First Northwest Bancorp Reports Third Quarter 2024 Financial Results

BY GlobeNewswire | MUNICIPAL | 10/29/24 09:30 AM EDT

PORT ANGELES, Wash., Oct. 29, 2024 (GLOBE NEWSWIRE) --

CEO Commentary
"This was a quarter of mixed results. Progress on customer deposit gathering and the termination of the FDIC Consent Order was overshadowed by a quarterly loss driven by additional provisions primarily related to certain equity loans made to high net worth, accredited investors.

The teamwork and collaboration between Staff, Management and the Board to address the matters identified in the Consent Order is demonstrative of the qualifications, determination and capabilities of the First Fed team.?We appreciate that the FDIC acknowledged the planning, monitoring and execution required to comply with the Order and validation that all of these matters were properly addressed. I am very proud of this accomplishment, and I would like to thank all of the many people within the bank who worked tirelessly to reach this achievement less than one year after the Order was issued.

Through an internal review of our loan portfolio and with consultation with our prudential regulators, it was determined that larger provisions were required in the second quarter of 2024. As a result, we decided it was appropriate to file a restated quarterly report on Form 10-Q for the quarter ended June 30, 2024, and identified a material weakness in the design of certain internal controls.?The loans for which we increased reserves were originated between 2020 and 2023.?More recent vintages of our loan portfolio are performing well as we have engaged in lending and partnerships that we have evaluated as having a relatively lower risk profile. The provision for credit losses after the amendment was?$8.7?million in the second quarter of 2024.

Management and the Board of Directors take the reported material weakness very seriously. We have taken corrective action to address the basis for the restatement and are working to promptly remediate.?

We also acknowledge the ongoing lawsuits filed by some of the Water Station equipment borrowers. We intend to vigorously defend against these claims, which we believe are meritless. We also intend to continue pursuing?collection of all monies owed by the litigants using all available legal means.

Moving forward, the highly capable bankers at First Fed are focused on continuing to build relationships with small businesses and individuals in the communities we serve.?We continue to pursue inroads in SBA, treasury, maritime lending, first and second mortgage lending and community banking.?We are introducing products and services to meet our customers where they are and to enhance their overall experience with First Fed. We believe that focusing on these fundamentals of Community Banking will improve our results and our overall franchise value."

-- Matthew P. Deines, President and CEO, First Northwest Bancorp (FNWB)

2024 FINANCIAL RESULTS

3Q 24

2Q 24

3Q 23

2024 YTD

2023 YTD

OPERATING RESULTS (in millions)

Net (loss) income

(2.0

)

(2.2

)

2.5

(3.8

)

7.8

Pre-provision net interest income

14.0

14.2

15.0

42.2

47.2

Provision for credit losses

3.1

8.7

0.4

12.8

0.2

Noninterest expense

15.8

15.6

14.4

45.8

44.5

Total revenue, net of interest expense *

15.8

21.6

17.9

53.5

54.2

PER SHARE DATA

Basic and diluted (loss) earnings

(0.23

)

(0.25

)

0.28

(0.43

)

0.87

Book value

17.17

16.81

16.20

17.17

16.20

Tangible book value *

17.00

16.64

16.03

17.00

16.03

BALANCE SHEET (in millions)

Total assets

2,255

2,216

2,154

2,255

2,154

Total loans

1,735

1,698

1,635

1,735

1,635

Total deposits

1,712

1,708

1,658

1,712

1,658

Total shareholders' equity

161

159

156

161

156

ASSET QUALITY

Net charge-off ratio⁽¹⁾

0.10

1.70

0.30

0.67

0.10

Nonperforming assets to total assets

1.35

1.07

0.11

1.35

0.11

Allowance for credit losses on loans

to total loans

1.27

1.14

1.04

1.27

1.04

Nonaccrual loan coverage ratio

714

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

2024 FINANCIAL RESULTS (Continued)

3Q 24

2Q 24

3Q 23

2024 YTD

2023 YTD

SELECTED RATIOS

Return on average assets⁽¹⁾

-0.36

-0.40

0.46

-0.23

0.50

Return on average equity⁽¹⁾

-4.91

-5.47

6.17

-3.14

6.50

Return on average tangible common equity^{(1) *}

-4.96

-5.53

6.23

-3.17

6.57

Net interest margin

2.70

2.76

2.97

2.74

3.22

Efficiency ratio

100.31

72.32

80.52

85.54

82.06

Bank common equity tier 1 (CETI) ratio

12.20

12.40

13.43

12.20

13.43

Bank total risk-based capital ratio

13.44

13.49

14.38

13.44

14.38

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

?	2024 Significant Items as of?September 30, 2024
?	Year-to-date net loss of?$3.8 million?was primarily due to a provision for credit losses of?$12.8 million?as the collectability of a small number of loan relationships continued to deteriorate and additional reserves were taken on purchased loan pools.
?	First?Fed Bank ("First Fed" or the "Bank") balance sheet restructuring contributed to an?improved year-to-date yield on earning assets by 16-basis points over the prior year end to 5.44%.
?	-??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?$2.1 million year-to-date loss on sale.
?	-??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 an exchange in the third quarter. Two additional policy restructures expected to be completed by the end of the first quarter of 2025.
?	Net interest margin decreased over the prior year end from?3.13%?to 2.74%, impacted by the increase in deposit and borrowing costs outpacing increased yields on loans and investments.
?	Loan mix shifted away from construction and commercial real estate into commercial business, auto, multi-family real estate, one-to-four family and home equity compared to the prior year end.?The weighted-average rate on new loans year-to-date was 8.5%.
?	Borrowings increased $14.1 million, or 4.4%, to $335.0 million at September 30, 2024, compared to $320.9 million at December 31, 2023.
?	Repurchased 214,132 shares during the first quarter, which closed out the October 2020 Stock Repurchase Plan.
?	Repurchased 98,156 shares during the third quarter under the new share repurchase plan approved in April 2024.?
?	Year-to-date deposit growth of $34.7 million, or 2.0%, to $1.71 billion, with a $30.0 million shift from savings to money market accounts. Cost of total deposits increased over the prior year end from?1.66%?to 2.49%.
?	Estimated insured deposits totaled $1.3 billion, or?77% of total deposits at September 30, 2024.?Available liquidity to uninsured deposit coverage remained strong at?142% at September 30, 2024.
?	Classified loans increased to?2.71% of total loans at September 30, 2024, compared to?2.12% at December 31, 2023.
?	Nonperforming assets increased?$11.7 million?year-to-date mainly due to three commercial loan relationships included in commercial construction, commercial real estate and commercial business.
?	Completed a reduction-in-force impacting 9% of our workforce on July 24, 2024. This action, along with year-to-date headcount management through attrition, is expected to result in a reduction in current levels of compensation expense by approximately $820,000 per quarter starting in the fourth quarter of 2024.
?	?

