What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-13 compared with 2021-11-12 · 379 added, 691 removed, 1748 unchanged (38% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share information) (Unaudited)

September 30, 2021

March 31, 2022

December 31, 2021

2 unchanged sentences

$ 13,868  

Interest-bearing deposits in banks

Interest-earning deposits in banks

66,257  

13 unchanged sentences

Servicing rights on sold loans, net

Servicing rights on sold loans, at fair value

Bank-owned life insurance, net

1 unchanged sentence

39,318  

Goodwill and other intangible assets

Goodwill and other intangible assets, net

Prepaid expenses and other assets

11 unchanged sentences

39,250  

39,280  

Accrued interest payable

9 unchanged sentences

Common stock, $0.01 par value, authorized 75,000,000 shares;

issued and outstanding 10,050,877 shares at September 30, 2021, and 10,247,185 shares at December 31, 2020

issued and outstanding 10,003,622 shares at March 31, 2022, and 9,972,698 shares at December 31, 2021

Additional paid-in capital

4 unchanged sentences

103,014  

Accumulated other comprehensive income, net of tax

Accumulated other comprehensive (loss) income, net of tax

( 15,153 )  

Unearned employee stock ownership plan (ESOP) shares

16 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

Interest and fees on loans receivable

Interest on mortgage-backed securities

$ 14,536  

$ 12,541  

Interest on investment securities

2 unchanged sentences

Total interest income

16,901  

14,633  

INTEREST EXPENSE

2 unchanged sentences

Net interest income

15,486  

13,483  

PROVISION FOR LOAN LOSSES

Net interest income after provision for loan losses

15,486  

12,983  

NONINTEREST INCOME

Loan and deposit service fees

Sold loan servicing fees, net of amortization

Sold loan servicing fees

Net gain on sale of loans

10 unchanged sentences

FDIC insurance premium

FHLB prepayment penalty

Other expense

Total noninterest expense

14,831  

12,094  

INCOME BEFORE PROVISION FOR INCOME TAXES

2 unchanged sentences

NET INCOME ATTRIBUTABLE TO PARENT

Basic earnings per common share

Diluted earnings per common share

See selected notes to the consolidated financial statements.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands) (Unaudited)

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive income:

Unrealized holding (losses) gains on investments available for sale arising during the period

Income tax benefit (provision) related to unrealized holding (losses) gains

Unrecognized defined benefit ("DB") plan prior service cost, net of amortization

Income tax benefit (provision) related to DB plan prior service cost, net of amortization

Reclassification adjustment for net gains on sales of securities realized in income

Income tax benefit related to reclassification adjustment on sales of securities

Other comprehensive (loss) income, net of tax

COMPREHENSIVE INCOME

Comprehensive loss attributable to noncontrolling interest

COMPREHENSIVE INCOME ATTRIBUTABLE TO PARENT

See selected notes to the consolidated financial statements.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Three Months Ended September 30, 2021 and 2020

(Dollars in thousands, except share information) (Unaudited)

Additional Paid-in

Unearned ESOP

Accumulated Other Comprehensive Income,

Noncontrolling

Total Shareholders'

BALANCE, June 30, 2020

$ 2,806  

$ 3,120  

$ 86,633  

$ ( 9,559 )  

$ 176,315  

Common stock repurchased

( 141,793 )  

( 1,418 )  

( 248 )  

Restricted stock award grants net of forfeitures

59,859  

Restricted stock awards canceled

(10,088 )  

( 123 )  

Other comprehensive income, net of tax

Share-based compensation expense

ESOP shares committed to be released

( 13 )  

Cash dividends declared and paid ( $0.05 per share)

( 514 )  

BALANCE, September 30, 2020

10,234,204  

$ 97,229  

$ 89,546  

$ ( 9,395 )  

$ 3,186  

$ 180,668  

BALANCE, June 30, 2021

10,205,867  

$ 97,463  

$ 96,573  

$ ( 8,901 )  

$ 3,546  

$ ( 190 )  

$ 188,593  

( 120 )  

Common stock repurchased

Basic and diluted earnings per common share

$ 0.30  

$ 0.33  

See selected notes to the consolidated financial statements.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands) (Unaudited)

Three Months Ended

$ 2,504  

Restricted stock award forfeitures net of grants

$ 3,120  

Restricted stock awards canceled

Other comprehensive loss:

Unrealized holding losses on investments available for sale arising during the period

( 19,454 )  

Income tax benefit related to unrealized holding losses

Unrecognized defined benefit ("DB") plan prior service cost, net of amortization

Income tax benefit (provision) related to DB plan prior service cost, net of amortization

Reclassification adjustment for net (gains) losses on sales of securities realized in income

( 126 )  

Income tax benefit related to reclassification adjustment on sales of securities

Other comprehensive loss, net of tax

( 15,441 )  

Share-based compensation expense

ESOP shares committed to be released

Cash dividends declared and paid ( $0.06 per share)

( 609 )  

BALANCE, September 30, 2021

10,050,877  

$ 96,396  

$ 99,058  

COMPREHENSIVE LOSS

( 12,937 )  

Comprehensive loss attributable to noncontrolling interest

( 302 )  

COMPREHENSIVE LOSS ATTRIBUTABLE TO PARENT

$ ( 12,635 )  

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Nine Months Ended September 30, 2021 and 2020

For the Three Months Ended March 31, 2022 and 2021

(Dollars in thousands, except share information) (Unaudited)

1 unchanged sentence

Unearned ESOP

Accumulated Other Comprehensive Income,

Accumulated Other Comprehensive Income (Loss),

Noncontrolling

16 unchanged sentences

( 11 )  

Other comprehensive income, net of tax

Other comprehensive loss, net of tax

( 5,243 )  

Share-based compensation expense

2 unchanged sentences

( 609 )  

BALANCE, September 30, 2020

10,234,204  

BALANCE, March 31, 2021

10,195,644  

11 unchanged sentences

( 302 )  

( 265 )  

10,029  

Common stock issued and initial investment in Quin Ventures

29,719  

( 44 )  

( 45 )  

Common stock repurchased

( 291,932 )  

( 2,916 )  

( 2,018 )  

Restricted stock award grants net of forfeitures

5 unchanged sentences

( 15,441 )  

Reclassification resulting from change in accounting method

Share-based compensation expense

2 unchanged sentences

( 698 )  

BALANCE, September 30, 2021

BALANCE, March 31, 2022

10,003,622  

4 unchanged sentences

$ ( 783 )  

$ 177,776  

See selected notes to the consolidated financial statements.

2 unchanged sentences

(In thousands) (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Amortization and accretion of premiums and discounts on investments, net

Amortization (accretion) of deferred loan fees and purchased premiums, net

Accretion of deferred loan fees and purchased premiums, net

Amortization of debt issuance costs

Amortization of mortgage servicing rights, net

Additions to mortgage servicing rights, net

Net (decrease) increase on the valuation allowance on mortgage servicing rights

Change in fair value of sold loan servicing rights

Additions to servicing rights on sold loans, net

Amortization of servicing rights on sold loans, net

Net increase in the valuation allowance on servicing rights on sold loans

Provision for loan losses

6 unchanged sentences

Proceeds from loans held for sale

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

Change in assets and liabilities:

Decrease (increase) in accrued interest receivable

(Increase) decrease in accrued interest receivable

Increase in prepaid expenses and other assets

Decrease in accrued interest payable

(Decrease) increase in accrued interest payable

Increase in accrued expenses and other liabilities

4 unchanged sentences

Proceeds from sales of securities available for sale

Redemption of FHLB stock

Purchase of bank-owned life insurance, net of surrenders

(Purchase) redemption of FHLB stock

Net increase in loans receivable

Purchase of premises and equipment, net

Net cash paid for branch acquisition

Capital contributions to equity investments

Capital contributions to historic tax credit partnerships

Net cash from investing activities

3 unchanged sentences

(In thousands) (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM FINANCING ACTIVITIES

Net increase in deposits

Net (decrease) increase in deposits

Proceeds from long-term FHLB advances

Repayment of long-term FHLB advances

Net decrease in short-term FHLB advances

Net increase (decrease) in short-term FHLB advances

Proceeds from issuance of subordinated debt, net

4 unchanged sentences

Net cash from financing activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, beginning of period

5 unchanged sentences

NONCASH INVESTING ACTIVITIES

Unrealized (loss) gain on securities available for sale

Loans transferred to real estate owned and repossessed assets, net of deferred loan fees and allowance for loan losses

Change in unrealized loss on securities available for sale

Lease liabilities arising from obtaining right-of-use assets

BUSINESS COMBINATION (see Note 11)

Fair value of assets acquired

Fair value of liabilities assumed

See selected notes to the consolidated financial statements.

24 unchanged sentences

In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial statements in accordance with GAAP have been included.

Operating results for the three and nine months ended September 30, 2021 , are not necessarily indicative of the results that may be expected for future periods.

Operating results for the three months ended March 31, 2022 , are not necessarily indicative of the results that may be expected for future periods.

In preparing the unaudited interim consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

6 unchanged sentences

Subsequent events - The Company has evaluated subsequent events for potential recognition and disclosure and has included additional information where appropriate.

See Note 10 for additional information.

Recently adopted accounting pronouncements

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2019, FASB issued ASU No.

2019 - 12, Income Taxes (Topic 740 ):

Simplifying the Accounting for Income Taxes .

ASU 2019 - 12 simplifies various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The standard also clarifies and amends existing guidance to improve consistent application.

This ASU, which is effective for fiscal years beginning after December 15, 2020, did not have a material impact on the Company's financial statements.

In January 2021, the FASB issued ASU No.

2020 - 01, Investments-Equity Securities (Topic 321 ), Investments-Equity Method and Joint Ventures (Topic 323 ), and Derivatives and Hedging (Topic 815 )-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 .

ASU 2020 - 01 clarifies the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives including accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments.

The ASU, which is effective for fiscal years beginning after December 15, 2020, did not have a material effect on the Company's financial statements.

2021 - 01, Reference Rate Reform (Topic 848 ):

2021 - 01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

2021 - 01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.

This ASU was effective upon issuance and generally can be applied through December 31, 2022.

The adoption of ASU 2021 - 01 did not have a material impact on the Company’s financial statements.

Recently issued accounting pronouncements not yet adopted

30 unchanged sentences

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

ASU 2020 - 04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The amendments are effective for the Company as of March 12, 2020 through December 31, 2022.

The Company does not believe this standard will have a material impact on its financial statements.

Reclassifications - Certain amounts in the unaudited interim consolidated financial statements for prior periods have been reclassified to conform to the current unaudited financial statement presentation with no effect on net income or shareholders' equity.

ASU 2020 - 04 provides temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued.

It is intended to help stakeholders during the global market-wide reference rate transition period.

This ASU is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is implementing a transition plan to identify and modify its loans and other financial instruments that are either directly or indirectly influenced by LIBOR.

The Company is in the process of evaluating ASU No.

2020 - 04 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments, with no material expected impact on the Company's financial statements.

In March 2022, the FASB issued ASU No.

2022 - 01, Derivatives and Hedging (Topic 815 ):

Fair Value Hedging—Portfolio Layer Method .

ASU 2022 - 01 expands the portfolio layer method of hedge accounting prescribed in ASU No.

2017 - 12 to allow multiple hedged layers of a single closed portfolio and to include portfolios of both prepayable and non-prepayable financial assets.

This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same accounting method to similar hedging strategies.

The ASU also specifies eligible hedging instruments in a single-layer hedge, provides additional guidance on accounting and disclosure of hedge basis adjustments and specifies how hedge basis adjustments should be considered in determining credit losses for assets in the designated closed portfolio.

This ASU is effective for public business entities for interim and annual periods in fiscal years beginning after December 15, 2022.

The Company is evaluating the effect that ASU 2022 - 01 will have on its consolidated financial statements.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2022, the FASB issued ASU No.

2022 - 02,  

Financial Instruments—Credit Losses (Topic 326 ):

Troubled Debt Restructurings and Vintage Disclosures .

ASU 2022 - 02 eliminates the accounting guidance for troubled debt restructurings ("TDRs") in ASC 310 - 40, "Receivables - Troubled Debt Restructurings by Creditors" for entities that have adopted the current expected credit loss model introduced by ASU 2016 - 13, “Financial Instruments –

Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments”.

ASU 2022 - 02 also requires that public business entities disclose current-period gross charge-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326 - 20, "Financial Instruments—Credit Losses—Measured at Amortized Cost".

ASU 2022 - 02 is effective for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The Company is evaluating the effect that ASU 2022 - 02 will have on its consolidated financial statements and related disclosures.

Note 2 - Securities

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at September 30, 2021 are summarized as follows:

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at March 31, 2022 are summarized as follows:

Amortized Cost

8 unchanged sentences

$ 110,248  

$ 110,265  

government and agency issued bonds (Agency bonds)

Corporate issued asset-backed securities (ABS corporate)

11,047  

( 31 )  

Treasury notes

International agency issued bonds (Agency bonds)

( 137 )  

4 unchanged sentences

Small Business Administration securities (SBA)

15,545  

15,842  

Mortgage-backed securities:

11 unchanged sentences

$ 377,695  

$ 325,890  

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at December 31, 2021 , are summarized as follows:

10 unchanged sentences

$ 113,364  

government agency issued asset-backed securities (ABS agency)

( 27 )  

( 354 )  

63,820  

ABS corporate

Corporate issued asset-backed securities (ABS corporate)

14,556  

21 unchanged sentences

There were no securities classified as held-to-maturity at 

September 30, 2021  and 

March 31, 2022  and 

December 31, 2021 .

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following shows the unrealized gross losses and fair value of the investment portfolio by length of time that individual securities in each category have been in a continuous loss position as of September 30, 2021 :

Less Than Twelve Months

12 unchanged sentences

$ 107,056  

ABS corporate

( 31 )  

11,016  

Treasury notes

( 137 )  

6 unchanged sentences

( 1,622 )  

34,615  

Mortgage-backed securities:

3 unchanged sentences

26,783  

( 5,176 )  

86,545  

MBS corporate

3 unchanged sentences

22,035  

( 2,809 )  

90,048  

Total available for sale

22 unchanged sentences

( 27 )  

( 354 )  

21,430  

ABS corporate

7 unchanged sentences

( 234 )  

( 567 )  

28,642  

Mortgage-backed securities:

3 unchanged sentences

12,802  

( 1,163 )  

51,831  

MBS corporate

11 unchanged sentences

The Company may hold certain investment securities in an unrealized loss position that are not considered other than temporarily impaired ("OTTI").

At September 30, 2021 and December 31, 2020 , there were 

At March 31, 2022 and December 31, 2021 , there were 

155 and 

76 investment securities in an unrealized loss position, respectively.

We believe that the unrealized losses on our investment securities relate principally to the general change in interest rates, market demand, and related volatility, rather than credit quality, that has occurred since the initial purchase, and such unrecognized losses or gains will continue to vary with general interest rate level and market fluctuations in the future.

Certain investments in a loss position are guaranteed by government entities or government sponsored entities.

The Company does not intend to sell the securities in an unrealized loss position and believes it is not likely it will be required to sell these investments prior to a market price recovery or maturity.

There were no OTTI losses during the three and nine months ended September 30, 2021 and 2020 .

We believe that the unrealized losses on our investment securities relate principally to the general change in interest rates, market demand, and related volatility that has occurred since the initial purchase, and such unrecognized losses or gains will continue to vary with general interest rate level and market fluctuations in the future.

We do not believe the unrealized losses on our securities are related to deterioration in credit quality. Certain investments in a loss position are guaranteed by government entities or government sponsored entities.

The Company does not intend to sell the securities in an unrealized loss position and believes that it is unlikely that we will be required to sell these investments prior to a market price recovery or maturity.

There were no OTTI losses during the three months ended March 31, 2022 and 2021 .

FIRST NORTHWEST BANCORP AND SUBSIDIARY

3 unchanged sentences

therefore, these securities are shown separately.

September 30, 2021

March 31, 2022

Available-for-Sale

10 unchanged sentences

Due after five through ten years

17,995  

17,332  

Due after ten years

26 unchanged sentences

Due within one year

$ 7,827  

$ 7,832  

Due after one through five years

26 unchanged sentences

Sales of securities available-for-sale for the periods shown are summarized as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Three Months Ended March 31,

(In thousands)

1 unchanged sentence

$ 10,452  

$ 47,844  

$ 109,829  

$ 142,276  

Gross realized gains

Gross realized losses

( 341 )  

( 624 )  

( 417 )  

Note 3 - Loans Receivable

Loans receivable consisted of the following at the dates indicated:

September 30, 2021

March 31, 2022

December 31, 2021

43 unchanged sentences

The following tables summarize changes in the ALLL and loan portfolio by segment and impairment method for the periods shown:

At or For the Three Months Ended September 30, 2021

At or For the Three Months Ended March 31, 2022

One-to-four family

14 unchanged sentences

( 193 )  

Ending balance

( 19 )  

1 unchanged sentence

( 137 )  

$ 2,483  

$ 2,379  

$ 15,243  

At or For the Nine Months Ended September 30, 2021

One-to-four family

Commercial real estate

Construction and land

Auto and other consumer

Commercial business

(In thousands)

Beginning balance

$ 3,469  

$ 1,764  

$ 3,420  

$ 1,461  

$ 2,642  

$ 13,847  

(Recapture of) provision for loan losses

( 236 )  

( 142 )  

( 12 )  

( 801 )  

Ending balance

5 unchanged sentences

$ 15,127  

At September 30, 2021

At March 31, 2022

One-to-four family

35 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At or For the Three Months Ended September 30, 2020

At or For the Three Months Ended March 31, 2021

One-to-four family

10 unchanged sentences

$ 2,642  

Provision for (recapture of) loan losses

$ 13,847  

Ending balance

$ 3,844  

$ 1,435  

$ 3,340  

$ 2,224  

$ 13,007  

At or For the Nine Months Ended September 30, 2020

One-to-four family

Commercial real estate

Construction and land

Auto and other consumer

Commercial business

(In thousands)  

Beginning balance

$ 3,024  

$ 2,243  

$ 2,261  

(Recapture of) provision for loan losses

( 59 )  

Provision for (recapture of) loan losses

( 197 )  

6 unchanged sentences

$ 2,337  

$ 14,265  

At December 31, 2021

40 unchanged sentences

The following table presents a summary of loans individually evaluated for impairment by portfolio segment at the dates indicated:

September 30, 2021

March 31, 2022

December 31, 2021

13 unchanged sentences

One-to-four family

Commercial real estate

Construction and land

13 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, 2021

Average Recorded Investment

Interest Income Recognized

Average Recorded Investment

Interest Income Recognized

(In thousands)

With no allowance recorded:

One-to-four family

Commercial real estate

Auto and other consumer

With an allowance recorded:

One-to-four family

Commercial real estate

Construction and land

Auto and other consumer

Total impaired loans:

One-to-four family

Commercial real estate

Construction and land

Auto and other consumer

$ 4,321  

$ 4,876  

Interest income recognized on a cash basis on impaired loans for the three and nine months ended September 30, 2021 , was $ 65,000 and $ 183,000 , respectively.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the average recorded investment in loans individually evaluated for impairment and the related interest income recognized for the periods shown:

Three Months Ended

Nine Months Ended

September 30, 2020

March 31, 2022

March 31, 2021

Average Recorded Investment

8 unchanged sentences

Auto and other consumer

Commercial business

With an allowance recorded:

3 unchanged sentences

Auto and other consumer

Commercial business

Total impaired loans:

3 unchanged sentences

Auto and other consumer

Commercial business

$ 3,112  

$ 5,358  

Interest income recognized on a cash basis on impaired loans for the three and nine months ended September 30, 2020 , was $ 84,000 .

and $ 181,000 , respectively.

Interest income recognized on a cash basis on impaired loans for the three months ended March 31, 2022  and 

2021 , was $ 66,000 and $ 76,000 , respectively.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

1 unchanged sentence

The following table presents the recorded investment in nonaccrual loans by class of loan at the dates indicated:

September 30, 2021

March 31, 2022

December 31, 2021

4 unchanged sentences

Auto and other consumer

Commercial business

Total nonaccrual loans

3 unchanged sentences

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due.

There were no loans past due 90 days or more and still accruing interest at September 30, 2021 and December 31, 2020 .

The following table presents the recorded investment in past due loans, by class, as of September 30, 2021 :

There were no loans past due 90 days or more and still accruing interest at March 31, 2022 and December 31, 2021 .

The following table presents the recorded investment in past due loans, by class, as of March 31, 2022 :

90 Days or More

64 unchanged sentences

risk ratings 6, 7, and 8 in our 8 -point risk rating system, respectively.

An asset is considered substandard if it is inadequately protected by the current net worth and pay capacity of the borrower or of any collateral pledged.

An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the borrower or of any collateral pledged.

Substandard assets include those characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

12 unchanged sentences

The following table represents the internally assigned grade as of 

September 30, 2021 , by class of loans:

March 31, 2022 , by class of loans:

Special Mention

12 unchanged sentences

370,346  

353,356  

Construction and land

1 unchanged sentence

16,844  

Total real estate loans

209,395  

Total real estate loans

996,237  

28 unchanged sentences

172,409  

15,647  

162,467  

Commercial real estate

13 unchanged sentences

38,739  

39,172  

Auto and other consumer

14 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table represents the credit risk profile based on payment activity as of September 30, 2021 , by class of loans:

The following table represents the credit risk profile based on payment activity as of March 31, 2022 , by class of loans:

Nonperforming

58 unchanged sentences

Through 

September 30, 2021 , the Company had granted COVID- 19 pandemic related temporary loan modifications on a total of 

357 loans aggregating to $ 175.0 million, or 

March 31, 2022 , the Company had granted COVID- 19 pandemic related temporary loan modifications on 

357 loans totaling $ 177.6 million, or 

12.9 % of total loans.

Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

As of September 30, 2021 , no loans remained on deferral.

Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation to determine whether or not a loan is deemed to be impaired.

As of March 31, 2022 , no loans modified in accordance with the CARES Act remained on deferral.

The following table is a summary of information pertaining to TDR loans included in impaired loans at the dates indicated:

September 30, 2021

March 31, 2022

December 31, 2021

5 unchanged sentences

Total nonaccrual TDR loans

There were no newly restructured and renewals or modifications of existing TDR loans that occurred during the three and nine months ended September 30, 2021 or 2020 .

There were no TDR loans which incurred a payment default within 12 months of the restructure date during the 

three and nine months ended September 30, 2021  or 

No additional funds were committed to be advanced in connection with TDR loans at September 30, 2021 .

There were no newly restructured, renewals, or modifications of existing TDR loans that occurred during the three months ended March 31, 2022 or 2021 .

There were no TDR loans that incurred a payment default within 12 months of the restructure date during the 

three months ended March 31, 2022  or 

No additional funds were committed to be advanced in connection with TDR loans at March 31, 2022 .

