fnwb20200630

11-K 1 fnwb20200630_11k.htm FORM 11-K fnwb20200630_11k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 11-K

(Mark One)

☒	ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended June 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from _____ to _____

Commission File Number: 001-36741

A. Full title of the plan and the address of the plan, if different from that of the issuer named below:

First Federal Savings and Loan Association of Port Angeles 401(k) Plan

B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

FIRST NORTHWEST BANCORP

105 West 8th Street

Port Angeles, Washington 98362

REQUIRED INFORMATION

1. Not Applicable

2. Not Applicable

3. Not Applicable

4. The First Federal Savings and Loan Association of Port Angeles 401(k) Plan (the “Plan”) is subject to the requirements of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). Furnished herewith are the financial statements and schedules of the Plan for the fiscal year ended June 30, 2020, prepared in accordance with the financial reporting requirements of ERISA and for purposes of satisfying the requirements of Form 11-K.

First Federal Savings and Loan Association of Port Angeles 401(k) Plan

Form 11-K

TABLE OF CONTENTS

The following financial statements and supplementary information for the First Federal Savings and Loan Association of Port Angeles 401(k) Plan are being filed herewith:

	Page
Report of Independent Registered Accounting Firm	2

Financial Statements:
Statements of Net Assets Available for Benefits at
June 30, 2020 and 2019	4
Statement of Changes in Net Assets Available for Benefits for the
Year Ended June 30, 2020	5
Notes to Financial Statements	6
Supplementary Information:
Schedule H, Line 4i -- Schedule of Assets (Held at End of Year)	10

Exhibit:
Exhibit 23 -- Consent of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

To the Plan Administrator, Participants and Trustees of

First Federal Savings and Loan Association of Port Angeles 401(k) Plan

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for benefits of the First Federal Savings and Loan Association of Port Angeles 401(k) Plan (the “Plan”) as of June 30, 2020 and 2019, the related statement of changes in net assets available for benefits for the year then ended June 30, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of June 30, 2020 and 2019, and the changes in net assets available for benefits for the year then ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Opinion on the Supplementary Information

The supplementary information included in Schedule H, line 4(i) – Schedule of Assets (Held at End of Year) as of June 30, 2020 has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplementary information is the responsibility of the Plan's management. Our audit procedures included determining whether the supplementary information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplementary information. In forming our opinion on the supplementary information in the accompanying schedule, we evaluated whether the supplementary information, including its form and content, is presented in conformity with DOL’s Rules and Regulations for Reporting and Disclosure under ERISA. In our opinion, the supplementary information in the accompanying schedule is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ Moss Adams LLP

Spokane, Washington

December 28, 2020

We have served as the Plan's auditor since 2014.

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PORT ANGELES 401(K) PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

	June 30,
	2020		2019
ASSETS
Investments, at fair value:
Registered investment companies	$	9,347,025	$	8,248,255
Common trusts		633,621		419,801
Common stock fund		781,904		1,429,741
Total investments, at fair value		10,762,550		10,097,797

Receivables
Employer contributions		—		62
Notes receivable from participants		207,787		245,725
Total receivables		207,787		245,787

Cash		1,718		—

Total Assets		10,972,055		10,343,584

NET ASSETS AVAILABLE FOR BENEFITS	$	10,972,055	$	10,343,584

The accompanying notes are an integral part of these financial statements.

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PORT ANGELES 401(K) PLAN

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

	Year Ended
	June 30, 2020
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income
Net appreciation in fair value of investments	$	355,577
Dividends		239,372
Net investment income		594,949

Interest income on notes receivable from participants		14,338

Contributions
Participants		871,586
Employer		317,587
Rollovers		19,428
Total contributions		1,208,601

Total additions		1,817,888

DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants		1,147,424
Administrative expenses		41,993
Total deductions		1,189,417

CHANGE IN NET ASSETS		628,471

NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year		10,343,584

End of year	$	10,972,055

The accompanying notes are an integral part of these financial statements.

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PORT ANGELES 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

Note 1 – Description of Plan

The following description of the First Federal Savings and Loan Association of Port Angeles 401(k) Plan (the “Plan”) provides only general information. Participants should refer to the Plan Agreement, as amended, for a more complete description of the Plan’s provisions.

General - The Plan is a 401(k) salary deferral plan covering substantially all employees of First Federal Savings and Loan Association of Port Angeles (the "Company"), and is subject to provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Company is the Plan’s sponsor and serves as plan administrator.

Eligibility - Effective July 1, 2019, all employees of the Company are eligible to participate in the Plan upon hire. Prior to that date, there was a minimum age requirement of 21 years in order to become eligible to participate in the Plan.

Contributions

Participant contributions - Each year, participants may elect to make combined 401(k) and Roth 401(k) voluntary contributions up to the maximum amounts allowable of pretax and after-tax annual compensation, as defined in the Plan. Participants who have attained age 50 before the end of the Plan year are eligible to make voluntary catch-up contributions. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans.

Employer matching contributions - The Company may elect to make discretionary matching contributions to the Plan. The Company matches 50% of employee contributions up to 6% of eligible compensation deferred to the Plan.

Profit sharing contributions - The Company may elect to make profit sharing contributions to the Plan. No profit sharing contributions were made during the Plan year.

Contributions are subject to regulatory limitations.

Participation accounts - Each participant’s account is credited with the participant’s and Company matching contributions. Participant accounts are charged with an allocation of administrative expenses that are paid by the Plan. Allocations are based on participant earnings, account balances, or specific participant transactions, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. Participants direct the investment of their contributions into various investment options offered by the Plan.

Vesting - Participants are vested immediately in their contributions plus actual earnings thereon. Effective July 1, 2019, participants are also vested immediately in the Company's contribution portion of their account. Prior to that date, vesting in the Company’s contribution portion of their account was based on years of continuous service at 25% per year after one full year of service becoming fully vested after four years of service.

Notes receivable from participants - Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of the present value of their vested account balance. The loans are issued by the Plan and secured by the balance in the participant’s account. Loan terms range from one to five years or up to 20 years for the purchase of a principal residence. Under the terms of the Plan Agreement, loans to participants will bear a reasonable rate of interest determined by the Plan administrator. Principal and interest is paid ratably through monthly payroll deductions. Only one loan is allowed at a time. As of June 30, 2020, the rates of interest on outstanding loans ranged from 4.25 % to 6.50 % with various maturities through February 2028.

Payment of benefits - On termination of service due to death, disability, or retirement, a participant may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest in his or her account, or over any period that does not exceed the life expectancy of the beneficiary. For termination of service for other reasons, a participant may only receive the value of the vested interest in his or her account as a lump-sum distribution. If the vested account balance is $1,000 or less at termination the amount will be cashed out at the time of termination. If the balance is over $1,000 the distribution will only be made with consent from the account holder.

Forfeitures - Forfeitures are the non-vested portion of a participant’s account that is lost upon termination of employment. Forfeitures are retained in the Plan, must be used in the subsequent year and will first be used to pay Plan administrative expenses, with any remaining amount used to reduce future Company contributions. As of June 30, 2020 and 2019, forfeited non-vested accounts totaled $1 and $7,182, respectively. For the year ended June 30, 2020, $13,385 of forfeited funds were used for payment of Plan administrative expenses.

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PORT ANGELES 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

Note 2 – Summary of Significant Accounting Policies

Basis of accounting - The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, using the accrual method of accounting.

Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that may affect certain amounts and disclosures. Accordingly, actual results could differ from those estimates.

Change in Accounting Principle - In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820. The amendments in this update remove disclosures that no longer are considered cost beneficial, modify and/or clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-13 is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. ASU 2018-13 has been adopted for the June 30, 2020, Plan year end. This ASU did not have a material impact on the Plan's financial statements.

Investment valuation - The investments are stated at fair value. If available, quoted market prices are used to value investments.

Fair value is the price that would be received to sell an asset or paid to transfer a liability (the “exit price”) in an orderly transaction between market participants at the measurement date. See Note 3 for discussion of fair value measurements.

Income recognition - Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. The net appreciation in fair value of investments consists of both the realized gains and losses and unrealized appreciation and depreciation of those investments.

Notes receivable from participants - Notes receivable from participants are measured at amortized cost, which represents unpaid principal balance plus accrued but unpaid interest. Delinquent notes receivable from participants are reclassified as distributions upon the occurrence of a distributable event, based on the terms of the Plan Agreement. There was no allowance for credit losses at June 30, 2020 or 2019.

Payment of benefits - Benefits are recorded when paid.

Expenses - General Plan administrative expenses may be paid out of the forfeiture account or paid by the Company. Investment management, distribution and loan transaction fees are paid by the Plan participants.

Subsequent events - During March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic in response to the rapidly growing outbreak of the virus. The COVID-19 pandemic is having, and will likely continue to have, significant effects on global markets, businesses, and communities. While the full impact of COVID-19 is unknown and cannot be reasonably estimated as these events are still developing, it could impact the volatility of the Company’s stock price and Plan assets. The impact to participants would be dependent on the timing of distributions and the related share price of investments held at the distribution date.

The Plan has adopted several relief provisions in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The relief provisions allow qualified individuals to receive coronavirus-related distributions without penalty, delay repayments of Plan loans for up to one year, and waive required minimum distributions for 2020. These provisions are effective immediately although the Plan document does not need to be amended until 2022.

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PORT ANGELES 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

Note 3 - Fair Value Measurement

The framework for measuring fair value provides a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level 3).

The three levels of the fair value hierarchy are described as follows:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access.

Level 2 Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2020 and 2019.

Shares of registered investment company funds are valued at the net asset value (NAV) of shares held by the Plan and are valued at the closing price reported on the active market on which the individual securities are traded.

Units held in common trusts (CT) are valued using the NAV practical expedient of the CT as reported by the CT manager. The NAV practical expedient is based on the fair value of the underlying assets owned by the CT, minus its liabilities, and then divided by the number of units outstanding. The NAV practical expedient of a CT is calculated based on a compilation of primarily observable market information.

The common stock fund consists of a unitized stock fund of First Northwest Bancorp (FNWB) common stock and a short-term cash component that provides liquidity for daily trading. FNWB common stock is valued at the closing price reported on the active market on which the individual securities are traded and the short-term cash investments are valued at cost, which approximates fair value.

The valuation methods used by the Plan may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following tables disclose by level, the fair value hierarchy, of the Plan’s assets at fair value at the dates indicated:

	Fair Value Measurement at June 30, 2020
	Level 1		Level 2		Level 3		Total

Registered investment companies	$	9,347,025	$	—	$	—	$	9,347,025
Common stock fund		781,904		—		—		781,904
Total assets in the fair value hierarchy	$	10,128,929	$	—	$	—		10,128,929
Investment measured at NAV (practical expedient)								633,621
Investments at fair value							$	10,762,550

	Fair Value Measurement at June 30, 2019
	Level 1		Level 2		Level 3		Total

Registered investment companies	$	8,248,255	$	—	$	—	$	8,248,255
Common stock fund		1,429,741		—		—		1,429,741
Total assets in the fair value hierarchy	$	9,677,996	$	—	$	—		9,677,996
Investment measured at NAV (practical expedient)								419,801
Investments at fair value							$	10,097,797

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PORT ANGELES 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

Note 4 - Tax Status

The Plan document is a volume submitter salary deferral plan with cash or deferred arrangements (CODA) that received a favorable opinion letter from the Internal Revenue Service (IRS) dated March 31, 2014, which stated that the Plan, as then designed, was in accordance with applicable sections of the Internal Revenue Code (IRC). MG Trust Company believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. Although the Plan has been amended since receiving the determination letter, the Plan administrator believes the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.

In accordance with guidance on accounting for uncertainty in income taxes, Trustees have evaluated the Plan’s tax positions and does not believe the Plan has any uncertain tax positions that require disclosure or adjustment to the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Plan was formed on December 1, 2012 and has no open tax years before that time.

Note 5 - Risks and Uncertainties

The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, market volatility, and credit risks. It is reasonably possible, given the level of risk associated with investment securities that changes in the values of the investments in the near term could materially affect a participant’s account balance and the amounts reported in the statement of net assets available for benefits.

Note 6 - Party-In-Interest Transactions

Plan investments include a common stock fund which is comprised of a unitized stock fund of First Northwest Bancorp common stock and short term cash. The Plan held 62,868 and 88,916 shares with fair values of $781,904 and $1,429,741 at June 30, 2020 and 2019, respectively. The Company is a wholly owned subsidiary of First Northwest Bancorp.

Note 7 - Plan Termination

Although it has not expressed any intention to do so, the Company has the right to terminate the Plan and discontinue its contributions at any time. If the Plan is terminated, amounts allocated to a participant’s account become fully vested.

SUPPLEMENTARY INFORMATION

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PORT ANGELES 401(K) PLAN

EIN: 91-0369590 PLAN #: 002

SCHEDULE H, LINE 4(i) – SCHEDULE OF ASSETS (HELD AT END OF YEAR)

JUNE 30, 2020

		(c)
	(b)	Description of investment, including			(e)
	Identity of issue, borrower,	maturity date, rate of interest, collateral,	(d)		Current
(a)	lessor or similar party	par or maturity value	Cost		value
	Cash	Cash			$	1,718

	American Funds AMCAP Fund R5	Registered investment company		**		30,134
	American Funds EuroPacific Gr R6	Registered investment company		**		55,608
	Columbia Dividend Income R5	Registered investment company		**		9,694
	Nasdaq 100 Index Fund Direct Shares	Registered investment company		**		1,544,671
	Vanguard 500 Index Fund Adm	Registered investment company		**		1,643,034
	Vanguard Growth Index Adm	Registered investment company		**		884,042
	Vanguard Inflation-Protected Secs Adm	Registered investment company		**		19,528
	Vanguard Interm-Term Bond Idx Adm	Registered investment company		**		182,647
	Vanguard Long Term Govt Bond	Registered investment company		**		365,148
	Vanguard Mid Cap Index Adm	Registered investment company		**		764,921
	Vanguard REIT Index Adm	Registered investment company		**		297,512
	Vanguard Short Term Bond Index Adm	Registered investment company		**		200,089
	Vanguard Short Term Treasury	Registered investment company		**		578,470
	Vanguard Small Cap Index Adm	Registered investment company		**		280,583
	Vanguard Target Retirement 2015	Registered investment company		**		131,549
	Vanguard Target Retirement 2020	Registered investment company		**		11,867
	Vanguard Target Retirement 2025	Registered investment company		**		471,256
	Vanguard Target Retirement 2030	Registered investment company		**		361,409
	Vanguard Target Retirement 2035	Registered investment company		**		236,779
	Vanguard Target Retirement 2040	Registered investment company		**		145,050
	Vanguard Target Retirement 2045	Registered investment company		**		358,179
	Vanguard Target Retirement 2050	Registered investment company		**		197,172
	Vanguard Target Retirement 2055	Registered investment company		**		89,431
	Vanguard Target Retirement 2060	Registered investment company		**		28,927
	Vanguard Target Retirement 2065	Registered investment company		**		20,487
	Vanguard Target Retirement Income	Registered investment company		**		5,193
	Vanguard Total Intl Stock Index Adm	Registered investment company		**		170,487
	Vanguard Value Index Adm	Registered investment company		**		238,717
	Victory Sycamore Established Value I	Registered investment company		**		24,441

	Morley Stable Value	Common trust		**		633,620
	Forfeiture Account	Common trust		—		1

*	First Northwest Bancorp	Common Stock Fund		**		781,904

*	Participant loans	Various maturity dates through February 2028; Interest rates 4.25% - 6.50%		—		207,787

					$	10,972,055
*	Indicates party-in-interest.
**	Information is not required as investments are participant directed.

EXHIBIT INDEX

Exhibit	Description
23	Consent of Moss Adams LLP

SIGNATURES

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

		First Federal Savings and Loan Association of Port Angeles 401(k) Plan

Date: December 28, 2020		/s/ Geraldine L. Bullard
		Geraldine L. Bullard
		Executive Vice President and Chief Financial Officer of First Federal
		Savings and Loan Association of Port Angeles, Plan Administrator
		(Principal Financial Officer)