• First Northwest Bancorp Announces Record Earnings in the Third Quarter of 2021

    Source: Nasdaq GlobeNewswire / 27 Oct 2021 07:30:01   America/New_York

    PORT ANGELES, Wash., Oct. 27, 2021 (GLOBE NEWSWIRE) -- First Northwest Bancorp (Nasdaq: FNWB)

    Net IncomeDiluted Earnings Per ShareYTD Loan GrowthNet Interest MarginBook Value per Share
    $4.2 Million$0.4518%3.58%$18.65
    $18.481, excluding goodwill and intangibles


    CEO Commentary

    “First Fed achieved strong loan growth and record earnings in the third quarter as our strategic investment in technology, market expansion and personnel continues to deliver results,” said Matthew P. Deines, President and CEO of First Northwest Bancorp. “We believe our momentum will help us to continue to grow revenue, deliver results and create shareholder value in the years to come.”

    “We continue to make progress on all aspects of our business with significant loan and revenue growth and enhancements to our deposit franchise,” Deines added. “Loan growth in the third quarter was broad-based due to solid commercial real estate and construction lending originations and partnerships with select specialty lenders who give us the ability to add consumer loans with attractive risk-adjusted returns. Growth in our balance sheet led to a healthy increase in interest income while improvements in our deposit franchise kept interest expense stable.”

    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 November 26, 2021, to shareholders of record as of the close of business on November 12, 2021. On July 23, we closed on the previously announced Bellevue branch purchase from Sterling Savings and Trust. The branch had over $65 million in deposits at closing.

    Quarter Ended September 30, 2021 to June 30, 2021Quarter Ended September 30, 2021 to September 30, 2020
    Financial Highlights
    Net income of $4.2 million and diluted earnings per share of $0.45, compared to $3.0 million and $0.32, respectivelyNet income of $4.2 million and diluted earnings per share of $0.45, compared to $3.7 million and $0.40, respectively
    Total revenue of $21.1 million, an increase of 11.3%, or $2.1 million, compared to an increase in non-interest expenses of 1.7%, or $227,000Total revenue of $21.1 million, an increase of 16.0%, or $2.9 million, compared to an increase in non-interest expenses of 38.2%, or $3.9 million
    Effective tax rate of 18.9% for both quartersEffective tax rate of 17.2%, compared to 28.1%
    Financial Position  
    Total assets of $1.85 billion, up $57.7 million, or 3.2%Increase in total assets of $280.5 million, or 17.9%
    Total gross loans of $1.35 billion, up $96.7 million, or 7.7%Increase in total gross loans of $280.0 million, or 26.1%
    Total deposits of $1.52 billion, up $81.2 million, or 5.6%Increase in total deposits of $268.5 million, or 21.4%
    Asset Quality 
    Nonperforming assets (nonaccrual loans and repossessed assets) to total assets of 0.06%, compared to 0.10%Nonperforming assets (nonaccrual loans and repossessed assets) to total assets of 0.06%, compared to 0.21%
    Net loan charge-offs to average loans outstanding of approximately 0.00% for both quartersNet loan charge-offs to average loans outstanding of approximately 0.01%, compared to 0.04%
    Key Performance Metrics 
    Net interest margin of 3.58%, compared to 3.34%Net interest margin of 3.58%, compared to 3.36%
    Efficiency ratio of 70.3%, compared to 78.2%Efficiency ratio of 70.3%, compared to 60.9%
    Return on average assets and on tangible common equity1 of 0.92% and 8.93%, compared to 0.69% and 6.37%, respectivelyReturn on average assets and on tangible common equity1 of 0.92% and 8.93%, compared to 0.99% and 8.09%, respectively
    Tangible book value per share1 of $18.48, a decrease from $18.49Tangible book value per share1 of $18.48, an increase of 4.70% from $17.65
    Year-To-Date Highlights 
    Net income of $10.3 million and diluted earnings per share of $1.11, up 57.8% and 60.9%, from $6.5 million and $0.69, respectively
    Total revenue of $57.3 million, an increase of 17.2%, or $8.4 million, compared to an increase in noninterest expenses of 33.6%, or $10.0 million
    Effective tax rate of 17.2%, compared to 24.4%
    Net interest margin of 3.48%, compared to 3.20%
    Efficiency ratio of 73.5%, compared to 70.0%
    Return on average assets and on tangible common equity1 of 0.79% and 7.41%, compared to 0.62% and 4.82%
    Repurchased 291,932 shares of common stock at an average price of $16.87 per share for a total of $4.9 million year-to-date

    Balance Sheet Review

    Total assets increased $57.7 million, or 3.2%, to $1.85 billion at September 30, 2021, compared to $1.79 billion at June 30, 2021, and increased $280.5 million, or 17.9%, compared to $1.56 billion at September 30, 2020.

