First Northwest Bancorp Reports?Second?Quarter 2024?Financial Results

BY GlobeNewswire | MUNICIPAL | 07/25/24 07:00 AM EDT

PORT ANGELES, Wash., July 25, 2024 (GLOBE NEWSWIRE) -- "In spite of challenging times for the entire industry as a result of the rate environment, First Northwest executed on a balance sheet restructure strategy. The restructure?included?a sale-leaseback transaction for six of our branches, a restructure of our bank-owned life insurance policies, two securities loss sale transactions, two balance sheet hedges against fixed rate loans and municipal bonds and the sale of our Visa B shares," commented Matthew P. Deines, President and CEO.?"As a result, we reached an inflection point for the net interest margin in the second quarter after declines for the preceding five quarters.?We also reduced wholesale funding reliance in the current quarter, and today are announcing significant expense reduction through a reduction in force which we expect will positively impact earnings in the second half of 2024 and into 2025. We still have substantial work to do in order to produce stronger earnings.?However, we believe we have laid the groundwork for improved earnings moving forward as lower yielding assets reprice, payoff and paydown in line with contractual commitments.

"First Northwest continues our efforts to deemphasize real estate lending to focus on generating loans and deposits from small-to-medium sized businesses in our markets.?Year-to-date in 2024, real estate loans are essentially flat, while non-real estate loans increased by 12%, or approximately $44 million. We believe that this diversification strategy will decrease interest rate risk and will allow us to build stronger relationships with businesses in our footprint.?

"There was a substantial increase to our provision for credit losses this quarter. This was related to two borrowing relationships which we have been managing closely since the beginning of 2023.?We have appointed a receiver for both relationships and we are working to resolve these problem assets as quickly as possible."

The Board of Directors of First Northwest Bancorp (FNWB) declared a quarterly cash dividend of?$0.07 per common share. The dividend will be payable on August 23, 2024, to shareholders of record as of the close of business on August 9, 2024.

2024 FINANCIAL RESULTS

2Q 24

1Q 24

2Q 23

2024 YTD

2023 YTD

OPERATING RESULTS (in millions)

Net income

1.4

0.4

1.8

5.3

Pre-provision net interest income

14.3

13.9

16.0

28.2

32.3

Noninterest expense

15.6

14.3

15.2

29.9

30.1

Total revenue, net of interest expense *

21.6

16.1

17.7

37.7

36.3

PER SHARE DATA

Basic and diluted earnings

0.16

0.04

0.20

0.59

Book value

17.19

17.00

16.56

17.19

16.56

Tangible book value *

17.02

16.83

16.39

17.02

16.39

BALANCE SHEET (in millions)

Total assets

2,220

2,240

2,163

2,220

2,163

Total loans

1,705

1,711

1,638

1,705

1,638

Total deposits

1,708

1,667

1,653

1,708

1,653

Total shareholders' equity

163

161

160

163

160

ASSET QUALITY

Net charge-off ratio ⁽¹⁾

0.15

0.19

0.10

0.17

0.05

Nonperforming assets to total assets

1.36

0.87

0.12

1.36

0.12

Allowance for credit losses on loans

to total loans

1.26

1.05

1.06

1.26

1.06

Nonaccrual loan coverage ratio

677

SELECTED RATIOS

Return on average assets ⁽¹⁾

0.26

0.07

0.34

0.17

0.51

Return on average equity ⁽¹⁾

3.50

0.98

4.41

2.24

6.67

Return on average tangible equity ⁽¹⁾ *

3.53

0.99

4.47

2.27

6.75

Net interest margin

2.77

2.76

3.25

2.76

3.35

Efficiency ratio

72.27

88.75

86.01

79.31

82.81

Bank common equity tier 1 (CETI) ratio

12.55

12.56

13.10

12.55

13.10

Bank total risk-based capital ratio

13.76

13.57

14.08

13.76

14.08

(1)??Performance ratios are annualized, where appropriate.
*?See reconciliation of Non-GAAP Financial Measures later in this release.

?	2024 Significant Items
??	First?Fed Bank ("First Fed" or "Bank") made progress on restructuring the balance sheet in the second quarter, resulting in an?improved yield on earning assets.
?	-? Sale-leaseback transaction completed in the second quarter, resulting in a $7.9 million gain on sale of premises and equipment.
?	-? Sold?$23.2 million of lower-yielding security investments which resulted in a?$2.1 million loss on sale during the?second quarter.
?	-? Purchased?$53.3 million of higher-yielding security investments year-to-date.
?	-? Continued conversion of lower-yielding bank-owned life insurance ("BOLI") with one conversion completed in the first quarter and two additional policy restructures expected to be completed in the third and fourth quarters.
?	-? Improved earning assets yield by?14?basis points over the prior quarter to 5.56%.
??	Net interest margin increased over the prior quarter from 2.76% to 2.77% after decreasing for the past five quarters.
??	Loan mix shifted away from construction and commercial real estate in the second quarter.?The weighted-average rate on new loans was 8.2% at June 30, 2024.
??	Borrowings decreased $68.9 million, or 18.5%, to $302.6 million at June 30, 2024, compared to $371.5 million at March 31, 2024.
?	Repurchased 214,132 shares of Company stock during the first quarter, which closed out the October 2020 Stock Repurchase Plan.
?	New share repurchase plan approved in April 2024 authorizing the repurchase of 10%, or?944,279,?of authorized and outstanding shares.
?	Deposit growth of $41.7 million, or 2.5% during the second quarter to $1.71 billion.
?	Estimated insured deposits totaled $1.3 billion, or 76% of total deposits at June 30, 2024.?Available liquidity to uninsured deposit coverage remains strong at 1.4x at June 30, 2024.
?	Classified loans increased to 2.7% of total loans at June 30, 2024, compared to 2.1% at December 31, 2023.
?	Nonperforming assets increased $10.8 million during the second quarter mainly due to credit concerns on one commercial construction project.
??	Provision for credit losses of $4.2 million taken in the second quarter related to reserves taken on previously identified substandard lending relationships.
??	Completed a reduction-in-force impacting 9% of our workforce on July 24, 2024. This action, along year-to-date headcount management through attrition, is expected to result in a reduction in current levels of compensation expense by approximately $1.0 million a quarter starting in the fourth quarter of 2024.
?	?

First Northwest Bancorp (FNWB) ?("First Northwest" or "Company") today reported net income of?$1.4 million?for the?second quarter of 2024, compared to?$396,000 for the?first quarter of 2024?and $1.8 million?for the second quarter of 2023. Basic and diluted income per share were $0.16?for the?second quarter of 2024, compared to $0.04?for the?first quarter of 2024?and $0.20?for the second quarter of 2023. In the second quarter of 2024, the Company generated a return on average assets?of 0.26%, a return on average equity of?3.50%?and a return on average tangible common equity* of 3.53%.?Income before provision for income taxes?was?$1.8 million for the current quarter, compared to $843,000 for the preceding quarter, an increase of $909,000, or 107.8%, and decreased?$424,000?compared to income of?$2.2 million?for the second quarter of 2023.

The Bank continued efforts to restructure the balance sheet to improve earnings, which started in the fourth quarter of 2023. The Bank completed a sale-leaseback transaction involving?six branch locations in May 2024. The sale of the branches resulted in a $7.9 million gain on sale of premises and equipment recorded during the second quarter of 2024. Monthly rent expense increased?$130,000 as a result of the leaseback for an annual estimated increase of $1.6 million, partially offset by a $204,000 annual reduction to depreciation expense.

Investment security purchases during the?second quarter of 2024 totaled $7.8 million, carrying an estimated weighted-average yield of?6.7% with a weighted-average life of?3.6 years.?The Bank sold?$23.2 million of securities with an average yield of?3.1% during the second quarter of 2024. Proceeds of?$21.1 million were used to pay down borrowings carrying an average rate of 5.5%.

