What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-12 compared with 2024-11-12 · 214 added, 558 removed, 1174 unchanged (40% of the section changed)

3 unchanged sentences

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

September 30, 2024

March 31, 2025

December 31, 2024

12 unchanged sentences

Premises and equipment, net

10,436 18,049

Servicing rights on sold loans, at fair value

Bank-owned life insurance, net

Bank-owned life insurance ("BOLI"), net

31,786 41,150

5 unchanged sentences

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

16,687 17,001

Prepaid expenses and other assets

6 unchanged sentences

Lease liability, net

17,266 17,535

Accrued expenses and other liabilities

4 unchanged sentences

Shareholders' Equity

Preferred stock, $ 0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding

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

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

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

Additional paid-in capital

15 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

Interest and fees on loans receivable

$ 22,231 $ 22,767

Interest on investment securities

2 unchanged sentences

Total interest income

26,823 27,326

INTEREST EXPENSE

Total interest expense

12,976 13,398

Net interest income

13,847 13,928

PROVISION FOR CREDIT LOSSES

7 unchanged sentences

Net gain on sale of loans

Net (loss) gain on sale of investment securities

Net gain on sale of premises and equipment

Increase in cash surrender value of bank-owned life insurance

Increase in BOLI cash surrender value

Income from BOLI death benefit, net

Total noninterest income

9 unchanged sentences

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

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

Net (loss) income attributable to parent

$ ( 9,036 ) $ 396

Basic and diluted (loss) earnings per common share

$ ( 1.03 ) $ 0.04

See selected notes to the consolidated financial statements.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands) (Unaudited)

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income

Other comprehensive income (loss):

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

Amortization of unrecognized DB plan prior service cost

Unrealized holding (losses) gains on derivatives

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

Other comprehensive income (loss), net of tax

Comprehensive income (loss)

Comprehensive loss attributable to noncontrolling interest

Comprehensive income (loss) attributable to parent

See selected notes to the consolidated financial statements.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Three Months Ended September 30, 2024 and 2023

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

Additional Paid-in

Unearned ESOP

Accumulated Other Comprehensive Loss,

Noncontrolling

Total Shareholders'

Balance at June 30, 2023

$ ( 9,036 ) $ 396

2,504 — 2,504

Common stock repurchased

( 1,073 ) — ( 10 ) ( 2 ) ( 12 )

Restricted stock award grants net of forfeitures

Restricted stock awards canceled

( 3,606 ) — ( 43 ) ( 43 )

Other comprehensive loss, net of tax

( 5,784 ) ( 5,784 )

Share-based compensation expense

ESOP shares committed to be released

Cash dividends declared ($ 0.07 per share)

( 673 ) ( 673 )

Balance at September 30, 2023

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

Balance at June 30, 2024

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

( 1,980 ) — ( 1,980 )

Common stock repurchased

( 98,156 ) — ( 991 ) ( 23 ) ( 1,014 )

Restricted stock award grants net of forfeitures

Restricted stock awards canceled

Other comprehensive (loss) income:

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

3,105 ( 747 )

Amortization of unrecognized defined benefit ("DB") plan prior service cost

Reclassification adjustment for change in fair value of hedged items

Other comprehensive income, net of tax

Share-based compensation expense

ESOP shares committed to be released

( 28 ) 164 136

Cash dividends declared ($ 0.07 per share)

( 659 ) ( 659 )

Balance at September 30, 2024

Comprehensive (loss) income

$ ( 6,993 ) $ 567

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Nine Months Ended September 30, 2024 and 2023

For the Three Months Ended March 31, 2025 and 2024

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

2 unchanged sentences

Accumulated Other Comprehensive Loss,

Noncontrolling

Total Shareholders'

1 unchanged sentence

9,611,876 $ 96 $ 95,784 $ 107,349 $ ( 7,253 ) $ ( 32,636 ) $ 163,340

7,808 ( 160 ) 7,648

Common stock repurchased

3 unchanged sentences

( 9,460 ) — ( 148 ) ( 148 )

Other comprehensive loss, net of tax

( 5,307 ) ( 5,307 )

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

( 2,951 ) ( 2,951 )

Close out investment in Quin Ventures

( 3,451 ) 3,451 —

Other comprehensive income, net of tax

Share-based compensation expense

2 unchanged sentences

( 671 ) ( 671 )

Balance at September 30, 2023

Balance at March 31, 2024

9,442,796 $ 94 $ 93,763 $ 106,202 $ ( 7,088 ) $ ( 32,465 ) $ 160,506

2 unchanged sentences

( 9,036 ) ( 9,036 )

Common stock repurchased

( 312,288 ) ( 2 ) ( 3,160 ) ( 895 ) ( 4,057 )

Restricted stock award grants net of forfeitures

7 unchanged sentences

( 656 ) ( 656 )