    Cash and cash equivalents decreased by $4.6 million, or 5.7%, to $76.1 million as of September 30, 2021, compared to $80.7 million as of June 30, 2021. The Company continues to deploy excess cash and move it into higher yielding assets relative to cash.

    Investment securities decreased $44.6 million, or 12.0%, to $325.9 million at September 30, 2021, compared to $370.5 million three months earlier, and decreased $43.2 million compared to $369.1 million at September 30, 2020. At September 30, 2021, municipal bonds totaled $110.3 million and comprised the largest portion of the investment portfolio at 33.8%. The estimated average life of the total investment securities portfolio was approximately 5.84 years.

    Securities consisted of the following at the dates indicated:

     September 30,
    2021    		 June 30,
    2021    		 September 30,
    2020    		 Three Month
    Change    		 One Year
    Change
     (In thousands)
    Available for Sale at Fair Value         
    Municipal bonds$        110,265 $       130,458 $          97,143 $    (20,193) $     13,122 
    U.S. government and agency issued bonds (Agency bonds) 1,940  1,949  —   (9)  1,940 
    U.S. government agency issued asset-backed securities (ABS agency) —  36,564  73,618   (36,564)   (73,618)
    Corporate issued asset-backed securities (ABS corporate) 11,016  4,000  32,747  7,016   (21,731)
    Corporate issued debt securities (Corporate debt) 55,946  49,880  33,230  6,066   22,716 
    U.S. Small Business Administration securities (SBA) 15,842  16,753  23,864  (911)  (8,022)
    Mortgage-backed securities:         
    U.S. government agency issued mortgage-backed securities (MBS agency) 75,091  75,429  92,402  (338)  (17,311)
    Corporate issued mortgage-backed securities (MBS corporate) 55,790  55,467  16,107  323   39,683 
    Total securities available for sale$        325,890 $       370,500 $        369,111 $    (44,610) $    (43,221)

    Net loans, excluding loans held for sale, increased $98.8 million, or 7.9%, to $1.35 billion at September 30, 2021, from $1.25 billion at June 30, 2021, and increased $283.7 million, or 26.7%, from $1.06 billion a year ago. Commercial business loans increased $15.9 million during the quarter, mainly as the result of a $27.5 million increase in Northpointe Mortgage Participation program loans, partially offset by a $17.8 million decrease related to Paycheck Protection Program (“PPP”) loans paid off during the quarter.

    The Company originated $52.7 million in residential mortgages during the third quarter and sold $22.3 million, with an average gross margin on sale of mortgage loans of approximately 2.67%. This production compares to residential mortgage originations of $51.9 million in the preceding quarter with sales of $28.7 million, with an average gross margin of 2.54%.

    Loans receivable consisted of the following at the dates indicated:

     September 30,
    2021    		 June 30,
    2021    		 September 30,
    2020    		 Three Month
    Change    		 One Year
    Change
     (In thousands)
    Real Estate:         
    One to four family$      294,432  $      301,816  $      317,755  $        (7,384) $       (23,323)
    Multi-family 177,560   166,502   127,569   11,058   49,991 
    Commercial real estate 353,356   319,644   283,390   33,712   69,966 
    Construction and land 214,472   183,685   75,204   30,787   139,268 
    Total real estate loans 1,039,820   971,647   803,918   68,173   235,902 
              
    Consumer:         
    Home equity 38,881   36,886   34,120   1,995   4,761 
    Auto and other consumer 182,238   171,617   111,782   10,621   70,456 
    Total consumer loans 221,119   208,503   145,902   12,616   75,217 
              
    Commercial business 91,939   75,995   123,036   15,944   (31,097)
              
    Total loans 1,352,878   1,256,145   1,072,856   96,733   280,022 
    Less:         
    Net deferred loan fees 5,274   5,610   2,628   (336)  2,646 
    Premium on purchased loans, net (12,765)  (10,393)  (4,196)  (2,372)  (8,569)
    Allowance for loan losses 15,243   14,588   13,007   655   2,236 
    Total loans receivable, net$   1,345,126  $   1,246,340  $   1,061,417  $        98,786  $      283,709 

    Total deposits increased $81.2 million, to $1.52 billion at September 30, 2021, compared to $1.44 billion at June 30, 2021, and increased $268.5 million, or 21.4%, when compared to $1.25 billion a year ago. Demand deposits increased 30.6% compared to a year ago to $510.6 million at September 30, 2021, and represented 33.5% of total deposits; money market accounts increased 44.1% compared to a year ago to $573.7 million, and represented 37.7% of total deposits; savings accounts increased 12.5% compared to a year ago to $193.5 million at September 30, 2021, and represented 12.7% of total deposits; and certificates of deposit decreased 16.5% compared to a year ago to $245.1 million at quarter-end, and represented 16.1% of total deposits.