The fair value hedge on loans, tied to the compounded overnight index swap using the secured overnight financing rate index,?established in the first quarter of 2024 added $551,000 to interest income year-to-date. The fair value hedge on loans reduces interest rate risk by reducing liability sensitivity while increasing interest income. We estimate that if rates remain unchanged, this hedge will add $1.4?million of annualized interest income in 2024. The estimated?impact will be reduced if the Federal Reserve implements rate cuts during the year. The Bank should maintain a positive carry on its derivative for up to five rate cuts.

The balance sheet restructure plan also includes the surrender of $22.5 million and exchange of $3.5 million of existing BOLI contracts to reinvest in higher yielding products. The first-year revenue increase?will be partially offset by taxes on surrender values and charges on exchanged contracts. The first $6.1?million policy earning 2.58% was surrendered during the first quarter and reinvested into a policy earning 5.18%. The remaining surrender transactions are expected to be completed by the end of the fourth quarter of 2024.

Net Interest Income
Total interest income increased?$1.3 million to?$28.6 million for the second quarter of 2024, compared to?$27.3 million in the previous quarter, and increased?$3.2 million compared to?$25.5 million in the second quarter of 2023. Interest income increased in the current quarter due to higher yields on loans and?investments combined with an increased volume in both categories. Interest and fees?on loans increased year-over-year?as the loan portfolio grew as a result of draws on new and existing lines of credit,?originations of commercial real estate, commercial business and home equity loans, and auto and manufactured home loan purchases. Loan yields increased over the prior year due to higher rates on new originations as well as the repricing of variable and adjustable-rate loans tied to the Prime Rate or other indices.

Total interest expense increased?$978,000?to?$14.4 million?for the second quarter of 2024, compared to?$13.4 million?in the?first quarter of 2024, and increased $4.9 million?compared to?$9.5 million?in the?second quarter of 2023. Interest expense for the current quarter was higher due to a?4?basis point increase in the cost of deposits to 2.47%?for the quarter ended?June 30, 2024, from?2.43%?for the prior quarter as a result of customers shifting?deposit balances into higher paying products. While the cost of deposits continued to rise during the current quarter, it is significantly lower than the 31 basis point increase reported during the first quarter of 2024. The increase over the?second quarter of 2023 was the result of a?93?basis point increase in the cost of deposits from?1.54%?in the?second quarter one year ago. A shift in the deposit mix from transaction and savings accounts to money market accounts and CDs also added to the higher cost?of deposits compared to the second quarter of 2023. Higher costs of brokered CDs also contributed to additional deposit costs with a 150 basis point increase to 4.94%?for the current quarter compared to 3.44%?for the second quarter one year ago.

Net interest income?before provision for credit losses?for the?second quarter of 2024?increased?$323,000, or?2.3%, to $14.3 million, compared to?$13.9 million for the preceding quarter, and decreased?$1.7 million, or?10.8%, from the?second quarter one?year ago.

The Company recorded a?$4.2 million provision for credit losses in the second quarter of 2024, primarily due to reserves taken on individually evaluated loans, charge-offs from the Splash unsecured consumer loan program and an increase in the estimated pooled loss rates used in the Current Expected Credit Loss model. Decreases attributable to the loss factors applied to home equity lines of credit, commercial real estate and consumer loans at quarter end were offset by increases to the loss factors applied to one-to-four family, commercial business?and multi-family loans.?Higher loss factors and a moderate increase in commitment balances also resulted in a provision for credit losses on unfunded commitments at quarter end.?This compares to a credit loss provision?of $970,000?for the preceding quarter and a provision of?$300,000 for the second quarter of 2023.

The net interest margin increased to?2.77%?for the second quarter of 2024, from 2.76%?for the prior quarter, and decreased?48 basis points from?3.25%?for?the second quarter of 2023. The increase over the linked quarter is reflective of higher yields received on increased volumes of loans and investments outpacing an increased cost?on a higher volume?of borrowings.?The decrease in net interest margin?from the same quarter one year ago is due to higher funding costs for?deposits and borrowed funds. The weighted-average yield on new loan originations was 8.24%,?which partially offset the increase in the cost of funds. Organic loan production comprised 60% of new loan commitments?for the second quarter with the remaining 40% added through purchases of higher-yielding loans from established third-party relationships. The Bank's fair value hedging agreements on securities and loans added $174,000 and $378,000, respectively, to interest income for the second quarter of 2024.

The yield on average earning assets for the second quarter of 2024?increased?14 basis points to 5.56%?compared to?the first quarter of 2024?and increased?39?basis points from?5.17%?for the second quarter of 2023. The second quarter increase is attributable to higher loan volume and rates at origination and increased yields on variable-rate loans. The yield on investment securities was positively impacted by higher rates and increased volume as a result of the securities restructuring.?The year-over-year increase in interest income was primarily due to higher average loan balances augmented by increases in yields on all earning assets, which were positively impacted by the rising rate environment.

The cost of average interest-bearing liabilities increased?14 basis points to?3.28%?for the second quarter of 2024, compared to?3.14% for the first quarter of 2024, and increased?95 basis points from?2.33%?for the second quarter of 2023.?Total cost of funds increased to?2.87%?for the?second quarter of 2024 from?2.74% in the prior quarter?and increased?from?1.98%?for the second quarter of 2023.

Current quarter increases were due to higher costs on interest-bearing customer deposits due to competitive pressures related to continued higher market rates and migration from lower costing deposits to higher yield money market accounts. The average brokered CDs balance increased $3.6 million from the linked quarter with no change in the average rate paid.

The increase over the same quarter last year was driven?by higher rates paid on deposits and borrowings and higher average CD balances. The Company attracted and retained?funding through the use of promotional products and a focus on digital account acquisition during 2023. The mix of retail deposit balances shifted from no or low-cost transaction accounts towards higher cost term certificate and higher yield money market and savings products. Retail CDs represented 26.8%, 28.4%?and 25.8%?of retail deposits at June 30, 2024, March 31, 2024?and June 30, 2023, respectively.?Average interest-bearing deposit balances increased?$14.1 million, or 1.0%, to $1.41 billion?for the second quarter of 2024 compared to the first quarter of 2024 and increased $74.0 million, or 5.6%, compared to $1.33 billion?for the second quarter of 2023.

Selected Yields

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Loan yield

5.62

5.51

5.38

5.31

5.38

Investment securities yield

5.01

4.75

4.53

4.18

4.09

Cost of interest-bearing deposits

2.91

2.86

2.52

2.22

1.87

Cost of total deposits

2.47

2.43

2.12

1.85

1.54

Cost of borrowed funds

4.76

4.52

4.50

4.45

4.36

Net interest spread

2.28

2.40

2.54

2.84

Net interest margin

2.77

2.76

2.84

2.97

3.25

Noninterest Income
Noninterest income increased?to $7.4 million for the?second quarter of 2024?compared to $2.2 million for the?first quarter of 2024. A sale-leaseback transaction involving six branch properties?was completed in?the second quarter of 2024, resulting in a gain on sale of premises and equipment of $7.9 million. The Bank also sold lower-yielding securities which resulted in a recorded loss of $2.1 million in the current quarter. The proceeds from these activities were used to pay down higher-cost borrowings. Income from the gain on sale of loans in the current quarter includes $116,000 from SBA loans.

Noninterest income increased 329.4%?from $1.7 million?in the same quarter one year ago, primarily due to the sale-leaseback and security sales transactions described above.