Balance at September 30, 2024

Balance at March 31, 2025

9,440,618 $ 94 $ 93,450 $ 87,506 $ ( 6,429 ) $ ( 28,129 ) $ 146,492

3 unchanged sentences

(In thousands) (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

12 unchanged sentences

Provision for credit losses on loans

Recapture of provision for credit losses on unfunded commitments

( 113 ) ( 1,024 )

Provision for (recapture of) credit losses on unfunded commitments

Allocation of ESOP shares

2 unchanged sentences

( 11 ) ( 52 )

Loss on sale of securities available for sale, net

Increase in cash surrender value of life insurance, net

Gain on extinguishment of subordinated debt

Increase in BOLI cash surrender value, net

( 372 ) ( 243 )

Income from BOLI death benefit, net

Origination of loans held for sale

1 unchanged sentence

Proceeds from sale of loans held for sale

14,188 21,664

Change in assets and liabilities:

1 unchanged sentence

( 160 ) ( 1,015 )

(Increase) decrease in ROU asset

( 11,268 ) 433

(Increase) decrease in prepaid expenses and other assets

Decrease in ROU asset

Increase in prepaid expenses and other assets

( 11,675 ) ( 6,509 )

(Decrease) increase in accrued interest payable

Decrease in accrued interest payable

( 1,132 ) ( 566 )

Increase (decrease) in lease liabilities

Decrease in lease liabilities

( 269 ) ( 201 )

1 unchanged sentence

( 3,100 ) 1,670

Net cash provided by operating activities

Net cash used by operating activities

( 21,743 ) ( 4,865 )

Cash flows from investing activities:

1 unchanged sentence

Proceeds from maturities, calls, and principal repayments of securities available for sale

Proceeds from sales of securities available for sale

Purchase of FHLB stock

27,957 14,031

Purchase of bank-owned life insurance, net of surrenders

Early surrender of bank-owned life insurance policy

Net increase in loans receivable

Redemption (purchase) of FHLB stock

1,329 ( 2,212 )

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

Early surrender of BOLI policies

Proceeds from BOLI death benefit

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

2 unchanged sentences

Capital contributions to low-income housing tax credit partnerships

Net cash used by investing activities

Net cash provided (used) by investing activities

69,297 ( 78,466 )

3 unchanged sentences

(In thousands) (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from financing activities:

Net increase in deposits

Net decrease in deposits

Proceeds from long-term FHLB advances

1 unchanged sentence

Net (decrease) increase in short-term FHLB advances

Net decrease in line of credit

Redemption of subordinated debt, net

Net increase in line of credit

Net increase in advances from borrowers for taxes and insurance

2 unchanged sentences

Repurchase of common stock

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net cash (used) provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

2 unchanged sentences

Cash paid for interest on deposits and borrowings

Cash paid for income taxes

Supplemental disclosures of noncash investing activities:

2 unchanged sentences

Amortization of unrecognized DB plan prior service cost

Cumulative effect of adoption of ASU 2016-13 Financial Instruments - Credit Losses on January 1, 2023

Lease liabilities arising from obtaining right-of-use assets

Transfer of BOLI receivable to prepaid expenses and other assets due to death benefit accrued but not paid at period end

Series A equity investment acquired upon conversion of commercial business loan

See selected notes to the consolidated financial statements.

8 unchanged sentences

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.

In April 2021, First Northwest entered into an Amended and Restated Joint Venture Agreement (the "Joint Venture Agreement") with the Bank, Peace of Mind, Inc.

("POM"), and Quin Ventures, Inc.

("Quin" or "Quin Ventures").

First Northwest extended $ 8.0 million to Quin Ventures under a capital financing agreement and related promissory note and issued 29,719 shares of the Company's common stock to POM with a value of $ 500,000 .

Quin Ventures sold substantially all of its assets in December 2022 to Quil Ventures, Inc.

("Quil"), at which time POM returned the 29,719 shares previously issued and the joint venture agreement was terminated.

As part of the sale transaction, the Company received a 5 % ownership stake in Quil valued at $ 225,000 and recorded a $ 1.5 million commitment receivable.

In June 2023, First Northwest determined that Quin Ventures was no longer a going concern.

The Company wrote off the remaining investment in Quin Ventures through retained earnings in accordance with applicable non-controlling interest accounting methods.

The noncontrolling interest in Quin Ventures balance was moved to retained earnings, with no change to total shareholders' equity as a result of the transaction.

In December 2023, the Company determined that Quil was no longer a going concern, making the collectability of the receivable from and investment in Quil unlikely.

As result, the related investment of $ 225,000 and commitment receivable of $ 1.5 million were written off during the fourth quarter of 2023, impacting other noninterest income and other noninterest expense, respectively.

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." For periods prior to June 30, 2023, Company references also include Quin Ventures.

