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First Northwest Bancorp Reports听First Quarter听2025 Improved Profitability

PORT ANGELES, Wash., April 24, 2025 (GLOBE NEWSWIRE) -- First Northwest Bancorp (Nasdaq: FNWB)听("First Northwest" or the "Company") today reported net income of听$1.5 million for the first quarter of 2025, compared to a net loss of听$2.8 million for the听fourth quarter of 2024 and net income of听$396,000 for the first quarter of 2024. Basic and diluted income per share were听$0.17 for the first quarter of 2025, compared to basic and diluted loss per share of听$0.32 for the听fourth quarter of 2024 and basic and diluted income per share of听$0.04 for the first quarter of 2024.

In the first quarter of 2025, the Company recorded adjusted pre-tax, pre-provision net revenue ("PPNR")⁽¹⁾ of $1.5 million, compared to听$1.4 million听for the preceding quarter and听$1.2 million听for the first quarter of 2024.

The Board of Directors of First Northwest听declared a quarterly cash dividend of $0.07听per common share, payable on May 23, 2025, to shareholders of record as of the close of business on May 9, 2025.

Quote from First Northwest President and CEO, Matthew P. Deines:
"We were pleased to see improved profitability in the first quarter of 2025, which helped grow capital levels and tangible book value. We saw improvement on our asset quality metrics, with nonperforming loans 14% lower than the prior quarter, and remain focused on continued asset quality improvement听over the balance of 2025. Core commercial and consumer customer growth was positive during the first quarter, with lower net loans and deposits largely the result of a decrease in funding to one large wholesale relationship听and reduced brokered deposit balances. We expect better core growth and asset quality trends,听combined with ongoing expense discipline and modest margin improvement, will continue to improve profitability and capital in future quarters. With improved profitability, we are evaluating the potential for future stock buybacks."

Key Points for听First Quarter and Going Forward

Positive Balance Sheet Trends:

• A favorable deposit mix shift included a $45.0 million decrease in brokered deposits while core customer deposits grew $23.0 million. The loan-to-deposit ratio was stable at 99.9% compared to 99.3% in the fourth quarter of 2024.
  
• The Company reduced borrowings by $28.9 million. The total cost of funds decreased to 2.67% compared to 2.80% in the fourth quarter of 2024.

Update on provision for credit losses:

• The Company recorded a $1.6 million provision for credit losses on loans in the first quarter of 2025, primarily due to $1.4 million of charge-offs related to three commercial business loans, one commercial construction loan and a small number of consumer loans. This compares to loan credit loss provisions of $3.8 million for the preceding quarter and $1.2 million for the first quarter of 2024.
  
• 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 and expect further improvement in nonperforming loans over the course of 2025.

Other significant events:

• First Fed Bank's ("First Fed" or the "Bank") balance sheet restructuring continued with the remaining bank-owned life insurance policy ("BOLI") surrender transaction recorded in the first quarter of 2025, with $266,000 of tax and penalties recorded in the provision for income tax. The surrendered policy value was reinvested in the second quarter of 2025. We expect to receive the return of the surrendered funds early in the third quarter of 2025.
  
• We sadly lost a former Bank employee in the first quarter of 2025, resulting in a $1.1 million BOLI death benefit gain.
  
• The Company recorded a $846,000 gain on extinguishment of debt related to repurchasing $5.0 million of subordinated debt at a discount during the first quarter of 2025. In addition to the current quarter gain, the future cost related to interest expense on the subordinated debt will be reduced.
  
• The Company also recognized a $315,000 gain on the conversion of a commercial business loan receivable into a Series A equity investment during the first quarter of 2025.

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

Selected Quarterly Financial Ratios:

Adjusted Pre-tax, Pre-Provision Net Revenue听⁽¹⁾

Adjusted PPNR for the听first quarter of 2025听increased听$40,000听to $1.5 million, compared to听$1.4 million听for the preceding quarter, and increased听$308,000听from听$1.2 million听in the听first quarter one听year ago.

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

• Total interest income decreased $1.4 million to $26.8 million for the first quarter of 2025, compared to $28.2 million for the previous quarter, and decreased $503,000 compared to $27.3 million in the first quarter of 2024. Interest income decreased in the first quarter of 2025 primarily due to a decrease in the income earned on loans receivable and reduced interest income received on Company deposit accounts as both yields earned and average volumes decreased. Average loan balances and related interest income were impacted by a significant decrease in the Northpointe Bank Mortgage Purchase Program ("Northpointe Bank MPP") of $24.7 million and $461,000, respectively. Variable-rate yields on loans and investments were impacted by the cumulative 100 basis points Federal Reserve rate cuts which occurred between September and December 2024.
  
• Total interest expense decreased $1.1 million to $13.0 million for the first quarter of 2025, compared to $14.1 million for the previous quarter, and decreased $422,000 compared to $13.4 million in the first quarter of 2024. Interest expense decreased in the first quarter of 2025 primarily due to decreases in interest paid on brokered certificates of deposit ("CDs"), money market accounts and customer CDs.
  
• The net interest margin increased to 2.76% for the first quarter of 2025, from 2.73% for the prior quarter, and was flat compared to the first quarter of 2024. The Company reported reduced rates and declining volumes of CDs and money market accounts during the first quarter of 2025 which lowered costs; however, these savings were partially offset by a decrease in interest earned on loans and an increase in cost due to higher average borrowings.
  
• Noninterest income included a $1.1 million BOLI death benefit payment received due to the passing of a former employee, a $846,000 gain on extinguishment of debt and a $315,000 gain on the conversion of a loan receivable into an equity investment during the current quarter.
  
• Noninterest expense was relatively unchanged at $14.3 million for the first quarter of 2025, compared to the previous quarter and the first quarter of 2024.

Allowance for Credit Losses on Loans ("ACLL") and Credit Quality

The allowance for credit losses on loans ("ACLL") increased听$176,000听to听$20.6 million at March 31, 2025, from听$20.5 million at December 31, 2024. The ACLL as a percentage of total loans was听1.24% at March 31, 2025, an increase听from 1.21%听at December 31, 2024, and an increase from听1.05% one year earlier. The small increase to the pooled loan reserve combined with charge-offs totaling $1.4 million resulted in a provision expense of $1.6听million for the quarter ended March 31, 2025.

Nonperforming loans totaled听$26.4 million at March 31, 2025, a decrease of听$4.1 million, or 13.5%, from December 31, 2024. ACLL to nonperforming loans increased to听78% at March 31, 2025, from听67% at December 31, 2024, and decreased from听92% at March 31, 2024. This ratio increased during the first quarter as principal payments and charge-offs decreased balances on loans that were already adequately reserved.

Classified loans decreased听$4.7 million to听$37.9 million at March 31, 2025, from听$42.5 million听at December 31, 2024, primarily due to $3.9 million in principal payments received on two commercial construction loans and charge-offs totaling听$825,000 on two commercial business loans and one commercial construction loan during the听first quarter. An $8.1听million construction loan relationship, which became a classified loan听in the fourth quarter of 2022; a听$7.2听million commercial construction loan relationship, which became classified in the second quarter of 2024; and a $6.2听million commercial loan relationship, which became classified in the fourth quarter of 2023, account for 57% of the classified loan balance at March 31, 2025.听The Bank has exercised legal remedies, including the appointment of a third-party receiver听and foreclosure actions, to liquidate the underlying collateral to satisfy the听real estate loans in two of these听three collateral-dependent听relationships. The Bank is also closely monitoring a group of commercial business loans that have similar collateral, with 16听loans totaling $1.7听million included in classified loans at March 31, 2025, and an additional seven loans totaling $2.4听million included in the听special mention risk grading category.

Financial Condition and Capital

Investment securities decreased $24.9 million, or 7.3%, to听$315.4 million at March 31, 2025, compared to听$340.3 million three months earlier, and decreased听$10.5 million compared to听$326.0 million at March 31, 2024.听The market value of the portfolio increased $3.1听million during the听first quarter of 2025.听The estimated average life of the securities portfolio was approximately听6.9 years at March 31, 2025,听6.9 years at the prior quarter end and听7.8 years at the end of听the first quarter of 2024. The effective duration of the portfolio was approximately听4.3 years at March 31, 2025, compared to听3.9 years at the prior quarter end and听4.4 years at the end of the first quarter of 2024. The MBS non-agency portfolio decreased $20.2听million due to early redemptions and maturities and $2.4 million from regular repayment activity听during the most recent quarter.
听

Net loans, excluding loans held for sale, decreased $31.4 million, or 1.9%, to听$1.64 billion at March 31, 2025, from听$1.68 billion at December 31, 2024, and decreased $49.0 million, or 2.9%, from听$1.69 billion one year prior.听Construction loans that converted听into fully amortizing loans during the quarter totaled听$13.3听million. Loan payoffs of $71.0听million, regular payments of $29.4听million and charge-offs totaling $1.4听million听outpaced new loan funding听totaling听$45.3听million听and draws on existing loans totaling $23.3听million. The large decrease in commercial business loans was due to the change in funding needs of the Northpointe Bank MPP, which dropped $36.2听million compared to the prior quarter.

Total deposits decreased听$22.0 million to听$1.67 billion at March 31, 2025, compared to听$1.69 billion at December 31, 2024, and was relatively unchanged compared to听one year prior. During the听first quarter of 2025, total customer deposit balances increased听$23.0 million and brokered deposit balances decreased $45.0 million. Overall, the current rate environment continues to contribute听to greater competition for deposits leading to higher rates paid on interest-bearing demand deposits and savings accounts during the current quarter. The deposit mix compared to March 31, 2024, also reflects a shift to higher demand and money market account balances with increased rates paid on those accounts while rates paid on certificate and savings accounts decreased.

Total shareholders鈥� equity increased to听$157.0 million at March 31, 2025, compared to听$153.9 million three months earlier, due to an increase in the after-tax fair market values of the available-for-sale听investment securities portfolio of $2.4听million and听net income of $1.5 million, partially offset by dividends declared of听$656,000 and a decrease in the after-tax fair market values of derivatives of $425,000.

Capital levels for both the Company and the Bank听remain in excess of applicable regulatory requirements and the Bank was categorized as "well-capitalized" at March 31, 2025. Preliminary calculations of听Common Equity Tier 1 and Total Risk-Based Capital Ratios at March 31, 2025, were听12.7% and 13.9%, respectively.

First Northwest continued听to return capital to our shareholders through cash dividends during the first quarter of 2025. The Company paid cash dividends totaling听$649,000 in the first quarter of 2025.听No shares of common stock were repurchased听under the Company's April 2024听Stock Repurchase Plan (the "Repurchase Plan") during the quarter ended听March 31, 2025. There are听846,123 shares that听remain available for repurchase under the Repurchase Plan.

2024 Awards/Recognition				听	听	听			听
听				听	听	Sound Publishing:
Puget Sound Business Journal Top Corporate Philanthropists				听	听	Best of the Olympic Peninsula Awards
Bellingham Best of the Northwest - Silver				听	听	Best Lender in Clallam and Jefferson County			听
The Leader Readers Choice Award - Best Bank				听	听	Best Bank in Clallam County and West End			听
听	听	听	听	听	听	听	听	听	听
听				听	听				听

We recommend reading this earnings release in conjunction with the First听Quarter听2025 Investor Presentation, located at http://investor.ourfirstfed.com/quarterly-reports and included as an exhibit to our April 24, 2025, Current Report on Form 8-K.

About the Company
First Northwest Bancorp (Nasdaq: 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 18听locations in Washington state including 12 full-service branches. First Fed鈥檚 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听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 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 and execution on certain strategies, perceived opportunities in the market, potential future credit experience, including our ability to collect, the outcome of litigation听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听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;听changes in general economic conditions and conditions within the securities markets, including potential recessionary and other unfavorable conditions and trends relating to housing markets, costs of living, unemployment levels, interest rates, supply chain difficulties and inflationary pressures, among other things; legislative, regulatory, and policy changes; and other factors described in the Company鈥�s latest Annual Report on Form 10-K under the section entitled "Risk Factors,"听and other filings with the Securities and Exchange Commission ("SEC"),which are available on our website at www.ourfirstfed.com and on the SEC鈥�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听2025 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鈥�s operations and stock price performance.

For More Information Contact:
Matthew P. Deines, President and Chief Executive Officer
Phyllis Nomura, EVP and听Chief Financial Officer
[email protected]
360-457-0461

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听("GAAP"). Non-GAAP measures are presented where management believes the information will help investors understand听the Company鈥檚 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.

Calculations Based on PPNR and Adjusted PPNR: