First Northwest Bancorp Reports Second Quarter 2025 Improved Profitability

PORT ANGELES, Wash., July 24, 2025 (GLOBE NEWSWIRE) -- First Northwest Bancorp (Nasdaq: FNWB) ("First Northwest" or the "Company"), the holding company for First Fed Bank ("First Fed" or the "Bank"), today reported net income of $3.7 million for the second quarter of 2025, compared to a net loss of $9.0 million for the first quarter of 2025 and a net loss of $2.2 million for the second quarter of 2024. Basic and diluted income per share were $0.42 for the second quarter of 2025, compared to basic and diluted loss per share of $1.03 for the first quarter of 2025 and basic and diluted loss per share of $0.25 for the second quarter of 2024.

In the second quarter of 2025, the Company recorded Adjusted Pre-Tax, Pre-Provision Net Revenue ("PPNR")⁽¹⁾ of $2.1 million, compared to $1.5 million for the preceding quarter and $530,000 for the second quarter of 2024.

The Board of Directors of First Northwest has elected not to declare a dividend for this quarter as part of a prudent approach to capital management. The Company remains committed to maintaining a strong balance sheet and will continue to evaluate future dividend decisions in light of the Company’s long-term strategic objectives.

Quote from Cindy Finnie, First Northwest Board Chair:
"As previously disclosed, the Board has begun a search process for the next full time Chief Executive Officer. We also continue to strongly dispute the allegations contained in the legal proceedings disclosed in our June 13, 2025, 8-K and intend to vigorously defend against them. Despite the volatility of the past few quarters, the Board remains focused on the strategic objectives of the Bank, building on the positive core trends from the past few quarters."

Quote from Geraldine Bullard, First Northwest Interim CEO:
"Our second quarter included continued modest improvement in several important performance measures, including seven basis points of net interest margin expansion and our fifth consecutive quarter of growing Adjusted PPNR. Commercial business loan recoveries totaling $1.1 million drove a modest provision release during the quarter. The Bank continues to show core customer growth, with loans growing 3% annualized compared to the preceding quarter and total deposits only down modestly despite a $31.0 million reduction in brokered time deposits during the quarter."

Key Points for the Second Quarter

Positive Trends:

• Return on average assets increased to 0.68% for the current quarter from -1.69% in the preceding quarter.

• Net interest margin increased to 2.83% for the current quarter compared to 2.76% in the first quarter of 2025, as a result of an increase in the yield on interest-earning assets and a decrease in the rate paid on interest-bearing liabilities.

• Efficiency ratio improved to 78.0% for the current quarter from 113.5% in the preceding quarter due to the recognition of a payroll tax credit in the current quarter while the preceding quarter included higher expenses related to the legal reserve recorded.

• Customer deposits increased $19.6 million to $1.55 billion at June 30, 2025 from $1.53 billion at March 31, 2025.

• Recorded a $296,000 recapture of provision for credit losses on loans in the second quarter of 2025, compared to provisions for credit losses on loans of $7.8 million for the preceding quarter and $8.7 million for the second quarter of 2024.
  
  

Other significant events:

• In the second quarter of 2025, the statute of limitations expired on employee retention credit ("ERC") payments received for the first and second quarters of 2021. As a result, the Bank recorded $2.6 million as a reduction to compensation and benefits. A related contingent ERC consulting expense of $528,000 was recorded in professional fees, partially offsetting the credit. The Bank anticipates recording the remaining reserved ERC of $2.0 million in 2028.

• During the second quarter of 2025, the Bank consolidated the operations of its Bellevue and Fremont business centers into a new location, the Seattle business center. This consolidation resulted in a one-time increase to other expense of $599,000 for the early termination of the Bellevue business center lease and write-off of remaining leasehold improvements. No additional costs were incurred for closing the Fremont business center. The Bank estimates the consolidation will reduce annual rent expense by $130,000 going forward.

• The Company disclosed in its Current Report on Form 8-K filed on July 21, 2025, that a settlement agreement was reached in the previously disclosed legal matter discussed in Part II, Item 1 of the Company's Form 10-Q for the quarter ended March 31, 2025. The Bank continues to vigorously defend itself in the separate legal proceedings disclosed in the Company's Current Report on Form 8-K filed on June 13, 2025.
  
  

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

Selected Quarterly Financial Ratios:

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

Adjusted PPNR for the second quarter of 2025 increased $616,000 to $2.1 million, compared to $1.5 million for the preceding quarter, and increased $1.6 million from $530,000 in the second quarter one year ago.

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

• Total interest income increased $308,000 to $27.1 million for the second quarter of 2025, compared to $26.8 million for the preceding quarter, and decreased $1.5 million compared to $28.6 million in the second quarter of 2024. Interest income increased in the second quarter of 2025 primarily due to an increase in the yields earned on loans receivable, partially offset by a decrease in both the yield earned and average volume of investment securities. Average real estate and commercial business loan balances decreased while average consumer loan balances increased over the preceding quarter.

• Total interest expense decreased $38,000 to $12.9 million for the second quarter of 2025, compared to $13.0 million for the preceding quarter, and decreased $1.4 million compared to $14.4 million in the second quarter of 2024. Interest expense decreased in the second quarter of 2025 primarily due to a reduced volume of brokered certificates of deposit ("CDs") and decreases in interest paid on customer CDs, brokered CDs and demand deposits. These decreases were partially offset by increases in the volume and interest paid on money market and savings accounts and an increase in the rate paid on advances during the current quarter.

• The net interest margin increased to 2.83% for the second quarter of 2025, from 2.76% for both the preceding quarter and the second quarter of 2024.

• Noninterest income decreased $1.6 million to $2.2 million for the second quarter of 2025, from $3.8 million for the preceding quarter. The first quarter of 2025 was higher due to nonrecurring income items including a $1.1 million BOLI death benefit payment received due to the passing of a former employee and a $846,000 gain on extinguishment of debt.