First Northwest's business activities generally are limited to passive investment activities and oversight of its investment in First Fed and former controlling interest in Quin Ventures.

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 related disclosures and the Bank and Quin Ventures for income statement related disclosures.

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.

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.

6 unchanged sentences

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

Operating results for the three and nine months ended September 30, 2024 , are not necessarily indicative of the results that may be expected for future periods.

Operating results for the three months ended March 31, 2025 , are not necessarily indicative of the results that may be expected for future periods.

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

1 unchanged sentence

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

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

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

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

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

its wholly owned subsidiary, First Fed, and its former controlling interest in Quin Ventures.

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.

Through June 2023, First Northwest and POM shared equal ownership in Quin Ventures;

however, it was previously determined that First Northwest had a controlling interest for financial reporting purposes under Accounting Standards Codification Topic 810.

The Quin Ventures net loss allocable to POM is shown on the financial statements where applicable through a noncontrolling interest adjustment.

Subsequent events - The Company has evaluated subsequent events for potential recognition and disclosure.

Recently adopted accounting pronouncements

June 2022, the FASB issued ASU

Fair Value Measurement (Topic 820 ):

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

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

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

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

03 is effective for the Company for fiscal years beginning after

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

The adoption of this ASU did

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

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

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, a consensus of the Emerging Issues Task Force .

ASU 2023 - 02 allows an entity the option to apply the proportional amortization method of accounting to other equity investments that are made for the primary purpose of receiving tax credits or other income tax benefits if certain conditions are met.

Prior to this ASU, the application of the proportional amortization method of accounting was limited to investments in low-income housing tax credit structures.

The proportional amortization method of accounting results in the amortization of applicable investments, as well as the related income tax credits or other income tax benefits received, being presented on a single line in the statements of income, income tax expense.

Under this ASU, an entity has the option to apply the proportional amortization method of accounting to applicable investments on a tax-credit-program-by-tax-credit-program basis.

In addition, the amendments in this ASU require that all tax equity investments accounted for using the proportional amortization method use the delayed equity contribution guidance in paragraph 323 - 740 - 25 - 3, requiring a liability to be recognized for delayed equity contributions that are unconditional and legally binding or for equity contributions that are contingent upon a future event when that contingent event becomes probable.

Under this ASU, low-income housing tax credit investments for which the proportional amortization method is not applied can no longer be accounted for using the delayed equity contribution guidance.

Further, this ASU specifies that impairment of low-income housing tax credit investments not accounted for using the equity method must apply the impairment guidance in Subtopic 323 - 10:

Investments - Equity Method and Joint Ventures - Overall .

This ASU also clarifies that for low-income housing tax credit investments not accounted for under the proportional amortization method or the equity method, an entity shall account for them under Topic 321:

Investments - Equity Securities .

The amendments in this ASU also require additional disclosures in interim and annual periods concerning investments for which the proportional amortization method is applied, including (i) the nature of tax equity investments, and (ii) the effect of tax equity investments and related income tax credits and other income tax benefits on the financial position and results of operations.

ASU 2023 - 02 is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted.

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

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

Improvements to Reportable Segment Disclosures .

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

The Company has identified one reporting segment.

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

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

Recently issued accounting pronouncements not yet adopted

In March 2024, the FASB issued ASU 2024 - 01, Compensation—Stock Compensation (Topic 718 ):

4 unchanged sentences

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

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 ):

4 unchanged sentences

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

In November 2024, the FASB issued ASU 2024 - 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.

Note 2 - Securities

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

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available-for-sale at March 31, 2025 are summarized as follows:

Amortized Cost

37 unchanged sentences

58,106 55 ( 3,670 ) 54,491 —

8,664 18 ( 16 ) 8,666 —

Mortgage-backed securities:

4 unchanged sentences

$ 376,265 $ 238 $ ( 36,159 ) $ 340,344 $ —

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

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

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

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 September 30, 2024 :

Less Than Twelve Months

34 unchanged sentences

— — ( 3,670 ) 46,355 ( 3,670 ) 46,355

( 16 ) 3,093 — — ( 16 ) 3,093

Mortgage-backed securities:

4 unchanged sentences

$ ( 653 ) $ 41,933 $ ( 35,506 ) $ 241,991 $ ( 36,159 ) $ 283,924

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

There were 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 .

3 unchanged sentences

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

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

Based on the Company’s evaluation of these securities, no credit impairment was recorded at March 31, 2025 , or December 31, 2024 .

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

1 unchanged sentence

therefore, these securities are shown separately.

