What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-12 compared with 2024-08-12 · 218 added, 207 removed, 1514 unchanged (22% of the section changed)

3 unchanged sentences

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

June 30, 2024

September 30, 2024

December 31, 2023

3 unchanged sentences

64,769 103,324

Investment securities available for sale, at fair value

Investment securities available for sale, at fair value (amortized cost of $ 341,011 and $ 333,950 , respectively)

310,860 295,623

Loans held for sale

Loans receivable (net of allowance for credit losses on loans of $ 21,462 and $ 17,510 )

Loans receivable (net of allowance for credit losses on loans of $ 21,970 and $ 17,510 , respectively)

1,714,416 1,642,518

12 unchanged sentences

10,802 13,001

Right-of-use ("ROU") asset, net

Prepaid expenses and other assets

5 unchanged sentences

Accrued interest payable

Lease liability, net

Accrued expenses and other liabilities

6 unchanged sentences

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

issued and outstanding 9,453,247 shares at June 30, 2024, and 9,611,876 shares at December 31, 2023

issued and outstanding 9,365,979 shares at September 30, 2024, and 9,611,876 shares at December 31, 2023

Additional paid-in capital

12 unchanged sentences

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data) (Unaudited)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

10 unchanged sentences

Provision for (recapture of) credit losses on unfunded commitments

Provision for (recapture of) credit losses

Net interest income after provision for (recapture of) credit losses

Provision for credit losses

Net interest income after provision for credit losses

NONINTEREST INCOME

5 unchanged sentences

Increase in cash surrender value of bank-owned life insurance

Other (loss) income

Total noninterest income

9 unchanged sentences

Total noninterest expense

Income before provision for income taxes

Provision for income taxes

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

(Benefit) provision for income taxes

Net (loss) income

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

Net income attributable to parent

Basic and diluted earnings per common share

Net (loss) income attributable to parent

Basic and diluted (loss) earnings per common share

See selected notes to the consolidated financial statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net (loss) income

Other comprehensive income (loss):

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

Income tax benefit related to unrealized holding (losses) gains on investments

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

Amortization of unrecognized DB plan prior service cost

Income tax provision related to amortization of DB plan prior service cost

Unrealized holding gains (losses) on derivatives

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

Unrealized holding (losses) gains on derivatives

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

Income tax provision related to reclassification adjustment on sales of securities

Other comprehensive income (loss), net of tax

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Three Months Ended June 30, 2024 and 2023

For the Three Months Ended September 30, 2024 and 2023

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

4 unchanged sentences

Total Shareholders'

Balance at March 31, 2023

Balance at June 30, 2023

9,633,496 $ 96 $ 95,360 $ 111,750 $ ( 7,583 ) $ ( 40,066 ) $ — $ 159,557

2 unchanged sentences

( 1,073 ) — ( 10 ) ( 2 ) ( 12 )

Restricted stock award forfeitures net of grants

( 8,911 ) — — —

Restricted stock award grants net of forfeitures

Restricted stock awards canceled

2 unchanged sentences

( 5,784 ) ( 5,784 )

Close out investment in Quin Ventures

( 3,451 ) 3,451 —

Share-based compensation expense

ESOP shares committed to be released

( 13 ) 166 153

Cash dividends declared ($ 0.07 per share)

( 673 ) ( 673 )

Balance at September 30, 2023

9,630,735 $ 96 $ 95,658 $ 113,579 $ ( 7,418 ) $ ( 45,850 ) $ — $ 156,065

Balance at June 30, 2024

9,453,247 $ 94 $ 93,985 $ 103,322 $ ( 6,923 ) $ ( 31,597 ) $ — $ 158,881

Balance at March 31, 2024

( 1,980 ) — ( 1,980 )

Common stock repurchased

( 98,156 ) — ( 991 ) ( 23 ) ( 1,014 )

8 unchanged sentences

( 659 ) ( 659 )

Balance at June 30, 2024

Balance at September 30, 2024

9,365,979 $ 94 $ 93,218 $ 100,660 $ ( 6,759 ) $ ( 26,424 ) $ — $ 160,789

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Six Months Ended June 30, 2024 and 2023

For the Nine Months Ended September 30, 2024 and 2023

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

12 unchanged sentences

( 15,412 ) — ( 205 ) ( 205 )

Other comprehensive income, net of tax

Other comprehensive loss, net of tax

( 5,307 ) ( 5,307 )

Reclassification resulting from adoption of Accounting Standards Codification 326, net of tax

6 unchanged sentences

( 2,027 ) ( 2,027 )

Balance at June 30, 2023

Balance at September 30, 2023

9,630,735 $ 96 $ 95,658 $ 113,579 $ ( 7,418 ) $ ( 45,850 ) $ — $ 156,065

10 unchanged sentences

ESOP shares committed to be released

( 13 ) 494 481

Cash dividends declared ($ 0.21 per share)

( 1,991 ) ( 1,991 )

Balance at June 30, 2024

Balance at September 30, 2024

9,365,979 $ 94 $ 93,218 $ 100,660 $ ( 6,759 ) $ ( 26,424 ) $ — $ 160,789

3 unchanged sentences

(In thousands) (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

Net income before noncontrolling interest

Net (loss) income before noncontrolling interest

$ ( 3,803 ) $ 7,648

Adjustments to reconcile net income to net cash from operating activities:

3 unchanged sentences

Accretion of deferred loan fees and purchased premiums, net

( 1,133 ) ( 451 )

Amortization of debt issuance costs

1 unchanged sentence

Additions to servicing rights on sold loans, net

( 38 ) ( 145 )

Provision for credit losses on loans

Recapture of provision for credit losses on unfunded commitments

( 113 ) ( 1,024 )

Allocation of ESOP shares

1 unchanged sentence

Gain on sale of loans, net

( 260 ) ( 405 )

Loss on sale of securities available for sale, net

Increase in cash surrender value of life insurance, net

( 851 ) ( 668 )

Origination of loans held for sale

( 13,553 ) ( 21,351 )

Proceeds from sale of loans held for sale

14,188 21,664

Change in assets and liabilities:

Increase in accrued interest receivable

( 1,045 ) ( 1,350 )

(Increase) decrease in ROU asset

( 11,268 ) 433

(Increase) decrease in prepaid expenses and other assets

( 396 ) 1,718

(Decrease) increase in accrued interest payable

Increase in accrued expenses and other liabilities

( 1,243 ) 1,821

Increase (decrease) in lease liabilities

11,371 ( 399 )

(Decrease) increase in accrued expenses and other liabilities

( 5,654 ) 2,359

Net cash provided by operating activities

3 unchanged sentences

Proceeds from sales of securities available for sale

Redemption (purchase) of FHLB stock

Purchase of FHLB stock

( 771 ) ( 940 )

Purchase of bank-owned life insurance, net of surrenders

1 unchanged sentence

Net increase in loans receivable

( 83,721 ) ( 89,551 )

Net sale (purchase) of premises and equipment, net of amortization

6,521 ( 1,066 )

Capital contributions to equity and partnership investments

( 6,386 ) ( 335 )

Capital disbursements received from equity and partnership investments

1 unchanged sentence

Net cash used by investing activities

( 88,596 ) ( 83,298 )

See selected notes to the consolidated financial statements.

2 unchanged sentences

(In thousands) (Unaudited)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from financing activities:

4 unchanged sentences

Net decrease in line of credit

Net increase (decrease) in advances from borrowers for taxes and insurance

Net increase in advances from borrowers for taxes and insurance

Payment of dividends

9 unchanged sentences

Supplemental disclosures of noncash investing activities:

Change in unrealized gain on securities available for sale

Change in unrealized gain (loss) on fair value hedge

Change in unrealized gain (loss) on securities available for sale

Change in unrealized (loss) gain on fair value hedge

Amortization of unrecognized DB plan prior service cost

36 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 six months ended June 30, 2024 , are not necessarily indicative of the results that may be expected for future periods.

Operating results for the three and nine months ended September 30, 2024 , 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.

1 unchanged sentence

Material estimates that are particularly susceptible to significant change in the near term relate to a determination of the allowance for credit losses ("ACL"), fair value of financial instruments and derivatives, and deferred tax assets and liabilities.

Restatement - On October 21, 2024, the Audit Committee of the Board of Directors (the "Audit Committee") of the Company, based on the recommendation of, and after consultation with, the Company’s management and independent registered public accounting firm, concluded that certain charge-offs of commercial construction loans, commercial business loans and the Splash unsecured consumer loan program as well as increased provision on Splash consumer loans should have been reported in the interim period ending June 30, 2024.

On October 25, 2024, the Company filed amendments to its quarterly report for the period ended June 30, 2024 to restate the consolidated financial statements included therein.

The consolidated financial statements as of and for the nine months ended September 30, 2024 , reflect the effects of the restatement as of and for the period ended June 30, 2024.

Principles of consolidation - The accompanying consolidated financial statements include the accounts of First Northwest;

6 unchanged sentences

Recently adopted accounting pronouncements

In June 2022, the FASB issued ASU No.

June 2022, the FASB issued ASU

Fair Value Measurement (Topic 820 ):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

ASU 2022 - 03 clarifies that a contractual restriction on the sale of an equity security should not be considered in measuring fair value, nor should the contractual restriction be recognized and measured separately.

03 clarifies that a contractual restriction on the sale of an equity security should

not be considered in measuring fair value, nor should the contractual restriction be recognized and measured separately.

Further, this ASU requires disclosure of the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet, the nature and remaining duration of the restriction(s), and the circumstances that could cause a lapse in the restriction(s).

ASU 2022 - 03 is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted.

The adoption of this ASU did not have a material impact on the consolidated financial statements and related disclosures.

03 is effective for the Company for fiscal years beginning after

December 15, 2023, including interim periods within those fiscal years, with early adoption permitted.

The adoption of this ASU did

not have a material impact on the consolidated financial statements and related disclosures.

In March 2023, the FASB issued ASU 2023 - 02, Investments - Equity Method and Joint Ventures (Topic 323 ):

13 unchanged sentences

The adoption of this ASU did not have a material impact on the consolidated financial statements and related disclosures.

November 2023, the FASB issued ASU

Segment Reporting (Topic 280 ):

In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures .

07 requires public companies to provide more transparency in both quarterly and annual reports about the expenses they incur from revenue generating business units to better understand the Company's overall performance and potential future cash flows.

The Company has identified

one reporting segment.

07 is effective for the Company for fiscal years beginning after

December 15, 2023, including interim periods within those fiscal years, with early adoption permitted.

The adoption of this ASU did

not have a material impact on the consolidated financial statements and related disclosures.

ASU 2023 - 07 requires public companies to provide more transparency in both quarterly and annual reports about the expenses they incur from revenue generating business units to better understand the Company's overall performance and potential future cash flows.

The Company has identified one reporting segment.

ASU 2023 - 07 is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted.

The adoption of this ASU did not have a material impact on the consolidated financial statements and related disclosures.

Recently issued accounting pronouncements not yet adopted

6 unchanged sentences

The adoption of this ASU is not expected to have a material impact on the consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024 - 03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses .

ASU 2024 - 03 requires additional disclosure of the nature of expenses included in the income statement in response to requests from investors for more information to better understand an entity's performance and potential future cash flows.

The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

ASU 2024 - 03 is effective for the Company for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted.

The adoption of this ASU is not expected to have a material impact on the 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 June 30, 2024 are summarized as follows:

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at September 30, 2024 are summarized as follows:

Amortized Cost

43 unchanged sentences

$ 333,950 $ — $ ( 38,327 ) $ 295,623 $ —

There were no securities classified as held-to-maturity at June 30, 2024 and December 31, 2023 .

There was no allowance for credit losses on investment securities recorded at June 30, 2024 and December 31, 2023 , based on analysis performed by the Company.

Accrued interest receivable on available-for-sale debt securities totaled $ 2.3 million and $ 1.9 million as of June 30, 2024 and December 31, 2023 , respectively.

There were no securities classified as held-to-maturity at September 30, 2024 and December 31, 2023 .

There was no allowance for credit losses on investment securities recorded at September 30, 2024 and December 31, 2023 , based on analysis performed by the Company.

Accrued interest receivable on available-for-sale debt securities totaled $ 2.4 million and $ 1.9 million as of September 30, 2024 and December 31, 2023 , respectively.

Accrued interest receivable on securities is reported in accrued interest receivable on the Consolidated Balance Sheets and is excluded from the calculation of the allowance for credit losses on investment securities.

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 June 30, 2024 :

Less Than Twelve Months

40 unchanged sentences

$ ( 176 ) $ 19,494 $ ( 38,151 ) $ 274,306 $ ( 38,327 ) $ 293,800

There were 23 available-for-sale securities with unrealized losses of less than one year, and 146 available-for-sale securities with an unrealized loss of more than one year at June 30, 2024 .

There were 10 available-for-sale securities with unrealized losses of less than one year, and 145 available-for-sale securities with an unrealized loss of more than one year at September 30, 2024 .

There were 6 available-for-sale securities with unrealized losses of less than one year, and 156 available-for-sale securities with an unrealized loss of more than one year at December 31, 2023 .

3 unchanged sentences

The Company believes that it is unlikely that we would be required to sell these investments prior to a market price recovery or maturity.

Based on the Company’s evaluation of these securities, no credit impairment was recorded at June 30, 2024 , or December 31, 2023 .

Based on the Company’s evaluation of these securities, no credit impairment was recorded at September 30, 2024 , or December 31, 2023 .

The amortized cost and estimated fair value of investment securities by contractual maturity are shown in the following tables at the dates indicated.

1 unchanged sentence

therefore, these securities are shown separately.

June 30, 2024

September 30, 2024

Available-for-Sale

51 unchanged sentences

Sales of available-for-sale securities were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

9 unchanged sentences

These segments are further disaggregated into classes based on similar attributes and risk characteristics.

Loan amounts are presented at amortized cost which is comprised of the loan balance net of unearned loan fees in excess of unamortized costs and premiums of $ 19.1 million as of June 30, 2024 and $ 14.8 million as of December 31, 2023 .

Loan amounts are presented at amortized cost which is comprised of the loan balance net of unearned loan fees in excess of unamortized costs and unamortized purchase premiums of $ 19.5 million as of September 30, 2024 and $ 14.8 million as of December 31, 2023 .

The amortized cost reflected in total loans receivable does not include accrued interest receivable.

Accrued interest receivable on loans was $ 7.1 million as of June 30, 2024 and $ 6.0 million as of December 31, 2023 , and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the calculation of the allowance for credit losses on loans.

Accrued interest receivable on loans was $ 6.5 million as of September 30, 2024 and $ 6.0 million as of December 31, 2023 , and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the calculation of the allowance for credit losses on loans.

The amortized cost of loans receivable, net of the allowance for credit losses on loans ("ACLL"), consisted of the following at the dates indicated:

June 30, 2024

September 30, 2024

December 31, 2023

31 unchanged sentences

The following table presents the amortized cost of nonaccrual loans by class of loan at the dates indicated:

June 30, 2024

September 30, 2024

December 31, 2023

8 unchanged sentences

$ 312 $ 1,319 $ 1,631 $ 418 $ 1,426 $ 1,844

— 708 708 — — —

Commercial real estate

9 unchanged sentences

$ 2,556 $ 27,820 $ 30,376 $ 747 $ 17,897 $ 18,644

Interest income recognized on a cash basis on nonaccrual loans for the three months ended June 30, 2024 and 2023 , was $ 66,000 and $ 18,000 , respectively.

Interest income recognized on a cash basis on nonaccrual loans for the six months ended June 30, 2024 and 2023 , was $ 141,000 and $ 26,000 , respectively.

Interest income recognized on a cash basis on nonaccrual loans for the three months ended September 30, 2024 and 2023 , was $ 1,000 and $ 19,000 , respectively.

Interest income recognized on a cash basis on nonaccrual loans for the nine months ended September 30, 2024 and 2023 , was $ 35,000 and $ 52,000 , respectively.

Past due loans.

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 three loans with a total amortized cost of $ 8.5 million that were past due 90 days or more and still accruing interest at June 30, 2024 .

The loans were well secured and met the regulatory criteria for continuing to accrue interest.

There were no loans past due 90 days or more and still accruing interest at December 31, 2023 .

There were no loans past due 90 days or more and still accruing interest at September 30, 2024 and December 31, 2023 .

The following tables present the amortized cost of past due loans (including both accruing and nonaccruing loans) by segment and class as of the periods shown:

90 Days or More

June 30, 2024

September 30, 2024

Past Due Past Due Past Due Past Due Current Total Loans

51 unchanged sentences

Loans not otherwise classified are considered pass graded loans and are rated 1 - 3 in our risk rating system.

The following table presents the amortized cost of loans receivable by internally assigned risk grade and class of loans as of June 30, 2024 , as well as gross charge-off activity for the six months ended June 30, 2024 .

The following table presents the amortized cost of loans receivable by internally assigned risk grade and class of loans as of September 30, 2024 , as well as gross charge-off activity for the nine months ended September 30, 2024 .

Term loans that are renewed or extended for periods longer than 90 days are presented as a new origination in the year of most recent renewal or extension.

18 unchanged sentences

8,787 14,869 1,772 16,208 2,787 980 — 45,403

Substandard (Grade 6)

— — — — 708 — — 708

Total multi-family

20 unchanged sentences

192 5,541 — 224 — 25 — 5,982

Special Mention (Grade 5)

— — — — — 12 — 12

Substandard (Grade 6)

163 unchanged sentences

Changes in the ACLL for all other individually evaluated loans is based substantially on the Company’s evaluation of cash flows expected to be received from such loans.

As of June 30, 2024 , $ 31.9 million of loans were individually evaluated with $ 3.7 million of ACLL attributed to such loans.

At June 30, 2024 , four individually evaluated loans totaling $ 2.8 million were evaluated using a discounted cash flow approach and the remaining loans totaling $ 29.1 million were evaluated based on the underlying value of the collateral.

Two of the loans evaluated using the discounted cash flow method were accruing at quarter end, while the remaining loans evaluated using the discounted cash flow method and collateral dependent loans were all on nonaccrual status at June 30, 2024 .

As of September 30, 2024 , $ 31.8 million of loans were individually evaluated with $ 2.6 million of ACLL attributed to such loans.

At September 30, 2024 , eight individually evaluated loans totaling $ 4.6 million were evaluated using a discounted cash flow approach and the remaining loans totaling $ 27.2 million were evaluated based on the underlying value of the collateral.

One loan evaluated using the discounted cash flow method remained on accrual at quarter end, while the other loans evaluated using the discounted cash flow method and all loans evaluated based on collateral value were on nonaccrual at September 30, 2024 .

At December 31, 2023 , $ 20.0 million of loans were individually evaluated with $ 165,000 of ACLL attributed to such loans.

5 unchanged sentences

Collateral Type

June 30, 2024

Single Family Residence Multi-family Housing Condominium Automobile Business Assets Total

September 30, 2024

Single Family Residence Warehouse Condominium Automobile Business Assets Total

(In thousands)

1 unchanged sentence

$ 1,319 $ — $ — $ — $ — $ 1,319

Commercial real estate

— 5,624 — — — 5,624

30 unchanged sentences

In those instances, the ACLL for a MLTB is determined through individual evaluation.

During the six months ended June 30, 2024 , there was one new MLTB, a commercial business loan with a recorded investment of $ 16,000 for which the Bank agreed to defer payments.

During the nine months ended September 30, 2024 , there was one new MLTB, a commercial business loan with a recorded investment of $ 17,000 for which the Bank agreed to defer payments.

The borrower has agreed to resume principal and interest payments at the end of the deferral period.

The loan was current at June 30, 2024 , based on the modified terms.

The loan was current at September 30, 2024 , based on the modified terms.

During the year ended December 31, 2023, there was one new MLTB, a commercial business loan with a recorded investment of $ 119,000 for which the Bank agreed to defer principal payments.

16 unchanged sentences

The following tables detail activity in the allowance for credit losses on loans by class for the periods shown:

At or For the Three Months Ended June 30, 2024

At or For the Three Months Ended September 30, 2024

Beginning Balance

Provision for (Recapture of) Credit Losses

(Recapture of) Provision for Credit Losses

Ending Balance

13 unchanged sentences

$ 19,343 $ ( 516 ) $ 66 $ 3,077 $ 21,970

At or For the Six Months Ended June 30, 2024

At or For the Nine Months Ended September 30, 2024

Beginning Balance

15 unchanged sentences

$ 17,510 $ ( 8,808 ) $ 312 $ 12,956 $ 21,970

At or For the Three Months Ended June 30, 2023

At or For the Three Months Ended September 30, 2023

Beginning Balance

15 unchanged sentences

$ 17,297 $ ( 731 ) $ ( 501 ) $ 880 $ 16,945

At or For the Six Months Ended June 30, 2023

At or For the Nine Months Ended September 30, 2023

Beginning Balance

23 unchanged sentences

The credit risks associated with the unfunded commitments are consistent with the risks outlined for each loan class.

The allowance is recognized in accrued expenses and other liabilities on the Consolidated Balance Sheets and is adjusted as a provision, or recapture of provision, for credit losses on the Consolidated Statements of Income.

The allowance for unfunded commitments was $ 647,000 and $ 817,000 at June 30, 2024 , and December 31, 2023 , respectively.

The allowance for unfunded commitments was $ 704,000 and $ 817,000 at September 30, 2024 , and December 31, 2023 , respectively.

Note 5 - Premises and Equipment

Premises and equipment consist of the following as of:

June 30, 2024

September 30, 2024

December 31, 2023

11 unchanged sentences

$ 10,436 $ 18,049

Depreciation expense for the three months ended June 30, 2024 and 2023 , was $ 364,000 and $ 404,000 , respectively.

Depreciation expense for the six months ended June 30, 2024 and 2023 , was $ 745,000 and $ 799,000 , respectively.

Depreciation expense for the three months ended September 30, 2024 and 2023 , was $ 346,000 and $ 402,000 , respectively.

Depreciation expense for the nine months ended September 30, 2024 and 2023 , was $ 1.1 million and $ 1.2 million, respectively.

Note 6 - Leases

2 unchanged sentences

If the exercise of a renewal option is considered to be reasonably certain, the Company includes the extended term in the calculation of the right-of-use asset and lease liability.

At June 30, 2024 , the Company's right of use assets included in other assets and lease liabilities included in other liabilities were $ 17.6 million and $ 18.0 million, respectively.

Total costs incurred by the Company, as a lessee, were $ 864,000 and $ 573,000 for the six months ended June 30, 2024 and 2023 , respectively, and principally related to contractual lease payments on operating leases.

At September 30, 2024 , the Company's ROU assets and lease liabilities were $ 17.3 million and $ 17.8 million, respectively.

Total costs incurred by the Company, as a lessee, were $ 1.6 million and $ 857,000 for the nine months ended September 30, 2024 and 2023 , respectively, and principally related to contractual lease payments on operating leases.

The Company's leases do not impose significant covenants or other restrictions on the Company.

The following table presents amounts relevant to the Company's assets leased for use in its operations at the dates indicated:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

4 unchanged sentences

The following table presents the weighted-average remaining lease terms and discount rates of the Company's assets leased for use in its operations at the dates indicated:

June 30, 2024

September 30, 2024

December 31, 2023

5 unchanged sentences

(In Thousands)

June 30, 2025

June 30, 2026

June 30, 2027

June 30, 2028

June 30, 2029

September 30, 2025

September 30, 2026

September 30, 2027

September 30, 2028

September 30, 2029

Total minimum payments required

3 unchanged sentences

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

June 30, 2024

September 30, 2024

December 31, 2023

16 unchanged sentences

$ 1,711,641 2.68 $ 1,676,892 2.34

The aggregate amount of time deposits in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limit, currently $250,000, at June 30, 2024 and December 31, 2023 , were $ 151.2 million and $ 173.8 million, respectively.

The aggregate amount of time deposits in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limit, currently $250,000, at September 30, 2024 and December 31, 2023 , were $ 170.7 million and $ 173.8 million, respectively.

Maturities of certificates at the dates indicated are as follows:

June 30, 2024

September 30, 2024

December 31, 2023

12 unchanged sentences

$ 645,370 $ 651,038

At June 30, 2024 and December 31, 2023 , deposits included $ 120.0 million and $ 114.2 million, respectively, in public fund deposits.

The Bank had an outstanding letter of credit from the Federal Home Loan Bank of Des Moines ("FHLB") with a notional amount of $ 60.0 million at June 30, 2024 and December 31, 2023 , to secure public deposits.

At September 30, 2024 and December 31, 2023 , deposits included $ 119.0 million and $ 114.2 million, respectively, in public fund deposits.

The Bank had an outstanding letter of credit from the Federal Home Loan Bank of Des Moines ("FHLB") with a notional amount of $ 60.0 million at September 30, 2024 and December 31, 2023 , to secure public deposits.

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

Also included in deposits at June 30, 2024 and December 31, 2023 , were funds held by federally recognized tribes totaling $ 18.5 million and $ 18.4 million, respectively.

Investment securities with a carrying value of $ 22.2 million and $ 23.8 million were pledged as collateral for these deposits at June 30, 2024 and December 31, 2023 , respectively.

Also included in deposits at September 30, 2024 and December 31, 2023 , were funds held by federally recognized tribes totaling $ 20.7 million and $ 18.4 million, respectively.

Investment securities with a carrying value of $ 24.2 million and $ 23.8 million were pledged as collateral for these deposits at September 30, 2024 and December 31, 2023 , respectively.

This exceeds the minimum collateral requirements established by the Bureau of Indian Affairs.

Interest on deposits by type for the periods shown was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

17 unchanged sentences

First Fed periodically uses fixed-rate advances maturing in less than one year as an alternative source of funds.

Available borrowing capacity was $ 257.6 million and $ 253.8 million at June 30, 2024 and December 31, 2023 , respectively.

All borrowings are secured by collateral consisting of single-family, home equity, commercial real estate, and multi-family loans receivable in the amounts of $ 909.4 million and $ 896.2 million at June 30, 2024 and December 31, 2023 , respectively.

The Bank had outstanding letters of credit from the FHLB with notional amounts of $ 60.0 million to secure public deposits and $ 772,000 to secure the Bellevue, Washington branch lease at June 30, 2024 .

Available borrowing capacity was $ 226.1 million and $ 253.8 million at September 30, 2024 and December 31, 2023 , respectively.

All borrowings are secured by collateral consisting of single-family, home equity, commercial real estate, and multi-family loans receivable in the amounts of $ 907.3 million and $ 896.2 million at September 30, 2024 and December 31, 2023 , respectively.

First Fed also has an established borrowing arrangement with the Federal Reserve Bank of San Francisco ("FRB") to utilize the discount window for short-term borrowing.

Available borrowing capacity was $ 17.0 million and $ 6.6 million at June 30, 2024 and December 31, 2023 , respectively.

Available borrowing capacity was $ 18.7 million and $ 6.6 million at September 30, 2024 and December 31, 2023 , respectively.

An overnight test of the line of credit was performed at the end of June 2024.

Investment securities with a carrying value of $ 17.8 million and $ 6.9 million were pledged to the FRB at June 30, 2024 and December 31, 2023 , respectively.

Investment securities with a carrying value of $ 19.3 million and $ 6.9 million were pledged to the FRB at September 30, 2024 and December 31, 2023 , respectively.

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.

9 unchanged sentences

Investment securities with a carrying value of $ 12.9 million were pledged to secure the BTFP at December 31, 2023.

The following table sets forth information regarding our borrowings at the end of and during the six months ended June 30, 2024 .

The following table sets forth information regarding our borrowings at the end of and during the nine months ended September 30, 2024 .

The table includes both long- and short-term borrowings.

14 unchanged sentences

3.63 % 5.35 % — % 8.50 % 4.00 %

The amounts by year of maturity and weighted-average interest rate of FHLB long-term, fixed-rate advances at June 30, 2024 are as follows:

The amounts by year of maturity and weighted-average interest rate of FHLB long-term, fixed-rate advances at September 30, 2024 are as follows:

Weighted- Average Interest Rate

30 unchanged sentences

Actual results could differ significantly from the estimates and interpretations used in determining the current and deferred income tax assets and liabilities.

The effective tax rates were 30.1 % and 20.2 % for the six months ended June 30, 2024 and 2023 , respectively.

The effective tax rates were 25.5 % and 19.9 % for the nine months ended September 30, 2024 and 2023 , respectively.

The effective tax rates differ from the statutory maximum federal tax rate for 2024 and 2023 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.

The current period rate includes an estimate for taxes and penalties on the early surrender of a BOLI contract which was recorded in the first quarter of 2024.

Note 10 - Earnings per Common Share

Note 10 - Earnings (Loss) per Common Share

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

2 unchanged sentences

The following table presents a reconciliation of the components used to compute basic and diluted earnings per share for the periods shown:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except share data)

Net income available to common shareholders

Net (loss) income available to common shareholders

$ ( 1,980 ) $ 2,504 $ ( 3,803 ) $ 7,808

Earnings allocated to participating securities

Dividends and undistributed earnings allocated to participating securities

( 1 ) ( 11 ) ( 3 ) ( 39 )

Earnings allocated to common shareholders

(Loss) earnings allocated to common shareholders

$ ( 1,981 ) $ 2,493 $ ( 3,806 ) $ 7,769

13 unchanged sentences

8,756,765 8,934,882 8,805,124 8,930,404

Basic earnings per common share

Basic (loss) earnings per common share

$ ( 0.23 ) $ 0.28 $ ( 0.43 ) $ 0.87

Diluted earnings per common share

Diluted (loss) earnings per common share

$ ( 0.23 ) $ 0.28 $ ( 0.43 ) $ 0.87

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

At June 30, 2024 and 2023 , antidilutive shares as calculated under the treasury stock method totaled 6,715 and 14,987 , respectively.

At September 30, 2024 and 2023 , antidilutive shares as calculated under the treasury stock method totaled 20,663 and 13,582 , respectively.

Note 11 - Employee Benefits

5 unchanged sentences

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.

Principal and interest payments of $ 837,000 and $ 835,000 , respectively, were made by the ESOP during the six months ended June 30, 2024 and 2023 .

Principal and interest payments of $ 837,000 and $ 835,000 , respectively, were made by the ESOP during the nine months ended September 30, 2024 and 2023 .

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.

2 unchanged sentences

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 June 30, 2024 and 2023 , was $ 148,000 and $ 153,000 , respectively.

Compensation expense related to the ESOP for the six months ended June 30, 2024 and 2023 , was $ 345,000 and $ 340,000 , respectively.

Compensation expense related to the ESOP for the three months ended September 30, 2024 and 2023 , was $ 136,000 and $ 167,000 , respectively.

Compensation expense related to the ESOP for the nine months ended September 30, 2024 and 2023 , was $ 481,000 and $ 507,000 , respectively.

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

June 30, 2024

September 30, 2024

December 31, 2023

3 unchanged sentences

Committed to be released shares

13,221 26,514

Unallocated shares

8 unchanged sentences

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

As of June 30, 2024 , there were 222,448 total shares available for grant under the 2020 EIP, all of which are available to be granted as restricted shares.

As of September 30, 2024 , there were 210,093 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.

As of June 30, 2024 , there were no shares available for grant under the 2015 EIP.

As of September 30, 2024 , there were no shares available for grant under the 2015 EIP.

At this date, there are 10,220 shares granted under the 2015 EIP that are expected to vest subject to the 2015 EIP plan provisions.

There were 68,138 and 29,349 shares of restricted stock awarded, respectively, during the six months ended June 30, 2024 and 2023 .

There were 81,181 and 32,449 shares of restricted stock awarded, respectively, during the nine months ended September 30, 2024 and 2023 .

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 June 30, 2024 and 2023 , total compensation expense for the equity incentive plans was $ 257,000 and $ 358,000 , respectively.

Included in the compensation expense for the three months ended June 30, 2024 and 2023 , was directors' equity compensation of $ 56,000 and $ 73,000 , respectively.

For the six months ended June 30, 2024 and 2023 , total compensation expense for the equity incentive plans was $ 521,000 and $ 749,000 , respectively.

Included in the compensation expense for the six months ended June 30, 2024 and 2023 , was directors' equity compensation of $ 110,000 and $ 131,000 , respectively.

For the three months ended September 30, 2024 and 2023 , total compensation expense for the equity incentive plans was $ 260,000 and $ 349,000 , respectively.

Included in the compensation expense for the three months ended September 30, 2024 and 2023 , was directors' equity compensation of $ 75,000 and $ 59,000 , respectively.

For the nine months ended September 30, 2024 and 2023 , total compensation expense for the equity incentive plans was $ 781,000 and $ 1.1 million, respectively.

Included in the compensation expense for the nine months ended September 30, 2024 and 2023 , was directors' equity compensation of $ 185,000 and $ 190,000 , respectively.

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

Three Months Ended June 30, 2024

Shares Weighted-Average Grant Date Fair Value

Non-vested at April 1, 2024

Three Months Ended September 30, 2024

Weighted-Average Grant Date Fair Value

Non-vested at July 1, 2024

108,143 $ 15.60

1 unchanged sentence

( 867 ) 15.70

Non-vested at June 30, 2024

( 1,288 ) 20.19

Non-vested at September 30, 2024

114,075 14.84

(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.

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Shares Weighted-Average Grant Date Fair Value

4 unchanged sentences

( 2,763 ) 16.62

Non-vested at June 30, 2024

Non-vested at September 30, 2024

114,075 14.84

1 unchanged sentence

The surrendered shares are canceled and are unavailable for reissue.

As of June 30, 2024 , there was $ 1.3 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards.

As of September 30, 2024 , there was $ 1.1 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 1.94 years.

46 unchanged sentences

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

June 30, 2024

September 30, 2024

Quoted Prices in Active Markets for Identical Assets or Liabilities

19 unchanged sentences

— 1,762 12,650 14,412

Interest rate swap derivative

— 1,318 — 1,318

Total assets measured at fair value

$ 6,999 $ 288,528 $ 33,329 $ 328,856

Financial Liabilities

Interest rate swap derivative

$ — $ 2,749 $ — $ 2,749

December 31, 2023

25 unchanged sentences

The following tables provide 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 dates indicated:

June 30, 2024

September 30, 2024

Fair Value (In thousands)

34 unchanged sentences

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

As of or For the Three Months Ended June 30,

As of or For the Six Months Ended June 30,

As of or For the Three Months Ended September 30,

As of or For the Nine Months Ended September 30,

Sold loan servicing rights:

8 unchanged sentences

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

As of or For the Three Months Ended June 30,

As of or For the Six Months Ended June 30,

As of or For the Three Months Ended September 30,

As of or For the Nine Months Ended September 30,

Securities available for sale:

9 unchanged sentences

$ 17,095 $ 29,192 $ 17,095 $ 29,192

As of or For the Three Months Ended June 30,

As of or For the Six Months Ended June 30,

As of or For the Three Months Ended September 30,

As of or For the Nine Months Ended September 30,

Partnership investments:

6 unchanged sentences

( 283 ) ( 57 ) ( 6,782 ) ( 404 )

Unrealized (Losses) Gains

Unrealized Gains (Losses)

30 ( 15 ) ( 137 ) 293

5 unchanged sentences

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

June 30, 2024

September 30, 2024

(In thousands)

5 unchanged sentences

$ — $ — $ 17,388 $ 17,388

At June 30, 2024 and December 31, 2023 , there were no individually evaluated loans with discounts to appraisal disposition value or other unobservable inputs.

At September 30, 2024 and December 31, 2023 , there were no individually evaluated 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:

June 30, 2024

September 30, 2024

Fair Value Measurements Using:

18 unchanged sentences

14,412 14,412 — 1,762 12,650

Interest rate swap derivative

1,318 1,318 — 1,318 —

Financial liabilities

11 unchanged sentences

2,153 2,153 — 2,153 —

Interest rate swap derivative

2,749 2,749 — 2,749 —

December 31, 2023

42 unchanged sentences

(In thousands)

Balance at March 31, 2023

$ ( 34,642 ) $ ( 600 ) $ ( 1,509 ) $ ( 1,357 ) $ ( 38,108 )

Other comprehensive (loss) income before reclassification

( 3,037 ) — — 1,049 ( 1,988 )

Amounts reclassified from accumulated other comprehensive income

Net other comprehensive (loss) income

( 3,037 ) — 30 1,049 ( 1,958 )

Balance at June 30, 2023

$ ( 37,679 ) $ ( 600 ) $ ( 1,479 ) $ ( 308 ) $ ( 40,066 )

Balance at March 31, 2024

$ ( 30,687 ) $ ( 288 ) $ ( 1,392 ) $ ( 98 ) $ ( 32,465 )

Other comprehensive (loss) income before reclassification

( 997 ) — — 172 ( 825 )

Amounts reclassified from accumulated other comprehensive income

1,663 — 30 — 1,693

Net other comprehensive income

666 — 30 172 868

Net other comprehensive (loss) income

Balance at September 30, 2023

Balance at June 30, 2024

$ ( 30,021 ) $ ( 288 ) $ ( 1,362 ) $ 74 $ ( 31,597 )

Balance at December 31, 2022

$ ( 38,404 ) $ ( 600 ) $ ( 1,539 ) $ — $ ( 40,543 )

Other comprehensive income (loss) before reclassification

725 — — ( 308 ) 417

Amounts reclassified from accumulated other comprehensive income

Net other comprehensive income

725 — 60 ( 308 ) 477

Balance at June 30, 2023

$ ( 37,679 ) $ ( 600 ) $ ( 1,479 ) $ ( 308 ) $ ( 40,066 )

Balance at September 30, 2024

Balance at December 31, 2022

$ ( 30,099 ) $ ( 288 ) $ ( 1,421 ) $ ( 828 ) $ ( 32,636 )

Other comprehensive (loss) income before reclassification

( 1,585 ) — — 902 ( 683 )

Amounts reclassified from accumulated other comprehensive income

1,663 — 59 — 1,722

Net other comprehensive (loss) income

Balance at September 30, 2023

Balance at December 31, 2023

Other comprehensive income (loss) before reclassification

Amounts reclassified from accumulated other comprehensive income

Net other comprehensive income

78 — 59 902 1,039

Balance at June 30, 2024

$ ( 30,021 ) $ ( 288 ) $ ( 1,362 ) $ 74 $ ( 31,597 )

Balance at September 30, 2024

Note 15 - Derivatives and Hedging Activities

13 unchanged sentences

Line item in the Consolidated Balance Sheets where the hedged item is included:

June 30, 2024

September 30, 2024

Investment securities (1)

8 unchanged sentences

( 1 ) These amounts include the amortized cost basis of a closed portfolio of AFS securities used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period.

At June 30, 2024 and December 31, 2023 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 57.0 million and $ 57.4 million, respectively;

the cumulative basis adjustments associated with this hedging relationship was ($ 95,000 ) and $ 1.1 million, respectively;

At September 30, 2024 and December 31, 2023 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 56.8 million and $ 57.4 million, respectively;

the cumulative basis adjustments associated with this hedging relationship was $ 1.4 million and $ 1.1 million, respectively;

and the amount of the designated hedged items was $ 50.0 million for both periods.

( 2 ) These amounts include the amortized cost basis of a closed portfolio of loans receivable used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period.

At June 30, 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 289.8 million, the cumulative basis adjustments associated with this hedging relationship was $( 1.0 ) million, and the amount of the designated hedged items was $ 100.0 million.

At September 30, 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 283.2 million, the cumulative basis adjustments associated with this hedging relationship was $ 1.6 million, and the amount of the designated hedged items was $ 100.0 million.

No prior year end information is provided as this hedging relationship was initiated in 2024.

4 unchanged sentences

(In thousands)

June 30, 2024

September 30, 2024

Fair value hedges:

8 unchanged sentences

The following table summarizes the effect of fair value accounting on the Consolidated Statements of Income for the periods shown:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

14 unchanged sentences

( 300 ) — ( 1,544 ) —

Net (expense) income recognized on fair value

Net income recognized on fair value

$ 498 $ — $ 118 $ 138

7 unchanged sentences

The Company has interest rate swap agreements with its derivative counterparties that contain provisions where if the Company either defaults or fails to maintain its status as a well or adequately capitalized institution, then the Company could be required to terminate the contract or post additional collateral.

At June 30, 2024 , the Company had no derivatives in a net liability position related to these agreements.

The Company has minimum collateral posting thresholds with its derivative counterparties and has posted cash of $ 1.1 million at June 30, 2024 , to secure the related interest rate swap agreements as needed.

At September 30, 2024 , the Company had derivatives in a net liability position related to these agreements.

The Company has minimum collateral posting thresholds with its derivative counterparties and has posted cash of $ 3.5 million at September 30, 2024 , to secure the related interest rate swap agreements as needed.

In certain cases, the Company will have posted excess collateral compared to total exposure due to initial margin requirements or day-to-day rate volatility.

As of June 30, 2024 , the Company was in compliance with all credit risk-related contingent features.

As of September 30, 2024 , the Company was in compliance with all credit risk-related contingent features.

Given the considerations described above, the Company considers the impact of the risk of counterparty default to be immaterial.

21 unchanged sentences

The annual increase in rent is expected to be partially oﬀset by the elimination of annualized depreciation expense on the buildings of $ 204,000 .

The executed Lease Agreements also generated right of use assets totaling $ 12.2 million and lease liabilities of $ 12.2 million resulting in increases to other assets and other liabilities, respectively, on the Consolidated Balance Sheets that was recorded during the second quarter of 2024.

The executed Lease Agreements also generated ROU assets totaling $ 12.2 million and lease liabilities of $ 12.2 million resulting in increases to other assets and other liabilities, respectively, on the Consolidated Balance Sheets that was recorded during the second quarter of 2024.

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