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Item 8. Financial Statements and Supplementary Data

2026-03-12 compared with 2025-03-13 · 491 added, 461 removed, 1963 unchanged (33% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm ( Moss Adams LLP , Everett, Washington , PCAOB ID:

Report of Independent Registered Public Accounting Firm ( Baker Tilly US, LLP , Everett, Washington , PCAOB ID:

Consolidated Balance Sheets, December 31, 2025 and 2024

Consolidated Statements of Operations For the Years Ended December 31, 2025 and 2024

Consolidated Statements of Comprehensive (Loss) Income For the Years Ended December 31, 2024 and 2023

Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31, 2025 and 2024

Consolidated Statements of Changes in Shareholders' Equity For the Years Ended December 31, 2025 and 2024

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First Northwest Bancorp and Subsidiary

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of First Northwest Bancorp and Subsidiary (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive (loss) income, shareholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework ( 2013 ) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2025 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of First Northwest Bancorp and Subsidiary (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2025 and 2024, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal

control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans

Critical Audit Matter Description

As described in Notes 1 and 4 to the consolidated financial statements, the Company’s consolidated allowance for credit losses on loans (ACLL) balance was $17 million as of December 31, 2025.

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Baseline loss rates are calculated using peer institution data related to historical losses.

Historical losses are adjusted for management’s consideration of the forecasted direction of the economic environment.

Historical losses are adjusted for management’s consideration of the forecasted direction of the economic and business environment.

The Company also considers other qualitative risk factors to adjust the estimated ACLL.

How We Addressed the Matter in Our Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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● Performing an independent sensitivity analysis to evaluate the reasonableness of the qualitative risk factors used by management.

/s/ Moss Adams LLP

Everett, Washington

March 13, 2025

We have served as the Company's auditor since 2002.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

First Northwest Bancorp and Subsidiary

Opinion on Internal Control over Financial Reporting

We have audited First Northwest Bancorp and Subsidiary's (the "Company") internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheets of First Northwest Bancorp and Subsidiary as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive (loss) income, shareholders' equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”) and our report dated March 13, 2025 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting included in Item 9A.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of the assets of the company;

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ Moss Adams LLP

/s/ Baker Tilly US, LLP

Everett, Washington

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CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(dollars in thousands, except share data)

December 31, 2025

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Premises and equipment, net

10,129 18,049

Servicing rights on sold loans, at fair value

Bank-owned life insurance, net

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

42,382 41,150

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

15,596 17,001

Prepaid expenses and other assets

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Lease liability, net

16,439 17,535

Accrued expenses and other liabilities

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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 9,353,348 at December 31, 2024;

issued and outstanding 9,611,876 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;

9,467,925 and 9,353,348 shares issued and outstanding at December 31, 2025 and 2024, respectively

Additional paid-in capital

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CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(dollars in thousands, except per share data)

For the Year Ended December 31,

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Interest and fees on loans receivable

$ 90,290 $ 93,752

Interest on investment securities

13,484 15,025

Interest-bearing deposits and other

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Total interest income

107,001 112,340

INTEREST EXPENSE

37,020 42,427

12,682 13,593

Total interest expense

49,702 56,020

Net interest income

57,299 56,320

PROVISION FOR CREDIT LOSSES

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Recapture of provision for credit losses on unfunded commitments

( 5 ) ( 218 )

Provision for credit losses

Net interest income after provision for credit losses

49,984 39,822

NONINTEREST INCOME

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Net gain on sale of premises and equipment

Increase in cash surrender value of bank-owned life insurance, net

Income from death benefit on bank-owned life insurance, net

Other (loss) income

Increase in BOLI cash surrender value, net

Income from BOLI death benefit, net

Other income (loss)

3,791 ( 694 )

Total noninterest income

11,639 12,614

NONINTEREST EXPENSE

Compensation and benefits

28,808 32,665

Data processing

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FDIC insurance premium

Legal settlement paid

Other expense

Total noninterest expense

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

(Benefit) provision for income taxes

Net (loss) income

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

Net (loss) income attributable to parent

Basic and diluted (loss) earnings per common share

67,057 59,993

Loss before benefit from provision for income taxes

( 5,434 ) ( 7,557 )

Benefit from provision for income taxes

( 1,243 ) ( 944 )

$ ( 4,191 ) $ ( 6,613 )

Basic and diluted loss per common share

$ ( 0.48 ) $ ( 0.75 )

See accompanying notes to the consolidated financial statements.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

For the Year Ended December 31,

Net (loss) income

Other comprehensive (loss) income:

$ ( 4,191 ) $ ( 6,613 )

Other comprehensive income (loss):

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

Net actuarial (losses) gains on defined benefit ("DB") plan assets

( 2,230 ) ( 63 )

Net actuarial gains (losses) on defined benefit ("DB") plan assets

Amortization of unrecognized DB plan prior service cost

( 31 ) ( 32 )

Reclassification adjustment for change in fair value of hedged items

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Other comprehensive income, net of tax

Comprehensive (loss) income

Comprehensive loss attributable to noncontrolling interest

Comprehensive (loss) income attributable to parent

Comprehensive income (loss)

$ 3,583 $ ( 4,149 )

See accompanying notes to the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(In thousands, except share data)

(dollars in thousands, except share data)

Additional Paid-in

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Accumulated Other Comprehensive Loss

Noncontrolling

Total Shareholders'

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Other comprehensive income, net of tax

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 —

Share-based compensation

ESOP shares committed to be released

( 37 ) 659 622

Cash dividends declared and paid ($ 0.28 per share)

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( 4,191 ) ( 4,191 )

Common stock repurchased

( 312,288 ) ( 3 ) ( 3,160 ) ( 894 ) ( 4,057 )

Restricted stock award grants, net of forfeitures

125,798 2 — 2

Restricted stock awards canceled

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(dollars in thousands)

For the Year Ended December 31,

Cash flows from operating activities:

Net (loss) income before noncontrolling interest

Adjustments to reconcile net (loss) income to net cash from operating activities:

$ ( 4,191 ) $ ( 6,613 )

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

Depreciation and amortization

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Accretion of deferred loan fees and purchased premiums, net

( 1,784 ) ( 1,535 )

Amortization of debt issuance costs

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Additions to servicing rights on sold loans, net

( 13 ) ( 38 )

Provision for credit losses on loans

Recapture of provision for credit losses on unfunded commitments

Deferred federal income taxes, net

( 5 ) ( 218 )

Deferred income taxes, net

( 2,014 ) ( 1,409 )

Allocation of ESOP shares

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Gain on sale of loans, net

( 112 ) ( 312 )

Loss on sale of securities available for sale, net

Gain on extinguishment of subordinated debt

Increase in cash surrender value of life insurance, net

( 1,889 ) ( 1,179 )

Income from death benefit on bank-owned life insurance, net

( 1,059 ) ( 1,536 )

Origination of loans held for sale

( 25,166 ) ( 22,197 )

Proceeds from loans held for sale

31,168 22,790

Legal settlement paid

Insurance reimbursement

Change in assets and liabilities:

Increase in accrued interest receivable

(Increase) decrease in ROU asset

Decrease (increase) in accrued interest receivable

1,661 ( 265 )

Decrease (increase) in ROU asset

1,405 ( 10,954 )

Decrease in prepaid expenses and other assets

(Decrease) increase in accrued interest payable

Increase (decrease) in lease liabilities

Increase in accrued expenses and other liabilities

Net cash provided by operating activities

Decrease in accrued interest payable

( 2,072 ) ( 101 )

(Decrease) increase in lease liabilities

( 1,096 ) 11,107

(Decrease) increase in accrued expenses and other liabilities

( 3,293 ) 3,890

Net cash (used) provided by operating activities

( 2,758 ) 16,876

Cash flows from investing activities:

Purchase of securities available for sale

( 5,534 ) ( 99,963 )

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

85,976 33,874

Proceeds from sales of securities available for sale

Purchase of FHLB stock

Redemption (purchase) of FHLB stock

1,330 ( 771 )