September 30, 2024

March 31, 2025

Available-for-Sale

6 unchanged sentences

Due after one through five years

12,267 12,227

Due after five through ten years

42 unchanged sentences

$ 376,265 $ 340,344

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Proceeds from sales

$ — $ — $ 21,048 $ —

Gross realized gains

Gross realized losses

— — ( 2,117 ) —

Note 3 - Loans Receivable

3 unchanged sentences

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

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

Loan amounts are presented at amortized cost which is comprised of the loan balance net of unearned loan fees in excess of unamortized costs and unamortized purchase premiums of $ 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 $ 6.5 million as of September 30, 2024 and $ 6.0 million as of December 31, 2023 , and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the calculation of the allowance for credit losses on loans.

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:

September 30, 2024

March 31, 2025

December 31, 2024

31 unchanged sentences

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

September 30, 2024

March 31, 2025

December 31, 2024

19 unchanged sentences

$ 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 September 30, 2024 and 2023 , was $ 1,000 and $ 19,000 , respectively.

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

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 September 30, 2024 and December 31, 2023 .

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:

90 Days or More

September 30, 2024

March 31, 2025

Past Due Past Due Past Due Past Due Current Total Loans

51 unchanged sentences

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

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

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.

18 unchanged sentences

— 8,722 5,525 1,756 22,957 2,201 — 41,161

Special Mention (Grade 5)

— — 3,330 — — — — 3,330

Total multi-family

58 unchanged sentences

132 45 108 3,444 1,449 4 2,020 7,202

Loss (Grade 8)

— — — — — — 3 3

Total commercial business

10 unchanged sentences

6,827 7,195 8,658 3,874 1,480 1,546 2,020 31,600

Loss (Grade 8)

$ 54,704 $ 195,048 $ 184,328 $ 391,219 $ 375,918 $ 363,936 $ 92,423 $ 1,657,576

$ 149,107 $ 228,901 $ 432,679 $ 401,917 $ 218,058 $ 216,667 $ 87,478 $ 1,734,807

Total gross charge-offs year-to-date

22 unchanged sentences

8,755 — 1,764 23,051 1,278 976 — 35,824

Special Mention (Grade 5)

— 3,785 — — — — — 3,785

Total multi-family

20 unchanged sentences

213 5,531 — 222 — 30 — 5,996

Special Mention (Grade 5)

7,196 — — — — 14 — 7,210

Substandard (Grade 6)

32 unchanged sentences

— 136 1,064 314 — — 3 1,517

Special Mention (Grade 5)

— — 1,279 1,552 — 2 — 2,833

Substandard (Grade 6)

26 unchanged sentences

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

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

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

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

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

At December 31, 2023 , one individually evaluated loan with a recorded investment of $ 2.5 million was evaluated using a discounted cash flow approach and the remaining loans totaling $ 17.5 million were evaluated based on the underlying value of the collateral.

The loan evaluated using the discounted cash flow method was accruing at year end, while the collateral dependent loans were all on nonaccrual status at December 31, 2023.

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.

2 unchanged sentences

Collateral Type

September 30, 2024

Single Family Residence Warehouse Condominium Automobile Business Assets Total

March 31, 2025

Single Family Residence

Office Building

(In thousands)

5 unchanged sentences

7,150 8,120 — 15,270

29 — — — — 29

Auto and other consumer

— — — 241 — 241

Commercial business

— — — — 603 603

Total collateral dependent loans

2 unchanged sentences

December 31, 2024

Single Family Residence Condominium Automobile Business Assets Total

Single Family Residence

Business Assets

(In thousands)

1 unchanged sentence

$ 1,113 $ — $ — $ — $ 1,113

Construction and land

Commercial real estate

— — 11,995 — 11,995

Auto and other consumer

Construction and land

8,150 11,384 — — 19,534

4 unchanged sentences

Modified Loans to Troubled Borrowers.

On January 1, 2023, the Company adopted ASU 2022 - 02, which introduced new reporting requirements for modifications of loans to borrowers experiencing financial difficulty.

The Company refers to these loans as modified loans to troubled borrowers ("MLTB").

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.

3 unchanged sentences

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

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

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

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

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

The borrower continues to make interest-only payments and the loan was current at year end based on the modified terms.

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

5 unchanged sentences

The reserve is an estimate based upon factors and trends at the time the financial statements are prepared.

The Company adopted ASU 2016 - 13 effective January 1, 2023, which increased the beginning ACLL.

The Company has identified segments of loans with similar risk characteristics for which it then applies one of two loss methodologies.

