estate                                                               |   |      2,102                                             |                                                                            |       |      1,539                                                   |                                      |   |    13,211                                                        |   |   |   16,852 |   |   |        634,324 |   |   |   651,176 |
| Business                                                                                           |                            |               |              - |                                                                            |   |              - |                                                                            |       |               - |                                      |   |              - |   |   |             3,627 |   |   |        3,627 |
| Consumer                                                                                           |                            |               |           69                  |                                                                            |   |         714                             |                                                                            |       |          212                             |                                      |   |         995                             |   |   |          10,333 |   |   |      11,328 |
|                                                                                               |                            |               |                                                                            |                                                                            | Total  | $                                                                               |      2,171                                             |       | $                                                                                     |      2,253       |   | $                                                                               |    13,423 |   | $ |   17,847 |   | $ |        648,284 |   | $ |   666,131 |
|                                                                                               |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |   |   |   |   |   |
| (1) There were no loans 90 days or more past due and still accruing interest at June 30, 2012.     |                            |               |                                                                            |                                                                            |   |                                                                            |
| (2) Net of undisbursed funds.                                                                      |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |
|                                                                                               |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                                                               |                            |               |                                                                            |                                                                            |   | Loans Past Due at December 31, 2011                                             |                                                                            |       |                                                                                  |                                      |   |                                                                            |
|                                                                                               |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   | 90 Days                                                                         |   |   |   |   |   | Total Loans |
|                                                                                               |                            |               |                                                                            |                                                                            |   | 30-59 Days                                                                      |                                                                            | 60-89 Days |                                                                                  | and Greater                               |   | Total                                                                           |   | Current |   | (1) (2) |
|                                                                                               |                            |               |                                                                            |                                                                            |   | (In thousands)                                                                  |
| Real estate:                                                                                       |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |
|                                                                                               | One-to-four family residential: |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |   |
|                                                                                               |                            | Owner occupied     | $                                                                               |      2,594                                             |   | $                                                                               |      1,318                                             |       | $                                                                                     |       4,076 |   | $                                                                               |      7,988 |   | $ |        180,009 |   | $ |   187,997 |
|                                                                                               |                            | Non-owner occupied |                                                                            |         761                             |   |                                                                            |              - |       |                                                                                  |       3,224 |   |                                                                            |      3,985 |   |   |        143,394 |   |   |   147,379 |
|                                                                                               | Multifamily                     |               |              - |                                                                            |   |              - |                                                                            |       |          949                             |                                      |   |         949                             |   |   |        112,314 |   |   |   113,263 |
|                                                                                               | Commercial real estate          |               |         633                             |                                                                            |   |              - |                                                                            |       |       2,621                                             |                                      |   |      3,254                                             |   |   |        228,583 |   |   |   231,837 |
|                                                                                               | Construction/land development   |               |              - |                                                                            |   |              - |                                                                            |       |       9,199                                             |                                      |   |      9,199                                             |   |   |          15,525 |   |   |      24,724 |
|                                                                                               |                            |               |                                                                            | Total real estate                                                               |   |      3,988                                             |                                                                            |       |      1,318                                                   |                                      |   |    20,069                                                        |   |   |   25,375 |   |   |        679,825 |   |   |   705,200 |
| Business                                                                                           |                            |               |         240                             |                                                                            |   |              - |                                                                            |       |               - |                                      |   |         240                             |   |   |             3,669 |   |   |        3,909 |
| Consumer                                                                                           |                            |               |      1,133                                             |                                                                            |   |              - |                                                                            |       |               - |                                      |   |      1,133                                             |   |   |          11,366 |   |   |      12,499 |
|                                                                                               |                            |               |                                                                            |                                                                            | Total  | $                                                                               |      5,361                                             |       | $                                                                                     |      1,318       |   | $                                                                               |    20,069 |   | $ |   26,748 |   | $ |        694,860 |   | $ |   721,608 |
|                                                                                               |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |   |   |   |   |   |
| (1) There were no loans 90 days or more past due and still accruing interest at December 31, 2011. |                            |               |                                                                            |
| (2) Net of undisbursed funds.                                                                      |                            |               |                                                                            |                                                                            |   |                                                                            |                                                                            |       |                                                                                  |                                      |   |                                                                            |   |   |   |   |   |

----

|                          |            |                                 |                                 |   |                                                                    | June 30, 2012                                                                           |                                  |
|-------------------------------|-----------------|--------------------------------------|--------------------------------------|--------|-------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------|
|                          |            |                                 |                                 |   |                                                                    |                                                                                    |   One-to-Four Family Residential |   | Multifamily |   | Commercial Real Estate |   |    Construction/  Land Development |   | Business |   | Consumer |   | Total (1) |   |
|                          |            |                                 |                                 |   |                                                                    | (In thousands)                                                                          |                                  |
| Risk Rating:                  |            |                                 |                                 |   |                                                                    |                                                                                    |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          | Pass            |                                 |                                 | $      |   292,513                                                     |                                                                                    | $                                     |          98,439 |   | $ |   187,329 |   | $ |          8,574 |   | $ |    3,627 |   | $ |   10,179 |   | $ |      600,661 |   |
|                          | Special mention |      12,409 |                                 |   |            2,706 |                                                                                    |                                  |      14,940 |   |   |              365 |   |   |            - |   |   |         714 |   |   |        31,134 |   |
|                          | Substandard     |                                 |      13,455 |   |                                                                    |            3,286                 |                                  |   |        8,429 |   |   |          8,731 |   |   |            - |   |   |         435 |   |   |        34,336 |   |
|                          |            |                                 |                                 |   | Total                                                                   | $                                                                                       |   318,377                   |   | $ |        104,431 |   | $ |   210,698 |   | $ |        17,670 |   | $ |    3,627 |   | $ |   11,328 |   | $ |      666,131 |   |
|                          |            |                                 |                                 |   |                                                                    |                                                                                    |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Net of undisbursed funds. |            |                                 |                                 |   |                                                                    |                                                                                    |                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|                          |            |                                 |                                 |   |                                                                    |                                                                                    |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          |            |                                 |                                 |   |                                                                    | December 31, 2011                                                                       |                                  |
|                          |            |                                 |                                 |   |                                                                    |                                                                                    |   One-to-Four Family Residential |   |   | Multifamily |   | Commercial Real Estate |   |    Construction/  Land Development |   | Business |   | Consumer |   | Total (1) |   |
|                          |            |                                 |                                 |   |                                                                    | (In thousands)                                                                          |                                  |
| Risk Rating:                  |            |                                 |                                 |   |                                                                    |                                                                                    |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                          | Pass            |                                 |                                 | $      |   307,807                                                     |                                                                                    | $                                     |        106,900 |   | $ |   203,997 |   | $ |        15,101 |   | $ |    3,909 |   | $ |   11,822 |   | $ |      649,536 |   |
|                          | Special mention |      13,193 |                                 |   |            5,414 |                                                                                    |                                  |      14,256 |   |   |              424 |   |   |            - |   |   |         488 |   |   |        33,775 |   |
|                          | Substandard     |                                 |      14,376 |   |                                                                    |               949 |                                  |   |      13,584 |   |   |          9,199 |   |   |            - |   |   |         189 |   |   |        38,297 |   |
|                          |            |                                 |                                 |   | Total                                                                   | $                                                                                       |   335,376                   |   | $ |        113,263 |   | $ |   231,837 |   | $ |        24,724 |   | $ |    3,909 |   | $ |   12,499 |   | $ |      721,608 |   |
|                          |            |                                 |                                 |   |                                                                    |                                                                                    |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) Net of undisbursed funds. |            |                                 |                                 |   |                                                                    |                                                                                    |                                  |   |   |   |   |   |   |   |   |   |   |   |   |

----

|              |                                                                                                                                                                                     |                                            |   |   |                                                            | June 30, 2012     |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|--------|--------|-----------------------------------------------------------------|-------------------|
|              |                                                                                                                                                                                     |                                            |   |   |                                                            |              | One-to-Four Family Residential |   | Multifamily |   | Commercial Real Estate |   |   Construction/  Land Development |   | Business |   | Consumer |   | Total (3) |
|              |                                                                                                                                                                                     |                                            |   |   |                                                            | (In thousands)    |
| Performing (1)    | $                                                                                                                                                                                        |   309,267                             |   | $      |   102,392                                             |              | $ |   208,164 |   | $ |            8,939 |   | $ |    3,627 |   | $ |   11,116 |   | $ |   643,505 |
| Nonperforming (2) |                                                                                                                                                                                     |        9,110 |   |   |        2,039                 |              |   |        2,534 |   |   |            8,731 |   |   |            - |   |   |         212 |   |   |      22,626 |
|              |                                                                                                                                                                                     |                                            |   |   | Total                                                           | $                 |   318,377 |   | $ |   104,431 |   | $ |   210,698 |   | $ |         17,670 |   | $ |    3,627 |   | $ |   11,328 |   | $ |   666,131 |
|              |                                                                                                                                                                                     |                                            |   |   |                                                            |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)               | There were $169.3 million of owner-occupied one-to-four family residential loans and $140.0 million of non-owner occupied one-to-four family residential loans classified as performing. |
| (2)               | There were $5.3 million of owner-occupied one-to-four family residential loans and $3.8 million of non-owner occupied one-to-four family residential loans classified as nonperforming.  |
| (3)               | Net of undisbursed funds.                                                                                                                                                                |                                            |   |   |                                                            |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
|              |                                                                                                                                                                                     |                                            |   |   |                                                            | December 31, 2011 |
|              |                                                                                                                                                                                     |                                            |   |   |                                                            |              | One-to-Four Family Residential |   | Multifamily |   |  Commercial Real Estate |   |   Construction/  Land Development |   | Business |   | Consumer |   | Total (3) |
|              |                                                                                                                                                                                     |                                            |   |   |                                                            | (In thousands)    |
| Performing (1)    | $                                                                                                                                                                                        |   325,568                             |   | $      |   112,314                                             |              | $ |   228,101 |   | $ |         15,525 |   | $ |    3,909 |   | $ |   12,499 |   | $ |   697,916 |
| Nonperforming (2) |                                                                                                                                                                                     |        9,808 |   |   |           949 |              |   |        3,736 |   |   |            9,199 |   |   |            - |   |   |              - |   |   |      23,692 |
|              |                                                                                                                                                                                     |                                            |   |   | Total                                                           | $                 |   335,376 |   | $ |   113,263 |   | $ |   231,837 |   | $ |         24,724 |   | $ |    3,909 |   | $ |   12,499 |   | $ |   721,608 |
|              |                                                                                                                                                                                     |                                            |   |   |                                                            |              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)               | There were $183.0 million of owner-occupied one-to-four family residential loans and $142.6 million of non-owner occupied one-to-four family residential loans classified as performing. |
| (2)               | There were $5.0 million of owner-occupied one-to-four family residential loans and $4.8 million of non-owner occupied one-to-four family residential loans classified as nonperforming.  |
| (3)               | Net of undisbursed funds.                                                                                                                                                                |                                            |   |   |                                                            |              |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                              |   | Three Months Ended June 30, 2012 |   |   | Six Months Ended June 30, 2012                   |   |
|-------------------------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------------------------|--------|
|                                                              |   | Number of Loans                  |   |   | Pre-Modification Outstanding Recorded Investment |   |   | Post-Modification Outstanding Recorded Investment |   |   | Number of Loans |   |   | Pre-Modification Outstanding Recorded Investment |   |   | Post-Modification Outstanding Recorded Investment |   |
|                                                              |   | (Dollars in thousands)           |   |
| TDRs that Occurred During the Period:                             |   |                             |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential:                                   |   |                             |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Principal and interest with interest rate    concession |   |                             | -      |   |                                             | $      | - |   |   | $ | - |   |   |   | 1 |   |   | $ | 214 |   |   | $ | 213 |   |
| Commercial:                                                       |   |                             |   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Principal and interest with interest rate    concession |   |                             | 1      |   |                                             |   | 1,415 |   |   |   | 1,409 |   |   |   | 1 |   |   |   | 1,415 |   |   |   | 1,409 |   |
| Interest only payments with interest rate    concession |   |                             | 1      |   |                                             |   | 2,012 |   |   |   | 2,012 |   |   |   | 2 |   |   |   | 2,508 |   |   |   | 2,508 |   |
| Total                                                             |   |                             | 2      |   |                                             | $      | 3,427 |   |   | $ | 3,421 |   |   |   | 4 |   |   | $ | 4,137 |   |   | $ | 4,130 |   |

|                              |   | Types of Modifications           |                   |
|-----------------------------------|--------|----------------------------------|------------------------|
|                              |   | Three Months Ended June 30, 2012 |                   | Six Months Ended June 30, 2012 |   |
|                              |   |                             |   Number of Loans |   |   |   | Interest Only Payments with Interest Rate Concession |   |   |   |   Interest Rate Concession |   |   |   |   Number of Loans |   |   |   |  Interest Only Payments with Interest Rate Concession |   |   | Interest Rate Concession |   |
|                              |   | (Dollars in thousands)           |                   |
| TDRs that Subsequently Defaulted: |   |                             |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential    |   |                             | 1                      |   |   | $ | 274 |   |   | $ | - |   |   |   | 1 |   |   | $ | 274 |   |   | $ | - |   |
| Commercial                        |   |                             | 1                      |   |   |   | 1,409 |   |   |   | - |   |   |   | 1 |   |   |   | 1,409 |   |   |   | - |   |
| Total                             |   |                             | 2                      |   |   | $ | 1,683 |   |   | $ | - |   |   |   | 2 |   |   | $ | 1,683 |   |   | $ | - |   |

----

|                      |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |   |
|---------------------------|--------|-----------------------------|--------|--------|---------------------------|--------|
|                      |   | 2012                        |   |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
|                      |   | (In thousands)              |   |
| Beginning balance         |   | $                           | 22,448 |   |                      | $      | 31,266 |   |   | $ | 26,044 |   |   | $ | 30,102 |   |
| Loans transferred to OREO |   |                        | 6,176  |   |                      |   | 5,673 |   |   |   | 8,022 |   |   |   | 15,950 |   |
| Capitalized improvements  |   |                        | -      |   |                      |   | 2 |   |   |   | - |   |   |   | 90 |   |
| Dispositions of OREO      |   |                        | (6,183 | )      |                      |   | (10,673 | ) |   |   | (11,315 | ) |   |   | (19,246 | ) |
| Market value adjustments  |   |                        | (235   | )      |                      |   | (289 | ) |   |   | (545 | ) |   |   | (917 | ) |
| Ending balance            |   | $                           | 22,206 |   |                      | $      | 25,979 |   |   | $ | 22,206 |   |   | $ | 25,979 |   |
|                      |   |                        |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |

| ·   | Level 1 – Quoted prices for identical instruments in active markets. |
|--------------------|----------------------------------------------------------------------------|

| ·   | Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 – Instruments whose significant value drivers are unobservable. |
|--------------------|-------------------------------------------------------------------------------|

----

|                                            | Fair Value Measurements at June 30, 2012     |   |
|-------------------------------------------------|----------------------------------------------|--------|
|                                            |                                         |   |   | Quoted Prices in | Significant |   |   |   |   |
|                                            |                                         |   |   | Active Markets |   | Other |   | Significant |   |
|                                            | Fair Value                                   |   | for Identical |   | Observable |   | Unobservable |   |
|                                            | Measurements                                 |   | Assets (Level 1) |   |    Inputs (Level 2) |   | Inputs (Level 3) |   |
|                                            | (In thousands)                               |   |
| Available-for-sale investments:                 |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed investments:                    |                                         |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                                      |                                         | $      | 41,913 |   |   | $ | - |   |   | $ | 41,913 |   |   | $ | - |   |
| Freddie Mac                                     |                                         |   | 18,190 |   |   |   | - |   |   |   | 18,190 |   |   |   | - |   |
| Ginnie Mae                                      |                                         |   | 6,084 |   |   |   | - |   |   |   | 6,084 |   |   |   | - |   |
| Municipal bonds                                 |                                         |   | 1,792 |   |   |   | - |   |   |   | 1,792 |   |   |   | - |   |
| U.S. Government sponsored entities and agencies |                                         |   | 62,504 |   |   |   | - |   |   |   | 62,504 |   |   |   | - |   |
| Total                                           |                                         | $      | 130,483 |   |   | $ | - |   |   | $ | 130,483 |   |   | $ | - |   |
|                                            |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            | Fair Value Measurements at December 31, 2011 |   |
|                                            |                                         |   |   |   | Quoted Prices in | Significant |   |   |   |   |   |
|                                            |                                         |   |   |   | Active Markets |   | Other |   | Significant |   |
|                                            | Fair Value                                   |   | for Identical |   | Observable |   | Unobservable |   |
|                                            | Measurements                                 |   | Assets (Level 1) |   |    Inputs (Level 2) |   | Inputs (Level 3) |   |
|                                            | (In thousands)                               |   |
| Available-for-sale investments:                 |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed investments:                    |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fannie Mae                                      |                                         | $      | 52,163 |   |   | $ | - |   |   | $ | 52,163 |   |   | $ | - |   |
| Freddie Mac                                     |                                         |   | 19,845 |   |   |   | - |   |   |   | 19,845 |   |   |   | - |   |
| Ginnie Mae                                      |                                         |   | 7,495 |   |   |   | - |   |   |   | 7,495 |   |   |   | - |   |
| Municipal bonds                                 |                                         |   | 1,847 |   |   |   | - |   |   |   | 1,847 |   |   |   | - |   |
| U.S. Government sponsored entities and agencies |                                         |   | 47,652 |   |   |   | - |   |   |   | 47,652 |   |   |   | - |   |
| Total                                           |                                         | $      | 129,002 |   |   | $ | - |   |   | $ | 129,002 |   |   | $ | - |   |
|                                            |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                           | Fair Value Measurements at June 30, 2012     |         |
|----------------------------------------------------------------------------------------------------------------|----------------------------------------------|--------------|
|                                                                                                           |                                         |         |   | Quoted Prices in | Significant |   |   |   |   |   |   |   |
|                                                                                                           |                                         |         |   | Active Markets |   | Other |   | Significant |   |   |   |   |
|                                                                                                           | Fair Value                                   |         | for Identical |   | Observable |   | Unobservable |   | Total |   |
|                                                                                                           | Measurements                                 |         | Assets (Level 1) |   |   |    Inputs (Level 2) |   |   |    Inputs (Level 3) |   | Losses |   |
|                                                                                                           | (In thousands)                               |         |
| Impaired loans (included in loans                                                                              |                                         |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| receivable, net) (1) (2)                                                                                       |                                         | $            | 84,567 |   |   | $ | - |   |   | $ | - |   |   | $ | 84,567 |   |   | $ | 821 |   |
| OREO (3)                                                                                                       |                                         |         | 22,206 |   |   |   | - |   |   |   | - |   |   |   | 22,206 |   |   |   | 235 |   |
| Total                                                                                                          |                                         | $            | 106,773 |   |   | $ | - |   |   | $ | - |   |   | $ | 106,773 |   |   | $ | 1,056 |   |
| __________                                                                                                |                                         |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) The loss represents the specific reserve against loans that were considered impaired at June 30, 2012.     |                                         |         |   |   |   |
| (2) There were no undisbursed funds at June 30, 2012.                                                          |                                         |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (3) The loss represents OREO market value adjustments for the quarter ended June 30, 2012.                     |                                         |         |   |   |   |   |   |   |   |
|                                                                                                           |                                         |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                           | Fair Value Measurements at December 31, 2011 |         |
|                                                                                                           |                                         |         |   |   |   | Quoted Prices in |   | Significant |   |   |   |   |   |   |   |   |   |
|                                                                                                           |                                         |         |   |   |   | Active Markets |   | Other |   | Significant |   |   |   |   |   |
|                                                                                                           |                                         | Fair Value   |   |   | for Identical |   |   | Observable |   | Unobservable |   | Total |   |
|                                                                                                           |                                         | Measurements |   |   |    Assets (Level 1) |   |   |    Inputs (Level 2) |   |   |   Inputs (Level 3) |   | Losses |   |
|                                                                                                           | (In thousands)                               |         |
| Impaired loans including undisbursed                                                                           |                                         |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| but committed funds of $36 (included                                                                           |                                         |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| in loans receivable, net) (1)                                                                                  |                                         | $            | 89,389 |   |   | $ | - |   |   | $ | - |   |   | $ | 89,389 |   |   | $ | 564 |   |
| OREO (2)                                                                                                       |                                         |         | 26,044 |   |   |   | - |   |   |   | - |   |   |   | 26,044 |   |   |   | 1,924 |   |
| Total                                                                                                          |                                         | $            | 115,433 |   |   | $ | - |   |   | $ | - |   |   | $ | 115,433 |   |   | $ | 2,488 |   |
| __________                                                                                                |                                         |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) The loss represents the specific reserve against loans that were considered impaired at December 31, 2011. |                                         |         |   |   |   |
| (2) The loss represents OREO market value adjustments for the year ended December 31, 2011.                    |                                         |         |   |   |   |   |   |   |

|           | June 30, 2012 |
|----------------|---------------|
|           | Fair Value    |   | Valuation Technique(s) |   | Unobservable Input(s) |   | Range (Weighted Average) |
|           |          |   |   |   |   | (Dollars in thousands) |   |   |   |
|           |          |   |   |   |   |   |   |   |   |
| Impaired loans |          | $ | 84,567 |   | Market approach |   | Adjusted for differences between comparable sales |   |   | 0.0% - 51%    | (1.6%) |
|           |          |   |   |   |   |   |   |   |   |   |   |
| OREO           |          | $ | 22,206 |   | Market approach |   | Adjusted for differences between comparable sales |   |   | 0.0% - 27%    | (1.4%) |

----

|                           |   | June 30, 2012  |    |
|--------------------------------|--------|----------------|---------|
|                           |   | Carrying       |    |   | Estimated |   |   | Fair Value Measurements Using: |   |
|                           |   | Value          |    |   | Fair Value |   |   | Level 1 |   |   | Level 2 |   |   | Level 3 |   |
|                           |   | (In thousands) |    |
| Financial Assets:              |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash on hand and in banks      |   | $              | 4,670   |   |   | $ | 4,670 |   |   | $ | 4,670 |   |   | $ | - |   |   | $ | - |   |
| Interest-bearing deposits      |   |           | 155,327 |   |   |   | 155,327 |   |   |   | 155,327 |   |   |   | - |   |   |   | - |   |
| Investments available-for-sale |   |           | 130,483 |   |   |   | 130,483 |   |   |   | - |   |   |   | 130,483 |   |   |   | - |   |
| Loans receivable, net          |   |           | 649,965 |   |   |   | 681,585 |   |   |   | - |   |   |   | - |   |   |   | 681,585 |   |
| Federal Home Loan Bank stock   |   |           | 7,413   |   |   |   | 7,413 |   |   |   | 7,413 |   |   |   | - |   |   |   | - |   |
| Accrued interest receivable    |   |           | 3,665   |   |   |   | 3,665 |   |   |   | - |   |   |   | 3,665 |   |   |   | - |   |
|                           |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial Liabilities:         |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                       |   |           | 197,802 |   |   |   | 197,802 |   |   |   | 197,802 |   |   |   | - |   |   |   | - |   |
| Certificates of deposit        |   |           | 527,061 |   |   |   | 532,298 |   |   |   | - |   |   |   | - |   |   |   | 532,298 |   |
| Advances from the FHLB         |   |           | 83,066  |   |   |   | 84,401 |   |   |   | - |   |   |   | 84,401 |   |   |   | - |   |
| Accrued interest payable       |   |           | 180     |   |   |   | 180 |   |   |   | - |   |   |   | 180 |   |   |   | - |   |

|                           |   | December 31, 2011 |    |
|--------------------------------|--------|-------------------|---------|
|                           |   | Carrying          |    |   | Estimated |   |
|                           |   | Value             |    |   | Fair Value |   |
|                           |   | (In thousands)    |    |
| Financial Assets:              |   |              |    |   |   |   |
| Cash on hand and in banks      |   | $                 | 4,620   |   |   | $ | 4,620 |   |
| Interest-bearing deposits      |   |              | 160,141 |   |   |   | 160,141 |   |
| Investments available-for-sale |   |              | 129,002 |   |   |   | 129,002 |   |
| Loans receivable, net          |   |              | 703,288 |   |   |   | 738,266 |   |
| Federal Home Loan Bank stock   |   |              | 7,413   |   |   |   | 7,413 |   |
| Accrued interest receivable    |   |              | 3,856   |   |   |   | 3,856 |   |
|                           |   |              |    |   |   |   |   |   |
| Financial Liabilities:         |   |              |    |   |   |   |   |   |
| Deposits                       |   |              | 218,621 |   |   |   | 218,621 |   |
| Certificates of deposit        |   |              | 570,044 |   |   |   | 577,570 |   |
| Advances from the FHLB         |   |              | 83,066  |   |   |   | 84,926 |   |
| Accrued interest payable       |   |              | 184     |   |   |   | 184 |   |

| ·   | Financial instruments with book value equal to fair value: The fair value of financial instruments that are short-term or reprice frequently and that have little or no risk are considered to have a fair value equal to book value. These instruments include cash on hand and in banks, interest-bearing deposits, Federal Home Loan Bank of Seattle (“FHLB”) stock, accrued interest receivable and accrued interest payable. FHLB stock is not publicly-traded, however, it may be redeemed on a dollar-for-dollar basis, for any amount the Bank is not required to hold, subject to the FHLB’s discretion. The fair value is therefore equal to the book value. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Investments available-for-sale: The fair value of all investments, excluding FHLB stock, was based upon quoted market prices for similar investments in active markets, identical or similar investments in markets that are not active and model-derived valuations whose inputs are observable. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Loans receivable: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. The fair value of fixed-rate loans is estimated using discounted cash flow analysis, utilizing interest rates that would be offered for loans with similar terms to borrowers of similar credit quality. As a result of current market conditions, cash flow estimates have been further discounted to include a credit factor. The fair value of nonperforming loans is estimated using the fair value of the underlying collateral. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Liabilities: The fair value of deposits with no stated maturity, such as statement, NOW, and money market accounts, is equal to the amount payable on demand. The fair value of certificates of deposit is based on the discounted value of contractual cash flows using current interest rates for certificates of deposit with similar remaining maturities. The fair value of FHLB advances is estimated based on discounting the future cash flows using current interest rates for debt with similar remaining maturities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Off balance sheet commitments: No fair value adjustment is necessary for commitments made to extend credit, which represents commitments for loan originations or for outstanding commitments to purchase loans. These commitments are at variable rates, are for loans with terms of less than one year and have interest rates which approximate prevailing market rates, or are set at the time of loan closing. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                      |                                                                                                          |    |             |                                                                                                                                        |                  | Weighted-Average                                                                                                                                                                                        |      | Aggregate |                                                    | Weighted-Average |
|-------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------|------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|-----------|---------------------------------------------------------|------------------|
|                                      |                                                                                                          |    | Weighted-Average |                                                                                                                                        | Remaining Contractual |                                                                                                                                                                                                    | Intrinsic |      | Grant-Date                                              |
|                                      | Shares                                                                                                        |    | Exercise Price   |                                                                                                                                        | Term in Years         |                                                                                                                                                                                                    | Value     |      | Fair Value                                              |
| Outstanding at January 1, 2012            |        1,373,524                                                           |    | $                |                     9.52                |                  |                               6.60                |      | $         |       94                  |             | $ |                     1.91 |
|    Granted                      |                   - |    |             |                        - |                  |                                  - |      |      |          - |             |   |                        - |
|    Exercised                    |                   - |    |             |                        - |                  |                                  - |      |      |                                                    |             |   |                        - |
|    Forfeited or expired         |           (10,000                                           | )  |             |                     9.78                |                  |                                  - |      |      |                                                    |             |   |                     1.92 |
| Outstanding at June 30, 2012              |        1,363,524                                                           |    |             |                     9.52                |                  |                               6.10                |      |      |      205                       |             |   |                     1.91 |
|                                      |                                                                                                          |    |             |                                                                                                                                        |                  |                                                                                                                                                                                                    |      |      |                                                    |             |   |   |
| Expected to vest assuming a 3% forfeiture |                                                                                                          |    |             |                                                                                                                                        |                  |                                                                                                                                                                                                    |      |      |                                                    |             |   |   |
|  rate over the vesting term          |           532,922                                           |    |             |                     9.41                |                  |                               6.13                |      |      |      119                       |             |   |   |
|                                      |                                                                                                          |    |             |                                                                                                                                        |                  |                                                                                                                                                                                                    |      |      |                                                    |             |   |   |
| Exercisable at June 30, 2012              |           814,114                                           |    |             |                     9.59                |                  |                               6.08                |      |      |       82                  |             |   |   |