    The total cost of funds was 0.36% for the third quarter of 2021 compared to 0.37% for the second quarter of 2021 and improved from 0.51% for the third quarter of 2020.

    Deposits consisted of the following at the dates indicated:

     September 30,
    2021    		 June 30,
    2021    		 September 30,
    2020    		 Three Month
    Change    		 One Year
    Change
     (In thousands)
      
    Noninterest-bearing demand deposits$        328,463 $        307,119 $        154,861 $        21,344  $      173,602 
    Interest-bearing demand deposits 182,181  175,939  236,006  6,242   (53,825)
    Money market accounts 573,713  511,051  398,144  62,662   175,569 
    Savings accounts 193,479  185,798  171,905  7,681   21,574 
    Certificates of deposit 245,080  261,831  293,540  (16,751)  (48,460)
    Total deposits$     1,522,916 $     1,441,738 $     1,254,456 $        81,178  $      268,460 

    Total shareholders’ equity decreased to $187.4 million at September 30, 2021, compared to $188.6 million three months earlier, and increased from $180.7 million a year earlier. Tangible book value per common share1 was $18.48 at September 30, 2021, compared to $18.49 at June 30, 2021 and $17.65 at September 30, 2020; while book value per common share was $18.65 at September 30, 2021, compared to $18.49 at June 30, 2021 and $17.65 at September 30, 2020. We repurchased 137,953 shares of common stock under the October 2020 Plan at an average price of $17.81 per share for a total of $2.5 million during the quarter ended September 30, 2021.

    Income Statement Results

    In the third quarter of 2021, the Company generated a return on average assets ("ROAA") of 0.92%, and a return on average equity ("ROAE") of 8.69%, compared to 0.69% and 6.46%, respectively, in the second quarter of 2021, and 0.99% and 8.22%, respectively, in the third quarter of 2020. For the first nine months of 2021, ROAA and ROAE was 0.79% and 7.33%, respectively, compared to 0.62% and 4.92% for the first nine months of 2020.

    Total interest income increased to $16.8 million for the third quarter of 2021, compared to $15.1 million in the previous quarter and $13.4 million in the third quarter of 2020. Interest and fees on loans increased due to loan growth during the current quarter in addition to deferred fee income recognized on PPP and Main Street Lending Program (“MSLP”) loans. The current quarter yield on average loans receivable increased by 2 basis points compared to the same period in the prior year. Total interest expense was $1.4 million for the third quarter of 2021, compared to $1.4 million in the second quarter of 2021, and $1.6 million in the third quarter a year ago. A nominal increase during the quarter compared to the preceding quarter was due to interest on deposits of $25,000. For the first nine months of 2021, total interest income increased 23.2% to $46.5 million, compared to $37.7 million for the first nine months of 2020. A decrease of $2.4 million in interest expense year-over-year was due to the decline in the cost of total deposits to 24 basis points compared to 67 basis points in the third quarter one year ago.

    Net interest income, before provision for loan losses, increased 12.5% during the quarter to $15.4 million, compared to $13.6 million for the preceding quarter, and increased 30.5% compared to $11.8 million in the third quarter a year ago. For the first nine months of 2021, net interest income before the provision for loan losses increased 35.8% to $42.5 million, compared to $31.3 million for the first nine months of 2020. As of September 30, 2021, we received SBA proceeds on forgiven loans totaling $39.7 million. Approximately $899,000 of the income recognized during the third quarter was related to deferred fees associated with PPP loan payoffs, compared to $93,000 of the income related to deferred fees associated with PPP loan payoffs in the second quarter of 2021. As of September 30, 2021, there is approximately $819,000 of PPP loan fee income remaining to be recognized in income.

    The Company recorded a $700,000 provision for loan losses during the third quarter of 2021. This compares to a provision for loan losses of $300,000 for the preceding quarter, and a provision for loan losses of $1.4 million for the third quarter of 2020. The lower quarterly provision reflects improvement in economic conditions and stable credit quality compared to the prior year.

    The net interest margin expanded 24 basis points to 3.58% for the third quarter of 2021, compared to 3.34% for the second quarter of 2021, and increased 22 basis points compared to 3.36% for the third quarter in 2020. For the first nine months of 2021, the net interest margin increased 28 basis points to 3.48%, compared to 3.20% in the first nine months of 2020, primarily due to a substantial reduction in the cost of funds as well as an improvement in our earning asset mix. Average total loans increased to 77% of average interest-earning assets compared to 72% one year ago.

    The yield on earning assets increased 23 basis points to 3.91% for the third quarter of 2021, compared to 3.68% for the second quarter of 2021, and increased 9 basis points from 3.82% for the third quarter of 2020. The increase was due to higher yields on the investment portfolio and loans, coupled with higher average loan balances. The yield on the loan portfolio increased to 4.47% for the third quarter of 2021, from 4.30% for the second quarter of 2021, and increased from 4.45% for the third quarter of 2020, primarily due to deferred fee income recognized on PPP loan payoffs. The cost of interest-bearing liabilities decreased one basis point to 0.45% for the third quarter of 2021, compared to 0.46% for the second quarter of 2021, and decreased 15 basis points from 0.60% for the third quarter of 2020.