Noninterest Income

$ in thousands

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Loan and deposit service fees

1,076

1,102

1,068

1,064

Sold loan servicing fees and servicing rights mark-to-market

219

276

(191

)

Net gain on sale of loans

150

171

Net (loss) gain on sale of investment securities

(2,117

)

(5,397

)

Net gain on sale of premises and equipment

7,919

Increase in cash surrender value of bank-owned life insurance

293

243

260

252

190

Other income

(48

)

572

831

1,315

590

Total noninterest income

7,347

2,188

(2,929

)

2,904

1,711

Noninterest Expense
Noninterest expense totaled?$15.6 million for the second quarter of 2024, compared to?$14.3 million for the preceding quarter and?$15.2 million for the second quarter a year ago. Increases were primarily due to incentive compensation of $436,000, a one-time tax assessment on the sale-leaseback?of $359,000?and additional rent expense of $239,000 for the six properties sold in the sale-leaseback transaction.?Other expense increased this quarter due to the one-time entry?recorded in the first quarter of 2024?of?$218,000 reducing the expense accrued for a civil money penalty.?Current quarter decreases included a reduction in legal fees of $116,000, auditing services of $52,000 and consulting fees of $58,000.

The increase in total noninterest expenses compared to the?second quarter of 2023?is mainly due to higher incentive compensation of $133,000, payroll taxes of $175,000, tax on the sale-leaseback of $359,000 and?additional rent of $239,000,?partially offset by?lower advertising costs of $552,000, legal fees of $149,000 and consulting fees of $124,000. The Company continues to focus?on controlling compensation expense?and reducing advertising and other discretionary spending while higher market rates and an inverted yield curve persists, which are outside forces actively compressing the net interest margin.

Noninterest Expense

$ in thousands

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Compensation and benefits

8,588

8,128

7,397

7,795

8,180

Data processing

2,008

1,944

2,107

1,945

2,080

Occupancy and equipment

1,799

1,240

1,262

1,173

1,214

Supplies, postage, and telephone

317

293

351

292

435

Regulatory assessments and state taxes

457

513

376

446

424

Advertising

377

309

235

501

929

Professional fees

684

910

1,119

929

884

FDIC insurance premium

473

386

418

369

313

Other expense

906

580

3,725

926

758

Total noninterest expense

15,609

14,303

16,990

14,376

15,217

Efficiency ratio

72.27

88.75

150.81

80.52

86.01

Investment Securities
Investment securities decreased?$19.2 million, or 5.9%, to?$306.7 million at June 30, 2024, compared to?$326.0 million three months earlier, and decreased?$15.3 million compared to?$322.0 million at June 30, 2023.?The Bank sold?$23.2 million of lower-yielding securities?and purchased?$7.5?million, at higher rates,?during the second quarter of 2024. The market value of the portfolio increased $848,000 during the?second quarter of 2024?primarily due to changes in portfolio mix.?At June 30, 2024, municipal bonds totaled $78.8?million and comprised the largest portion of the investment portfolio at 25.7%. Agency issued mortgage-backed securities ("MBS agency") were the second largest segment, totaling $77.3?million,?or 25.2%, of the portfolio at quarter end. Included in MBS non-agency are $29.8?million of commercial mortgaged-backed securities ("CMBS"), of which 89.8% are in "A" tranches and the remaining 10.2% are in "B" tranches. Our largest exposure in the CMBS portfolio is to long-term care facilities, which comprises 65.2%, or $19.4?million,?of our private label CMBS securities.?All of the CMBS bonds have credit enhancements ranging from 28.8% to 99.8%, with a weighted-average credit enhancement of 55.2%,?that further reduces the risk of loss on these investments.

The estimated average life of the securities portfolio was approximately?7.8?years at the current quarter end, the prior quarter and?the second quarter of 2023. The effective duration of the portfolio was approximately 4.3 years at June 30, 2024, compared to 4.4?years in the prior quarter and 5.2?years at the end of the?second quarter of 2023. Our recent investments have primarily been floating rate securities to take advantage of higher short-term rates above those offered on cash?and to reduce our liability sensitivity.

Investment Securities Available for Sale, at Fair Value

$ in thousands

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Municipal bonds

78,825

87,004

87,761

93,995

100,503

U.S. Treasury notes

2,377

2,364

International agency issued bonds (Agency bonds)

1,703

1,717

U.S. government agency issued asset-backed securities (ABS agency)

13,982

14,822

11,782

Corporate issued asset-backed securities (ABS corporate)

16,483

13,929

5,286

Corporate issued debt securities (Corporate debt):

Senior positions

9,066

13,617

9,270

16,975

16,934

Subordinated bank notes

43,826

39,414

42,184

37,360

36,740

U.S. Small Business Administration securities (SBA)

9,772

7,911

Mortgage-backed securities:

U.S. government agency issued mortgage-backed securities (MBS agency)

77,301

83,271

63,247

66,946

71,565

Non-agency issued mortgage-backed securities (MBS non-agency)

57,459

65,987

76,093

89,968

92,140

Total securities available for sale, at fair value

306,714

325,955

295,623

309,324

321,963

Loans and Unfunded Loan Commitments
Net loans, excluding loans held for sale, decreased $10.5 million, or 0.6%, to $1.68 billion at June 30, 2024, from?$1.69 billion at March 31, 2024, and increased $61.4 million, or 3.8%, from?$1.62 billion?one year ago.

Auto and other consumer loans increased $16.8?million?during the current quarter with $12.7?million of new Woodside auto loan purchases, $9.9 million of First Help auto loan purchases and Triad manufactured home loan purchases?totaling $8.1?million, partially offset by payments.?Multi-family loans increased $10.5?million during the current quarter. The increase was primarily the result of $12.7?million of construction loans converting into permanent amortizing loans, partially offset by scheduled payments. One-to-four family loans increased $6.0?million?during the current quarter as a result of $12.0?million in residential construction loans that converted to permanent amortizing loans, partially offset by payments.?Home equity loans increased $222,000?over the previous quarter due to organic home equity loan production of $2.1 million and draws on new and existing commitments offset by payments.

Commercial business loans decreased $16.5?million, primarily attributable to payment activity and a $5.8 million decrease in our Northpointe Bank Mortgage Purchase Program participation which were partially offset by organic originations totaling $6.9 million and draws on existing lines of credit of $3.3 million. Construction loans decreased $14.1?million during the quarter, with $25.4 million converting?into fully amortizing loans, partially offset by draws on new and existing loans.?New single-family residence construction loan commitments totaled?$2.7 million in the second quarter, compared to?$1.9 million in the preceding quarter.?Commercial real estate loans decreased $9.6?million?during the current quarter?compared to the previous quarter as payoffs and scheduled payments exceeded?originations of $4.5 million.

The Company originated?$5.0 million in residential mortgages during the?second quarter of 2023?and sold $4.9 million, with an average gross margin on sale of mortgage loans of approximately 2.05%. This production compares to residential mortgage originations of?$5.0 million in the preceding quarter with sales of $5.2 million, and an average gross margin of 2.16%. Single-family home inventory remains historically low and?higher market rates on mortgage?loans continue?to limit saleable mortgage loan production.