Early surrender of bank-owned life insurance policy

Purchase of bank-owned life insurance

( 9,109 ) ( 14,616 )

Proceeds from bank-owned life insurance death benefit

Net increase in loans receivable

Sale (purchase) of premises and equipment, net of amortization

Net decrease (increase) in loans receivable

49,762 ( 47,849 )

Proceeds from sale of premises and equipment

Capital contributions to partnership investments

( 990 ) ( 6,502 )

Redemption of partnership investment

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Capital contributions to low-income housing tax credit partnerships

Net cash used by investing activities

( 1,051 ) ( 2,011 )

Net cash provided (used) by investing activities

132,938 ( 87,066 )

See accompanying notes to the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(dollars in thousands)

For the Year Ended December 31,

Cash flows from financing activities:

Net increase in deposits

Net (decrease) increase in deposits

$ ( 88,925 ) $ 11,134

Proceeds from long-term FHLB advances

30,000 105,000

Repayment of long-term FHLB advances

Net (decrease) increase in short-term FHLB advances

Net increase (decrease) in line of credit

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

( 30,000 ) ( 25,000 )

Net decrease in short-term FHLB advances

( 30,000 ) ( 65,000 )

Redemption of subordinated debt, net

Net increase in line of credit

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

Payment of dividends

( 1,318 ) ( 2,645 )

Restricted stock awards canceled

( 113 ) ( 187 )

Repurchase of common stock

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net cash (used) provided by financing activities

( 117,511 ) 19,469

Net increase (decrease) in cash and cash equivalents

12,669 ( 50,721 )

Cash and cash equivalents at beginning of year

72,448 123,169

Cash and cash equivalents at end of year

$ 85,117 $ 72,448

Supplemental disclosures of cash flow information:

Cash paid for interest on deposits and borrowings

$ 51,832 $ 56,121

Cash paid for income taxes

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Change in unrealized loss on securities available for sale

Change in unrealized gain (loss) on fair value hedge

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

$ 10,382 $ 2,406

Change in unrealized (loss) gain on fair value hedge

Change in unrealized gain (loss) on DB Plan

Amortization of unrecognized DB plan prior service cost

Loan principal transferred from held-for-investment to held-for-sale

Loan principal transferred to real estate owned and repossessed assets, net

Lease liabilities arising from obtaining right-of-use assets

Series A equity investment acquired upon conversion of commercial business loan

Write-down of equity investment

Loss on equity investment in QUIL received through Quin Ventures asset sale

See accompanying notes to the consolidated financial statements.

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Nature of operations - 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 were contributed to the Bank upon Conversion.

At the time of Conversion, the Bank established a liquidation account in an amount equal to its total net worth, approximately $ 79.7 million, as of June 30, 2014, the latest statement of financial condition appearing in First Northwest's prospectus.

The liquidation account is maintained for the benefit of eligible depositors who continue to maintain their accounts at the Bank after the Conversion.

The liquidation account is reduced annually to the extent that eligible depositors have reduced their qualifying deposits.

Subsequent increases will not restore an eligible holder’s interest in the liquidation account.

In the event of a complete liquidation, each eligible depositor will be entitled to receive a distribution from the liquidation account in an amount proportionate to the current adjusted qualifying balances for accounts then held.

The liquidation account balance is not available for payment of dividends, and the Bank may not pay dividends if those dividends would reduce equity capital below the required liquidation account amount.

Pursuant to the Conversion, the Bank’s Board of Directors adopted an ESOP which purchased in the open market 8 % of the common stock originally issued for a total of 1,048,029 shares.

As of December 15, 2015, 1,048,029 shares, or 100.0 % of the total, had been purchased.

As of December 31, 2024 , First Northwest had allocated 492,208 shares from the total shares purchased to participants.

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 non-banking 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 investments in First Fed and former controlling interest in Quin Ventures.

Accordingly, the information set forth in this report, including the consolidated 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 BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Northwest and the Bank are collectively referred to as the "Company." On August 5, 2022, First Northwest's election to be treated as a financial holding company became effective, allowing the Company to engage in non-banking activities that are financial in nature or incidental to financial activities.

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 financial statements and related data, relates primarily to the Bank.

The Bank is a community-oriented financial institution providing commercial and consumer banking services to individuals and businesses primarily in western Washington State with offices in Clallam, Jefferson, Kitsap, King, Snohomish and Whatcom counties.

These services include deposit and lending transactions that are supplemented with borrowing and investing activities.

Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make assumptions.

2 unchanged sentences

Material estimates that are particularly susceptible to significant change in the near term relate to a determination of the allowance for credit losses, fair value of financial instruments, deferred tax assets and liabilities, and the valuation of collateral-dependent loans.

Principles of consolidation - The accompanying consolidated financial statements include the accounts of First Northwest Bancorp and its wholly owned subsidiary, First Fed, and its former controlling interest in Quin Ventures, Inc.

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 810.

As a result, 100% of Quin Ventures balances, excluding intercompany activity, are reported in the consolidated financial statements presented.

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

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

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( 1 ) held-to-maturity, ( 2 ) available-for-sale, or ( 3 ) trading.

First Fed had no trading securities at December 31, 2024 and 2023 .

Investment securities are categorized as held-to-maturity when First Fed has the positive intent and ability to hold those securities to maturity.

First Fed had no held-to-maturity securities at December 31, 2024 and 2023 .

First Fed had no held-to-maturity or trading securities at December 31, 2025 and 2024 .

Securities that are held-to-maturity are stated at cost and adjusted for amortization of premiums and accretion of discounts, which are recognized as adjustments to interest income.

Investment securities categorized as available for sale are generally held for investment purposes (to maturity), although unanticipated future events may result in the sale of some securities.

Available-for-sale securities are recorded at fair value, with the unrealized holding gain or loss reported in other comprehensive income (OCI), net of tax, as a separate component of shareholders' equity.

Available-for-sale securities are recorded at fair value, with the unrealized holding gain or loss reported in other comprehensive income, net of tax, as a separate component of shareholders' equity.

Realized gains or losses are determined using the amortized cost basis of securities sold using the specific identification method and are included in earnings.

52 unchanged sentences

We may pay a purchase premium or receive a purchase discount on fully originated loans that we purchase.

Premiums and discounts are capitalized at the time of purchase and amortized as an adjustment to the yield over the contractual life using the effective interest method.

Premiums and discounts are capitalized at the time of purchase and amortized as an adjustment to the yield over the contractual life using the effective interest method and included in interest income.

Allowance for credit losses - On January 1, 2023, the Company adopted Financial Accounting Standards Board ("FASB") ASU 2016 - 13 Financial Instruments - Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments , as amended, which replaces the incurred loss methodology with a current expected credit loss ("CECL") methodology.

The allowance for credit losses on loans ("ACLL") is a valuation account that is deducted from the amortized cost of loans receivable to present the net amount expected to be collected.

The ACLL is a valuation account that is deducted from the amortized cost of loans receivable to present the net amount expected to be collected.

Loans are charged against the allowance when management believes the collectability of a loan balance is unlikely.

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If the present value of cash flows is less than the total recorded investment, a reserve is calculated.

For each loan segment collectively measured, the baseline loss rates are calculated using peer institution data from FFIEC Call Report filings.

For each loan segment collectively measured, the baseline loss rates are calculated using peer institution data from Federal Financial Institutions Examinations Council ("FFIEC") Call Report filings.

The Bank evaluates the historical period on a quarterly basis.

1 unchanged sentence

Estimated cashflows consider the principal and interest in accordance with the contractual term of the loan and estimated prepayments.

Contractual cashflows are based on the amortized cost, as adjusted for balances guaranteed by governmental entities, such as the Small Business Administration ("SBA") or the United States Department of Agriculture ("USDA"), or the unguaranteed amortized cost.

Contractual cashflows are based on the amortized cost, as adjusted for balances guaranteed by governmental entities, such as the SBA or the United States Department of Agriculture, or the unguaranteed amortized cost.

The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies:

5 unchanged sentences

The CECL methodology includes consideration of the forecasted direction of the economic and business environment and its likely impact to the estimated allowance as compared to the historical losses over the reasonable and supportable time frame.

Economic forecast models for the current period are uploaded to the model, which targets two forecasted macroeconomic factors, which are national gross domestic product ("GDP") and unemployment figures.

Economic forecast models for the current period are uploaded to the model, which targets two forecasted macroeconomic factors, which are national gross domestic product and unemployment figures.

Each of the forecasted DCF segments is impacted by these macroeconomic factors.

23 unchanged sentences

In-substance foreclosed properties are those properties for which the Bank has taken physical possession, regardless of whether formal foreclosure proceedings have taken place.

At December 31, 2025 , there was $ 1.4 million of one -to- four family residential real estate included in other assets on the Consolidated Balance Sheets which was acquired during the year.

Loan servicing rights - Loan servicing rights are recorded at fair value when loans are originated and subsequently sold with the servicing rights retained.

19 unchanged sentences

Investments in non-publicly traded stock are measured at cost, less impairment, plus or minus changes resulting from observable price changes in ordinary transactions for the identical or similar investment of the same issuer.

The recorded balance of these equity investments was $ 500,000 and $ 1.6 million at December 31, 2024 and 2023 , respectively.

The recorded balance of these equity investments was $ 1.8 million and $ 500,000 at December 31, 2025 and 2024 , respectively.

Partnership investments include limited partnerships in investment funds and other business ventures.

9 unchanged sentences

The asset is valued by a third party and is amortized into noninterest expense over its estimated useful life.

The CDI is evaluated for impairment annually with any additional decline recorded as noninterest expense on the Consolidated Income Statement.

The CDI is evaluated for impairment annually with any additional decline recorded as noninterest expense on the Consolidated Statements of Operations.

Income taxes - First Fed accounts for income taxes in accordance with the provisions of ASC 740 - 10, Income Taxes , which requires the use of the asset and liability method of accounting for income taxes.

28 unchanged sentences

The mortgage loans that are sold with recourse provisions are accounted for as sales until such time as the loan defaults.

Periodically, First Fed sells mortgage loans with "life of the loan" recourse provisions, requiring First Fed to repurchase the loan at any time if it defaults.

First Fed sold mortgage loans in the past with "life of the loan" recourse provisions, requiring First Fed to repurchase the loan at any time if it defaults.

The remaining balance of such loans at December 31, 2025 and 2024 , was approximately $ 1.2 million and $ 1.5 million, respectively.

Of these loans, no loans were repurchased during the years ended December 31, 2025 or 2024 .

No allowance is recorded for these loans under CECL.

No reserve is recorded for these loans in other liabilities.

Off-balance-sheet credit-related financial instruments - In the ordinary course of business, First Fed has entered into commitments to extend credit, including commitments under lines of credit, commercial letters of credit, and standby letters of credit.

Such financial instruments are recorded when they are funded.

Advertising costs - First Fed expenses advertising costs as they are incurred.

Comprehensive income (loss) - Accounting principles generally require that recognized revenue, expenses, and gains and losses be included in net income (loss).

23 unchanged sentences

Third-party credit card interchange income is included in Service Fees on the Consolidated Statements of Operations.

Investment services revenue - Commissions received on the sale of investment related products is determined by a percentage of underlying instruments sold and is recognized when the sale is finalized.

Investment services revenue is included in Other Income on the Consolidated Statements of Operations.

Gains/losses on the sale of other real estate owned are included in non-interest expense and are generally recognized when the performance obligation is complete.

This is typically at delivery of control over the property to the buyer at the time of each real estate closing.

Gains/losses on the sale of real estate owned are included in noninterest income or expense, respectively, and are generally recognized when the performance obligation is complete.

This accounting treatment is typically at delivery of control over the property to the buyer at the time of each real estate closing.

Advertising costs - First Fed expenses advertising costs as they are incurred.

Fair value measurements - Fair values of financial instruments are estimated using relevant market information and other assumptions (Note 15 ).

29 unchanged sentences

Recently adopted accounting pronouncements

In June 2022, the FASB issued ASU 2022 - 03, Fair Value Measurement (Topic 820 ):

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

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

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

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

The adoption of this ASU did not have a material impact on its 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 .

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 was 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 No.

2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures .

This ASU enhances disclosures about significant segment expenses.

The key amendments:

( 1 ) require that a public entity disclose on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, ( 2 ) require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition, ( 3 ) require that a public entity provide all annual disclosures about a reportable segment's profit or loss currently required by GAAP in interim periods as well, ( 4 ) clarify that if CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, an entity may report one or more of those additional measures of segment profit, ( 5 ) require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure of segment profit or loss in assessing segment performance and deciding how to allocate resources and ( 6 ) require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures.

This ASU was effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company has incorporated the required disclosures;

see Note 19 for additional information.

Recently issued accounting pronouncements not yet adopted

In December 2023, the FASB issued ASU No.

5 unchanged sentences

This ASU is effective for public business entities for annual periods beginning after December 15, 2024.

The Company does not expect adoption of the ASU to have a material effect on the Company's consolidated financial statements.

The adoption of this ASU is reflected in the presentation of Note 10 of the Company's consolidated financial statements.

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.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In November 2024, the FASB issued ASU 2024 - 04, Debt—Debt with Conversion and Other Options (Subtopic 470 - 20 ):

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 September 2025, the FASB issued ASU 2025 - 06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350 - 40 ):

Targeted Improvements to the Accounting for Internal-Use Software which clarifies the accounting for costs related to internal-use software.

The new guidance clarifies the threshold entities apply to begin capitalizing costs and removes all references to project stages in ASC Subtopic 350 - 40.

ASU 2025 - 06 is effective for the Company for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years.

The Company does not anticipate this ASU will have a material impact on its financial statements.

In November 2025, the FASB issued ASU 2025 - 08, Financial instruments – Credit Losses (Topic 326 ):

Purchased Loans , which amends the guidance in ASC 326 on the accounting for certain purchased loans.

Under the ASU, entities must account for acquired loans (excluding credit cards) that meet certain criteria at acquisition ("purchased seasoned loans") by recognizing them at their purchase price plus an allowance for expected credit losses (the "gross-up approach").

ASU 2025 - 08 also introduces an accounting policy election related to the subsequent measurement of expected credit losses for entities that use a method other than a discounted cash flow analysis to estimate credit losses on purchased seasoned loans.

If this accounting policy is elected, entities can use the amortized cost basis of the asset to subsequently measure their credit loss allowance.

ASU 2025 - 08 is effective for annual reporting periods beginning after December 15, 2026, including interim periods within those fiscal years.

Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance.

The Company is currently evaluating the impact of ASU 2025 - 08 on its consolidated financial statements.

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

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Securities

1 unchanged sentence

December 31, 2025

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

Allowance for Credit Losses

(In thousands)

(dollars in thousands)

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses

Available for Sale

18 unchanged sentences

December 31, 2024

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair Value

Allowance for Credit Losses

(In thousands)

(dollars in thousands)

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses

Available for Sale

6 unchanged sentences

58,106 55 ( 3,670 ) 54,491 —

8,664 18 ( 16 ) 8,666 —

Mortgage-Backed Securities

13 unchanged sentences

Twelve Months or Longer

Gross Unrealized Losses

Estimated Fair Value

Gross Unrealized Losses

Estimated Fair Value

Gross Unrealized Losses

Estimated Fair Value

(In thousands)

(dollars in thousands)

Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value

Available for Sale

15 unchanged sentences

Twelve Months or Longer

Gross Unrealized Losses

Estimated Fair Value

Gross Unrealized Losses

Estimated Fair Value

Gross Unrealized Losses

Estimated Fair Value

(In thousands)

(dollars in thousands)

Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value

Available for Sale

6 unchanged sentences

— — ( 3,670 ) 46,355 ( 3,670 ) 46,355

( 16 ) 3,093 — — ( 16 ) 3,093

Mortgage-Backed Securities

17 unchanged sentences

December 31, 2024

Amortized Cost

Estimated Fair Value

Amortized Cost

Estimated Fair Value

(In thousands)

(dollars in thousands)

Amortized Cost Estimated Fair Value Amortized Cost Estimated Fair Value

Mortgage-backed securities:

11 unchanged sentences

Due within one year

1,000 959 — —

Due after one through five years

10 unchanged sentences

For the Year Ended December 31,

(In thousands)

(dollars in thousands)

Proceeds from sales

$ 21,048 $ 40,619

Gross realized gains

Gross realized losses

( 2,117 ) ( 5,397 )

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.

The loan portfolio is comprised of three portfolio segments that reflect the Company’s lending strategy and risk management practices.

These segments include Real Estate Loans, Consumer Loans, and Commercial Business Loans.

Each portfolio segment is further disaggregated into classes of loans with similar attributes and risk characteristics.

Management uses these segment and class groupings to evaluate portfolio performance and determine the allowance for credit losses.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

3 unchanged sentences

Accrued interest receivable on loans was $ 5.0 million and $ 6.0 million as of December 31, 2025 and 2024 , respectively, 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 ACLL, consisted of the following at the dates indicated:

December 31, 2024

December 31, 2023

(In thousands)

The amortized cost of loans receivable, net of derivative basis adjustment and ACLL, consisted of the following at the dates indicated:

(dollars in thousands)

December 31, 2025 December 31, 2024

One-to-four family

21 unchanged sentences

$ 1,612,028 $ 1,675,186

Loans, by the earlier of next repricing date or maturity, at the dates indicated:

December 31, 2024

December 31, 2023

(In thousands)

Loans receivable by the earliest of next repricing date or maturity, at the dates indicated:

(dollars in thousands)

December 31, 2025 December 31, 2024

Adjustable-rate loans

25 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

December 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)

(dollars in thousands)

Nonaccrual Loans with ACLL Nonaccrual Loans with No ACLL Total Nonaccrual Loans Nonaccrual Loans with ACLL Nonaccrual Loans with No ACLL Total Nonaccrual Loans

One-to-four family

16 unchanged sentences

The following table presents the amortized cost of past due loans (including both accruing and nonaccruing loans) by segment and class as of December 31, 2025 :

30-59 Days Past Due

60-89 Days Past Due

90 Days or More Past Due

Total Past Due

Total loans receivable

(In thousands)

(dollars in thousands)

30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total loans receivable

One-to-four family

19 unchanged sentences

The following table presents the amortized cost of past due loans (including both accruing and nonaccruing loans) by segment and class as of December 31, 2024 :

30-59 Days Past Due

60-89 Days Past Due

90 Days or More Past Due

Total Past Due

Total loans receivable

(In thousands)

(dollars in thousands)

30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total loans receivable

One-to-four family

34 unchanged sentences

Term Loans by Year of Origination (1)

(In thousands)

(dollars in thousands)

2025 2024 2023 2022 2021 Prior Loans Loans

One-to-four family

49 unchanged sentences

— 117 182 132 — 23 280 734

Special Mention (Grade 5)

— — — — — 9 101 110

Substandard (Grade 6)

48 unchanged sentences

Term Loans by Year of Origination (1)

(In thousands)

(dollars in thousands)

2024 2023 2022 2021 2020 Prior Loans Loans

One-to-four family

15 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)

29 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 December 31, 2025 , $ 25.9 million of loans were individually evaluated with $ 151,000 of ACLL attributed to such loans.

At December 31, 2025 , two individually evaluated loans with recorded investments totaling $ 303,000 were evaluated using a discounted cash flow approach and the remaining loans totaling $ 25.6 million were evaluated based on the underlying value of the collateral.

One $ 4.5 million commercial real estate loan was accruing interest at year end, while all other individually evaluated loans were on nonaccrual status at December 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 at year end, while all other individually evaluated loans were on nonaccrual status at December 31, 2024 .

As of 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 remaining individually evaluated loans were all on nonaccrual status at December 31, 2023 .

One $ 6.4 million commercial real estate loan was accruing interest at year end, while the remaining individually evaluated loans were all on nonaccrual status at December 31, 2024 .

Collateral-Dependent Loans.

2 unchanged sentences

Collateral Type

Single Family Residence

Business Assets

(In thousands)

(dollars in thousands)

Single Family Residence Condominium Multi-family Office Building Gas Station Business Assets Total

One-to-four family

$ 2,181 $ — $ — $ — $ — $ — $ 2,181

— — 4,531 — — — 4,531

Commercial real estate

8 unchanged sentences

Collateral Type

Single Family Residence

Business Assets

(In thousands)

(dollars in thousands)

Single Family Residence Warehouse Condominium Automobile Business Assets Total

One-to-four family

$ 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

6 unchanged sentences

Modified Loans to Troubled Borrowers.

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

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").

4 unchanged sentences

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

During the year ended December 31, 2025 , there were three new MLTB.

The Bank agreed to modify the rate, extend the interest-only payment period and extend the term for a commercial real estate loan which had a recorded investment of $ 5.5 million at the time of modification.

This commercial real estate loan was in compliance with the modified terms at December 31, 2025 .

The Bank also agreed to defer payments on a commercial real estate loan with a recorded investment of $ 4.1 million at the time of modification.

This commercial real estate loan was not in compliance with the modified terms at year end and was placed on nonaccrual status.

A previously charged-off commercial business loan was reinstated with term and rate modifications.

The commercial business loan was not in compliance with the modified terms at December 31, 2025 , and was placed on nonaccrual status.

During the year ended December 31, 2024 , there were two new MLTB.

3 unchanged sentences

The commercial real estate loan was in compliance with the modified terms at December 31, 2024 .

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 deferred principal payments.

The borrower continues to make interest-only payments and the loan was current at December 31, 2023 , based on the modified terms.

Note 4 - Allowance for Credit Losses on Loans ("ACLL")

1 unchanged sentence

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.

ASC 326 requires the Company to recognize estimates for lifetime credit losses on loans 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.

3 unchanged sentences

At or For the Year Ended December 31, 2025

Beginning Balance

Provision for (Recapture of) Credit Losses

Ending Balance

(In thousands)

(dollars in thousands)

Beginning Balance Charge-offs Recoveries (Recapture of) Provision for Credit Losses Ending Balance

One-to-four family

14 unchanged sentences

At or For the Year Ended December 31, 2024

Beginning Balance

Impact of Day 1 CECL Adoption

Adjusted Beginning Balance

Provision for (Recapture of) Credit Losses

Ending Balance

(In thousands)

(dollars in thousands)

Beginning Balance Charge-offs Recoveries Provision for (Recapture of) Credit Losses Ending Balance

One-to-four family

11 unchanged sentences

$ 17,510 $ ( 14,179 ) $ 402 $ 16,716 $ 20,449

$ 16,116 $ 2,209 $ 18,325 $ ( 3,322 ) $ 150 $ 2,357 $ 17,510

Allowance for Credit Losses on Unfunded Loan Commitments ("ACLUC").

The Company maintains an ACLUC in accordance with ASC 326:

Financial Instruments - Credit Losses , as discussed in Note 1.

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 includes an additional 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.

2 unchanged sentences

Premises and equipment consist of the following as of:

December 31, 2024

December 31, 2023

(In thousands)

$ 676 $ 2,907

(dollars in thousands)

December 31, 2025 December 31, 2024

Building improvements

9 unchanged sentences

Depreciation expense was $ 1.2 million and $ 1.4 million for the years ended December 31, 2025 and 2024 , respectively.

During the year ended December 31, 2025, the Company recorded a $ 358,000 impairment loss on its Bellevue branch leasehold improvements and equipment related to the announced closure of the branch in April 2026.

These charges were recorded in other noninterest expense.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

7 unchanged sentences

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

In the second quarter of 2025, the Bank consolidated its Bellevue and Fremont business centers into a new location.

As a result, the ROU asset and lease liability balances decreased $ 1.9 million for the terminated leases and increased $ 1.3 million related to the lease for the new Seattle business center.

An additional decrease of $ 185,000 was recorded in the fourth quarter of 2025 related to the announced closure of the Bellevue branch in April 2026.

The following table presents amounts relevant to the Company's assets leased for use in its operations for the years ended:

December 31, 2024

December 31, 2023

(In Thousands)

(dollars in thousands)

December 31, 2025 December 31, 2024

Operating cash flows from operating leases

8 unchanged sentences

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

(dollars in thousands)

December 31, 2025

Twelve-month period ending:

(In Thousands)

Total minimum payments required

9 unchanged sentences

For the Year Ended December 31,

(In thousands)

(dollars in thousands)

Balance at beginning of period

14 unchanged sentences

For the Year Ended December 31,

(In thousands)

(dollars in thousands)

Servicing fees

23 unchanged sentences

December 31, 2024

Weighted- Average Interest Rate

(dollars in thousands)

Amount Weighted- Average Interest Rate Amount Weighted- Average Interest Rate

Noninterest-bearing demand deposits

12 unchanged sentences

$ 1,599,101 2.04 $ 1,688,026 2.42

The aggregate amount of time deposits in excess of the FDIC insured limit, currently $250,000, at December 31, 2024 and 2023 , were $ 174.4 million and $ 173.8 million, respectively.

Maturities of certificates at the dates indicated are as follows:

The aggregate amount of time deposits issued in excess of the FDIC insured limit, currently $250,000, at December 31, 2025 and 2024 , were $ 164.2 million and $ 174.4 million, respectively.

Maturities of certificates of deposit at the dates indicated are as follows:

(dollars in thousands)

December 31, 2025

(In thousands)

Within one year or less

12 unchanged sentences

For the Year Ended December 31,

(In thousands)

(dollars in thousands)

Demand deposits

Money market accounts

10,462 10,017

Savings accounts

16 unchanged sentences

Available borrowing capacity was $ 17.3 million and $ 17.9 million at December 31, 2025 and 2024 , respectively.

No funds have been borrowed to date.

A borrowing test was performed in June 2025.

Investment securities with a carrying value of $ 18.0 million and $ 18.6 million were pledged to the FRB at December 31, 2025 and 2024 , respectively.

4 unchanged sentences

Beginning in April 2026, the interest rate will reset quarterly to the three -month SOFR plus 300 -basis points.

On May 20, 2022, First Northwest consummated a borrowing arrangement with NexBank for a $ 20.0 million revolving line of credit.

In March 2025, the Company redeemed $ 5.0 million of the Notes at a discount, resulting in a reduction to the outstanding balance and a $ 905,000 gain on extinguishment of debt recorded in noninterest income.

On May 20, 2022, First Northwest began a borrowing arrangement with NexBank for a revolving line of credit.

The agreement was modified in 2025 and the new terms allow a maximum extension of credit of $ 15.0 million.

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 Company was in compliance with all covenants at December 31, 2025 , including fixed coverage, Tier 1 leverage, and risk-based capital ratio minimum requirements and classified assets to Tier 1 capital and Texas ratio maximum requirements.

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.

The line of credit matures on November 16, 2026 .

In October 2023, PCBB extended a $ 50.0 million unsecured Fed Funds Borrowing Facility to the Bank.

The Bank must maintain a minimum demand deposit account average balance of $ 250,000 with PCBB.

Availability of funds are not guaranteed and facility usage is generally limited to ten consecutive days.

Available borrowing capacity was $ 50.0 million at December 31, 2025 .

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.

A borrowing test was performed in June 2025.

This credit facility is authorized for use through December 2027.

FHLB advances, line of credit, and subordinated debt outstanding by type of advance were as follows:

December 31, 2024

December 31, 2023

(In thousands)

(dollars in thousands)

December 31, 2025 December 31, 2024

Long-term advances

18 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The maximum and average outstanding balances and average interest rates on FHLB short-term, fixed-rate advances were as follows:

For the Year Ended December 31,

(Dollars in thousands)

Maximum outstanding at any month-end

Monthly average outstanding

Weighted-average daily interest rates

Interest expense during the period

The maximum and average outstanding balances and average interest rates on FHLB long-term, fixed-rate advances were as follows:

12 unchanged sentences

December 31, 2024

Weighted- Average Interest Rate

(dollars in thousands)

Amount Weighted- Average Interest Rate Amount Weighted- Average Interest Rate

Within one year or less

18 unchanged sentences

Interest expense during the period

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The maximum and average outstanding balances and average interest rates on subordinated debt were as follows:

9 unchanged sentences

Interest expense during the period

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Income Taxes

3 unchanged sentences

For the Year Ended December 31,

(In thousands)

(dollars in thousands)

State and local

Total current

( 2,057 ) ( 1,335 )

Total (benefit) provision for income tax

State and local

Total deferred

( 2,014 ) ( 1,409 )

Total benefit for income tax

$ ( 1,243 ) $ ( 944 )

A reconciliation of the tax provision (benefit) based on statutory corporate tax rates, estimated to be 21 % for the year ended December 31, 2025 , on pre-tax income and the provision (benefit) shown in the accompanying Consolidated Statements of Operations for the periods shown is summarized as follows:

For the Year Ended December 31,

(In thousands)

For the Year Ended

December 31, 2025

December 31, 2024

(dollars in thousands)

Federal income tax computed at statutory rates

$ ( 1,141 ) 21.00 % $ ( 1,587 ) 21.00 %

Low-income housing tax credits

State taxes (1)

18 ( 0.33 ) ( 37 ) 0.49

Nondeductible or nontaxable items:

Tax-exempt income, net of amount disallowed

( 9 ) 0.17 39 ( 0.52 )

Bank-owned life insurance income

1 unchanged sentence

Bank-owned life insurance early surrender of contract

— — 1,172 ( 15.51 )

Bank-owned life insurance penalty for early surrender of contract

Total (benefit) provision for income tax

266 ( 4.90 ) 261 ( 3.46 )

Other nondeductible

( 28 ) 0.52 ( 44 ) 0.58

Other adjustments:

Low-income housing tax credits, net (2)

( 69 ) 1.26 ( 43 ) 0.57

329 ( 6.05 ) ( 137 ) 1.82

Total benefit for income tax

$ ( 1,243 ) 22.87 % $ ( 944 ) 12.49 %

(1) California made up the majority of the state tax expense.

(2) Policy election to present all LIHTC components as one item using the proportional amortization method.

The following table presents income taxes paid (net of refunds) by jurisdiction for the periods shown:

For the Year Ended December 31,

(dollars in thousands)

Total taxes paid

As a result of the bad debt deductions taken in years prior to 1988, retained earnings include accumulated earnings of approximately $ 6.4 million, on which federal income taxes have not been provided.

13 unchanged sentences

In 2023, the Company wrote off its investment in Quin Ventures.

The $ 8.4 million tax loss as a result of the investment being written off contributed to an overall Federal net operating loss of $ 6.3 million which was included in the Company's consolidated tax provision for the year ended December 31, 2023 .

The $ 8.4 million tax loss as a result of the investment being written off contributed to an overall Federal net operating loss carryforward of $ 8.0 million which was included in the Company's consolidated tax provision for the year ended December 31, 2024 .

The Company applies the provisions of FASB ASC 740 that require the application of a more-likely-than- not recognition criterion for the reporting of uncertain tax positions on its financial statements.

5 unchanged sentences

The components of net deferred tax assets and liabilities at the periods shown are summarized as follows:

December 31, 2024

December 31, 2023

(In thousands)

(dollars in thousands)

December 31, 2025 December 31, 2024

Deferred tax assets

2 unchanged sentences

Unrealized loss on securities available for sale

Unrealized loss on defined benefit plan

Unrealized loss on hedge

Accrued compensation

Deferred compensation

Nonaccrual loans

13 unchanged sentences

Right of use assets

Other liabilities

Total deferred tax liabilities

11 unchanged sentences

The plan provides defined benefits based on years of service and final average salary prior to the freeze.

The Company uses December 31 as the measurement date for this plan.

The measurement date for this plan is December 31.

A related prior service cost of $ 1.2 million and $ 1.3 million, net of tax, was included in accumulated other comprehensive loss on the Company's balance sheet at December 31, 2025 and 2024 , respectively.

1 unchanged sentence

The following table summarizes the changes in benefit obligations and plan assets for the periods shown:

December 31, 2024

December 31, 2023

(dollars in thousands)

December 31, 2025 December 31, 2024

Change in fair value of plan assets

12 unchanged sentences

Actuarial loss

( 131 ) ( 45 )

Benefits paid

8 unchanged sentences

$ 1,878 $ 2,048

Other changes recognized in other comprehensive (loss) income

Net loss (gain)

Other changes recognized in other comprehensive income (loss)

Net (gain) loss

$ ( 126 ) $ 252

1 unchanged sentence

( 150 ) ( 150 )

Net periodic benefit (income) cost

Net periodic benefit cost (income)

$ ( 276 ) $ 102

31 unchanged sentences

Benefit payments projected to be made from the Bank DB Plan are as follows:

December 31, 2024

(dollars in thousands)

December 31, 2025

Estimated future benefit payments

9 unchanged sentences

Significant Unobservable Inputs

(In thousands)

(dollars in thousands)

(Level 1) (Level 2) (Level 3) Total

$ 1,584 $ — $ — $ 1,584

8 unchanged sentences

Significant Unobservable Inputs

(In thousands)

(dollars in thousands)

(Level 1) (Level 2) (Level 3) Total

$ 1,516 $ — $ — $ 1,516

Small/Mid U.S.

International Equity

31 unchanged sentences

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

December 31, 2024

December 31, 2023

(In thousands, except share data)

(dollars in thousands, except share data)

December 31, 2025 December 31, 2024

Allocated shares

9 unchanged sentences

Stock-based Compensation

On November 16, 2015, the Company's shareholders approved the First Northwest Bancorp 2015 Equity Incentive Plan (the "2015 EIP"), which provided for the grant of incentive stock options, non-qualified stock options, restricted stock and restricted stock units to eligible participants.

The cost of awards under the 2015 EIP generally is based on the fair value of the awards on their grant date.

Shares of common stock issued under the EIP may be authorized but unissued shares or repurchased shares.

During the year ended June 30, 2017, the Company purchased and retired 523,014 shares of common stock to be used for future stock awards.

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.

1 unchanged sentence

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

At December 31, 2024 , there were 221,587 total shares available for grant under the 2020 EIP, all of which are available to be granted as restricted shares.

Following adoption of the 2020 EIP, no additional awards may be made under the 2015 EIP.

At December 31, 2024 , there were 6,920 restricted shares outstanding under the 2015 EIP that are expected to vest subject to the 2015 EIP plan provisions.

During the years ended December 31, 2024 and 2023 , restricted awards of 81,181 and 32,449 shares were awarded, respectively, and no stock options were granted.

Restricted shares vest ratably over periods of up 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 awards based on the fair value of the shares at the grant date amortized over the stated period.

For the years ended December 31, 2024 and 2023 , total stock compensation expense for the 2015 and 2020 EIPs was $ 957,000 and $ 1.4 million, respectively.

At December 31, 2025 , there were 95,789 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 December 31, 2025, there were no shares available for grant under the 2015 EIP.

The final shares granted under the 2015 EIP vested in the second quarter of 2025.

There were 151,650 and 81,181 shares of restricted stock awarded, respectively, during the years ended December 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 no performance shares awarded, respectively, during the years ended December 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 years ended December 31, 2025 and 2024 , total stock compensation expense for the 2015 and 2020 EIPs was $ 733,000 and $ 957,000 , respectively.

Included in the above stock compensation expense for the years ended December 31, 2025 and 2024 , was directors' stock compensation of $ 248,000 and $ 242,000 , respectively.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For the Year Ended

December 31, 2024

The following tables provide a summary of changes in non-vested restricted awards for the year ended December 31, 2025 :

Weighted-Average Grant Date Fair Value

5 unchanged sentences

Non-vested at December 31, 2025

97,064 $ 14.46

( 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 of the vested shares.

The surrendered shares are canceled and are unavailable for reissue.

As of December 31, 2024 , there was $ 762,000 of total unrecognized compensation cost related to non-vested restricted shares.

As of December 31, 2025 , there was $ 1.1 million of total unrecognized compensation cost related to non-vested restricted shares.

The cost is expected to be recognized over the remaining weighted-average vesting period which is approximately 2.20 years.

10 unchanged sentences

The minimum requirements are a ratio of common equity Tier 1 capital ( "CET1 capital") to total risk-weighted assets the ( "CET1 risk-based ratio") of 4.5 %, a Tier 1 capital ratio of 6.0 %, a total capital ratio of 8.0 %, and a leverage ratio of 4.0 %.

In addition to the minimum regulatory capital ratios, First Northwest Bancorp and First Fed must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5 % of risk-weighted assets in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of retained income that could be utilized for such actions.

In addition to the minimum regulatory capital ratios, First Northwest and First Fed must maintain a capital conservation buffer consisting of additional CET1 capital greater than 2.5 % of risk-weighted assets in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of retained income that could be utilized for such actions.

At December 31, 2025 , the Bank's CETI capital exceeded the required capital conservation buffer.

13 unchanged sentences

(dollars in thousands)

Amount Ratio Amount Ratio Amount Ratio

As of December 31, 2025

21 unchanged sentences

For the Year Ended December 31,

(In thousands)

(dollars in thousands)

Beginning balance

$ 9,808 $ 236

Loan advances

Loan repayments

( 157 ) ( 676 )

Reclassifications (1)

( 6,597 ) 9,723

Ending balance

$ 3,054 $ 9,808

(1) Represents loans that were once considered related party but are no longer considered related party or loans that were not related party that subsequently became related party loans.

(1) Represents loans that were once considered related party but are no longer considered related party and loans that were not related party that subsequently became related party loans.

Deposits and certificates from related parties totaled $ 8.4 million and $ 7.0 million at December 31, 2025 and 2024 , respectively.

3 unchanged sentences

The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First Fed’s exposure to credit loss, in the event of nonperformance by the other party to the financial instrument for commitments to extend credit, is represented by the contractual notional amount of those instruments.

1 unchanged sentence

Management does not anticipate any material loss as a result of these transactions.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established by the contract.

4 unchanged sentences

The following financial instruments were outstanding whose contract amounts represent credit risk at:

December 31, 2024

December 31, 2023

(In thousands)

(dollars in thousands)

December 31, 2025 December 31, 2024

Commitments to grant loans

2 unchanged sentences

167,489 163,827

The Company has future funding obligations related to partnership investments, with remaining off‑balance sheet commitments totaling $ 2.3 million.

Low-Income Housing Tax Credit Investments - The carrying value of the unconsolidated LIHTC investment was $ 4.1 million and $ 4.5 million at December 31, 2025 and 2024 , respectively.

3 unchanged sentences

There were no impairment losses on the Company’s LIHTC investment during the years ended December 31, 2025 and 2024 .

Legal contingencies - Various legal claims may arise from time to time in the normal course of business, which, in the opinion of management, have no current material effect on First Fed’s consolidated financial statements.

Legal 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, a liability will not be reserved but the amount of loss or a range of possible losses may be disclosed if the amount can be reasonably estimated.

Water Station Management Litigation

As the Company previously disclosed, on August 27, 2024, involuntary bankruptcy proceedings were commenced against Creative Technologies, LLC, Water Station Management, LLC ("Water Station Management") and Refreshing USA, LLC (collectively the "OpCo Debtors"), certain of which were borrowers of the Bank.

In addition, on September 5, 2024, Ideal Property Investments LLC ("Ideal" and, together with the OpCo Debtors, the "Debtors"), also a borrower of the Bank, 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 the Bank, seeking to avoid certain transactions with the Bank under a theory of constructive fraudulent transfer or, in the alternative, to recharacterize them (the "Adversary Proceeding").

On July 17, 2025, the Bank, the OpCo Debtors, Ideal and the Joint Official Committee of Unsecured Creditors of the Debtors entered into a Settlement Agreement, Plan Support Agreement and Release (the "Settlement Agreement") to resolve the Adversary Proceeding and any other claims of the parties.

Pursuant to the Settlement Agreement, the Bank agreed, in exchange for, among other things, a release of all claims of the parties to the Settlement Agreement, to (i) release certain liens against the property of the Debtors and (ii) make certain cash payments of not less than $ 2.87 million and not more than $ 5.74 million, with the amount within that range to be determined by the percentage of certain unsecured creditors of the OpCo Debtors that enter into a mutual release of all claims related to the Debtors with the Bank and the Company under the OpCo Debtors’ Chapter 11 plan of liquidation.

The OpCo Debtors' Chapter 11 plan of liquidation was confirmed on September 9, 2025, with more than the 80 % threshold of eligible creditors opting in to a mutual release under which they released claims against the Company in exchange for a reciprocal release, and the remainder of eligible creditors choosing not to release claims against the Company or obtain a reciprocal release.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Bank subsequently paid the amounts required under the Settlement Agreement, utilizing $ 5.74 million of the $ 5.75 million previously reserved in the first quarter of 2025 as a noninterest expense.

The Bank pursued reimbursement from its insurance carrier.

The insurance carrier paid $ 3.3 million of legal and settlement fees directly to third parties.

In addition, the Bank received a $ 1.7 million insurance reimbursement in October 2025 to offset costs associated with the litigation described above, which is included in other income.

Pursuant to the terms of the Settlement Agreement, the Bank maintains an unsecured creditors' claim in the amount of $ 30.6 million.

The Bank is uncertain about the total amount that may be recovered from this claim through the bankruptcy proceeding and, therefore, has not established a receivable or income for this matter.

3|5|2 Capital Litigation

On June 10, 2025, 3|5|2 Capital GP LLC, on behalf of 3|5|2 Capital ABS Master Fund LP (collectively, "3|5|2 Capital"), filed a complaint (the "3|5|2 Complaint") against First Fed, in the Superior Court of the State of Washington for King County, arising from 3|5|2 Capital’s alleged investment in bonds of Water Station Management.

The 3|5|2 Complaint alleges that Water Station Management and certain affiliated individuals and entities misappropriated over $ 100 million by using the proceeds from a bond offering to repay earlier investors and creditors, including the Bank, rather than for the disclosed purpose of expanding Water Station Management’s business.

The 3|5|2 Complaint asserts claims against the Bank for aiding and abetting the alleged fraud, conspiracy to commit fraud, unjust enrichment, and constructive trust, and seeks various forms of relief, including not less than $ 106.9 million in compensatory damages plus interest, unspecified punitive damages, and attorneys' fees and costs.

The Company strongly disputes the allegations contained in the 3|5|2 Complaint and is vigorously defending against the claims.

On September 30, 2025, First Fed filed its Answer, Affirmative Defenses, and Counterclaims, which include a counterclaim alleging that 3|5|2 Capital aided and abetted a fraudulent scheme perpetrated by Ryan Wear, Water Station, and certain affiliated entities, causing damage to the Bank.

On January 30, 2026, First Fed filed its Amended Answer, Affirmative Defenses, and Counterclaims adding Leucadia Asset Management, LLC to the litigation with 3|5|2 Capital.

The Bank is now waiting for a response.

Socotra REIT I Litigation

On October 17, 2025, Socotra REIT I, LLC filed a complaint (the "Socotra Complaint") against First Fed, in the Superior Court of the State of Washington for King County.

The Socotra Complaint alleges that First Fed made misrepresentations, committed fraudulent acts, converted funds, and violated Washington’s Consumer Protection Act in connection with a $ 7.7 million commercial loan from Socotra to Ideal that paid down $ 4.0 million in First Fed secured obligations, and seeks unspecified damages including restitution, statutory penalties, and attorneys' fees and costs.

The Company strongly disputes the allegations contained in the Socotra Complaint and intends to vigorously defend against the claims made therein.

On December 8, 2025, First Fed filed its Answer and Affirmative Defenses.

The Bank is now waiting for a response.

Significant group concentrations of credit risk - Concentration of credit risk is the risk associated with a lack of diversification, such as having substantial loan concentrations in a specific type of loan within First Fed’s loan portfolio, thereby exposing First Fed to greater risks resulting from adverse economic, political, regulatory, geographic, industrial, or credit developments.

57 unchanged sentences

Significant Unobservable Inputs

(dollars in thousands)

(Level 1) (Level 2) (Level 3) Total

Financial Assets

(In thousands)

Securities available for sale

12 unchanged sentences

— — 3,014 3,014

Interest rate swap derivative

Total assets measured at fair value

7 unchanged sentences

Significant Unobservable Inputs

(dollars in thousands)

(Level 1) (Level 2) (Level 3) Total

Financial Assets

(In thousands)

Securities available for sale

4 unchanged sentences

— 16,122 — 16,122

— 8,666 — 8,666

Corporate debt

5 unchanged sentences

— — 3,281 3,281

Interest rate swap derivative

Total assets measured at fair value

7 unchanged sentences

December 31, 2025

Fair Value (In thousands)

Fair Value (dollars in thousands)

Valuation Technique

Unobservable Input

Range (Weighted Average) (a)

Range (Weighted Average) (1)

Sold loan servicing rights

7 unchanged sentences

Offered quotes

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

(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 Year Ended December 31,

(In thousands)

(dollars in thousands)

Sold loan servicing rights:

8 unchanged sentences

As of or For the Year Ended December 31,

(In thousands)

(dollars in thousands)

Securities available for sale:

4 unchanged sentences

( 25,460 ) ( 18,410 )

Unrealized Gains (Losses)

Unrealized Gains

Balance at end of period

4 unchanged sentences

December 31, 2025

(In thousands)

(dollars in thousands)

Level 1 Level 2 Level 3 Total

Collateral-dependent loans

$ — $ — $ 25,582 $ 25,582

Real estate owned and repossessed assets

— — 1,380 1,380

December 31, 2024

(In thousands)

(dollars in thousands)

Level 1 Level 2 Level 3 Total

Collateral-dependent loans

1 unchanged sentence

At December 31, 2025 and 2024 , there were no collateral-dependent loans with discounts to appraisal disposition value or other unobservable inputs.

December 31, 2025

Fair Value (dollars in thousands)

Valuation Technique

Unobservable Input

Range (Weighted-Average) (1)

Real estate owned and repossessed assets

$ 1,380 Market comparable

Discount to appraisal

0% - 10% (5%)

( 1 ) Discount to appraisal disposition value.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

4 unchanged sentences

Fair Value Measurements Using:

(In thousands)

(dollars in thousands)

Amount Value Level 1 Level 2 Level 3

Financial assets

12 unchanged sentences

3,014 3,014 — — 3,014

Interest rate swap derivative

267 267 — 267 —

Financial liabilities

16 unchanged sentences

Fair Value Measurements Using:

(In thousands)

(dollars in thousands)

Amount Value Level 1 Level 2 Level 3

Financial assets

12 unchanged sentences

3,281 3,281 — — 3,281

Interest rate swap derivative

267 267 — 267 —

Financial liabilities

21 unchanged sentences

For the Year Ended December 31,

(In thousands, except share data)

Net (loss) income attributable to parent:

Net (loss) income available to common shareholders

(dollars in thousands, except share data)

Net loss available to common shareholders

$ ( 4,191 ) $ ( 6,613 )

Dividends and undistributed earnings allocated to participating securities

(Loss) earnings allocated to common shareholders

Loss allocated to common shareholders

$ ( 4,191 ) $ ( 6,617 )

12 unchanged sentences

8,790,719 8,784,849

Basic (loss) earnings per common share

Basic loss per common share

$ ( 0.48 ) $ ( 0.75 )

Diluted (loss) earnings per common share

Diluted loss per common share

$ ( 0.48 ) $ ( 0.75 )

15 unchanged sentences

At December 31, 2025 and 2024 , the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges.