First Northwest Bancorp (FNWB) ?("First Northwest" or the "Company") today reported a net loss?of?$2.0 million for the third quarter of 2024, compared to a net loss of?$2.2 million for the?second quarter of 2024 and net income of?$2.5 million for the third quarter of 2023. Basic and diluted loss per share were?$0.23 for the third quarter of 2024, compared to basic and diluted loss per share of?$0.25 for the?second quarter of 2024 and basic and diluted earnings per share of?$0.28 for the third quarter of 2023. In the third quarter of 2024, the Company generated a return on average assets?of -0.36%, a return on average equity of?-4.91% and a return on average tangible common equity* of -4.96%.?Loss before provision for income taxes?was?$3.2 million for the third quarter of 2024, compared to a loss before provision for income taxes of?$2.8 million for the preceding quarter, a?decrease of $417,000, or 15.1%, and decreased?$6.3 million compared to income of?$3.1 million for the third quarter of 2023.

The Bank recorded reserves on individually analyzed loans totaling $1.9?million due to the uncertain future cash flows from specific loan relationships in the third quarter of 2024. An additional credit loss on loans of $1.8?million?was attributable to an increase in the reserve on pooled commercial business loans, with a reserve loss rate of 3.4% applied to?that segment of the loan portfolio at period end. We believe the reserve on individually analyzed loans does not represent?a universal decline in the collectability of all loans in the portfolio. We continue to work on resolution plans for all troubled borrowers. The provision for credit losses on loans had a significant negative impact on net income and was the only reason for the net loss recorded for the third quarter of 2024.

Steps taken to restructure the Bank's balance sheet continue to have a positive impact. 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 $946,000 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 $1.3?million of annualized interest income in 2024. The estimated?impact will be reduced if the Federal Reserve Board ("FRB") implements additional rate cuts during the year. The Bank expects to maintain a positive carry on its derivative for up to 75-basis points of additional rate cuts.

The balance sheet restructure plan also includes the conversion of BOLI policies in order to reinvest in higher yielding products. The first $6.1?million policy earning 2.58% was surrendered during the first quarter and reinvested into a policy earning 5.18%. In the third quarter of 2024, a $1.3?million policy earning 3.18% was exchanged and reinvested into a policy earning 5.73%. The remaining surrender and exchange transactions are expected to be completed by the end of the first quarter of 2025.

Net Interest Income
Total interest income decreased?$405,000 to?$28.2 million for the third quarter of 2024, compared to?$28.6 million in the previous quarter, and increased?$2.4 million compared to?$25.8 million in the third quarter of 2023. Interest income decreased in the third quarter of 2024?primarily due to interest reversals for loans placed on nonaccrual totaling $619,000. The interest adjustments were partially offset by higher yields on performing loans combined with increased loan volume. 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 decreased?$190,000 to?$14.2 million for the third quarter of 2024, compared to?$14.4 million in the second quarter of 2024, and increased?$3.3 million compared to?$10.9 million in the?third quarter of 2023. Interest expense for the three months ended September 30, 2024, was lower primarily due to lower rates on advances combined with decreased advance volumes.?The decrease was partially offset by a 9-basis point increase in the cost of deposits to?2.56% for the quarter ended September 30, 2024, from?2.47% for the prior quarter as a result of customers continuing to shift?deposit balances into higher earning products. The increase over the?third quarter of 2023 was the result of a 71-basis point increase in the cost of deposits from?1.85% in the?third quarter one year ago. A shift in the deposit mix from transaction and savings accounts to money market accounts and time deposits also added to the higher cost?of deposits compared to the third quarter of 2023. Higher costs of brokered time deposits also contributed to additional deposit costs with a 57-basis point increase to 4.88%?for the current quarter compared to 4.31%?for the?third quarter one year ago.

Net interest income?before provision for credit losses?for the?third quarter of 2024 decreased $215,000, or 1.5%, to $14.0 million, compared to?$14.2 million for the preceding quarter, and decreased $930,000, or 6.2%, from the?third quarter one?year ago.?The impact of the September FRB rate cut will be reflected beginning with fourth quarter 2024 interest income and expenses.

The Company recorded a?$3.1 million provision for credit losses on loans?in the third quarter of 2024, primarily due to reserves taken individually analyzed loans and Current Expected Credit Loss model loss factor increases attributable to pooled commercial business and multi-family loans at quarter end. Credit loss provision increases were offset by decreases to the loss factors applied to consumer, commercial real estate and one-to-four family loans.?Higher loss factors applied to unfunded commitments and a moderate increase in commitment balances also resulted in a provision for credit losses on unfunded commitments of?$57,000 for the quarter.?The total provision for credit loss recorded for the?third quarter of 2024 was $3.1 million, compared?to a credit loss provision?of?$8.7 million for the preceding quarter and a provision of?$371,000 for the third quarter of 2023.

The net interest margin decreased to?2.70% for the third quarter of 2024, from?2.76% for the prior quarter, and decreased 27-basis points from?2.97% for?the third quarter of 2023. The decrease over the linked quarter is primarily due to the accrued interest reversed on three nonperforming commercial loans during the three months ended?September 30, 2024, partially offset by an increase in interest income earned on a higher volume?of loans. Investment securities also had decreased volume due to regular payments and lower yields due to variable-rate securities?compared to the preceding quarter. The Company reported reduced rates and declining volume?of borrowings during the quarter which lowered costs; however, these savings were partially offset by an increase in cost due to a higher volume of retail customer deposits.?The decrease in net interest margin?from the same quarter one year ago is due to higher funding costs for?deposits and borrowed funds. Organic loan production comprised 73% of new loan commitments?for the?third quarter with the remaining 27% added through purchases of higher-yielding loans from established third-party relationships. The Bank's fair value hedging agreements on securities and loans added $188,000 and $395,000, respectively, to interest income for the?third quarter of 2024.

The yield on average earning assets for the?third quarter of 2024 decreased 11-basis points to?5.44% compared to?5.55% for the?second quarter of 2024 and increased 30-basis points from?5.14% for the third quarter of 2023. The?third quarter decrease is attributable to the accrued interest reversed on nonperforming loans, a?lower yield and volume of?investment securities and a decrease in the balance of Federal Home Loan Bank ("FHLB") stock.?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 higher rate environment.

The cost of average interest-bearing liabilities decreased 5-basis points to?3.23% for the third quarter of 2024, compared to?3.28% for the second quarter of 2024, and increased 63-basis points from?2.60% for the third quarter of 2023.?Total cost of funds decreased to?2.82% for the?third quarter of 2024 from?2.87% in the prior quarter?and increased?from?2.23% for the third quarter of 2023. Current quarter decreases were due to lower average balances and costs on borrowings. The Bank continues to offer higher rate specials on money market and CD accounts to attract and retain retail customer deposits. The average brokered CD?balance decreased $5.5?million from the linked quarter with a 6-basis point decrease in the average rate paid on brokered funds.

The increase in cost of average interest-bearing liabilities 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. The mix of retail deposit balances shifted from no or low-cost transaction and savings accounts towards higher cost term certificate and higher yield money market accounts. Retail CDs represented 29.3%, 26.8%?and 27.6%?of retail deposits at September 30, 2024,?June 30, 2024 and September 30, 2023, respectively.?Average interest-bearing deposit balances increased $44.8 million, or 3.2%, to?$1.45 billion for the?third quarter of 2024 compared to the?second quarter of 2024 and increased $75.0 million, or 5.4%, compared to?$1.38 billion for the third quarter of 2023.

Selected Yields

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Loan yield

5.51

5.62

5.51

5.38

5.31

Investment securities yield

4.90

5.01

4.75

4.53

4.18

Cost of interest-bearing deposits

3.00

2.91

2.86

2.52

2.22

Cost of total deposits

2.56

2.47

2.43

2.12

1.85

Cost of borrowed funds

4.35

4.76

4.52

4.50

4.45

Net interest spread

2.21

2.27

2.28

2.40

2.54

Net interest margin

2.70

2.76

2.84

2.97

Noninterest Income
Noninterest income decreased?to?$1.8 million for the?third quarter of 2024 compared to?$7.4 million for the second quarter of 2024. Nonrecurring second quarter transactions included a?sale-leaseback transaction which resulted in a gain on sale of premises and equipment of $7.9 million, partially offset by a?$2.1 million loss on the sale of lower-yielding available-for-sale securities. Income from the gain on sale of loans in the third quarter of 2024 includes $51,000 from SBA loans, compared to $116,000 in the prior quarter. Write-downs on sold loan servicing rights mark-to-market valuation totaled $161,000 for the third quarter of 2024 compared to $103,000 in the prior quarter.?Other noninterest income includes a valuation gain on partnership investments of $279,000 compared to a loss of $56,000 in the preceding quarter.

Noninterest income decreased?38.7% from?$2.9 million in the same quarter one year ago. The third quarter of 2023 included?$750,000 in credit enhancements reimbursed to the Company on Splash charge-offs recorded in other noninterest income. The quarter ended?September 30, 2023, also included a $102,000 gain on sale of mortgage loans, compared to a $6,000 gain in the third quarter of 2024.

Noninterest Income

$ in thousands

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Loan and deposit service fees

1,059

1,076

1,102

1,068

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

219

276

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

315

293

243

260

252

Other income

337

(48

)

572

831

1,315

Total noninterest income

1,779

7,347

2,188

(2,929

)

2,904

Noninterest Expense
Noninterest expense totaled?$15.9 million for the third quarter of 2024, compared to?$15.6 million for the preceding quarter and?$14.4 million for the?third quarter a year ago. Increases were primarily due to one-time severance payouts of $704,000 during the three months ended September 30, 2024, partially offset by a decrease in occupancy due to the one-time tax assessment on the sale-leaseback?of $359,000 paid in the previous quarter.?Other expense increased this quarter primarily due to $161,000 of additional credit related expenses.

The increase in total noninterest expenses compared to the?third quarter of 2023 is mainly due to current quarter one-time severance payouts of $704,000, additional payroll tax expense?of $342,000?and additional medical benefit expense of $162,000. Payroll tax expense in the?third quarter of 2023 included accretion of the employee retention credit ("ERC") which reduced the expense by $293,000. In the fourth quarter of 2023, the Bank stopped the recognition of?the ERC for the foreseeable future.?Occupancy increased due to the additional rent of $416,000 from the previous quarter sale-leaseback transaction. Other increases compared to the third quarter of 2023 included $51,000 in stockholder communications, $103,000 of state taxes, $163,000 in FDIC insurance premiums, and $269,000 of additional credit related expenses. These increases were?partially offset by?lower legal fees of $204,000,?consulting fees of $146,000 and advertising costs of $91,000. The Company continues to focus?on controlling compensation expense?and reducing advertising and other discretionary spending to improve earnings.

Noninterest Expense

$ in thousands

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Compensation and benefits

8,582

8,588

8,128

7,397

7,795

Data processing

2,085

2,008

1,944

2,107

1,945

Occupancy and equipment

1,553

1,799

1,240

1,262

1,173

Supplies, postage, and telephone

360

317

293

351

292

Regulatory assessments and state taxes

548

457

513

376

446

Advertising

409

377

309

235

501

Professional fees

698

684

910

1,119

929

FDIC insurance premium

533

473

386

418

369

Other expense

1,080

906

580

3,725

926

Total noninterest expense

15,848

15,609

14,303

16,990

14,376

Efficiency ratio

100.31

72.32

88.75

150.81

80.52

Investment Securities
Investment securities increased $4.2 million, or 1.4%, to?$310.9 million at September 30, 2024, compared to?$306.7 million three months earlier, and increased?$1.5 million compared to?$309.3 million at September 30, 2023.?The market value of the portfolio increased $8.1 million during the?third quarter of 2024 primarily due to the market rally in the second half the third quarter which drove the yield curve lower.?At September 30, 2024, municipal bonds totaled $81.4?million and comprised the largest portion of the investment portfolio at 26.2%. Agency issued mortgage-backed securities ("MBS agency") were the second largest segment, totaling $78.5?million,?or 25.3%, of the portfolio at quarter end. Included in MBS non-agency were $29.6 million?of commercial mortgage-backed securities ("CMBS"), of which 89.8% were in "A" tranches and the remaining 10.2% were in "B" tranches. Our largest exposure in the CMBS portfolio at September 30, 2024, was to long-term care facilities, which comprised?65.0%, or $19.2 million,?of our private label CMBS securities.?All of the CMBS bonds had credit enhancements ranging from 28.8% to 71.8%, with a weighted-average credit enhancement of 55.3%,?that further reduced?the risk of loss on these investments.

The estimated average life of the securities portfolio was approximately?7.4 years at September 30, 2024,?7.8 years at the prior quarter end and?7.7 years for the third quarter of 2023. The effective duration of the portfolio was approximately?3.9 years at September 30, 2024, compared to?4.3 years in the prior quarter and?4.9 years at the end of the third quarter of 2023. Our recent investment purchases?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

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Municipal bonds

81,363

78,825

87,004

87,761

93,995

U.S. Treasury notes

2,377

International agency issued bonds (Agency bonds)

1,703

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

13,296

13,982

14,822

11,782

Corporate issued asset-backed securities (ABS corporate)

16,391

16,483

13,929

5,286

Corporate issued debt securities (Corporate debt):

Senior positions

10,241

9,066

13,617

9,270

16,975

Subordinated bank notes

43,817

43,826

39,414

42,184

37,360

U.S. Small Business Administration securities (SBA)

9,317

9,772

7,911

Mortgage-backed securities:

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

78,549

77,301

83,271

63,247

66,946

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

57,886

57,459

65,987

76,093

89,968

Total securities available for sale, at fair value

310,860

306,714

325,955

295,623

309,324

Loans and Unfunded Loan Commitments
Net loans, excluding loans held for sale, increased $36.7 million, or 2.2%, to?$1.71 billion at September 30, 2024, from?$1.68 billion at June 30, 2024, and increased $96.4 million, or 6.0%, from?$1.62 billion one year ago.