The following table presents TDR loans by class at the dates indicated by accrual and nonaccrual status:

September 30, 2021

December 31, 2020

March 31, 2022

(In thousands)

2 unchanged sentences

$ 1,776  

$ 2,054  

$ 2,162  

Total TDR loans

1 unchanged sentence

$ 1,824  

$ 2,116  

$ 2,224  

FIRST NORTHWEST BANCORP AND SUBSIDIARY

1 unchanged sentence

Note 4 - Deposits

The aggregate amount of time deposits in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limit, currently $250,000, at September 30, 2021 and December 31, 2020 , were $ 75.4 million and $ 91.7 million, respectively.

The aggregate amount of time deposits in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limit, currently $250,000, at March 31, 2022 and December 31, 2021 , were $ 63.8 million and $ 75.1 million, respectively.

Deposits and weighted-average interest rates at the dates indicated are as follows:

September 30, 2021

March 31, 2022

December 31, 2021

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Maturities of certificates at the dates indicated are as follows:

September 30, 2021

March 31, 2022

December 31, 2021

10 unchanged sentences

After three years through four years

13,404  

14,358  

After four years through five years

2 unchanged sentences

$ 247,243  

Brokered certificates of deposits of $ 55.1 million and $ 89.6 million are included in the September 30, 2021 and December 31, 2020 certificate of deposits totals above, respectively.

September 30, 2021 and December 31, 2020 , deposits included $ 117.7 million and $ 80.9 million, respectively, in public fund deposits.

Brokered certificates of deposits of $ 65.7 million and $ 65.7 million are included in the March 31, 2022 and December 31, 2021 certificate of deposits totals above, respectively.

March 31, 2022 and December 31, 2021 , deposits included $ 106.7 million and $ 134.1 million, respectively, in public fund deposits.

Investment securities with a carrying value of $ 61.3 million and $ 67.9 million were pledged as collateral for these deposits at 

September 30, 2021 and December 31, 2020 , respectively.

March 31, 2022 and December 31, 2021 , respectively.

This exceeds the minimum collateral requirements established by the Washington Public Deposit Protection Commission.

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Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Demand deposits

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Total interest expense on deposits

$ 1,405  

$ 2,609  

$ 5,584  

FIRST NORTHWEST BANCORP AND SUBSIDIARY

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The effective tax rates were 18.1 % and 

24.3 % for the nine months ended September 30, 2021 and 2020 , respectively.

13.2 % for the three months ended March 31, 2022 and 2021 , respectively.

The effective tax rates differ from the statutory maximum federal tax rate for 2022  and 

2021 of 21 %, largely due to the nontaxable earnings on bank-owned life insurance ("BOLI") and tax-exempt interest income earned on certain investment securities and loans.

Additionally, a cumulative adjustment was recorded in the first quarter of 2021, which reduced the current year provision, and an estimate for the penalty on the BOLI contract surrendered in 2020 was included in the 2020 year-to-date provision, which resulted in a higher effective tax rate.

Note 6 - Earnings per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

In addition, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are considered participating securities and are included in the computation of earnings per share.

The following table presents a reconciliation of the components used to compute basic and diluted earnings per share for the three and nine months ended September 30, 2021 and 2020 .

Additionally, a tax accrual true-up was recorded in the first quarter of 2021, which reduced the prior year provision and resulted in a lower effective tax rate.

Note 6 - Earnings per Common Share

The two -class method is used for computing basic and diluted earnings per share.

Under the two -class method, EPS is determined for each class of common stock and participating security according to dividends declared and participating rights in undistributed earnings.

The Company has issued restricted shares under share-based compensation plans which qualify as participating securities.

The following table presents a reconciliation of the components used to compute basic and diluted earnings per share for the three months ended March 31, 2022 and 2021 .

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except share data)

Net Income Attributable to Parent

$ 4,178  

$ 3,675  

Net income available to common shareholders

$ 2,806  

$ 3,120  

Basic weighted average common shares outstanding

Earnings allocated to participating securities

( 70 )  

Earnings allocated to common shareholders

$ 2,736  

$ 3,018  

Weighted average common shares outstanding

10,040,090  

Dilutive restricted stock grants

10,241,823  

Weighted average unvested restricted stock awards

( 234,953 )  

Weighted average unallocated ESOP shares

( 674,969 )  

Diluted weighted average common shares outstanding

Total basic weighted average common shares outstanding

9,130,168  

9,156,824  

Basic weighted average common shares outstanding

9,130,168  

9,156,824  

Basic earnings per share

Dilutive restricted stock awards

95,200  

91,371  

Total diluted weighted average common shares outstanding

9,225,368  

9,248,195  

Diluted earnings per share

Basic earnings per common share

$ 0.30  

$ 0.33  

Diluted earnings per common share

$ 0.30  

$ 0.33  

Unallocated ESOP shares are not included as outstanding for either basic or diluted earnings per share calculations.

As of September 30, 2021 and 2020 , there were 

701,412  and 

754,301  shares in the ESOP that remain unallocated, respectively.

Potentially dilutive shares are excluded from the computation of EPS if their effect is anti-dilutive.

March 31, 2022  and 

December 31, 2021 , antidilutive shares as calculated under the treasury stock method totaled 

17 and 115 , respectively.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

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Note 7 - Employee Benefits

Change from Multi-employer to Single-employer Pension Plan

Effective March 23, 2021, the Company withdrew from the Pentegra Defined Benefit Plan for Financial Institutions ("Pentegra DB Plan") and established the First Federal Defined Benefit Plan ("Bank DB Plan"), a single-employer plan. On March 23, 2021, all assets and liabilities were transferred from the Pentegra DB Plan to the newly established Bank DB Plan.

The Bank DB Plan is a defined benefit pension plan covering current and former employees. Benefits available under the plan are frozen. The plan provides defined benefits based on years of service and final average salary prior to the freeze. The Company uses December 31 as the measurement date for this plan. The initial measurement period will be March 23, 2021 –

December 31, 2021.

The fair value of plan assets and projected benefit obligation on the March 23, 2021, Bank DB Plan adoption date were $ 14,705,000 and $ 14,197,000 , respectively.

A $2,717,599 cash contribution was made to the Pentegra DB Plan in March 2021 prior to the transiti on.

A prior service cost of $ 1.7 million , net of tax, was included in accumulated other comprehensive loss on the Company's balance sheet at September 30, 2021 . The prior service cost is expected to be amortized over 15 years.

Weighted-average assumptions used to determine pension benefit obligations at year-end include a 2.95 % discount rate and a 0 % rate of compensation increase.

The weighted average assumptions used to determine net periodic pension cost include 2.95 % discount rate, 5.75 % expected return on plan assets and a 0 % rate of compensation increase. The 5.75% weighted average expected long-term rate of return is estimated based on current trends in similar plan assets, as well as projected future rates of returns on similar assets.

Employee Stock Ownership Plan

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The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Bank's discretionary contributions to the ESOP and earnings on the ESOP assets.

An $ 835,000 principal and interest payment was made by the ESOP during the nine months ended September 30, 2021 .

No  principal and interest payment was made by the ESOP during the three months ended March 31, 2022 .

As shares are committed to be released from collateral, the Company reports compensation expense equal to the average daily market prices of the shares and the shares become outstanding for EPS computations.

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dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.

Compensation expense related to the ESOP for the three months ended September 30, 2021 and 2020 , was $ 179,000  and $ 99,000 , respectively. Compensation expense related to the ESOP for the nine months ended September 30, 2021 and 2020 , was $ 503,000  and $ 359,000 , respectively.

Compensation expense related to the ESOP for the three months ended March 31, 2022 and 2021 , was $ 291,000  and $ 217,000 , respectively.

Shares issued to the ESOP as of the dates indicated are as follows:

September 30, 2021

March 31, 2022

December 31, 2021

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39,663  

26,442  

Unallocated shares

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The maximum number of shares that may be utilized for awards under the 2020 EIP is 520,000 .

September 30, 2021 , there were 

March 31, 2022 , there were 

302,294  total shares available for grant under the 2020 EIP, all of which are available to be granted as restricted shares.

As a result of the approval of the 2020 EIP, the First Northwest Bancorp 2015 Equity Incentive Plan (the "2015 EIP") was frozen and no additional awards will be made.

September 30, 2021 , there were no shares available for grant under the 2015 EIP.

March 31, 2022 , there were no shares available for grant under the 2015 EIP.

At this date, there are 

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42,243  and 

126,059  shares of restricted stock awarded, respectively, during the nine months ended September 30, 2021 and 2020 .

84,896  shares of restricted stock awarded, respectively, during the three months ended March 31, 2022 and 2021 .

Awarded shares of restricted stock vest ratably over periods ranging from one to five years from the date of grant provided the eligible participant remains in service to the Company.

The Company recognizes compensation expense for the restricted stock awards based on the fair value of the shares at the grant date amortized over the vesting period.

For the three months ended September 30, 2021 and 2020 , total compensation expense for the equity incentive plans was $ 433,000  and $ 362,000 , respectively. For the nine months ended September 30, 2021 and 2020 , total compensation expense for the equity incentive plans was $ 1.4 million and $ 917,000 , respectively.

Included in the above compensation expense for the three months ended September 30, 2021 and 2020 , was directors' compensation of $ 64,000  and $ 102,000 , respectively.

For the three months ended March 31, 2022 and 2021 , total compensation expense for the equity incentive plans was $ 411,000  and $ 404,000 , respectively.

Included in the above compensation expense for the 

nine months ended September 30, 2021 and 2020 , was directors' compensation of $ 324,000  and $ 273,000 , respectively.

three months ended March 31, 2022 and 2021 , was directors' compensation of $ 55,000  and $ 91,000 , respectively.

The following tables provide a summary of changes in non-vested restricted stock awards for the period shown:

For the Three Months Ended

September 30, 2021

March 31, 2022

Weighted-Average Grant Date Fair Value

Non-vested at July 1, 2021

Non-vested at January 1, 2022

236,432  

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( 2,400 )  

Non-vested at September 30, 2021

Non-vested at March 31, 2022

244,629  

$ 16.99  

(1) A surrender of vested stock awards by a participant surrendering the number of shares valued at the current stock price at the vesting date to cover the participant's share of tax on the vested shares.

(1) A surrender of vested stock awards by a participant surrendering the number of shares valued at the current stock price at the vesting date to cover the participant's tax obligation on the vested shares.

The surrendered shares are canceled and are unavailable for reissue.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended

September 30, 2021

Weighted-Average Grant Date Fair Value

Non-vested at January 1, 2021

292,892  

$ 13.96  

96,205  

( 80,815 )  

( 13,088 )  

( 17,212 )  

Non-vested at September 30, 2021

277,982  

$ 15.80  

The surrendered shares are canceled and are unavailable for reissue.

As of September 30, 2021 , there was $ 3.6 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards.

As of March 31, 2022 , there was $ 3.5 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards.

The cost is expected to be recognized over the remaining weighted-average vesting period of approximately 

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The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the overall fair value measurement.

Qualitative disclosures of valuation techniques - Securities available for sale:

The Company used the following methods to measure fair value on a recurring and nonrecurring basis.

Securities available for sale and Equity investments :

where quoted prices are available in an active market, securities are classified as Level 1.

Level 1 instruments include highly liquid government bonds, securities issued by the U.S.

Treasury, and exchange-traded equity securities.

If quoted prices are not available, management determines fair value using pricing models, quoted prices of similar securities, which are considered Level 2, or discounted cash flows.

Treasury, and exchange-traded equity securities. If quoted prices are not available, management determines fair value using pricing models, quoted prices of similar securities, which are considered Level 2, or discounted cash flows.

In certain cases, where there is limited activity in the market for an instrument, assumptions must be made to determine their fair value.

Such instruments are classified as Level 3.

Sold loan servicing rights, at fair value : The fair value of sold loan servicing rights is determined through a discounted cash flow analysis, which uses interest rates, prepayment speeds, discount rates, and delinquency rate assumptions as inputs.