    Noninterest income increased 10.7% to $4.3 million for the third quarter of 2021 from $3.9 million for the second quarter of 2021 and decreased 10.4% compared to $4.8 million for the third quarter a year ago. The third quarter of 2021 included $815,000 of servicing fee income on sold loans compared to $13,000 in the preceding quarter and $148,000 in the third quarter a year ago due in part to a catch-up entry for servicing fees on MSLP loans. Noninterest income growth during the third quarter of 2021 also included a $1.3 million gain on sale of investment securities and $134,000 in swap program participation fees. Loan and deposit service fees totaled $1.0 million for the third quarter 2021, compared to $1.0 million for the preceding quarter and $868,000 for the third quarter a year ago. In the year ago quarter, loan and deposit service fees were lower due to accommodations made to help customers affected by the halt on the economy due to the pandemic. For the first nine months of 2021, noninterest income decreased 3.1% to $10.9 million, compared to $11.2 million in the first nine months of 2020, reflecting a lower gain on sale of mortgage loans and a decrease in the cash surrender value of bank owned life insurance (BOLI) due to a one-time increase from a restructure of the BOLI policies in the third quarter of 2020, partially offset by an increase in servicing fee income on sold loans.

    Noninterest expense totaled $13.9 million for the third quarter of 2021, compared to $13.7 million for the preceding quarter and $10.1 million for the third quarter a year ago. For the first nine months of 2021, noninterest expense increased to $39.7 million, from $29.7 million in the first nine months of 2020. The increases for both the third quarter and for the year-to-date period reflect higher compensation expense, including salaries, production-related commissions, incentives and benefits, as well as costs associated with expanding our footprint with two new locations, and technology enhancements for digital and mobile banking products.

    The provision for income tax increased to $946,000 for the third quarter of 2021, compared to $663,000 for the second quarter of 2021, and decreased compared to $1.4 million for the third quarter of 2020.  The decrease from the prior year is due to a penalty recorded related to the surrender of a bank-owned life insurance policy in the third quarter of 2020 which resulted in a higher tax provision as well as a higher effective tax rate for the related period.

    Capital Ratios and Credit Quality

    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 September 30, 2021. Common Equity Tier 1 and Total Risk-Based Capital Ratios at September 30, 2021 were 13.4% and 14.4 %, respectively.

    Nonperforming loans were $1.2 million at September 30, 2021, a decrease from $1.8 million at June 30, 2021. The percentage of the allowance for loan losses to nonperforming loans increased to 1288.5%, at September 30, 2021, from 817.7% at June 30, 2021, and 419.9% at September 30, 2020. Classified loans decreased $647,000 during the third quarter to $12.7 million at September 30, 2021, reflecting improvements in almost all loan categories. The allowance for loan losses as a percentage of total loans was 1.1% at September 30, 2021, a decrease from 1.2% reported at both the three months and one year earlier.

    Awards/Recognition

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

    In April 2021, 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 this year. First Fed was ranked #4 in the medium-sized company category.

    In May 2021, 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, which recognizes the region's fastest-growing middle market companies.

    On June 24, First Fed was named to the Forbes Best Banks list for 2021 and included on the Forbes Best Bank in Washington list. Nearly 25,000 Americans were surveyed for their opinions on their current and former banking relationships. Only 135 banks (2.7%) made the list of the nearly 5,000 FDIC-insured banks in the country. First Fed was one of three in Washington to be recognized as a Best Bank based on customer feedback.

    Additionally, on June 14 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 by each company’s own employees.

    About the Company

    First Northwest is a bank holding company that primarily engages in the business activity of its subsidiary, First Fed. First Fed is a community-oriented financial institution which has served customers and communities since 1923. Currently First Fed has 12 full-service branches and two business centers serving Clallam, Jefferson, Kitsap, Whatcom, and King counties in Washington. First Fed’s business and operating strategy is focused on building sustainable earnings through hiring experienced bankers, geographic expansion, diversifying our loan product mix, expanding our deposit product offerings that deliver value-added solutions, enhancing existing services and digital service delivery channels, and enhancing our infrastructure to support the changing needs and expectations of our customers. On October 31, 2021, the Company will convert from a State Savings Bank Charter to a State Commercial Bank Charter and the Bank will simultaneously be renamed First Fed Bank from First Federal Savings and Loan Association.

    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 or range of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in the Company’s 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 SEC’s 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 2021 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us and could negatively affect the Company’s operations and stock price performance.


