PART I - FINANCIAL INFORMATION [Item 1 - Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20-%20Financial%20Statements%20(Unaudited)) This section presents unaudited consolidated financial statements, including balance sheets, income, comprehensive income, equity changes, cash flows, and detailed notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets reflect First Northwest Bancorp's financial position, showing growth in total assets, loans, and deposits, and the introduction of subordinated debt Key Balance Sheet Data (in thousands) | Item | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------------------------- | :----------- | :----------- | | Total Assets | $1,845,137 | $1,654,349 | | Loans receivable (net) | $1,345,126 | $1,141,969 | | Deposits | $1,522,916 | $1,333,517 | | Subordinated debt, net | $39,261 | — | | Total Shareholders' Equity | $187,444 | $186,383 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated income statements detail revenues and expenses, showing significant growth in net interest income and net income attributable to parent, despite increased noninterest expenses Net Income Attributable to Parent (in thousands) | Period | 2021 | 2020 | Change (YoY) | | :----------------------- | :--- | :--- | :----------- | | Three Months Ended Sep 30 | $4,178 | $3,675 | +13.7% | | Nine Months Ended Sep 30 | $10,294 | $6,524 | +57.8% | Net Interest Income (in thousands) | Period | 2021 | 2020 | Change (YoY) | | :----------------------- | :--- | :--- | :----------- | | Three Months Ended Sep 30 | $15,352 | $11,761 | +30.5% | | Nine Months Ended Sep 30 | $42,484 | $31,281 | +35.8% | Basic Earnings Per Common Share | Period | 2021 | 2020 | Change (YoY) | | :----------------------- | :--- | :--- | :----------- | | Three Months Ended Sep 30 | $0.45 | $0.40 | +12.5% | | Nine Months Ended Sep 30 | $1.12 | $0.69 | +62.3% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income statements report total comprehensive income, including net income and other components, showing a decrease attributable to parent due to other comprehensive losses Comprehensive Income Attributable to Parent (in thousands) | Period | 2021 | 2020 | Change (YoY) | | :----------------------- | :--- | :--- | :----------- | | Three Months Ended Sep 30 | $1,446 | $6,144 | -76.4% | | Nine Months Ended Sep 30 | $5,521 | $11,249 | -50.9% | Other Comprehensive (Loss) Income, Net of Tax (in thousands) | Period | 2021 | 2020 | Change (YoY) | | :----------------------- | :------- | :------- | :----------- | | Three Months Ended Sep 30 | $(2,612) | $2,469 | -205.8% | | Nine Months Ended Sep 30 | $(4,508) | $4,725 | -195.4% | [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This section details changes in shareholders' equity, reflecting the impact of net income, stock repurchases, restricted awards, other comprehensive income/loss, and cash dividends Total Shareholders' Equity (in thousands) | Date | Amount | | :--------------- | :----- | | Sep 30, 2021 | $187,444 | | Dec 31, 2020 | $186,383 | | Sep 30, 2020 | $180,668 | Common Stock Repurchased (Nine Months Ended Sep 30) | Year | Shares Repurchased | Amount (in thousands) | | :--- | :----------------- | :-------------------- | | 2021 | (291,932) | $(4,936) | | 2020 | (560,306) | $(7,169) | Cash Dividends Paid (Nine Months Ended Sep 30) | Year | Per Share | Amount (in thousands) | | :--- | :-------- | :-------------------- | | 2021 | $0.18 | $(1,831) | | 2020 | $0.15 | $(1,569) | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flow statements break down operating, investing, and financing activities, showing a significant increase in net cash from operations and a shift in investing Net Cash Flows (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating Activities | $11,455 | $3,323 | | Investing Activities | $(108,271) | $(240,994) | | Financing Activities | $107,781 | $241,011 | | Net Increase in Cash and Equivalents | $10,965 | $3,340 | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for financial statements, covering accounting policies, financial instruments, employee benefits, fair value, and transactions [Note 1 - Basis of Presentation and Critical Accounting Policies](index=12&type=section&id=Note%201%20-%20Basis%20of%20Presentation%20and%20Critical%20Accounting%20Policies) This note outlines the company's structure, business, financial statement basis, consolidation principles, and adopted accounting pronouncements, including CECL deferral - First Northwest Bancorp is the holding company for First Fed Bank and has a controlling interest in Quin Ventures, Inc.[28](index=28&type=chunk)[33](index=33&type=chunk)[37](index=37&type=chunk) - First Fed Bank provides commercial and consumer banking services in Western Washington State[34](index=34&type=chunk) - The company adopted ASU 2019-10, deferring the effective date of CECL guidance to **January 1, 2023**[39](index=39&type=chunk) [Note 2 - Securities](index=16&type=section&id=Note%202%20-%20Securities) This note details available-for-sale investment securities, including cost, gains/losses, fair value, and maturities, noting decreased total securities and increased unrealized losses Total Securities Available for Sale (in thousands) | Date | Amortized Cost | Fair Value | | :--------------- | :------------- | :--------- | | Sep 30, 2021 | $322,575 | $325,890 | | Dec 31, 2020 | $357,407 | $364,296 | - At September 30, 2021, there were **62 investment securities** in an unrealized loss position, compared to **36** at December 31, 2020[50](index=50&type=chunk) - Management believes unrealized losses are due to general interest rate changes and market volatility, not credit quality, and does not intend to sell these securities prior to market price recovery or maturity[51](index=51&type=chunk) [Note 3 - Loans Receivable](index=19&type=section&id=Note%203%20-%20Loans%20Receivable) This note details the loan portfolio, ALLL changes, impaired, nonaccrual, and past due loans, showing increased total loans and ALLL, with decreased nonperforming loans Loans Receivable and ALLL (in thousands) | Item | Sep 30, 2021 | Dec 31, 2020 | | :------------------------ | :----------- | :----------- | | Total Loans | $1,352,878 | $1,154,033 | | Allowance for Loan Losses | $15,243 | $13,847 | Nonaccrual and Past Due Loans (in thousands) | Item | Sep 30, 2021 | Dec 31, 2020 | | :-------------------- | :----------- | :----------- | | Total Nonaccrual Loans | $1,183 | $2,273 | | Total Past Due Loans | $543 | $1,833 | - The company granted COVID-19 related temporary loan modifications on **357 loans** aggregating to **$175.0 million**; no loans remained on deferral as of September 30, 2021[86](index=86&type=chunk) [Note 4 - Deposits](index=30&type=section&id=Note%204%20-%20Deposits) This note breaks down deposit types, weighted-average interest rates, and CD maturities, showing increased total deposits and decreased average interest rates Deposits and Weighted-Average Interest Rates (in thousands) | Item | Sep 30, 2021 Amount | Sep 30, 2021 Rate | Dec 31, 2020 Amount | Dec 31, 2020 Rate | | :-------------------------- | :------------------ | :------------------ | :------------------ | :------------------ | | Total Deposits | $1,522,916 | 0.20% | $1,333,517 | 0.36% | | Certificates of Deposit | $245,080 | 0.70% | $308,769 | 1.00% | - Brokered certificates of deposits decreased to **$55.1 million** at September 30, 2021, from **$89.6 million** at December 31, 2020[92](index=92&type=chunk) [Note 5 - Federal Taxes on