Commercial business loans increased $38.2?million, primarily attributable to a $29.0?million increase in our Northpointe Bank Mortgage Purchase Program participation, organic originations totaling $7.9?million and draws on existing lines of credit of $5.7?million which were partially offset by payments. One-to-four family loans increased $5.9?million?during the?third quarter of 2024 as a result of $14.2?million in residential construction loans that converted to permanent amortizing loans, partially offset by payoffs and scheduled payments. Home equity loans increased $4.3 million over the previous quarter due to organic home equity loan production of $5.5?million and draws on new and existing commitments of $4.6 million, partially offset by payoffs and scheduled payments. Multi-family loans increased $3.7?million during the current quarter. The increase was primarily the result of $9.2?million of construction loans converting into permanent amortizing loans, partially offset by payoffs and scheduled payments. Commercial real estate loans increased $497,000 during the?third quarter of 2024 compared to the previous quarter as originations of $8.6 million were offset by payoffs and scheduled payments.

Construction loans decreased $11.6?million during the quarter, with $23.4 million converting?into fully amortizing loans, partially offset by draws on new and existing loans.?New single-family residence construction loan commitments totaled?$4.1 million in the?third quarter, compared to?$2.7 million in the preceding quarter. Auto and other consumer loans decreased $4.4?million?during the?third quarter of 2024 as payoffs and scheduled payments were higher than $5.8?million of new auto loan purchases, a $4.3 million manufactured home loan pool?and individual manufactured home loan purchases totaling $1.2?million.?

The Company originated?$3.4 million in residential mortgages during the?third quarter of 2023?and sold $3.9 million, with an average gross margin on sale of mortgage loans of approximately 2.06%. This production compares to residential mortgage originations of?$5.0 million in the preceding quarter with sales of $4.9 million, and an average gross margin of 2.05%. Single-family home inventory remained?historically low and?higher market rates on mortgage?loans continued to limit saleable mortgage loan production through much of the third quarter.

Loans by Collateral and Unfunded Commitments

$ in thousands

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

One-to-four family construction

51,607

49,440

70,100

60,211

72,991

All other construction and land

45,166

58,346

55,286

69,484

71,092

One-to-four family first mortgage

469,053

434,840

436,543

426,159

409,207

One-to-four family junior liens

14,701

13,706

12,608

12,250

12,859

One-to-four family revolving open-end

48,459

44,803

45,536

42,479

38,413

Commercial real estate, owner occupied:

Health care

29,407

29,678

29,946

22,523

22,677

Office

17,901

19,215

17,951

18,468

18,599

Warehouse

11,645

14,613

14,683

14,758

14,890

Other

64,535

56,292

55,063

61,304

57,414

Commercial real estate, non-owner occupied:

Office

49,770

50,158

53,099

53,548

53,879

Retail

49,717

50,101

50,478

51,384

51,466

Hospitality

62,282

62,628

66,982

67,332

61,339

Other

82,573

84,428

93,040

94,822

96,083

Multi-family residential

354,118

350,382

339,907

333,428

325,338

Commercial business loans

86,904

79,055

90,781

76,920

75,068

Commercial agriculture and fishing loans

15,369

14,411

10,200

5,422

4,437

State and political subdivision obligations

404

405

439

Consumer automobile loans

144,036

151,121

139,524

132,877

134,695

Consumer loans secured by other assets

132,749

129,293

122,895

108,542

104,999

Consumer loans unsecured

4,411

5,209

6,415

7,712

9,093

Total loans

1,734,807

1,698,124

1,711,442

1,660,028

1,634,978

Unfunded commitments under lines of credit or existing loans

166,446

155,005

148,736

149,631

154,722

Deposits
Total deposits increased?$3.4 million to?$1.71 billion at September 30, 2024, compared to?$1.71 billion at June 30, 2024, and increased $53.9 million, or 3.3%, compared to?$1.66 billion one year ago. During the third quarter of 2024, total retail customer deposit balances?increased?$23.4 million and brokered deposit balances decreased $20.0 million. Compared to the preceding quarter, there were balance increases of $18.1?million in consumer time deposits, $17.7?million in business money market accounts,?$7.9?million in consumer demand accounts?and $7.7?million in business time deposits. These increases?were partially offset by decreases in business demand accounts of $26.4?million, brokered time deposits?of $20.0?million, consumer money market accounts of $7.4?million, business savings accounts of $6.5?million, consumer?savings accounts of $5.3?million and public fund time deposits?of $941,000,?during the third quarter of 2024. Increases in time deposits?and money market accounts were driven by customer behavior as they sought out?higher rates. Overall, the current rate environment continues to contribute?to greater competition for deposits with ongoing deposit rate specials offered to attract new funds.

The Company estimates that $401.0 million, or 23%, of total deposit balances were uninsured at September 30, 2024. Approximately $265.7 million, or 16%,?of total deposits?were uninsured business and consumer deposits with the remaining $135.3 million, or 8%, consisting of uninsured?public funds at September 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?$115.5?million?of related deposit balances while the remaining $19.8?million of uninsured tribal accounts?was fully covered through pledged securities at September 30, 2024.

As of September 30, 2024, consumer deposits made up?58% of total deposits with an average balance of?$24,000 per account,?business deposits made?up?22% of total deposits with an average balance of?$51,000 per account, public fund deposits made up?8% of total deposits with an average balance of?$1.6 million per account and the remaining?12% of account balances are brokered time deposits. We have maintained the majority of our public fund relationships for over 10 years. Approximately?70% of our customer base is located in rural areas, with?18% in urban areas and the remaining?12% are brokered deposits as of September 30, 2024.