    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    CONSOLIDATED BALANCE SHEETS
    (Dollars in thousands, except share data) (Unaudited)

     September 30,
    2021    		 June 30,
    2021    		 September 30,
    2020    		 Three
    Month
    Change    		 One Year
    Change
    Assets         
    Cash and due from banks$      17,012  $     17,589  $      16,776  -3.3% 1.4%
    Interest-bearing deposits in banks 59,108   63,133   35,303  -6.4  67.4 
    Investment securities available for sale, at fair value     325,890       370,500       369,111  -12.0  -11.7 
    Loans held for sale   2,231     1,971     4,754  13.2  -53.1 
    Loans receivable (net of allowance for loan losses of $15,243, $14,588, and $13,007)  1,345,126    1,246,340    1,061,417  7.9  26.7 
    Federal Home Loan Bank (FHLB) stock, at cost   4,397     5,597     5,944  -21.4  -26.0 
    Accrued interest receivable   5,775     5,949     7,367  -2.9  -21.6 
    Premises and equipment, net 18,188   16,386   14,737  11.0  23.4 
    Mortgage servicing rights, net   2,934     2,381     1,545  23.2  89.9 
    Bank-owned life insurance, net 39,080   38,839   38,104  0.6  2.6 
    Goodwill and other intangible assets   1,186    —    —  100.0  100.0 
    Prepaid expenses and other assets 24,210   18,706   9,612  29.4  151.9 
    Total assets$1,845,137  $1,787,391  $1,564,670  3.2% 17.9%
              
    Liabilities and Shareholders' Equity         
    Deposits$1,522,916  $1,441,738  $1,254,456  5.6% 21.4%
    Borrowings 60,000   90,000       109,150  -33.3  -45.0 
    Subordinated debt, net 39,261   39,241    —  0.1  100.0 
    Accrued interest payable  29        455    51  -93.6  -43.1 
    Accrued expenses and other liabilities 33,369   26,221   18,359  27.3  81.8 
    Advances from borrowers for taxes and insurance 2,118   1,143   1,986  85.3  6.6 
    Total liabilities 1,657,693   1,598,798   1,384,002  3.7  19.8 
              
    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 10,050,877 at September 30, 2021; issued and outstanding 10,205,867 at June 30, 2021; and issued and outstanding 10,234,204 at September 30, 2020      102        102        102  0.0  0.0 
    Additional paid-in capital 96,396   97,463   97,229  -1.1  -0.9 
    Retained earnings 99,058   96,573   89,546  2.6  10.6 
    Accumulated other comprehensive income, net of tax      934     3,546     3,186  -73.7  -70.7 
    Unearned employee stock ownership plan (ESOP) shares (8,736)  (8,901)  (9,395) 1.9  7.0 
    Total parent's shareholders' equity     187,754       188,783       180,668  -0.5  3.9 
    Noncontrolling interest in Quin Ventures LLC (310)     (190)   —  -63.2  100.0 
    Total shareholders' equity     187,444       188,593       180,668  -0.6  3.8 
              
    Total liabilities and shareholders' equity$1,845,137  $1,787,391  $1,564,670  3.2% 17.9%



    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    CONSOLIDATED STATEMENTS OF INCOME
    (Dollars in thousands, except per share data) (Unaudited)

     Quarter Ended    
     September 30,
    2021    		 June 30,
    2021    		 September 30,
    2020    		 Three Month
    Change    		 One Year
    Change
    INTEREST INCOME         
    Interest and fees on loans receivable$         14,581 $       12,866 $         11,097 13.3% 31.4%
    Interest on mortgage-backed and related securities 715  644  565 11.0  26.5 
    Interest on investment securities 1,423  1,480  1,603 -3.9  -11.2 
    Interest on deposits in banks 18  15  9 20.0  100.0 
    FHLB dividends 41  46  97 -10.9  -57.7 
    Total interest income 16,778  15,051  13,371 11.5  25.5 
              
    INTEREST EXPENSE         
    Deposits 850  825  1,405 3.0  -39.5 
    Borrowings 186  183  205 1.6  -9.3 
    Subordinated debt 390  394  — -1.0  100.0 
    Total interest expense 1,426  1,402  1,610 1.7  -11.4 
              
    Net interest income 15,352  13,649  11,761 12.5  30.5 
              
    PROVISION FOR LOAN LOSSES 700  300  1,350 133.3  -48.1 
              
    Net interest income after provision for loan losses 14,652  13,349  10,411 9.8  40.7 
              
    NONINTEREST INCOME         
    Loan and deposit service fees 1,015  1,001  868 1.4  16.9 
    Sold loan servicing fees, net of amortization 815  13  148 6169.2  450.7 
    Net gain on sale of loans 663  921  1,725 -28.0  -61.6 
    Net gain on sale of investment securities 1,286  1,124  969 14.4  32.7 
    Increase in cash surrender value of bank-owned life insurance 241  242  622 -0.4  -61.3 
    Other income 265  571  449 -53.6  -41.0 
    Total noninterest income 4,285  3,872  4,781 10.7  -10.4 
              