Income](index=31&type=section&id=Note%205%20-%20Federal%20Taxes%20on%20Income) This note discusses effective tax rates, highlighting the impact of nontaxable BOLI earnings, tax-exempt interest income, and prior period adjustments Effective Tax Rates (Nine Months Ended Sep 30) | Year | Rate | | :--- | :--- | | 2021 | 17.2% | | 2020 | 24.3% | - The effective tax rates differ from the statutory federal tax rate due to nontaxable earnings on bank-owned life insurance and tax-exempt interest income. A cumulative adjustment in Q1 2021 reduced the provision, while a BOLI contract surrender penalty in 2020 increased the prior year's rate[97](index=97&type=chunk) [Note 6 - Earnings per Share](index=31&type=section&id=Note%206%20-%20Earnings%20per%20Share) This note reconciles basic and diluted EPS, showing an increase in both for the three and nine months ended September 30, 2021, compared to prior year Basic Earnings Per Common Share | Period | 2021 | 2020 | | :----------------------- | :--- | :--- | | Three Months Ended Sep 30 | $0.45 | $0.40 | | Nine Months Ended Sep 30 | $1.12 | $0.69 | Diluted Earnings Per Common Share | Period | 2021 | 2020 | | :----------------------- | :--- | :--- | | Three Months Ended Sep 30 | $0.45 | $0.40 | | Nine Months Ended Sep 30 | $1.11 | $0.69 | [Note 7 - Employee Benefits](index=32&type=section&id=Note%207%20-%20Employee%20Benefits) This note details the transition to a single-employer defined benefit pension plan and provides ESOP information, including compensation expense and share allocation - Effective **March 23, 2021**, the company transitioned from the Pentegra Defined Benefit Plan for Financial Institutions to the First Federal Defined Benefit Plan, a single-employer plan[102](index=102&type=chunk) ESOP Compensation Expense (in thousands) | Period | 2021 | 2020 | | :----------------------- | :--- | :--- | | Three Months Ended Sep 30 | $179 | $99 | | Nine Months Ended Sep 30 | $503 | $359 | - Unallocated ESOP shares were **701,412** at September 30, 2021, compared to **754,301** at September 30, 2020[100](index=100&type=chunk)[110](index=110&type=chunk) [Note 8 - Stock-based Compensation](index=33&type=section&id=Note%208%20-%20Stock-based%20Compensation) This note describes equity incentive plans, including the 2020 EIP, and reports compensation expense for restricted stock awards and unrecognized costs - The First Northwest Bancorp 2020 Equity Incentive Plan (2020 EIP) was approved in **May 2020**, with **336,383 shares** available for grant as of September 30, 2021[112](index=112&type=chunk) Total Compensation Expense for Equity Incentive Plans (in thousands) | Period | 2021 | 2020 | | :----------------------- | :--- | :--- | | Three Months Ended Sep 30 | $433 | $362 | | Nine Months Ended Sep 30 | $1,400 | $917 | - As of September 30, 2021, there was **$3.6 million** of total unrecognized compensation cost related to non-vested shares, expected to be recognized over approximately **2.46 years**[120](index=120&type=chunk) [Note 9 - Fair Value Accounting and Measurement](index=34&type=section&id=Note%209%20-%20Fair%20Value%20Accounting%20and%20Measurement) This note explains the fair value measurement hierarchy (Level 1, 2, 3) and presents assets/liabilities measured at fair value, noting Level 3 to Level 2 reclassification - The company uses a three-level valuation hierarchy (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs) for determining fair value[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) Securities Available-for-Sale Fair Value (in thousands) | Date | Level 1 | Level 2 | Level 3 | Total | | :--------------- | :------ | :------ | :------ | :---- | | Sep 30, 2021 | $0 | $325,890 | $0 | $325,890 | | Dec 31, 2020 | $0 | $355,384 | $8,912 | $364,296 | - All Level 3 securities (Corporate debt and MBS corporate) totaling **$8.9 million** were transferred to Level 2 during the nine months ended September 30, 2021, after obtaining observable market data[132](index=132&type=chunk) [Note 10 - Change in Accumulated Other Comprehensive Income ("AOCI")](index=40&type=section&id=Note%2010%20-%20Change%20in%20Accumulated%20Other%20Comprehensive%20Income%20(%22AOCI%22)) This note details AOCI changes, including unrealized gains/losses on securities and defined benefit costs, showing a significant decrease due to other comprehensive losses Total Accumulated Other Comprehensive Income (in thousands) | Date | Amount | | :--------------- | :----- | | Sep 30, 2021 | $934 | | Dec 31, 2020 | $5,442 | | Sep 30, 2020 | $3,186 | Net Other Comprehensive (Loss) Income, Net of Tax (Nine Months Ended Sep 30, in thousands) | Year | Amount | | :--- | :------- | | 2021 | $(4,508) | | 2020 | $4,725 | [Note 11 - Business Combination](index=41&type=section&id=Note%2011%20-%20Business%20Combination) This note reports the Bank's acquisition of Sterling Bank and Trust's Washington branch for **$63.5 million** in cash, expanding deposits and establishing a Bellevue presence, recognizing goodwill - On **July 23, 2021**, the Bank acquired certain assets and assumed liabilities of Sterling Bank and Trust's sole branch in Washington State[143](index=143&type=chunk) - Total consideration paid for the acquisition was **$63.5 million** in cash[143](index=143&type=chunk)[146](index=146&type=chunk) Goodwill and Acquired Deposits (in thousands) | Item | Amount | | :-------------------- | :----- | | Goodwill Recognized | $1,062 | | Deposits Assumed | $64,867 | [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, including forward-looking statements, business overview, COVID-19 impact, and detailed performance comparisons [Forward-Looking Statements](index=42&type=section&id=Forward-Looking%20Statements) This section highlights forward-looking statements, subject to significant business, economic, and competitive uncertainties, including the ongoing COVID-19 pandemic impact - Forward-looking statements are not historical facts and are identified by words such as "believes," "expects," "anticipates," or "estimates"[148](index=148&type=chunk) - Key uncertainties include the scope and duration of the COVID-19 pandemic, legislative or regulatory changes, credit quality risks, ability to control operating costs, and successful execution of growth strategies[150](index=150&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements[152](index=152&type=chunk) [General Business Overview](index=44&type=section&id=General%20Business%20Overview) First Northwest Bancorp operates through First Fed, a community-oriented institution offering diverse banking services in Western Washington, focusing on sustainable earnings and strategic growth - First Fed Bank is a community-oriented financial institution with **12 full-service branches** and **two business centers** in Western Washington[153](index=153&type=chunk) - The business strategy focuses on building sustainable earnings through geographic expansion, diversifying loan products, expanding deposit offerings, and enhancing digital service delivery[153](index=153&type=chunk) - Primary income source is net interest income, supplemented by noninterest income from service charges, mortgage banking, and loan sales[156](index=156&type=chunk) [Impact of COVID-19 Pandemic](index=44&type=section&id=Impact%20of%20COVID-19%20Pandemic) The COVID-19 pandemic created uncertainty, but the company is well-positioned, providing loan modifications and PPP funding, while monitoring vulnerable industries - The U.S. economy is recovering, and the company anticipates continued improvements in commercial and consumer activity with vaccine availability and eased restrictions in Washington State[159](index=159&type=chunk)[160](index=160&type=chunk) - At September 30, 2021, the company's exposure to hospitality, restaurant and food services, and lessors of commercial real estate to these industries was **3.6%**, **0.1%**, and **4.2%** of the total loan portfolio, respectively[161](index=161&type=chunk) - The company processed **$35.0 million** in SBA Paycheck Protection Program (PPP) loans for **427 customers** in the second round (2021) and **$32.2 million** for **515 customers** in the initial round (2020). As of September 30, 2021, **87.5%** of first-round and **33.0%** of second-round loans were forgiven[165](index=165&type=chunk) [Critical Accounting Policies](index=46&type=section&id=Critical%20Accounting%20Policies) No material changes occurred in critical accounting policies from those disclosed in the Company's Annual Report on Form 10-K for December 31, 2020 - There are no material changes to the critical accounting policies as disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2020[166](index=166&type=chunk) [Comparison of Financial Condition at September 30, 2021 and December 31, 2020](index=46&type=section&id=Comparison%20of%20Financial%20Condition%20at%20September%2030,%202021%20and%20December%2031,%202020) This section compares financial condition, highlighting significant increases in total assets, net loans, and deposits, alongside subordinated debt issuance and modest equity rise [Assets](index=46&type=section&id=Assets) Total assets significantly increased, driven by substantial growth in net loans, especially construction and consumer loans, while investment securities decreased - Total assets increased to **$1.85 billion** at September 30, 2021, from **$1.65 billion** at December 31, 2020[167](index=167&type=chunk) Loan Portfolio Changes (in thousands) | Loan Type | Sep 30, 2021 | Dec 31, 2020 | Change Amount | Change Percent | | :------------------------ | :----------- | :----------- | :------------ | :------------- | | Net Loans (excl. HFS) | $1,345,126 | $1,141,969 | $203,157 | +17.8% | | Construction and Land | $214,472 | $123,627 | $90,845 | +73.5% | | Auto and Other Consumer | $182,238 | $128,233 | $54,005 | +42.1% | - Nonperforming loans decreased **$1.1 million**, or **48.0%**, to **$1.2 million** at September 30, 2021, from **$2.3 million** at December 31, 2020[177](index=177&type=chunk)[182](index=182&type=chunk) - Investment securities decreased **$38.4 million**, or **10.5%**, to **$325.9 million** at September 30, 2021, from **$364.3 million** at December 31, 2020[182](index=182&type=chunk) [Liabilities](index=51&type=section&id=Liabilities) Total liabilities increased due to a significant rise in deposits and subordinated debt issuance, with a strategic shift towards noninterest-bearing and core deposits - Total liabilities increased to **$1.66 billion** at September 30, 2021, from **$1.47 billion** at December 31, 2020[184](index=184&type=chunk) - Deposit balances increased **14.2%**, to **$1.52 billion** at September 30, 2021, from **$1.33 billion** at December 31, 2020, driven by organic growth, the Bellevue branch acquisition, and government stimulus[185](index=185&type=chunk) - The company completed a private placement of **$40.0 million** of **3.75%** fixed-to-floating rate subordinated notes in **March 2021**[186](index=186&type=chunk) [Equity](index=51&type=section&id=Equity) Total shareholders' equity modestly increased, driven by net income, partially offset by share repurchases, decreased unrealized gains, and pension plan adjustments - Total shareholders' equity increased **$1.4 million** to **$187.8 million** for the nine months ended September 30, 2021[187](index=187&type=chunk) - The increase from year-to-date net income of **$10.2 million** was partially offset by **$4.9 million** in share repurchases, a **$2.8 million** after-tax decrease in unrealized gain on available-for-sale investments, and a **$1.7 million** adjustment for pension plan prior service cost[187](index=187&type=chunk) [Comparison of Results of Operations for the Three Months Ended September 30, 2021 and 2020](index=51&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20September%2030,%202021%20and%202020) This section compares operating results, showing increased net income driven by higher net interest income after loan loss provision, partially offset by increased noninterest expenses [General](index=51&type=section&id=General) Net income increased by **13.7%** due to higher net interest income after loan loss provision and modest noninterest income growth, partially offset by increased noninterest expenses - Net income increased **$503,000**, or **13.7%**, to **$4.2 million** for the three months ended September 30, 2021, compared to **$3.7 million** for the same period in 2020[188](index=188&type=chunk) [Net Interest Income](index=51&type=section&id=Net%20Interest%20Income) Net interest income grew significantly, driven by increased average earning assets and an improved net interest margin, despite decreased average cost of interest-bearing liabilities - Net interest income increased **$3.6 million** to **$15.4 million** for the three months ended September 30, 2021, from **$11.8 million** for the same period in 2020[189](index=189&type=chunk) - The net interest margin increased **22 basis points** to **3.58%** for the three months ended September 30, 2021, from **3.36%** for the same period in 2020[190](index=190&type=chunk) - The average cost of interest-bearing liabilities decreased to **0.45%** for the three months ended September 30, 2021, compared to **0.60%** for the same period last year[190](index=190&type=chunk) [Interest Income](index=51&type=section&id=Interest%20Income) Total interest income increased due to higher average balances of interest-earning assets and increased interest/fees on loans, including deferred fee income from PPP/MSLP payoffs - Total interest income increased **$3.4 million**, or **25.5%**, to **$16.8 million** for the three months ended September 30, 2021, from **$13.4 million** for the comparable period in 2020[191](index=191&type=chunk) - Interest and fees on loans receivable increased **$3.5 million** to **$14.6 million**, driven by a **$296.3 million** increase in the average balance of net loans receivable and recognition of deferred fee income from PPP and MSLP loan payoffs[191](index=191&type=chunk) [Interest Expense](index=53&type=section&id=Interest%20Expense) Total interest expense decreased due to lower deposit interest expense from reduced average cost, partially offset by new interest expense from subordinated debt - Total interest expense decreased **$184,000**, or **11.4%**, to **$1.4 million** for the three months ended September 30, 2021, compared to **$1.6 million** for the same period in 2020[195](index=195&type=chunk) - Interest expense on deposits decreased **$555,000** due to a **27 basis point** decrease in the average cost of interest-bearing deposits, offset by **$390,000** in interest expense on subordinated debt issued in 2021[195](index=195&type=chunk) - The average balance of interest-bearing deposits increased **$170.1 million**, or **16.9%**, to **$1.18 billion**[195](index=195&type=chunk) [Provision for Loan Losses](index=53&type=section&id=Provision%20for%20Loan%20Losses) The provision for loan losses significantly decreased, reflecting a more stable economic outlook compared to prior year's elevated provision due to COVID-19 uncertainty - The provision for loan losses was **$700,000** for the three months ended September 30, 2021, compared to **$1.4 million** for the same period in 2020, which was elevated due to COVID-19 uncertainty[197](index=197&type=chunk) Net Charge-offs (in thousands) | Period | 2021 | 2020 | | :----------------------- | :--- | :--- | | Three Months Ended Sep 30 | $(45) | $(452) | [Noninterest Income](index=53&type=section&id=Noninterest%20Income) Noninterest income decreased, primarily due to a significant decline in net gain on loan sales, partially offset by increased sold loan servicing fees and investment security gains - Total noninterest income decreased **$495,000**, or **10.4%**, to **$4.3 million** for the three months ended September 30, 2021, from **$4.8 million** for the same period in 2020[198](index=198&type=chunk)[200](index=200&type=chunk) - Net gain on sale of loans decreased **$1.1 million**, or **61.6%**, due to less saleable inventory and reduced loan refinancing activity[198](index=198&type=chunk)[200](index=200&type=chunk) - Sold loan servicing fees increased **$667,000** due to an increase in servicing right value and an adjustment to recognize servicing fee income on MSLP loans[198](index=198&type=chunk)[200](index=200&type=chunk) [Noninterest Expense](index=55&type=section&id=Noninterest%20Expense) Noninterest expense substantially increased, mainly driven by higher compensation and benefits due to increased staffing, incentive accruals, commissions, and other operational costs - Total noninterest expense increased **$3.9 million**, or **38.2%**, to **$13.9 million** for the three months ended September 30, 2021, compared to **$10.1 million** for the same period in 2020[201](index=201&type=chunk)[202](index=202&type=chunk) - Compensation and benefits increased **$2.6 million**, or **43.5%**, due to employee additions, a **$620,000** increase in incentive accrual, and **$226,000** in commissions on increased mortgage and commercial loan production[201](index=201&type=chunk)[202](index=202&type=chunk) [Provision for Income Tax](index=55&type=section&id=Provision%20for%20Income%20Tax) Income tax expense decreased despite increased income before taxes, primarily due to a prior year BOLI restructure-related penalty that inflated 2020 expense - An income tax expense of **$946,000** was recorded for the three months ended September 30, 2021, compared to **$1.4 million** for the same period in 2020[202](index=202&type=chunk) - The higher expense in Q3 2020 was due to a BOLI restructure-related penalty[202](index=202&type=chunk) [Comparison of Results of Operations for the Nine Months Ended September 30, 2021 and 2020](index=55&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Nine%20Months%20Ended%20September%2030,%202021%20and%202020) This section compares operating results, showing a significant increase in net income driven by substantial net interest income after loan loss provision, partially offset by higher noninterest expenses [General](index=55&type=section&id=General) Net income significantly increased, primarily due to a substantial rise in net interest income after loan loss provision, partially offset by higher noninterest expenses - Net income increased **$3.8 million**, or **57.8%**, to **$10.3 million** for the nine months ended September 30, 2021, compared to **$6.5 million** for the same period in 2020[203](index=203&type=chunk) [Net Interest Income](index=55&type=section&id=Net%20Interest%20Income) Net interest income saw substantial growth, driven by increased average earning assets and an improved net interest margin, benefiting from decreased average cost of interest-bearing liabilities - Net interest income increased **$11.2 million** to **$42.5 million** for the nine months ended September 30, 2021, from **$31.3 million** for the same period in 2020[204](index=204&type=chunk) - The net interest margin increased **28 basis points** to **3.48%** for the nine months ended September 30, 2021, from **3.20%** for the same period in 2020[205](index=205&type=chunk) - The average cost of interest-bearing liabilities decreased to **0.44%** for the nine months ended September 30, 2021, compared to **0.85%** for the same period last year[205](index=205&type=chunk) [Interest Income](index=55&type=section&id=Interest%20Income) Total interest income increased due to higher average balances of interest-earning assets and a significant rise in interest/fees on loans, including deferred fee income from PPP/MSLP payoffs - Total interest income increased **$8.8 million**, or **23.2%**, to **$46.5 million** for the nine months ended September 30, 2021, from **$37.7 million** for the comparable period in 2020[206](index=206&type=chunk) - Interest and fees on loans receivable increased **$8.8 million** to **$40.0 million**, driven by a **$275.9 million** increase in the average balance of net loans receivable and recognition of deferred fee income on PPP and MSLP loan payoffs[206](index=206&type=chunk) [Interest Expense](index=56&type=section&id=Interest%20Expense) Total interest expense significantly decreased, mainly due to substantial reduction in deposit interest expense from lower average rates, partially offset by increased subordinated debt costs - Total interest expense decreased **$2.5 million**, or **38.1%**, to **$4.0 million** for the nine months ended September 30, 2021, compared to **$6.4 million** for the same period in 2020[207](index=207&type=chunk) - Interest expense on deposits decreased **$3.0 million** due to a **49 basis point** decrease in the average cost of interest-bearing deposits, offset by an increase in borrowing costs of **$529,000** related to the subordinated debt issued in 2021[207](index=207&type=chunk) - The average balance of interest-bearing deposits increased **$203.2 million**, or **21.8%**, to **$1.14 billion**[207](index=207&type=chunk) [Provision for Loan Losses](index=56&type=section&id=Provision%20for%20Loan%20Losses) The provision for loan losses substantially decreased, reflecting a more favorable economic environment and reduced uncertainty compared to prior year's higher provision due to COVID-19 - The provision for loan losses was **$1.5 million** for the nine months ended September 30, 2021, compared to **$4.1 million** for the same period in 2020[209](index=209&type=chunk)[210](index=210&type=chunk) Net Charge-offs (in thousands) | Period | 2021 | 2020 | | :----------------------- | :--- | :--- | | Nine Months Ended Sep 30 | $(104) | $(737) | [Noninterest Income](index=57&type=section&id=Noninterest%20Income) Noninterest income slightly decreased, primarily due to a decline in net gain on loan sales and decreased BOLI cash surrender value, partially offset by increased servicing fees and other income - Total noninterest income decreased **$346,000**, or **3.1%**, to **$10.9 million** for the nine months ended September 30, 2021, from **$11.2 million** for the same period in 2020[210](index=210&type=chunk)[211](index=211&type=chunk) - Net gain on sale of loans decreased **$1.2 million**, or **28.9%**, over the same period in 2020[210](index=210&type=chunk)[211](index=211&type=chunk) - Sold loan servicing fees increased **$867,000** due to recognition of servicing right value and servicing fee income on MSLP loans[210](index=210&type=chunk)[211](index=211&type=chunk) [Noninterest Expense](index=57&type=section&id=Noninterest%20Expense) Noninterest expense significantly increased, mainly driven by higher compensation and benefits due to increased staffing, commissions, incentive accruals, equity awards, and software/advertising costs - Total noninterest expense increased **$10.0 million**, or **33.6%**, to **$39.7 million** for the nine months ended September 30, 2021, compared to **$29.8 million** for the same period in 2020[211](index=211&type=chunk)[213](index=213&type=chunk) - Compensation and benefits increased **$7.2 million**, or **41.2%**, due to staff additions, commissions, incentive accrual, and a **$500,000** increase related to equity awarded for the Quin joint venture agreement[211](index=211&type=chunk)[213](index=213&type=chunk) - Software costs increased **$898,000** due to implementing more robust systems for digital initiatives and company growth[211](index=211&type=chunk) [Provision for Income Tax](index=58&type=section&id=Provision%20for%20Income%20Tax) Income tax expense remained relatively stable despite a significant increase in income before taxes, as prior year's expense included a penalty offsetting current period's higher income - An income tax expense of **$2.1 million** was recorded for the nine months ended September 30, 2021, similar to **$2.1 million** for the same period in 2020[213](index=213&type=chunk) - The prior year's expense included a penalty, which resulted in a similar expense for both periods despite a **$3.5 million** increase in income before taxes in 2021[213](index=213&type=chunk) [Average Balances, Interest and Average Yields/Cost](index=59&type=section&id=Average%20Balances,%20Interest%20and%20Average%20Yields/Cost) This section provides detailed tables of average balances, interest, and yields/rates for interest-earning assets and liabilities, illustrating net interest income and margin components Average Interest-Earning Assets (Nine Months Ended Sep 30, in thousands) | Year | Average Balance Outstanding | Yield | | :--- | :-------------------------- | :---- | | 2021 | $1,631,179 | 3.81% | | 2020 | $1,305,366 | 3.85% | Average Interest-Bearing Liabilities (Nine Months Ended Sep 30, in thousands) | Year | Average Balance Outstanding | Rate | | :--- | :-------------------------- | :--- | | 2021 | $1,215,559 | 0.44% | | 2020 | $1,002,751 | 0.85% | Net Interest Margin (Nine Months Ended Sep 30) | Year | Margin | | :--- | :----- | | 2021 | 3.48% | | 2020 | 3.20% | [Rate/Volume Analysis](index=61&type=section&id=Rate/Volume%20Analysis) This section analyzes changes in interest income and expense, distinguishing between volume and interest rate impacts for major interest-earning assets and liabilities Total Interest-Earning Assets (Nine Months Ended Sep 30, 2021 vs. 2020, in thousands) | Factor | Increase (Decrease) | | :----- | :------------------ | | Volume | $9,802 | | Rate | $(1,045) | | Total | $8,757 | Total Interest-Bearing Liabilities (Nine Months Ended Sep 30, 2021 vs. 2020, in thousands) | Factor | Increase (Decrease) | | :----- | :------------------ | | Volume | $1 | | Rate | $(2,447) | | Total | $(2,446) | [Off-Balance Sheet Activities](index=61&type=section&id=Off-Balance%20Sheet%20Activities) The company engages in off-balance sheet transactions, primarily loan commitments and lines of credit, reporting no material effect on financial condition or cash flows - The company engaged in no off-balance sheet transactions likely to have a material effect on its financial condition, results of operations, or cash flows for the nine months ended September 30, 2021, and the year ended December 31, 2020[222](index=222&type=chunk) - Off-balance sheet transactions primarily take the form of loan commitments and lines of credit[222](index=222&type=chunk) [Contractual Obligations](index=62&type=section&id=Contractual%20Obligations) This section summarizes scheduled maturities of contractual obligations, including deposits, FHLB advances, subordinated debt, leases, deferred compensation, and contingent liabilities Total Contractual Obligations (in thousands) at Sep 30, 2021 | Maturity Period | Amount | | :-------------------- | :----- | | Within 1 Year | $170,075 | | After 1 Year Through 3 Years | $106,168 | | After 3 Years Through 5 Years | $36,019 | | Beyond 5 Years | $44,822 | | **Total Balance** | **$357,084** | Commitments and Contingent Liabilities (in thousands) at Sep 30, 2021 | Item | Total Amounts Committed | | :------------------------------------------ | :---------------------- | | Commitments to originate loans | $3,014 | | Unfunded commitments under lines of credit | $256,132 | | Standby letters of credit | $212 | | **Total Commitments** | **$259,358** | [Liquidity Management](index=62&type=section&id=Liquidity%20Management) This section discusses liquidity management, relying on deposit inflows, loan repayments, security maturities/sales, and FHLB borrowings, highlighting strong liquid assets and capital compliance - Primary sources of funds include deposit inflows, loan repayments, maturities and sales of securities, and borrowings from the FHLB[225](index=225&type=chunk) - At September 30, 2021, cash and cash equivalents totaled **$76.1 million**, with an additional **$200.0 million** in unpledged available-for-sale securities providing liquidity[227](index=227&type=chunk) - The company (on an unconsolidated basis) had liquid assets of **$16.6 million** at September 30, 2021[230](index=230&type=chunk) [Capital Resources](index=63&type=section&id=Capital%20Resources) This section details the company's capital position, showing the Bank exceeded all regulatory capital requirements and was considered "well capitalized" under FDIC guidelines - At September 30, 2021, shareholders' equity totaled **$187.8 million**, or **10.2%** of total assets[231](index=231&type=chunk) - The Bank exceeded all regulatory capital requirements and was considered "**well capitalized**" under FDIC regulatory capital guidelines at September 30, 2021[231](index=231&type=chunk)[232](index=232&type=chunk) First Fed Capital Ratios at Sep 30, 2021 | Capital Ratio | Actual Ratio | Minimum Requirement | Well-Capitalized Requirement | | :---------------------------------- | :----------- | :------------------ | :--------------------------- | | Tier I leverage capital | 10.6% | 4.0% | 5.0% | | Common equity tier I (CET1) | 13.4% | 4.5% | 6.5% | | Tier I risk-based capital | 13.4% | 6.0% | 8.0% | | Total risk-based capital | 14.4% | 8.0% | 10.0% | [Effect of Inflation and Changing Prices](index=63&type=section&id=Effect%20of%20Inflation%20and%20Changing%20Prices) Financial statements are prepared using historical dollars; interest rates, not inflation, significantly impact performance due to the monetary nature of assets and liabilities - Financial statements are prepared using historical dollars, without considering the change in the relative purchasing power of money due to inflation[234](index=234&type=chunk) - Interest rates generally have a more significant impact on a financial institution's performance than general levels of inflation[234](index=234&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in market risk disclosures since the company's Annual Report on Form 10-K for December 31, 2020 - There has not been any material change in the market risk disclosures contained in First Northwest Bancorp's Annual Report on Form 10-K for the year ended December 31, 2020[235](index=235&type=chunk) [Item 4 - Controls and Procedures](index=64&type=section&id=Item%204%20-%20Controls%20and%20Procedures) CEO and CFO concluded disclosure controls were effective as of September 30, 2021, with no material changes in internal control, acknowledging inherent limitations - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were **effective** as of September 30, 2021[237](index=237&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the quarter ended September 30, 2021[238](index=238&type=chunk) - Control procedures provide only reasonable, not absolute, assurance that objectives are met, and can be circumvented by individual acts, collusion, or management override[239](index=239&type=chunk) PART II - OTHER INFORMATION This part contains other information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and regulatory disclosures [Item 1 - Legal Proceedings](index=65&type=section&id=Item%201%20-%20Legal%20Proceedings) The company is involved in routine legal proceedings, none of which are currently considered to have a material impact on its financial position or results of operations - The company is engaged in legal proceedings in the ordinary course of business, none of which are currently considered to have a material impact on its financial position or results of operations[242](index=242&type=chunk) [Item 1A - Risk Factors](index=65&type=section&id=Item%201A%20-%20Risk%20Factors) This section supplements risk factors, emphasizing ongoing uncertain adverse effects of COVID-19 on customer operations, credit risk, and stock price, despite strong capital - The effects of the COVID-19 pandemic continue to pose risks to the future results of operations of customers and the market price of the company's stock due to unprecedented uncertainty and volatility[244](index=244&type=chunk) - The economic downturn in local markets could result in increased credit risk associated with the loan portfolio[245](index=245&type=chunk) - The company believes its **strong capital position** will be important in managing through the effects of the pandemic[245](index=245&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=65&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section summarizes common stock repurchases during the three months ended September 30, 2021, including shares bought back and remaining authorized for repurchase - Total common stock repurchases during the three months ended September 30, 2021, were **149,087 shares** at an average price of **$17.85 per share**[246](index=246&type=chunk) - As of September 30, 2021, **715,935 shares** remained available for future purchases under the October 2020 stock repurchase plan[247](index=247&type=chunk) [Item 3 - Defaults Upon Senior Securities](index=66&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - Not applicable[248](index=248&type=chunk) [Item 4 - Mine Safety Disclosures](index=66&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[249](index=249&type=chunk) [Item 5 - Other Information](index=66&type=section&id=Item%205%20-%20Other%20Information) This section updates COVID-19 related legislation and regulation, detailing acts that provided stimulus and expanded the SBA Paycheck Protection Program - Governments at federal, state, and local levels continue to address the COVID-19 pandemic through legislation such as the CARES Act, Paycheck Protection Program Flexibility Act (PPPFA), Consolidated Appropriations Act, and American Rescue Plan Act of 2021[250](index=250&type=chunk) - These acts provided **significant stimulus** and expanded the SBA Paycheck Protection Program (PPP) funding[250](index=250&type=chunk) [Item 6 - Exhibits](index=66&type=section&id=Item%206%20-%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and financial statements formatted in iXBRL - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act[251](index=251&type=chunk) - The financial statements are formatted in Inline Extensible Business Reporting Language (iXBRL)[251](index=251&type=chunk) [SIGNATURES](index=67&type=section&id=SIGNATURES) This section contains the signatures of the President, CEO, and Director, and the Executive Vice President and CFO, certifying the report - The report is signed by Matthew P. Deines, President, Chief Executive Officer and Director, and Geraldine L. Bullard, Executive Vice President and Chief Financial Officer, on **November 12, 2021**[254](index=254&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP (Exact name of registrant as specified in its charter) | Washington | | 46-1259 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP | (Exact name of registrant as specified in its charter) | | | --- | --- | | W ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP (Exact name of registrant as specified in its charter) Washington 46-1259100 (State or other jurisdic ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP | (Exact name of registrant as specified in its charter) | | | --- | --- | ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP | (Exact name of registrant as specified in its charter) | | | --- | --- | | Washington | 46-1259 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP | (Exact name of registrant as specified in its charter) | | | | --- | --- | --- | | Washington ...

Part I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) First Northwest Bancorp operates as a community-oriented financial institution in Western Washington, focusing on diverse lending activities and strategic fintech investments Key Financial Data as of December 31, 2019 | Metric | Amount (in millions) | | :--- | :--- | | Total Assets | $1,300 | | Net Loans | $878.4 | | Total Deposits | $1,000 | | Total Shareholders' Equity | $176.9 | - The company's lending activities are diverse, including one- to four-family mortgages, commercial and multi-family real estate, construction, commercial business, and consumer loans[19](index=19&type=chunk) - In 2019, the Company initiated a strategic partnership to invest up to **$3.0 million** in fintech-related businesses, signaling a focus on technological innovation[16](index=16&type=chunk)[165](index=165&type=chunk) [General Overview](index=6&type=section&id=General%20Overview) - First Northwest Bancorp is a Washington-based bank holding company for First Federal Savings and Loan Association of Port Angeles[15](index=15&type=chunk) - The company operates ten full-service branches and a lending center, serving Clallam, Jefferson, Kitsap, King, and Whatcom counties in Western Washington[18](index=18&type=chunk) [Market Area](index=6&type=section&id=Market%20Area) - The company primarily operates in Clallam, Jefferson, Kitsap, Whatcom, and King counties, with diverse local economies based on government, healthcare, tourism, technology, and military sectors[21](index=21&type=chunk)[22](index=22&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - The company plans to expand its operations throughout the Puget Sound Region, a major economic hub in the Pacific Northwest with key employment sectors in aerospace, technology, and international trade[28](index=28&type=chunk)[29](index=29&type=chunk) [Lending Activities](index=8&type=section&id=Lending%20Activities) Loan Portfolio Composition (December 31, 2019) | Loan Category | Amount (in millions) | Percent of Total | | :--- | :--- | :--- | | One- to four-family | $306.0 | 34.6% | | Commercial real estate | $255.7 | 28.9% | | Auto and other consumer | $112.1 | 12.7% | | Multi-family | $96.1 | 10.9% | | Commercial business | $41.6 | 4.7% | | Construction and land | $37.2 | 4.2% | | Home equity | $35.0 | 4.0% | | **Total Loans** | **$883.8** | **100.0%** | - As of December 31, 2019, **55.1%** of the total loan portfolio consisted of fixed-rate loans, while **44.9%** were adjustable-rate loans[33](index=33&type=chunk) - Total loan originations were **$199.8 million** in 2019, a decrease from **$253.4 million** in 2018, with loan purchases totaling **$68.0 million** in 2019, primarily consisting of auto loans[91](index=91&type=chunk)[92](index=92&type=chunk)[100](index=100&type=chunk) [Asset Quality](index=24&type=section&id=Asset%20Quality) Nonperforming Assets Trend | Metric | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Total Nonperforming Assets | $1.95 million | $1.85 million | | Nonperforming Assets as % of Total Assets | 0.1% | 0.1% | | Nonaccruing Loans | $1.80 million | $1.72 million | - The allowance for loan losses was **$9.6 million**, or **1.1%** of total loans, at December 31, 2019, remaining stable compared to the prior year[122](index=122&type=chunk) - Troubled debt restructurings (TDRs) totaled **$3.5 million** as of December 31, 2019, with the vast majority performing in accordance with their modified terms[113](index=113&type=chunk) - Classified loans, consisting of substandard loans, increased to **$5.0 million** at year-end 2019 from **$3.4 million** at year-end 2018[116](index=116&type=chunk)[118](index=118&type=chunk) [Investment Activities](index=32&type=section&id=Investment%20Activities) - Total investment securities increased by **3.0%** to **$315.6 million** at December 31, 2019, with the portfolio's objective to provide liquidity, maintain earnings, and manage risk[136](index=136&type=chunk) - The portfolio is primarily composed of U.S. government agency issued mortgage-backed securities (**$159.7 million**), corporate issued asset-backed securities (**$41.7 million**), and municipal bonds (**$39.5 million**)[143](index=143&type=chunk) - During the fourth quarter of 2019, all held-to-maturity investments were reclassified as available-for-sale to provide greater flexibility in portfolio management[139](index=139&type=chunk) [Deposit Activities and Other Sources of Funds](index=36&type=section&id=Deposit%20Activities%20and%20Other%20Sources%20of%20Funds) Deposit Composition (December 31, 2019) | Deposit Type | Amount (in millions) | Percent of Total | | :--- | :--- | :--- | | Certificates of Deposit | $308.1 | 30.7% | | Money Market Accounts | $248.1 | 24.8% | | Savings Accounts | $169.0 | 16.9% | | Noninterest-bearing Transaction | $160.4 | 16.0% | | Interest-bearing Transaction | $116.1 | 11.6% | | **Total Deposits** | **$1,001.6** | **100.0%** | - Total deposits grew by **6.5%** to **$1.0 billion** in 2019, which included **$51.6 million** in brokered certificates of deposit[149](index=149&type=chunk)[152](index=152&type=chunk) - The company utilizes advances from the Federal Home Loan Bank (FHLB) for liquidity and interest rate risk management, with **$112.9 million** outstanding at year-end 2019 and a remaining borrowing capacity of **$243.2 million**[160](index=160&type=chunk)[161](index=161&type=chunk) [Regulation and Supervision](index=42&type=section&id=How%20We%20Are%20Regulated) - First Northwest Bancorp is regulated as a bank holding company by the Federal Reserve, and its subsidiary, First Federal, is a state-chartered savings bank regulated by the Washington State DFI and the FDIC[175](index=175&type=chunk)[177](index=177&type=chunk)[213](index=213&type=chunk) - The company and the bank are subject to minimum capital requirements, including a capital conservation buffer, and as of December 31, 2019, First Federal met the requirements to be categorized as "well capitalized"[191](index=191&type=chunk)[193](index=193&type=chunk)[195](index=195&type=chunk) - Operations are subject to numerous federal and state laws, including the Community Reinvestment Act (CRA), Bank Secrecy Act (BSA), Dodd-Frank Act, and various consumer protection laws enforced by agencies like the CFPB[203](index=203&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk)[231](index=231&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including increased credit concentration in commercial lending, rapid loan portfolio growth, interest rate fluctuations, intense competition, regulatory changes, and cybersecurity threats - Increased emphasis on commercial real estate lending, which reached **39.8%** of the total loan portfolio, exposes the company to higher credit risk compared to traditional residential lending[244](index=244&type=chunk)[245](index=245&type=chunk) - Rapid loan portfolio growth and geographic expansion into the Puget Sound region may increase credit risk, as these newer, less-seasoned loans have a limited performance history[248](index=248&type=chunk) - A significant concentration of credit exists, with the ten largest borrowing relationships totaling **$112.9 million**, or **12.8%** of total loans, increasing the risk of material loss from a single borrower's default[250](index=250&type=chunk) - The business is subject to interest rate risk, as changes in rates can affect net interest income, loan origination volumes, and the value of financial assets[280](index=280&type=chunk) - The company faces risks from its use of technology, including potential security breaches in its information systems and internet banking activities, which could result in liability and reputational damage[299](index=299&type=chunk)[301](index=301&type=chunk) [Item 2. Properties](index=61&type=section&id=Item%202.%20Properties) As of December 31, 2019, the company operated through ten branch offices and other administrative sites in Washington, with a net book value of **$12.2 million** for its properties - The company conducts business from ten branch offices and one loan production office in Washington state[306](index=306&type=chunk) - The net book value of the Company's properties was **$12.2 million** at December 31, 2019[306](index=306&type=chunk) [Item 3. Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in routine legal actions, none of which are expected to materially impact its financial condition or operations - There are no legal proceedings that are expected to have a material adverse effect on the company's financial position[309](index=309&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under 'FNWB,' and it actively engages in stock repurchase programs, including a new plan authorized in December 2019 - The company's common stock is listed on The Nasdaq Stock Market under the symbol "FNWB"[311](index=311&type=chunk) - A new stock repurchase plan was authorized on December 5, 2019, for up to **535,097 shares**, or approximately **5%** of outstanding shares at that time[313](index=313&type=chunk)[316](index=316&type=chunk) Stock Repurchases (Q4 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 2019 | 66,600 | $17.40 | | Nov 2019 | 33,400 | $17.26 | | Dec 2019 | 7,793 | $17.59 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section details the company's strategy to diversify its loan portfolio and expand its market, highlighting **3.9% asset growth** to **$1.31 billion** and a **26.8% increase in net income** to **$9.0 million** in 2019, while maintaining strong capital [Business and Operating Strategy](index=64&type=section&id=Our%20Business%20and%20Operating%20Strategy) - The company's strategy includes expanding its geographic footprint, repositioning the loan portfolio towards higher-yielding commercial and auto loans, and enhancing infrastructure and technology[325](index=325&type=chunk)[326](index=326&type=chunk) - A key objective is to increase the portfolio of higher-yielding commercial loans, with commercial and multifamily real estate and commercial business loans growing to **44.5%** of total loans at year-end 2019 from **40.8%** a year prior[325](index=325&type=chunk)[327](index=327&type=chunk) - The company is focused on improving its online presence and exploring alternative lending opportunities, including a **$3.0 million** commitment to a fintech investment fund[328](index=328&type=chunk)[329](index=329&type=chunk) [Comparison of Financial Condition (2019 vs. 2018)](index=67&type=section&id=Comparison%20of%20Financial%20Condition%20at%20December%2031%2C%202019%20and%20December%2031%2C%202018) - Total assets increased by **$48.5 million** (**3.9%**) to **$1.31 billion**, driven by increases in cash, net loans, and investment securities[334](index=334&type=chunk) - Net loans receivable grew by **$14.5 million** (**1.6%**), with significant increases in auto loans (**+$24.7 million**) and commercial business loans (**+$22.7 million**), offset by a decrease in one- to four-family residential loans (**-$30.2 million**)[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk) - Total deposits increased by **$61.3 million** (**6.5%**) to **$1.0 billion**, while borrowings decreased by **$23.7 million** as the company utilized more brokered CDs for funding[348](index=348&type=chunk)[349](index=349&type=chunk) - Shareholders' equity rose by **$4.6 million** to **$176.9 million**, reflecting net income of **$9.0 million**, partially offset by **$7.8 million** in share repurchases[350](index=350&type=chunk) [Comparison of Results of Operations (2019 vs. 2018)](index=70&type=section&id=Comparison%20of%20Results%20of%20Operations%20for%20the%20Years%20Ended%20December%2031%2C%202019%20and%20December%2031%2C%202018) Key Operating Results | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Income | $9.0 million | $7.1 million | | Diluted EPS | $0.91 | $0.68 | | Net Interest Income | $37.9 million | $36.8 million | | Provision for Loan Losses | $0.7 million | $1.2 million | | Noninterest Income | $7.0 million | $5.9 million | | Noninterest Expense | $33.1 million | $32.9 million | - Net income increased by **26.8%** year-over-year, driven by higher net interest income and a **$0.5 million** increase in gain on sale of loans[351](index=351&type=chunk)[361](index=361&type=chunk)[363](index=363&type=chunk) - The net interest margin remained stable at **3.20%** for both 2019 and 2018, as the benefit from higher loan yields was offset by an increased cost of interest-bearing liabilities[353](index=353&type=chunk) [Asset and Liability Management and Market Risk](index=75&type=section&id=Asset%20and%20Liability%20Management%20and%20Market%20Risk) Interest Rate Sensitivity Analysis (as of Dec 31, 2019) | Change in Interest Rates (Basis Points) | Change in Economic Value of Equity (EVE) | Change in Net Interest Income (NII) over 1 Year | | :--- | :--- | :--- | | +300 | +0.1% | -15.5% | | +200 | +1.6% | -10.1% | | +100 | +1.8% | -4.9% | | -100 | -18.0% | -0.5% | - The company manages interest rate risk to minimize adverse effects of rate changes, with analysis showing net interest income projected to decrease in a rising rate environment, while the economic value of equity is projected to decrease significantly in a falling rate environment[371](index=371&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk) [Capital Resources](index=78&type=section&id=Capital%20Resources) - Both the Company and the Bank exceeded all regulatory capital requirements as of December 31, 2019, and the Bank was considered "well capitalized" under FDIC guidelines[391](index=391&type=chunk) Bank Capital Ratios (as of Dec 31, 2019) | Ratio | Actual | Minimum to be Well-Capitalized | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 17.5% | 6.5% | | Tier 1 Risk-Based Capital | 17.5% | 8.0% | | Total Risk-Based Capital | 18.7% | 10.0% | | Tier 1 Leverage | 12.2% | 5.0% | [Item 8. Financial Statements and Supplementary Data](index=79&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2019 and 2018, along with the independent auditor's unqualified opinion on both the financial statements and internal control over financial reporting Consolidated Balance Sheet Highlights | (in thousands) | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$1,307,336** | **$1,258,758** | | Net Loans Receivable | $878,437 | $863,852 | | Total Investment Securities | $315,580 | $306,470 | | **Total Liabilities** | **$1,130,485** | **$1,086,494** | | Total Deposits | $1,001,645 | $940,260 | | Borrowings | $112,930 | $136,552 | | **Total Shareholders' Equity** | **$176,851** | **$172,264** | Consolidated Income Statement Highlights | (in thousands) | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net Interest Income | $37,865 | $36,792 | | Provision for Loan Losses | $669 | $1,174 | | Noninterest Income | $7,012 | $5,919 | | Noninterest Expense | $33,117 | $32,857 | | **Net Income** | **$9,014** | **$7,105** | [Item 9A. Controls and Procedures](index=135&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and the independent auditor concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[685](index=685&type=chunk) - Management assessed the company's internal control over financial reporting as effective as of December 31, 2019, based on the COSO framework[688](index=688&type=chunk) - The independent registered public accounting firm, Moss Adams LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[689](index=689&type=chunk)[690](index=690&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=136&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, the audit committee, and corporate governance matters, including the code of ethics, is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's Proxy Statement[695](index=695&type=chunk) [Item 11. Executive Compensation](index=136&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's Proxy Statement[700](index=700&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=136&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership by certain beneficial owners and management, as well as details on equity compensation plans, is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information regarding security ownership is incorporated by reference from the company's Proxy Statement[701](index=701&type=chunk) - As of December 31, 2019, there were **1,324,150** securities available for future issuance under the 2015 Equity Incentive Plan[703](index=703&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=137&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding transactions with related persons and director independence is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's Proxy Statement[704](index=704&type=chunk) [Item 14. Principal Accounting Fees and Services](index=137&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive Proxy Statement for the 2020 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's Proxy Statement[705](index=705&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=137&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements included in Item 8 and provides a comprehensive list of exhibits filed with the report - This item lists the financial statements and exhibits filed with the Form 10-K[707](index=707&type=chunk)[710](index=710&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP (Exact name of registrant as specified in its charter) Washington 46-1259100 (State or other ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number: 001-36741 FIRST NORTHWEST BANCORP (Exact name of registrant as specified in its charter) Washington 46-1259100 (State or other juri ...