• Noninterest expense decreased $7.2 million to $12.8 million for the second quarter of 2025, compared to $20.0 million for the preceding quarter. Compensation and benefits was lower primarily due to the ERC recorded during the current quarter. Other expense for the preceding quarter included the previously disclosed $5.8 million legal reserve.
  
  

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

The allowance for credit losses on loans ("ACLL") decreased $2.2 million to $18.4 million at June 30, 2025, from $20.6 million at March 31, 2025. The ACLL as a percentage of total loans was 1.10% at June 30, 2025, a decrease from 1.24% at March 31, 2025, and from 1.14% one year earlier. A release of $2.6 million reserves on individually evaluated loans, partially offset by net loan charge-offs totaling $1.9 million and a small increase to the pooled loan reserve, resulted in a recapture of provision expense of $296,000 for the quarter ended June 30, 2025.

Nonperforming loans totaled $20.4 million at both June 30, 2025 and March 31, 2025. Current quarter activity included an increase due to a $4.1 million commercial real estate loan transitioning into nonperforming status, large principal payments received totaling $3.6 million and charged-off balances totaling $1.3 million. ACLL to nonperforming loans decreased to 90% at June 30, 2025, from 101% at March 31, 2025, and increased from 82% at June 30, 2024. This ratio increased in the first quarter of 2025 with decreases in balances due to principal payments and charge-offs on loans with appropriate reserves.

Classified loans decreased $663,000 to $30.9 million at June 30, 2025, from $31.6 million at March 31, 2025, primarily due to payments received of $3.2 million and commercial business loan net charge-offs totaling $1.5 million, partially offset by the downgrade of a $4.1 million commercial real estate loan that was adversely impacted by reduced cross-border traffic during the second quarter. Four collateral dependent loans totaling $23.8 million account for 77% of the classified loan balance at June 30, 2025. 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 the largest of these four collateral-dependent relationships. The Bank is also closely monitoring a group of commercial business loans that have similar collateral, with 11 loans totaling $562,000 included in classified loans at June 30, 2025, and four additional loans totaling $686,000 included in the special mention risk grading category.

Financial Condition and Capital

Investment securities decreased $11.9 million, or 3.8%, to $303.5 million at June 30, 2025, compared to $315.4 million three months earlier, and decreased $3.2 million compared to $306.7 million at June 30, 2024. Maturities totaling $11.8 million and regular principal payments totaling $5.7 million were partially offset by purchases totaling $5.5 million during the current quarter. Net unrealized losses were flat for the second quarter of 2025. The estimated average life of the securities portfolio was approximately 7.6 years at June 30, 2025, 6.9 years at the preceding quarter end and 7.8 years at the end of the second quarter of 2024. The effective duration of the portfolio was approximately 4.9 years at June 30, 2025, compared to 4.3 years at the preceding quarter end and 4.3 years at the end of the second quarter of 2024.

Net loans, excluding loans held for sale, increased $9.6 million, or 0.6%, to $1.65 billion at June 30, 2025, from $1.64 billion at March 31, 2025, and decreased $30.6 million, or 1.8%, from $1.68 billion one year prior. Construction loans that converted into fully amortizing loans during the quarter totaled $6.0 million. New loan funding totaling $47.2 million and draws on existing loans totaling $23.9 million outpaced loan payoffs of $34.1 million, regular payments of $28.4 million and charge-offs totaling $2.4 million.

The Bank invested $9.1 million into a new bank-owned life insurance policy in the second quarter of 2025 to replace a policy surrendered in the preceding quarter. The Bank received the return of the surrendered funds early in the third quarter of 2025.

Total deposits decreased $11.4 million to $1.65 billion at June 30, 2025, compared to $1.67 billion at March 31, 2025, and decreased $53.7 million compared to $1.71 billion one year prior. During the second quarter of 2025, total customer deposit balances increased $19.6 million and brokered deposit balances decreased $31.0 million. Overall, the current rate environment continues to contribute to competition for deposits leading to increased volumes and higher rates paid on money market and savings accounts during the current quarter. The deposit mix compared to June 30, 2024, also reflects a shift in volume to money market and customer CD accounts while the volume and rate paid on brokered CDs decreased.

Total shareholders’ equity increased to $149.7 million at June 30, 2025, compared to $146.5 million three months earlier, due to net income of $3.7 million and an increase in the after-tax fair market values of the available-for-sale investment securities portfolio of $128,000, partially offset by dividends declared of $661,000 and a decrease in the after-tax fair market values of derivatives of $197,000.

Capital levels for both the Company and the Bank remain in excess of applicable regulatory requirements and the Bank was categorized as "well-capitalized" at June 30, 2025. Preliminary calculations of Common Equity Tier 1 and Total Risk-Based Capital Ratios at June 30, 2025, were 12.1% and 13.1%, respectively.

First Northwest continued to provide a return on capital to our shareholders through cash dividends during the second quarter of 2025. The Company paid cash dividends totaling $650,000 in the second quarter of 2025. No shares of common stock were repurchased under the Company's April 2024 Stock Repurchase Plan (the "Repurchase Plan") during the quarter ended June 30, 2025. There are 846,123 shares that remain available for repurchase under the Repurchase Plan.

2025 Awards/Recognition
Forbes Best-in-State Banks

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

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 17 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 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 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, 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; legal proceedings regulatory investigations and their resolutions; 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 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’s operations and stock price performance.

For More Information Contact:
Geraldine Bullard, Interim Chief Executive Officer, Chief Operating Officer and EVP
Phyllis Nomura, Chief Financial Officer and EVP
IRGroup@ourfirstfed.com
360-457-0461