Loans by Collateral and Unfunded Commitments

$ in thousands

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

One-to-four family construction

53,418

70,100

60,211

72,991

74,787

All other construction and land

58,346

55,286

69,484

71,092

81,968

One-to-four family first mortgage

434,840

436,543

426,159

409,207

428,879

One-to-four family junior liens

13,706

12,608

12,250

12,859

11,956

One-to-four family revolving open-end

44,803

45,536

42,479

38,413

33,658

Commercial real estate, owner occupied:

Health care

29,678

29,946

22,523

22,677

23,157

Office

19,215

17,951

18,468

18,599

18,797

Warehouse

14,613

14,683

14,758

14,890

15,158

Other

56,292

55,063

61,304

57,414

60,054

Commercial real estate, non-owner occupied:

Office

50,158

53,099

53,548

53,879

54,926

Retail

50,101

50,478

51,384

51,466

51,824

Hospitality

62,628

66,982

67,332

61,339

53,416

Other

84,428

93,040

94,822

96,083

90,870

Multi-family residential

350,382

339,907

333,428

325,338

296,398

Commercial business loans

81,714

90,781

76,920

75,068

80,079

Commercial agriculture and fishing loans

14,411

10,200

5,422

4,437

7,844

State and political subdivision obligations

405

439

Consumer automobile loans

151,121

139,524

132,877

134,695

137,860

Consumer loans secured by other assets

129,293

122,895

108,542

104,999

105,653

Consumer loans unsecured

5,209

6,415

7,712

9,093

10,437

Total loans

1,704,761

1,711,442

1,660,028

1,634,978

1,638,160

Unfunded commitments under lines of credit or existing loans

155,005

148,736

149,631

154,722

168,668

Deposits
Total deposits increased $41.7 million?to?$1.71 billion at June 30, 2024, compared to?$1.67 billion at March 31, 2024, and increased $55.2 million, or 3.3%, compared to?$1.65 billion?one year ago. During?second quarter of 2024, total retail customer deposit balances?increased $10.2 million and brokered deposit balances increased $31.5?million. Compared to the preceding quarter, there were balance?increases?in?brokered CDs of $31.5?million, business demand accounts of $20.9 million, business money market accounts of $18.3?million and?consumer money market accounts of $9.3?million. These increases?were partially offset by?decreases in?consumer CDs of $18.1?million, consumer?savings accounts of $7.8?million, consumer demand accounts of $5.6?million, business savings accounts of $4.2 million, business CDs of $2.0 million, and public fund CDs?of $664,000,?during the?second quarter of 2024. Increases in demand and money market accounts were driven by customer behavior as they sought out?higher rates offered as CD specials matured. Overall, the current rate environment continues to contribute?to greater competition for deposits with additional deposit rate specials offered to attract new funds.

The Company estimates that $328.4 million, or 24%, of total deposit balances were uninsured at June 30, 2024. Approximately $272.7 million, or 16%,?of total deposits?were uninsured business and consumer deposits with the remaining $134.1?million, or 8%, consisting of uninsured?public funds at June 30, 2024. Uninsured public fund balances were fully collateralized. The Bank holds an FHLB standby letter of credit as part of our participation in the Washington Public Deposit Protection Commission program which covered?$116.6?million?of related deposit balances while the remaining $17.5?million was fully covered through pledged securities at June 30, 2024.

As of June 30, 2024, consumer deposits made up 57% of total deposits with an average balance of $23,000 per account,?business deposits made?up 22% of total deposits with an average balance of $53,000 per account, public fund deposits made up 8% of total deposits with an average balance of $1.6?million per account and the remaining 13% of account balances are brokered CDs. We have maintained the majority of our public fund relationships for over 10 years. Approximately 68% of our customer base is located in rural areas, with 19% in urban areas and the remaining 13% are brokered deposits as of June 30, 2024.

Deposits

$ in thousands

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Noninterest-bearing demand deposits

276,543

252,083

269,800

280,475

292,119

Interest-bearing demand deposits

162,201

169,418

182,361

179,029

189,187

Money market accounts

423,047

362,205

372,706

374,269

402,760

Savings accounts

224,631

242,148

253,182

260,279

242,117

Certificates of deposit, retail

398,161

443,412

410,136

379,484

333,510

Total retail deposits

1,484,583

1,469,266

1,488,185

1,473,536

1,459,693

Certificates of deposit, brokered

223,705

207,626

169,577

179,586

134,515

Total deposits

1,708,288

1,676,892

1,657,762

1,653,122

1,594,208

Public fund and tribal deposits included in total deposits

138,439

132,652

128,627

130,974

119,969

Total loans to total deposits

100

102

100

103

Deposit Mix

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Noninterest-bearing demand deposits

16.2

15.0

16.3

17.0

18.3

Interest-bearing demand deposits

9.5

10.1

11.0

10.8

11.9

Money market accounts

24.8

21.6

22.5

22.6

25.3

Savings accounts

13.1

14.4

15.3

15.7

15.2

Certificates of deposit, retail

23.3

26.5

24.7

23.0

20.9

Certificates of deposit, brokered

13.1

12.4

10.2

10.9

8.4

Cost of Deposits for the Quarter Ended

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Interest-bearing demand deposits

0.47

0.45

0.46

0.45

Money market accounts

2.40

2.08

1.48

1.22

0.99

Savings accounts

1.62

1.63

1.54

1.42

1.22

Certificates of deposit, retail

4.10

4.13

3.92

3.52

3.25

Certificates of deposit, brokered

4.94

4.72

4.31

3.44

Cost of total deposits

2.47

2.43

2.12

1.85

1.54

Asset Quality
The allowance for credit losses on loans ("ACLL") increased $3.5 million from $18.0 million?at?March 31, 2024, to $21.5 million at June 30, 2024. The ACLL as a percentage of total loans was?1.26% at June 30, 2024, increasing from 1.05% at March 31, 2024, and from?1.06% one year earlier. The current quarter increase can be attributed to reserves taken on individually evaluated loans and?an increase to the loss factors applied as a result of the current economic forecast.

Nonperforming loans totaled?$30.3 million at June 30, 2024, an increase of?$10.8 million from?March 31, 2024, primarily attributable to a $8.1 million commercial construction loan placed on nonaccrual due to credit concerns during the current quarter,?a $733,000 increase to a commercial construction relationship previously placed on nonaccrual, two delinquent commercial business loans with an aggregate total of?$1.8?million, a $535,000 delinquent purchased one-to-four family loan and three delinquent auto loans totaling $406,000.?The percentage of the allowance for credit losses on loans to nonperforming loans decreased to?71%?at June 30, 2024, from?92%?at March 31, 2024, and from?677%?at June 30, 2023. This ratio continues to decline as higher balances of real estate loans are included in nonperforming assets with no significant corresponding increase to the ACLL as these loans are considered adequately collateralized.

Classified loans increased?$11.3 million to?$46.4 million at June 30, 2024, due to the downgrade?of the five loans noted above during the?second quarter. A $15.2?million construction loan relationship, which became a classified loan?in the fourth quarter of 2022; a $9.2?million commercial loan relationship which became classified in the fourth quarter of 2023; and the $8.1 million commercial construction loan relationship which became classified in the current quarter, account for 70% of the classified loan balance at June 30, 2024.?The Bank has exercised legal remedies, including the appointment of a third-party receivership and foreclosure actions, to liquidate the underlying collateral to satisfy the?real estate loans in these three collateral dependent?relationships.

$ in thousands

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Allowance for credit losses on loans to total loans

1.26

1.05

1.04

1.06

Allowance for credit losses on loans to nonaccrual loans

714

677

Nonaccrual loans to total loans

1.78

1.14

1.12

0.15

0.16

Net charge-off ratio (annualized)

0.15

0.19

0.14

0.30

0.10

Total nonaccrual loans

30,268

19,481

18,644

2,374

2,554

Reserve for unfunded commitments

647

548

817

828

1,336

Capital
Total shareholders? equity increased to $162.5 million?at June 30, 2024, compared to?$160.5 million three months earlier, due to net income of $1.4 million, an increase in the after-tax fair market values of the available-for-sale?investment securities portfolio and derivatives of $666,000 and $173,000, respectively, partially offset by dividends declared of $662,000.

Book value per common share?was?$17.19?at June 30, 2024, compared to?$17.00?at March 31, 2024, and?$16.56?at June 30, 2023. Tangible book value per common share*?was?$17.02?at June 30, 2024, compared to?$16.83?at March 31, 2024, and?$16.39?at June 30, 2023.

Capital levels for both the Company and its operating bank, First Fed, remain in excess of applicable regulatory requirements and the Bank was categorized as "well-capitalized" at June 30, 2024. Common Equity Tier 1 and Total Risk-Based Capital Ratios at June 30, 2024, were?12.6% and?13.8%, respectively.

2Q 24

1Q 24

4Q 23

3Q 23

2Q 23

Equity to total assets

7.32

7.17

7.42

7.25

7.38

Tangible common equity to tangible assets *

7.25

7.10

7.35

7.17

7.31

Capital ratios (First Fed Bank):

Tier 1 leverage

9.55

9.74

9.90

10.12

10.16

Common equity Tier 1 capital

12.55

12.56

13.12

13.43

13.10

Tier 1 risk-based

12.55

12.56

13.12

13.43

13.10

Total risk-based

13.76

13.57

14.11

14.38

14.08

Additional Initiatives?
First Northwest approved a new share repurchase plan in an ongoing effort return capital to our shareholders in the second quarter of 2024. The Company's Board of Directors authorized the repurchase of 944,279 shares through such new share repurchase plan ("April 2024?Stock Repurchase Plan"). Cash dividends totaling?$670,000?were paid in the second quarter of 2024.

^*?See reconciliation of Non-GAAP Financial Measures later in this release.

Awards/Recognition
The Company received several accolades as a leader in the community in the last year.

Image: Best of the Northwest ?	In October 2023, the First Fed team was honored to bring home the Gold for Best Bank in the Best of the Northwest survey hosted by Bellingham Alive?for the second year in a row.
? Image: 2023 Best of Olympic Peninsula	In September 2023, the First Fed team was recognized in the 2023 Best of Olympic Peninsula surveys, winning Best Bank and Best Financial Advisor in Clallam County. First Fed was also a finalist for Best Bank in Jefferson County, Best Employer in Kitsap County and Best Bank and Best Financial Institution in Bainbridge.
Image: Puget Sound Business Journal?s Best Workplaces ?	In June 2023,?First Fed was named on the Puget Sound Business Journal?s Best Workplaces list. First Fed has been recognized as one the top 100 workplaces in Washington, as voted?for two years in row by each company?s own employees.
? Image: Puget Sound Business Journal Top Corporate Citizen	In May 2023, First Fed was recognized as a Top Corporate Citizen by the Puget Sound Business Journal. The Corporate Citizenship Awards honors local corporate philanthropists and companies making significant contributions in the region. The top 25 small, medium and large-sized companies were recognized in addition to nine other honorees last year. First Fed was ranked #1?in the medium-sized company category in 2023 and was ranked #3 in the same category in 2022.
?	?

About the Company
First Northwest Bancorp (FNWB) is a financial holding company engaged in investment activities including the business of its subsidiary, First Fed Bank. First Fed is a Pacific Northwest-based financial institution which has served its customers and communities since 1923. Currently First Fed has 16 locations in Washington state including 12 full-service branches. First Fed?s business and operating strategy is focused on building sustainable earnings by delivering a full array of financial products and services for individuals, small businesses, non-profit organizations?and commercial customers. In 2022, First Northwest made an investment in The Meriwether Group, LLC, a boutique investment banking and accelerator firm. Additionally, First Northwest focuses on strategic partnerships to provide modern financial services such as digital payments and marketplace lending. First Northwest Bancorp (FNWB) was incorporated in 2012 and completed its initial public offering in 2015 under the ticker symbol FNWB. The Company is headquartered in Port Angeles, Washington.

Forward-Looking Statements
Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision, and include, but are not limited to, statements about our plans, objectives, expectations and intentions that are not historical facts, and?other statements often identified by words such as "believes," "expects," "anticipates," "estimates," or similar expressions. These forward-looking statements are based upon current management beliefs and expectations and may, therefore, involve risks and uncertainties, many of which are beyond our control. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities; pressures on liquidity, including as a result of withdrawals of deposits or declines in the value of our investment portfolio;?changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Company?s latest Annual Report on Form 10-K under the section entitled "Risk Factors,"?and other filings with the Securities and Exchange Commission ("SEC"),which are available on our website at www.ourfirstfed.com and on the SEC?s website at www.sec.gov.

Any of the forward-looking statements that we make in this press release and in the other public statements we make may turn out to be incorrect because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed or implied in any forward-looking statements made by or on our behalf and the Company's operating and stock price performance may be negatively affected. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for?2024?and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Company?s operations and stock price performance.

For More Information Contact:
Matthew P. Deines, President and Chief Executive Officer
Geri Bullard, EVP,?Chief Financial Officer and Chief Operating Officer
IRGroup@ourfirstfed.com
360-457-0461

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data) (Unaudited)

June 30, 2024

March 31, 2024

June 30, 2023

Three Month Change

One Year Change

ASSETS

Cash and due from banks

19,184

15,562

19,294

23.3

-0.6

Interest-earning deposits in banks

63,995

61,784

59,008

3.6

8.5

Investment securities available for sale, at fair value

306,714

325,955

321,963

-5.9

-4.7

Loans held for sale

1,086

988

2,049

9.9

-47.0

Loans receivable (net of allowance for credit losses on loans $21,462, $17,958, and $17,297)

1,682,282

1,692,774

1,620,863

-0.6

3.8

Federal Home Loan Bank (FHLB) stock, at cost

13,086

15,876

12,621

-17.6

3.7

Accrued interest receivable

9,466

8,909

7,480

6.3

26.6

Premises held for sale, net

6,751

-100.0

n/a

Premises and equipment, net

10,714

11,028

18,140

-2.8

-40.9

Servicing rights on sold loans, at fair value

3,740

3,820

3,825

-2.1

-2.2

Bank-owned life insurance, net

41,113

34,681

40,066

18.5

2.6

Equity and partnership investments

15,085

15,121

14,569

-0.2

3.5

Goodwill and other intangible assets, net

1,084

1,085

1,087

-0.1

-0.3

Deferred tax asset, net

12,216

12,704

15,031

-3.8

-18.7

Prepaid expenses and other assets

39,873

32,982

26,882

20.9

48.3

Total assets

2,219,638

2,240,020

2,162,878

-0.9

2.6

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits

1,708,288

1,666,624

1,653,122

2.5

3.3

Borrowings

302,575

371,455

303,397

-18.5

-0.3

Accrued interest payable

3,143

2,830

1,367

11.1

129.9

Accrued expenses and other liabilities

41,810

36,207

44,286

15.5

-5.6

Advances from borrowers for taxes and insurance

1,304

2,398

1,149

-45.6

13.5

Total liabilities

2,057,120

2,079,514

2,003,321

-1.1

2.7

Shareholders' Equity

Preferred stock, $0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding

n/a

Common stock, $0.01 par value, authorized 75,000,000 shares; issued and outstanding 9,453,247 at June 30, 2024; issued and outstanding 9,442,796 at March 31, 2024; and issued and outstanding 9,633,496 at June 30, 2023

0.0

-2.1

Additional paid-in capital

93,985

93,763

95,360

0.2

-1.4

Retained earnings

106,959

106,202

111,750

0.7

-4.3

Accumulated other comprehensive loss, net of tax

(31,597

)

(32,465

)

(40,066

)

2.7

21.1

Unearned employee stock ownership plan (ESOP) shares

(6,923

)

(7,088

)

(7,583

)

