First Northwest Bancorp(US:FNWB)2025-03-13 18:23Loan Portfolio and Performance - The commercial real estate and multi-family loans increased to $723.0 million, or 42.6% of the total loan portfolio, as of December 31, 2024, compared to $721.1 million, or 43.4% at December 31, 2023[256]. - The commercial loan portfolio rose to $874.5 million, or 51.6% of total loans, at December 31, 2024, up from $833.4 million, or 50.2% at December 31, 2023[261]. - Total consumer loans increased to $347.9 million, or 20.6% of total loans, at December 31, 2024, from $318.5 million, or 19.2% at December 31, 2023[261]. - The construction and land loans decreased by $51.6 million, or 39.8%, to $78.1 million, or 4.6% of the total loan portfolio at December 31, 2024[265]. - The aggregate amount of loans to the five largest borrowers was approximately $95.9 million, with the ten largest borrowing relationships totaling $165.7 million, or 9.8% of total loans, as of December 31, 2024[264]. - Unsecured loans to small businesses and professionals amounted to $21.1 million, while consumer loans purchased from Splash Financial were $7.3 million at December 31, 2024[259]. - Losses of $3.4 million have been experienced on the Splash Financial loans to date, with purchases of these loans suspended in August 2023[260]. - The company’s increased focus on commercial real estate lending has raised its risk profile, with potential adverse effects on future earnings due to larger charge-offs compared to consumer loans[257]. - As of December 31, 2024, the total loan portfolio included $474.4 million, or 28.0%, in one-to-four family mortgage loans and home equity loans secured by residential properties[269]. - Commercial business loans amounted to $151.5 million, representing 8.9% of total loans, with repayment often dependent on unpredictable cash flows[271]. - Nonperforming assets totaled $30.5 million, or 1.4% of total assets, which could adversely affect net income if delinquencies increase[275]. - The allowance for credit losses on loans may be insufficient, potentially leading to significant provisions that could materially decrease net income[273]. - Nonperforming loans rose by $11.9 million, or 63.7%, to $30.5 million at December 31, 2024, with the ratio of nonperforming loans to total loans increasing to 1.80% from 1.12%[347]. - The allowance for credit losses on loans increased by $2.9 million, or 16.8%, to $20.449 million at December 31, 2024, compared to $17.510 million at December 31, 2023[346]. Financial Performance and Income - Total assets increased by $30.2 million, or 1.4%, to $2.23 billion at December 31, 2024, from $2.2 billion at December 31, 2023[337]. - Net interest income decreased by $5.1 million, or 8.3%, to $56.3 million for the year ended December 31, 2024, as interest expense outpaced interest income[358]. - Interest income increased by $11.4 million, or 11.3%, to $112.3 million for the year ended December 31, 2024, primarily due to higher yields on loans receivable[361]. - Total interest expense rose by $16.6 million, or 41.9%, for the year ended December 31, 2024, driven by increased deposit and borrowing costs[364]. - The net interest margin decreased by 39 basis points to 2.74% for the year ended December 31, 2024, from 3.13% for the year ended December 31, 2023[359]. - Total provision for credit losses increased by $15.2 million to $16.5 million in 2024, compared to $1.3 million in 2023[365]. - Noninterest income surged to $12.6 million in 2024, up from $4.0 million in 2023, marking a 213.8% increase[366]. - Net interest income decreased to $56.3 million in 2024 from $61.4 million in 2023, a decline of 8.5%[371]. - The company recorded an income tax benefit of $944,000 in 2024, compared to an expense of $549,000 in 2023[368]. - The total average assets increased to $2.20 billion in 2024 from $2.11 billion in 2023[371]. - The company reported a comprehensive loss of $4,149 thousand in 2024, compared to a comprehensive income of $10,193 thousand in 2023[430]. - For the year ended December 31, 2024, the net loss before noncontrolling interest was $6.613 million, compared to a net income of $2.126 million in 2023[435]. Capital and Regulatory Compliance - As of December 31, 2024, First Northwest Bancorp's Tier I leverage capital was $208,836 thousand, representing a ratio of 9.4%, exceeding the minimum requirement of $88,930 thousand (4.0%) and the well-capitalized requirement of $111,163 thousand (5.0%) [399]. - The Common Equity Tier I (CET1) capital to risk-weighted assets ratio was 12.4% with an actual amount of $208,836 thousand, significantly above the minimum requirement of $75,515 thousand (4.5%) and the well-capitalized requirement of $109,077 thousand (6.5%) [399]. - Total risk-based capital to risk-weighted assets was 13.6% with an actual amount of $228,409 thousand, surpassing the minimum requirement of $134,248 thousand (8.0%) and the well-capitalized requirement of $167,810 thousand (10.0%) [399]. - The capital conservation buffer was fully implemented at 2.5% of risk-weighted assets as of December 31, 2024, ensuring compliance with regulatory requirements [395]. - The allowance for credit losses on loans (ACLL) was reported at $20.5 million as of December 31, 2024, reflecting management's estimates based on historical losses and economic forecasts [411]. - First Northwest Bancorp and its subsidiary, First Fed, maintained a "well-capitalized" status under FDIC regulatory capital guidelines as of December 31, 2024 [396]. - The company is subject to capital adequacy requirements imposed by the Federal Reserve and the FDIC, which are critical for maintaining operational flexibility [394]. - The company aims to avoid limitations on dividends, share repurchases, and discretionary bonuses by maintaining CET1 capital above required minimum levels [395]. Market and Economic Conditions - Economic downturns could lead to increased loan delinquencies, defaults, and foreclosures, significantly impairing the value of collateral[267]. - The Federal Reserve decreased the federal funds target rate starting September 2024, which may positively impact housing markets and refinancing activity[286]. - Interest rate fluctuations could adversely affect net interest income, especially if rates on deposits rise faster than those on loans[289]. - A sustained increase in market interest rates could adversely affect earnings due to higher costs of funds to retain deposits[290]. - The fair value of fixed-rate securities fluctuates inversely with changes in interest rates, potentially impacting shareholders' equity[291]. - The economic value of equity decreased by 44.1% with a 400 basis point increase in interest rates, amounting to a $99,521,000 change[381]. - Projected net interest income for 2024 is expected to increase by 4.4% with a 400 basis point increase in interest rates, amounting to $68,623,000[381]. - The impact of inflation on the company's operations is primarily reflected in increased operating costs and its effect on interest rates, which are crucial for financial institutions [400]. Operational and Strategic Initiatives - The company plans to continue both strategic and opportunistic growth, although it may face challenges in managing rapid growth effectively[263]. - The company aims to enhance noninterest income through SBA loan products and treasury management services, anticipating future revenue growth from these areas[328]. - The company has focused on expanding its deposit product offerings and enhancing its digital infrastructure to support growth[328]. - The company has implemented strategies to reposition its loan portfolio, increasing the origination of higher-yielding commercial loans[328]. - The company continues to monitor and resolve nonperforming loans proactively, employing independent firms to review its loan portfolio[328]. - The company has opened four new full-service branches and two business centers over the past seven years, with plans for further expansion[301]. - The company has commitments to invest in fintech-related businesses, including Canapi Ventures and other venture capital funds, to support growth in the fintech sector[328]. Shareholder and Stock Information - As of March 6, 2025, the company had 9,358,008 shares of common stock issued and outstanding, with approximately 477 shareholders of record[315]. - The company repurchased a total of 1,023,420 shares at an average cost of $14.07 per share as of December 31, 2024, under the stock repurchase plan authorized on October 28, 2020[316]. - As of December 31, 2024, 98,156 shares, or 10.4% of the shares authorized in the April 2024 stock repurchase plan, were purchased at an average cost of $10.23 per share, leaving 846,123 shares available for future purchases[319]. - Shareholders' equity decreased to $153,882 thousand in 2024 from $163,340 thousand in 2023, a decline of 5.75%[426]. - Cash dividends declared and paid remained consistent at $0.28 per share in both 2023 and 2024[433]. - The company repurchased common stock amounting to $4.057 million in 2024, up from $1.149 million in 2023[438].