Deposits

$ in thousands

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Noninterest-bearing demand deposits

252,999

276,543

252,083

269,800

280,475

Interest-bearing demand deposits

167,202

162,201

169,418

182,361

179,029

Money market accounts

433,307

423,047

362,205

372,706

374,269

Savings accounts

212,763

224,631

242,148

253,182

260,279

Certificates of deposit, retail

441,665

398,161

443,412

410,136

379,484

Total retail deposits

1,507,936

1,484,583

1,469,266

1,488,185

1,473,536

Certificates of deposit, brokered

203,705

223,705

207,626

169,577

179,586

Total deposits

1,711,641

1,708,288

1,676,892

1,657,762

1,653,122

Public fund and tribal deposits included in total deposits

139,729

138,439

132,652

128,627

130,974

Total loans to total deposits

101

102

100

Deposit Mix

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Noninterest-bearing demand deposits

14.8

16.2

15.0

16.3

17.0

Interest-bearing demand deposits

9.8

9.5

10.1

11.0

10.8

Money market accounts

25.3

24.8

21.6

22.5

22.6

Savings accounts

12.4

13.1

14.4

15.3

15.7

Certificates of deposit, retail

25.8

23.3

26.5

24.7

23.0

Certificates of deposit, brokered

11.9

13.1

12.4

10.2

10.9

Cost of Deposits for the Quarter Ended

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Interest-bearing demand deposits

0.45

0.47

0.45

0.46

Money market accounts

2.65

2.40

2.08

1.48

1.22

Savings accounts

1.64

1.62

1.63

1.54

1.42

Certificates of deposit, retail

4.16

4.10

4.13

3.92

3.52

Certificates of deposit, brokered

4.88

4.94

4.72

4.31

Cost of total deposits

2.56

2.47

2.43

2.12

1.85

Asset Quality
The allowance for credit losses on loans ("ACLL") increased?$2.6 million from?$19.3 million at June 30, 2024, to?$22.0 million at September 30, 2024. The ACLL as a percentage of total loans was?1.27% at September 30, 2024, increasing from 1.14% at June 30, 2024, and increasing from?1.04% one year earlier. The current quarter increase can be attributed to $1.9 million of additional reserves taken on individually evaluated?commercial business loans due uncertainty in the collectability of these loans. The pooled loan reserve increased $1.2?million due to higher loss factors applied to commercial business and multi-family loans, partially offset by lower loss factors applied to one-to-four family, commercial real estate,?home equity, auto and other consumer loans. Loss factors were revised based on the results of an annual loss driver analysis, in conjunction with other relevant factors,?to update each segment's sensitivity to qualitative factors used in the calculation of the pooled reserve at September 30, 2024.

Nonperforming loans totaled?$30.4 million at September 30, 2024, an increase of?$6.8 million from June 30, 2024, primarily attributable to a $5.6?million delinquent commercial real estate relationship?and two commercial business loans with an aggregate total of?$1.7?million placed on nonaccrual due to credit concerns. The percentage of the allowance for credit losses on loans to nonperforming loans decreased to?72% at September 30, 2024, from?82% at June 30, 2024, and from?714% at September 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 secured loans are considered adequately reserved for based on information currently available.

Classified loans increased?$7.2 million to?$46.9 million at September 30, 2024, due to the downgrade?of one $6.4 million commercial real estate loan and ten commercial business loans totaling $5.6 million during the?third quarter, partially offset by?loan payoffs totaling $5.0 million. An $11.2?million construction loan relationship, which became a classified loan?in the fourth quarter of 2022; an $8.1 million commercial construction loan relationship, which became classified in the previous quarter; and a $6.2?million commercial loan relationship, which became classified in the fourth quarter of 2023, account for 55% of the classified loan balance at September 30, 2024.?The Bank has exercised legal remedies, including the appointment of a third-party receiver?and foreclosure actions, to liquidate the underlying collateral to satisfy the?real estate loans in two of these?three collateral dependent?relationships. The Bank is also closely monitoring certain equity program loans, with 14 loans totaling $5.9 million included in classified loans at September 30, 2024, and an additional nine loans totaling $3.1 million included in the?special mention risk grading category.

$ in thousands

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Allowance for credit losses on loans to total loans

1.27

1.14

1.05

1.04

Allowance for credit losses on loans to nonaccrual loans

714

Nonaccrual loans to total loans

1.75

1.39

1.14

1.12

0.15

Net charge-off ratio (annualized)

0.10

1.70

0.19

0.14

0.30

Total nonaccrual loans

30,376

23,631

19,481

18,644

2,374

Reserve for unfunded commitments

704

647

548

817

828

Capital
Total shareholders? equity increased to?$160.8 million at September 30, 2024, compared to?$158.9 million three months earlier, due to an increase in the after-tax fair market values of the available-for-sale?investment securities portfolio of $6.3 million, partially offset by a net loss of $2.0 million, a decrease in the after-tax fair market values of derivatives of $1.2 million, share repurchases totaling $1.0 million?and?dividends declared of $659,000.

Book value per common share?was?$17.17 at September 30, 2024, compared to?$16.81 at June 30, 2024, and?$16.20 at September 30, 2023. Tangible book value per common share*?was?$17.00 at September 30, 2024, compared to?$16.64 at June 30, 2024, and?$16.03 at September 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 September 30, 2024. Common Equity Tier 1 and Total Risk-Based Capital Ratios at September 30, 2024, were?12.2% and 13.4%, respectively.

3Q 24

2Q 24

1Q 24

4Q 23

3Q 23

Equity to total assets

7.13

7.17

7.42

7.25

Tangible common equity to tangible assets *

7.06

7.10

7.35

7.17

Capital ratios (First Fed Bank):

Tier 1 leverage

9.39

9.38

9.74

9.90

10.12

Common equity Tier 1 capital

12.20

12.40

12.56

13.12

13.43

Tier 1 risk-based

12.20

12.40

12.56

13.12

13.43

Total risk-based

13.44

13.49

13.57

14.11

14.38

Share Repurchase Program and Cash Dividend
First Northwest continued?to return capital to our shareholders through cash dividends and share repurchases during the third quarter of 2024. We repurchased?98,156 shares of common stock under the Company's April 2024?Stock Repurchase Plan ("Repurchase Plan") at an average price of?$10.19 per share for a total of?$1.0 million during the quarter ended?September 30, 2024, leaving?846,123 shares remaining under the plan. In addition, the Company paid cash dividends totaling?$652,000 in the third 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: 2024 Best of Olympic Peninsula	In September 2024, the First Fed team was recognized in the 2024 Best of Olympic Peninsula surveys, winning Best Bank and Best Lender in Clallam County; Best Bank and Best Financial Advisor in the West End; and Best Lender in Jefferson County. First Fed was also a finalist for Best Bank, Best Customer Service, Best Employer and Best Financial Advisor in Jefferson County; Best Customer Service, Best Employer and Best Financial Advisor in Clallam County; and Best Customer Service and Best Employer in the West End.
Image: Puget Sound Business Journal Midsize Corporate Philanthropists	In May 2024, First Fed, along with the First Fed Community Foundation, were honored to be ranked second on the Puget Sound Business Journal Midsize Corporate Philanthropists list.
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 as a finalist for Best Employer in Kitsap County and Best Bank and Best Financial Institution in Bainbridge.
?	?