    NONINTEREST EXPENSE         
    Compensation and benefits 8,713  8,559  6,070 1.8  43.5 
    Data processing 826     726     640 13.8  29.1 
    Occupancy and equipment 1,848  1,803  1,367 2.5  35.2 
    Supplies, postage, and telephone    279     355     254 -21.4  9.8 
    Regulatory assessments and state taxes    335     301     262 11.3  27.9 
    Advertising    547     492     285 11.2  91.9 
    Professional fees    422     644     361 -34.5  16.9 
    FDIC insurance premium    134     168       86 -20.2  55.8 
    Other 830  659  756 25.9  9.8 
    Total noninterest expense 13,934  13,707  10,081 1.7  38.2 
              
    INCOME BEFORE PROVISION FOR INCOME TAXES 5,003  3,514  5,111 42.4  -2.1 
              
    PROVISION FOR INCOME TAXES    946  663  1,436 42.7  -34.1 
              
    NET INCOME 4,057  2,851  3,675 42.3  10.4 
    Net loss on noncontrolling interest in Quin Ventures LLC    121     145       — -16.6  100.0 
              
    NET INCOME ATTRIBUTABLE TO PARENT$           4,178 $         2,996 $           3,675 39.5% 13.7%
              
              
    Basic earnings per common share$             0.45 $           0.33 $             0.40 36.4% 12.5%
    Diluted earnings per common share$             0.45 $           0.32 $             0.40 40.6% 12.5%



    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    CONSOLIDATED STATEMENTS OF INCOME
    (Dollars in thousands, except per share data) (Unaudited)

     Nine Months Ended September 30, Percent
      2021  2020  Change
    INTEREST INCOME     
    Interest and fees on loans receivable$             39,988 $             31,169  28.3%
    Interest on mortgage-backed and related securities 1,823  2,264  -19.5 
    Interest on investment securities 4,473  3,988  12.2 
    Interest on deposits in banks 46  85  -45.9 
    FHLB dividends 132  199  -33.7 
    Total interest income 46,462  37,705  23.2 
          
    INTEREST EXPENSE     
    Deposits 2,609  5,584  -53.3 
    Borrowings 560  840  -33.3 
    Subordinated debt 809    —  100.0 
    Total interest expense 3,978  6,424  -38.1 
          
    Net interest income 42,484  31,281  35.8 
          
    PROVISION FOR LOAN LOSSES 1,500  4,116  -63.6 
          
    Net interest income after provision for loan losses 40,984  27,165  50.9 
          
    NONINTEREST INCOME     
    Loan and deposit service fees       2,853        2,514  13.5 
    Sold loan servicing fees, net of amortization 858    (9) 9633.3 
    Net gain on sale of loans       2,921        4,109  -28.9 
    Net gain on sale of investment securities       2,410        2,235  7.8 
    Increase in cash surrender value of bank-owned life insurance 727        1,577  -53.9 
    Other income 1,092  782  39.6 
    Total noninterest income 10,861  11,208  -3.1 
          
    NONINTEREST EXPENSE     
    Compensation and benefits     24,567      17,397  41.2 
    Data processing 2,921        2,099  9.1 
    Occupancy and equipment 5,274        4,063  29.8 
    Supplies, postage, and telephone 876  749  17.0 
    Regulatory assessments and state taxes 897  659  36.1 
    Advertising       1,484  934  58.9 
    Professional fees       1,588        1,115  42.4 
    FDIC insurance premium 450  156  188.5 
    FHLB prepayment penalty   —  210  -100.0 
    Other 2,308  2,363  -2.3 
    Total noninterest expense 39,735  29,745  33.6 
          
    INCOME BEFORE PROVISION FOR INCOME TAXES 12,110  8,628  40.4 
          
    PROVISION FOR INCOME TAXES 2,082  2,104  -1.0 
          
    NET INCOME     10,028        6,524  53.7 
    Net loss on noncontrolling interest in Quin Ventures LLC      266  —  100.0 
          
    NET INCOME ATTRIBUTABLE TO PARENT$             10,294 $               6,524  57.8%
          
          
    Basic earnings per common share$                 1.12 $                 0.69  62.3%
    Diluted earnings per common share$                 1.11 $                 0.69  60.9%


    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
     September 30,
    2021    		 June 30,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020
    Performance ratios: (1)         
    Return on average assets 0.92%  0.69%  0.76%  0.97%  0.99%
    Return on average equity 8.69   6.46   6.70   8.32   8.22 
    Average interest rate spread 3.46   3.22   3.38   3.35   3.22 
    Net interest margin (2) 3.58   3.34   3.48   3.46   3.36 
    Efficiency ratio (3) 70.3   78.2   74.7   67.7   60.9 
    Equity to total assets 10.16   10.55   10.49   11.27   11.55 
    Average interest-earning assets to average interest-bearing liabilities 134.1   133.9   134.6   131.7   130.9 
    Book value per common share$      18.65  $      18.49  $       17.86  $         18.20  $       17.65 
              
