• First Northwest Bancorp Reports First Quarter 2023 Earnings

    ソース: Nasdaq GlobeNewswire / 26 4 2023 07:00:01   America/New_York

    PORT ANGELES, Wash., April 26, 2023 (GLOBE NEWSWIRE) --

    Matthew P. Deines, President and CEO, comments on financial results:

    "First Fed generated solid first quarter results despite the well-publicized challenges in the banking industry," said Matthew P. Deines, President and CEO of First Northwest Bancorp. "Our granular deposit franchise and reputation as a trusted member of the communities we serve has proved a source of strength and stability. We are well-positioned to navigate the rapidly changing environment and enhance long-term shareholder value."

    The Board of Directors of First Northwest Bancorp declared a quarterly cash dividend of $0.07 per common share. The dividend will be payable on May 26, 2023, to shareholders of record as of the close of business on May 12, 2023.

    FINANCIAL HIGHLIGHTS 1Q 23  4Q 22  1Q 22  1Q 23 Highlights
    FINANCIAL RESULTS (in millions)             Deposit growth year-to-date of $30.0 million
    Operating revenue (1) $18.6  $22.3  $17.9  Retail growth $29.3 million, or 2.0%
    Noninterest expense  14.9   15.1   14.8  Brokered growth $654,000, or 0.5%
    Pre-provision net income  16.3   18.9   15.5    
    Net income  3.5   6.1   2.8  Loan growth year-to-date of $31.9 million,
    PER SHARE DATA              or 2%
    Basic and diluted earnings $0.39  $0.66  $0.30    
    Book value  16.57   16.31   17.77  Deposit insurance coverage update:
    Tangible book value *  16.38   16.13   17.56  Estimated uninsured deposits totaling
    BALANCE SHEET (in millions)              $271.3 million, or approximately 17%
    Total loans $1,579  $1,548  $1,386   of total deposits
    Total deposits  1,594   1,564   1,549   42% of uninsured in urban areas
    Total shareholders' equity  160   158   178   58% of uninsured in rural areas
    ASSET QUALITY             Estimated collateralized deposits to total
    Net charge-off ratio  0.25%  0.11%  0.00%  deposits of 7%
    Nonperforming assets to total assets  0.12   0.09   0.06  Estimated insured deposits to total
    Allowance for credit losses on loans              deposits of 76%
    to total loans  1.10   1.04   1.09    
    Nonperforming loan coverage ratio  661   900   1,227  Liquidity:
    SELECTED RATIOS              Increased on balance sheet liquidity
    Return on average assets  0.70%  1.18%  0.60%  in response to recent bank failures.
    Return on average equity  8.98   15.26   6.01    
    Return on average tangible equity *  9.08   15.45   6.09  Asset quality:
    Net interest margin  3.46   3.96   3.53   Credit metrics remain stable. Past due and
    Efficiency ratio  79.78   67.91   82.91   nonperforming balances remain low.
    Common equity tier 1 (CETI) ratio  13.34   13.40   13.67    
    Total risk-based capital ratio  14.36   14.42   14.73    

    (1)  Net interest income before provision plus noninterest income
    * See reconciliation of Non-GAAP Financial Measures later in this release.

    First Northwest Bancorp (Nasdaq: FNWB) ("First Northwest" or "Company") today reported quarterly net income of $3.5 million for the first quarter of 2023, compared to $6.1 million for the fourth quarter of 2022, and $2.8 million for the first quarter of 2022. Basic and diluted earnings per share were $0.39 for the first quarter of 2023, compared to $0.66 for the fourth quarter of 2022, and $0.30 for the first quarter of 2022. In the first quarter of 2023, the Company generated a return on average assets ("ROAA") of 0.70%, a return on average equity ("ROAE") of 8.98%, and a return on average tangible common equity* of 9.08%. Results in the first quarter of 2023 were positively impacted by a recapture of provision for credit losses on unfunded commitments and a reduction in noninterest expense.

    The Company implemented the Current Expected Credit Loss (“CECL”) model for estimating the allowance for losses on loans and other assets effective January 1, 2023. The initial recognition resulted in increases of $2.2 million to the Allowance for Credit Losses on Loans and $1.5 million to the Unfunded Commitment Liability. The tax-effected cumulative effect of this change in accounting estimate of $3.0 million was recorded in retained earnings. Subsequent adjustments in the allowance for credit losses estimate are recorded in net income. The CECL model attempts to predict future losses by relying on projected metrics, such as unemployment and national GDP, applied to current balances. We recorded a recapture of the provision for credit losses during the first quarter of 2023 primarily due to a $22.2 million reduction in unfunded commitments during the current quarter. We anticipate continued fluctuation in the provision for credit losses going forward as both projected metrics and balances change.

    Net Interest Income
    Total interest income decreased $379,000 to $23.3 million for the first quarter of 2023, compared to $23.7 million in the previous quarter, and increased $6.4 million from $16.9 million in the first quarter of 2022. Interest income decreased in the current quarter due to a higher reduction in fees related to the prepayment of certain loans compared to the prior quarter in excess of the gains recorded from higher yields on earning assets. Interest and fees on loans increased year-over-year, in part, as the Company's banking subsidiary, First Fed Bank ("First Fed" or "Bank"), grew the loan portfolio through single-family, multi-family and commercial real estate lending as well as purchased auto and manufactured home loans. Loan yields have increased over the prior year due to higher rates on new originations as well as the repricing of variable rate loans tied to the Prime Rate or other indices.

    Total interest expense was $7.0 million for the first quarter of 2023, compared to $4.7 million in the fourth quarter of 2022 and $1.4 million in the first quarter a year ago. Current quarter interest expense was higher due to a 50 basis point increase in the cost of deposits to 1.12% at March 31, 2023, from 0.62% at the prior quarter end. The increase over the first quarter of 2022 was the result of a 93 basis point increase in the cost of deposits from 0.19% one year prior along with higher volumes of short-term FHLB advances and certificates of deposit ("CDs"). A shift in the deposit mix from transaction and money market accounts to a higher volume of savings accounts and CDs, primarily promotional, resulted in higher costs of deposits.

    Net interest income before provision for credit losses for the first quarter of 2023 decreased 13.9% to $16.3 million, compared to $18.9 million for the preceding quarter, and increased 5.3% from the first quarter one year ago.

    The Company recorded a $500,000 recapture of provision for credit losses in the first quarter of 2023, reflecting a decrease in unfunded commitments during the quarter, primarily due to construction loan disbursements, as well as improvements in the underlying assumptions driving anticipated loss rates within the CECL model adopted January 1, 2023. Specifically, the gross domestic product assumption metric improved since implementation at the beginning of 2023. This compares to a loan loss provision of $285,000 for the preceding quarter and no provision for the first quarter of 2022, which were both estimated using the incurred loss method based on historical loss trends combined with qualitative adjustments.

    The net interest margin decreased to 3.46% for the first quarter of 2023, from 3.96% the prior quarter, and decreased 7 basis points compared to the first quarter of 2022 of 3.53%. Decreases from both the prior quarter and the prior year are primarily due to higher funding costs for both deposits and borrowed funds.

    The yield on average earning assets of 4.95% for the first quarter of 2023, was flat compared to the fourth quarter of 2022, and increased 109 basis points from 3.86% for the first quarter of 2022. Higher loan rates at origination and increased yields on variable-rate loans were offset by a decline in the recognition of fees related to the prepayment of certain loans during the fourth quarter. The year-over-year increase was primarily due to higher average loan balances augmented by increases in yields, which were positively impacted by the rising rate environment and overall improvements in the mix of interest-earning assets.

    The cost of average interest-bearing liabilities increased to 1.81% for the first quarter of 2023, compared to 1.24% for the fourth quarter of 2022, and increased from 0.43% for the first quarter of 2022. Total cost of funds increased to 1.53% for the first quarter of 2023 from 1.02% in the prior quarter and increased from 0.34% for the first quarter of 2022. Current quarter increases were due to higher costs on interest-bearing deposits and advances in addition to an increase in average certificate of deposit balances.

    The increase over the same quarter last year was driven by higher rates paid on deposits. The Company has attracted and retained funding through the use of promotional products. The mix of retail deposit balances has shifted away from non-maturity accounts towards higher cost term certificate and savings products. Retail CDs represented 22.8%, 17.3% and 11.7% of retail deposits at March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

    Selected Yields 1Q 23  4Q 22  3Q 22  2Q 22  1Q 22 
    Loan yield  5.16%  5.22%  4.75%  4.48%  4.43%
    Investment securities yield  3.93   3.71   3.21   2.96   2.57 
    Cost of interest-bearing deposits  1.37   0.78   0.41   0.26   0.24 
    Cost of deposits  1.12   0.62   0.32   0.20   0.19 
    Cost of borrowed funds  3.92   3.30   2.50   1.96   2.32 
    Net interest spread  3.14   3.72   3.72   3.65   3.43 
    Net interest margin  3.46   3.96   3.88   3.77   3.53 
                         

    Noninterest Income
    Noninterest income declined 30.7% to $2.3 million for the first quarter of 2023 from $3.4 million for the fourth quarter of 2022 from the prior quarter due partly to the non-recurring BOLI death benefit payment recorded in the fourth quarter of 2022. Noninterest income declined slightly from the same quarter one year ago, with decreases in gain on sale of loans and gain on sale investment securities. Saleable mortgage loan production continues to be hindered by reduced refinancing activity due to rising market rates on mortgage loans and a lack of single-family home inventory compared to the prior year.

    Noninterest Income                    
    $ in thousands 1Q 23  4Q 22  3Q 22  2Q 22  1Q 22 
    Loan and deposit service fees $1,141  $1,163  $1,302   1,091  $1,173 
    Sold loan servicing fees and servicing right mark-to-market  493   202   206   27   432 
    Net gain on sale of loans  176   55   285   231   253 
    Net gain on sale of investment securities           (8)  126 
    Increase in cash surrender value of bank-owned life insurance  226   230   221   213   252 
    Income from death benefit on bank-owned life insurance, net     1,489          
    Other income  298   229   320   668   167 
    Total noninterest income $2,334  $3,368  $2,334  $2,222  $2,403 
                         

    Noninterest Expense
    Noninterest expense totaled $14.9 million for the first quarter of 2023, compared to $15.1 million for the preceding quarter and $14.8 million for the first quarter a year ago. Compensation and benefits was lower due to a decrease in medical insurance and payroll tax expense as well as lower commissions and incentives paid. The payroll tax expense was reduced in the first quarter of 2023 by a portion of the Employee Retention Credit ("ERC") received in March 2023. These decreases were partially offset by an increase in advertising related to strategic deposit gathering initiatives and additional corporate sponsorships. The increase over the first quarter of 2022 reflects increases in data processing and occupancy expenses associated with building enhanced technological infrastructure, offset by the medical insurance and payroll tax refunds received and lower commissions and incentives paid in 2023.

    Noninterest Expense                    
    $ in thousands 1Q 23  4Q 22  3Q 22  2Q 22  1Q 22 
    Compensation and benefits $7,837  $8,357  $9,045  $9,735  $8,803 
    Data processing  2,038   2,119   1,778   1,870   1,772 
    Occupancy and equipment  1,209   1,300   1,499   1,432   1,167 
    Supplies, postage, and telephone  355   333   322   408   313 
    Regulatory assessments and state taxes  389   372   365   441   361 
    Advertising  1,041   486   645   1,370   752 
    Professional fees  806   762   695   629   559 
    FDIC insurance premium  257   235   219   211   223 
    Other expense  939   1,179   807   867   881 
    Total noninterest expense $14,871  $15,143  $15,375  $16,963  $14,831 
    Efficiency ratio  79.78%  67.91%  74.86%  87.15%  82.91%
                         

    Investment Securities
    Investment securities increased $2.5 million, or 0.8%, to $329.1 million at March 31, 2023, compared to $326.6 million three months earlier, and decreased $48.6 million compared to $377.7 million at March 31, 2022. The market value of the portfolio increased $4.8 million during the first quarter of 2023, primarily driven by a decrease in long-term interest rates. At March 31, 2023, municipal bonds totaled $101.9 million and comprised the largest portion of the investment portfolio at 31.0%. Non-agency issued mortgage-backed securities were the second largest segment, totaling $93.0 million, or 28.3%, of the portfolio at quarter end. The estimated average life of the securities portfolio was approximately 8.1 years, compared to 8.2 years in the prior quarter and 7.0 years in the first quarter of 2022. The effective duration of the portfolio was approximately 5.1 years, compared to 5.1 years in the prior quarter and 5.0 years at the end of the first quarter of 2022.

    Investment Securities                    
    $ in thousands 1Q 23  4Q 22  3Q 22  2Q 22  1Q 22 
    Municipal bonds $101,910  $98,050  $96,130  $104,048  $110,248 
    U.S. Treasury notes  2,390   2,364   2,355   2,420   2,450 
    International agency issued bonds (Agency bonds)  1,745   1,702   1,683   1,762   1,811 
    Corporate issued debt securities (Corporate debt)  55,117   55,499   56,165   57,977   59,904 
    U.S. Small Business Administration securities (SBA)              2,777 
    Mortgage-backed securities:                    
    U.S. government agency issued mortgage-backed securities (MBS agency)  74,946   75,648   78,231   85,796   96,064 
    Non-agency issued mortgage-backed securities (MBS non-agency)  92,978   93,306   94,872   101,141   104,441 
                         

    Loans and Unfunded Loan Commitments
    Net loans, excluding loans held for sale, increased $30.6 million, or 2.0%, to $1.56 billion at March 31, 2023, from $1.53 billion at December 31, 2022, and increased $191.5 million, or 14.0%, from $1.37 billion one year ago. One-to-four family loans increased $11.0 million during the current quarter as a result of $1.1 million in new amortizing loan originations and $18.1 million of residential construction loans that converted to permanent amortizing loans, partially offset by sales and payments received. Multi-family loans increased $32.3 million during the current quarter. The increase was the result of new originations totaling $9.2 million and $9.9 million of construction loans converting into permanent amortizing loans. Construction loans decreased $32.4 million during the quarter, with $48.0 million converting into fully amortizing loans, partially offset by draws on new and existing loans. Commercial business, automobile, and home equity loans increased $23.1 million, $12.0 million and $1.2 million, respectively, during the current quarter compared to the previous quarter as originations and draws on existing commitments exceeded payoffs and scheduled payments. Commercial real estate loans decreased $16.0 million, with payoffs and scheduled payments in excess of the $20.0 million of construction loans that converted into permanent amortizing loans.

    The Company originated $5.8 million in residential mortgages during the first quarter of 2023 and sold $5.4 million, with an average gross margin on sale of mortgage loans of approximately 1.99%. This production compares to residential mortgage originations of $8.6 million in the preceding quarter with sales of $3.3 million, with an average gross margin of 2.19%. Higher market rates on mortgage loans and a lack of single-family home inventory continued to hinder saleable mortgage loan production in the first quarter. New single-family residence construction loan commitments totaled $4.9 million in the first quarter, compared to $16.1 million in the preceding quarter.

    Loans by Collateral and Unfunded Commitments                    
    $ in thousands 1Q 23  4Q 22  3Q 22  2Q 22  1Q 22 
    One-to-four family construction $65,770  $63,021  $58,038  $60,848  $70,091 
    All other construction and land  95,769   130,588   157,527   152,024   137,611 
    One-to-four family first mortgage  394,595   384,255   374,309   351,813   331,788 
    One-to-four family junior liens  9,140   8,219   7,244   2,701   2,969 
    One-to-four family revolving open-end  30,473   29,909   27,496   25,438   20,897 
    Commercial real estate, owner occupied:                    
    Health care  23,311   23,463   23,909   24,058   24,235 
    Office  22,246   22,583   23,002   24,311   25,936 
    Warehouse  16,782   20,411   18,479   21,144   21,174 
    Other  52,212   47,778   38,282   31,375   29,142 
    Commercial real estate, non-owner occupied:                    
    Office  58,711   59,216   60,655   62,971   61,522 
    Retail  52,175   54,800   53,186   50,818   48,929 
    Hospitality  45,978   46,349   44,359   44,845   53,633 
    Other  93,207   89,047   98,386   96,597   79,585 
    Multi-family residential  284,699   252,765   242,509   220,677   203,101 
    Commercial business loans  80,825   73,963   69,626   69,888   52,848 
    Commercial agriculture and fishing loans  1,829   1,847   938   525   539 
    State and political subdivision obligations  439   439   472   472   472 
    Consumer automobile loans  136,540   136,213   134,221   133,364   127,712 
    Consumer loans secured by other assets  114,343   102,333   104,272   102,685   93,165 
    Consumer loans unsecured  420   352   481   745   367 
    Total loans $1,579,464  $1,547,551  $1,537,391  $1,477,299  $1,385,716 
                         
    Unfunded loan commitments $203,014  $225,836  $231,208  $250,311  $260,391 
                         

    Deposits
    Total deposits increased $30.0 million, to $1.59 billion at March 31, 2023, compared to $1.56 billion at December 31, 2022, and increased $44.8 million, or 2.9%, compared to $1.55 billion one year ago. Increases in consumer CDs of $75.2 million, business savings account balances of $29.8 million, business CD balances of $12.3 million, consumer savings account balances of $11.4 million, and brokered CDs of $654,000, were offset by decreases in consumer money market account balances of $62.2 million, business demand account balances of $15.1 million, consumer demand account balances of $12.4 million, business money market account balances of $8.0 million, and public fund CDs of $1.9 million during the first quarter. We believe decreases in certain categories were driven by customers seeking higher rates and additional diversification over a variety of account types. The current rate environment has contributed to greater competition for deposits with more rate specials offered to attract new funds.

    Demand deposits decreased 9.4% compared to a year ago to $481.3 million at March 31, 2023, and represented 30.2% of total deposits; money market accounts decreased 30.8% compared to a year ago to $402.8 million, and represented 25.3% of total deposits; savings accounts increased 22.7% compared to a year ago to $242.1 million at March 31, 2023, and represented 15.2% of total deposits; and CDs increased 95.8% compared to a year ago to $468.0 million at quarter-end, and represented 29.4% of total deposits. Brokered CDs increased $68.8 million to $134.5 million at March 31, 2023, from $65.7 million a year ago, accounting for 30.0% of the increase in CD balances.

    The Company estimates that approximately 17% of total deposits are uninsured. Consumer deposits make up 62% of total deposits with an average balance of approximately $24,000 per account. Collateralized public fund balances totaled $115.3 million at March 31, 2023. While the mix of deposits moved to higher cost product types, the Company did not experience any unusual deposit activity in the first quarter of 2023.

    Deposits               
    $ in thousands 1Q 23  4Q 22  3Q 22  2Q 22  1Q 22 
    Noninterest-bearing demand deposits $292,119  $315,083  $342,808  $336,311  $326,289 
    Interest-bearing demand deposits  189,187   193,558   192,504   192,114   204,949 
    Money market accounts  402,760   473,009   519,018   587,747   581,804 
    Savings accounts  242,117   200,920   196,780   195,029   197,351 
    Certificates of deposit, retail  333,510   247,824   224,574   183,823   173,281 
    Certificates of deposit, brokered  134,515   133,861   129,551   85,700   65,740 
    Total deposits $1,594,208  $1,564,255  $1,605,235  $1,580,724  $1,549,414 
                         
    Noninterest-bearing deposits to total deposits  18%  20%  21%  21%  21%
    Total loans to total deposits  99%  99%  96%  93%  89%
                         

    Asset Quality
    Nonperforming loans were $2.6 million at March 31, 2023, an increase of $843,000 from December 31, 2022, related to increased delinquencies in a single-family residential loan, Triad purchased manufactured home loans and Splash unsecured consumer loans. The percentage of the allowance for credit losses on loans to nonperforming loans decreased to 661% at March 31, 2023, from 900% at December 31, 2022, and decreased from 1227% at March 31, 2022. Classified loans increased $1.3 million to $18.2 million at March 31, 2023, due to the downgrade of one $537,000 single-family residential loan during the first quarter along with delinquent Triad purchased manufactured home loans totaling $320,000 and Splash unsecured consumer loans totaling $438,000. The allowance for credit losses on loans as a percentage of total loans was 1.10% at March 31, 2023, increasing from 1.04% at the prior quarter end and increasing from 1.09% reported one year earlier.

    $ in thousands 1Q 23  4Q 22  3Q 22  2Q 22  1Q 22 
    Allowance for credit losses on loans to total loans  1.10%  1.04%  1.06%  1.07%  1.09%
    Allowance for credit losses on loans to nonperforming loans  661   900   463   1269   1227 
    Nonperforming loans to total loans  0.17   0.12   0.22   0.08   0.09 
    Net charge-off ratio (annualized)  0.25   0.11   0.06   (0.03)  0.00 
                         
    Total nonperforming loans $2,633  $1,790  $3,517  $1,241  $1,233 
                         
    Reserve for unfunded commitments $1,336  $325  $331  $358  $368 
                         

    Capital
    Total shareholders’ equity increased to $160.3 million at March 31, 2023, compared to $158.3 million three months earlier, due to $3.5 million of net income and an increase in the fair market value of the investment securities portfolio, net of taxes, of $3.7 million, partially offset by a $3.0 million decrease for the cumulative CECL adjustment, a $1.4 million decrease in the fair market value of derivatives, net of taxes and the cost of repurchased shares. Bond values increased quarter-over-quarter as the economic outlook on long-term rates fell, partially influenced by the recent bank failures.

    Tangible book value per common share* was $16.38 at March 31, 2023, compared to $16.13 at December 31, 2022, and $17.56 at March 31, 2022. Book value per common share was $16.57 at March 31, 2023, compared to $16.31 at December 31, 2022, and $17.77 at March 31, 2022.

    Capital levels for both the Company and its operating bank, First Fed, remain in excess of applicable regulatory requirements and the Bank was categorized as "well-capitalized" at March 31, 2023. Common Equity Tier 1 and Total Risk-Based Capital Ratios at March 31, 2023, were 13.3% and 14.4%, respectively.

      1Q 23  4Q 22  3Q 22  2Q 22  1Q 22 
    Equity to total assets  7.38%  7.75%  7.49%  8.13%  9.14%
    Tangible common equity ratio *  7.30   7.67   7.40   8.04   9.04 
    Capital ratios (First Fed Bank):                    
    Tier 1 leverage  10.41   10.41   10.50   10.41   10.61 
    Common equity Tier 1 capital  13.34   13.40   13.13   13.21   13.67 
    Tier 1 risk-based  13.34   13.40   13.13   13.21   13.67 
    Total risk-based  14.36   14.42   14.16   14.24   14.73 
                         

    Share Repurchase Program and Cash Dividend
    First Northwest continued to return capital to our shareholders through cash dividends and share repurchases during the first quarter of 2023. We repurchased 44,441 shares of common stock under the Company's October 2020 stock repurchase plan at an average price of $14.07 per share for a total of $627,000 during the quarter ended March 31, 2023, leaving 257,586 shares remaining under the plan. In addition, the Company paid cash dividends totaling $671,000 in the first quarter of 2023. 

    ____________

    * See reconciliation of Non-GAAP Financial Measures later in this release.

    Awards/Recognition

    The Company has received several accolades as a leader in the community.

    In April 2022, First Fed was recognized as a Top Corporate Citizen by the Puget Sound Business Journal. The Corporate Citizenship Awards honors local corporate philanthropists and companies making significant contributions in the region. The top 25 small, medium and large-sized companies were recognized in addition to nine other honorees last year. First Fed was ranked #3 in the medium-sized company category in 2022 and was ranked #4 in the same category in 2021.

    In June 2022, First Fed was named to the Middle Market Fast 50 List by the Puget Sound Business Journal. First Fed also made the Fast 50 list for 2020 and 2021, which recognizes the region's fastest-growing middle market companies.

    Additionally, in June 2022 First Fed was named on the Puget Sound Business Journal’s Best Workplaces list. First Fed has been recognized as one the top 100 workplaces in Washington, as voted for two years in row by each company’s own employees.

    In September 2022, the First Fed team was honored to bring home the Gold for Best Bank in the Best of the Northwest survey hosted by Bellingham Alive.

    In October 2022, First Fed was also recognized in the Best of the Peninsula surveys, winning Best Bank for both Clallam and Jefferson counties. The Bank was a finalist for Best Bank on Bainbridge Island and Central Kitsap. Also, First Fed received Best Financial Advisor in Jefferson.

    About the Company

    First Northwest Bancorp (Nasdaq: FNWB) is a financial holding company engaged in investment activities including the business of its subsidiary, First Fed Bank. First Fed is a Pacific Northwest-based financial institution which has served its customers and communities since 1923. Currently First Fed has 16 locations in Washington state including 12 full-service branches. First Fed’s business and operating strategy is focused on building sustainable earnings by delivering a full array of financial products and services for individuals, small businesses, non-profit organizations, and commercial customers. In 2022, First Northwest made an investment in The Meriwether Group, LLC, a boutique investment banking and accelerator firm. Additionally, First Northwest focuses on strategic partnerships to provide modern financial services such as digital payments and marketplace lending. First Northwest Bancorp was incorporated in 2012 and completed its initial public offering in 2015 under the ticker symbol FNWB. The Company is headquartered in Port Angeles, Washington.

    Forward-Looking Statements

    Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities; pressures on liquidity, including as a result of withdrawals of deposits or declines in the value of our investment portfolio; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Companys latest Annual Report on Form 10-K and other filings with the Securities and Exchange Commission ("SEC"), which are available on our website at www.ourfirstfed.com and on the SECs website at www.sec.gov.

    Any of the forward-looking statements that we make in this Press Release and in the other public statements we make may turn out to be incorrect because of the inaccurate assumptions we might make, because of the factors illustrated above or because of other factors that we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed or implied in any forward-looking statements made by or on our behalf and the Company's operating and stock price performance may be negatively affected. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2023 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Companys operations and stock price performance.

    For More Information Contact:
    Matthew P. Deines, President and Chief Executive Officer
    Geri Bullard, EVP and Chief Financial Officer
    IRGroup@ourfirstfed.com
    360-457-0461


    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    CONSOLIDATED BALANCE SHEETS
    (Dollars in thousands, except share data) (Unaudited)
     
      
      March 31,
    2023
      December 31,
    2022
      March 31,
    2022
      Three
    Month
    Change
      One
    Year
    Change
     
    ASSETS                    
    Cash and due from banks $17,844  $17,104  $16,271   4.3%  9.7%
    Interest-earning deposits in banks  122,773   28,492   66,257   330.9   85.3 
    Investment securities available for sale, at fair value  329,086   326,569   377,695   0.8   -12.9 
    Loans held for sale     597   1,334   -100.0   -100.0 
    Loans receivable (net of allowance for credit losses loans $17,396, $16,116, and $15,127)  1,562,068   1,531,435   1,370,589   2.0   14.0 
    Federal Home Loan Bank (FHLB) stock, at cost  15,602   11,681   8,122   33.6   92.1 
    Accrued interest receivable  7,205   6,743   5,696   6.9   26.5 
    Premises and equipment, net  18,252   18,089   21,050   0.9   -13.3 
    Servicing rights on sold loans, at fair value  4,224   3,887   4,046   8.7   4.4 
    Bank-owned life insurance, net  39,878   39,665   39,570   0.5   0.8 
    Equity and partnership investments  14,392   14,289   3,777   0.7   281.0 
    Goodwill and other intangible assets, net  1,088   1,089   1,180   -0.1   -7.8 
    Deferred tax asset, net  14,211   14,091   5,809   0.9   144.6 
    Prepaid expenses and other assets  25,471   28,339   22,886   -10.1   11.3 
    Total assets $2,172,094  $2,042,070  $1,944,282   6.4%  11.7%
                         
    LIABILITIES AND SHAREHOLDERS' EQUITY                    
    Deposits $1,594,208  $1,564,255  $1,549,414   1.9%  2.9%
    Borrowings  379,377   285,358   184,250   32.9   105.9 
    Accrued interest payable  508   455   13   11.6   3,807.7 
    Accrued expenses and other liabilities  35,255   32,344   30,691   9.0   14.9 
    Advances from borrowers for taxes and insurance  2,410   1,376   2,138   75.1   12.7 
    Total liabilities  2,011,758   1,883,788   1,766,506   6.8   13.9 
                         
    Shareholders' Equity                    
    Preferred stock, $0.01 par value, authorized 5,000,000 shares, no shares issued or outstanding           n/a   n/a 
    Common stock, $0.01 par value, authorized 75,000,000 shares; issued and outstanding 9,674,055 at March 31, 2023; issued and outstanding 9,703,581 at December 31, 2022; and issued and outstanding 10,003,622 at March 31, 2022  97   97   100   0.0   -3.0 
    Additional paid-in capital  95,333   95,508   96,473   -0.2   -1.2 
    Retained earnings  114,139   114,424   105,546   -0.2   8.1 
    Accumulated other comprehensive loss, net of tax  (38,108)  (40,543)  (15,153)  6.0   -151.5 
    Unearned employee stock ownership plan (ESOP) shares  (7,749)  (7,913)  (8,407)  2.1   7.8 
    Total parent's shareholders' equity  163,712   161,573   178,559   1.3   -8.3 
    Noncontrolling interest in Quin Ventures, Inc.  (3,376)  (3,291)  (783)  -2.6   -331.2 
    Total shareholders' equity  160,336   158,282   177,776   1.3   -9.8 
    Total liabilities and shareholders' equity $2,172,094  $2,042,070  $1,944,282   6.4%  11.7%


    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    CONSOLIDATED STATEMENTS OF INCOME
    (Dollars in thousands, except per share data) (Unaudited)
     
      
      Quarter Ended         
      March 31,
    2023
      December 31,
    2022
      March 31,
    2022
      Three
    Month
    Change
      One
    Year
    Change
     
    INTEREST INCOME                    
    Interest and fees on loans receivable $19,504  $20,240  $14,536   -3.6%  34.2%
    Interest on investment securities  3,182   3,059   2,275   4.0   39.9 
    Interest on deposits in banks  404   173   38   133.5   963.2 
    FHLB dividends  192   189   52   1.6   269.2 
    Total interest income  23,282   23,661   16,901   -1.6   37.8 
    INTEREST EXPENSE                    
    Deposits  4,353   2,434   717   78.8   507.1 
    Borrowings  2,624   2,297   698   14.2   275.9 
    Total interest expense  6,977   4,731   1,415   47.5   393.1 
    Net interest income  16,305   18,930   15,486   -13.9   5.3 
    (Recapture of) provision for credit losses  (500)  285      -275.4   100.0 
    Net interest income after (recapture of) provision for credit losses  16,805   18,645   15,486   -9.9   8.5 
    NONINTEREST INCOME                    
    Loan and deposit service fees  1,141   1,163   1,173   -1.9   -2.7 
    Sold loan servicing fees and servicing right mark-to-market  493   202   432   144.1   14.1 
    Net gain on sale of loans  176   55   253   220.0   -30.4 
    Net gain on sale of investment securities        126   n/a   -100.0 
    Increase in cash surrender value of bank-owned life insurance  226   230   252   -1.7   -10.3 
    Income from death benefit on bank-owned life insurance, net     1,489      -100.0   n/a 
    Other income  298   229   167   30.1   78.4 
    Total noninterest income  2,334   3,368   2,403   -30.7   -2.9 
    NONINTEREST EXPENSE                    
    Compensation and benefits  7,837   8,357   8,803   -6.2   -11.0 
    Data processing  2,038   2,119   1,772   -3.8   15.0 
    Occupancy and equipment  1,209   1,300   1,167   -7.0   3.6 
    Supplies, postage, and telephone  355   333   313   6.6   13.4 
    Regulatory assessments and state taxes  389   372   361   4.6   7.8 
    Advertising  1,041   486   752   114.2   38.4 
    Professional fees  806   762   559   5.8   44.2 
    FDIC insurance premium  257   235   223   9.4   15.2 
    Other expense  939   1,179   881   -20.4   6.6 
    Total noninterest expense  14,871   15,143   14,831   -1.8   0.3 
    Income before provision for income taxes  4,268   6,870   3,058   -37.9   39.6 
    Provision for income taxes  825   1,008   554   -18.2   48.9 
    Net income  3,443   5,862   2,504   -41.3   37.5 
    Net loss attributable to noncontrolling interest in Quin Ventures, Inc.  85   198   302   -57.1   -71.9 
    Net income attributable to parent $3,528  $6,060  $2,806   -41.8%  25.7%
                         
    Basic and diluted earnings per common share $0.39  $0.66  $0.30   -40.9%  30.0%


    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    Selected Financial Ratios and Other Data
    (Dollars in thousands, except per share data) (Unaudited)
     
      
      As of or For the Quarter Ended 
      March 31,
    2023
      December 31,
    2022
      September 30,
    2022
      June 30,
    2022
      March 31,
    2022
     
    Performance ratios: (1)                    
    Return on average assets  0.70%  1.18%  0.85%  0.51%  0.60%
    Return on average equity  8.98   15.26   10.12   5.75   6.01 
    Average interest rate spread  3.14   3.72   3.72   3.65   3.43 
    Net interest margin (2)  3.46   3.96   3.88   3.77   3.53 
    Efficiency ratio (3)  79.8   67.9   74.9   87.2   82.9 
    Equity to total assets  7.38   7.75   7.49   8.13   9.14 
    Average interest-earning assets to average interest-bearing liabilities  122.4   124.8   128.6   130.0   132.3 
    Book value per common share $16.57  $16.31  $15.69  $16.60  $17.77 
                         
    Tangible performance ratios:                    
    Tangible assets (4) $2,170,202  $2,040,267  $2,089,454  $2,029,702  $1,942,151 
    Tangible common equity (4)  158,444   156,479   154,612   163,224   175,645 
    Tangible common equity ratio (4)  7.30%  7.67%  7.40%  8.04%  9.04%
    Return on tangible common equity (4)  9.08   15.45   10.23   5.82   6.09 
    Tangible book value per common share (4) $16.38  $16.13  $15.50  $16.40  $17.56 
                         
    Asset quality ratios:                    
    Nonperforming assets to total assets at end of period (5)  0.12%  0.09%  0.17%  0.06%  0.06%
    Nonperforming loans to total loans (6)  0.17   0.12   0.22   0.08   0.09 
    Allowance for credit losses on loans to nonperforming loans (6)  660.69   900.34   462.70   1268.90   1226.85 
    Allowance for credit losses on loans to total loans  1.10   1.04   1.06   1.07   1.09 
    Annualized net charge-offs (recoveries) to average outstanding loans  0.25   0.11   0.06   (0.03)  0.00 
                         
    Capital ratios (First Fed Bank):                    
    Tier 1 leverage  10.4%  10.4%  10.5%  10.4%  10.6%
    Common equity Tier 1 capital  13.3   13.4   13.1   13.2   13.7 
    Tier 1 risk-based  13.3   13.4   13.1   13.2   13.7 
    Total risk-based  14.4   14.4   14.2   14.2   14.7 
                         
    Other Information:                    
    Average total assets $2,050,210  $2,039,016  $1,996,765  $1,963,665  $1,899,717 
    Average total loans  1,552,299   1,554,276   1,500,508   1,455,038   1,345,279 
    Average interest-earning assets  1,909,271   1,895,799   1,859,396   1,836,202   1,777,704 
    Average noninterest-bearing deposits  294,235   326,450   342,944   344,827   328,304 
    Average interest-bearing deposits  1,288,429   1,243,185   1,224,548   1,223,888   1,221,323 
    Average interest-bearing liabilities  1,559,983   1,519,106   1,446,428   1,412,327   1,343,216 
    Average equity  159,319   157,590   168,264   173,584   189,455 
    Average shares -- basic  8,911,294   9,069,493   9,093,821   9,094,894   9,130,168 
    Average shares -- diluted  8,939,601   9,106,453   9,138,123   9,166,131   9,225,368 


    (1)Performance ratios are annualized, where appropriate.
    (2)Net interest income divided by average interest-earning assets.
    (3)Total noninterest expense as a percentage of net interest income and total other noninterest income.
    (4)See reconciliation of Non-GAAP Financial Measures later in this release.
    (5)Nonperforming assets consists of nonperforming loans (which include nonaccruing loans and accruing loans more than 90 days past due), real estate owned and repossessed assets.
    (6)Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.


    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    ADDITIONAL INFORMATION
    (Dollars in thousands) (Unaudited)
     
      
    Selected loan detail: 
      March 31,
    2023
      December 31,
    2022
      March 31,
    2022
      Three
    Month
    Change
      One
    Year
    Change
     
      (In thousands) 
    Commercial business loans breakout                    
    PPP loans $72  $86  $6,992  $(14) $(6,920)
    Secured lines of credit  30,723   15,279   10,988   15,444   19,735 
    Unsecured lines of credit  588   1,276   2,300   (688)  (1,712)
    SBA loans  8,805   8,056   4,349   749   4,456 
    Other commercial business loans  59,798   52,230   29,150   7,568   30,648 
    Total commercial business loans $99,986  $76,927  $53,779  $23,059  $46,207 
                         
    Auto and other consumer loans breakout                    
    Triad Manufactured Home loans $102,424  $89,011  $88,563  $13,413  $13,861 
    Woodside auto loans  123,337   122,961   108,106   376   15,231 
    First Help auto loans  6,281   5,084   7,215   1,197   (934)
    Other auto loans  7,350   8,182   12,379   (832)  (5,029)
    Other consumer loans  11,910   13,675   5,045   (1,765)  6,865 
    Total auto and other consumer loans $251,302  $238,913  $221,308  $12,389  $29,994 
                         
    Construction and land loans breakout                    
    1-4 Family construction $87,269  $77,138  $70,827  $10,131  $16,442 
    Multifamily construction  51,788   76,345   83,206   (24,557)  (31,418)
    Acquisition-renovation  7,096   19,247   31,066   (12,151)  (23,970)
    Nonresidential construction  6,909   9,218   10,712   (2,309)  (3,803)
    Land and development  8,600   11,698   12,045   (3,098)  (3,445)
    Total construction and land loans $161,662  $193,646  $207,856  $(31,984) $(46,194)
      

    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    ADDITIONAL INFORMATION
    (Dollars in thousands) (Unaudited)

    Non-GAAP Financial Measures
    This press release contains financial measures that are not defined in generally accepted accounting principles ("GAAP"). Non-GAAP measures are presented where management believes the information will help investors understand the Company’s results of operations or financial position and assess trends. Where non-GAAP financial measures are used, the comparable GAAP financial measure is also provided. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, and are not necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of the GAAP and non-GAAP measures are presented below.

    Calculations Based on Tangible Common Equity:

      March 31,
    2023
      December 31,
    2022
      September 30,
    2022
      June 30,
    2022
      March 31,
    2022
     
      (Dollars in thousands, except per share data) 
    Total shareholders' equity $160,336  $158,282  $156,599  $165,154  $177,776 
    Less: Goodwill and other intangible assets  1,088   1,089   1,173   1,176   1,180 
    Disallowed non-mortgage loan servicing rights  804   714   814   754   951 
    Total tangible common equity $158,444  $156,479  $154,612  $163,224  $175,645 
                         
    Total assets $2,172,094  $2,042,070  $2,091,441  $2,031,632  $1,944,282 
    Less: Goodwill and other intangible assets  1,088   1,089   1,173   1,176   1,180 
    Disallowed non-mortgage loan servicing rights  804   714   814   754   951 
    Total tangible assets $2,170,202  $2,040,267  $2,089,454  $2,029,702  $1,942,151 
                         
    Average shareholders' equity $159,319  $157,590  $168,264  $173,584  $189,455 
    Less: Average goodwill and other intangible assets  1,089   1,171   1,175   1,179   1,182 
    Average disallowed non-mortgage loan servicing rights  715   813   755   949   1,381 
    Total average tangible common equity $157,515  $155,606  $166,334  $171,456  $186,892 
                         
    Tangible common equity ratio (1)  7.30%  7.67%  7.40%  8.04%  9.04%
    Net income $3,528  $6,060  $4,291  $2,488  $2,806 
    Return on tangible common equity (1)  9.08%  15.45%  10.23%  5.82%  6.09%
    Common shares outstanding  9,674,055   9,703,581   9,978,041   9,950,172   10,003,622 
    Tangible book value per common share (1) $16.38  $16.13  $15.50  $16.40  $17.56 
    GAAP Ratios:                    
    Equity to total assets  7.38%  7.75%  7.49%  8.13%  9.14%
    Return on average equity  8.98%  15.26%  10.12%  5.75%  6.01%
    Book value per common share $16.57  $16.31  $15.69  $16.60  $17.77 
                         

    Non-GAAP Financial Measures Footnote

    (1)We believe these non-GAAP metrics provide an important measure with which to analyze and evaluate financial condition and capital strength. In addition, we believe that use of tangible equity and tangible assets improves the comparability to other institutions that have not engaged in acquisitions that resulted in recorded goodwill and other intangibles.

     


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