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, including our ability to collect, the outcome of litigation?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; the risk of inaccuracies in the reporting of our financial condition as a result of the material weakness in our internal controls; 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)

September 30, 2024

June 30, 2024

September 30, 2023

Three Month Change

One Year Change

ASSETS

Cash and due from banks

17,953

19,184

20,609

-6.4

-12.9

Interest-earning deposits in banks

64,769

63,995

63,277

1.2

2.4

Investment securities available for sale, at fair value

310,860

306,714

309,324

1.4

0.5

Loans held for sale

378

1,086

689

-65.2

-45.1

Loans receivable (net of allowance for credit losses on loans $21,970, $19,343, and $16,945)

1,714,416

1,677,764

1,618,033

2.2

6.0

Federal Home Loan Bank (FHLB) stock, at cost

14,435

13,086

12,621

10.3

14.4

Accrued interest receivable

8,939

9,466

8,093

-5.6

10.5

Premises and equipment, net

10,436

10,714

17,954

-2.6

-41.9

Servicing rights on sold loans, at fair value

3,584

3,740

3,729

-4.2

-3.9

Bank-owned life insurance, net

41,429

41,113

40,318

0.8

2.8

Equity and partnership investments

14,912

15,085

14,623

-1.1

2.0

Goodwill and other intangible assets, net

1,083

1,084

1,087

-0.1

-0.4

Deferred tax asset, net

10,802

12,216

16,611

-11.6

-35.0

Prepaid expenses and other assets

41,490

40,715

26,577

1.9

56.1

Total assets

2,255,486

2,215,962

2,153,545

1.8

4.7

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits

1,711,641

1,708,288

1,657,762

0.2

3.3

Borrowings

334,994

302,575

300,416

10.7

11.5

Accrued interest payable

2,153

3,143

2,276

-31.5

-5.4

Accrued expenses and other liabilities

43,424

41,771

34,651

4.0

25.3

Advances from borrowers for taxes and insurance

2,485

1,304

2,375

90.6

4.6

Total liabilities

2,094,697

2,057,081

1,997,480

1.8

4.9

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 9,365,979 at September 30, 2024; issued and outstanding 9,453,247 at June 30, 2024; and issued and outstanding 9,630,735 at September 30, 2023

0.0

-2.1

Additional paid-in capital

93,218

93,985

95,658

-0.8

-2.6

Retained earnings

100,660

103,322

113,579

-2.6

-11.4

Accumulated other comprehensive loss, net of tax

(26,424

)

(31,597

)

(45,850

)

16.4

42.4

Unearned employee stock ownership plan (ESOP) shares

(6,759

)

(6,923

)

(7,418

)

2.4

8.9

Total shareholders' equity

160,789

158,881

156,065

1.2

3.0

Total liabilities and shareholders' equity

2,255,486

2,215,962

2,153,545

1.8

4.7

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

Quarter Ended

September 30, 2024

June 30, 2024

September 30, 2023

Three Month Change

One Year Change

INTEREST INCOME

Interest and fees on loans receivable

23,536

23,733

21,728

-0.8

8.3

Interest on investment securities

3,786

3,949

3,368

-4.1

12.4

Interest on deposits in banks

582

571

524

1.9

11.1

FHLB dividends

302

358

214

-15.6

41.1

Total interest income

28,206

28,611

25,834

-1.4

9.2

INTEREST EXPENSE

Deposits

10,960

10,180

7,699

7.7

42.4

Borrowings

3,226

4,196

3,185

-23.1

1.3

Total interest expense

14,186

14,376

10,884

-1.3

30.3

Net interest income

14,020

14,235

14,950

-1.5

-6.2

PROVISION FOR CREDIT LOSSES

Provision for credit losses on loans

3,077

8,640

880

-64.4

249.7

Provision for (recapture of) credit losses on unfunded commitments

(509

)

-42.4

111.2

Provision for credit losses

3,134

8,739

371

-64.1

744.7

Net interest income after provision for credit losses

10,886

5,496

14,579

98.1

-25.3

NONINTEREST INCOME

Loan and deposit service fees

1,059

1,076

1,068

-1.6

-0.8

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

-86.5

-89.8

Net gain on sale of loans

150

171

-61.3

-66.1

Net loss on sale of investment securities

(2,117

)

100.0

n/a

Net gain on sale of premises and equipment

7,919

-100.0

n/a

Increase in cash surrender value of bank-owned life insurance

315

293

252

7.5

25.0

Other income

337

(48

)

1,315

802.1

-74.4

Total noninterest income

1,779

7,347

2,904

-75.8

-38.7

NONINTEREST EXPENSE

Compensation and benefits

8,582

8,588

7,795

-0.1

10.1

Data processing

2,085

2,008

1,945

3.8

7.2

Occupancy and equipment

1,553

1,799

1,173

-13.7

32.4

Supplies, postage, and telephone

360

317

292

13.6

23.3

Regulatory assessments and state taxes

548

457

446

19.9

22.9

Advertising

409

377

501

8.5

-18.4

Professional fees

698

684

929

2.0

-24.9

FDIC insurance premium

533

473

369

12.7

44.4

Other expense

1,080

906

926

19.2

16.6

Total noninterest expense

15,848

15,609

14,376

1.5

10.2

(Loss) income before (benefit) provision for income taxes

(3,183

)

(2,766

)

3,107

-15.1

-202.4

(Benefit) provision for income taxes

(1,203

)

(547

)

603

-119.9

-299.5

Net (loss) income

(1,980

)

(2,219

)

2,504

10.8

-179.1

Basic and diluted (loss) earnings per common share

(0.23

)

(0.25

)

0.28

8.0

-182.1

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

Nine Months Ended September 30,

Percent

2024

2023

Change

INTEREST INCOME

Interest and fees on loans receivable

70,036

62,531

12.0

Interest on investment securities

11,367

9,886

15.0

Interest on deposits in banks

1,798

1,545

16.4

FHLB dividends

942

628

50.0

Total interest income

84,143

74,590

12.8

INTEREST EXPENSE

Deposits

31,252

18,261

71.1

Borrowings

10,708

9,092

17.8

Total interest expense

41,960

27,353

53.4

Net interest income

42,183

47,237

-10.7

PROVISION FOR CREDIT LOSSES

Provision for credit losses on loans

12,956

1,195

984.2

(Recapture of) provision for credit losses on unfunded commitments

(113

)

(1,024

)

89.0

Provision for credit losses

12,843

171

7,410.5

Net interest income after provision for credit losses

29,340

47,066

-37.7

NONINTEREST INCOME

Loan and deposit service fees

3,237

3,273

-1.1

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

303

400

-24.3

Net gain on sale of loans

260

405

-35.8

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

851

668

27.4

Other income

861

2,203

-60.9

Total noninterest income

11,314

6,949

62.8

NONINTEREST EXPENSE

Compensation and benefits

25,298

23,812

6.2

Data processing

6,037

6,063

-0.4

Occupancy and equipment

4,592

3,596

27.7

Supplies, postage, and telephone

970

1,082

-10.4

Regulatory assessments and state taxes

1,518

1,259

20.6

Advertising

1,095

2,471

-55.7

Professional fees

2,292

2,619

-12.5

FDIC insurance premium

1,392

939

48.2

Other

2,566

2,623

-2.2

Total noninterest expense

45,760

44,464

2.9

(Loss) income before (benefit) provision for income taxes

(5,106

)

9,551

-153.5

(Benefit) provision for income taxes

(1,303

)

1,903

-168.5

Net (loss) income

(3,803

)

7,648

-149.7

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

160

-100.0

Net (loss) income attributable to parent

(3,803

)

7,808

-148.7

Basic and diluted (loss) earnings per common share

(0.43

)

0.87

-149.4

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

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

Performance ratios:⁽¹⁾

Return on average assets

-0.36

-0.40

0.07

-1.03

0.46

Return on average equity

-4.91

-5.47

0.98

-14.05

6.17

Average interest rate spread

2.21

2.27

2.28

2.40

2.54

Net interest margin⁽²⁾

2.70

2.76

2.84

2.97

Efficiency ratio⁽³⁾

100.3

72.3

88.8

150.8

80.5

Equity to total assets

7.13

7.17

7.42

7.25

Average interest-earning assets to average interest-bearing liabilities

118.0

117.6

118.3

118.2

120.0

Book value per common share

17.17

16.81

17.00

16.99

16.20

Tangible performance ratios:⁽¹⁾

Tangible common equity to tangible assets⁽⁴⁾

7.06

7.10

7.35

7.17

Return on average tangible common equity⁽⁴⁾

-4.96

-5.53

0.99

-14.20

6.23

Tangible book value per common share⁽⁴⁾

17.00

16.64

16.83

16.03

Asset quality ratios:

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

1.35

1.07

0.87

0.85

0.11

Nonaccrual loans to total loans⁽⁶⁾

1.75

1.39

1.14

1.12

0.15

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

72.33

81.85

92.18

93.92

713.77

Allowance for credit losses on loans to total loans

1.27

1.14

1.05

1.04

Annualized net charge-offs to average outstanding loans

0.10

1.70

0.19

0.14

0.30

Capital ratios (First Fed Bank):

Tier 1 leverage

9.4

9.7

9.9

10.1

Common equity Tier 1 capital

12.2

12.4

12.6

13.1

13.4

Tier 1 risk-based

12.2

12.4

12.6

13.1

13.4

Total risk-based

13.4

13.5

13.6

14.1

14.4

Other Information:

Average total assets

2,209,333

2,219,370

2,166,187

2,127,655

2,139,734

Average total loans

1,718,402

1,717,830

1,678,656

1,645,418

1,641,206

Average interest-earning assets

2,061,970

2,072,280

2,027,821

1,980,226

1,994,251

Average noninterest-bearing deposits

252,911

251,442

249,283

259,845

276,294

Average interest-bearing deposits

1,452,817

1,408,018

1,422,116

1,379,059

1,377,734

Average interest-bearing liabilities

1,747,649

1,762,858

1,714,474

1,675,044

1,661,996

Average equity

160,479

163,079

161,867

155,971

160,994

Average common shares -- basic

8,756,765

8,783,086

8,876,236

8,928,620

8,906,526

Average common shares -- diluted

8,756,765

8,783,086

8,907,184

8,968,828

8,934,882

Tangible assets⁽⁴⁾

2,253,914

2,214,361

2,238,446

2,200,230

2,151,849

Tangible common equity⁽⁴⁾

159,217

157,280

158,932

161,773

154,369

(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 Nine Months Ended September 30,						?
?	?	2024		?	?	2023		?
Performance ratios:⁽¹⁾	?	?	?	?	?	?	?	?
Return on average assets	?	?	-0.23	%	?	?	0.50	%
Return on average equity	?	?	-3.14	?	?	?	6.50	?
Average interest rate spread	?	?	2.25	?	?	?	2.83	?
Net interest margin⁽²⁾	?	?	2.74	?	?	?	3.22	?
Efficiency ratio⁽³⁾	?	?	85.54	?	?	?	82.06	?
Equity to total assets	?	?	7.13	?	?	?	7.25	?
Average interest-earning assets to average interest-bearing liabilities	?	?	117.9	?	?	?	121.0	?
Book value per common share	?	$	17.17	?	?	$	16.20	?
?	?	?	?	?	?	?	?	?
Tangible performance ratios:⁽¹⁾	?	?	?	?	?	?	?	?
Tangible common equity to tangible assets⁽⁴⁾	?	?	7.06	%	?	?	7.17	%
Return on average tangible common equity⁽⁴⁾	?	?	-3.17	?	?	?	6.57	?
Tangible book value per common share⁽⁴⁾	?	$	17.00	?	?	$	16.03	?
?	?	?	?	?	?	?	?	?
Asset quality ratios:	?	?	?	?	?	?	?	?
Nonperforming assets to total assets at end of period⁽⁵⁾	?	?	1.35	%	?	?	0.11	%
Nonaccrual loans to total loans⁽⁶⁾	?	?	1.75	?	?	?	0.15	?
Allowance for credit losses on loans to nonaccrual loans⁽⁶⁾	?	?	72.33	?	?	?	713.77	?
Allowance for credit losses on loans to total loans	?	?	1.27	?	?	?	1.04	?
Annualized net charge-offs to average outstanding loans	?	?	0.67	?	?	?	0.10	?
?	?	?	?	?	?	?	?	?
Capital ratios (First Fed Bank):	?	?	?	?	?	?	?	?
Tier 1 leverage	?	?	9.4	%	?	?	10.1	%
Common equity Tier 1 capital	?	?	12.2	?	?	?	13.4	?
Tier 1 risk-based	?	?	12.2	?	?	?	13.4	?
Total risk-based	?	?	13.4	?	?	?	14.4	?
?	?	?	?	?	?	?	?	?
Other Information:	?	?	?	?	?	?	?	?
Average total assets	?	$	2,198,337	?	?	$	2,102,980	?
Average total loans	?	?	1,705,088	?	?	?	1,698,394	?
Average interest-earning assets	?	?	2,054,052	?	?	?	1,959,946	?
Average noninterest-bearing deposits	?	?	251,218	?	?	?	284,282	?
Average interest-bearing deposits	?	?	1,427,743	?	?	?	1,333,696	?
Average interest-bearing liabilities	?	?	1,741,683	?	?	?	1,619,763	?
Average equity	?	?	161,803	?	?	?	160,573	?
Average common shares -- basic	?	?	8,805,124	?	?	?	8,910,391	?
Average common shares -- diluted	?	?	8,805,124	?	?	?	8,930,404	?
Tangible assets⁽⁴⁾	?	?	2,253,914	?	?	?	2,151,849	?
Tangible common equity⁽⁴⁾	?	?	159,217	?	?	?	154,369	?