    Tangible performance ratios:1         
    Tangible assets$1,843,395  $1,787,389  $1,736,292  $  1,654,348  $1,564,669 
    Tangible common equity 185,702   188,591   182,097   186,382   180,667 
    Tangible common equity ratio 10.07%  10.55%  10.49%  11.27%  11.55%
    Return on tangible common equity 8.93   6.37   6.95   8.15   8.09 
    Tangible book value per common share$       18.48  $      18.49  $       17.86  $         18.19  $       17.65 
              
    Asset quality ratios:         
    Nonperforming assets to total assets at end of period (4) 0.06%  0.10%  0.12%  0.10%  0.21%
    Nonperforming loans to total loans (5) 0.09   0.14   0.18   0.20   0.30 
    Allowance for loan losses to nonperforming loans (5) 1,288.50   817.71   668.15   609.20   419.85 
    Allowance for loan losses to total loans 1.13   1.16   1.22   1.20   1.21 
    Net charge-offs to average outstanding loans 0.01   0.00   0.00   0.00   0.04 
              
    Capital ratios (First Federal):         
    Tier 1 leverage 10.6%  10.9%  11.2%  10.3%  10.5%
    Common equity Tier 1 capital 13.4   14.5   15.1   13.4   14.7 
    Tier 1 risk-based 13.4   14.5   15.1   13.4   14.7 
    Total risk-based 14.4   15.6   16.3   14.6   16.0 
              
    Other Information:         
    Average total assets$   1,810,543  $  1,737,363  $   1,645,806  $     1,567,521  $  1,488,723 
    Average total loans 1,303,199   1,211,348   1,144,230   1,089,505   1,009,210 
    Average interest-earning assets 1,702,762   1,639,782   1,549,316   1,466,103   1,401,090 
    Average noninterest-bearing deposits 314,677   304,483   283,204   245,024   218,615 
    Average interest-bearing deposits 1,179,096   1,133,472   1,092,114   1,032,608   1,009,041 
    Average interest-bearing liabilities 1,269,958   1,224,665   1,150,743   1,113,339   1,070,285 
    Average equity 190,764   186,153   186,171   183,424   178,887 
    Average shares - basic 9,184,568   9,130,113   9,094,354   9,214,965   9,257,252 
    Average shares - diluted 9,268,076   9,248,667   9,185,725   9,258,109   9,263,975 


    (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)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.
    (5)Nonperforming loans consists of nonaccruing loans and accruing loans more than 90 days past due.


    FIRST NORTHWEST BANCORP AND SUBSIDIARY
    Selected Financial Ratios and Other Data
    (Dollars in thousands, except per share data) (Unaudited) (continued)

     As of or For the Nine Months Ended September 30,
      2021   2020 
    Performance ratios: (1)   
    Return on average assets 0.79%  0.62%
    Return on average equity 7.33   4.92 
    Average interest rate spread 3.37   3.00 
    Net interest margin (2) 3.48   3.20 
    Efficiency ratio (3) 73.5   70.0 
    Equity to total assets 10.16   11.55 
    Average interest-earning assets to average interest-bearing liabilities 134.2   130.2 
    Book value per common share$                        18.65  $                         17.65 
        
    Tangible performance ratios:1   
    Tangible assets$                 1,843,395  $                  1,564,669 
    Tangible common equity 185,702   180,667 
    Tangible common equity ratio 10.07%  11.55%
    Return on tangible common equity 7.41   4.82 
    Tangible book value per common share$                        18.48  $                         17.65 
        
    Asset quality ratios:   
    Nonperforming assets to total assets at end of period (4) 0.06%  0.21%
    Nonperforming loans to total loans (5) 0.09   0.30 
    Allowance for loan losses to nonperforming loans (5) 1288.50   419.85 
    Allowance for loan losses to total loans 1.13   1.21 
    Net charge-offs to average outstanding loans 0.01   0.08 
        
    Capital ratios (First Federal):   
    Tier 1 leverage 10.6%  10.5%
    Common equity Tier 1 capital 13.4   14.7 
    Tier 1 risk-based 13.4   14.7 
    Total risk-based 14.4   16.0 
        
    Other Information:   
    Average total assets$                 1,731,841  $                  1,393,036 
    Average total loans 1,220,175   941,627 
    Average interest-earning assets 1,631,179   1,305,366 
    Average noninterest-bearing deposits 300,903   177,971 
    Average interest-bearing deposits 1,135,213   931,988 
    Average interest-bearing liabilities 1,215,559   1,002,751 
    Average equity 187,713   176,844 
    Average shares -– basic 9,196,729   9,409,754 
    Average shares -– diluted 9,294,256   9,439,238 