2.3

8.7

Total shareholders' equity

162,518

160,506

159,557

1.3

1.9

Total liabilities and shareholders' equity

2,219,638

2,240,020

2,162,878

-0.9

2.6

FIRST NORTHWEST BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF?INCOME
(Dollars in thousands, except per share data) (Unaudited)

Quarter Ended

June 30, 2024

March 31, 2024

June 30, 2023

Three Month Change

One Year Change

INTEREST INCOME

Interest and fees on loans receivable

23,749

22,767

21,299

4.3

11.5

Interest on investment securities

3,949

3,632

3,336

8.7

18.4

Interest on deposits in banks

571

645

617

-11.5

-7.5

FHLB dividends

358

282

222

27.0

61.3

Total interest income

28,627

27,326

25,474

4.8

12.4

INTEREST EXPENSE

Deposits

10,180

10,112

6,209

0.7

64.0

Borrowings

4,196

3,286

3,283

27.7

27.8

Total interest expense

14,376

13,398

9,492

7.3

51.5

Net interest income

14,251

13,928

15,982

2.3

-10.8

PROVISION FOR CREDIT LOSSES

Provision for credit losses on loans

4,138

1,239

300

234.0

1,279.3

Provision for (recapture of) credit losses on unfunded commitments

(269

)

136.8

100.0

Provision for credit losses

4,237

970

300

336.8

1,312.3

Net interest income after provision for credit losses

10,014

12,958

15,682

-22.7

-36.1

NONINTEREST INCOME

Loan and deposit service fees

1,076

1,102

1,064

-2.4

1.1

Sold loan servicing fees and servicing rights mark-to-market

219

(191

)

-66.2

138.7

Net gain on sale of loans

150

188.5

158.6

Net loss on sale of investment securities

(2,117

)

100.0

Net gain on sale of premises and equipment

7,919

100.0

Increase in cash surrender value of bank-owned life insurance

293

243

190

20.6

54.2

Other income

(48

)

572

590

-108.4

-108.1

Total noninterest income

7,347

2,188

1,711

235.8

329.4

NONINTEREST EXPENSE

Compensation and benefits

8,588

8,128

8,180

5.7

5.0

Data processing

2,008

1,944

2,080

3.3

-3.5

Occupancy and equipment

1,799

1,240

1,214

45.1

48.2

Supplies, postage, and telephone

317

293

435

8.2

-27.1

Regulatory assessments and state taxes

457

513

424

-10.9

7.8

Advertising

377

309

929

22.0

-59.4

Professional fees

684

910

884

-24.8

-22.6

FDIC insurance premium

473

386

313

22.5

51.1

Other expense

906

580

758

56.2

19.5

Total noninterest expense

15,609

14,303

15,217

9.1

2.6

Income before provision for income taxes

1,752

843

2,176

107.8

-19.5

Provision for income taxes

334

447

475

-25.3

-29.7

Net income

1,418

396

1,701

258.1

-16.6

Net loss attributable to noncontrolling interest in Quin Ventures, Inc.

n/a

-100.0

Net income attributable to parent

1,418

396

1,776

258.1

-20.2

Basic and diluted earnings per common share

0.16

0.04

0.20

300.0

-20.0

FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF?INCOME (Dollars in thousands, except per share data) (Unaudited)
?
?	Six Months Ended June 30,						?	?	Percent		?
?	2024		?	?	2023		?	?	Change		?
INTEREST INCOME	?	?	?	?	?	?	?	?	?	?	?
Interest and fees on loans receivable	$	46,516	?	?	$	40,803	?	?	?	14.0	%
Interest on investment securities	?	7,581	?	?	?	6,518	?	?	?	16.3	?
Interest on deposits in banks	?	1,216	?	?	?	1,021	?	?	?	19.1	?
FHLB dividends	?	640	?	?	?	414	?	?	?	54.6	?
Total interest income	?	55,953	?	?	?	48,756	?	?	?	14.8	?
INTEREST EXPENSE	?	?	?	?	?	?	?	?	?	?	?
Deposits	?	20,292	?	?	?	10,562	?	?	?	92.1	?
Borrowings	?	7,482	?	?	?	5,907	?	?	?	26.7	?
Total interest expense	?	27,774	?	?	?	16,469	?	?	?	68.6	?
Net interest income	?	28,179	?	?	?	32,287	?	?	?	-12.7	?
PROVISION FOR CREDIT LOSSES	?	?	?	?	?	?	?	?	?	?	?
Provision for credit losses on loans	?	5,377	?	?	?	315	?	?	?	1,607.0	?
(Recapture of) provision for credit losses on unfunded commitments	?	(170	)	?	?	(515	)	?	?	67.0	?
Provision for (recapture of) credit losses	?	5,207	?	?	?	(200	)	?	?	2,703.5	?
Net interest income after provision for (recapture of) credit losses	?	22,972	?	?	?	32,487	?	?	?	-29.3	?
NONINTEREST INCOME	?	?	?	?	?	?	?	?	?	?	?
Loan and deposit service fees	?	2,178	?	?	?	2,205	?	?	?	-1.2	?
Sold loan servicing fees and servicing rights mark-to-market	?	293	?	?	?	302	?	?	?	-3.0	?
Net gain on sale of loans	?	202	?	?	?	234	?	?	?	-13.7	?
Net loss on sale of investment securities	?	(2,117	)	?	?	?	?	?	?	100.0	?
Net gain on sale of premises and equipment	?	7,919	?	?	?	?	?	?	?	100.0	?
Increase in cash surrender value of bank-owned life insurance	?	536	?	?	?	416	?	?	?	28.8	?
Other income	?	524	?	?	?	888	?	?	?	-41.0	?
Total noninterest income	?	9,535	?	?	?	4,045	?	?	?	135.7	?
NONINTEREST EXPENSE	?	?	?	?	?	?	?	?	?	?	?
Compensation and benefits	?	16,716	?	?	?	16,017	?	?	?	4.4	?
Data processing	?	3,952	?	?	?	4,118	?	?	?	-4.0	?
Occupancy and equipment	?	3,039	?	?	?	2,423	?	?	?	25.4	?
Supplies, postage, and telephone	?	610	?	?	?	790	?	?	?	-22.8	?
Regulatory assessments and state taxes	?	970	?	?	?	813	?	?	?	19.3	?
Advertising	?	686	?	?	?	1,970	?	?	?	-65.2	?
Professional fees	?	1,594	?	?	?	1,690	?	?	?	-5.7	?
FDIC insurance premium	?	859	?	?	?	570	?	?	?	50.7	?
Other	?	1,486	?	?	?	1,697	?	?	?	-12.4	?
Total noninterest expense	?	29,912	?	?	?	30,088	?	?	?	-0.6	?
Income before provision for income taxes	?	2,595	?	?	?	6,444	?	?	?	-59.7	?
Provision for income taxes	?	781	?	?	?	1,300	?	?	?	-39.9	?
Net income	?	1,814	?	?	?	5,144	?	?	?	-64.7	?
Net loss attributable to noncontrolling interest in Quin Ventures, Inc.	?	?	?	?	?	160	?	?	?	-100.0	?
Net income attributable to parent	$	1,814	?	?	$	5,304	?	?	?	-65.8	%
?	?	?	?	?	?	?	?	?	?	?	?
Basic and diluted earnings per common share	$	0.20	?	?	$	0.59	?	?	?	-66.1	%
?	?	?	?	?	?	?	?	?	?	?	?

FIRST NORTHWEST BANCORP AND SUBSIDIARY
Selected Financial Ratios and Other Data
(Dollars in thousands, except per share data) (Unaudited)

As of or For the Quarter Ended

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

June 30, 2023

Performance ratios: ⁽¹⁾

Return on average assets

0.26

0.07

-1.03

0.46

0.34

Return on average equity

3.50

0.98

(14.05

)

6.17

4.41

Average interest rate spread

2.28

2.40

2.54

2.84

Net interest margin ⁽²⁾

2.77

2.76

2.84

2.97

3.25

Efficiency ratio ⁽³⁾

72.3

88.8

150.8

80.5

86.0

Equity to total assets

7.32

7.17

7.42

7.25

7.38

Average interest-earning assets to average interest-bearing liabilities

117.6

118.3

118.2

120.0

120.7

Book value per common share

17.19

17.00

16.99

16.20

16.56

Tangible performance ratios: ⁽¹⁾

Tangible common equity to tangible assets ⁽⁴⁾

7.25

7.10

7.35

7.17

7.31

Return on average tangible common equity ⁽⁴⁾

3.53

0.99

(14.20

)

6.23

4.47

Tangible book value per common share ⁽⁴⁾

17.02

16.83

16.03

16.39

Asset quality ratios:

Nonperforming assets to total assets at end of period ⁽⁵⁾

1.36

0.87

0.85

0.11

0.12

Nonaccrual loans to total loans ⁽⁶⁾

1.78

1.14

1.12

0.15

0.16

Allowance for credit losses on loans to nonaccrual loans ⁽⁶⁾

70.91

92.18

93.92

713.77

677.25

Allowance for credit losses on loans to total loans

1.26

1.05

1.04

1.06

Annualized net charge-offs to average outstanding loans

0.15

0.19

0.14

0.30

0.10

Capital ratios (First Fed Bank):

Tier 1 leverage

9.6

9.7

9.9

10.1

10.2

Common equity Tier 1 capital

12.6

13.1

13.4

13.1

Tier 1 risk-based

12.6

13.1

13.4

13.1

Total risk-based

13.8

13.6

14.1

14.4

14.1

Other Information:

Average total assets

2,219,411

2,166,187

2,127,655

2,139,734

2,118,014

Average total loans

1,717,903

1,678,656

1,645,418

1,641,206

1,605,133

Average interest-earning assets

2,072,430

2,027,821

1,980,226

1,994,251

1,975,384

Average noninterest-bearing deposits

251,442

249,283

259,845

276,294

282,514

Average interest-bearing deposits

1,408,018

1,422,116

1,379,059

1,377,734

1,333,943

Average interest-bearing liabilities

1,762,858

1,714,474

1,675,044

1,661,996

1,636,188

Average equity

163,119

161,867

155,971

160,994

161,387

Average common shares -- basic

8,783,086

8,876,236

8,928,620

8,906,526

8,914,355

Average common shares -- diluted

8,788,523

8,907,184

8,968,828

8,934,882

8,931,386

Tangible assets ⁽⁴⁾

2,218,037

2,238,446

2,200,230

2,151,849

2,161,235

Tangible common equity ⁽⁴⁾

160,917

158,932

161,773

154,369

157,914

(1) Performance ratios are annualized, where appropriate.??

(2) Net interest income divided by average interest-earning assets.? ??

(3) Total noninterest expense as a percentage of net interest income and total other noninterest income.??

(4) See reconciliation of Non-GAAP Financial Measures later in this release.??

(5) Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.??

(6) Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.

FIRST NORTHWEST BANCORP AND SUBSIDIARY Selected Financial Ratios and Other Data (Dollars in thousands, except per share data) (Unaudited)
?
?	As of or For the Six Months Ended June 30,						?
?	2024		?	?	2023		?
Performance ratios: ⁽¹⁾	?	?	?	?	?	?	?
Return on average assets	?	0.17	%	?	?	0.51	%
Return on average equity	?	2.24	?	?	?	6.67	?
Average interest rate spread	?	2.28	?	?	?	2.98	?
Net interest margin ⁽²⁾	?	2.76	?	?	?	3.35	?
Efficiency ratio ⁽³⁾	?	79.3	?	?	?	82.8	?
Equity to total assets	?	7.32	?	?	?	7.38	?
Average interest-earning assets to average interest-bearing liabilities	?	117.9	?	?	?	121.5	?
Book value per common share	$	17.19	?	?	$	16.56	?
?	?	?	?	?	?	?	?
Tangible performance ratios: ⁽¹⁾	?	?	?	?	?	?	?
Tangible common equity to tangible assets ⁽⁴⁾	?	7.25	%	?	?	7.31	%
Return on average tangible common equity ⁽⁴⁾	?	2.27	?	?	?	6.75	?
Tangible book value per common share ⁽⁴⁾	$	17.02	?	?	$	16.39	?
?	?	?	?	?	?	?	?
Asset quality ratios:	?	?	?	?	?	?	?
Nonperforming assets to total assets at end of period ⁽⁵⁾	?	1.36	%	?	?	0.12	%
Nonaccrual loans to total loans ⁽⁶⁾	?	1.78	?	?	?	0.16	?
Allowance for credit losses on loans to nonaccrual loans ⁽⁶⁾	?	70.91	?	?	?	677.25	?
Allowance for credit losses on loans to total loans	?	1.26	?	?	?	1.06	?
Annualized net charge-offs to average outstanding loans	?	0.17	?	?	?	0.05	?
?	?	?	?	?	?	?	?
Capital ratios (First Fed Bank):	?	?	?	?	?	?	?
Tier 1 leverage	?	9.6	%	?	?	10.2	%
Common equity Tier 1 capital	?	12.6	?	?	?	13.1	?
Tier 1 risk-based	?	12.6	?	?	?	13.1	?
Total risk-based	?	13.8	?	?	?	14.1	?
?	?	?	?	?	?	?	?
Other Information:	?	?	?	?	?	?	?
Average total assets	$	2,192,799	?	?	$	2,084,299	?
Average total loans	?	1,698,394	?	?	?	1,605,133	?
Average interest-earning assets	?	2,050,075	?	?	?	1,942,510	?
Average noninterest-bearing deposits	?	250,362	?	?	?	288,343	?
Average interest-bearing deposits	?	1,415,068	?	?	?	1,311,311	?
Average interest-bearing liabilities	?	1,738,667	?	?	?	1,598,295	?
Average equity	?	162,493	?	?	?	160,359	?
Average common shares -- basic	?	8,829,687	?	?	?	8,912,358	?
Average common shares -- diluted	?	8,844,937	?	?	?	8,932,117	?
Tangible assets ⁽⁴⁾	?	2,218,037	?	?	?	2,161,235	?
Tangible common equity ⁽⁴⁾	?	160,917	?	?	?	157,914	?
?
(1) Performance ratios are annualized, where appropriate.
(2) Net interest income divided by average interest-earning assets.
(3) Total noninterest expense as a percentage of net interest income and total other noninterest income.
(4) See reconciliation of Non-GAAP Financial Measures later in this release.
(5) Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
(6) Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.
?

FIRST NORTHWEST BANCORP AND SUBSIDIARY
ADDITIONAL INFORMATION
(Dollars in thousands) (Unaudited)

June 30, 2024

March 31, 2024

June 30, 2023

Three Month Change

One Year Change

(In thousands)

Real Estate:

One-to-four family

389,934

383,905

365,600

6,029

24,334

Multi-family

350,076

339,538

296,561

10,538

53,515

Commercial real estate

375,511

385,130

375,961

(9,619

)

(450

)

Construction and land

111,251

125,347

157,060

(14,096

)

(45,809

)

Total real estate loans

1,226,772

1,233,920

1,195,182

(7,148

)

31,590

Consumer:

Home equity

72,613

72,391

58,895

222

13,718

Auto and other consumer

285,623

268,834

253,950

16,789

31,673

Total consumer loans

358,236

341,225

312,845

17,011

45,391

Commercial business

119,753

136,297

130,133

(16,544

)

(10,380

)

Total loans receivable

1,704,761

1,711,442

1,638,160

(6,681

)

66,601

Less:

Derivative basis adjustment

1,017

710

307

1,017

Allowance for credit losses on loans

21,462

17,958

17,297

3,504

4,165

Total loans receivable, net

1,682,282

1,692,774

1,620,863

(10,492

)

61,419

Selected loan detail:

June 30, 2024

March 31, 2024

June 30, 2023

Three Month Change

One Year Change

(In thousands)

Construction and land loans breakout

1-4 Family construction

60,492

69,075

65,025

(8,583

)

(4,533

)

Multifamily construction

43,341

45,776

58,070

(2,435

)

(14,729

)

Acquisition-renovation

7,266

(7,266

)

Nonresidential construction

1,015

3,374

19,033

(2,359

)

(18,018

)

Land and development

6,403

7,122

7,666

(719

)

(1,263

)

Total construction and land loans

111,251

125,347

157,060

(14,096

)

(45,809

)

Auto and other consumer loans breakout

Triad Manufactured Home loans

110,510

105,525

90,792

4,985

19,718

Woodside auto loans

131,151

128,072

125,948

3,079

5,203

First Help auto loans

17,427

8,326

5,602

9,101

11,825

Other auto loans

2,690

3,313

6,188

(623

)

(3,498

)

Other consumer loans

23,845

23,598

25,420

247

(1,575

)

Total auto and other consumer loans

285,623

268,834

253,950

16,789

31,673

Commercial business loans breakout

PPP loans

(13

)

(49

)

Northpointe Bank MPP

9,150

15,047

23,904

(5,897

)

(14,754

)

Secured lines of credit

28,862

41,014

38,355

(12,152

)

(9,493

)

Unsecured lines of credit

1,133

1,001

1,231

132

(98

)

SBA loans

7,146

8,944

9,038

(1,798

)

(1,892

)

Other commercial business loans

73,457

70,273

57,551

3,184

15,906

Total commercial business loans

119,753

136,297

130,133

(16,544

)

(10,380

)

FIRST NORTHWEST BANCORP AND SUBSIDIARY
ADDITIONAL INFORMATION
(Dollars in thousands) (Unaudited)

Non-GAAP Financial Measures
This press release contains financial measures that are not in conformity with generally accepted accounting principles in the United States of America?("GAAP"). Non-GAAP measures are presented where management believes the information will help investors understand?the Company?s results of operations or financial position and assess trends. Where non-GAAP financial measures are used, the comparable GAAP financial measure is also provided. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures that may be presented by other companies. Other banking companies may use names similar to those the Company uses for the non-GAAP financial measures the Company discloses, but may calculate them differently. Investors should understand how the Company and other companies each calculate their non-GAAP financial measures when making comparisons. Reconciliations of the GAAP and non-GAAP measures are presented below.

Calculation of Total Revenue:

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

June 30, 2023

(Dollars in thousands)

Net interest income

14,251

13,928

14,195

14,950

15,982

Noninterest income

7,347

2,188

(2,929

)

2,904

1,711

Total revenue, net of interest expense ⁽¹⁾

21,598

16,116

11,266

17,854

17,693

1) We believe this?non-GAAP metric?provides an important measure with which to analyze and evaluate income available for noninterest expenses.

Calculations Based on Tangible Common Equity:

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

June 30, 2023

(Dollars in thousands, except per share data)

Total shareholders' equity

162,518

160,506

163,340

156,065

159,557

Less: Goodwill and other intangible assets

1,084

1,085

1,086

1,087

Disallowed non-mortgage loan servicing rights

517

489

481

609

556

Total tangible common equity

160,917

158,932

161,773

154,369

157,914

Total assets

2,219,638

2,240,020

2,201,797

2,153,545

2,162,878

Less: Goodwill and other intangible assets

1,084

1,085

1,086

1,087

Disallowed non-mortgage loan servicing rights

517

489

481

609

556

Total tangible assets

2,218,037

2,238,446

2,200,230

2,151,849

2,161,235

Average shareholders' equity

163,119

161,867

155,971

160,994

161,387

Less: Average goodwill and other intangible assets

1,085

1,086

1,087

1,088

Average disallowed non-mortgage loan servicing rights

489

481

608

557

801

Total average tangible common equity

161,545

160,301

154,277

159,350

159,498

Net income (loss)

1,418

396

(5,522

)

2,504

1,776

Common shares outstanding

9,453,247

9,442,796

9,611,876

9,630,735

9,633,496

GAAP Ratios:

Equity to total assets

7.32

7.17

7.42

7.25

7.38

Return on average equity

3.50

0.98

-14.05

6.17

4.41

Book value per common share

17.19

17.00

16.99

16.20

16.56

Non-GAAP Ratios:

Tangible common equity to tangible assets ⁽¹⁾

7.25

7.10

7.35

7.17

7.31

Return on average tangible common equity ⁽¹⁾

3.53

0.99

-14.20

6.23

4.47

Tangible book value per common share ⁽¹⁾

17.02

16.83

16.03

16.39

(1)?We believe these non-GAAP metrics provide an important measure with which to analyze and evaluate financial condition and capital strength. In addition, we believe that use of tangible equity and tangible assets improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.

FIRST NORTHWEST BANCORP AND SUBSIDIARY ADDITIONAL INFORMATION (Dollars in thousands) (Unaudited)
?
?	June 30, 2024		?	?	June 30, 2023		?
?	(Dollars in thousands, except per share data)						?
Total shareholders' equity	$	162,518	?	?	$	159,557	?
Less: Goodwill and other intangible assets	?	1,084	?	?	?	1,087	?
Disallowed non-mortgage loan servicing rights	?	517	?	?	?	556	?
Total tangible common equity	$	160,917	?	?	$	157,914	?
?	?	?	?	?	?	?	?
Total assets	$	2,219,638	?	?	$	2,162,878	?
Less: Goodwill and other intangible assets	?	1,084	?	?	?	1,087	?
Disallowed non-mortgage loan servicing rights	?	517	?	?	?	556	?
Total tangible assets	$	2,218,037	?	?	$	2,161,235	?
?	?	?	?	?	?	?	?
Average shareholders' equity	$	162,493	?	?	$	160,359	?
Less: Average goodwill and other intangible assets	?	1,085	?	?	?	1,088	?
Average disallowed non-mortgage loan servicing rights	?	485	?	?	?	758	?
Total average tangible common equity	$	160,923	?	?	$	158,513	?
?	?	?	?	?	?	?	?
Net income	$	1,814	?	?	$	5,304	?
Common shares outstanding	?	9,453,247	?	?	?	9,633,496	?
GAAP Ratios:	?	?	?	?	?	?	?
Equity to total assets	?	7.32	%	?	?	7.38	%
Return on average equity	?	2.24	%	?	?	6.67	%
Book value per common share	$	17.19	?	?	$	16.56	?
Non-GAAP Ratios:	?	?	?	?	?	?	?
Tangible common equity to tangible assets ⁽¹⁾	?	7.25	%	?	?	7.31	%
Return on average tangible common equity ⁽¹⁾	?	2.27	%	?	?	6.75	%
Tangible book value per common share ⁽¹⁾	$	17.02	?	?	$	16.39	?
?
(1)?We believe these non-GAAP metrics provide an important measure with which to analyze and evaluate financial condition and capital strength. In addition, we believe that use of tangible equity and tangible assets improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.
?

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Puget Sound Business Journal?s Best Workplaces

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First Northwest Bancorp Reports?Second?Quarter 2024?Financial Results

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Puget Sound Business Journal?s Best Workplaces

Puget Sound Business Journal?s Best Workplaces

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Puget Sound Business Journal Top Corporate Citizen

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