Servicing rights are classified as Level 3 due to reliance on assumptions used in the valuation.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

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The following tables show the Company’s assets measured at fair value on a recurring basis at the dates indicated:

September 30, 2021

Quoted Prices in Active Markets for Identical Assets or Liabilities  

March 31, 2022

Quoted Prices in Active Markets for Identical Assets or Liabilities

Significant Other Observable Inputs

Significant Unobservable Inputs  

(In thousands)

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$ 104,911  

ABS corporate

$ 110,248  

11,016  

Treasury notes

Corporate debt

3 unchanged sentences

96,064  

MBS corporate

104,441  

MBS corporate

Sold loan servicing rights

Equity investments

$ 13,472  

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$ 113,364  

63,820  

ABS corporate

11 unchanged sentences

60,008  

Equity investments

$ 11,963  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The significant unobservable inputs in the fair value measurement of the Company's Level 3 securities are noted below.

Significant fluctuations in any of those inputs in isolation would result in a significantly different fair value measurement.

The following table presents quantitative information about recurring Level 3 fair value measurements at the date indicated:

December 31, 2020

Fair Value (In thousands)

The following table provides a description of the valuation technique, unobservable input, and qualitative information about the unobservable inputs for the Company's assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at the date indicated:

March 31, 2022

(In thousands)

Valuation Technique

Unobservable Input

Corporate debt

Consensus pricing

Offered quotes

Comparability adjustments (%)

-0.7% - +1.3%

Consensus pricing

Offered quotes

Comparability adjustments (%)

MBS corporate

Consensus pricing

Offered quotes

Comparability adjustments (%)

-1.5% - +1.5%

(a) Unobservable inputs were weighted by the relative fair value of the instruments.

The following tables summarize the changes in Level 3 assets measured at fair value on a recurring basis at the dates indicated:

September 30, 2021

Balance at January 1, 2021

Transfers Out of Level 3 (1)

(In thousands)

Securities available for sale

Corporate debt

$ 2,540  

$ ( 2,540 )  

MBS corporate

(Weighted Average)

Sold loan servicing rights

$ 4,046  

Discounted cash flow

Constant prepayment rate

2.15%-10.55% (7.54%)  

Discount rate

9.75%-14.25% (11.45%)  

The following tables summarize the changes in Level 3 assets measured at fair value on a recurring basis at the dates indicated:

March 31, 2022

Election of Fair Value Option for Servicing Rights at January 1, 2022

Servicing rights that result from transfers and sale of financial assets

Changes in fair value due to changes in model inputs or assumptions (1)

(In thousands)

Sold loan servicing rights

$ 3,820  

$ 4,046  

(1) Transferred from Level 3 to Level 2 after obtaining observable market data.

(1) Represents changes due to collection/realization of expected cash flows and curtailments.

December 31, 2021

Balance at January 1, 2021

Transfers Into Level 3 (1)

Transfers Out of Level 3 (1)

(In thousands)

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$ ( 2,540 )  

$ 2,540  

MBS corporate

2 unchanged sentences

$ ( 8,912 )  

(1) Transferred from Level 2 to Level 3 because of a lack of observable market data, resulting from little to no market activity for the securities.

(1) Transferred from Level 3 to Level 2 after obtaining observable market data.

Assets and liabilities measured at fair value on a nonrecurring basis - Assets are considered to be valued on a nonrecurring basis if the fair value measurement of the instrument does not necessarily result in a change in the amount recorded on the consolidated balance sheets.

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The following tables present the Company’s assets measured at fair value on a nonrecurring basis at the dates indicated:

September 30, 2021

March 31, 2022

(In thousands)

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$ 3,195  

September 30, 2021 and December 31, 2020 , there were no impaired loans with discounts to appraisal disposition value or other unobservable inputs.

March 31, 2022 and December 31, 2021 , there were no impaired loans with discounts to appraisal disposition value or other unobservable inputs.

The following tables present the carrying value and estimated fair value of financial instruments at the dates indicated:

September 30, 2021

March 31, 2022

Fair Value Measurements Using:

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13,472  

364,223  

Loans held for sale

4 unchanged sentences

Accrued interest receivable

Mortgage servicing rights, net

Sold loan servicing rights, at fair value

Equity investments

Financial liabilities

32 unchanged sentences

11,963  

332,249  

Loans held for sale

4 unchanged sentences

Accrued interest receivable

Mortgage servicing rights, net

Sold loan servicing rights, net

Equity investments

Financial liabilities

11 unchanged sentences

80,192  

Subordinated debt

39,280  

39,144  

Accrued interest payable

4 unchanged sentences

Securities - Fair values for investment securities are primarily measured using information from a third -party pricing service. The pricing service uses pricing models based on market data. In the event that limited or less transparent information is provided by the third -party pricing service, fair value is estimated using secondary pricing services or non-binding third -party broker quotes.

Loans receivable, net - At September 30, 2021 , the fair value of loans is estimated by discounting the future cash flows using the current rate at which similar loans and leases would be made to borrowers with similar credit and for the same remaining maturities.

Loans receivable, net - At March 31, 2022 , the fair value of loans is estimated by discounting the future cash flows using the current rate at which similar loans and leases would be made to borrowers with similar credit and for the same remaining maturities.

Additionally, to be consistent with the requirements under FASB ASC Topic 820 for Fair Value Measurements and Disclosures, the loans were valued at a price that represents the Company’s exit price or the price at which these instruments would be sold or transferred.

Mortgage servicing rights, net - The estimated fair value of mortgage servicing rights is based on market prices for comparable mortgage servicing contracts when available.

Sold loan servicing rights, net - The estimated fair value of servicing rights on sold loans is based on market prices for comparable loan servicing contracts when available.

If no comparable contract is available, the estimated fair value is based on a valuation model that calculates the present value of estimated future net servicing income.

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(In thousands)  

BALANCE, June 30, 2020

Other comprehensive income before reclassification

Amounts reclassified from accumulated other comprehensive income

( 766 )  

Net other comprehensive income

BALANCE, September 30, 2020

$ 3,186  

BALANCE, June 30, 2021

$ 5,260  

$ ( 1,714 )  

$ 3,546  

Other comprehensive (loss) income before reclassification

( 1,625 )  

Amounts reclassified from accumulated other comprehensive income

BALANCE, December 31, 2020

$ 5,442  

Net other comprehensive (loss) income

$ 5,442  

BALANCE, September 30, 2021

Other comprehensive loss before reclassification

( 3,498 )  

( 1,745 )  

BALANCE, December 31, 2019

Net other comprehensive loss

( 3,498 )  

Other comprehensive income before reclassification

Amounts reclassified from accumulated other comprehensive income

( 1,745 )  

Net other comprehensive income

BALANCE, September 30, 2020

BALANCE, March 31, 2021

$ 1,944  

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( 15,370 )  

( 1,685 )  

Amounts reclassified from accumulated other comprehensive income

( 100 )  

Net other comprehensive loss

( 2,823 )  

Net other comprehensive (loss) income

( 15,470 )  

BALANCE, September 30, 2021

BALANCE, March 31, 2022

$ ( 13,330 )  

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estimates of our risks and future costs and benefits;

statements concerning the potential effects of the COVID-19 pandemic on the Bank's business and financial results and conditions.

statements concerning the continuing effects of the COVID-19 pandemic on the Bank's business and financial results and conditions.

These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control.

Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the following factors:

the scope and duration of the COVID-19 pandemic;

the effects of the COVID-19 pandemic, including on our credit quality and operations, as well as its impact on general economic conditions;

legislative or regulatory changes, including actions taken by governmental authorities in response to the COVID-19 pandemic;

the risks associated with lending and potential adverse changes in the credit quality of loans in our portfolio;

legislative or regulatory changes, including actions taken by governmental authorities in response to inflationary pressures, the COVID-19 pandemic, and climate change;

the risks associated with lending and potential adverse changes in the credit quality of loans in our portfolio, particularly with respect to borrowers affected by the COVID-19 pandemic, natural disasters, or climate change;

a decrease in the market demand for loans that we originate for sale;

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other economic, competitive, governmental, regulatory and technical factors affecting our operations, pricing, products and services and other risks described elsewhere in our filings with the Securities and Exchange Commission, including this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021.

Further, statements about the potential effects of the COVID-19 pandemic on the Bank’s businesses and financial results and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Bank’s control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on the Bank, its customers and third parties. These developments could have an adverse impact on our financial position and our results of operations.

Further, statements about the potential effects of the COVID-19 pandemic on the Bank’s businesses and financial results and condition may constitute forward-looking statements and are subject to the risk that the actual effects may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond the Bank’s control, including the direct and indirect impact of the ongoing pandemic on the Bank, its customers and third parties.

These developments could have an adverse impact on our financial position and our results of operations.

Any of the forward-looking statements that we make in this report and in other statements we make may turn out to be wrong because of inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot anticipate or predict.

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Due to these risks, uncertainties and assumptions, the forward-looking statements discussed in this report might not occur, and you should not put undue reliance on any forward-looking statements.

First Northwest is a bank holding company that primarily engages in the business activity of its subsidiary, First Fed.

First Fed is a community-oriented financial institution which has served customers and communities since 1923.

Currently, First Fed has 12 full-service branches and two business centers serving Clallam, Jefferson, Kitsap, Whatcom, and King counties in Washington State.

Our business and operating strategy is focused on building sustainable earnings through hiring experienced bankers, geographic expansion, diversifying our loan product mix, expanding our deposit product offerings that deliver value-added solutions, enhancing existing services and digital service delivery channels, and enhancing our infrastructure to support the changing needs and expectations of our customers.

We offer a wide range of products and services focused on the financial security and payment needs of the communities we serve.

Lending activities include the origination of first lien one- to four-family mortgage loans, commercial and multi-family real estate loans, construction and land loans (including lot loans), commercial business loans, and consumer loans, consisting primarily of automobile loans as well as home equity loans and lines of credit.

We continue to increase the origination of commercial real estate, multi-family real estate, acquisition/renovation, construction, and commercial business loans.

More recently we have increased our consumer loan portfolio through our manufactured home and auto loan purchase programs, in order to diversify our asset portfolio and increase interest income.

We continue to originate one- to four-family residential mortgage loans and regularly sell conforming loans into the secondary market to increase noninterest income and manage interest rate risk.

We also retain one- to four-family first and second lien loans in our portfolio to generate interest income.

We offer traditional consumer and business deposit products, including transaction accounts, savings and money market accounts, and certificates of deposit for individuals, businesses, and nonprofit organizations.

Deposits are our primary source of funds for lending and investing activities.

We also borrow funds, typically from the Federal Home Loan Bank of Des Moines, as a way to provide cost effective liquidity and manage interest rate risk.

First Northwest Bancorp, a Washington corporation, is the bank holding company for First Fed Bank. The Company also has a controlling interest in Quin Ventures, Inc. and limited partnership investments. First Northwest's business activities are generally limited to passive investment activities and oversight of its investments in First Fed and Quin Ventures.

First Fed Bank is a community-oriented financial institution serving Western Washington with offices in Clallam, Jefferson, King, Kitsap, and Whatcom counties.

We have twelve full-service branches and two business centers. First Fed’s business and operating strategy is focused on building sustainable earnings by delivering a fully array of financial products and services for individuals, small business, and commercial customers.

Additionally, First Fed focuses on strategic partnerships with financial technology (“fintech”) companies to develop and deploy digitally focused financial solutions to meet customers’

needs on a broader scale.

Lending activities include the origination of first lien one- to four-family mortgage loans, commercial and multi-family real estate loans, construction and land loans (including lot loans), commercial business loans, and consumer loans, consisting primarily of automobile loans as well as home equity loans and lines of credit.

Over the last five years, we have significantly increased the origination of commercial real estate, multi-family real estate, construction, and commercial business loans, and more recently have increased our consumer loan portfolio through our manufactured home and auto loan purchase programs.

We offer traditional consumer and business deposit products, including transaction accounts, savings and money market accounts and certificates of deposit for individuals and businesses.

Deposits are our primary source of funding for our lending and investing activities.

Quin Ventures is a fintech focused on financial wellness and lifestyle protection for consumers nationwide.

First Northwest's limited partnership investments include Canapi Ventures Fund, L.P., BankTech Ventures, L.P., and JAM FINTOP Blockchain, L.P., which invest in fintech-related business with a focus on developing digital solutions applicable to the banking industry.

First Northwest is affected by prevailing economic conditions as well as government policies and regulations concerning, among other things, monetary and fiscal affairs, housing and financial institutions.

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The COVID-19 pandemic and related restrictive measures taken by governments, businesses and individuals caused unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that we serve.

As initial restrictive measures were eased during 2020 and into 2021, the U.S.

economy started to recover and, with the availability and distribution of a COVID-19 vaccine, we anticipate continued improvements in commercial and consumer activity and the U.S.

We anticipate continued improvements in commercial and consumer activity and the U.S.

As of September 30, 2021, the governor of Washington removed restrictions initially set in place, allowing businesses to return to full capacity.

We recognize that our business and consumer customers are experiencing varying degrees of financial distress, which is expected to continue through the remainder of 2021, especially if new COVID-19 variant infections increase and new restrictions are mandated.

We recognize that our business and consumer customers are experiencing varying degrees of financial distress, which is expected to continue through the remainder of 2022, as new COVID-19 variant infections increase and new restrictions are mandated.

Commercial activity has improved but has not returned to the levels existing prior to the outbreak of the pandemic, which may result in our customers’

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restaurant and food services;

and lessors of commercial real estate to hospitality, restaurant, and retail establishments, all of which have been significantly impacted by the COVID-19 pandemic. At September 30, 2021, the Company’s exposure as a percent of the total loan portfolio to these industries w as 3.6%, 0.1%, and 4.2%, re spectively.

and lessors of commercial real estate to hospitality, restaurant, and retail establishments, all of which have been significantly impacted by the COVID-19 pandemic. At March 31, 2022, the Company’s exposure as a percent of the total loan portfolio to these industries was 4.0%, 0.3%, and 4.0%, r e spectively.

We recognize that these industries may take longer to recover as consumers may be hesitant to return to full social interaction or may change their spending habits on a more permanent basis as a result of the pandemic.

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While uncertainty still exists, we believe we are well-positioned to operate effectively through the present economic environment.

We continue to provide banking and financial services to our customers, with drive-thru access available at all our branch locations and in-person services available to walk-in customers or by appointment.

Our branch locations are currently open and operating, having returned to normal business hours at the beginning of May 2021.

We continue to provide banking and financial services to our customers, having returned to regular lobby and drive-thru access at all our branch locations in May 2021.

In addition, we continue to provide access to banking and financial services through online banking, Interactive Teller Machines ("ITMs"), Automated Teller Machines ("ATMs"), and by telephone.

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We provided assistance to many small businesses applying for the SBA's Paycheck Protection Program ("PPP") funding.

As of September 30, 2021, we processed $35.0 million of loans for 427 customers during the second round of SBA PPP funding with an average loan amount of $82,000. 

We processed $32.2 million of loans for 515 customers through the initial round of SBA PPP funding during 2020 with an average loan amount of $63,000.

W e processed $35.0 million of loans for 427 customers during the second round of SBA PPP funding with an average loan amount of $82,000. 

Payments by borrowers on these loans can be deferred up to sixteen months after the note date, and interest, at 1%, will continue to accrue during the deferment period.

Loans can be forgiven in whole or part (up to full principal and any accrued interest).

We partnered with a third-party financial technology provider to assist our borrowers with the loan forgiveness application process. As of September 30, 2021, $28.2 million, or 87.5%, of the first-round loans were forgiven and $11.5 million, or 33.0%, of second-round loans were forgiven.

We partnered with a third-party financial technology provider to assist our borrowers with the loan forgiveness application process. As of March 31, 2022, $32.1 million, or 99.7%, of the first-round loans were forgiven and $27.9 million, or 79.7%, of second-round loans were forgiven.

Critical Accounting Policies

There are no material changes to the critical accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

Comparison of Financial Condition at September 30, 2021 and December 31, 2020

Total assets increased to $1.85 billion at September 30, 2021 from $1.65 billion at December 31, 2020.

Net loans, excluding loans held for sale, increased $203.2 million to $1.35 billion at September 30, 2021, from $1.14 billion at December 31, 2020.

During the nine months ended September 30, 2021, auto and other consumer loans increased $54.0 million, as a result of $20.1 million in purchases of manufactured home loans and $49.9 million in purchases of auto loans offset by payment activity.

One- to four-family residential loans decreased $15.4 million as payment of loans exceeded originations during the period.

Commercial business loans decreased $8.3 million as our participation in the Northpointe Bank Mortgage Participation Program decreased to $27.5 million at September 30, 2021, from $47.3 million at December 31, 2020, partially offset by a $3.6 million increase in PPP loans, as originations exceeded forgiveness payments.

Construction and land loans increased $90.9 million, or 73.5%, to $214.5 million at September 30, 2021, from $123.6 million at December 31, 2020.

Our construction loans are geographically dispersed throughout Western Washington (with one loan in Oregon).

Effective January 1, 2022, the Bank elected to measure servicing rights using the fair value method of accounting. We record servicing rights on loans originated and subsequently sold into the secondary market.

We stratify our capitalized servicing rights based on the type, term and interest rates of the underlying loans.

Servicing rights are measured at fair value at each reporting date with the change reported in earnings.

The value is determined through a discounted cash flow analysis, which uses interest rates, prepayment speeds and delinquency rate assumptions as inputs.

All of these assumptions require a significant degree of management judgment.

If our assumptions prove to be incorrect, the value of our mortgage servicing rights could be negatively affected.

There were no other material changes to the critical accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

Comparison of Financial Condition at March 31, 2022 and December 31, 2021

Total assets increased to $1.94 billion at March 31, 2022 from $1.92 billion at December 31, 2021.

Cash and cash equivalents decreased by $43.5 million, or 34.5%, to $82.5 million as of March 31, 2022, compared to $126.0 million as of December 31, 2021.

Excess cash was deployed into the investment and loan portfolios as the Bank continued to build earning assets.

Net loans, excluding loans held for sale, increased $20.3 million to $1.37 billion at March 31, 2022, from $1.35 billion at December 31, 2021.

During the three months ended March 31, 2022, multi-family loans increased $31.3 million as $16.6 million of acquisition-renovation construction and $13.6 million of commercial construction loans transitioned into amortizing loans.

Auto and other consumer loans increased $23.4 million, as a result of a $16.0 million purchase of a pool of manufactured home loans, $5.9 million in individual manufactured home loan purchases, and a net increase in auto loans of $2.4 million offset by payment activity.

One- to four-family residential loans decreased $3.9 million as payment of loans exceeded originations during the current quarter.

Commercial business loans decreased $25.3 million, mainly as the result of a decrease in Northpointe Mortgage Participation Program of $26.3 million and Paycheck Protection Program (“PPP”) loans paid off during the quarter totaling $7.3 million, offset by a $1.9 million SBA loan origination and draws on existing loans.

Our participation in the Northpointe program is based on current funding needs of the program.

Given the slowdown in the mortgage market, as well as recent funding raises by Northpointe, we do not anticipate significant activity in the near term.

Construction and land loans decreased $15.3 million, or 6.8%, to $209.4 million at March 31, 2022, from $224.7 million at December 31, 2021.

Our construction loans are geographically dispersed throughout Western Washington with one loan in Oregon and two loans in Idaho.

We manage our construction lending by utilizing a licensed third-party vendor to assist us in monitoring our construction projects.

We continue to monitor the projects currently in our portfolio to determine the impact of COVID-19 on completion.

As of this point in time, we have no reason to believe that any of the projects in process will not be completed.

At September 30, 2021, acquisition-renovation loans of $53.7 million were included in the construction loan total compared to $39.3 million at December 31, 2020.

As of the date of this report, we have no reason to believe that any of the projects in process will not be completed.

At March 31, 2022, acquisition-renovation loans of $31.2 million were included in the construction loan total compared to $51.1 million at December 31, 2021.

These commercial acquisition-renovation loans represent financing primarily for the acquisition of multi-family properties with a construction component used for the renovation of common areas and specific units of the building.

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however, we consider these loans to be lower risk than typical ground-up construction projects.

By investing in one- to four-family, multi-family and acquisition-renovation construction projects which increase the supply of housing in our market, we are doing our small part to address housing affordability.

We monitor real estate values and general economic conditions in our market areas, in addition to assessing the strength of our borrowers, including their equity contributions to a project, to prudently underwrite construction loans.

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The following tables show our construction commitments by type and geographic concentrations at the dates indicated:

September 30, 2021

March 31, 2022

North Olympic Peninsula (1)

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Total disbursed for land

During the nine months ended September 30, 2021, the Company originated $281.5 million of loans, of which $175.8 million, or 62.4%, were originated in the Puget Sound region, $92.5 million, or 32.9%, in the North Olympic Peninsula, $6.7 million, or 2.4%, in other areas throughout Washington State, and $6.5 million, or 2.3%, in Oregon.

The Company purchased an additional $49.9 million in auto loans and $20.1 million in manufactured home loans during the nine months ended September 30, 2021.

During the three months ended March 31, 2022, the Company originated $139.8 million of loans, of which $92.3 million, or 66.1%, were originated in the Puget Sound region, $27.2 million, or 19.4%, in the North Olympic Peninsula, $9.4 million, or 6.7%, in other areas throughout Washington State, and $10.9 million, or 7.8%, in other states.

The Company purchased an additional $16.0 million in auto loans and $21.5 million in manufactured home loans during the three months ended March 31, 2022.

We will continue to evaluate opportunities to acquire assets through wholesale channels in order to supplement our organic originations and increase net interest income.

Our allowance for loan losses increased $1.4 million, or 10.1%, to $15.2 million at September 30, 2021, from $13.9 million at December 31, 2020.

The increase was due to a loan loss provision of $1.5 million, offset by net charge-offs of $104,000 for the nine-month period. The loan loss provision is made to account for growth in the loan portfolio adjusted for qualitative factors.

We continue to monitor the economic impact of the COVID-19 pandemic which is reflected in the qualitative factor adjustments. The allowance for loan losses as a percentage of total loans at September 30, 2021 and December 31, 2020 was 1.1% and 1.2%, respectively.

Nonperforming loans decreased $1.1 million, or 48.0%, to $1.2 million at September 30, 2021, from $2.3 million at December 31, 2020, mainly attributable to improvements in nonperforming one- to four-family loans of $351,000, multi-family loans of $284,000, commercial real estate loans of $81,000 and auto and other consumer loans of $429,000.

Nonperforming loans to total loans was 0.1% at September 30, 2021 and 0.2% at December 31, 2020.

The allowance for loan losses as a percentage of nonperforming loans increased to 1,288.5% at September 30, 2021, from 609.2% at December 31, 2020.

At September 30, 2021, there were $1.9 million in restructured loans, of which $1.8 million were performing in accordance with their modified payment terms and returned to accrual status. Classified loans increased $5.2 million to $12.7 million at September 30, 2021, from $7.5 million at December 31, 2020, due to the addition of a single commercial real estate loan that was downgraded in 2021.

Net loan charge-offs are concentrated mainly in our indirect auto loan portfolio.

Our allowance for loan losses remained $15.1 million at March 31, 2022, as no loan loss provision was recorded for the three months ended March 31, 2022.

Net recoveries were $3,000 for the three-month period. The loan loss provision is made to account for growth in the loan portfolio adjusted for qualitative factors.

We continue to monitor the economic impact of the COVID-19 pandemic, which is reflected in the qualitative factor adjustments. The allowance for loan losses as a percentage of total loans was 1.1% at both March 31, 2022 and December 31, 2021.

Nonperforming loans decreased $148,000, or 10.7%, to $1.2 million at March 31, 2022, from $1.4 million at December 31, 2021, reflecting improvements in nonperforming auto and other consumer loans of $106,000, home equity loans of $29,000, one- to four-family loans of $10,000, and commercial real estate loans of $3,000.

Nonperforming loans to total loans was 0.1% at both March 31, 2022 and December 31, 2021.

The allowance for loan losses as a percentage of nonperforming loans increased to 1227% at March 31, 2022, from 1095% at December 31, 2021.

At March 31, 2022, there were $1.8 million in restructured loans, of which $1.79 million were performing in accordance with their modified payment terms and are accruing loans. Classified loans increased $1.7 million to $14.3 million at March 31, 2022, from $12.6 million at December 31, 2021, due to the addition of a single residential real estate loan that was downgraded in 2022.

Loan charge-offs are concentrated mainly in our indirect auto loan portfolio.

We stopped originating loans from one of our indirect auto loan product offerings in 2020 to reduce credit risk and future charge-off activity.

We continue to monitor the program in order to prudently manage risk within the portfolio.

The balance of indirect auto loans decreased to $12.6 million at September 30, 2021 from $20.5 million at December 31, 2020.

We believe our allowance for loan losses is adequate to absorb the known and inherent risks of loss in the overall loan portfolio as of September 30, 2021.

The balance of indirect auto loans decreased to $8.8 million at March 31, 2022 from $10.6 million at December 31, 2021.

We believe our allowance for loan losses is adequate to absorb the known and inherent risks of loss in the overall loan portfolio as of March 31, 2022.

Loans receivable, excluding loans held for sale, consisted of the following at the dates indicated :

Increase (Decrease)

September 30, 2021

March 31, 2022

December 31, 2021

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Increase (Decrease)

September 30, 2021

March 31, 2022

December 31, 2021

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Total consumer loans

Commercial business

Total nonperforming loans

Real estate owned:

Total real estate owned

Repossessed assets

Total nonperforming assets

Nonaccrual and 90 days or more past due loans as a percentage of total loans

Investment securities decreased $38.4 million, or 10.5%, to $325.9 million at September 30, 2021, from $364.3 million at December 31, 2020, due to the sale of securities, normal payments and prepayment activity offset by purchases.

Other investment securities, including municipal bonds and other asset-backed securities, were $195.0 million at September 30, 2021, or 59.8% of the total investment securities portfolio, a decrease of $80.0 million from $275.0 million at December 31, 2020.

Mortgage-backed securities totaled $130.9 million at September 30, 2021, or 40.2% of the investment securities portfolio, an increase during the year of $41.6 million, or 46.6%, from $89.3 million at December 31, 2020.

The investment portfolio, including mortgage-backed securities, had an estimated projected average life of 5.8 years as of September 30, 2021, and 7.3 years as of December 31, 2020, and had an estimated average repricing term of 5.6 years as of September 30, 2021, and 5.0 years as of December 31, 2020, based on the interest rate environment at those times.

The investment portfolio was composed of 42.0% in amortizing securities at September 30, 2021 and 48.0% at December 31, 2020.

Investment securities increased $33.5 million, or 9.7%, to $377.7 million at March 31, 2022, from $344.2 million at December 31, 2021, due to the purchase of securities, partially offset by sales, normal payments and prepayment activity.

The investment portfolio, including mortgage-backed securities, had an estimated projected average life of 7.0 years as of March 31, 2022, and 5.7 years as of December 31, 2021, and had an estimated average repricing term of 7.0 years as of March 31, 2022, and 5.4 years as of December 31, 2021, based on the interest rate environment at those times.

The investment portfolio was composed of 45.0% in amortizing securities at March 31, 2022 and 43.0% at December 31, 2021.

The projected average life of our securities may vary due to prepayment activity, which, particularly in the mortgage-backed securities portfolio, is impacted by prevailing mortgage interest rates.

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For additional information, see Note 2 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Total liabilities increased to $1.66 billion at September 30, 2021, from $1.47 billion at December 31, 2020, primarily due to an increase in deposits of $189.4 million and the issuance of subordinated debt of $40.0 million in March 2021.

Deposit balances increased 14.2%, to $1.52 billion at September 30, 2021, from $1.33 billion at December 31, 2020.

There was a $144.5 million increase in money market accounts, a $79.5 million increase in demand deposit accounts, and a $29.0 million increase in savings accounts during the period, while the balance of certificates of deposits decreased $63.7 million.

The increase in deposits is in large part due to organic growth, deposits added through the purchase of the Bellevue branch, the Federal government's continued response to the pandemic including stimulus payments, and deposits of additional PPP and MSLP funding.

We strategically increased noninterest-bearing and other core deposits, while reducing the level of certificates of deposits, to manage overall funding costs. In addition to collecting customer deposits, we utilize brokered certificates of deposit ("brokered CDs") as an additional funding source in order to manage our cost of funds, reduce our reliance on public funds deposits, and manage interest rate risk.

At September 30, 2021, we had $55.1 million in brokered CDs included in the $245.0 million balance of certificates of deposit compared to $89.6 million in brokered CDs at December 31, 2020.

On March 25, 2021, the Company completed a private placement of $40.0 million of 3.75% fixed-to-floating rate subordinated notes due 2031 (the “Notes”) to certain qualified institutional buyers and institutional accredited investors.

The net proceeds to the Company from the sale of the Notes were approximately $39.3 million after deducting placement agent fees and other offering expenses. The Notes have been structured to qualify as Tier 2 capital for the Company for regulatory capital purposes.

The Company intends to use the net proceeds of the offering for general corporate purposes and provided $20.0 million to the Bank as Tier 1 capital.

Total shareholders' equity increased $1.4 million to $187.8 million for the nine months ended September 30, 2021.

Total liabilities increased to $1.77 billion at March 31, 2022, from $1.73 billion at December 31, 2021, primarily due to an increase in borrowing of $65.0 million, offset by a decrease in deposits of $31.2 million.

Deposit balances decreased 2.0%, to $1.55 billion at March 31, 2022, from $1.58 billion at December 31, 2021. There was a $2.7 million increase in savings accounts offset by a $16.0 million decrease in money market accounts and a $9.7 million decrease in demand deposit accounts, and certificates of deposits decreased $8.2 million during the period.

A runoff in commercial and public fund account balances of $44.1 million was partially offset by an increase in consumer account balances of $13.0 million. We also utilize brokered certificates of deposit ("brokered CDs") as an additional funding source in order to manage our cost of funds, reduce our reliance on public funds deposits, and manage interest rate risk.

Brokered CDs totaling $65.7 million were included in the $239.0 million balance of certificates of deposit at March 31, 2022.

FHLB advances increased 81.3% to $145.0 million at March 31, 2022, from $80.0 million at December 31, 2021. We increased short-term advances to replace liquidity lost with deposit outflow.

Total shareholders' equity decreased $12.4 million to $177.8 million for the three months ended March 31, 2022.

The Company recorded year-to-date net income of $2.8 million.

The increase due to year-to-date net income was partially offset by $4.9 million in repurchases of shares of common stock, an after-tax decrease in unrealized gain on available-for-sale investments of $2.8 million, a $1.7 million adjustment in other comprehensive income reflecting the recognition of prior service cost related to the transfer out of participation in a multiemployer pension plan into a single employer plan, and a $1.9 million decrease related to realized gains on securities sold.

Comparison of Results of Operations for the Three Months Ended September 30, 2021 and 2020

Net income increased $503,000, or 13.7%, to $4.2 million for the three months ended September 30, 2021, compared to net income of $3.7 million for the three months ended September 30, 2020, due to an increase in net interest income after provision for loan losses compared to the same period in 2020 and a modest increase in noninterest income, partially offset by an increase in noninterest expense.

The net income increase was offset by an after-tax decrease in unrealized gain on available-for-sale investments of $15.3 million.

All categories of the investment portfolio have been significantly impacted by the rising rate environment.

Comparison of Results of Operations for the Three Months Ended March 31, 2022 and 2021

Net income was $2.8 million for the three months ended March 31, 2022, and compared to $3.1 million for the three months ended March 31, 2021.

A $2.5 million increase in net interest income after provision for loan loss was offset by a $301,000 decrease in noninterest income and a $2.7 million increase in noninterest expense.

Net Interest Income.

Net interest income increased $3.6 million to $15.4 million for the three months ended September 30, 2021, from $11.8 million for the three months ended September 30, 2020.

Net interest income increased $2.0 million to $15.5 million for the three months ended March 31, 2022, from $13.5 million for the three months ended March 31, 2021.

This increase was mainly the result of an increase in average earning assets of $228.4 million.

The yield on average interest-earning assets increased 9 basis points to 3.91% for the three months ended September 30, 2021, compared to 3.82% for the same period in the prior year due to an increase in loan fee recognition and investment securities rates.

The average cost of interest-bearing liabilities decreased to 0.45% for the three months ended September 30, 2021, compared to 0.60% for the same period last year, due primarily to a decrease in rates on interest-bearing deposits of 27 basis points combined with an increase in borrowing volume of $29.6 million and higher borrowing rates due to the issuance of subordinated debt.

Total cost of funds decreased 15 basis points to 36 basis points for the three months ended September 30, 2020, from 51 basis points for the same period in 2020.

The net interest margin increased 22 basis points to 3.58% for the three months ended September 30, 2021, from 3.36% for the same period in 2020.

The yield on average interest-earning assets increased 8 basis points to 3.86% for the three months ended March 31, 2022, compared to 3.78% for the same period in the prior year, due to an increase in yields earned on investment securities.

The average cost of interest-bearing liabilities increased to 0.43% for the three months ended March 31, 2022, compared to 0.40% for the same period last year, due primarily to an increase in borrowing rates of 85 basis points related to the issuance of subordinated debt offset by a decrease in rates on interest-bearing deposits of 10 basis points.

Total cost of funds increased 2 basis points to 0.34% for the three months ended March 31, 2022, from 0.32% for the same period in 2021.

The net interest margin increased 5 basis points to 3.53% for the three months ended March 31, 2022, from 3.48% for the same period in 2021.

Interest Income.

Total interest income increased $3.4 million, or 25.5%, to $16.8 million for the three months ended September 30, 2021, from $13.4 million for the comparable period in 2020, primarily due to an increase in the average balances on interest-earning assets.

Interest and fees on loans receivable increased $3.5 million, to $14.6 million for the three months ended September 30, 2021, from $11.1 million for the three months ended September 30, 2020, related to an increase in the average balance of net loans receivable of $296.3 million compared to the prior year, along with recognition of deferred fee income from PPP and Main Street Lending Program ("MSLP") loan payoffs.

Average loan yields increased 2 basis points to 4.47% for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

Total interest income increased $2.3 million, or 15.5%, to $16.9 million for the three months ended March 31, 2022, from $14.6 million for the comparable period in 2021, primarily due to an increase in the average balances on interest-earning assets.

Interest and fees on loans receivable increased $2.0 million, to $14.5 million for the three months ended March 31, 2022, from $12.5 million for the three months ended March 31, 2021, related to an increase in the average balance of net loans receivable of $198.0 million compared to the prior year.

Average loan yields were 4.43% for each of the three months ended March 31, 2022 and 2021.

The following table compares average earning asset balances, associated yields, and resulting changes in interest income for the periods shown:

Three Months Ended September 30,

Three Months Ended March 31,

Average Balance Outstanding

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Investment securities

Mortgage-backed securities

Interest-bearing deposits in banks

Interest-earning deposits in banks

Total interest-earning assets

Interest Expense.

Total interest expense decreased $184,000, or 11.4%, to $1.4 million for the three months ended September 30, 2021, compared to $1.6 million for the three months ended September 30, 2020, due to a decrease in interest expense on deposits of $555,000 resulting from a 27 basis point decrease in the average cost of interest-bearing deposits, offset by interest expense on subordinated debt issued in 2021 of $390,000.

The average balance of interest-bearing deposits increased $170.1 million, or 16.9%, to $1.18 billion for the three months ended September 30, 2021, from $1.01 billion for the three months ended September 30, 2020, as we grew deposits in new and existing market areas.

Additionally, the purchase of the Bellevue branch added $55.3 million in average deposit balances, mainly in money market and CD accounts.

During the three months ended September 30, 2021, interest expense decreased due to a decrease in the average balances on savings accounts of $14.2 million and certificates of deposit of $61.9 million, respectively, coupled with decreases in the average rate paid of 34 and 28 basis points, respectively, compared to the three months ended September 30, 2020.

During the same period, the average balances of money market and demand deposit accounts increased $181.5 million and $36.3 million, respectively.

The average cost of interest-bearing deposit products decreased to 0.29% for the three months ended September 30, 2021, from 0.56% for the three months ended September 30, 2020, due in large part to the expiration of promotional rates and a shift in balances to lower-yielding demand deposit accounts.

Borrowing costs increased due to the subordinated debt issued in March 2021.

Total interest expense increased $265,000, or 23.0%, to $1.4 million for the three months ended March 31, 2022, compared to $1.2 million for the three months ended March 31, 2021, due to an increase in borrowing costs of $428,000 primarily related to the subordinated debt issued in 2021, offset by a decrease in interest expense on deposits of $217,000 resulting from a 10 basis point decrease in the average cost of interest-bearing deposits.

The average balance of interest-bearing deposits increased $129.2 million, or 11.8%, to $1.22 billion for the three months ended March 31, 2022, from $1.09 billion for the three months ended March 31, 2021, due to core deposit growth in new and existing market areas as well as purchasing the Bellevue branch in July of 2021.

During the three months ended March 31, 2022, interest expense decreased on certificates of deposit due to a decrease in the average balances of $53.4 million, along with a decrease in the average rates paid of 18 basis points, compared to the three months ended March 31, 2021.

During the same period, the average balances of money market and savings accounts increased $126.7 million and $21.1 million, respectively, while the average rate paid decreased 4 basis points for both categories, resulting in comparatively minor changes to interest expense.

Interest-bearing demand account average balances increased $34.8 million and the average rate paid increased 2 basis points, resulting in a minor increase to interest expense.

The average cost of interest-bearing deposit products decreased to 0.24% for the three months ended March 31, 2022, from 0.34% for the three months ended March 31, 2021, due in large part to the expiration of promotional rates and a shift in deposit mix to higher levels of transaction accounts.

Borrowing costs increased due to the issuance of subordinated debt in March 2021 and increases in both the average balance and cost of FHLB advances compared to the same period in 2021.

The following table details average balances, cost of funds and the change in interest expense for the periods shown:

Three Months Ended September 30,

Three Months Ended March 31,

Average Balance Outstanding

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(Dollars in thousands)

Savings accounts

Transaction accounts

Money market accounts

Certificates of deposit

FHLB advances

Subordinated debt

Total interest-bearing liabilities

Provision for Loan Losses.

The provision for loan losses was $700,000 for the three months ended September 30, 2021, primarily due to growth in the loan portfolio, and was $1.4 million for the three months ended September 30, 2020, which was elevated due to the uncertainty in economic conditions created by the COVID-19 pandemic and growth in the loan portfolio.

The following table details activity and information related to the allowance for loan losses for the periods shown:

Three Months Ended September 30,

(Dollars in thousands)

Provision for loan losses

Net charge-offs

Allowance for loan losses

Allowance for losses as a percentage of total gross loans receivable at period end

Total nonaccrual loans

Allowance for loan losses as a percentage of nonaccrual loans at period end

Nonaccrual and 90 days or more past due loans as a percentage of total loans

Noninterest Income.

Noninterest income decreased $495,000, or 10.4%, to $4.3 million for the three months ended September 30, 2021, from $4.8 million for the three months ended September 30, 2020, mainly due to a decrease in gain on sale of mortgage loans of $1.1 million due to less saleable inventory and a decrease in loan refinancing activity. Gain on sale of investments was $1.3 million for the third quarter of 2021, compared to gain on sale of investments of $969,000 for the same period in 2020.

Servicing fee income on sold loans increased $667,000 due to an increase to record the servicing right value as well as an adjustment to recognize servicing fee income on MSLP loans.

The following table provides a detailed analysis of the changes in the components of noninterest income for the periods shown:

Three Months Ended September 30,

Increase (Decrease)

(Dollars in thousands)

Loan and deposit service fees

Sold loan servicing fees, net of amortization

Net gain on sale of loans

Net gain on sale of investment securities

Increase in cash surrender value of bank-owned life insurance

Total noninterest income

Noninterest Expense.

Noninterest expense increased $3.9 million, or 38.2%, to $13.9 million for the three months ended September 30, 2021, compared to $10.1 million for the three months ended September 30, 2020, primarily as a result of an increase in compensation and benefits as we added employees to manage the company and staff new digital and fintech endeavors and generate additional revenue.

Compensation and benefits was also higher due to a $620,000 increase in incentive accrual and $226,000 in commissions paid on increased mortgage and commercial loan production.

The following table provides an analysis of the changes in the components of noninterest expense for the periods shown:

Three Months Ended September 30,

Increase (Decrease)

(Dollars in thousands)

Compensation and benefits

Data processing

Occupancy and equipment

Supplies, postage, and telephone

Regulatory assessments and state taxes

Professional fees

FDIC insurance premium

Other expense

Provision for Income Tax.

An income tax expense of $946,000 was recorded for the three months ended September 30, 2021, compared to $1.4 million for the three months ended September 30, 2020.

There was a period-over-period increase in income before taxes of $107,000; however, the expense recorded for the three months ended September 30, 2020, included a BOLI restructure related penalty, resulting in a higher expense for the third quarter of 2020. For additional information, see Note 5 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Comparison of Results of Operations for the Nine Months Ended September 30, 2021 and 2020

Net income increased $3.8 million, or 57.8%, to $10.3 million for the nine months ended September 30, 2021, compared to net income of $6.5 million for the nine months ended September 30, 2020, due to an increase in net interest income after provision for loan losses compared to the same period in 2020 offset by an increase in noninterest expense.

Net Interest Income.

Net interest income increased $11.2 million to $42.5 million for the nine months ended September 30, 2021, from $31.3 million for the nine months ended September 30, 2020.

This increase was mainly the result of an increase in average earning assets of $325.8 million.

The yield on average interest-earning assets decreased 4 basis points to 3.81% for the nine months ended September 30, 2021, compared to 3.85% for the same period in the prior year due to a decrease in reinvestment loan and investment securities rates.

The average cost of interest-bearing liabilities decreased to 0.44% for the nine months ended September 30, 2021, compared to 0.85% for the same period last year, due primarily to a decrease in rates on interest-bearing deposits of 49 basis points offset by an increase in borrowing rates of 70 basis points related to the issuance of subordinated debt.

Total cost of funds decreased 37 basis points to 35 basis points for the nine months ended September 30, 2021, from 73 basis points for the same period in 2020.

The net interest margin increased 28 basis points to 3.48% for the nine months ended September 30, 2021, from 3.20% for the same period in 2020.

Interest Income.

Total interest income increased $8.8 million, or 23.2%, to $46.5 million for the nine months ended September 30, 2021, from $37.7 million for the comparable period in 2020, primarily due to an increase in the average balances on interest-earning assets.

Interest and fees on loans receivable increased $8.8 million, to $40.0 million for the nine months ended September 30, 2021, from $31.2 million for the nine months ended September 30, 2020, related to an increase in the average balance of net loans receivable of $275.9 million compared to the prior year and the recognition of deferred fee income on PPP and MSLP loan payoffs.

Average loan yields decreased 3 basis points to 4.42% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The following table compares average earning asset balances, associated yields, and resulting changes in interest income for the periods shown:

Nine Months Ended September 30,

Average Balance Outstanding

Increase (Decrease) in Interest Income

(Dollars in thousands)

Loans receivable, net

Investment securities

Mortgage-backed securities

Interest-bearing deposits in banks

Total interest-earning assets

Interest Expense.

Total interest expense decreased $2.5 million, or 38.1%, to $4.0 million for the nine months ended September 30, 2021, compared to $6.4 million for the nine months ended September 30, 2020, due to a decrease in interest expense on deposits of $3.0 million resulting from a 49 basis point decrease in the average cost of interest-bearing deposits, offset by an increase in borrowing costs of $529,000 related to the subordinated debt issued in 2021.

The average balance of interest-bearing deposits increased $203.2 million, or 21.8%, to $1.14 billion for the nine months ended September 30, 2021, from $932.0 million for the nine months ended September 30, 2020, as we grew deposits in new and existing market areas as well as purchasing the Bellevue branch.

During the nine months ended September 30, 2021, interest expense decreased on savings accounts, certificates of deposit and transaction accounts due to decreases in the average balances of $11.5 million, $51.5 million and $43.2 million, respectively, along with decreases in the average rates paid of 54 basis points, 69 basis points and 1 basis point, respectively, compared to the nine months ended September 30, 2020.

During the same period, the average balance of money market accounts increased $200.0 million and the average rate paid decreased 26 basis points.

The average cost of interest-bearing deposit products decreased to 0.31% for the nine months ended September 30, 2021, from 0.80% for the nine months ended September 30, 2020, due in large part to the expiration of promotional rates and a shift in balances to transaction accounts.

Borrowing costs increased due to the issuance of subordinated debt in March 2021, partially offset by a decrease in the average balance and cost of FHLB advances compared to the same period in 2020.

The following table details average balances, cost of funds and the change in interest expense for the periods shown:

Nine Months Ended September 30,

Average Balance Outstanding

Increase (Decrease) in Interest Expense

(Dollars in thousands)

Savings accounts

Transaction accounts

Money market accounts

Certificates of deposit

3 unchanged sentences

Provision for Loan Losses.

The provision for loan losses was $1.5 million for the nine months ended September 30, 2021, primarily due to growth in the loan portfolio, and was $4.1 million for the nine months ended September 30, 2020, due to the uncertainty in economic conditions created by the COVID-19 pandemic as well as growth in the loan portfolio.

The Company recorded no loan loss provision during the first quarter of 2022.

This compares to a provision for loan losses of $500,000 for the three months ended March 31, 2021.

The lack of provision reflects improvement in economic conditions, less uncertainty regarding the impact of COVID-19, and stable credit quality metrics compared to the prior year.

The following table details activity and information related to the allowance for loan losses for the periods shown:

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

Provision for loan losses

Net charge-offs

Net recoveries (charge-offs)

Allowance for loan losses

4 unchanged sentences

Noninterest Income.

Noninterest income decreased $346,000, or 3.1%, to $10.9 million for the nine months ended September 30, 2021, from $11.2 million for the nine months ended September 30, 2020.

Servicing fee income on sold loans increased $624,000 due to the recognition of the servicing right value and servicing fee income on MSLP loans and $218,000 related to mortgage servicing fee income, other fintech-related investments increased $370,000, and interchange fee income on deposit accounts increased $326,000.

These increases were offset by a decline in gain on sales of loans of $1.2 million over the same period in 2020.

The cash surrender value of bank-owned life insurance (BOLI) decreased $850,000 due to a BOLI restructure that occurred during the nine months ended September 30, 2020, which resulted in the recognition of additional market gains in 2020.

Noninterest income decreased $301,000, or 11.1%, to $2.4 million for the three months ended March 31, 2022, from $2.7 million for the three months ended March 31, 2021.

Loan and deposit service fees increased over the same period in 2021 due to $120,000 of commercial loan late fees received during the quarter. Servicing fee income on sold loans increased $200,000 due to the fair value accounting election and a $63,000 increase in Main Street Lending Program servicing fee income.

Investment securities with low yields driven by high levels of prepayment activity were sold for a gain of $126,000 during the quarter, allowing the Company to reallocate funds into higher yielding assets. Other income decreased due to a valuation decrease of $67,000 recorded on our joint venture fintech investments compared to a gain of $208,000 in the same period in 2021, offset by adjustable-rate conversion ("ARC") loan fee income of $149,000 in the current period compared to no ARC fee income during the same period in 2021. These increases were offset by a decline in gain on sales of mortgage loans of $1.1 million over the same period in 2021 as rising mortgage loan rates and lack of single family home inventory have resulted in a decline in mortgage loan production.

The following table provides a detailed analysis of the changes in the components of noninterest income for the periods shown:

Nine Months Ended September 30,

Three Months Ended March 31,

Increase (Decrease)

1 unchanged sentence

Loan and deposit service fees

Sold loan servicing fees, net of amortization

Sold loan servicing fees

Net gain on sale of loans

3 unchanged sentences

Noninterest Expense.

Noninterest expense increased $10.0 million, or 33.6%, to $39.7 million for the nine months ended September 30, 2021, compared to $29.8 million for the nine months ended September 30, 2020, primarily as a result of an increase in compensation and benefits as we added staff to manage the company and generate additional revenue.

Compensation and benefits was also higher due to a $898,000 increase in commissions paid on increased mortgage and commercial loan production, a $748,000 increase in incentive accrual, and a $500,000 increase related to equity awarded to the principal owners of POM as part of the Quin joint venture agreement.

Costs related to software increased $898,000 as we implemented more robust systems to support digital initiatives and Company growth. Increases in advertising and professional fees were related to the purchase of the Bellevue branch, Quin Ventures expenditures, the relocation of our Fairhaven branch, and the opening of the Ferndale branch.

The increase in FDIC insurance over the prior year was due to a combination of a small bank assessment credit issued in September 2019 that resulted in no FDIC insurance payment during the first quarter of 2020 and an increase in average assets which resulted in a higher assessment base.

Noninterest expense increased $2.7 million, or 22.6%, to $14.8 million for the three months ended March 31, 2022, compared to $12.1 million for the three months ended March 31, 2021, primarily as a result of an increase in compensation and benefits as we added staff to manage the company and build up data and fintech infrastructures. Costs related to software increased $423,000 as we implemented more robust systems to support digital initiatives and implement customer relationship management tools. Increases in advertising were related to Quin Ventures and online initiatives.

The increase in regulatory assessments and state taxes was due to an increase in taxable income compared to the same period in 2021 combined with an accrual for regulatory exams in the current year.

The following table provides an analysis of the changes in the components of noninterest expense for the periods shown:

Nine Months Ended September 30,

Three Months Ended March 31,

Increase (Decrease)

7 unchanged sentences

FDIC insurance premium

FHLB prepayment penalty

Other expense

Total noninterest expense

Provision for Income Tax.

An income tax expense of $2.1 million was recorded for the nine months ended September 30, 2021, compared to $2.1 million for the nine months ended September 30, 2020.

There was a year-over-year increase in income before taxes of $3.5 million; however, the expense recorded for the nine months ended September 30, 2020, included a penalty, resulting in a similar expense for both periods. For additional information, see Note 5 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

An income tax expense of $554,000 was recorded for the three months ended March 31, 2022, compared to $473,000 for the three months ended March 31, 2021.

There was a year-over-year decrease in income before taxes of $535,000; however, the expense recorded for the three months ended March 31, 2021, included a tax accrual true-up. For additional information, see Note 5 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q.

Average Balances, Interest and Average Yields/Cost

The following tables set forth, for the periods indicated, information regarding average balances of assets and liabilities as well as the total dollar amounts of interest income from average interest-earning assets and interest expense on average interest-bearing liabilities, resultant yields, interest rate spread, net interest margin (otherwise known as net yield on interest-earning assets), and the ratio of average interest-earning assets to average interest-bearing liabilities.

Also presented is the weighted average yield on interest-earning assets, rates paid on interest-bearing liabilities and the net spread as of September 30, 2021 and 2020.

Also presented is the weighted average yield on interest-earning assets, rates paid on interest-bearing liabilities and the net spread as of March 31, 2022 and 2021.

Income and all average balances are monthly average balances, which management deems to be not materially different than daily averages.

Nonaccrual loans have been included in the table as loans carrying a zero yield.

Three Months Ended September 30,

Interest-earning assets:

Loans receivable, net (1)

Investment securities

Mortgage-backed securities

FHLB dividends

Interest-bearing deposits in banks

Total interest-earning assets (2)

Noninterest-earning assets

Total average assets

Interest-bearing liabilities:

Interest-bearing demand deposits

Money market accounts

Savings accounts

Certificates of deposit

Total deposits

FHLB borrowings

Subordinated debt

Total interest-bearing liabilities

Noninterest-bearing liabilities

Average equity

Total interest-bearing liabilities

Net interest income

Net interest rate spread

Net earning assets

Net interest margin (3)

Average interest-earning assets to average interest-bearing liabilities

(1) The average loans receivable, net balances include nonaccrual loans.

(2) Includes interest-bearing deposits (cash) at other financial institutions.

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

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

2 unchanged sentences

Investment securities

Mortgage-backed securities

FHLB dividends

Interest-bearing deposits in banks

Interest-earning deposits in banks

Total interest-earning assets (2)

10 unchanged sentences

Total interest-bearing liabilities

Noninterest-bearing liabilities

Noninterest-bearing deposits

Other noninterest-bearing liabilities

Total average liabilities

Average equity

Total interest-bearing liabilities

Total average liabilities and equity

Net interest income

4 unchanged sentences

(1) The average loans receivable, net balances include nonaccrual loans.

(2) Includes interest-bearing deposits (cash) at other financial institutions.

(2) Includes interest-earning deposits (cash) at other financial institutions.

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

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30, 2021 vs.

Increase (Decrease) Due to

March 31, 2022 vs.

Increase (Decrease) Due to

Total Increase (Decrease)

(In thousands)

Interest-earning assets:

10 unchanged sentences

Net change in interest income

(1) Includes interest-bearing deposits (cash) at other financial institutions.

(1) Includes interest-earning deposits (cash) at other financial institutions.

Off-Balance Sheet Activities

3 unchanged sentences

requests for funding and take the form of loan commitments and lines of credit.

For the nine months ended September 30, 2021 and the year ended December 31, 2020, we engaged in no off-balance sheet transactions likely to have a material effect on our financial condition, results of operations or cash flows.

For the three months ended March 31, 2022 and the year ended December 31, 2021, we engaged in no off-balance sheet transactions likely to have a material effect on our financial condition, results of operations or cash flows.

Contractual Obligations

At September 30, 2021, our scheduled maturities of contractual obligations were as follows:

At March 31, 2022, our scheduled maturities of contractual obligations were as follows:

After 1 Year Through

9 unchanged sentences

Commitments and Off-Balance Sheet Arrangements

The following table summarizes our commitments and contingent liabilities with off-balance sheet risks as of September 30, 2021:

The following table summarizes our commitments and contingent liabilities with off-balance sheet risks as of March 31, 2022:

Amount of Commitment Expiration

15 unchanged sentences

The levels of these assets depend on our operating, financing, lending and investing activities during any given period.

At September 30, 2021, cash and cash equivalents totaled $76.1 million, and unpledged securities classified as available-for-sale with a market value of $200.0 million provided additional sources of liquidity.

We pledged collateral to support borrowings from the FHLB of $446.8 million and have an established borrowing arrangement with the Federal Reserve Bank of San Francisco, for which available-for-sale securities with a market value of $23.5 million were pledged as of September 30, 2021.

At September 30, 2021, we had $3.0 million in loan commitments outstanding and $256.3 million in undisbursed loans and standby letters of credit, including $180.4 million in undisbursed construction loan commitments.

Certificates of deposit due within one year as of September 30, 2021 totaled $157.0 million, or 64.1% of certificates of deposit with a weighted-average rate of 0.67%.

We believe the large percentage of certificates of deposit that mature within one year reflects customers' hesitancy to invest their funds for longer periods as market interest rates have recently declined.

At March 31, 2022, cash and cash equivalents totaled $82.5 million, and unpledged securities classified as available-for-sale with a market value of $272.0 million provided additional sources of liquidity.

We pledged collateral of $475.7 million to support borrowings from the FHLB and have an established borrowing arrangement with the Federal Reserve Bank of San Francisco, for which available-for-sale securities with a market value of $9.7 million were pledged as of March 31, 2022.

At March 31, 2022, we had $12.8 million in loan commitments outstanding and $260.6 million in undisbursed loans and standby letters of credit, including $161.3 million in undisbursed construction loan commitments.

Certificates of deposit due within one year as of March 31, 2022 totaled $147.3 million, or 61.6% of certificates of deposit with a weighted-average rate of 0.40%.

We believe the large percentage of certificates of deposit that mature within one year reflects customers' hesitancy to invest their funds for longer periods as market interest rates were in decline.

If these maturing deposits are not renewed, however, we will be required to seek other sources of funds, including other certificates of deposit, non-maturity deposits, and borrowings.

4 unchanged sentences

The Company is a separate legal entity from the Bank and provides for its own liquidity.

At September 30, 2021, the Company, on an unconsolidated basis, had liquid assets of $16.6 million.

In addition to its operating expenses, the Company is responsible for paying dividends declared, if any, to its shareholders, funds paid for Company stock repurchases, and payments on subordinated notes held at the Company level.

At March 31, 2022, the Company, on an unconsolidated basis, had liquid assets of $7.8 million.

In addition to its operating expenses, the Company is responsible for paying dividends declared, if any, to its shareholders, funds paid for Company stock repurchases, payments on subordinated notes held at the Company level, and commitments to joint ventures.

The Company has the ability to receive dividends or capital distributions from the Bank, although there are regulatory restrictions on the ability of the Bank to pay dividends.

2 unchanged sentences

Capital Resources

At September 30, 2021, shareholders' equity totaled $187.8 million, or 10.2% of total assets.

Our book value per share of common stock was $18.65 at September 30, 2021, compared to $18.19 at December 31, 2020.

At September 30, 2021, the Bank exceeded all regulatory capital requirements and was considered "well capitalized" under FDIC regulatory capital guidelines.

The following table provides the capital requirements and actual results for First Fed at September 30, 2021.

At March 31, 2022, shareholders' equity totaled $177.8 million, or 9.1% of total assets.

Our book value per share of common stock was $17.77 at March 31, 2022, compared to $19.10 at December 31, 2021.

At March 31, 2022, the Bank exceeded all regulatory capital requirements and was considered "well capitalized" under FDIC regulatory capital guidelines.

The following table provides the capital requirements and actual results for First Fed at March 31, 2022.

Minimum Capital Requirements

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements