First Northwest Bancorp 10-Q

fnwb20250331_10q.htm Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP (Exact name of registrant as specified in its charter) Washington 46-1259100 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer I.D. Number) 105 West 8th Street , Port Angeles , Washington 98362 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: ( 360 ) 457-0461 Securities registered pursuant to Section 12(b) of the Act: Title of each class: Trading Symbol(s): Name of each exchange on which registered: Common Stock, par value $0.01 per share FNWB The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Emerging growth company ☐ Non-accelerated filer ☐ Smaller reporting company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 5, 2025, there were 9,440,009 shares of common stock, $0.01 par value per share, outstanding. 1 Table of Contents FIRST NORTHWEST BANCORP FORM 10-Q TABLE OF CONTENTS PART 1 - FINANCIAL INFORMATION Page I tem 1 - Financial Statements (Unaudited) 3 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 34 Item 3 - Quantitative and Qualitative Disclosures About Market Risk 49 Item 4 - Controls and Procedures 49 PART II - OTHER INFORMATION Item 1 - Legal Proceedings 50 Item 1A - Risk Factors 50 Item 2 - Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities 50 Item 3 - Defaults Upon Senior Securities 51 Item 4 - Mine Safety Disclosures 51 Item 5 - Other Information 51 Item 6 - Exhibits 51 SIGNATURES 52 As used in this report, "First Northwest" refers to First Northwest Bancorp and "First Fed" or the "Bank" refers to First Fed Bank, the wholly owned subsidiary of First Northwest. The terms "we," "our," "us," and "Company" refer to First Northwest together with First Fed, unless the context indicates otherwise. 2 Table of Contents PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share information) (Unaudited) March 31, 2025 December 31, 2024 ASSETS Cash and due from banks $ 18,911 $ 16,811 Interest-earning deposits in banks 51,412 55,637 Investment securities available for sale, at fair value (amortized cost of $ 348,249 and $ 376,265 , respectively) 315,433 340,344 Loans held for sale 2,940 472 Loans receivable (net of allowance for credit losses on loans of $ 20,569 and $ 20,449 , respectively) 1,637,573 1,675,186 Federal Home Loan Bank ("FHLB") stock, at cost 13,106 14,435 Accrued interest receivable 8,319 8,159 Premises and equipment, net 9,870 10,129 Servicing rights on sold loans, at fair value 3,301 3,281 Bank-owned life insurance ("BOLI"), net 31,786 41,150 Equity and partnership investments 15,026 13,229 Goodwill and other intangible assets, net 1,082 1,082 Deferred tax asset, net 14,304 13,738 Right-of-use ("ROU") asset, net 16,687 17,001 Prepaid expenses and other assets 31,680 21,352 Total assets $ 2,171,430 $ 2,232,006 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $ 1,666,068 $ 1,688,026 Borrowings 307,091 336,014 Accrued interest payable 2,163 3,295 Lease liability, net 17,266 17,535 Accrued expenses and other liabilities 29,767 31,770 Advances from borrowers for taxes and insurance 2,583 1,484 Total liabilities 2,024,938 2,078,124 Shareholders' Equity Preferred stock, $ 0.01 par value; 5,000,000 shares authorized; no shares issued or outstanding — — Common stock, $ 0.01 par value; 75,000,000 shares authorized; 9,440,618 and 9,353,348 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively 94 93 Additional paid-in capital 93,450 93,357 Retained earnings 87,506 97,198 Accumulated other comprehensive loss, net of tax ( 28,129 ) ( 30,172 ) Unearned employee stock ownership plan ("ESOP") shares ( 6,429 ) ( 6,594 ) Total shareholders' equity 146,492 153,882 Total liabilities and shareholders' equity $ 2,171,430 $ 2,232,006 See selected notes to the consolidated financial statements. 3 Table of Contents FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited) Three Months Ended March 31, 2025 2024 INTEREST INCOME Interest and fees on loans receivable $ 22,231 $ 22,767 Interest on investment securities 3,803 3,632 Interest on deposits and other 482 645 FHLB dividends 307 282 Total interest income 26,823 27,326 INTEREST EXPENSE Deposits 9,737 10,112 Borrowings 3,239 3,286 Total interest expense 12,976 13,398 Net interest income 13,847 13,928 PROVISION FOR CREDIT LOSSES Provision for credit losses on loans 7,770 1,239 Provision for (recapture of) credit losses on unfunded commitments 15 ( 269 ) Provision for credit losses 7,785 970 Net interest income after provision for credit losses 6,062 12,958 NONINTEREST INCOME Loan and deposit service fees 1,106 1,102 Sold loan servicing fees and servicing rights mark-to-market 195 219 Net gain on sale of loans 11 52 Increase in BOLI cash surrender value 372 243 Income from BOLI death benefit, net 1,059 — Other income 1,034 572 Total noninterest income 3,777 2,188 NONINTEREST EXPENSE Compensation and benefits 7,715 8,128 Data processing 2,011 1,944 Occupancy and equipment 1,592 1,240 Supplies, postage, and telephone 298 293 Regulatory assessments and state taxes 479 513 Advertising 265 309 Professional fees 777 910 FDIC insurance premium 434 386 Other expense 6,429 580 Total noninterest expense 20,000 14,303 (Loss) income before (benefit) provision for income taxes ( 10,161 ) 843 (Benefit) provision for income taxes ( 1,125 ) 447 Net (loss) income $ ( 9,036 ) $ 396 Basic and diluted (loss) earnings per common share $ ( 1.03 ) $ 0.04 See selected notes to the consolidated financial statements. 4 Table of Contents FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (In thousands) (Unaudited) Three Months Ended March 31, 2025 2024 Net (loss) income $ ( 9,036 ) $ 396 Other comprehensive (loss) income: Unrealized holding gains (losses) on investments available for sale arising during the period 3,105 ( 747 ) Tax effect ( 666 ) 159 Amortization of unrecognized defined benefit ("DB") plan prior service cost 37 37 Tax effect ( 8 ) ( 8 ) Reclassification adjustment for change in fair value of hedged items ( 541 ) 929 Tax effect 116 ( 199 ) Other comprehensive income, net of tax 2,043 171 Comprehensive (loss) income $ ( 6,993 ) $ 567 See selected notes to the consolidated financial statements. 5 Table of Contents FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the Three Months Ended March 31, 2025 and 2024 (Dollars in thousands, except share information) (Unaudited) Common Stock Additional Paid-in Retained Unearned ESOP Accumulated Other Comprehensive Loss, Total Shareholders' Shares Amount Capital Earnings Shares Net of Tax Equity Balance at December 31, 2023 9,611,876 $ 96 $ 95,784 $ 107,349 $ ( 7,253 ) $ ( 32,636 ) $ 163,340 Net income 396 396 Common stock repurchased ( 214,132 ) ( 2 ) ( 2,169 ) ( 872 ) ( 3,043 ) Restricted stock award grants net of forfeitures 54,512 — — — Restricted stock awards canceled ( 9,460 ) — ( 148 ) ( 148 ) Other comprehensive income, net of tax 171 171 Share-based compensation expense 264 264 ESOP shares committed to be released 32 165 197 Cash dividends declared ($ 0.07 per share) ( 671 ) ( 671 ) Balance at March 31, 2024 9,442,796 $ 94 $ 93,763 $ 106,202 $ ( 7,088 ) $ ( 32,465 ) $ 160,506 Balance at December 31, 2024 9,353,348 $ 93 $ 93,357 $ 97,198 $ ( 6,594 ) $ ( 30,172 ) $ 153,882 Net loss ( 9,036 ) ( 9,036 ) Restricted stock award grants net of forfeitures 94,549 1 — 1 Restricted stock awards canceled ( 7,279 ) — ( 76 ) ( 76 ) Other comprehensive income, net of tax 2,043 2,043 Share-based compensation expense 194 194 ESOP shares committed to be released ( 25 ) 165 140 Cash dividends declared ($0.07 per share) ( 656 ) ( 656 ) Balance at March 31, 2025 9,440,618 $ 94 $ 93,450 $ 87,506 $ ( 6,429 ) $ ( 28,129 ) $ 146,492 See selected notes to the consolidated financial statements. 6 Table of Contents FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net (loss) income before noncontrolling interest $ ( 9,036 ) $ 396 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 330 382 Amortization of core deposit intangible — 1 Amortization and accretion of premiums and discounts on investments, net 59 179 Accretion of deferred loan fees and purchased premiums, net ( 446 ) ( 353 ) Amortization of debt issuance costs 77 19 Change in fair value of sold loan servicing rights ( 9 ) ( 17 ) Additions to servicing rights on sold loans, net ( 11 ) ( 10 ) Provision for credit losses on loans 7,770 1,239 Provision for (recapture of) credit losses on unfunded commitments 15 ( 269 ) Allocation of ESOP shares 140 197 Share-based compensation expense 194 264 Gain on sale of loans, net ( 11 ) ( 52 ) Gain on extinguishment of subordinated debt ( 905 ) — Increase in BOLI cash surrender value, net ( 372 ) ( 243 ) Income from BOLI death benefit, net ( 1,059 ) — Origination of loans held for sale ( 6,109 ) ( 5,421 ) Proceeds from sale of loans held for sale 3,652 5,238 Change in assets and liabilities: Increase in accrued interest receivable ( 160 ) ( 1,015 ) Decrease in ROU asset 314 206 Increase in prepaid expenses and other assets ( 11,675 ) ( 6,509 ) Decrease in accrued interest payable ( 1,132 ) ( 566 ) Decrease in lease liabilities ( 269 ) ( 201 ) (Decrease) increase in accrued expenses and other liabilities ( 3,100 ) 1,670 Net cash used by operating activities ( 21,743 ) ( 4,865 ) Cash flows from investing activities: Purchase of securities available for sale — ( 45,292 ) Proceeds from maturities, calls, and principal repayments of securities available for sale 27,957 14,031 Redemption (purchase) of FHLB stock 1,329 ( 2,212 ) Early surrender of BOLI policies 9,381 6,140 Proceeds from BOLI death benefit 528 — Net decrease (increase) in loans receivable 30,289 ( 51,142 ) Purchase of premises and equipment, net of amortization ( 71 ) ( 113 ) Capital contributions to equity and partnership investments ( 295 ) ( 50 ) Capital disbursements received from equity and partnership investments 179 263 Capital contributions to low-income housing tax credit partnerships — ( 91 ) Net cash provided (used) by investing activities 69,297 ( 78,466 ) See selected notes to the consolidated financial statements. 7 Table of Contents FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2025 2024 Cash flows from financing activities: Net decrease in deposits $ ( 21,958 ) $ ( 10,268 ) Proceeds from long-term FHLB advances 30,000 30,000 Repayment of long-term FHLB advances ( 20,000 ) ( 15,000 ) Net (decrease) increase in short-term FHLB advances ( 40,000 ) 32,000 Redemption of subordinated debt, net ( 4,095 ) — Net increase in line of credit 6,000 3,500 Net increase in advances from borrowers for taxes and insurance 1,099 1,138 Payment of dividends ( 649 ) ( 671 ) Restricted stock awards canceled ( 76 ) ( 148 ) Repurchase of common stock — ( 3,043 ) Net cash (used) provided by financing activities ( 49,679 ) 37,508 Net decrease in cash and cash equivalents ( 2,125 ) ( 45,823 ) Cash and cash equivalents at beginning of period 72,448 123,169 Cash and cash equivalents at end of period $ 70,323 $ 77,346 Supplemental disclosures of cash flow information: Cash paid for interest on deposits and borrowings $ 14,166 $ 13,964 Supplemental disclosures of noncash investing activities: Change in unrealized gain (loss) on securities available for sale $ 3,105 $ ( 747 ) Change in unrealized (loss) gain on fair value hedge ( 541 ) 929 Amortization of unrecognized DB plan prior service cost 37 37 Transfer of BOLI receivable to prepaid expenses and other assets due to death benefit accrued but not paid at period end 1,404 — Series A equity investment acquired upon conversion of commercial business loan 1,260 — See selected notes to the consolidated financial statements. 8 Table of Contents FIRST NORTHWEST BANCORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation and Critical Accounting Policies Organization and nature of business - First Northwest Bancorp, a Washington corporation ("First Northwest"), became the holding company of First Fed Bank ("First Fed" or the "Bank") on January 29, 2015, upon completion of the Bank's conversion from a mutual to stock form of organization (the "Conversion"). In connection with the Conversion, the Company issued an aggregate of 12,167,000 shares of common stock at an offering price of $ 10.00 per share for gross proceeds of $ 121.7 million. An additional 933,360 shares of Company common stock and $ 400,000 in cash were contributed to the First Federal Community Foundation ("Foundation"), a charitable foundation that was established in connection with the Conversion, resulting in the issuance of a total of 13,100,360 shares. The Company received $ 117.6 million in net proceeds from the stock offering of which $ 58.4 million was contributed to the Bank upon Conversion. Pursuant to the Bank's Plan of Conversion (the "Plan") adopted by its Board of Directors, and as approved by its members, the Company established an employee stock ownership plan ("ESOP"). On December 18, 2015, the ESOP completed its open market purchases, with funds borrowed from the Company, of 8 % of the common stock issued in the Conversion for a total of 1,048,029 shares. On October 31, 2021, the Bank converted from a State Savings Bank Charter to a State Commercial Bank Charter and was simultaneously renamed First Fed Bank from First Federal Savings and Loan Association of Port Angeles. On August 5, 2022, First Northwest's election to be treated as a financial holding company became effective, allowing the Company to engage in activities that are financial in nature or incidental to financial activities. First Northwest and the Bank are collectively referred to as the "Company." First Northwest's business activities generally are limited to passive investment activities and oversight of its investment in First Fed. Accordingly, the information set forth in this report, including the consolidated unaudited financial statements and related data, relates primarily to the Bank for balance sheet and income statement related disclosures. The Bank is a community-oriented financial institution providing commercial and consumer banking services to individuals and businesses in western Washington State with offices in Clallam, Jefferson, Kitsap, King, and Whatcom counties. These services include deposit and lending transactions that are supplemented with bor rowing and investing activities. Basis of presentation - The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all the information and footnotes required by U.S. Generally Accepted Accounting Principles ("GAAP") for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10 -K for the year ended December 31, 2024 . 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 months ended March 31, 2025 , are not necessarily indicative of the results that may be expected for future periods. 9 Table of Contents 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. Actual results could differ from those estimates. 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. Principles of consolidation - The accompanying consolidated financial statements include the accounts of First Northwest and its wholly owned subsidiary, First Fed. All material intercompany accounts and transactions have been eliminated in consolidation. Subsequent events - The Company has evaluated subsequent events for potential recognition and disclosure. Recently adopted accounting pronouncements In March 2024, the FASB issued ASU 2024 - 01, Compensation—Stock Compensation (Topic 718 ): Scope Application of Profits Interest and Similar Awards . ASU 2024 - 01 added an illustrative example to demonstrate how an entity should apply the scope guidance in paragraph 718 - 10 - 15 - 3 to determine whether a profits interest award should be accounted for in accordance with Topic 718. Awards not meeting the criteria should be accounted for in accordance with Topic 710. The illustrative example provides four fact patterns which are intended to reduce complexity in determining whether a profits interest award is subject to the guidance in Topic 718 and reduce existing diversity in practice. ASU 2024 - 01 is effective for the Company for fiscal years beginning after December 15, 2024, 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 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. In November 2024, the FASB issued ASU 2024 - 04, Debt—Debt with Conversion and Other Options (Subtopic 470 - 20 ): Induced Conversions of Convertible Debt Instruments . ASU 202404 clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments do not change the accounting for conversions that include the issuance of all equity securities upon conversion. ASU 2024 - 04 is effective for the Company for fiscal years beginning after December 15, 2025, 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. 10 Table of Contents Note 2 - Securities The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at March 31, 2025 are summarized as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses (In thousands) Available for Sale Municipal bonds $ 93,001 $ — $ ( 14,706 ) $ 78,295 $ — U.S. government agency issued asset-backed securities (ABS agency) 12,689 13 ( 59 ) 12,643 — Corporate issued asset-backed securities (ABS corporate) 15,709 20 ( 58 ) 15,671 — Corporate issued debt securities (Corporate debt) 58,075 74 ( 3,082 ) 55,067 — U.S. Small Business Administration securities (SBA) 8,061 15 ( 15 ) 8,061 — Mortgage-backed securities: U.S. government agency issued mortgage-backed securities (MBS agency) 107,984 148 ( 11,490 ) 96,642 — Non-agency issued mortgage-backed securities (MBS non-agency) 52,730 3 ( 3,679 ) 49,054 — Total securities available for sale $ 348,249 $ 273 $ ( 33,089 ) $ 315,433 $ — The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at December 31, 2024 , are summarized as follows: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses (In thousands) Available for Sale Municipal bonds $ 93,212 $ — $ ( 15,336 ) $ 77,876 $ — ABS agency 12,944 16 ( 84 ) 12,876 — ABS corporate 16,065 62 ( 5 ) 16,122 — Corporate debt 58,106 55 ( 3,670 ) 54,491 — SBA 8,664 18 ( 16 ) 8,666 — Mortgage-backed securities: MBS agency 111,372 83 ( 12,758 ) 98,697 — MBS non-agency 75,902 4 ( 4,290 ) 71,616 — Total securities available for sale $ 376,265 $ 238 $ ( 36,159 ) $ 340,344 $ — 11 Table of Contents There were no securities classified as held-to-maturity at March 31, 2025 and December 31, 2024 . There was no allowance for credit losses on investment securities recorded at March 31, 2025 and December 31, 2024 , based on analysis performed by the Company. Accrued interest receivable on available-for-sale debt securities totaled $ 2.2 million and $ 2.0 million as of March 31, 2025 and December 31, 2024 , 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 March 31, 2025 : Less Than Twelve Months Twelve Months or Longer Total Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value (In thousands) Available for Sale Municipal bonds $ — $ — $ ( 14,706 ) $ 78,295 $ ( 14,706 ) $ 78,295 ABS agency — — ( 59 ) 6,297 ( 59 ) 6,297 ABS corporate ( 22 ) 3,978 ( 36 ) 5,673 ( 58 ) 9,651 Corporate debt — — ( 3,082 ) 51,902 ( 3,082 ) 51,902 SBA — — ( 15 ) 2,251 ( 15 ) 2,251 Mortgage-backed securities: MBS agency ( 79 ) 8,386 ( 11,411 ) 53,788 ( 11,490 ) 62,174 MBS non-agency ( 21 ) 4,347 ( 3,658 ) 40,917 ( 3,679 ) 45,264 Total available-for-sale in a loss position $ ( 122 ) $ 16,711 $ ( 32,967 ) $ 239,123 $ ( 33,089 ) $ 255,834 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 December 31, 2024 : Less Than Twelve Months Twelve Months or Longer Total Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value (In thousands) Available for Sale Municipal bonds $ — $ — $ ( 15,336 ) $ 77,876 $ ( 15,336 ) $ 77,876 ABS agency ( 21 ) 2,957 ( 63 ) 6,311 ( 84 ) 9,268 ABS corporate — — ( 5 ) 2,798 ( 5 ) 2,798 Corporate debt — — ( 3,670 ) 46,355 ( 3,670 ) 46,355 SBA ( 16 ) 3,093 — — ( 16 ) 3,093 Mortgage-backed securities: MBS agency ( 545 ) 26,531 ( 12,213 ) 51,181 ( 12,758 ) 77,712 MBS non-agency ( 71 ) 9,352 ( 4,219 ) 57,470 ( 4,290 ) 66,822 Total available-for-sale in a loss position $ ( 653 ) $ 41,933 $ ( 35,506 ) $ 241,991 $ ( 36,159 ) $ 283,924 There were 9 available-for-sale securities with unrealized losses of less than one year, and 147 available-for-sale securities with an unrealized loss of more than one year at March 31, 2025 . There were 22 available-for-sale securities with unrealized losses of less than one year, and 144 available-for-sale securities with an unrealized loss of more than one year at December 31, 2024 . Management believes that the unrealized losses on our investment securities relate principally to the general change in interest rates, market liquidity and demand, and market 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 a deterioration in credit quality. Certain investments in a loss position are guaranteed by government entities or government sponsored entities. 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 March 31, 2025 , or December 31, 2024 . 12 Table of Contents The amortized cost and estimated fair value of investment securities by contractual maturity are shown in the following tables at the dates indicated. Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties; therefore, these securities are shown separately. March 31, 2025 Available-for-Sale Amortized Cost Estimated Fair Value (In thousands) Mortgage-backed securities: Due within one year $ 11,278 $ 11,182 Due after one through five years 12,267 12,227 Due after five through ten years 8,021 7,649 Due after ten years 129,148 114,638 Total mortgage-backed securities 160,714 145,696 All other investment securities: Due within one year — — Due after one through five years 21,538 20,868 Due after five through ten years 61,073 56,615 Due after ten years 104,924 92,254 Total all other investment securities 187,535 169,737 Total investment securities $ 348,249 $ 315,433 December 31, 2024 Available-for-Sale Amortized Cost Estimated Fair Value (In thousands) Mortgage-backed securities: Due within one year $ 26,690 $ 26,509 Due after one through five years 11,564 11,539 Due after five through ten years 8,080 7,609 Due after ten years 140,940 124,656 Total mortgage-backed securities 187,274 170,313 All other investment securities: Due within one year — — Due after one through five years 21,559 20,751 Due after five through ten years 58,535 53,321 Due after ten years 108,897 95,959 Total all other investment securities 188,991 170,031 Total investment securities $ 376,265 $ 340,344 13 Table of Contents Note 3 - Loans Receivable The Company has identified three segments of its loan portfolio that reflect the structure of the lending function, the Company's strategic plan and the manner in which management monitors performance and credit quality. The three loan portfolio segments are: Real Estate Loans, Consumer Loans and Commercial Business Loans. 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 unamortized purchase premiums of $ 20.1 million as of March 31, 2025 and $ 19.1 million as of December 31, 2024 . The amortized cost reflected in total loans receivable does not include accrued interest receivable. Accrued interest receivable on loans was $ 6.1 million as of March 31, 2025 and $ 6.0 million as of December 31, 2024 , 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: March 31, 2025 December 31, 2024 (In thousands) Real Estate: One-to-four family $ 394,428 $ 395,315 Multi-family 338,147 332,596 Commercial real estate 387,312 390,379 Construction and land 64,877 78,110 Total real estate loans 1,184,764 1,196,400 Consumer: Home equity 79,151 79,054 Auto and other consumer 273,878 268,876 Total consumer loans 353,029 347,930 Commercial business loans 119,783 151,493 Total loans receivable 1,657,576 1,695,823 Less: Derivative basis adjustment ( 566 ) 188 Allowance for credit losses on loans 20,569 20,449 Total loans receivable, net $ 1,637,573 $ 1,675,186 Nonaccrual Loans. The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. For those loans placed on nonaccrual status due to payment delinquency, return to accrual status will generally not occur until the borrower demonstrates repayment ability over a period of not less than six months. 14 Table of Contents The following table presents the amortized cost of nonaccrual loans by class of loan at the dates indicated: March 31, 2025 December 31, 2024 Nonaccrual Loans with ACLL Nonaccrual Loans with No ACLL Total Nonaccrual Loans Nonaccrual Loans with ACLL Nonaccrual Loans with No ACLL Total Nonaccrual Loans (In thousands) One-to-four family $ 315 $ 1,089 $ 1,404 $ 364 $ 1,113 $ 1,477 Commercial real estate 4 — 4 4 5,594 5,598 Construction and land 9 15,271 15,280 10 19,534 19,544 Home equity 54 — 54 55 — 55 Auto and other consumer 132 578 710 — 700 700 Commercial business 2,761 142 2,903 2,537 604 3,141 Total nonaccrual loans $ 3,275 $ 17,080 $ 20,355 $ 2,970 $ 27,545 $ 30,515 Interest income recognized on a cash basis on nonaccrual loans for the three months ended March 31, 2025 and 2024 , was $ 8,000 and $ 75,000 , 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 no loans past due 90 days or more and still accruing interest at March 31, 2025 and December 31, 2024 . 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: 30-59 Days 60-89 Days 90 Days or More Total March 31, 2025 Past Due Past Due Past Due Past Due Current Total Loans (In thousands) Real Estate: One-to-four family $ 1,041 $ — $ 877 $ 1,918 $ 392,510 $ 394,428 Multi-family — — — — 338,147 338,147 Commercial real estate — — — — 387,312 387,312 Construction and land 14 — 15,270 15,284 49,593 64,877 Total real estate loans 1,055 — 16,147 17,202 1,167,562 1,184,764 Consumer: Home equity 326 11 — 337 78,814 79,151 Auto and other consumer 2,724 467 683 3,874 270,004 273,878 Total consumer loans 3,050 478 683 4,211 348,818 353,029 Commercial business loans 694 105 108 907 118,876 119,783 Total loans $ 4,799 $ 583 $ 16,938 $ 22,320 $ 1,635,256 $ 1,657,576 15 Table of Contents 30-59 Days 60-89 Days 90 Days or More Total December 31, 2024 Past Due Past Due Past Due Past Due Current Total Loans (In thousands) Real Estate: One-to-four family $ 333 $ 321 $ 839 $ 1,493 $ 393,822 $ 395,315 Multi-family 876 — — 876 331,720 332,596 Commercial real estate — — 5,594 5,594 384,785 390,379 Construction and land 17 8,150 11,384 19,551 58,559 78,110 Total real estate loans 1,226 8,471 17,817 27,514 1,168,886 1,196,400 Consumer: Home equity 53 — — 53 79,001 79,054 Auto and other consumer 2,905 437 700 4,042 264,834 268,876 Total consumer loans 2,958 437 700 4,095 343,835 347,930 Commercial business loans 676 — 604 1,280 150,213 151,493 Total loans $ 4,860 $ 8,908 $ 19,121 $ 32,889 $ 1,662,934 $ 1,695,823 Credit quality indicator. Federal regulations provide for the classification of lower quality loans and other assets, such as debt and equity securities, as substandard, doubtful, or loss; 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 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. Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. When First Fed classifies problem assets as either substandard or doubtful, it may choose to individually evaluate the expected credit loss or may determine that the characteristics are not significantly different from those in pooled loan analysis. The Company evaluates individual loans for expected credit losses when those loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis. When an insured institution classifies problem assets as a loss, it is required to charge off such assets in the period in which they are deemed uncollectible. Assets that do not currently expose First Fed to sufficient risk to warrant classification as substandard or doubtful but possess identified weaknesses are designated as either watch or special mention assets; risk ratings 4 and 5 in our risk rating system, respectively. Loans not otherwise classified are considered pass graded loans and are rated 1 - 3 in our risk rating system. 16 Table of Contents The following table presents the amortized cost of loans receivable by internally assigned risk grade and class of loans as of March 31, 2025 , as well as gross charge-off activity for the three months ended March 31, 2025 . 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. Term Loans by Year of Origination or Most Recent Renewal or Extension (1) Revolving Total 2025 2024 2023 2022 2021 Prior Loans Loans (In thousands) One-to-four family Pass (Grades 1-3) $ 1,939 $ 2,543 $ 8,522 $ 132,589 $ 116,348 $ 127,420 $ — $ 389,361 Watch (Grade 4) — — — 296 — 2,676 — 2,972 Special Mention (Grade 5) — — — — — 672 — 672 Substandard (Grade 6) — — — 259 — 1,164 — 1,423 Total one-to-four family 1,939 2,543 8,522 133,144 116,348 131,932 — 394,428 Gross charge-offs year-to-date — — — — — — — — Multi-family Pass (Grades 1-3) 5,259 19,733 26,000 107,769 74,159 60,736 — 293,656 Watch (Grade 4) — 8,722 5,525 1,756 22,957 2,201 — 41,161 Special Mention (Grade 5) — — 3,330 — — — — 3,330 Total multi-family 5,259 28,455 34,855 109,525 97,116 62,937 — 338,147 Gross charge-offs year-to-date — — — — — — — — Commercial Real Estate Pass (Grades 1-3) 15,689 35,273 51,227 61,203 96,154 100,684 — 360,230 Watch (Grade 4) — 548 3,755 10,310 1,077 762 — 16,452 Special Mention (Grade 5) — — — — — 3,931 — 3,931 Substandard (Grade 6) 6,695 — — 4 — — — 6,699 Total commercial real estate 22,384 35,821 54,982 71,517 97,231 105,377 — 387,312 Gross charge-offs year-to-date — — — — 5,571 — — 5,571 Construction and Land Pass (Grades 1-3) 2,216 21,704 13,666 8,349 1,559 649 — 48,143 Watch (Grade 4) — 1,427 — — — 27 — 1,454 Substandard (Grade 6) — 7,150 8,120 — — 10 — 15,280 Total construction and land 2,216 30,281 21,786 8,349 1,559 686 — 64,877 Gross charge-offs year-to-date — — 374 — — — — 374 Home Equity Pass (Grades 1-3) 1,151 4,925 5,444 5,608 4,034 7,560 49,778 78,500 Watch (Grade 4) — 393 — 64 — 56 73 586 Substandard (Grade 6) — — — — — 65 — 65 Total home equity 1,151 5,318 5,444 5,672 4,034 7,681 49,851 79,151 Gross charge-offs year-to-date — — — — — — — — Auto and Other Consumer Pass (Grades 1-3) 15,527 61,231 38,874 48,063 52,440 52,662 555 269,352 Watch (Grade 4) — 730 449 930 464 582 — 3,155 Special Mention (Grade 5) — 200 169 52 — 19 — 440 Substandard (Grade 6) — — 430 167 31 303 — 931 Total auto and other consumer 15,527 62,161 39,922 49,212 52,935 53,566 555 273,878 Gross charge-offs year-to-date — — 122 87 — 15 19 243 Commercial business Pass (Grades 1-3) 6,003 30,424 18,400 8,150 3,425 1,752 38,512 106,666 Watch (Grade 4) 78 — 127 1,311 303 — 1,189 3,008 Special Mention (Grade 5) 15 — 182 895 1,518 1 296 2,907 Substandard (Grade 6) 132 45 108 3,444 1,449 4 2,020 7,202 Total commercial business 6,228 30,469 18,817 13,800 6,695 1,757 42,017 119,783 Gross charge-offs year-to-date — — — 577 333 603 — 1,513 Total loans Pass (Grades 1-3) 47,784 175,833 162,133 371,731 348,119 351,463 88,845 1,545,908 Watch (Grade 4) 78 11,820 9,856 14,667 24,801 6,304 1,262 68,788 Special Mention (Grade 5) 15 200 3,681 947 1,518 4,623 296 11,280 Substandard (Grade 6) 6,827 7,195 8,658 3,874 1,480 1,546 2,020 31,600 Total loans $ 54,704 $ 195,048 $ 184,328 $ 391,219 $ 375,918 $ 363,936 $ 92,423 $ 1,657,576 Total gross charge-offs year-to-date $ — $ — $ 496 $ 664 $ 5,904 $ 618 $ 19 $ 7,701 ( 1 ) 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. 17 Table of Contents The following table presents the amortized cost of loans receivable by internally assigned risk grade and class of loans as of December 31, 2024 , as well as gross charge-off activity for the year then ended. 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. Term Loans by Year of Origination or Most Recent Renewal or Extension (1) Revolving Total 2024 2023 2022 2021 2020 Prior Loans Loans (In thousands) One-to-four family Pass (Grades 1-3) $ 1,596 $ 10,315 $ 130,021 $ 116,245 $ 64,869 $ 65,927 $ — $ 388,973 Watch (Grade 4) — — 297 1,305 1,006 2,141 — 4,749 Special Mention (Grade 5) — — — — — 78 — 78 Substandard (Grade 6) — — 273 — 840 402 — 1,515 Total one-to-four family 1,596 10,315 130,591 117,550 66,715 68,548 — 395,315 Gross charge-offs for the year — — — — — — — — Multi-family Pass (Grades 1-3) 19,871 31,334 105,919 74,679 49,885 11,299 — 292,987 Watch (Grade 4) 8,755 — 1,764 23,051 1,278 976 — 35,824 Special Mention (Grade 5) — 3,785 — — — — — 3,785 Total multi-family 28,626 35,119 107,683 97,730 51,163 12,275 — 332,596 Gross charge-offs for the year — — — — — — — — Commercial Real Estate Pass (Grades 1-3) 35,011 51,514 72,064 97,421 74,182 28,762 — 358,954 Watch (Grade 4) 552 3,779 10,371 — — 767 — 15,469 Special Mention (Grade 5) — — — — 1,255 2,702 — 3,957 Substandard (Grade 6) — — 4 11,995 — — — 11,999 Total commercial real estate 35,563 55,293 82,439 109,416 75,437 32,231 — 390,379 Gross charge-offs for the year — — — — — — — — Construction and Land Pass (Grades 1-3) 20,870 15,874 13,638 1,357 504 327 — 52,570 Watch (Grade 4) 213 5,531 — 222 — 30 — 5,996 Substandard (Grade 6) 8,150 11,384 — — — 10 — 19,544 Total construction and land 29,233 32,789 13,638 1,579 504 367 — 78,110 Gross charge-offs for the year — 4,389 — — — — — 4,389 Home Equity Pass (Grades 1-3) 5,779 5,860 5,868 4,117 2,571 4,620 49,531 78,346 Watch (Grade 4) 122 — 65 — 35 61 326 609 Substandard (Grade 6) — — — — 55 11 33 99 Total home equity 5,901 5,860 5,933 4,117 2,661 4,692 49,890 79,054 Gross charge-offs for the year — — — — — — — — Auto and Other Consumer Pass (Grades 1-3) 55,699 46,719 65,193 36,235 12,268 47,728 518 264,360 Watch (Grade 4) 848 786 980 52 217 496 — 3,379 Special Mention (Grade 5) 228 14 — 157 — 38 — 437 Substandard (Grade 6) 240 243 31 — 133 53 — 700 Total auto and other consumer 57,015 47,762 66,204 36,444 12,618 48,315 518 268,876 Gross charge-offs for the year — 505 1,536 92 17 237 107 2,494 Commercial business Pass (Grades 1-3) 29,228 19,478 8,744 3,633 1,495 40,670 35,209 138,457 Watch (Grade 4) — 136 1,064 314 — — 3 1,517 Special Mention (Grade 5) — — 1,279 1,552 — 2 — 2,833 Substandard (Grade 6) 47 252 3,752 1,818 611 — 2,206 8,686 Total commercial business 29,275 19,866 14,839 7,317 2,106 40,672 37,418 151,493 Gross charge-offs for the year 2,105 259 2,771 2,022 139 — — 7,296 Total loans Pass (Grades 1-3) 168,054 181,094 401,447 333,687 205,774 199,333 85,258 1,574,647 Watch (Grade 4) 10,490 10,232 14,541 24,944 2,536 4,471 329 67,543 Special Mention (Grade 5) 228 3,799 1,279 1,709 1,255 2,820 — 11,090 Substandard (Grade 6) 8,437 11,879 4,060 13,813 1,639 476 2,239 42,543 Total loans $ 187,209 $ 207,004 $ 421,327 $ 374,153 $ 211,204 $ 207,100 $ 87,826 $ 1,695,823 Total Gross charge-offs for the year $ 2,105 $ 5,153 $ 4,307 $ 2,114 $ 156 $ 237 $ 107 $ 14,179 ( 1 ) 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 Table of Contents Individually Evaluated Loans. The Company evaluates loans collectively for purposes of determining the ACLL in accordance with ASC 326 by aggregating loans deemed to possess similar risk characteristics and individually evaluates loans that it believes no longer possess risk characteristics similar to other loans in the portfolio. These loans are typically identified from a substandard or worse internal risk grade, since the specific attributes and risks associated with such loans tend to become unique as the credit deteriorates. Such loans are typically nonperforming, modified loans made to borrowers experiencing financial difficulty, and/or are deemed collateral dependent, where the ultimate repayment of the loan is expected to come from the operation of or eventual sale of the collateral. Loans that are deemed by management to possess unique risk characteristics are evaluated individually for purposes of determining an appropriate lifetime ACLL. The Company uses a discounted cash flow approach, using the loan’s effective interest rate, for determining the ACL on individually evaluated loans, unless the loan is deemed collateral dependent. Collateral dependent loans are evaluated based on the estimated fair value of the underlying collateral, less estimated costs to sell. The Company may increase or decrease the ACLL for collateral dependent individually evaluated loans based on changes in the estimated expected fair value of the collateral. In cases where the loan is well-secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACLL is recorded. 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 March 31, 2025 , $ 26.0 million of loans were individually evaluated with $ 2.7 million of ACLL attributed to such loans. At March 31, 2025 , four individually evaluated loans totaling $ 2.9 million were evaluated using a discounted cash flow approach and the remaining loans totaling $ 23.1 million were evaluated based on the underlying value of the collateral. One $ 6.7 million commercial real estate loan was accruing interest at quarter end, while all other individually evaluated loans were on nonaccrual status at March 31, 2025 . As of December 31, 2024 , $ 35.8 million of loans were individually evaluated with $ 2.5 million of ACLL attributed to such loans. At December 31, 2024 , three individually evaluated loans with recorded investments totaling $ 2.5 million were evaluated using a discounted cash flow approach and the remaining loans totaling $ 33.2 million were evaluated based on the underlying value of the collateral. One $ 6.4 million commercial real estate loan was accruing interest at year end, while all other individually evaluated loans were on nonaccrual status at December 31, 2024. Collateral Dependent Loans. Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral. The following table summarizes individually evaluated collateral dependent loans by segment and collateral type as of the periods shown: Collateral Type March 31, 2025 Single Family Residence Condominium Office Building Total (In thousands) One-to-four family $ 1,089 $ — $ — $ 1,089 Commercial real estate — — 6,695 6,695 Construction and land 7,150 8,120 — 15,270 Total collateral dependent loans $ 8,239 $ 8,120 $ 6,695 $ 23,054 Collateral Type December 31, 2024 Single Family Residence Condominium Warehouse Business Assets Total (In thousands) One-to-four family $ 1,113 $ — $ — $ — $ 1,113 Commercial real estate — — 11,995 — 11,995 Construction and land 8,150 11,384 — — 19,534 Commercial business — — — 604 604 Total collateral dependent loans $ 9,263 $ 11,384 $ 11,995 $ 604 $ 33,246 19 Table of Contents Modified Loans to Troubled Borrowers. Modified loans to troubled borrowers ("MLTB") refer to modifications of loans to borrowers experiencing financial difficulty. A MLTB arises from a modification made to a loan in order to alleviate temporary difficulties in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize potential losses to the Company. GAAP requires that certain types of modifications be reported, which consist of the following: principal forgiveness, interest rate reduction, other-than-insignificant payment delay, term extension, or any combination of the foregoing. The ACLL for a MLTB is measured on a collective basis, as with other loans in the loan portfolio, unless management determines that such loans no longer possess risk characteristics similar to others in the loan portfolio. In those instances, the ACLL for a MLTB is determined through individual evaluation. There were no new MLTB during the three months ended March 31, 2025 . During the year ended December 31, 2024, there were two new MLTB. A commercial business loan with a recorded investment of $ 17,000 at the time of modification for which the Bank agreed to deferred principal payments and the borrower agreed to resume both principal and interest payments at the end of the deferral period. The commercial business loan was not in compliance with the modified terms at December 31, 2024, and the balance was charged-off. The Bank also agreed to defer payments on a commercial real estate loan with a recorded investment of $ 6.4 million. The commercial real estate loan was in compliance with the modified terms at both March 31, 2025 and December 31, 2024. Note 4 - Allowance for Credit Losses on Loans The Company maintains an ACLL and an ACLUC in accordance with ASC 326: Financial Instruments - Credit Losses . ASC 326 requires the Company to recognize estimates for lifetime credit losses on loans and unfunded loan commitments at the time of origination or acquisition. The recognition of credit losses at origination or acquisition represents the Company’s best estimate of lifetime expected credit losses, given the facts and circumstances associated with a particular loan or group of loans with similar risk characteristics. Determining the ACLL involves the use of significant management judgement and estimates, which are subject to change based on management’s ongoing assessment of the credit quality of the loan portfolio and changes in economic forecasts used in the Bank's Current Expected Credit Loss ("CECL") model. The reserve is an estimate based upon factors and trends at the time the financial statements are prepared. The Company has identified segments of loans with similar risk characteristics for which it then applies one of two loss methodologies. The Company uses a DCF methodology for most of its segments to calculate the ACLL. For certain segments with smaller portfolios or where data is prohibitive to running a DCF calculation, management has elected to use a Remaining Life methodology. The Company will evaluate individual loans for expected credit losses when those loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis. The allowance for individually evaluated loans is calculated using the collateral value method, which considers the likely source of repayment as the value of the collateral, less estimated costs to sell, or another method such as the cash flow method, which considers the contractual principal and interest terms and estimated cash flows available from the borrower to satisfy the debt. When the cash flow method is used, cash flows are discounted back by the effective interest rate and compared to the total recorded investment. If the present value of cash flows is less than the total recorded investment, a reserve is calculated. 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 March 31, 2025 Beginning Balance Charge-offs Recoveries Provision for (Recapture of) Credit Losses Ending Balance (In thousands) One-to-four family $ 4,757 $ — $ — $ 119 $ 4,876 Multi-family 2,493 — — 152 2,645 Commercial real estate 2,410 ( 5,571 ) 6 5,582 2,427 Construction and land 576 ( 374 ) — 259 461 Home equity 1,322 — — 65 1,387 Auto and other consumer 2,687 ( 243 ) 43 ( 38 ) 2,449 Commercial business 6,204 ( 1,513 ) 2 1,631 6,324 Total $ 20,449 $ ( 7,701 ) $ 51 $ 7,770 $ 20,569 20 Table of Contents At or For the Three Months Ended March 31, 2024 Beginning Balance Charge-offs Recoveries Provision for (Recapture of) Credit Losses Ending Balance (In thousands) One-to-four family $ 2,975 $ — $ 2 $ 1,099 $ 4,076 Multi-family 1,154 — — 177 1,331 Commercial real estate 3,671 — — ( 289 ) 3,382 Construction and land 1,889 — — ( 899 ) 990 Home equity 1,077 — — 664 1,741 Auto and other consumer 4,409 ( 806 ) 46 ( 806 ) 2,843 Commercial business 2,335 ( 33 ) — 1,293 3,595 Total $ 17,510 $ ( 839 ) $ 48 $ 1,239 $ 17,958 Allowance for Credit Losses on Unfunded Loan Commitments. The Company estimates expected credit losses on unfunded, off-balance sheet commitments over the contractual period in which the Company is exposed to credit risk from a contractual obligation to extend credit, unless the obligation is unconditionally cancellable by the Company. The Company has determined that no allowance is necessary for its home equity line of credit portfolio as it has the contractual ability to unconditionally cancel the available lines of credit. The allowance methodology is similar to the ACLL, but additionally includes an estimate of the future utilization of the commitment as determined by historical commitment utilization. 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 unfunded commitments on the Consolidated Statements of Operations. The allowance for unfunded commitments was $ 614,000 and $ 599,000 at March 31, 2025 , and December 31, 2024 , respectively. Note 5 - Deposits Deposits and weighted-average interest rates at the dates indicated are as follows: March 31, 2025 December 31, 2024 Amount Weighted-Average Interest Rate Amount Weighted-Average Interest Rate (Dollars in thousands) Noninterest-bearing demand deposits $ 247,890 0.00 % $ 256,416 0.00 % Interest-bearing demand deposits 169,912 0.68 164,891 0.44 Money market accounts 424,469 2.36 413,822 2.26 Savings accounts 235,188 1.61 205,055 1.35 Certificates of deposit, customer 450,663 3.97 464,928 4.18 Certificates of deposit, brokered 137,946 4.38 182,914 4.73 Total deposits $ 1,666,068 2.33 $ 1,688,026 2.42 The aggregate amount of time deposits in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limit, currently $250,000, at March 31, 2025 and December 31, 2024 , were $ 171.9 million and $ 174.4 million, respectively. Maturities of certificates at the dates indicated are as follows: March 31, 2025 December 31, 2024 (In thousands) Within one year or less $ 500,790 $ 527,486 After one year through two years 69,357 66,767 After two years through three years 12,674 29,378 After three years through four years 4,233 21,967 After four years through five years 1,555 2,244 Total certificates of deposit $ 588,609 $ 647,842 21 Table of Contents At March 31, 2025 and December 31, 2024 , deposits included $ 109.8 million and $ 100.8 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 March 31, 2025 and December 31, 2024 , to collateralize public deposits. This letter of credit exceeds the minimum collateral requirements established by the Washington Public Deposit Protection Commission. Also included in deposits at March 31, 2025 and December 31, 2024 , were funds held by federally recognized tribes totaling $ 28.6 million and $ 20.1 million, respectively. Investment securities with a carrying value of $ 23.6 million and $ 22.8 million were pledged as collateral for these deposits at March 31, 2025 and December 31, 2024 , respectively. These investment securities exceed 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 March 31, 2025 2024 (In thousands) Demand deposits $ 260 $ 187 Money market accounts 2,345 1,949 Savings accounts 783 953 Certificates of deposit, customer 4,522 4,494 Certificates of deposit, brokered 1,827 2,529 Total interest expense on deposits $ 9,737 $ 10,112 Note 6 - Borrowings First Fed is a member of the FHLB. As a member, First Fed has a committed line of credit of up to 35 % of total assets, subject to the amount of FHLB stock ownership and certain collateral requirements. First Fed maintains borrowing arrangements with the FHLB to borrow funds primarily under long-term, fixed-rate advance agreements. First Fed also has overnight borrowings through FHLB which renew daily until paid. First Fed periodically uses fixed-rate advances maturing in less than one year as an alternative source of funds. Available borrowing capacity was $ 217.6 million and $ 207.3 million at March 31, 2025 and December 31, 2024 , 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 $ 894.1 million and $ 951.8 million at March 31, 2025 and December 31, 2024 , respectively. The Bank had outstanding letters of credit from the FHLB with notional amounts of $ 60.0 million to collateralize public deposits and $ 772,000 to secure the Bellevue, Washington branch lease at March 31, 2025 . 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 $ 17.9 million and $ 17.9 million at March 31, 2025 and December 31, 2024 , respectively. An overnight test of the line of credit was performed at the end of June 2024. Investment securities with a carrying value of $ 18.5 million and $ 18.6 million were pledged to the FRB at March 31, 2025 and December 31, 2024 , 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. 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 used the net proceeds of the offering for general corporate purposes. Beginning in April 2026, the interest rate on the Notes will reset quarterly to the three -month Secured Overnight Financing Rate plus 300 -basis points. In March 2025, the Company repurchased $ 5.0 million of the Notes at a discount, resulting in a reduction to the outstanding balance and recording a gain on extinguishment of debt in noninterest income. On May 20, 2022, First Northwest consummated a borrowing arrangement with NexBank for a $ 20.0 million revolving line of credit. Borrowings are secured by a blanket lien on First Northwest's personal property assets (with certain exclusions), including all the outstanding shares of First Fed, cash, loans receivable, and limited partnership investments. The line of credit matures on May 17, 2025 . 22 Table of Contents The following table sets forth information regarding our borrowings at the end of and during the three months ended March 31, 2025 . The table includes both long- and short-term borrowings. FHLB Long-Term Advances FHLB Overnight Variable-Rate Advances Line of Credit Subordinated Debt, net (Dollars in thousands) Balance outstanding $ 170,000 $ 90,000 $ 12,500 $ 34,591 Maximum outstanding at any month-end 170,000 115,000 12,500 39,527 Average monthly outstanding during the period 161,667 105,000 7,867 38,370 Weighted-average daily interest rates Annual 3.74 % 4.54 % 8.25 % 4.06 % Period End 3.88 % 4.53 % 8.00 % 4.50 % Interest expense during the period 1,420 1,275 160 384 The amounts by year of maturity and weighted-average interest rate of FHLB long-term, fixed-rate advances at March 31, 2025 are as follows: Amount Weighted- Average Interest Rate (Dollars in thousands) Within one year or less $ 40,000 3.31 % After one year through two years 70,000 4.04 After two years through three years 35,000 3.78 After three years through four years 25,000 4.50 Total FHLB long-term advances $ 170,000 3.88 The following table sets forth information regarding our borrowings at the end of and during the year ended December 31, 2024 . The table includes both long- and short-term borrowings. FHLB Long-Term Advances FHLB Overnight Variable-Rate Advances Line of Credit Subordinated Debt, net (Dollars in thousands) Balance outstanding $ 160,000 $ 130,000 $ 6,500 $ 39,514 Maximum outstanding at any month-end 170,000 270,000 10,000 39,514 Average monthly outstanding during the period 136,250 137,750 6,635 39,475 Weighted-average daily interest rates Annual 3.35 % 5.38 % 9.41 % 4.00 % Period End 3.63 % 4.64 % 8.00 % 3.99 % Note 7 - Income Tax Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. These calculations are based on many complex factors including estimates of the timing of reversals of temporary differences, the interpretation of federal income tax laws, and a determination of the differences between the tax and the financial reporting basis of assets and liabilities. 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 11.1 % and 53.0 % for the three months ended March 31, 2025 and 2024 , respectively. The effective tax rates differ from the statutory maximum federal tax rate for 2025 and 2024 of 21 %, largely due to the nontaxable earnings on BOLI and tax-exempt interest income earned on certain investment securities and loans. The effective tax rates also include estimates for taxes and penalties on the early surrender of BOLI contracts which were recorded in both periods. The effective tax rate does not include a valuation allowance for the net deferred tax asset based on management’s evaluation of cumulative earnings inclusive of other comprehensive income and available tax planning strategies. 23 Table of Contents Note 8 - Earnings (Loss) 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 periods shown: Three Months Ended March 31, 2025 2024 (In thousands, except share data) Net income: Net (loss) income available to common shareholders $ ( 9,036 ) $ 396 Dividends and undistributed earnings allocated to participating securities — ( 1 ) (Loss) earnings allocated to common shareholders $ ( 9,036 ) $ 395 Basic: Weighted average common shares outstanding 9,380,951 9,542,514 Weighted average unvested restricted stock awards ( 112,987 ) ( 92,774 ) Weighted average unallocated ESOP shares ( 520,542 ) ( 573,504 ) Total basic weighted average common shares outstanding 8,747,422 8,876,236 Diluted: Basic weighted average common shares outstanding 8,747,422 8,876,236 Dilutive restricted stock awards — 30,948 Total diluted weighted average common shares outstanding 8,747,422 8,907,184 Basic (loss) earnings per common share $ ( 1.03 ) $ 0.04 Diluted (loss) earnings per common share $ ( 1.03 ) $ 0.04 Potentially dilutive shares are excluded from the computation of EPS if their effect is anti-dilutive. At March 31, 2025 and 2024 , antidilutive shares as calculated under the treasury stock method totaled 28,364 and 582 , respectively. Note 9 - Employee Benefits Employee Stock Ownership Plan In connection with the Conversion, the Company established an ESOP for eligible employees of the Company and the Bank. Employees of the Company and the Bank who have been credited with at least 1,000 hours of service during a 12 -month period are eligible to participate in the ESOP. Pursuant to the Plan, the ESOP purchased shares in the open market with funds borrowed from First Northwest. The Bank will make contributions to the ESOP in amounts necessary to amortize the ESOP loan payable to First Northwest over a period of 20 years, bearing estimated interest at 2.46 %. 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. No principal and interest payments were made by the ESOP during the three months ended March 31, 2025 and 2024 . 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. The compensation expense is accrued monthly throughout the year. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings; dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest. 24 Table of Contents Compensation expense related to the ESOP for the three months ended March 31, 2025 and 2024 , was $ 140,000 and $ 197,000 , respectively. Shares issued to the ESOP as of the dates indicated are as follows: March 31, 2025 December 31, 2024 (Dollars in thousands) Allocated shares 492,208 492,208 Committed to be released shares 39,663 26,442 Unallocated shares 516,158 529,379 Total ESOP shares issued 1,048,029 1,048,029 Fair value of unallocated shares $ 5,244 $ 5,400 Note 10 - Stock-based Compensation In May 2020, the Company's shareholders approved the First Northwest Bancorp 2020 Equity Incentive Plan ( "2020 EIP"), which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock shares or restricted stock units, and performance share awards to eligible participants through May 2030. The cost of awards under the 2020 EIP generally is based on the fair value of the awards on their grant date. The maximum number of shares that may be utilized for awards under the 2020 EIP is 520,000 . As of March 31, 2025 , there were 127,038 total shares available for grant under the 2020 EIP, all of which are available to be granted as restricted shares, performance shares, options or stock appreciation rights. 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 March 31, 2025 , there were no shares available for grant under the 2015 EIP. At this date, there are 2,500 shares granted under the 2015 EIP that are expected to vest subject to the 2015 EIP plan provisions. There were 64,443 and 55,987 shares of restricted stock awarded, respectively, during the three months ended March 31, 2025 and 2024 . Restricted share awards 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. In addition, there were 33,251 and 0 performance shares awarded, respectively, during the three months ended March 31, 2025 and 2024 . Performance share awards vest in accordance with the terms outlined in each award agreement. The Company recognizes compensation expense for the performance share awards based on the fair value of the shares at the grant date amortized over the performance period. For the three months ended March 31, 2025 and 2024 , total compensation expense for the equity incentive plans was $ 194,000 and $ 264,000 , respectively. Included in the compensation expense for the three months ended March 31, 2025 and 2024 , was directors' equity compensation of $ 56,000 and $ 54,000 , respectively. The following table provides a summary of changes in non-vested restricted stock awards for the periods shown: Three Months Ended March 31, 2025 Shares Weighted-Average Grant Date Fair Value Non-vested at January 1, 2025 97,064 $ 14.46 Granted 97,694 10.45 Vested ( 29,110 ) 16.82 Canceled (1) ( 7,279 ) 16.82 Forfeited ( 3,145 ) 10.07 Non-vested at March 31, 2025 155,224 11.47 (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. As of March 31, 2025 , there was $ 1.6 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 2.29 years. 25 Table of Contents Note 11 - Fair Value Measurements Fair value is the price to sell an asset or transfer a liability in an orderly transaction between market participants in the Company’s principal market. The Company has established and documented its process for determining the fair values of its assets and liabilities, where applicable. Fair value is based on quoted market prices, when available, for identical or similar assets or liabilities. In the absence of quoted market prices, management determines the fair value of the Company’s assets and liabilities using valuation models or third -party pricing services, both of which rely on market-based parameters when available, such as interest rate yield curves, option volatilities and credit spreads, or unobservable inputs. Unobservable inputs may be based on management’s judgment, assumptions, and estimates related to credit quality, liquidity, interest rates, and other relevant inputs. Any changes to valuation methodologies are reviewed by management to ensure they are relevant and justified. Valuation methodologies are refined as more market-based data becomes available. A three -level valuation hierarchy is used in determining fair value that is based on the transparency of the inputs used in the valuation process. The inputs used in determining fair value in each of the three levels of the hierarchy are as follows: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 - Either: (i) quoted prices for similar assets or liabilities; (ii) observable inputs, such as interest rates or yield curves; or (iii) inputs derived principally from or corroborated by observable market data. Level 3 - Unobservable inputs. The hierarchy gives the highest ranking to Level 1 inputs and the lowest ranking to Level 3 inputs. 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. The Company used the following methods to measure fair value on a recurring and nonrecurring basis. Securities available for sale : 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. 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. Interest rate swap derivative : The fair values of interest rate swap agreements are based on valuation models using observable market data as of the measurement date (Level 2 ). The Company’s securities derivatives are traded in an over-the-counter market where quoted market prices are not always available. The Company also entered into pay-fixed and receive-floating interest rate swaps associated with certain fixed rate loans. The fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including market transactions and third -party pricing services. The fair values of all interest rate swaps are determined from third -party pricing services without adjustment. 26 Table of Contents Assets and liabilities measured at fair value on a recurring basis - Assets and liabilities are considered to be valued on a recurring basis if fair value is measured regularly (i.e., daily, weekly, monthly, or quarterly). The following tables show the Company’s assets and liabilities measured at fair value on a recurring basis at the dates indicated: March 31, 2025 Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs (Level 1) (Level 2) (Level 3) Total Financial Assets (In thousands) Securities available-for-sale Municipal bonds $ 4,904 $ 73,391 $ — $ 78,295 ABS agency — 12,643 — 12,643 ABS corporate — 15,671 — 15,671 Corporate debt 1,937 53,130 — 55,067 SBA — 8,061 — 8,061 MBS agency — 96,642 — 96,642 MBS non-agency — 30,511 18,543 49,054 Sold loan servicing rights — — 3,301 3,301 Total assets measured at fair value $ 6,841 $ 290,049 $ 21,844 $ 318,734 Financial Liabilities Interest rate swap derivative $ — $ 1,170 $ — $ 1,170 December 31, 2024 Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs (Level 1) (Level 2) (Level 3) Total Financial Assets (In thousands) Securities available-for-sale Municipal bonds $ 12,059 $ 65,817 $ — $ 77,876 ABS agency — 12,876 — 12,876 ABS corporate — 16,122 — 16,122 Corporate debt 1,917 52,574 — 54,491 SBA — 8,666 — 8,666 MBS agency — 98,697 — 98,697 MBS non-agency — 39,735 31,881 71,616 Sold loan servicing rights — — 3,281 3,281 Interest rate swap derivative — 267 — 267 Total assets measured at fair value $ 13,976 $ 294,754 $ 35,162 $ 343,892 Financial Liabilities Interest rate swap derivative $ — $ 123 $ — $ 123 27 Table of Contents 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: March 31, 2025 Fair Value (In thousands) Valuation Technique Unobservable Input (1) Range (Weighted Average) Sold loan servicing rights $ 3,301 Discounted cash flow Constant prepayment rate 4.39% - 25.72% (5.77%) Discount rate 11.00% - 13.14% (11.58%) MBS non-agency $ 18,543 Consensus pricing Offered quotes 98.9 - 100.5 (1) Unobservable inputs were weighted by the relative fair value of the instruments. December 31, 2024 Fair Value (In thousands) Valuation Technique Unobservable Input (1) Range (Weighted Average) Sold loan servicing rights $ 3,281 Discounted cash flow Constant prepayment rate 5.05% - 29.58% (6.83%) Discount rate 11.13% - 13.52% (11.78%) MBS non-agency $ 31,881 Consensus pricing Offered quotes 99 - 101 (1) 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: As of or For the Three Months Ended March 31, 2025 2024 Sold loan servicing rights: (In thousands) Balance at beginning of period $ 3,281 $ 3,793 Servicing rights that result from transfers and sale of financial assets 11 10 Changes in fair value due to changes in model inputs or assumptions (1) 9 17 Balance at end of period $ 3,301 $ 3,820 (1) Represents changes due to collection/realization of expected cash flows and curtailments. As of or For the Three Months Ended March 31, 2025 2024 Securities available for sale: (In thousands) MBS non-agency Balance at beginning of period $ 31,881 $ 27,469 Principal payments and maturities ( 13,424 ) ( 10,248 ) Unrealized Gains 86 130 Balance at end of period $ 18,543 $ 17,351 28 Table of Contents 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. Generally, nonrecurring valuation is the result of the application of other accounting pronouncements that require assets or liabilities to be assessed for impairment or recorded at the lower of cost or fair value. The following tables present the Company’s assets measured at fair value on a nonrecurring basis at the dates indicated: March 31, 2025 Level 1 Level 2 Level 3 Total (In thousands) Individually evaluated collateral dependent loans $ — $ — $ 23,054 $ 23,054 December 31, 2024 Level 1 Level 2 Level 3 Total (In thousands) Individually evaluated collateral dependent loans $ — $ — $ 33,246 $ 33,246 At March 31, 2025 and December 31, 2024 , 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: March 31, 2025 Fair Value Measurements Using: Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 (In thousands) Financial assets Cash and cash equivalents $ 70,323 $ 70,323 $ 70,323 $ — $ — Investment securities available for sale 315,433 315,433 6,841 290,049 18,543 Loans held for sale 2,940 2,940 — 2,940 — Loans receivable, net 1,637,573 1,514,829 — — 1,514,829 FHLB stock 13,106 13,106 — 13,106 — Accrued interest receivable 8,319 8,319 — 8,319 — Sold loan servicing rights, at fair value 3,301 3,301 — — 3,301 Financial liabilities Demand deposits $ 1,077,459 $ 1,077,459 $ 1,077,459 $ — $ — Time deposits 588,609 587,839 — — 587,839 FHLB Borrowings 260,000 259,649 — — 259,649 Line of Credit 12,500 12,549 — — 12,549 Subordinated debt, net 34,591 35,861 — — 35,861 Accrued interest payable 2,163 2,163 — 2,163 — Interest rate swap derivative 1,170 1,170 — 1,170 — 29 Table of Contents December 31, 2024 Fair Value Measurements Using: Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 (In thousands) Financial assets Cash and cash equivalents $ 72,448 $ 72,448 $ 72,448 $ — $ — Investment securities available for sale 340,344 340,344 13,976 294,487 31,881 Loans held for sale 472 472 — 472 — Loans receivable, net 1,675,186 1,536,748 — — 1,536,748 FHLB stock 14,435 14,435 — 14,435 — Accrued interest receivable 8,159 8,159 — 8,159 — Sold loan servicing rights, at fair value 3,281 3,281 — — 3,281 Interest rate swap derivative 267 267 — 267 — Financial liabilities Demand deposits 1,040,184 $ 1,040,184 $ 1,040,184 $ — $ — Time deposits 647,842 648,232 — — 648,232 FHLB Borrowings 290,000 288,512 — — 288,512 Line of Credit 6,500 6,526 — — 6,526 Subordinated debt, net 39,514 39,974 — — 39,974 Accrued interest payable 3,295 3,295 — 3,295 — Interest rate swap derivative 123 123 — 123 — Note 12 - Change in Accumulated Other Comprehensive Income ("AOCI") Our AOCI includes unrealized gains (losses) on available-for-sale securities, defined benefit plan assets and derivatives as well as an unrecognized defined benefit plan prior service cost. The following table presents changes to accumulated other comprehensive income after-tax for the periods shown: Unrealized Gains and Losses on Available-for-Sale Securities Net Actuarial Gains (Losses) on DB Plan Assets Unrecognized DB Plan Prior Service Cost, Net of Amortization Unrealized Losses on Fair Value of Hedged Items Total (In thousands) Balance at December 31, 2023 $ ( 30,099 ) $ ( 288 ) $ ( 1,421 ) $ ( 828 ) $ ( 32,636 ) Other comprehensive loss before reclassification ( 588 ) — — — ( 588 ) Amounts reclassified from accumulated other comprehensive income — — 29 730 759 Net other comprehensive (loss) income ( 588 ) — 29 730 171 Balance at March 31, 2024 $ ( 30,687 ) $ ( 288 ) $ ( 1,392 ) $ ( 98 ) $ ( 32,465 ) Balance at December 31, 2024 $ ( 28,210 ) $ ( 486 ) $ ( 1,303 ) $ ( 173 ) $ ( 30,172 ) Other comprehensive income before reclassification 2,439 — — — 2,439 Amounts reclassified from accumulated other comprehensive income — — 29 ( 425 ) ( 396 ) Net other comprehensive income (loss) 2,439 — 29 ( 425 ) 2,043 Balance at March 31, 2025 $ ( 25,771 ) $ ( 486 ) $ ( 1,274 ) $ ( 598 ) $ ( 28,129 ) 30 Table of Contents Note 13 - Derivatives and Hedging Activities The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Fair Value Hedges of Interest Rate Risk The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreement without the exchange of the underlying notional amount. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income. The following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges for the periods shown. Carrying Amount of the Hedged Assets Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (In thousands) Line item in the Consolidated Balance Sheets where the hedged item is included: March 31, 2025 Investment securities (1) $ 50,760 $ 760 Loans receivable (2) 100,566 566 Total $ 151,326 $ 1,326 December 31, 2024 Investment securities (1) $ 50,220 $ 220 Loans receivable (2) 99,812 ( 188 ) Total $ 150,032 $ 32 ( 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 March 31, 2025 and December 31, 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 56.5 million and $ 56.7 million, respectively; the cumulative basis adjustments associated with this hedging relationship was $ 760,000 and $ 220,000 , 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 March 31, 2025 and December 31, 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 251.3 million and $ 258.1 million, respectively; the cumulative basis adjustments associated with this hedging relationship was $ 566,000 and ($ 188,000 ), respectively; and the amount of the designated hedged items was $ 100.0 million. for both periods. 31 Table of Contents The following table summarizes the Company’s derivative instruments at the date indicated. The Company has master netting agreements with derivative dealers with which it does business, but reflects gross assets and liabilities as “Other assets” and “Other liabilities,” respectively, on the Consolidated Balance Sheets, as follows: Fair Value Notional Amount Other Assets Other Liabilities (In thousands) March 31, 2025 Fair value hedges: Interest rate swaps - securities $ 50,000 $ — $ 663 Interest rate swaps - loans 100,000 — 507 December 31, 2024 Fair value hedges: Interest rate swaps - securities $ 50,000 $ — $ 123 Interest rate swaps - loans 100,000 267 — The following table summarizes the effect of fair value accounting on the Consolidated Statements of Operations for the periods shown: Three Months Ended March 31, 2025 2024 (In thousands) Total amounts recognized in interest on investment securities $ 3,803 $ 3,632 Total amounts recognized in interest and fees on loans receivable 22,231 22,767 Net gains (losses) on fair value hedging relationships Interest rate swaps - securities Recognized on hedged items $ ( 541 ) $ ( 967 ) Recognized on derivatives designated as hedging instruments 531 1,155 Interest rate swaps - loans Recognized on hedged items ( 754 ) ( 711 ) Recognized on derivatives designated as hedging instruments 757 884 Net (expense) income recognized on fair value hedges $ ( 7 ) $ 361 Credit Risk-related Contingent Features The Company is exposed to credit-related losses in the event of nonperformance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate the Company’s exposure to credit risk with these institutions. This credit risk is limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted. 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 March 31, 2025 , 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 March 31, 2025 , 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 March 31, 2025 , 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. 32 Table of Contents Note 14 - Segment Reporting First Fed is engaged in the business of attracting deposits and providing lending services. Substantially all income is derived from a diverse base of commercial, mortgage, and consumer lending activities and investments. The Company’s activities are considered to be a single industry segment for financial reporting purposes. The chief operating decision maker ("CODM") is comprised of the chief financial officer and the chief executive officer. The accounting policies of the Bank are the same as those described in the summary of significant accounting policies in Note 1 of the Company's Annual Report on Form 10 -K for the year ended December 31, 2024 (" 2024 Form 10 -K"). The CODM assesses performance for the Bank and decides how to allocate resources based on net income that is reported on the income statement as consolidated net income. The measurement of segment assets is reported on the balance sheet as total consolidated assets. The CODM uses net income to evaluate income generated from the segment assets (return on assets) in deciding whether to reinvest profits into the Bank or into other parts of the entity, such as to pay dividends or a share repurchase plan. Net income is used to monitor budget versus actual results and assess the performance of the Bank. The Company generates revenue from interest income, fee income and other noninterest income from investments and services. All operations are based in Washington State. No single customer accounts for more than 10% of total revenue. Note 15 - Contingencies In the normal course of business, the Company may have various legal claims and other similar contingent matters outstanding for which a loss may be realized. For these claims, the Company establishes a liability for contingent losses when it is probable that a loss has been incurred and the amount of loss can be reasonably estimated. For claims determined to be reasonably possible but not probable of resulting in a loss, there may be a range of possible losses in excess of the established liability. For additional information, see Legal Proceedings contained in Part II, Item 1 of this Form 10-Q. 33 Table of Contents ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements Certain matters discussed in this Quarterly Report on Form 10-Q constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by the use of words such as "believes," "expects," "anticipates," "estimates" or similar expressions. Forward-looking statements include, but are not limited to: • statements of our goals, intentions and expectations; • statements regarding our business plans, prospects, growth and operating strategies; • statements regarding the quality of our loan and investment portfolios; • statements regarding litigation; and • estimates of our risks and future costs and benefits. 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: • risks associated with lending and potential adverse changes in the credit quality of our loan portfolio; • legislative, regulatory and policy changes; • uncertainties relating to litigation; • continued depressed market demand for mortgage and Small Business Administration loans that we originate for sale; • changes in monetary and fiscal policies including interest rate policies of the Federal Reserve and the relative differences between short and long-term interest rates, deposit interest rates, our net interest margin and funding sources; • our ability to control operating costs and expenses; • whether our management team can succeed in implementing our operational strategy, including but not limited to our efforts to achieve higher net interest income and noninterest revenue growth; • our ability to successfully execute on growth strategies related to our entry into new markets and delivery channels, including banking as a service; • our ability to develop user-friendly digital applications to serve existing customers and attract new customers; • the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; • pressures on liquidity, including as a result of withdrawals of customer deposits or declines in the value of our investment portfolio; • increased competitive pressures among financial services companies, particularly from non-traditional banking entities such as challenger banks, fintech, and mega technology companies; • our ability to attract and retain deposits at a reasonable cost relative to the market; • changes in consumer spending, borrowing and savings habits, resulting in reduced demand for banking products and services, particularly in the event of a recession that affects our market areas; • results of examinations by our primary or other regulatory authorities could have an adverse impact on our business and operations; • disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; • risks related to overall economic conditions, including the impact on the economy of an elevated interest rate environment, geopolitical instability, including the wars in Ukraine and the Middle East, and potential recessionary and other unfavorable conditions and trends relating to housing markets, cost of living, unemployment levels, supply chain difficulties and inflationary pressures; • any failure of key third-party vendors to perform their obligations to us; • risks related to natural disasters, including droughts, fires, floods, earthquakes, pandemics, and other unexpected events; • the effects of any reputational damage to the Company resulting from any of the foregoing; and • 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 the Company's 2024 Form 10-K. 34 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. Any forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. 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. General First Northwest, a Washington corporation, is a bank holding company and a financial holding company. First Northwest is engaged in banking activities through its wholly owned subsidiary, First Fed Bank, as well as certain non-banking financial activities. Non-banking investments include several limited partnership investments, including a 33.3% interest in The Meriwether Group, LLC ("MWG"), a boutique investment bank and consulting firm focused on providing entrepreneurs with resources to help them succeed, including equity and debt raising services. The Company's business activities are generally focused on passive investment activities and oversight of the activities of First Fed. The Company has also entered into partnerships to strategically invest in fintech-related businesses. First Fed Bank is a community-oriented commercial bank founded in 1923 in Port Angeles, Washington. The Bank serves Clallam, Jefferson, King, Kitsap, Snohomish and Whatcom counties in Washington State through its twelve full-service branches and six business centers, including our headquarters. We offer a wide range of products and services focused on the lending, deposit and money movement needs of the communities we serve. To diversify our portfolio and increase interest income, we increased our origination of commercial real estate, multi-family real estate, and commercial business loans. We also increased our auto and consumer loans through purchased auto loan programs and purchased manufactured homes. We continue to originate one-to-four family residential mortgage loans, primarily for sale into the secondary market to generate noninterest gain on sale and servicing fee revenue and manage interest rate risk or retain select loans in our portfolio to enhance interest income. Home equity, residential construction and commercial construction loans are also originated primarily in Western Washington. We offer traditional consumer and business deposit products, including transaction accounts, savings and money market accounts and certificates of deposit ("CDs" or "term certificate") for individuals, businesses and nonprofit organizations. Deposits are our primary source of funding for our lending and investing activities. First Fed has a limited partnership investment in the Canapi Ventures SBIC Fund II, LP. First Fed also has a limited partnership investment in the Meriwether Group Capital Hero Fund LP ("Hero Fund") which was previously held by First Northwest. The Hero Fund is a private commercial lender focused on lower-middle market businesses, primarily in the Pacific Northwest. First Northwest's limited partnership investments include Canapi Ventures Fund, LP; BankTech Ventures, LP; and JAM FINTOP Frontier Fund, LP. These limited partnerships invest in fintech-related businesses with a focus on developing digital solutions applicable to the banking industry. In 2022, First Northwest acquired a 33.3% interest in MWG. Also in 2022, the Company acquired a 25% equity interest as a general partner in Meriwether Group Capital, LLC ("MWGC"), which provides financial advice for borrowers and capital for the Hero Fund. MWG also holds a 20% general partner interest in MWGC. MWGC holds a 0.01% general partner interest in the Hero Fund. The Company is impacted by prevailing economic conditions as well as government policies and regulations concerning, among other things, monetary and fiscal policy, including fiscal stimulus, interest rate policy and open market operations, housing, and consumer protection. Deposit flows are influenced by various factors, including changes in market rates; sales and marketing efforts; interest rates paid by competitors; available alternative investments such as money market mutual funds, the stock and bond markets; account maturities; government stimulus and unemployment programs; and the overall level of personal income and savings. Lending activities are influenced by prevailing interest rates and property values in our markets, the demand for funds, the number and quality of lenders employed by First Fed, and both regional and national economic cycles. Our primary source of pre-tax income is net interest income. Net interest income is interest income earned on our loans and investments less interest expense paid on our deposits and borrowings. Changes in levels of interest rates impact our net interest income. A secondary source of income for the Company is noninterest income, which includes revenue we receive from providing products and services, including service charges on deposit accounts, debit card interchange income, mortgage banking income, treasury and other commercial banking related fees, earnings from bank-owned life insurance, loan servicing income, earnings from equity and partnership investments, and gains and losses from the sale of loans and securities. 35 An offset to net interest income is the provision for credit losses, which represents the periodic charge to operations required to adequately provide for probable losses inherent in our loan, unfunded commitments and investment portfolios through the ACL. A recapture of previously recognized provision for credit losses may be recorded if forecasted macroeconomic factors improve, underlying balances decrease, or recoveries of amounts previously charged off are received. Noninterest expenses incurred in operating our business consist of salaries and employee benefit costs, occupancy and equipment expenses, professional fees, deposit insurance premiums and regulatory assessments, digital delivery and data processing expenses, marketing and other customer acquisition expenses, expenses related to real estate and personal property owned, state and local taxes, federal income tax, and other miscellaneous expenses. Recent Regulatory Developments On October 24, 2023, the federal banking agencies issued a final rule amending their regulations implementing the Community Reinvestment Act (the "CRA") to substantially revise how they evaluate an insured depository institution’s record of satisfying the credit needs of its entire communities, including low- and moderate-income individuals and neighborhoods. On March 28, 2025, the agencies announced their intent to issue a proposal to rescind the October 2023 final rule, and to reinstate the CRA framework that existed prior to the October 2023 final rule. The Bank received a rating of "satisfactory" in its most recent performance evaluation, which was conducted using the CRA framework that existed prior to the October 2023 final rule. Critical Accounting Policies There are no material changes to the critical accounting policies from those disclosed in the Company's 2024 Form 10-K. Comparison of Financial Condition at March 31, 2025 and December 31, 2024 Assets . Total assets decreased to $2.17 billion, or 2.7%, at March 31, 2025, from $2.23 billion at December 31, 2024. Cash and cash equivalents decreased by $2.1 million, or 2.9%, to $70.3 million as of March 31, 2025, compared to $72.5 million as of December 31, 2024. Investment securities decreased $24.9 million, or 7.3%, to $315.4 million at March 31, 2025, from $340.3 million at December 31, 2024. The decrease was primarily due to maturities and early redemptions within the MBS non-agency portfolio totaling $20.2 million along with other payment activity was partially offset by a portfolio market value increase of $3.1 million during the three months ended March 31, 2025. Included in MBS non-agency portfolio as of March 31, 2025, were $28.7 million of commercial mortgage-backed securities ("CMBS"), of which 93.4% were in "A" tranches with the remaining 6.6% in "B" tranches. Our largest exposure in the CMBS portfolio balance was to long-term care facilities, which comprised 67.8%, or $19.4 million, of our private label CMBS securities. All of the CMBS had credit enhancements at the current period end ranging from 30.8% to 93.1%, with a weighted-average credit enhancement of 62.6%, which further reduced the risk of loss on these investments. The investment portfolio, including mortgage-backed securities, had an estimated projected average life of 6.9 years as of both March 31, 2025 and December 31, 2024, and had an estimated average repricing term of 6.2 years as of March 31, 2025, compared to 5.3 years as of December 31, 2024, based on the interest rate environment at those times. The effective duration of the investment portfolio was 4.3 years at March 31, 2025, compared to 3.9 years at December 31, 2024. The investment portfolio was comprised of 55.9% in amortizing securities at March 31, 2025, compared to 60.2% at December 31, 2024. The projected average life of the securities portfolio may vary due to prepayment activity, particularly in the mortgage-backed securities portfolio, which is impacted by prevailing market interest rates. If prevailing market interest rates fall, we expect prepayments to accelerate due to the current coupons of fixed rate bonds. We utilize our securities portfolio to manage liquidity, improve long-term interest income and manage interest rate risk. For additional information, see Note 2 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q. 36 Table of Contents Net loans, excluding loans held for sale, decreased $37.6 million, or 2.2%, to $1.64 billion at March 31, 2025, from $1.68 billion at December 31, 2024. During the three months ended March 31, 2025, commercial business loans decreased $31.7 million, including a $36.2 million decrease to our Northpointe Bank Mortgage Purchase Program ("Northpointe MPP") participation and other repayment activity, partially offset by increases from $6.7 million of organic originations, $5.9 million of draws on existing line of credit commitments and $414,000 of new purchased loans. One-to-four family loans decreased $887,000 during the three months ended March 31, 2025, as repayment activity exceeded $4.5 million in residential construction loans that converted to permanent amortizing loans and new loan originations totaling $1.5 million. Multi-family loans increased $5.6 million during the three months ended March 31, 2025, as $8.0 million of construction loans converting into permanent amortizing loans exceeded repayments. Auto and other consumer loans increased $5.0 million with auto loan purchases of $11.1 million, manufactured home loan pool purchases of $4.6 million, and additional manufactured home loan purchases of $3.6 million, partially offset by prepayments and scheduled payments. Commercial real estate loans decreased $3.1 million during the three months ended March 31, 2025, with loan charge-offs totaling $5.6 million and repayment activity exceeding $12.3 million of new loan originations and $334,000 of construction loan conversions. Home equity loan outstanding balances increased $97,000 over the prior year end due to $2.5 million of net draws on new and existing line of credit commitments and $1.1 million of home equity loan originations, partially offset by prepayments and scheduled payments. Construction and land loans decreased $13.2 million, or 16.9%, to $64.9 million at March 31, 2025, from $78.1 million at December 31, 2024, with payment activity totaling $14.0 million and $12.8 million converting into fully amortizing loans, partially offset by draws on new and existing loan commitments. Construction projects in the portfolio are geographically dispersed throughout Western Washington as well as one project in California. All construction projects are monitored by either a third-party firm or our internal construction administration team. Projects with larger loan commitments have more robust monitoring by firms with more services and expertise. At March 31, 2025, 39% of construction commitments were secured by one-to-four family residential properties, which are anticipated to convert into amortizing loans upon completion and may be sold at that time. The following tables show our construction commitments by type and geographic concentrations at the dates indicated: March 31, 2025 North Olympic Peninsula (1) Puget Sound Region (2) Other Washington California Total (In thousands) Construction Commitment One-to-four family residential $ 7,255 $ 37,631 $ — $ — $ 44,886 Multi-family residential 3,900 16,612 3,261 — 23,773 Commercial real estate 500 34,077 4,940 8,060 47,577 Total commitment $ 11,655 $ 88,320 $ 8,201 $ 8,060 $ 116,236 Construction Funds Disbursed One-to-four family residential $ 2,125 $ 31,029 $ — $ — $ 33,154 Multi-family residential 1,305 5,896 2,198 — 9,399 Commercial real estate 269 14,742 1,608 — 16,619 Total disbursed for construction 3,699 51,667 3,806 — 59,172 Net deferred fees (costs) 5 (316 ) (12 ) (32 ) (355 ) Amortized cost for construction $ 3,704 $ 51,351 $ 3,794 $ (32 ) $ 58,817 Undisbursed Commitment One-to-four family residential $ 5,130 $ 6,602 $ — $ — $ 11,732 Multi-family residential 2,595 10,716 1,063 — 14,374 Commercial real estate 231 19,335 3,332 8,060 30,958 Total undisbursed $ 7,956 $ 36,653 $ 4,395 $ 8,060 $ 57,064 Land Funds Disbursed One-to-four family residential $ 2,148 $ 1,925 $ 212 $ — $ 4,285 Commercial real estate 900 845 — — 1,745 Total disbursed for land 3,048 2,770 212 — 6,030 Net deferred fees 15 10 5 — 30 Amortized cost for land $ 3,063 $ 2,780 $ 217 $ — $ 6,060 (1) Includes Clallam and Jefferson counties. (2) Includes Kitsap, Mason, Thurston, Pierce, King, Snohomish, Skagit, Whatcom, and Island counties. 37 Table of Contents December 31, 2024 North Olympic Peninsula (1) Puget Sound Region (2) Other Washington Total (In thousands) Construction Commitment One-to-four family residential $ 6,897 $ 45,945 $ 1,424 $ 54,266 Multi-family residential 3,900 14,828 5,695 24,423 Commercial real estate 500 40,259 4,215 44,974 Total commitment $ 11,297 $ 101,032 $ 11,334 $ 123,663 Construction Funds Disbursed One-to-four family residential $ 1,769 $ 35,711 $ 1,424 $ 38,904 Multi-family residential 709 10,245 4,582 15,536 Commercial real estate 99 16,508 900 17,507 Total disbursed 2,577 62,464 6,906 71,947 Net deferred fees (costs) 2 (329 ) (37 ) (364 ) Amortized cost for construction $ 2,579 $ 62,135 $ 6,869 $ 71,583 Undisbursed Commitment One-to-four family residential $ 5,128 $ 10,234 $ — $ 15,362 Multi-family residential 3,191 4,583 1,113 8,887 Commercial real estate 401 23,751 3,315 27,467 Total undisbursed $ 8,720 $ 38,568 $ 4,428 $ 51,716 Land Funds Disbursed One-to-four family residential $ 2,349 $ 2,183 $ 213 $ 4,745 Commercial real estate 900 845 — 1,745 Total disbursed for land 3,249 3,028 213 6,490 Net deferred fees 18 14 5 37 Amortized cost for land $ 3,267 $ 3,042 $ 218 $ 6,527 (1) Includes Clallam and Jefferson counties. (2) Includes Kitsap, Mason, Thurston, Pierce, King, Snohomish, Skagit, Whatcom, and Island counties. During the three months ended March 31, 2025, the Company added $67.3 million of organic loan originations, of which $31.3 million, or 46.5%, were located in the Puget Sound region, $11.2 million, or 16.7%, on the North Olympic Peninsula, $9.0 million, or 13.3%, in other areas throughout Washington State, and $15.8 million, or 23.5%, in other states. The Company purchased an additional $11.1 million in auto loans, $8.2 million in manufactured home loans, $550,000 in one-to-four family loans and $418,000 in commercial business loans to borrowers located throughout the United States during the three months ended March 31, 2025. The total loan portfolio was composed of 79.4% organic originations and 20.6% purchased loans at March 31, 2025. We will continue to assess our lending strategies across all product lines and markets where we do business as well as evaluate opportunities to supplement organic growth through wholesale acquisitions with the goal of improving earnings while also prudently managing credit risk. The ACLL increased to $20.6 million at March 31, 2025, compared to $20.5 million at December 31, 2024. Qualitative factor adjustments related to an increase in nonaccrual commercial business loans and an increase in the average risk rating of multi-family loans resulted in higher loss rates applied to those categories. Mild deterioration in gross domestic product and unemployment estimates further added to the increase in the allowance related to pooled loan balances. The ACLL as a percentage of total loans was 1.24% and 1.20% at March 31, 2025 and December 31, 2024, respectively. Management continues to monitor economic conditions for potential weaknesses that could expose the loan portfolio to losses. We believe the ACLL is adequate to cover current expected credit losses in the loan portfolio as of March 31, 2025. Nonperforming loans decreased $10.2 million, or 33.3%, to $20.4 million at March 31, 2025, from $30.5 million at December 31, 2024, primarily attributable to loan charge-offs totaling $7.7 million and $3.9 million in payments received on commercial construction loans, partially offset by a $633,000 commercial business loan placed on nonaccrual status during the quarter. The increase in charge-off activity was related to underlying collateral deficiencies for two commercial real estate loans and a related commercial business loan totaling $6.2 million. Nonperforming loans to total loans was 1.23% at March 31, 2025, compared to 1.80% at December 31, 2024. The ACLL as a percentage of nonaccrual loans increased to 101% at March 31, 2025, up from 67% at December 31, 2024. 38 Table of Contents Classified loans decreased $10.9 million, or 25.7%, to $31.6 million at March 31, 2025, from $42.5 million at December 31, 2024, primarily due to charge-offs totaling $7.2 million and $3.9 million in payments received on commercial construction loans included in this category. An $8.1 million construction loan relationship which became classified in the fourth quarter of 2022 and a $7.1 million commercial construction loan relationship which became classified in the second quarter of 2024, account for 48% of the classified loan balance at March 31, 2025. The Bank has exercised legal remedies, including the appointment of a third-party receiver and foreclosure actions, to liquidate the underlying collateral to satisfy the real estate loans in these collateral-dependent relationships. The Bank is also closely monitoring a group of commercial business loans that have similar collateral, with 16 loans totaling $1.6 million included in classified loans at March 31, 2025, and an additional seven loans totaling $2.4 million included in the special mention risk grading category. The Bank continues to work with these borrowers to facilitate satisfactory repayment. In the first quarter of 2025, the Bank recorded commercial real estate loan charge-offs totaling $5.6 million and commercial business loan charge-offs totaling $603,000 due to underlying collateral deficiencies. Additional commercial business loan charge-offs totaling $811,000 and commercial construction loan charge-offs totaling $374,000 were recorded as a result of uncertainty in the collectability of the underlying collateral in specific loan relationships. Charge-offs are based on individual loan evaluations and do not represent a universal decline in the collectability of all loans in these categories. Additional charged-off balances related to purchased unsecured consumer loans totaled $207,000 during the three months ended March 31, 2025. The Bank's active participation in the program was discontinued in 2023. Loans receivable, excluding loans held for sale, consisted of the following at the dates indicated : Increase (Decrease) March 31, 2025 December 31, 2024 Amount Percent (In thousands) Real Estate: One-to-four family $ 394,428 $ 395,315 $ (887 ) (0.2 )% Multi-family 338,147 332,596 5,551 1.7 Commercial real estate 387,312 390,379 (3,067 ) (0.8 ) Construction and land 64,877 78,110 (13,233 ) (16.9 ) Total real estate loans 1,184,764 1,196,400 (11,636 ) (1.0 ) Consumer: Home equity 79,151 79,054 97 0.1 Auto and other consumer 273,878 268,876 5,002 1.9 Total consumer loans 353,029 347,930 5,099 1.5 Commercial business loans 119,783 151,493 (31,710 ) (20.9 ) Total loans receivable 1,657,576 1,695,823 (38,247 ) (2.3 ) Less: Derivative basis adjustment (566 ) 188 (754 ) (401.1 ) Allowance for credit losses on loans 20,569 20,449 120 0.6 Loans receivable, net $ 1,637,573 $ 1,675,186 $ (37,613 ) (2.2 ) 39 Table of Contents The following table summarizes nonperforming assets at the dates indicated: Increase (Decrease) March 31, 2025 December 31, 2024 Amount Percent (In thousands) Nonaccrual loans: Real estate loans: One-to-four family $ 1,404 $ 1,477 $ (73 ) (4.9 )% Commercial real estate 4 5,598 (5,594 ) (99.9 ) Construction and land 15,280 19,544 (4,264 ) (21.8 ) Total real estate loans 16,688 26,619 (9,931 ) (37.3 ) Consumer loans: Home equity 54 55 (1 ) (1.8 ) Auto and other consumer 710 700 10 1.4 Total consumer loans 764 755 9 1.2 Commercial business 2,903 3,141 (238 ) (7.6 ) Total nonaccrual loans $ 20,355 $ 30,515 $ (10,160 ) (33.3 ) MLTB loans: Commercial real estate $ 6,695 $ 6,402 $ 293 4.6 Commercial business 108 111 (3 ) (2.7 ) Total restructured loans $ 6,803 $ 6,513 $ 290 4.5 Nonaccrual loans as a percentage of total loans 1.23 % 1.80 % (0.57 )% (31.7 ) Nonperforming MLTB loans included in total nonaccrual loans and total restructured loans above $ 108 $ 111 $ (3 ) (2.7 )% In the first quarter of 2025, a commercial business loan receivable held by First Northwest converted into a Series A security valued at $1.3 million. The transaction resulted in a $1.0 million reduction to loans receivable, a $260,000 reduction to interest receivable and a $1.3 million increase to equity investments. Also in the first quarter of 2025, a BOLI group life policy with a $9.4 million carrying value was terminated and the balance reclassified from BOLI to other assets until reimbursement is received from the issuer. In April, the Bank reinvested the value of the terminated policy into a new BOLI separate life policy. Liabilities. Total liabilities decreased to $2.02 billion at March 31, 2025, from $2.08 billion at December 31, 2024, due to decreases in brokered deposits of $45.0 million and borrowings of $28.9 million, partially offset by an increase in customer deposit balances of $23.0 million. Deposit account balances decreased $22.0 million, or 1.3%, to $1.67 billion at March 31, 2025 from $1.69 billion at December 31, 2024. During the first three months of 2025, total customer deposit balances increased $23.0 million and brokered deposit balances decreased $45.0 million. Within customer deposit balances, increases in savings accounts of $30.1 million and money market accounts of $10.7 million were partially offset by decreases in customer term certificates of $14.3 million and demand deposit accounts of $3.5 million. Increases in savings and money market accounts were driven by customer behavior as they sought out higher rates offered as term certificate specials matured and specials ended. We utilize brokered CDs as an additional funding source when it proves beneficial to provide liquidity, manage cost of funds, reduce reliance on FHLB advances, and manage interest rate risk. Overall, the current rate environment contributed to continued competition for deposits during the first quarter of 2025. As a result, the Bank continued offering deposit rate specials to retain existing balances and attract new funds. FHLB advances decreased $30.0 million, or 10.3% to $260.0 million at March 31, 2025, from $290.0 million at December 31, 2024. The Bank reduced short-term FHLB advances while long-term advances marginally increased to provide additional balance sheet liquidity. The Company also redeemed $5.0 million of subordinated debt during the first quarter of 2025 at a discount, resulting in a one-time gain on extinguishment of debt recorded in other noninterest income. 40 Table of Contents Equity . Total shareholders' equity decreased $7.4 million to $146.5 million for the three months ended March 31, 2025, due to a $9.0 million net loss recorded during that period, $656,000 of dividends declared and a $425,000 decrease in the post-tax fair market value of derivatives. These decreases were partially offset by an increase in the after-tax fair market values of the available-for-sale investment securities portfolio of $2.4 million. During the first quarter of 2025, the Company did not repurchase any common stock under the Company's April 2024 stock repurchase plan, leaving 846,123 shares remaining in the current share repurchase program. Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024 General. The Company recorded a net loss of $9.0 million for the three months ended March 31, 2025, compared to net income of $396,000 for the three months ended March 31, 2024. A $6.8 million increase in provision for credit losses and a $5.7 million increase in noninterest expense were partially offset by a decrease in provision for income tax of $1.6 million and a $1.6 million increase in noninterest income. Net Interest Income. Net interest income decreased $81,000 to $13.9 million for the three months ended March 31, 2025, from $13.9 million for the three months ended March 31, 2024, as declines in loan and interest-earning deposit income outpaced reduced deposit costs. Average earning assets increased $3.9 million year-over-year. The yield on average interest-earning assets decreased 7 basis points to 5.35% for the three months ended March 31, 2025, compared to 5.42% for the same period in the prior year, due to decreases in average net loans receivable and interest-earning deposit account balances, along with decreased yields on all interest-earning assets. The average cost of interest-bearing liabilities decreased to 3.05% for the three months ended March 31, 2025, compared to 3.14% for the same period last year, due primarily to lower rates paid on savings accounts, CDs, and advances along with decreases in the average balances of brokered CDs, savings account balances and subordinated debt. Total cost of funds decreased 7 basis points to 2.67% for the three months ended March 31, 2025, from 2.74% for the same period in 2024. The net interest margin remained flat at 2.76% for both the three months ended March 31, 2025 and the same period in 2024. Interest Income. Total interest income decreased $503,000, or 1.8%, to $26.8 million for the three months ended March 31, 2025, from $27.3 million for the comparable period in 2024, primarily due to a decrease in yields on all interest-earning assets and a decrease in average net loans receivable balances. Interest and fees on loans receivable decreased $536,000, to $22.2 million for the three months ended March 31, 2025, from $22.8 million for the three months ended March 31, 2024, primarily due to a decrease in the average balance of net loans receivable of $19.5 million compared to the prior year, coupled with a decrease in average loan yields to 5.49% for the three months ended March 31, 2025, from 5.51% for the same period in 2024. Average balances in the loan portfolio decreased primarily due to a lower average volume of construction loans partially offset by higher average volumes of one-to-four family, purchased auto and purchased manufactured home loans. Loan yields decreased over the prior year due to the repricing of variable- and adjustable-rate loans tied to the Prime Rate or other variable-rate indices. The yield earned on investment securities also decreased 12 basis points to 4.63% compared to the same period in 2024, due to floating bond yields and maturities of higher yielding fixed-rate investments. The following table compares average earning asset balances, associated yields, and resulting changes in interest income for the periods shown: Three Months Ended March 31, 2025 2024 Average Balance Outstanding Yield Average Balance Outstanding Yield (Decrease) Increase in Interest Income (Dollars in thousands) Loans receivable, net $ 1,641,937 5.49 % $ 1,661,420 5.51 % $ (536 ) Investment securities 333,208 4.63 307,490 4.75 171 FHLB stock 13,609 9.15 12,328 9.20 25 Interest-earning deposits in banks 42,917 4.55 46,583 5.57 (163 ) Total interest-earning assets $ 2,031,671 5.35 $ 2,027,821 5.42 $ (503 ) 41 Table of Contents Interest Expense. Total interest expense decreased $422,000, or 3.1%, to $13.0 million for the three months ended March 31, 2025, compared to $13.4 million for the three months ended March 31, 2024. The decrease over the first three months of 2024 was the result of a 4-basis point decrease in the cost of total deposits from 2.43% one year prior to 2.39% along with a reduction of brokered CDs. A shift in the deposit mix from savings accounts and brokered CDs to a higher volume of customer CDs and money market accounts resulted in a lower cost of deposits. Interest expense on borrowings increased marginally due to a $25.5 million increase in the average balance, partially offset by a 39-basis point decrease in the cost of advances, primarily FHLB advances, compared to the same period in 2024. During the three months ended March 31, 2025, interest expense on CDs decreased due to lower average balances of $33.2 million, primarily brokered CDs, along with a 17-basis point increase in the average rates paid, compared to the three months ended March 31, 2024. During the same period, the average balances of money market accounts increased $36.9 million, with a 21-basis point average rate increase, resulting in an increase to interest expense. The average cost of interest-bearing deposit accounts decreased to 2.80% for the three months ended March 31, 2025, from 2.86% for the three months ended March 31, 2024. The Bank continues to use promotional products designed to retain existing deposits and generate new deposits. Promotional rates are regularly reviewed and adjusted. The mix of customer deposit balances shifted from savings accounts towards money market accounts and CDs. Customer CDs represented 27.0% and 25.1% of total deposits at March 31, 2025 and 2024, respectively. Brokered CDs represented 8.3% and 11.5% of total deposits at March 31, 2025 and 2024, respectively. The following table details average balances, cost of funds and the change in interest expense for the periods shown: Three Months Ended March 31, 2025 2024 Average Balance Outstanding Rate Average Balance Outstanding Rate (Decrease) Increase in Interest Expense (Dollars in thousands) Interest-bearing demand deposits $ 168,414 0.63 % $ 165,379 0.45 % $ 73 Money market accounts 414,425 2.29 377,505 2.08 396 Savings accounts 216,499 1.47 235,784 1.63 (170 ) Certificates of deposit, customer 451,936 4.06 437,525 4.13 28 Certificates of deposit, brokered 158,269 4.68 205,923 4.94 (702 ) Advances 279,500 4.14 252,912 4.60 (37 ) Subordinated debt 38,370 4.06 39,446 4.02 (10 ) Total interest-bearing liabilities $ 1,727,413 3.05 $ 1,714,474 3.14 $ (422 ) Provision for Credit Losses. The Company recorded a $7.8 million loan loss provision and a $15,000 unfunded commitment provision for the three months ended March 31, 2025. This compares to a $1.2 million loan loss provision offset by a $269,000 unfunded commitment provision recapture for the three months ended March 31, 2024. The higher provision for credit losses on loans compared to the same period in 2024 was mainly due to underlying collateral deficiencies for two commercial real estate loans, a commercial business loan, a group of commercial equipment loans and consumer unsecured loans resulting in net charge-offs totaling $7.7 million for the three-month period. Increases in qualitative factor adjustments and a mild increase in factors related the general economic outlook applied to the remaining loan portfolio balance at March 31, 2025 also contributed to the higher provision. The increase in unfunded commitment provision compared to the same period in 2024 was due to higher balances. 42 Table of Contents The following table details activity and information related to the allowance for credit losses on loans and reserve for unfunded commitments for the periods shown: Three Months Ended March 31, 2025 2024 (Dollars in thousands) Provision for credit losses on loans $ 7,770 $ 1,239 Net charge-offs (7,650 ) (791 ) Allowance for credit losses on loans 20,569 17,958 Allowance for credit losses on loans as a percentage of total loans receivable at period end 1.24 % 1.05 % Total nonaccrual loans 20,355 19,481 Allowance for credit losses on loans as a percentage of nonaccrual loans at period end 101 % 92 % Nonaccrual loans and accruing loans 90 days or more past due as a percentage of total loans receivable 1.23 % 1.64 % Total loans receivable $ 1,657,576 $ 1,711,442 Provision for (recapture of) credit losses on unfunded commitments $ 15 $ (269 ) Reserve for unfunded commitments 614 548 Unfunded loan commitments 175,100 148,736 Noninterest Income. Noninterest income increased $1.6 million, or 72.6%, to $3.8 million for the three months ended March 31, 2025, from $2.2 million for the three months ended March 31, 2024. The increase was primarily due to income from a $1.1 million BOLI death benefit and a $846,000 gain on the extinguishment of debt related to repurchasing $5.0 million of subordinated debt at a discount. As a result of the conversion of lower-yielding BOLI policies in 2024, there was a period-over-period increase in BOLI cash surrender value. The following table provides a detailed analysis of the changes in the components of noninterest income for the periods shown: Three Months Ended March 31, Increase (Decrease) 2025 2024 Amount Percent (Dollars in thousands) Loan and deposit service fees $ 1,106 $ 1,102 $ 4 0.4 % Sold loan servicing fees and servicing rights mark-to-market 195 219 (24 ) (11.0 ) Net gain on sale of loans 11 52 (41 ) (78.8 ) Increase in BOLI cash surrender value 372 243 129 53.1 Income from BOLI death benefit, net 1,059 — 1,059 100.0 Other income 1,034 572 462 80.8 Total noninterest income $ 3,777 $ 2,188 $ 1,589 72.6 Noninterest Expense. Noninterest expense increased $5.7 million, or 39.8%, to $20.0 million for the three months ended March 31, 2025, compared to $14.3 million for the three months ended March 31, 2024. The increase in expenses compared to the same period in 2024 is mainly due to a $5.8 million accrued legal reserve included in other expense and an increase in occupancy and equipment due to additional rent related to a sale-leaseback transaction in the second quarter of 2024. These increases were partially offset by lower compensation and benefit costs due to a smaller workforce and lower professional fees. The Company continues to focus on controlling compensation expense and reducing advertising and other discretionary spending to improve earnings. 43 Table of Contents The following table provides an analysis of the changes in the components of noninterest expense for the periods shown: Three Months Ended March 31, Increase (Decrease) 2025 2024 Amount Percent (Dollars in thousands) Compensation and benefits $ 7,715 $ 8,128 $ (413 ) (5.1 )% Data processing 2,011 1,944 67 3.4 Occupancy and equipment 1,592 1,240 352 28.4 Supplies, postage, and telephone 298 293 5 1.7 Regulatory assessments and state taxes 479 513 (34 ) (6.6 ) Advertising 265 309 (44 ) (14.2 ) Professional fees 777 910 (133 ) (14.6 ) FDIC insurance premium 434 386 48 12.4 Other expense 6,429 580 5,849 1,008.4 Total noninterest expense $ 20,000 $ 14,303 $ 5,697 39.8 Provision for Income Tax. An income tax benefit of $1.1 million was recorded for the three months ended March 31, 2025, compared to an expense of $447,000 for the three months ended March 31, 2024, due to a period-over-period decrease in income before taxes of $11.0 million. Both periods include a tax penalty estimate for the early surrender of BOLI contracts. The provision also includes accruals for both federal and state income taxes. For additional information, see Note 7 of the Notes to Consolidated Financial Statements contained in Item 1 of this Form 10-Q. 44 Table of Contents 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 March 31, 2025 and 2024. 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 March 31, 2025 2024 Average Interest Average Interest Balance Earned/ Yield/ Balance Earned/ Yield/ Outstanding Paid Rate Outstanding Paid Rate (Dollars in thousands) Interest-earning assets: Loans receivable, net (1) (2) $ 1,641,937 $ 22,231 5.49 % $ 1,661,420 $ 22,767 5.51 % Total investment securities 333,208 3,803 4.63 307,490 3,632 4.75 FHLB dividends 13,609 307 9.15 12,328 282 9.20 Interest-earning deposits in banks 42,917 482 4.55 46,583 645 5.57 Total interest-earning assets (3) 2,031,671 26,823 5.35 2,027,821 27,326 5.42 Noninterest-earning assets 143,077 138,366 Total average assets $ 2,174,748 $ 2,166,187 Interest-bearing liabilities: Interest-bearing demand deposits $ 168,414 $ 260 0.63 $ 165,379 $ 187 0.45 Money market accounts 414,425 2,345 2.29 377,505 1,949 2.08 Savings accounts 216,499 783 1.47 235,784 953 1.63 Certificates of deposit, customer 451,936 4,522 4.06 437,525 4,494 4.13 Certificates of deposit, brokered 158,269 1,827 4.68 205,923 2,529 4.94 Total interest-bearing deposits (4) 1,409,543 9,737 2.80 1,422,116 10,112 2.86 Advances 279,500 2,855 4.14 252,912 2,892 4.60 Subordinated debt 38,370 384 4.06 39,446 394 4.02 Total interest-bearing liabilities 1,727,413 12,976 3.05 1,714,474 13,398 3.14 Noninterest-bearing deposits (4) 243,569 249,283 Other noninterest-bearing liabilities 47,296 40,563 Total average liabilities 2,018,278 2,004,320 Average equity 156,470 161,867 Total average liabilities and equity $ 2,174,748 $ 2,166,187 Net interest income $ 13,847 $ 13,928 Net interest rate spread 2.30 2.28 Net earning assets $ 304,258 $ 313,347 Net interest margin (5) 2.76 2.76 Average interest-earning assets to average interest-bearing liabilities 117.6 % 118.3 % (1) The average loans receivable, net balances include nonaccrual loans. (2) Interest earned on loans receivable includes net deferred costs of ($338,000) and ($171,000) for the three months ended March 31, 2025 and 2024, respectively. (3) Includes interest-earning deposits (cash) at other financial institutions. (4) Cost of all deposits, including noninterest-bearing demand deposits, was 2.39% and 2.43% for the three months ended March 31, 2025 and 2024, respectively. (5) Net interest income divided by average interest-earning assets. 45 Table of Contents Rate/Volume Analysis The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to outstanding balances and changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate. Three Months Ended March 31, 2025 Compared to March 31, 2024 Increase (Decrease) Due to Volume Rate Total Increase (Decrease) (In thousands) Interest-earning assets: Loans receivable, net $ (360 ) $ (176 ) $ (536 ) Investments 285 (114 ) 171 FHLB stock 28 (3 ) 25 Other (1) (52 ) (111 ) (163 ) Total interest-earning assets $ (99 ) $ (404 ) $ (503 ) Interest-bearing liabilities: Interest-bearing demand deposits $ 1 $ 72 $ 73 Money market accounts 185 211 396 Savings accounts (81 ) (89 ) (170 ) Certificates of deposit, customer 126 (98 ) 28 Certificates of deposit, brokered (591 ) (111 ) (702 ) Advances 291 (328 ) (37 ) Subordinated debt (13 ) 3 (10 ) Total interest-bearing liabilities $ (82 ) $ (340 ) $ (422 ) Change in net interest income $ (17 ) $ (64 ) $ (81 ) (1) Includes interest-earning deposits (cash) at other financial institutions. Off-Balance Sheet Activities In the normal course of operations, First Fed engages in a variety of financial transactions that are not recorded in the financial statements. These transactions involve varying degrees of off-balance sheet credit, interest rate and liquidity risks. These transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For the three months ended March 31, 2025 and the year ended December 31, 2024, we engaged in no off-balance sheet transactions likely to have a material effect on our financial condition, results of operations or cash flows. 46 Table of Contents Contractual Obligations At March 31, 2025, our scheduled maturities of contractual obligations were as follows: Within After 1 Year Through After 3 Years Through Beyond Total 1 Year 3 Years 5 Years 5 Years Balance (In thousands) Certificates of deposit $ 500,790 $ 82,031 $ 5,788 $ — $ 588,609 FHLB advances 130,000 105,000 25,000 — 260,000 Line of credit 12,500 — — — 12,500 Subordinated debt obligation — — — 34,591 34,591 Operating leases 1,113 2,284 2,050 11,819 17,266 Borrower taxes and insurance 2,583 — — — 2,583 Deferred compensation 144 247 242 728 1,361 Total contractual obligations $ 647,130 $ 189,562 $ 33,080 $ 47,138 $ 916,910 Commitments and Off-Balance Sheet Arrangements The following table summarizes our commitments and contingent liabilities with off-balance sheet risks as of March 31, 2025: Amount of Commitment by Expiration Within After 1 Year Through After 3 Years Through Beyond Total Amounts 1 Year 3 Years 5 Years 5 Years Committed (In thousands) Unfunded commitments under lines of credit $ 16,755 $ 19,020 $ 8,008 $ 74,392 $ 118,175 Unfunded commitments under existing construction loans 35,519 21,406 — — 56,925 Standby letters of credit 208 — — 200 408 Unfunded commitments under partnership agreements 3,035 — — — 3,035 Total commitments $ 55,517 $ 40,426 $ 8,008 $ 74,592 $ 178,543 Liquidity Management Liquidity is the ability to meet current and future short-term and long-term financial obligations. Our primary sources of funds consist of investment security principal and interest payments, customer and brokered deposit inflows, loan repayments and maturities, sales of securities, borrowings from the FHLB and utilization of the NexBank line of credit. While maturities and scheduled amortization of loans and securities are usually predictable sources of funds, deposit flows, calls of investment securities and borrowed funds, and prepayments on loans and investment securities are greatly influenced by general interest rates, economic conditions and competition, which can cause those sources of funds to fluctuate. Management regularly adjusts our investments in liquid assets based upon an assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of our liquidity management, interest-rate risk and investment policies. Our most liquid assets are cash and cash equivalents followed by available-for-sale securities. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At March 31, 2025, cash and cash equivalents totaled $70.3 million and unpledged securities classified as available-for-sale had a market value of $273.4 million. The Bank pledged collateral of $538.3 million to support borrowings from the FHLB, with a remaining borrowing capacity of $217.6 million at March 31, 2025. The Bank also has an established discount window borrowing arrangement with the FRB, for which available-for-sale securities with a market value of $18.5 million were pledged as of March 31, 2025, providing a borrowing capacity of $17.9 million. First Northwest has a $20.0 million borrowing arrangement with NexBank which is secured by First Northwest's personal property assets (with certain exclusions), including all the outstanding shares of First Fed, cash, loans receivable, and limited partnership investments. The remaining borrowing capacity of the NexBank line of credit was $7.5 million at March 31, 2025. 47 Table of Contents At March 31, 2025, we had commitments to fund $408,000 in standby letters of credit and $175.1 million in undisbursed loans, including $57.1 million in undisbursed construction loan commitments. CDs due within one year as of March 31, 2025, totaled $500.8 million, or 85.1% of CDs with a weighted-average rate of 4.11%. If these maturing deposits are not renewed, we will seek other sources of funds, including other CDs, non-maturity deposits, and borrowings. We can attract and retain deposits by adjusting the interest rates offered and through sales and marketing efforts in the markets we serve. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on CDs. We believe that our branch network, and the general cash flows from our existing lending and investment activities, will provide adequate short-term and long-term liquidity. For additional information, see the Consolidated Statements of Cash Flows in Item 1 of this Form 10-Q. First Fed has a diversified deposit base with approximately 62% of deposit account balances held by consumers, 22% held by business and 8% by public fund depositors, and 8% in brokered deposits. The average deposit account balance, excluding brokered and public fund accounts, was $28,000 at March 31, 2025. We estimate that 20-25% of our customer deposit balances are over the $250,000 FDIC insurance limit, representing less than 5% of deposit customers. Management believes that maintaining a diversified deposit base is an important factor in managing and maintaining adequate levels of liquidity. The Company is a separate legal entity from the Bank and provides for its own liquidity. At March 31, 2025, the Company, on an unconsolidated basis, had liquid assets of $865,000. In addition to its operating expenses, the Company is responsible for paying dividends declared, if any, to its shareholders, and for Company stock repurchases, interest payments on subordinated notes held at the Company level, payments on the NexBank revolving credit facility, and commitments to limited partnership investments. The Company may receive dividends or capital distributions from the Bank, although there may be regulatory limitations on the ability of the Bank to pay dividends. Capital Resources At March 31, 2025, shareholders' equity totaled $146.5 million, or 6.7% of total assets. Our book value per share of common stock was $15.52 at March 31, 2025, compared to $16.45 at December 31, 2024. At March 31, 2025, 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, 2025. Actual Minimum Capital Requirements Minimum Required to be Well-Capitalized Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) Tier 1 leverage capital (to average assets) $ 198,433 9.0 % $ 87,772 4.0 % $ 109,715 5.0 % Common equity tier 1 (to risk-weighted assets) 198,433 12.1 73,776 4.5 106,565 6.5 Tier 1 risk-based capital (to risk-weighted assets) 198,433 12.1 98,368 6.0 131,157 8.0 Total risk-based capital (to risk-weighted assets) 218,878 13.4 131,157 8.0 163,946 10.0 In order to avoid limitations, based on percentages of eligible retained income, on paying dividends, engaging in share repurchases, and paying discretionary bonuses, the Bank must maintain risk-based capital in an amount greater than the required minimum levels plus a capital conservation buffer, comprised of common equity tier 1 capital ("CET1"), of 2.5% of risk-weighted assets. 48 Table of Contents Effect of Inflation and Changing Prices The consolidated financial statements and related financial data presented in this report have been prepared according to GAAP, which require the measurement of financial and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs and the effect that general inflation may have on both short-term and long-term interest rates. Unlike companies in many other industries, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution's performance than do general levels of inflation. Although inflation expectations do affect interest rates, interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. Item 3. Quantitative and Qualitative Disclosures about Market Risk There has not been any material change in the market risk disclosures contained in the 2024 Form 10-K. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures. An evaluation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) was carried out under the supervision and with the participation of the Company's Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial and Accounting Officer), and other members of the Company's management team as of the end of the period covered by this quarterly report. The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures in effect as of March 31, 2025, were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) Changes in Internal Controls. There have been no changes in the Company's internal control over financial reporting (as defined in 13a-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The Company intends to continually review and evaluate the design and effectiveness of its disclosure controls and procedures and to improve its controls and procedures over time and to correct any deficiencies that it may discover in the future. The goal is to ensure that senior management has timely access to all material financial and non-financial information concerning the Company's business. While the Company believes the present design of its disclosure controls and procedures is effective to achieve its goal, future events affecting its business may cause the Company to modify its disclosure controls and procedures. The Company does not expect that its disclosure controls and procedures and internal control over financial reporting will prevent every error or instance of fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns in controls or procedures can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected. 49 Table of Contents PART II - OTHER INFORMATION Item 1. Legal Proceedings From time to time, the Company is engaged in legal proceedings in the ordinary course of business, none of which are currently considered to have a material impact on the Company’s financial position or results of operations other than the matter discussed below. On August 27, 2024, involuntary bankruptcy proceedings were commenced against Creative Technologies, LLC, Water Station Management, LLC and Refreshing USA, LLC (collectively the “OpCo Debtors”), certain of which were borrowers of First Fed. In addition, on September 5, 2024, Ideal Property Investments LLC (“Ideal”), also a borrower of First Fed, filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the Eastern District of Washington. On November 8, 2024, Ideal commenced an adversary proceeding in such bankruptcy proceedings against First Fed (the “Adversary Proceeding”), seeking to avoid certain transactions with First Fed under a theory of constructive fraudulent transfer or, in the alternative, to recharacterize them. Following commencement of the Adversary Proceeding and based on the facts and allegations asserted therein, First Fed determined, in light of its collateral position, that it was not probable that a liability had been incurred and therefore did not establish a legal reserve with respect to the Adversarial Proceeding. A judicial settlement conference was scheduled to begin on April 30, 2025 in which First Fed, the OpCo Debtors, and the Committee of Unsecured Creditors for the OpCo Debtors (the “Committee”) agreed to participate, with the purpose of resolving the Adversary Proceeding and all related claims. On April 27, 2025, the OpCo Debtors and the Committee raised previously unasserted claims relating to First Fed in connection with financial misconduct alleged against Ideal and the OpCo Debtors. As a result of this development, First Fed subsequently reevaluated its collateral position. Additionally, a legal reserve of $5.8 million was established for this matter and is included in other noninterest expense for the quarter ended March 31, 2025. Item 1A. Risk Factors There have been no material changes to the risk factors set forth in Part I. Item 1A of the Company's 2024 Form 10-K. Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities (a) Not applicable. (b) Not applicable. (c) The following table summarizes common stock repurchases during the three months ended March 31, 2025: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Repurchased as Part of Publicly Announced Plans (2) Maximum Number of Shares that May Yet Be Repurchased Under the Plans January 1, 2025 - January 31, 2025 1,640 $ — — 846,123 February 1, 2025 - March 1, 2025 — — — 846,123 March 2, 2025 - April 1, 2025 5,639 — — 846,123 Total 7,279 $ — — (1) Shares repurchased by the Company during the quarter represent shares acquired from restricted stock award participants in connection with the cancellation of restricted stock to pay withholding taxes upon vesting totaling 1,640 shares, 0 shares, and 5,639 shares, respectively, for the periods indicated. (2) On April 25, 2024, the Company announced that its Board of Directors had authorized the repurchase of up to an additional 944,279 shares of its common stock, or approximately 10% of its shares of common stock issued and outstanding as of April 24, 2024. As of March 31, 2025, a total of 98,156 shares, or 10.4% percent of the shares authorized in the April 2024 stock repurchase plan, have been purchased at an average cost of $10.23 per share, leaving 846,123 shares available for future purchases. No shares were repurchased pursuant to the Company's April 2024 stock repurchase plan during the periods indicated. 50 Table of Contents Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information During the fiscal quarter ended March 31, 2025 , no director or officer of First Northwest adopted or terminated a "Rule 10b5 - 1 trading arrangement" or "non-Rule 10b5 - 1 trading arrangement," as each term is defined in Item 408 (a) of Regulation S-K. Item 6. Exhibits Exhibit No. Exhibit Description Filed Herewith Form Original Exhibit No. Filing Date 10.1* First Fed 2025 Executive Officer Incentive Plan X 10.2* First Fed Bank Amended Executive Change in Control Plan X 10.3* Restricted Stock Unit Award Agreement with Matthew P. Deines effective March 7, 2025 X 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act X 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act X 32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act X 101 The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline Extensible Business Reporting Language (iXBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Operations; (3) Consolidated Statements of Comprehensive (Loss) Income; (4) Consolidated Statements of Changes in Shareholders' Equity; (5) Consolidated Statements of Cash Flows; and (6) Selected Notes to Consolidated Financial Statements 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Denotes a management contract or compensatory plan or arrangement. 51 Table of Contents SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST NORTHWEST BANCORP Date: May 12, 2025 /s/ Matthew P. Deines Matthew P. Deines President, Chief Executive Officer and Director (Principal Executive Officer) Date: May 12, 2025 /s/ Phyllis R. Nomura Phyllis R. Nomura Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 52