First Northwest Bancorp(US:FNWB)2025-05-12 20:16PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents unaudited consolidated financial statements and notes, detailing financial position, operations, and cash flows Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive (Loss) Income Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Consolidated Balance Sheet Highlights (March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----- | :---------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $2,171,430 | $2,232,006 | $(60,576) | (2.71)% | | Total Liabilities | $2,024,938 | $2,078,124 | $(53,186) | (2.56)% | | Total Shareholders' Equity | $146,492 | $153,882 | $(7,390) | (4.80)% | Consolidated Statements of Operations Highlights (Three Months Ended March 31, 2025 vs. 2024) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Total Interest Income | $26,823 | $27,326 | $(503) | (1.84)% | | Total Interest Expense | $12,976 | $13,398 | $(422) | (3.15)% | | Net Interest Income | $13,847 | $13,928 | $(81) | (0.58)% | | Provision for Credit Losses | $7,785 | $970 | $6,815 | 702.58% | | Total Noninterest Income | $3,777 | $2,188 | $1,589 | 72.62% | | Total Noninterest Expense | $20,000 | $14,303 | $5,697 | 39.83% | | Net (Loss) Income | $(9,036) | $396 | $(9,432) | (2381.82)% | | Basic and Diluted (Loss) Earnings per Common Share | $(1.03) | $0.04 | $(1.07) | (2675.00)% | Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31, 2025 vs. 2024) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net cash used by operating activities | $(21,743) | $(4,865) | $(16,878) | | Net cash provided (used) by investing activities | $69,297 | $(78,466) | $147,763 | | Net cash (used) provided by financing activities | $(49,679) | $37,508 | $(87,187) | | Net decrease in cash and cash equivalents | $(2,125) | $(45,823) | $43,698 | | Cash and cash equivalents at end of period | $70,323 | $77,346 | $(7,023) | Note 1 - Basis of Presentation and Critical Accounting Policies Note 2 - Securities Note 3 - Loans Receivable Note 4 - Allowance for Credit Losses on Loans Note 5 - Deposits Note 6 - Borrowings Note 7 - Income Tax Note 8 - Earnings (Loss) per Common Share Note 9 - Employee Benefits Note 10 - Stock-based Compensation Note 11 - Fair Value Measurements Note 12 - Change in Accumulated Other Comprehensive Income ("AOCI") Note 13 - Derivatives and Hedging Activities Note 14 - Segment Reporting Note 15 - Contingencies Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, condition, and critical accounting policies, comparing results for recent periods - Total assets decreased by $60.6 million (2.7%) to $2.17 billion at March 31, 2025, from $2.23 billion at December 31, 2024143 - Net loans decreased by $37.6 million (2.2%) to $1.64 billion, with commercial business loans decreasing $31.7 million and construction and land loans decreasing $13.2 million147149 - Total liabilities decreased by $53.2 million to $2.02 billion, driven by a $45.0 million decrease in brokered deposits and a $28.9 million decrease in borrowings, partially offset by a $23.0 million increase in customer deposits162163 - Total shareholders' equity decreased by $7.4 million to $146.5 million, mainly due to a $9.0 million net loss and a $425,000 decrease in post-tax fair market value of derivatives165 - The Company reported a net loss of $(9.0) million for Q1 2025, a significant decline from net income of $396,000 in Q1 2024166 - Net interest income decreased by $81,000 (0.6%) to $13.9 million, as declines in loan and interest-earning deposit income slightly outpaced reduced deposit costs167 - Provision for credit losses increased significantly to $7.8 million in Q1 2025 from $970,000 in Q1 2024, primarily due to net charge-offs totaling $7.7 million174 - Noninterest income increased by $1.6 million (72.6%) to $3.8 million, driven by a $1.1 million BOLI death benefit and an $846,000 gain on extinguishment of debt175 - Noninterest expense increased by $5.7 million (39.8%) to $20.0 million, mainly due to a $5.8 million accrued legal reserve included in other expense176 - An income tax benefit of $1.1 million was recorded in Q1 2025, compared to an expense of $447,000 in Q1 2024177 Regulatory Capital Ratios (March 31, 2025) | Capital Ratio | Actual Ratio | Minimum Requirement | Well-Capitalized Requirement | | :------------ | :----------- | :------------------ | :--------------------------- | | Tier 1 leverage capital | 9.0% | 4.0% | 5.0% | | Common equity tier 1 | 12.1% | 4.5% | 6.5% | | Tier 1 risk-based capital | 12.1% | 6.0% | 8.0% | | Total risk-based capital | 13.4% | 8.0% | 10.0% | Forward-Looking Statements General Recent Regulatory Developments Critical Accounting Policies Comparison of Financial Condition at March 31, 2025 and December 31, 2024 Comparison of Results of Operations for the Three Months Ended March 31, 2025 and 2024 Average Balances, Interest and Average Yields/Cost Rate/Volume Analysis Off-Balance Sheet Activities Contractual Obligations Commitments and Off-Balance Sheet Arrangements Liquidity Management Capital Resources Effect of Inflation and Changing Prices Item 3. Quantitative and Qualitative Disclosures About Market Risk Reports no material changes to market risk disclosures from the 2024 Form 10-K, indicating consistent risk management - No material changes in market risk disclosures from the 2024 Form 10-K199 Item 4. Controls and Procedures Confirms effectiveness of disclosure controls and procedures, with no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were effective as of March 31, 2025201 - There have been no material changes in the Company's internal control over financial reporting during the quarter ended March 31, 2025202 PART II - OTHER INFORMATION Item 1. Legal Proceedings Discloses ongoing legal proceedings, including a $5.8 million legal reserve for an adversary proceeding related to borrower bankruptcies - A $5.8 million legal reserve was established for an adversary proceeding related to borrower bankruptcies and newly raised claims of financial misconduct, included in other noninterest expense for Q1 2025208 Item 1A. Risk Factors Reports no material changes to risk factors from the Company's 2024 Form 10-K - No material changes to risk factors from the Company's 2024 Form 10-K209 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities Reports common stock repurchases for tax obligations and confirms no repurchases under the April 2024 plan, with shares remaining - Common stock repurchases for tax obligations related to restricted stock awards totaled 7,279 shares during the three months ended March 31, 2025210 - As of March 31, 2025, 846,123 shares remain available for future purchases under the April 2024 stock repurchase plan, with no shares repurchased under this plan during the reported period211 Item 3. Defaults Upon Senior Securities States this item is not applicable, indicating no defaults upon senior securities - Not applicable213 Item 4. Mine Safety Disclosures States this item is not applicable, indicating no mine safety disclosures - Not applicable214 Item 5. Other Information Reports no director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended March 31, 2025215 Item 6. Exhibits Lists exhibits filed with Form 10-Q, including incentive plans, stock agreements, certifications, and XBRL data - Exhibits include First Fed 2025 Executive Officer Incentive Plan, Amended Executive Change in Control Plan, Restricted Stock Unit Award Agreement, Section 302 and 906 certifications, and iXBRL financial data216 SIGNATURES Signatures Contains official signatures of the President, CEO, Director, and EVP & CFO, certifying the report - The report was signed by Matthew P. Deines (President, Chief Executive Officer and Director) and Phyllis R. Nomura (Executive Vice President and Chief Financial Officer) on May 12, 2025220