Carrying Amount of the Hedged Assets

Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets

(In thousands)

(dollars in thousands)

Carrying Amount of the Hedged Assets Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets

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

4 unchanged sentences

$ 151,883 $ 1,883

$ 150,032 $ 32

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 December 31, 2025 and 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 56.1 million, and $ 56.7 million, respectively;

the cumulative basis adjustments associated with this hedging relationship was $ 220,000 and $ 1.1 million, respectively;

the cumulative basis adjustments associated with this hedging relationship was $ 980,000 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 December 31, 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 258.1 million, the cumulative basis adjustments associated with this hedging relationship was ($ 188,000 ), 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 December 31, 2025 and 2024 , the amortized cost basis of the closed portfolio used in this hedging relationship was $ 213.3 million and $ 258.1 million, respectively;

the cumulative basis adjustments associated with this hedging relationship was $ 903,000 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.

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:

Notional Amount

Other Liabilities

(In thousands)

(dollars in thousands)

Notional Amount Other Assets Other Liabilities

December 31, 2025

8 unchanged sentences

$ 50,000 $ — $ 123

Interest rate swaps - loans

100,000 267 —

FIRST NORTHWEST BANCORP AND SUBSIDIARY

2 unchanged sentences

Year Ended December 31,

(In thousands)

(dollars in thousands)

Total amounts recognized in interest on investment securities

1 unchanged sentence

Total amounts recognized in interest and fees on loans receivable

90,290 93,752

Net gains (losses) on fair value hedging relationships

3 unchanged sentences

Recognized on derivatives designated as hedging instruments

( 142 ) ( 605 )

Interest rate swaps - loans

Recognized on hedged items

( 1,091 ) ( 188 )

Recognized on derivatives designated as hedging instruments

Net income recognized on fair value

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

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

Net (expense) income recognized on fair value

$ ( 99 ) $ 101

Credit Risk-related Contingent Features

12 unchanged sentences

The following table presents changes to accumulated other comprehensive loss after-tax for the periods shown:

Unrealized Gains (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 (Losses) on Fair Value of Hedged Items

(In thousands)

(dollars in thousands)

Unrealized Gains (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 Losses on Fair Value of Hedged Items Total

Balance at December 31, 2023

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

Other comprehensive income before reclassification

Other comprehensive income (loss) before reclassification

226 ( 198 ) — — 28

7 unchanged sentences

$ ( 28,210 ) $ ( 486 ) $ ( 1,303 ) $ ( 173 ) $ ( 30,172 )

Other comprehensive income (loss) before reclassification

Other comprehensive income before reclassification

8,152 99 — — 8,251

11 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 executive officer and the chief financial officer.

The accounting policies of the Bank are the same as those described in the summary of significant accounting policies in Note 1.

6 unchanged sentences

No single customer accounts for more than 10% of total revenue.

Note 20 - 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 leaseback 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 rent expense for the leaseback of these properties for 2024 was $ 1.0 million.

The annual increase in rent was 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 respective increases on the Consolidated Balance Sheets which were recorded during the second quarter of 2024.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

1 unchanged sentence

Note 20 - Parent Company Only Financial Statements

Presented below are the condensed balance sheets, statements of operations, and statements of cash flows for First Northwest Bancorp.

Presented below are the condensed balance sheets, statements of operations, and statements of cash flows for First Northwest.

FIRST NORTHWEST BANCORP

Condensed Balance Sheets

(In thousands)

(dollars in thousands)

December 31, 2025

1 unchanged sentence

Cash and due from banks

$ 7,587 $ 441

Investment in bank

21 unchanged sentences

Condensed Statements of Operations

(In thousands)

(dollars in thousands)

For the Year Ended December 31,

1 unchanged sentence

Interest and fees on loans receivable

Unrealized (loss) gain on equity and partnership investments

Interest-bearing deposits

Unrealized gain (loss) on equity and partnership investments

994 ( 1,201 )

4 unchanged sentences

Interest paid on line of credit

Recapture of provision for credit losses on loans

Other expenses

Total operating expenses

(Loss) income before benefit for income taxes and equity in undistributed earnings of subsidiary

Income (loss) before benefit for income taxes and equity in undistributed earnings of subsidiary

3,186 ( 1,427 )

1 unchanged sentence

( 723 ) ( 930 )

(Loss) income before equity in undistributed earnings of subsidiary

Income (loss) before equity in undistributed earnings of subsidiary

3,909 ( 497 )

1 unchanged sentence

( 8,100 ) ( 6,116 )

Net (loss) income

$ ( 4,191 ) $ ( 6,613 )

3 unchanged sentences

Condensed Statements of Cash Flows

(In thousands)

(dollars in thousands)

For the Year Ended December 31,

Cash flows from operating activities:

Net (loss) income

$ ( 4,191 ) $ ( 6,613 )

Adjustments to reconcile net (loss) income to net cash from operating activities:

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

Equity in undistributed earnings of subsidiary

Amortization of deferred loan fees

Amortization of debt issuance costs

Recapture of provision for credit losses on loans

Gain on extinguishment of subordinated debt

Change in payable to subsidiary

Change in accrued interest receivable and other assets

( 1,555 ) ( 68 )

Change in accrued interest payable and other liabilities

2 unchanged sentences

Cash flows from investing activities:

Net decrease loans receivable

Net decrease in loans receivable

ESOP loan repayment

5 unchanged sentences

Cash flows from financing activities:

Net decrease in line of credit

Redemption of subordinated debt, net

Net increase in line of credit

Repurchase of common stock

( 4,057 ) ( 1,149 )

Restricted stock awards canceled

4 unchanged sentences

1,484 ( 6,888 )

Net decrease in cash

Net increase (decrease) in cash

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

$ 7,587 $ 441

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosures of cash flow information:

Cash paid during the year for income taxes

$ 80 $ ( 192 )

Cash paid during the year for interest on borrowings

Supplemental disclosures of noncash investing activities:

Loss on equity investment in QUIL received through Quin Ventures asset sale

$ — $ ( 225 )

Series A equity investment acquired upon conversion of commercial business loan

Write-down of equity investment

Note 22 - Subsequent Event

On March 10, 2025, the Company repurchased $ 5.0 million of its outstanding subordinated debt in the open market.

The repurchased debt was retired and canceled, reducing the total outstanding debt of the Company.

The Company repurchased the debt at an 18.1 % discount to par value or $ 4.1 million.

Note 21 - Subsequent Events

Subsequent to December 31, 2025, the Bank announced the closure of its Bellevue branch, with operations scheduled to cease on April 30, 2026.

The decision followed management’s evaluation of branch performance, customer migration to digital channels, and alignment of the Company’s long‑term strategic objectives.

The Company recorded $ 631,000 in other noninterest expense and $ 50,000 in compensation expense for the year ended December 31,2025, which included one‑time closure‑related expenses for anticipated lease termination costs, severance, and equipment decommissioning.

Additional costs may be recognized in future periods.

The branch’s deposits and customer relationships will continue to be serviced through the Bank's online and mobile platforms, ATM network and branches with minimal service disruption.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Also subsequent to December 31, 2025, the Company signed an agreement to redeem its general partnership interest in MWGC in full at par and received the cash distribution of $ 150,000 in February 2026.

No gain or loss was recorded as a result of this redemption.

At the same time, the Bank signed a redemption agreement which sets forth the path to unwind its $ 6.0 million limited partnership investment in the Hero Fund through capital distributions beginning in April 2026.

The Bank anticipates receiving the full amount invested, with no gain or loss recorded, as a result of the future redemption.

On March 10, 2026, the Company became aware that its $ 2.0 million investment in subordinated debt may be approaching payment default.

The issuer has requested a loan modification in advance of the interest payment due on March 15, 2026.

If a modification agreement is not reached, there is a strong likelihood that the issuer will not be able to meet the scheduled interest payment due no later than March 25, 2026, including the 10 -day grace period, which would place the subordinated debt in default.

Management is actively monitoring the situation.

Management is also assessing the likelihood and timing of recovery, including possible legal actions.

No adjustments have been made to the December 31, 2025, financial statements as this event occurred after the balance sheet date.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data