----

|                                      |   |   |    |   | Weighted-Average |   |
|-------------------------------------------|--------|--------|---------|--------|------------------|--------|
|                                      |   |   |    |   | Grant-Date       |   |
| Nonvested Shares                          |   | Shares |    |   | Fair Value       |   |
| Nonvested at January 1, 2012              |   |   | 310,494 |   |             | $      | 9.66 |   |
| Granted                                   |   |   | -       |   |             |   | - |   |
| Vested                                    |   |   | (12,800 | )      |             |   | 6.19 |   |
| Forfeited                                 |   |   | (4,000  | )      |             |   | 10.35 |   |
| Nonvested at June 30, 2012                |   |   | 293,694 |   |             |   | 9.80 |   |
|                                      |   |   |    |   |             |   |   |   |
| Expected to vest assuming a 3% forfeiture |   |   |    |   |             |   |   |   |
| rate over the vesting term                |   |   | 284,882 |   |             |   |   |   |

----

|                                                 |   | Three Months Ended June 30,               |       |   | Six Months Ended June 30, |   |
|------------------------------------------------------|--------|-------------------------------------------|------------|--------|---------------------------|--------|
|                                                 |   | 2012                                      |       |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
|                                                 |   | (Dollars in thousands, except share data) |       |
| Net income available to common shareholders          |   | $                                         | 1,371      |   |                      | $      | 1,258 |   |   | $ | 1,993 |   |   | $ | 2,692 |   |
|                                                 |   |                                      |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Basic weighted-average common shares outstanding     |   |                                      | 17,629,899 |   |                      |   | 17,517,051 |   |   |   | 17,615,793 |   |   |   | 17,503,025 |   |
| Plus common stock options considered outstanding for |   |                                      |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| dilutive purposes (excludes antidilutive options)    |   |                                      | 19,292     |   |                      |   | 5,966 |   |   |   | 17,129 |   |   |   | 2,999 |   |
| Diluted weighted-average common shares outstanding   |   |                                      | 17,649,191 |   |                      |   | 17,523,017 |   |   |   | 17,632,922 |   |   |   | 17,506,024 |   |
|                                                 |   |                                      |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share                             |   | $                                         | 0.08       |   |                      | $      | 0.07 |   |   | $ | 0.11 |   |   | $ | 0.15 |   |
| Diluted earnings per share                           |   | $                                         | 0.08       |   |                      | $      | 0.07 |   |   | $ | 0.11 |   |   | $ | 0.15 |   |

----

----

----

----

----

|                    |   |               |   |   |        |   |   |        |   |   |        | Construction/ |   |         | Aggregate |   |
|-------------------------|--------|--------------------|--------|--------|-------------|--------|--------|-------------|--------|--------|-------------|---------------|--------|--------------|-----------|--------|
|                    |   | One-to-Four Family |   |   |        |   |   | Commercial  |   |   | Land        |          |   | Balance      |      |
| Borrower (1)            |   | Residential        |   |   | Multifamily |   |   | Real Estate |   |   | Development |          |   | of Loans (2) |      |
|                    |   | (In thousands)     |   |
| Real estate builder     |   | $                  | 21,087 |   |        | $      | -      |        |   | $      | 100         |          |   | $            | 4,996     |   |   | $ | 26,183 |   |
| Real estate builder (3) |   |               |   | 14,654 |        |   |   | -           |   |   |        | 229           |   |         |      | 3,926  |   |   |   | 18,809 |   |
| Real estate investor    |   |               |   | -      |        |   |   | -           |   |   |        | 18,121        |   |         |      | -      |   |   |   | 18,121 |   |
| Real estate investor    |   |               |   | 10,236 |        |   |   | 3,703       |   |   |        | 937           |   |         |      | -      |   |   |   | 14,876 |   |
| Real estate builder (4) |   |               |   | 14,045 |        |   |   | -           |   |   |        | 815           |   |         |      | -      |   |   |   | 14,860 |   |
| Total                   |   | $                  | 60,022 |   |        | $      | 3,703  |        |   | $      | 20,202      |          |   | $            | 8,922     |   |   | $ | 92,849 |   |

|                                                                                                                                       |                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (1)     The composition of borrowers represented in the table may change between periods.                              |                                                                                                                                       |   |   |
| (2)     Net of undisbursed funds.                                                                                      |                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |
| (3)     Of this amount, $1.7 million were considered impaired loans consisting of $13.2 million in performing one-to-  |
|                                                                                                                                       |      four family residential loans and $3.9 million in nonperforming construction/land development loans.              |
| (4)     Of this amount, $14.0 million were considered impaired loans consisting of $12.1 million in performing one-to- |
|                                                                                                                                       |      four family residential loans, $1.1 million in nonperforming one-to-four family residential loans and $815,000 in |
|                                                                                                                                       |      performing commercial real estate loans.                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                                          |   |                   |    |   | Increase/         |   |                      |       |   |
|-----------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|---------------------------|------------|--------|
|                                          |   | Balance at             |    |   | (Decrease) from   |   |                      | Percentage |   |
|                                          |   | June 30, 2012          |    |   | December 31, 2011 |   |  Increase/(Decrease) |
|                                          |   | (Dollars in thousands) |    |
| Cash on hand and in banks                     |   | $                      | 4,670   |   |              | $      | 50                        |       |   |   | 1.1 | % |
| Interest-bearing deposits                     |   |                   | 155,327 |   |              |   | (4,814                    | )          |   |   | (3.0 | ) |
| Investments available-for-sale, at fair value |   |                   | 130,483 |   |              |   | 1,481                     |       |   |   | 1.1 |   |
| Loans receivable, net                         |   |                   | 649,965 |   |              |   | (53,323                   | )          |   |   | (7.6 | ) |
| Premises and equipment, net                   |   |                   | 18,448  |   |              |   | (474                      | )          |   |   | (2.5 | ) |
| FHLB stock, at cost                           |   |                   | 7,413   |   |              |   | -                         |       |   |   | - |   |
| Accrued interest receivable                   |   |                   | 3,665   |   |              |   | (191                      | )          |   |   | (5.0 | ) |
| Federal income tax receivable                 |   |                   | 1,072   |   |              |   | 12                        |       |   |   | 1.1 |   |
| Deferred tax assets                           |   |                   | 1,000   |   |              |   | 1,000                     |       |   |   | 100.0 |   |
| OREO                                          |   |                   | 22,206  |   |              |   | (3,838                    | )          |   |   | (14.7 | ) |
| Prepaid expenses and other assets             |   |                   | 4,429   |   |              |   | (615                      | )          |   |   | (12.2 | ) |
| Total assets                                  |   | $                      | 998,678 |   |              | $      | (60,712                   | )          |   |   | (5.7 | ) |

----

|                    |                   |   |              | Increase/ |   |       | Percentage |   |
|-------------------------|------------------------|--------|-------------------|-----------|--------|------------|------------|--------|
|                    | Balance at             |   | (Decrease) from   |      |   | Increase/  |       |
|                    | June 30, 2012          |   | December 31, 2011 |      |   | (Decrease) |       |
|                    | (Dollars in thousands) |   |
| Noninterest-bearing     |                   | $      | 5,828             |      |   | $          | (185       | )      |   |   | (3.1 | )  % |
| NOW                     |                   |   | 14,767            |      |   |       | 574        |   |   |   | 4.0 |   |
| Statement savings       |                   |   | 17,984            |      |   |       | 200        |   |   |   | 1.1 |   |
| Money market            |                   |   | 159,223           |      |   |       | (21,408    | )      |   |   | (11.9 | ) |
| Certificates of deposit |                   |   | 527,061           |      |   |       | (42,983    | )      |   |   | (7.5 | ) |
| Total deposits          |                   | $      | 724,863           |      |   | $          | (63,802    | )      |   |   | (8.1 | ) |