6 unchanged sentences

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

At or For the Three Months Ended September 30, 2024

Beginning Balance

(Recapture of) Provision for Credit Losses

Ending Balance

(In thousands)

One-to-four family

$ 4,536 $ — $ 42 $ ( 270 ) $ 4,308

1,624 — — 965 2,589

Commercial real estate

3,132 — — ( 495 ) 2,637

Construction and land

801 — — ( 85 ) 716

1,692 — — ( 446 ) 1,246

Auto and other consumer

2,596 ( 492 ) 24 805 2,933

Commercial business

4,962 ( 24 ) — 2,603 7,541

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

At or For the Nine Months Ended September 30, 2024

Beginning Balance

Provision for (Recapture of) Credit Losses

Ending Balance

(In thousands)

One-to-four family

$ 2,975 $ — $ 44 $ 1,289 $ 4,308

1,154 — — 1,435 2,589

Commercial real estate

3,671 — — ( 1,034 ) 2,637

Construction and land

1,889 ( 3,978 ) — 2,805 716

1,077 — — 169 1,246

Auto and other consumer

4,409 ( 2,130 ) 268 386 2,933

Commercial business

2,335 ( 2,700 ) — 7,906 7,541

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

At or For the Three Months Ended September 30, 2023

At or For the Three Months Ended March 31, 2025

Beginning Balance

3 unchanged sentences

One-to-four family

$ 3,012 $ — $ — $ 526 $ 3,538

1,041 — — 230 1,271

Commercial real estate

2,924 — — ( 390 ) 2,534

Construction and land

2,535 — — ( 352 ) 2,183

1,125 — — 178 1,303

Auto and other consumer

4,795 ( 731 ) ( 501 ) 601 4,164

Commercial business

1,865 — — 87 1,952

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

At or For the Nine Months Ended September 30, 2023

At or For the Three Months Ended March 31, 2024

Beginning Balance

Impact of Day 1 CECL Adoption

Adjusted Beginning Balance

Provision for (Recapture of) Credit Losses

Provision for (Recapture

of) Credit Losses

Ending Balance

1 unchanged sentence

One-to-four family

$ 3,343 $ ( 429 ) $ 2,914 $ — $ 4 $ 620 $ 3,538

2,468 ( 1,449 ) 1,019 — — 252 1,271

Commercial real estate

4,217 ( 604 ) 3,613 — — ( 1,079 ) 2,534

Construction and land

2,344 1,555 3,899 — — ( 1,716 ) 2,183

549 346 895 ( 11 ) 5 414 1,303

Auto and other consumer

2,024 2,381 4,405 ( 2,657 ) 84 2,332 4,164

Commercial business

786 794 1,580 — — 372 1,952

385 ( 385 ) — — — — —

$ 16,116 $ 2,209 $ 18,325 $ ( 2,668 ) $ 93 $ 1,195 $ 16,945

Allowance for Credit Losses on Unfunded Loan Commitments.

3 unchanged sentences

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

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

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

Note 5 - Premises and Equipment

Premises and equipment consist of the following as of:

September 30, 2024

December 31, 2023

(In thousands)

$ 676 $ 2,907

Building improvements

11,235 17,945

Furniture, fixtures, and equipment

Construction in progress

Total premises and equipment

23,796 35,618

Less accumulated depreciation and amortization

( 13,360 ) ( 17,569 )

Premises and equipment, net of accumulated depreciation and amortization

$ 10,436 $ 18,049

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

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

Note 6 - Leases

The Bank has lease agreements with unaffiliated parties for fifteen locations, comprised of eleven full-service branches, three business centers, and a parking easement.

Lease expirations range from one to twenty years, with additional renewal options on certain leases ranging from two to ten years.

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

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

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

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

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Operating cash flows from operating leases

$ 700 $ 284 $ 1,564 $ 857

Right of use assets obtained in exchange for new operating lease liabilities

— 152 12,158 152

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

September 30, 2024

December 31, 2023

Weighted-average remaining lease term of operating leases (in years)

Weighted-average discount rate of operating leases

All lease agreements require the Bank to pay its pro-rata share of building operating expenses.

The minimum annual lease payments under non-cancelable operating leases with initial or remaining terms of one year or more through the initial lease term are as follows:

Twelve-month period ending:

(In Thousands)

September 30, 2025

September 30, 2026

September 30, 2027

September 30, 2028

September 30, 2029

Total minimum payments required

Less imputed interest

Present value of lease liabilities

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:

September 30, 2024

March 31, 2025

December 31, 2024

10 unchanged sentences

235,188 1.61 205,055 1.35

Certificates of deposit, retail

Certificates of deposit, customer

450,663 3.97 464,928 4.18

3 unchanged sentences

$ 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 September 30, 2024 and December 31, 2023 , were $ 170.7 million and $ 173.8 million, respectively.

The aggregate amount of time deposits in excess of the Federal Deposit Insurance Corporation ("FDIC") insured limit, currently $250,000, at 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:

September 30, 2024

March 31, 2025

December 31, 2024

7 unchanged sentences

After three years through four years

24,305 28,302

After four years through five years

20,506 22,817

Total certificates of deposit

$ 588,609 $ 647,842

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

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

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

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

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

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

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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Demand deposits

$ 187 $ 204 $ 567 $ 599

Money market accounts

2,875 1,146 7,244 2,866

Savings accounts

923 918 2,791 2,056

Certificates of deposit, retail

4,340 3,505 12,913 8,323

Certificates of deposit, customer

Certificates of deposit, brokered

2,635 1,926 7,737 4,417

Total interest expense on deposits

6 unchanged sentences

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

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

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

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

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 $ 18.7 million and $ 6.6 million at September 30, 2024 and December 31, 2023 , respectively.

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 $ 19.3 million and $ 6.9 million were pledged to the FRB at September 30, 2024 and December 31, 2023 , respectively.

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.

2 unchanged sentences

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.

1 unchanged sentence

The line of credit matures on May 17, 2025 .

In June 2023, First Fed established a Bank Term Funding Program ("BTFP") borrowing arrangement with the FRB as an additional source of liquidity.

Available borrowing capacity was $ 15.2 million at December 31, 2023.

No funds were borrowed between June 2023 and March 2024, when the BTFP stopped funding new loans, effectively ending the Bank's participation in the program.

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

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

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.

1 unchanged sentence

FHLB Overnight Variable-Rate Advances

FRB Discount Window

Line of Credit

10 unchanged sentences

3.88 % 4.53 % 8.00 % 4.50 %

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

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:

Weighted- Average Interest Rate

11 unchanged sentences

FHLB Overnight Variable-Rate Advances

FHLB Short-Term Fixed-Rate Advances

Line of Credit

16 unchanged sentences

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

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

The effective tax rates differ from the statutory maximum federal tax rate for 2024 and 2023 of 21 %, largely due to the nontaxable earnings on bank-owned life insurance ("BOLI") and tax-exempt interest income earned on certain investment securities and loans.

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

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.

Note 8 - Earnings (Loss) per Common Share

3 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands, except share data)

2 unchanged sentences

Dividends and undistributed earnings allocated to participating securities

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

(Loss) earnings allocated to common shareholders

11 unchanged sentences

Dilutive restricted stock awards

— 28,356 — 20,013

Total diluted weighted average common shares outstanding

5 unchanged sentences

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

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

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

5 unchanged sentences

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

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

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.

2 unchanged sentences

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

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

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

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:

September 30, 2024

March 31, 2025

December 31, 2024

14 unchanged sentences

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

As of September 30, 2024 , there were 210,093 total shares available for grant under the 2020 EIP, all of which are available to be granted as restricted shares.

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

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

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

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.

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

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

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

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

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

Three Months Ended September 30, 2024

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

Weighted-Average Grant Date Fair Value

Non-vested at July 1, 2024

108,143 $ 15.60

( 4,956 ) 15.70

( 867 ) 15.70

( 1,288 ) 20.19

Non-vested at September 30, 2024

114,075 14.84

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

The surrendered shares are canceled and are unavailable for reissue.

Nine Months Ended September 30, 2024

Shares Weighted-Average Grant Date Fair Value

Non-vested at January 1, 2025

96,022 $ 17.02

( 48,338 ) 17.00

( 12,027 ) 17.00

( 2,763 ) 16.62

Non-vested at September 30, 2024

114,075 14.84

Non-vested at March 31, 2025

The surrendered shares are canceled and are unavailable for reissue.

As of September 30, 2024 , there was $ 1.1 million of total unrecognized compensation cost related to non-vested shares granted as restricted stock awards.

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 unchanged sentences

Such instruments are classified as Level 3.

Equity and partnership investments :

Management determines fair value using quoted prices of similar investments or discounted cash flows, which are considered Level 2, when available.

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

The Company believes that the net asset value obtained through financial statements provided by each partnership approximates fair value.

Such instruments are classified as Level 3.

Sold loan servicing rights, at fair value :

1 unchanged sentence

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

Loans receivable, net :

The fair value of loans is estimated by discounting the future cash flows using the current rate at which similar loans and leases would be made to borrowers with similar credit and for the same remaining maturities.

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

Interest rate swap derivative :

8 unchanged sentences

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

September 30, 2024

March 31, 2025

Quoted Prices in Active Markets for Identical Assets or Liabilities

5 unchanged sentences

Municipal bonds

$ 5,054 $ 76,309 $ — $ 81,363

— 13,296 — 13,296

ABS corporate

— 16,391 — 16,391

Corporate debt

1,945 52,113 — 54,058

— 9,317 — 9,317

— 78,549 — 78,549

MBS non-agency

— 40,791 17,095 57,886

Sold loan servicing rights

— — 3,584 3,584

Equity and partnership investments

— 1,762 12,650 14,412

Total assets measured at fair value

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

Financial Liabilities

Interest rate swap derivative

$ — $ 2,749 $ — $ 2,749

December 31, 2024

6 unchanged sentences

Municipal bonds

$ 5,118 $ 82,643 $ — $ 87,761

— 11,782 — 11,782

ABS corporate

— 5,286 — 5,286

Corporate debt

1,883 49,571 — 51,454

— 63,247 — 63,247

MBS non-agency

— 48,624 27,469 76,093

Sold loan servicing rights

— — 3,793 3,793

Partnership investments

— — 13,183 13,183

Interest rate swap derivative

Total assets measured at fair value

$ 7,001 $ 261,153 $ 44,445 $ 312,599

Financial Liabilities

Interest rate swap derivative

$ — $ 1,002 $ — $ 1,002

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:

September 30, 2024

March 31, 2025

Fair Value (In thousands)

11 unchanged sentences

Offered quotes

Partnership investments

$ 12,650 Net asset value per share

Net asset value

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

13 unchanged sentences

Offered quotes

Partnership investments

$ 13,183 Net asset value per share

Net asset value

(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 September 30,

As of or For the Nine Months Ended September 30,

As of or For the Three Months Ended March 31,

Sold loan servicing rights:

1 unchanged sentence

Balance at beginning of period

$ 3,740 $ 3,825 $ 3,793 $ 3,887

Servicing rights that result from transfers and sale of financial assets

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

( 161 ) ( 167 ) ( 247 ) ( 303 )

Balance at end of period

$ 3,584 $ 3,729 $ 3,584 $ 3,729

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

As of or For the Three Months Ended September 30,

As of or For the Nine Months Ended September 30,

As of or For the Three Months Ended March 31,

Securities available for sale:

2 unchanged sentences

Balance at beginning of period

$ 17,231 $ 29,378 $ 27,469 $ 29,599

Principal payments received

( 148 ) — ( 10,530 ) —

Unrealized Gains (Losses)

12 ( 186 ) 156 ( 407 )

Balance at end of period

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

As of or For the Three Months Ended September 30,

As of or For the Nine Months Ended September 30,

Partnership investments:

(In thousands)

Balance at beginning of period

$ 12,823 $ 12,733 $ 13,183 $ 12,563

Funding contributions (1)

80 126 6,386 335

Distributions received (1)

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

Unrealized Gains (Losses)

30 ( 15 ) ( 137 ) 293

Principal payments and maturities

Unrealized Gains

Balance at end of period

$ 12,650 $ 12,787 $ 12,650 $ 12,787

( 1 ) In the second quarter of 2024, a redemption of First Northwest's limited partnership investment in Meriwether Group Hero Fund LP was offset by a subsequent limited partnership investment in the same entity by First Fed.

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.

1 unchanged sentence

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

September 30, 2024

March 31, 2025

(In thousands)

Individually evaluated collateral dependent loans

$ — $ — $ 27,181 $ 27,181

December 31, 2024

1 unchanged sentence

Individually evaluated collateral dependent loans

$ — $ — $ 17,388 $ 17,388

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

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:

September 30, 2024

March 31, 2025

Fair Value Measurements Using:

4 unchanged sentences

Cash and cash equivalents

$ 82,722 $ 82,722 $ 82,722 $ — $ —

Investment securities available for sale

310,860 310,860 6,999 286,766 17,095

Loans held for sale

378 378 — 378 —

Loans receivable, net

1,714,416 1,580,047 — — 1,580,047

14,435 14,435 — 14,435 —

Accrued interest receivable

8,939 8,939 — 8,939 —

Sold loan servicing rights, at fair value

3,584 3,584 — — 3,584

Equity and partnership investments

14,412 14,412 — 1,762 12,650

Financial liabilities

Demand deposits

$ 1,066,271 $ 1,066,271 $ 1,066,271 $ — $ —

Time deposits

645,370 647,583 — — 647,583

FHLB Borrowings

290,000 290,119 — — 290,119

Line of Credit

5,500 5,525 — — 5,525

Subordinated debt, net

39,494 42,016 — — 42,016

Accrued interest payable

2,153 2,153 — 2,153 —

Interest rate swap derivative

2,749 2,749 — 2,749 —

December 31, 2024

5 unchanged sentences

Cash and cash equivalents

$ 123,169 $ 123,169 $ 123,169 $ — $ —

Investment securities available for sale

295,623 295,623 7,001 261,153 27,469

Loans held for sale

753 753 — 753 —

Loans receivable, net

1,642,518 1,506,130 — — 1,506,130

13,664 13,664 — 13,664 —

Accrued interest receivable

7,894 7,894 — 7,894 —

Sold loan servicing rights, at fair value

3,793 3,793 — — 3,793

Partnership investments

13,183 13,183 — — 13,183

Interest rate swap derivative

Financial liabilities

Demand deposits

1,025,854 $ 1,025,854 $ 1,025,854 $ — $ —

Time deposits

651,038 648,428 — — 648,428

FHLB Borrowings

275,000 271,284 — — 271,284

Line of Credit

6,500 6,524 — — 6,524

Subordinated debt, net

39,436 42,116 — — 42,116

Accrued interest payable

3,396 3,396 — 3,396 —

Interest rate swap derivative

1,002 1,002 — 1,002 —

Note 12 - Change in Accumulated Other Comprehensive Income ("AOCI")

2 unchanged sentences

Unrealized Gains and Losses on Available-for-Sale Securities

Net Actuarial Gains (Losses) on Defined Benefit Plan Assets

Unrecognized Defined Benefit Plan Prior Service Cost, Net of Amortization

Unrealized Gains and Losses on Derivatives

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

(In thousands)

Balance at June 30, 2023

Other comprehensive (loss) income before reclassification

Amounts reclassified from accumulated other comprehensive income

Net other comprehensive (loss) income

Balance at September 30, 2023

Balance at June 30, 2024

Other comprehensive income (loss) before reclassification

Amounts reclassified from accumulated other comprehensive income

Net other comprehensive income

Balance at September 30, 2024

Balance at December 31, 2023

Other comprehensive (loss) income before reclassification

Other comprehensive loss before reclassification

Amounts reclassified from accumulated other comprehensive income

Net other comprehensive (loss) income

Balance at September 30, 2023

Balance at March 31, 2024

Balance at December 31, 2024

Other comprehensive income (loss) before reclassification

Other comprehensive income before reclassification

Amounts reclassified from accumulated other comprehensive income

Net other comprehensive income

Balance at September 30, 2024

Net other comprehensive income (loss)

Balance at March 31, 2025

Note 13 - Derivatives and Hedging Activities

5 unchanged sentences

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, the Secured Overnight Financing Rate.

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.

The fair value hedges are recorded as components of other assets and other liabilities in the Company’s consolidated balance sheets.

The gain or loss on these derivatives, as well as the offsetting loss or gain on the hedged items attributable to the hedged risk, are recognized in interest income in the Company’s consolidated statements of income.

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.

2 unchanged sentences

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

September 30, 2024

March 31, 2025

Investment securities (1)

2 unchanged sentences

$ 151,326 $ 1,326

$ 153,012 $ 3,012

December 31, 2024

1 unchanged sentence

$ 50,220 $ 220

Loans receivable (2)

99,812 ( 188 )

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

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

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

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

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.

The following table summarizes the Company’s derivative instruments at the date indicated.

3 unchanged sentences

(In thousands)

September 30, 2024

March 31, 2025

Fair value hedges:

7 unchanged sentences

$ 50,000 $ — $ 123

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

Three Months Ended September 30,

Nine Months Ended September 30,

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,

(In thousands)

8 unchanged sentences

Recognized on derivatives designated as hedging instruments

( 1,102 ) — ( 1,350 ) ( 254 )

Interest rate swaps - loans

2 unchanged sentences

Recognized on derivatives designated as hedging instruments

( 300 ) — ( 1,544 ) —

Net income recognized on fair value

Net (expense) income recognized on fair value hedges

$ ( 7 ) $ 361

(1) Fair value hedge on loans initiated in 2024.

Amounts presented for 2023 are limited to the fair value hedge on securities.

Credit Risk-related Contingent Features

4 unchanged sentences

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

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

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

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

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.

3 unchanged sentences

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, chief operating officer and the chief executive officer.

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").

3 unchanged sentences

Net income is used to monitor budget versus actual results and assess the performance of the Bank.

Note 17 - Sale and Leaseback of Premises

On January 30, 2024, the Bank entered into an agreement for the purchase and sale of real property (the "Sale Agreement") with Mountainseed Real Estate Services, LLC, a Georgia limited liability company ("Mountainseed"), providing for the Bank’s sale to Mountainseed of up to six properties (the "Properties").

All of the Properties are currently operated as branches and located in Clallam County, Washington or Jefferson County, Washington.

Upon signing the agreement, the Company classified the related properties as held for sale and presented them separately on the Consolidated Balance Sheets at cost, net of accumulated amortization.

The sale of all six properties was completed on May 7, 2024, for an aggregate cash sales price of $ 14.7 million.

A pre-tax gain on sale of $ 7.9 million was recorded in noninterest income for the second quarter of 2024.

Premises and equipment, net of depreciation, decreased by $ 6.8 million in the second quarter of 2024.

Concurrent with the closing of the sale of the Properties, the Bank entered into triple net lease agreements (the "Lease Agreements") to lease back each of the Properties sold.

Each Lease Agreement has an initial term of 15 years with one 15 -year renewal option.

Going forward, a monthly rent expense of $ 130,000 in the aggregate for all Properties will be recorded in Occupancy and Equipment.

The total estimated rent expense for the leaseback of these properties for 2024 is $ 1.0 million.

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

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

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.

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

What changed 10-Q

Item 1. Financial Statements