    (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)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.
    (5)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:

     As of the Quarter Ended
     September 30,
    2021    		 June 30,
    2021    		 September 30,
    2020    		 Three Month
    Change    		 One Year
    Change
     (In thousands)
    Commercial business loans breakout
    PPP loans$         26,858 $         45,211 $         32,089 $       (18,353) $         (5,231)
    Northpointe Bank MPP 27,504         —  71,416  27,504    (43,912)
    Secured lines of credit   8,279  13,685    1,240  (5,406)    7,039 
    Unsecured lines of credit   2,708    2,270    1,928       438        780 
    Other commercial business loans 26,590  14,829  16,363  11,761   10,227 
    Total commercial business loans$         91,939 $         75,995 $       123,036 $        15,944  $       (31,097)
              
    Auto and other consumer loans breakout        
    Triad Manufactured Home loans$         58,823 $         49,735 $           2,134 $          9,088  $        56,689 
    Woodside auto loans 99,335  94,934  79,178    4,401   20,157 
    First Help auto loans   4,164    4,608         —     (444)    4,164 
    Other auto loans 15,715  18,223  26,573  (2,508)   (10,858)
    Other consumer loans 4,201  4,117  3,897  84   304 
    Total auto and other
    consumer loans    		$       182,238 $       171,617 $       111,782 $        10,621  $        70,456 
              
    Construction and land loans breakout
    1-4 Family construction$         66,287 $         53,630 $         32,667 $        12,657  $        33,620 
    Multifamily construction 80,146  58,097  17,555  22,049   62,591 
    Acquisition-renovation 53,670  59,141    8,079  (5,471)  45,591 
    Nonresidential construction   4,520    3,156    6,970    1,364   (2,450)
    Land and development 9,849  9,661  9,933  188   (84)
    Total construction and land loans$       214,472 $       183,685 $         75,204 $        30,787  $      139,268 



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

    Non-GAAP Financial Measures

    This press release contains both financial measures based on GAAP and non-GAAP based financial measures, which are used where management believes them to be helpful in understanding the Company’s results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, are included in this press release. 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:

    Tangible Common Equity:

     As of or For the Quarter Ended
     September 30,
    2021    		 June 30,
    2021    		 March 31,
    2021    		 December 31,
    2020    		 September 30,
    2020
     (Dollars in thousands, except per share data)
    Total shareholders' equity$         187,444  $          188,593  $          182,098  $          186,383  $          180,668 
    Less: goodwill and intangible assets 1,186   —   —   —   — 
    Less: disallowed servicing rights 556   2   1   1   1 
    Total tangible common equity$         185,702  $          188,591  $          182,097  $         186,382  $          180,667 
              
    Total assets$       1,845,137  $       1,787,391  $       1,736,293  $       1,654,349  $       1,564,670 
    Less: goodwill and intangible assets 1,186   —   —   —   — 
    Less: disallowed servicing rights 556   2   1   1   1 
    Total tangible assets$       1,843,395  $       1,787,389  $       1,736,292  $       1,654,348  $       1,564,669 
              
    Tangible common equity ratio (1) 10.07%  10.55%  10.49%  11.27%  11.55%
    Net income$           4,178  $           2,996  $           3,120  $           3,816  $           3,675 
    Return on tangible common equity (1) 8.93%  6.37%  6.95%  8.15%  8.09%
    Common shares outstanding   10,050,877     10,205,867     10,195,644     10,247,185     10,234,204 
    Tangible book value per common share (1)$  18.48  $  18.49  $  17.86  $  18.19  $  17.65 


     As of or For the Nine Months Ended September 30,
      2021   2020 
     (Dollars in thousands, except per share data)
    Total shareholders' equity$          187,444  $          180,668 
    Less: goodwill and intangible assets 1,186          — 
    Less: disallowed servicing rights 556   1 
    Total tangible common equity$          185,702  $          180,667 
        
    Total assets$       1,845,137  $       1,564,670 
    Less: goodwill and intangible assets 1,186   — 
    Less: disallowed servicing rights 556   1 
    Total tangible assets$       1,843,395  $       1,564,669 
        
    Tangible common equity ratio (1) 10.07%  11.55%
    Net income$         10,294  $           6,524 
    Return on tangible common equity (1) 7.41%  4.82%
    Common shares outstanding   10,050,877     10,234,204 
    Tangible book value per common share (1)$  18.48  $  17.65 

    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.

    1 See reconciliation of Non-GAAP Financial Measures on page 14.

    Contact:
    Matthew P. Deines, President and Chief Executive Officer
    Geri Bullard, EVP and Chief Financial Officer
    First Northwest Bancorp
    360-457-0461


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