----

----

|                            |   | Three Months Ended June 30, 2012 |   |   | Six Months Ended June 30, 2012 |   |
|---------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                            |   | Compared to June 30, 2011        |   |   | Compared to June 30, 2011      |   |
|                            |   | Increase/(Decrease) Due to       |   |   | Increase/(Decrease) Due to     |   |
|                            |   | Rate                             |   |   | Volume                         |   |   | Total |   |   | Rate |   |   | Volume |   |   | Total |   |
|                            |   | (In thousands)                   |   |
| Interest-earning assets:        |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans receivable, net           |   | $                                | (180   | )      |                           | $      | (1,909 | ) |   | $ | (2,089 | ) |   | $ | (102 | ) |   | $ | (3,943 | ) |   | $ | (4,045 | ) |
| Investments available-for-sale  |   |                             | (608   | )      |                           |   | (154 | ) |   |   | (762 | ) |   |   | (1,051 | ) |   |   | (323 | ) |   |   | (1,374 | ) |
| Interest-bearing deposits       |   |                             | -      |   |                           |   | 3 |   |   |   | 3 |   |   |   | - |   |   |   | 24 |   |   |   | 24 |   |
| Total net change in income on   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| interest-earning assets         |   |                             | (788   | )      |                           |   | (2,060 | ) |   |   | (2,848 | ) |   |   | (1,153 | ) |   |   | (4,242 | ) |   |   | (5,395 | ) |
|                            |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                             |   |                             | -      |   |                           |   | - |   |   |   |  - |   |   |   |  (2 | )  |   |   | 1 |   |   |   | (1 | )  |
| Statement savings               |   |                             | (5     | )      |                           |   | 1 |   |   |   | (4 | ) |   |   | (21 | ) |   |   | 4 |   |   |   | (17 | ) |
| Money market                    |   |                             | (94    | )      |                           |   | (21 | ) |   |   | (115 | ) |   |   | (300 | ) |   |   | (47 | ) |   |   | (347 | ) |
| Certificates of deposit         |   |                             | (662   | )      |                           |   | (812 | ) |   |   | (1,474 | ) |   |   | (1,234 | ) |   |   | (1,566 | ) |   |   | (2,800 | ) |
| Advances from the FHLB          |   |                             | (10    | )      |                           |   | (62 | ) |   |   | (72 | ) |   |   | (12 | ) |   |   | (125 | ) |   |   | (137 | ) |
| Total net change in expenses    |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| on interest-bearing liabilities |   |                             | (771   | )      |                           |   | (894 | ) |   |   | (1,665 | ) |   |   | (1,569 | ) |   |   | (1,733 | ) |   |   | (3,302 | ) |
| Change in net interest income   |   | $                                | (17    | )      |                           | $      | (1,166 | ) |   | $ | (1,183 | ) |   | $ | 416 |   |   | $ | (2,509 | ) |   | $ | (2,093 | ) |

|                           |   |                                                        |   |                                                                |   |                                     |   |                                                                                |   |                                                                |    |                                     |   |                                                                                                                                                                      |   |                                                                                                                |   |   |   |
|--------------------------------|--------|-------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------|---------|------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|                           |   |                                                        |   |                                                                |   | Three Months Ended June 30,              |   |                                                                                |   |
|                           |   |                                                        |   |                                                                |   | 2012                                     |   | 2011                                                                                |   | Increase/(Decrease)                                                 |
|                           |   |                                                        |   |                                                                |   | Average                                  |   |                                                                                |   |                                                                | Average |                                     |   |                                                                                                                                                                      |   | in Interest and                                                                                                     |
|                           |   |                                                        |   |                                                                |   | Balance                                  |   | Yield                                                                               |   | Balance                                                             |    | Yield                                    |   | Dividend Income                                                                                                                                                           |
|                           |   |                                                        |   |                                                                |   | (Dollars in thousands)                   |
| Loans receivable, net          | $      |     658,861                             |   |       5.95                            | %      |                                     | $      |          785,427                       |   |       6.06                            | %       |                                     | $      |                   (2,089)                                                       |
| Investments available-for-sale |   |     138,409                             |   |       1.44                            |   |                                     |   |          157,698                       |   |       3.20                            |    |                                     |   |                      (762)                                       |
| Interest-bearing deposits      |   |     154,643                             |   |       0.25                            |   |                                     |   |          150,184                       |   |       0.25                            |    |                                     |   |                            3       |
| FHLB stock                     |   |          7,413 |   |            - |   |                                     |   |              7,413 |   |            - |    |                                     |   |                             - |
|                           |   | Total interest-earning assets                               | $      |     959,326                                     |   |       4.34 |   |                                                                                | $      |      1,100,722                             |    |       4.81 |   |                                                                                                                                                                      | $      |                   (2,848) |

----

|                           |                            |                                                        |                                                       |                                                                            |                |    |                                                          |                                                                                      |                                                       |                                                                            |            |   |                                                                                                                |                                                                                                                                                                      |
|--------------------------------|---------------------------------|-------------------------------------------------------------|------------------------------------------------------------|---------------------------------------------------------------------------------|---------------------|---------|---------------------------------------------------------------|-------------------------------------------------------------------------------------------|------------------------------------------------------------|---------------------------------------------------------------------------------|-----------------|--------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           | Six Months Ended June 30,       |                                                        |                                                       |                                                                            |
|                           | 2012                            |                                                        | 2011                                                       |                                                                            | Increase/(Decrease) |
|                           | Average                         |                                                        |                                                       |                                                                            |                | Average |                                                          |                                                                                      |                                                       |                                                                            | in Interest and |
|                           | Balance                         |                                                        | Yield                                                      |                                                                            | Balance             |    | Yield                                                         |                                                                                      | Dividend Income                                            |
|                           | (Dollars in thousands)          |
| Loans receivable, net          | $                               |     676,149                             |                                                       |          6.00                      | %                   |    | $                                                             |          806,058                             |                                                       |          6.03                      | %               |   | $                                                                                                                   |                   (4,045)                                                       |
| Investments available-for-sale |     137,321 |                                                        |          1.59 |                                                                            |                |    |          158,031 |                                                                                      |          3.12 |                                                                            |            |   |                   (1,374) |
| Interest-bearing deposits      |                            |     155,011                             |                                                       |          0.25                      |                |    |                                                          |          136,748                             |                                                       |          0.25                      |            |   |                                                                                                                |                          24                  |
| FHLB stock                     |                            |          7,413 |                                                       |              - |                |    |                                                          |               7,413 |                                                       |              - |            |   |                                                                                                                |                             - |
| Total interest-earning assets  | $                               |     975,894                             |                                                       |          4.42                      |                |    | $                                                             |       1,108,250                                             |                                                       |          4.86                      |            |   | $                                                                                                                   |                   (5,395)                                                       |

|                               | Three Months Ended June 30, |                                       |   |                                                                   |      |
|------------------------------------|-----------------------------|--------------------------------------------|--------|------------------------------------------------------------------------|-----------|
|                               | 2012                        |                                       | 2011   |                                                                   | Increase/ |
|                               | Average                     |                                       |   |                                                                   |      | Average |   |   |   |   | (Decrease) in |
|                               | Balance                     |                                       | Cost   |                                                                   |      | Balance |   | Cost |   |   | Interest Expense |
|                               | (Dollars in thousands)      |
| NOW                                | $                           |       14,577 |   |            0.14 | %         |   | $ |       12,688 |   |            0.16 | % |   | $ |                        - |
| Statement savings                  |                        |       17,962 |   |            0.20 |      |   |   |       16,319 |   |            0.32 |   |   |   |                      (4) |
| Money market                       |                        |     164,575            |   |            0.28 |      |   |   |     180,924 |   |            0.51 |   |   |   |                 (115) |
| Certificates of deposit            |                        |     535,268            |   |            1.87 |      |   |   |     671,685 |   |            2.36 |   |   |   |              (1,474) |
| Advances from the FHLB             |                        |       83,068 |   |            2.46 |      |   |   |       93,066 |   |            2.51 |   |   |   |                   (72) |
| Total interest-bearing liabilities | $                           |     815,450            |   |            1.54 |      |   | $ |     974,682 |   |            1.97 |   |   | $ |              (1,665) |

----

|                               | Six Months Ended June 30, |                                       |   |                                                                   |   |
|------------------------------------|---------------------------|--------------------------------------------|--------|------------------------------------------------------------------------|--------|
|                               | 2012                      |                                       |   | 2011                                                                   |   |   | Increase/ |
|                               | Average                   |                                       |   |                                                                   |   | Average |   |   |   |   | (Decrease) in |
|                               | Balance                   |                                       | Cost   |                                                                   |   | Balance |   | Cost |   |   | Interest Expense |
|                               | (Dollars in thousands)    |
| NOW                                | $                         |       14,301 |   |            0.15 | %      |   | $ |       12,883 |   |            0.19 | % |   | $ |                      (1) |
| Statement savings                  |                      |       17,893 |   |            0.20 |   |   |   |       16,096 |   |            0.43 |   |   |   |                   (17) |
| Money market                       |                      |     171,550            |   |            0.29 |   |   |   |     186,352 |   |            0.64 |   |   |   |                 (347) |
| Certificates of deposit            |                      |     547,681            |   |            1.93 |   |   |   |     679,044 |   |            2.38 |   |   |   |              (2,800) |
| Advances from the FHLB             |                      |       83,067 |   |            2.46 |   |   |   |       93,066 |   |            2.49 |   |   |   |                 (137) |
| Total interest-bearing liabilities | $                         |     834,492            |   |            1.58 |   |   | $ |     987,441 |   |            2.00 |   |   | $ |              (3,302) |

| ·       | Delinquent loans as a percentage of total loans decreased to 2.7% at June 30, 2012, from 3.6% at March 31, 2012; |
|---------------------------------------|------------------------------------------------------------------------------------------------------------------|

| ·       | Nonperforming loans decreased $3.8 million to $22.6 million at June 30, 2012, from $26.4 million at March 31, 2012. The decline was primarily the result of the transfer of a $4.5 million commercial real estate loan to OREO during the second quarter; |
|---------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·       | The loan portfolio decreased $31.0 million during the second quarter to $667.0 million from $698.0 million at March 31, 2012. The decline was due to lower loan demand, loan payoffs, transfers to OREO and charge-offs. |
|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                      |   |                   |   |   |                |   |   |     |   |   | Six Month  |   |   | One Year   |   |
|-------------------------------------------|--------|------------------------|--------|--------|---------------------|--------|--------|----------|--------|--------|------------|--------|--------|------------|--------|
|                                      |   | June 30,               |   |   |   December 31, |   |   | June 30, |   |   | Increase/  |   |   | Increase/  |   |
|                                      |   | 2012                   |   |   | 2011                |   |   | 2011     |   |   | (Decrease) |   |   | (Decrease) |   |
|                                      |   | (Dollars in thousands) |   |
| One-to-four family residential            |   | $                      | 9,110  |   |                | $      | 9,808  |     |   | $      | 13,684     |   |   | $          | (698   | ) |   | $ | (4,574 | ) |
| Multifamily                               |   |                   | 2,039  |   |                |   | 949    |     |   |   | 638        |   |   |       | 1,090  |   |   |   | 1,401 |   |
| Commercial real estate                    |   |                   | 2,534  |   |                |   | 3,736  |     |   |   | 7,882      |   |   |       | (1,202 | ) |   |   | (5,348 | ) |
| Construction/land development             |   |                   | 8,731  |   |                |   | 9,199  |     |   |   | 15,679     |   |   |       | (468   | ) |   |   | (6,948 | ) |
| Consumer                                  |   |                   | 212    |   |                |   | -      |     |   |   | 45         |   |   |       | 212    |   |   |   | 167 |   |
| Total nonperforming loans                 |   |                   | 22,626 |   |                |   | 23,692 |     |   |   | 37,928     |   |   |       | (1,066 | ) |   |   | (15,302 | ) |
| OREO                                      |   |                   | 22,206 |   |                |   | 26,044 |     |   |   | 25,979     |   |   |       | (3,838 | ) |   |   | (3,773 | ) |
| Total nonperforming assets                |   | $                      | 44,832 |   |                | $      | 49,736 |     |   | $      | 63,907     |   |   | $          | (4,904 | ) |   | $ | (19,075 | ) |
| Nonperforming assets as a                 |   |                   |   |   |                |   |   |     |   |   |       |   |   |       |   |   |   |   |   |   |
|    percent of total assets |   |                   | 4.5    | %      |                |   | 4.7    | %        |   |   | 5.6        | %      |   |       |   |   |   |   |   |   |

----

|                                        |   |           |   |   |         |   |   |     |   |   | Six Month  |   |   | One Year   |   |
|---------------------------------------------|--------|----------------|--------|--------|--------------|--------|--------|----------|--------|--------|------------|--------|--------|------------|--------|
|                                        |   | June 30,       |   |   | December 31, |   |   | June 30, |   |   | Increase/  |   |   | Increase/  |   |
|                                        |   | 2012           |   |   | 2011         |   |   | 2011     |   |   | (Decrease) |   |   | (Decrease) |   |
|                                        |   | (In thousands) |   |
| Nonperforming TDRs:                         |   |           |   |   |         |   |   |     |   |   |       |   |   |       |   |
|    One-to-four family residential |   | $              | 3,697  |   |         | $      | 3,994  |     |   | $      | 4,041      |   |   | $          | (297   | ) |   | $ | (344 | )  |
|    Multifamily                    |   |           | 1,076  |   |         |   | -      |     |   |   | -          |   |   |       | 1,076  |   |   |   | 1,076 |   |
|    Commercial real estate         |   |           | -      |   |         |   | 902    |     |   |   | 1,567      |   |   |       | (902   | ) |   |   | (1,567 | ) |
|    Construction/land development  |   |           | -      |   |         |   | 183    |     |   |   | 489        |   |   |       | (183   | ) |   |   | (489 | ) |
| Total nonperforming TDRs                    |   |           | 4,773  |   |         |   | 5,079  |     |   |   | 6,097      |   |   |       | (306   | ) |   |   | (1,324 | ) |
|                                        |   |           |   |   |         |   |   |     |   |   |       |   |   |       |   |   |   |   |   |   |
| Performing TDRs:                            |   |           |   |   |         |   |   |     |   |   |       |   |   |       |   |   |   |   |   |   |
|    One-to-four family residential |   |           | 49,695 |   |         |   | 52,768 |     |   |   | 52,961     |   |   |       | (3,073 | ) |   |   | (3,266 | ) |
|    Multifamily                    |   |           | 1,247  |   |         |   | 2,504  |     |   |   | 2,520      |   |   |       | (1,257 | ) |   |   | (1,273 | ) |
|    Commercial real estate         |   |           | 11,750 |   |         |   | 10,883 |     |   |   | 10,417     |   |   |       | 867    |   |   |   | 1,333 |   |
|    Consumer                       |   |           | 70     |   |         |   | 70     |     |   |   | 70         |   |   |       | -      |   |   |   | - |   |
| Total performing TDRs                       |   |           | 62,762 |   |         |   | 66,225 |     |   |   | 65,968     |   |   |       | (3,463 | ) |   |   | (3,206 | ) |
| Total TDRs                                  |   | $              | 67,535 |   |         | $      | 71,304 |     |   | $      | 72,065     |   |   | $          | (3,769 | ) |   | $ | (4,530 | ) |

----

|                           |   | County                       |   |   | Total  |   |   | Number of |   |   | Percent of |   |
|--------------------------------|--------|------------------------------|--------|--------|--------|--------|--------|-----------|--------|--------|------------|--------|
|                           |   | King                         |   |   | Pierce |   |   | Kitsap    |   |   | All Other  |   |   | OREO |   |   | Properties |   |   | Total OREO |   |
|                           |   |  (Dollars in thousands) |   |   |   |   |   |      |   |   |       |   |
| OREO:                          |   |                         |   |   |   |   |   |      |   |   |       |   |   |   |   |   |   |   |   |   |   |
| One-to-four family residential |   | $                            | 1,752  |   |   | $      | 1,805  |      |   | $      | -          |   |   | $ | 645 |   |   | $ | 4,202 |   |   |   | 19 |   |   |   | 18.9 | % |
| Multifamily                    |   |                         | 560    |   |   |   | -      |      |   |   | -          |   |   |   | - |   |   |   | 560 |   |   |   | 1 |   |   |   | 2.5 |   |
| Commercial real estate (1)     |   |                         | 2,704  |   |   |   | 8,295  |      |   |   | 1,201      |   |   |   | 649 |   |   |   | 12,849 |   |   |   | 32 |   |   |   | 57.9 |   |
| Construction/land development  |   |                         | 482    |   |   |   | 3,201  |      |   |   | 203        |   |   |   | 709 |   |   |   | 4,595 |   |   |   | 11 |   |   |   | 20.7 |   |
| Total OREO                     |   | $                            | 5,498  |   |   | $      | 13,301 |      |   | $      | 1,404      |   |   | $ | 2,003 |   |   | $ | 22,206 |   |   |   | 63 |   |   |   | 100.0 | % |

|                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (1)    Of the 32 properties classified as commercial real estate, 11 are office/retail buildings, 20 are developed lots and one is an undeveloped lot. |

|                      |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |   |
|---------------------------|--------|-----------------------------|--------|--------|---------------------------|--------|
|                      |   | 2012                        |   |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
|                      |   | (In thousands)              |   |
| Beginning balance         |   | $                           | 22,448 |   |                      | $      | 31,266 |   |   | $ | 26,044 |   |   | $ | 30,102 |   |
| Loans transferred to OREO |   |                        | 6,176  |   |                      |   | 5,673 |   |   |   | 8,022 |   |   |   | 15,950 |   |
| Capitalized improvements  |   |                        | -      |   |                      |   | 2 |   |   |   | - |   |   |   | 90 |   |
| Dispositions of OREO      |   |                        | (6,183 | )      |                      |   | (10,673 | ) |   |   | (11,315 | ) |   |   | (19,246 | ) |
| Market value adjustments  |   |                        | (235   | )      |                      |   | (289 | ) |   |   | (545 | ) |   |   | (917 | ) |
| Ending balance            |   | $                           | 22,206 |   |                      | $      | 25,979 |   |   | $ | 22,206 |   |   | $ | 25,979 |   |

----

|                                            | At or For the Six Months |
|-------------------------------------------------|--------------------------|
|                                            | Ended June 30,           |
|                                            | 2012                     |   |   | 2011 |   |
|                                            | (Dollars in thousands)   |   |
| Provision for loan losses                       | $                        |       2,350 |   |   | $ |       2,800 |   |
| Charge-offs                                     |                     |       5,048 |   |   |   |       8,651 |   |
| Recoveries                                      |                     |           589 |   |   |   |           306 |   |
| ALLL                                            |                     |     14,450 |   |   |   |     16,989 |   |
| ALLL as a percent of total loans                |                     | 2.17 | % |   |   | 2.20 | % |
| ALLL as a percent of nonperforming loans        |                     | 63.86 | % |   |   | 44.79 | % |
| Total nonperforming loans                       | $                        |     22,626 |   |   | $ |     37,928 |   |
| Nonperforming loans as a percent of total loans |                     | 3.40 | % |   |   | 4.92 | % |
| Total loans receivable                          | $                        |   666,131 |   |   | $ |   771,613 |   |
| Total loans originated                          |                     |     34,015 |   |   |   |     11,946 |   |

|                             | Three Months           |   | Increase/       |   |   | Percentage |   |
|----------------------------------|------------------------|--------|-----------------|--------|--------|------------|--------|
|                             | Ended                  |   | (Decrease) from |   |   | Increase/  |   |
|                             | June 30, 2012          |   | June 30, 2011   |   |   | (Decrease) |   |
|                             | (Dollars in thousands) |
| Service fees on deposit accounts |                   | $      | 31              |   |   | $          | -      |   |   |   | - | % |   |
| Loan service fees                |                   |   | 163             |   |   |       | 128    |   |   |   | 365.7 |   |   |
| Gain on sale of investments      |                   |   | 94              |   |   |       | (657   | ) |   |   | (87.5 | ) |   |
| Servicing rights, net            |                   |   | (12             | )      |   |       | 6      |   |   |   | (33.3 | ) |   |
| Other                            |                   |   | 54              |   |   |       | 27     |   |   |   | 100.0 |   |   |
| Total noninterest income         |                   | $      | 330             |   |   | $          | (496   | ) |   |   | (60.0 | ) |   |

|                             | Six Months             |   | Increase/       |   |   | Percentage |   |
|----------------------------------|------------------------|--------|-----------------|--------|--------|------------|--------|
|                             | Ended                  |   | (Decrease) from |   |   | Increase/  |   |
|                             | June 30, 2012          |   | June 30, 2011   |   |   | (Decrease) |   |
|                             | (Dollars in thousands) |   |
| Service fees on deposit accounts |                   | $      | 47              |   |   | $          | (2     | ) |   |   | (4.1 | )% |   |
| Loan service fees                |                   |   | 194             |   |   |       | 100    |   |   |   | 106.4 |   |   |
| Gain on sale of investments      |                   |   | 288             |   |   |       | (974   | ) |   |   | (77.2 | ) |   |
| Servicing rights, net            |                   |   | (22             | )      |   |       | 14     |   |   |   | (38.9 | ) |   |
| Other                            |                   |   | 104             |   |   |       | 51     |   |   |   | 96.2 |   |   |
| Total noninterest income         |                   | $      | 611             |   |   | $          | (811   | ) |   |   | (57.0 | ) |   |

----

|                                 |   | Three Months           |   |   | Increase/       |   |   | Percentage |   |
|--------------------------------------|--------|------------------------|--------|--------|-----------------|--------|--------|------------|--------|
|                                 |   | Ended                  |   |   | (Decrease) from |   |   | Increase/  |   |
|                                 |   | June 30, 2012          |   |   | June 30, 2011   |   |   | (Decrease) |   |
|                                 |   | (Dollars in thousands) |
| Compensation and employee benefits   |   | $                      | 3,451  |   |            | $      | 237    |       |   |   | 7.4 | % |   |
| Occupancy and equipment              |   |                   | 395    |   |            |   | -      |       |   |   | - |   |   |
| Professional fees                    |   |                   | 468    |   |            |   | (34    | )          |   |   | (6.8 | ) |   |
| Data processing                      |   |                   | 185    |   |            |   | 2      |       |   |   | 1.1 |   |   |
| Gain on sale of OREO property, net   |   |                   | (128   | )      |            |   | 380    |       |   |   | 74.8 |   |   |
| OREO market value adjustments        |   |                   | 235    |   |            |   | (54    | )          |   |   | (18.7 | ) |   |
| OREO related expenses, net           |   |                   | 446    |   |            |   | (540   | )          |   |   | (54.8 | ) |   |
| Regulatory assessments               |   |                   | 314    |   |            |   | (298   | )          |   |   | (48.7 | ) |   |
| Insurance and bond premiums          |   |                   | 100    |   |            |   | (148   | )          |   |   | (59.7 | ) |   |
| Proxy contest and related litigation |   |                   | 604    |   |            |   | 604    |       |   |   | 100.0 |   |   |
| Marketing                            |   |                   | 61     |   |            |   | 11     |       |   |   | 22.0 |   |   |
| Other general and administrative     |   |                   | 438    |   |            |   | (3     | )          |   |   | (0.7 | ) |   |
| Total noninterest expense            |   | $                      | 6,569  |   |            | $      | 157    |       |   |   | 2.4 |   |   |

|                                 |   | Six Months             |   |   | Increase/       |   |   | Percentage |   |
|--------------------------------------|--------|------------------------|--------|--------|-----------------|--------|--------|------------|--------|
|                                 |   | Ended                  |   |   | (Decrease) from |   |   | Increase/  |   |
|                                 |   | June 30, 2012          |   |   | June 30, 2011   |   |   | (Decrease) |   |
|                                 |   | (Dollars in thousands) |
| Compensation and employee benefits   |   | $                      | 6,878  |   |            | $      | 375    |       |   |   | 5.8 | % |   |
| Occupancy and equipment              |   |                   | 800    |   |            |   | 3      |       |   |   | 0.4 |   |   |
| Professional fees                    |   |                   | 941    |   |            |   | (41    | )          |   |   | (4.2 | ) |   |
| Data processing                      |   |                   | 366    |   |            |   | (26    | )          |   |   | (6.6 | ) |   |
| Gain on sale of OREO property, net   |   |                   | (349   | )      |            |   | 785    |       |   |   | 69.2 |   |   |
| OREO market value adjustments        |   |                   | 545    |   |            |   | (372   | )          |   |   | (40.6 | ) |   |
| OREO related expenses, net           |   |                   | 935    |   |            |   | (901   | )          |   |   | (49.1 | ) |   |
| Regulatory assessments               |   |                   | 411    |   |            |   | (911   | )          |   |   | (68.9 | ) |   |
| Insurance and bond premiums          |   |                   | 200    |   |            |   | (295   | )          |   |   | (59.6 | ) |   |
| Proxy contest and related litigation |   |                   | 604    |   |            |   | 604    |       |   |   | 100.0 |   |   |
| Marketing                            |   |                   | 113    |   |            |   | 2      |       |   |   | 1.8 |   |   |
| Other general and administrative     |   |                   | 746    |   |            |   | (27    | )          |   |   | (3.5 | ) |   |
| Total noninterest expense            |   | $                      | 12,190 |   |            | $      | (804   | )          |   |   | (6.2 | ) |   |

----

----

|                                      |          |   |     | Amount of Commitment Expiration - Per Period |                     |
|-------------------------------------------|---------------|--------|----------|----------------------------------------------|--------------------------|
|                                      |          |   |     |                                         |                     |   | After One |   | After Three |   |   |   |   |
|                                      | Total Amounts |   | Through  |                                         | Through                  |   | Through |   | After |   |
|                                      | Committed     |   | One Year |                                         |    Three Years |   | Five Years |   | Five Years |   |
|                                      |          |   |     |                                         |                     |    (In thousands) |   |   |   |   |   |   |   |
| Commitments to originate loans            | $        |   | 7,634    |                                         | $                   |   | 7,634 |   | $  |   | - |   | $  |   | - |   | $  |   | - |   |
| Unused portion of lines of credit         |          |   | 7,895    |                                         |                     |   | 262 |   |   |   | 2,826 |   |   |   | 550 |   |   |   | 4,257 |   |
| Undisbursed portion of construction loans |          |   | 845      |                                         |                     |   | 845 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total commitments                         | $        |   | 16,374   |                                         | $                   |   | 8,741 |   | $  |   | 2,826 |   | $  |   | 550 |   | $  |   | 4,257 |   |

----

----

|                                                     | Net Interest Income Change at            |   |
|----------------------------------------------------------|------------------------------------------|--------|
|                                                     | June 30, 2012                            |   |
|                                                     |  Basis PointChange in Rates         |   | % Change |   |
|                                                     | +300                                     |   |                 8.24% |   |
|                                                     | +200                                     |   |              6.03 |   |
|                                                     | +100                                     |   |              3.70 |   |
|                                                     | Base                                     |   |              0.64 |   |
|                                                     | (100)                                    |   |              0.78 |   |
| (1)                                                      | (200)                                    |   |               N/A |   |
| (1)                                                      | (300)                                    |   |               N/A |   |
|                                                     |                                     |   |   |   |
| (1)   The current federal funds rate is 0.25%, |
|                                                     | making a 200 or 300 basis point decrease |
|                                                     | in rates impossible.                     |   |   |

----

| Basis Point            |   |                    |                            |                      |   |                                                                                                    |    |                                                                                        |          |   | Net Portfolio as % of                                       |   | Market     |
|------------------------|--------|-------------------------|---------------------------------|---------------------------|--------|---------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------|---------------|--------|-------------------------------------------------------------|--------|------------|
| Change in              |   | Net Portfolio Value (2) |                            | Portfolio Value of Assets |   | Value of                                                                                                |
| Rates (1)              |   | Amount                  |                            | $ Change (3)              |   | % Change                                                                                                |    |                                                                                        | NPV Ratio (4) |   | % Change (5)                                                |   | Assets (6) |
| (Dollars in thousands) |
| +300                   |   | $                       |     176,286 |                      | $      |     (44,897                                                                         | )  |        (20.30                                            | )%            |   |          18.21 | %      |       |          (4.31 | )% |   | $ |       968,257 |
| +200                   |   |                    |     194,462 |                      |   |     (26,721                                                                         | )  |        (12.08                                            | )        |   |          19.54 |   |       |          (2.56 | )  |   |   |       995,041 |
| +100                   |   |                    |     209,935 |                      |   |     (11,248                                                                         | )  |          (5.09                                 | )        |   |          20.58 |   |       |          (1.08 | )  |   |   |    1,019,894 |
| Base                   |   |                    |     221,183 |                      |   |                  - |    |                - |          |   |          21.23 |   |       |                - |   |   |   |    1,041,779 |
| (100)                  |   |                    |     244,295 |                      |   |       23,112                                                              |    |          10.45                                 |          |   |          22.79 |   |       |            2.22 |   |   |   |    1,071,916 |
| (200)                  | (1)    |                    | N/A                             |                      |   | N/A                                                                                                     |    | N/A                                                                                         |          |   | N/A                                                         |   |       |          N/A |   |   |   | N/A |
| (300)                  | (1)    |                    | N/A                             |                      |   | N/A                                                                                                     |    | N/A                                                                                         |          |   | N/A                                                         |   |       |          N/A |   |   |   | N/A |
|                                                                                                                     |                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| (1) The current federal funds rate is 0.25%, making a 200 and 300 basis point decrease impossible.                       |                                                                                                                    |   |   |   |
| (2) The net portfolio value is the difference between the present value of the discounted cash flows of assets and       |
|                                                                                                                     | liabilities and represents the market value of the Company's equity for any given interest rate scenario. Net           |
|                                                                                                                     | portfolio value is useful for determining, on a market value basis, how equity changes in response to various           |
|                                                                                                                     | interest rate scenarios. Large changes in net portfolio value reflect increased interest rate sensitivity and generally |
|                                                                                                                     | more volatile earnings streams.                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (3) The increase or decrease in the estimated net portfolio value at the indicated interest rates compared to the net    |
|                                                                                                                     | portfolio value, assuming no change in interest rates.                                                                  |   |   |   |   |   |   |   |   |   |   |
| (4) Net portfolio value divided by the market value of assets.                                                           |                                                                                                                    |   |   |   |   |   |   |   |   |   |
| (5) The increase or decrease in the net portfolio value divided by the market value of assets.                           |                                                                                                                    |   |   |   |
| (6) The market value of assets represents the value of assets under the various interest rate scenarios and reflects the |
|                                                                                                                     | sensitivity of those assets to interest rate changes.                                                                   |   |   |   |   |   |   |   |   |   |   |   |

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| (a)   | Evaluation of Disclosure Controls and Procedures: An evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) was carried out under the supervision and with the participation of our Chief Executive Officer, Chief Financial Officer (Principal Financial and Accounting Officer) and several other members of our senior management as of the end of the period covered by this report. Our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2012, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   | Changes in Internal Controls: In the quarter ended June 30, 2012, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|  3.1               |          | Articles of Incorporation of First Financial Northwest (1)                                                                                                                                                                                                                                         |
|----------------------------------------|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2                     |          | Amended and Restated Bylaws of First Financial Northwest (2)                                                                                                                                                                                                                                       |
| 4        |          | Form of stock certificate of First Financial Northwest (1)                                                                                                                                                                                                                                         |
| 10.1                         |          | Form of Employment Agreement for President and Chief Executive Officer (1)                                                                                                                                                                                                                         |
| 10.2                         |          | Form of Change in Control Severance Agreement for Executive Officers (1)                                                                                                                                                                                                                           |
| 10.3                              |          | Form of First Savings Bank Employee Severance Compensation Plan (1)                                                                                                                                                                                                                                |
| 10.4                              |          | Form of Supplemental Executive Retirement Agreement entered into by First Savings Bank with Victor Karpiak, Harry A. Blencoe and Robert H. Gagnier (1)                                                                                                                                                  |
| 10.5                              |          | Form of Financial Institutions Retirement Fund (1)                                                                                                                                                                                                                                                 |
| 10.6                         |          | Form of 401(k) Retirement Plan (3)                                                                                                                                                                                                                                                                 |
| 10.7                              |          | 2008 Equity Incentive Plan (4)                                                                                                                                                                                                                                                                     |
| 10.8                         |          | Forms of incentive and non-qualified stock option award agreements (5)                                                                                                                                                                                                                             |
| 10.9                              |          | Form of restricted stock award agreement (5)                                                                                                                                                                                                                                                       |
| 14                 |          | Code of Business Conduct and Ethics (6)                                                                                                                                                                                                                                                            |
| 21                 |          | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                     |
| 31.1                              |          | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                                                                                                                                                                                                         |
| 31.2                         |          | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                                                                                                                                                                                                         |
| 32            |     | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act                                                                                                                                                                                  |
| 101                          |          | The following materials from First Financial Northwest’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Income Statements; (3) Consolidated Statements of  |

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|   |   |  Comprehensive Income; (4) Consolidated Statements of Changes in Stockholders’ Equity; (5) Consolidated Statements of Cash Flows; and (6) Selected Notes to Consolidated Financial Statements.* |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ________________________________________ |
|--------|------------------------------------------|

| (1)   | Filed as an exhibit to First Financial Northwest’s Registration Statement on Form S-1 (333-143549). |
|-----------------|-----------------------------------------------------------------------------------------------------------|

| (2)   | Filed as an exhibit to First Financial Northwest’s Current Report on Form 8-K dated March 22, 2012. |
|-----------------|-----------------------------------------------------------------------------------------------------------|

|   | (3)   | Filed as an exhibit to First Financial Northwest’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 and incorporated herein by reference. |
|--------|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4)   | Filed as Appendix A to First Financial Northwest’s definitive proxy statement dated April 15, 2008. |
|--------|-----------------|-----------------------------------------------------------------------------------------------------------|

|   | (5)   | Filed as an exhibit to First Financial Northwest’s Current Report on Form 8-K dated July 1, 2008. |
|--------|-----------------|---------------------------------------------------------------------------------------------------------|

|   | (6)   | Registrant elects to satisfy Regulation S-K §229.406 (c) by posting its code of ethics on its website at www.fsbnw.com. |
|--------|-----------------|------------------------------------------------------------------------------------------------------------------------------|

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|                             | First Financial Northwest, Inc.                                                                                                                                                                                                                                                                             |
|----------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |                                                                                                                                                                                                                                                                                                             |
|                             |                                                                                                                                                                                                                                                                                                             |
| Date: August 7, 2012   | /s/Victor Karpiak                                                                         |
|                             | Victor Karpiak                                                                                                                                                                                                                                                                                                   |
|                             | Chairman of the Board, President andChief Executive Officer(Principal Executive Officer)                                                                                                                                                                                                                         |
|                             |                                                                                                                                                                                                                                                                                                             |
|                             |                                                                                                                                                                                                                                                                                                             |
| Date: August 7, 2012   | /s/Kari Stenslie                                                 |
|                             | Kari Stenslie                                                                                                                                                                                                                                                                                                    |
|                             | Chief Financial Officer                                                                                                                                                                                                                                                                                     |
|                             | (Principal Financial and Accounting Officer)                                                                                                                                                                                                                                                                |

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| EXHIBIT INDEX |
|---------------|

| 31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act                                                |
|------|-------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 | Certification of Chief Financial Officer and Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act |
| 32   | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act                    |

| 101 | The following materials from First Financial Northwest’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in Extensible Business Reporting Language XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Income Statements; (3) Consolidated Statements of Comprehensive Income; (4) Consolidated Statements of Changes in Stockholders’ Equity; (5) Consolidated Statements of Cash Flows; and (6) Selected Notes to Consolidated Financial Statements.* |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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