(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)

September 30, 2024

June 30, 2024

September 30, 2023

Three Month Change

One Year Change

(In thousands)

Real Estate:

One-to-four family

395,792

389,934

369,950

5,858

25,842

Multi-family

353,813

350,076

325,496

3,737

28,317

Commercial real estate

376,008

375,511

381,508

497

(5,500

)

Construction and land

95,709

107,273

143,434

(11,564

)

(47,725

)

Total real estate loans

1,221,322

1,222,794

1,220,388

(1,472

)

934

Consumer:

Home equity

76,960

72,613

64,424

4,347

12,536

Auto and other consumer

281,198

285,623

248,786

(4,425

)

32,412

Total consumer loans

358,158

358,236

313,210

(78

)

44,948

Commercial business

155,327

117,094

101,380

38,233

53,947

Total loans receivable

1,734,807

1,698,124

1,634,978

36,683

99,829

Less:

Derivative basis adjustment

(1,579

)

1,017

(2,596

)

(1,579

)

Allowance for credit losses on loans

21,970

19,343

16,945

2,627

5,025

Total loans receivable, net

1,714,416

1,677,764

1,618,033

36,652

96,383

Selected loan detail:

September 30, 2024

June 30, 2024

September 30, 2023

Three Month Change

One Year Change

(In thousands)

Construction and land loans breakout

1-4 Family construction

43,125

56,514

63,371

(13,389

)

(20,246

)

Multifamily construction

29,109

43,341

54,318

(14,232

)

(25,209

)

Nonresidential construction

17,500

1,015

18,746

16,485

(1,246

)

Land and development

5,975

6,403

6,999

(428

)

(1,024

)

Total construction and land loans

95,709

107,273

143,434

(11,564

)

(47,725

)

Auto and other consumer loans breakout

Triad Manufactured Home loans

129,600

125,906

101,339

3,694

28,261

Woodside auto loans

126,129

131,151

124,833

(5,022

)

1,296

First Help auto loans

15,971

17,427

5,079

(1,456

)

10,892

Other auto loans

2,064

2,690

5,022

(626

)

(2,958

)

Other consumer loans

7,434

8,449

12,513

(1,015

)

(5,079

)

Total auto and other consumer loans

281,198

285,623

248,786

(4,425

)

32,412

Commercial business loans breakout

PPP loans

)

(45

)

Northpointe Bank MPP

38,155

9,150

162

29,005

37,993

Secured lines of credit

37,686

28,862

35,833

8,824

1,853

Unsecured lines of credit

1,571

1,133

919

438

652

SBA loans

7,219

7,146

9,149

(1,930

)

Other commercial business loans

70,696

70,798

55,272

(102

)

15,424

Total commercial business loans

155,327

117,094

101,380

38,233

53,947

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:

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

(Dollars in thousands)

Net interest income

14,020

14,235

13,928

14,195

14,950

Noninterest income

1,779

7,347

2,188

(2,929

)

2,904

Total revenue, net of interest expense⁽¹⁾

15,799

21,582

16,116

11,266

17,854

(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:

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

September 30, 2023

(Dollars in thousands, except per share data)

Total shareholders' equity

160,789

158,881

160,506

163,340

156,065

Less: Goodwill and other intangible assets

1,083

1,084

1,085

1,086

1,087

Disallowed non-mortgage loan servicing rights

489

517

489

481

609

Total tangible common equity

159,217

157,280

158,932

161,773

154,369

Total assets

2,255,486

2,215,962

2,240,020

2,201,797

2,153,545

Less: Goodwill and other intangible assets

1,083

1,084

1,085

1,086

1,087

Disallowed non-mortgage loan servicing rights

489

517

489

481

609

Total tangible assets

2,253,914

2,214,361

2,238,446

2,200,230

2,151,849

Average shareholders' equity

160,479

163,079

161,867

155,971

160,994

Less: Average goodwill and other intangible assets

1,084

1,085

1,086

1,087

Average disallowed non-mortgage loan servicing rights

517

489

481

608

557

Total average tangible common equity

158,878

161,505

160,301

154,277

159,350

Net (loss) income

(1,980

)

(2,219

)

396

(5,522

)

2,504

Common shares outstanding

9,365,979

9,453,247

9,442,796

9,611,876

9,630,735

GAAP Ratios:

Equity to total assets

7.13

7.17

7.42

7.25

Return on average equity

-4.91

-5.47

0.98

-14.05

6.17

Book value per common share

17.17

16.81

17.00

16.99

16.20

Non-GAAP Ratios:

Tangible common equity to tangible assets⁽¹⁾

7.06

7.10

7.35

7.17

Return on average tangible common equity⁽¹⁾

-4.96

-5.53

0.99

-14.20

6.23

Tangible book value per common share⁽¹⁾

17.00

16.64

16.83

16.03

(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)

?	?	September 30, 2024		?	?	September 30, 2023		?
?	?	(Dollars in thousands, except per share data)						?
Total shareholders' equity	?	$	160,789	?	?	$	156,065	?
Less: Goodwill and other intangible assets	?	?	1,083	?	?	?	1,087	?
Disallowed non-mortgage loan servicing rights	?	?	489	?	?	?	609	?
Total tangible common equity	?	$	159,217	?	?	$	154,369	?
?	?	?	?	?	?	?	?	?
Total assets	?	$	2,255,486	?	?	$	2,153,545	?
Less: Goodwill and other intangible assets	?	?	1,083	?	?	?	1,087	?
Disallowed non-mortgage loan servicing rights	?	?	489	?	?	?	609	?
Total tangible assets	?	$	2,253,914	?	?	$	2,151,849	?
?	?	?	?	?	?	?	?	?
Average shareholders' equity	?	$	161,803	?	?	$	160,573	?
Less: Average goodwill and other intangible assets	?	?	1,085	?	?	?	1,088	?
Average disallowed non-mortgage loan servicing rights	?	?	496	?	?	?	690	?
Total average tangible common equity	?	$	160,222	?	?	$	158,795	?
?	?	?	?	?	?	?	?	?
Net (loss) income	?	$	(3,803	)	?	$	7,808	?
Common shares outstanding	?	?	9,365,979	?	?	?	9,630,735	?
GAAP Ratios:	?	?	?	?	?	?	?	?
Equity to total assets	?	?	7.13	%	?	?	7.25	%
Return on average equity	?	?	-3.14	%	?	?	6.50	%
Book value per common share	?	$	17.17	?	?	$	16.20	?
Non-GAAP Ratios:	?	?	?	?	?	?	?	?
Tangible common equity to tangible assets⁽¹⁾	?	?	7.06	%	?	?	7.17	%
Return on average tangible common equity⁽¹⁾	?	?	-3.17	%	?	?	6.57	%
Tangible book value per common share⁽¹⁾	?	$	17.00	?	?	$	16.03	?
?
(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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Source: First Northwest Bancorp (FNWB)

First Northwest Bancorp Reports Third Quarter 2024 Financial Results

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