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First Northwest Bancorp Reports听Fourth Quarter听2024 Financial Results

PORT ANGELES, Wash., Jan. 29, 2025 (GLOBE NEWSWIRE) -- First Northwest Bancorp (Nasdaq: FNWB)听("First Northwest" or the "Company") today reported a net loss听of听$2.8 million for the fourth quarter of 2024, compared to a net loss of听$2.0 million for the听third quarter of 2024 and a net loss of听$5.5 million for the fourth quarter of 2023. Basic and diluted loss per share were听$0.32 for the fourth quarter of 2024, compared to basic and diluted loss per share of听$0.23 for the听third quarter of 2024 and basic and diluted loss per share of听$0.62 for the fourth quarter of 2023.

In the fourth quarter of 2024, the Company recorded adjusted pre-tax, pre-provision net revenue ("PPNR")⁽¹⁾ of $1.2 million, compared to a $49,000听adjusted PPNR loss for the preceding quarter and adjusted PPNR of听$327,000听for the fourth quarter of 2023.

The Board of Directors of First Northwest听declared a quarterly cash dividend of $0.07听per common share, payable on February 28, 2025, to shareholders of record as of the close of business on February 14, 2025.

Quote from First Northwest President and CEO, Matthew P. Deines:
"Although financial results in 2024 were adversely impacted by elevated credit costs, we are optimistic for continued improvement in asset quality in early 2025. During the fourth quarter, our pre-provision net revenue^听(1) grew to $1.2 million with modest margin improvement as we successfully reduced FHLB borrowings. As we look ahead to 2025, we are laser focused on growing core commercial and retail customer relationships while resolving problem assets, improving profitability and maintaining our strong capital position. Highlights for 2024 include the termination of our compliance Consent Order with the FDIC, reduction of core operating expenses and improvement in our liquidity position with the loan to deposit ratio below 100% at year-end. I鈥檇 like to thank all our employees for their efforts and contributions in 2024, and for making a positive impact in the communities we serve."

Key Points for听Fourth Quarter and Going Forward

Provision for credit losses:

• The Company recorded a听$3.8 million provision for credit losses on loans听in the fourth quarter of 2024, primarily due to charge-offs of six commercial business loans. This compares to loan credit loss provisions of听$3.1 million听for the preceding quarter and听$1.2 million听for the fourth quarter of 2023.听
• We believe the reserve on individually analyzed loans does not represent听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 for the fourth quarter of 2024.

First Fed Bank's ("First Fed" or the "Bank") balance sheet restructure continues 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, which was established in the first quarter of 2024, added $1.1 million to interest income for the year. The hedge successfully reduced the Bank's liability sensitivity, and lowered the overall interest rate risk profile. The hedge also enhanced earnings due to a favorable contract position during the 2024 interest rate environment. The Bank expects to maintain a positive carry on its derivative for up to an additional 25-basis points of rate cuts.听
• During 2024, bank-owned life insurance policies ("BOLI") were reinvested into higher yielding products. In the fourth quarter of 2024, a $8.5 million policy was surrendered and reinvested into a policy earning 6.01% and a $922,000 policy earning 1.64% was exchanged and reinvested into a policy earning 3.99%. Total policy conversions during 2024 increased the annual pre-tax net yield earned on the total BOLI portfolio by 74-basis points. The remaining surrender transaction is expected to be completed during the first quarter of 2025.听
• Investment security purchases during the听fourth quarter of 2024 totaled $47.1 million, carrying a weighted-average yield of听6.7%听at purchase and a weighted-average life of听3.1 years. The annualized interest income on these securities is anticipated to provide $2.6 million in revenue for 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fourth quarter of 2024听increased听$1.3 million听to $1.2 million, compared to an adjusted PPNR听loss of听$49,000听for the preceding quarter, and increased听$1.5 million听from an adjusted PPNR听$327,000听loss in the听fourth quarter one听year ago.

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

• Total interest income was relatively unchanged at听$28.2 million for the fourth quarter of 2024, compared to听the previous quarter, and increased听$1.9 million compared to听$26.3 million in the fourth quarter of 2023. Interest income decreased in the fourth quarter of 2024听primarily due to a decrease in the income earned on the securities derivative combined with lower FHLB dividends and reduced interest income received on Company deposit accounts. Higher yields on performing loans during the fourth quarter of 2024听were partially offset by nonaccrual interest adjustments totaling $46,000. Interest and fees听on loans increased year-over-year听as the loan portfolio grew. 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.
• The net interest margin increased to听2.73% for the fourth quarter of 2024, from听2.70% for the prior quarter, and decreased 11-basis points from听2.84% for听the fourth quarter of 2023. The Company reported reduced rates and declining volume听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 customer deposits.听The decrease in net interest margin听from the same quarter one year ago is due to higher funding costs for听deposits and borrowed funds.听
  
• Noninterest income included a $1.8 million write down on an equity investment in an organization that is involved in a lawsuit, partially offset by a $1.5 million BOLI death benefit payment received due to the passing of an employee.听
• Noninterest expense听for the fourth quarter of 2024听decreased mainly due to a $1.2 million reduction in compensation related to nonrecurring payouts in the previous quarter combined with a reduced incentive accrual and lower headcount in the fourth quarter of 2024. FDIC assessment, state taxes, advertising and other discretionary spending also decreased from the previous quarter.

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

The allowance for credit losses on loans ("ACLL") decreased听$1.5 million听to听$20.5 million at December 31, 2024, from听$22.0 million at September 30, 2024. The ACLL as a percentage of total loans was听1.21% at December 31, 2024, a decrease听from 1.27%听at September 30, 2024, and an increase from听1.05% one year earlier. The pooled loan reserve decreased $1.5听million during the听fourth quarter of 2024, primarily due to the decreases in multi-family, construction, and consumer loan balances combined with decreases resulting听from lower loss factors听applied to commercial business and commercial real estate loans, partially offset by higher loss factors applied to one-to-four family听and other consumer loans.

Nonperforming loans totaled听$30.5 million at December 31, 2024, an increase of听$139,000 from September 30, 2024. ACLL to nonperforming loans decreased to听67% at December 31, 2024, from听72% at September 30, 2024, and 94% at December 31, 2023. This ratio continued听to decline as higher balances of real estate loans are included in nonperforming assets with no significant corresponding increase to the ACLL as these collateral dependent loans were considered adequately reserved for based on information available at each period end.

Classified loans decreased听$4.4 million to听$42.5 million at December 31, 2024, from听$46.9 million听at September 30, 2024, primarily due to charge-offs totaling听$3.9听million on six commercial business loans during the听fourth quarter. An $11.4听million construction loan relationship, which became a classified loan听in the fourth quarter of 2022; an $8.1 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 61% of the classified loan balance at December 31, 2024.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 15听loans totaling $2.2听million included in classified loans at December 31, 2024, and an additional eight loans totaling $2.8听million included in the听special mention risk grading category.

Financial Condition and Capital

Investment securities increased $29.5 million, or 9.5%, to听$340.3 million at December 31, 2024, compared to听$310.9 million three months earlier, and increased听$44.7 million compared to听$295.6 million at December 31, 2023.听The market value of the portfolio decreased $5.8听million during the听fourth quarter of 2024.听The estimated average life of the securities portfolio was approximately听6.9 years at December 31, 2024,听7.4 years at the prior quarter end and听7.7 years at the end of听the fourth quarter of 2023. The effective duration of the portfolio was approximately听3.9 years at December 31, 2024, compared to听3.9 years at the prior quarter end and听4.8 years at the end of the fourth quarter of 2023. Investment purchases at the beginning of 2024 were primarily floating rate securities to take advantage of higher short-term rates above those offered on cash at that time and to reduce our liability sensitivity. Purchases in the fourth quarter were primarily fixed to rebalance our securities portfolio position for 2025.

Net loans, excluding loans held for sale, decreased $39.2 million, or 2.3%, to听$1.68 billion at December 31, 2024, from听$1.71 billion at September 30, 2024, and increased $32.7 million, or 2.0%, from听$1.64 billion one year prior.听Construction loans that converted听into fully amortizing loans during the quarter totaled听$18.3听million. Loan payoffs of $73.9听million, regular payments of $35.3 million and charge-offs totaling $5.3 million听outpaced new loan funding听totaling听$55.6听million听and draws on existing loans totaling $19.7 million.

Total deposits decreased听$23.6 million to听$1.69 billion at December 31, 2024, compared to听$1.71 billion at September 30, 2024, and increased $11.1 million, or 0.7%, compared to听$1.68 billion one year ago. During the听fourth quarter of 2024, total customer deposit balances decreased听$2.8 million and brokered deposit balances decreased $20.8 million. Overall, the current rate environment continues to contribute听to greater competition for deposits. As a result, the Bank continues offering听deposit rate specials to attract new funds.

Total shareholders鈥� equity decreased to听$153.9 million at December 31, 2024, compared to听$160.8 million three months earlier, due to a听decrease in the after-tax fair market values of the available-for-sale听investment securities portfolio of $4.5听million, a听net loss of $2.8 million听and听dividends declared of $656,000, partially offset by an increase in the after-tax fair market values of derivatives of $952,000.

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 December 31, 2024. Preliminary calculations of听Common Equity Tier 1 and Total Risk-Based Capital Ratios at December 31, 2024, were听12.4% and 13.6%, respectively.

First Northwest continued听to return capital to our shareholders through cash dividends during the fourth quarter of 2024. The Company paid cash dividends totaling听$656,000 in the fourth quarter of 2024.听No shares of common stock were repurchased听under the Company's April 2024听Stock Repurchase Plan ("Repurchase Plan") during the quarter ended听December 31, 2024. There are听846,123 shares that听remain available for repurchase under the Repurchase Plan.

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

	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.
	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.
	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听for the second year in a row.
	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.

We recommend reading this earnings release in conjunction with the Fourth听Quarter听2024 Investor Presentation, located at http://investor.ourfirstfed.com/quarterly-reports and included as an exhibit to our January 29, 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 16 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, 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; legislative and regulatory changes; and other factors described in the Company鈥�s latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q 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鈥�s operations and stock price performance.

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

(1) The average loans receivable, net balances include nonaccrual loans.
(2) Interest earned on loans receivable includes听net deferred fees (costs)听of听$103,000听and听($151,000)听for the three months ended December 31, 2024 and 2023, respectively.
(3) Includes interest-earning deposits (cash) at other financial institutions.
(4) Cost of all deposits, including noninterest-bearing demand deposits, was听2.58%听and听2.12%听for the three months ended December 31, 2024 and 2023, respectively.
(5) Net interest income divided by average interest-earning assets.

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: