ex_296266.htm

EX-99.1 2 ex_296266.htm EXHIBIT 99.1 ex_296266.htm

Exhibit 99.1

Contact:

Matthew P. Deines, President and Chief Executive Officer

Geri Bullard, EVP and Chief Financial Officer

First Northwest Bancorp

360-457-0461

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

FIRST NORTHWEST BANCORP ANNOUNCES RECORD EARNINGS IN THE THIRD QUARTER OF 2021

Net Income

Diluted Earnings Per Share

YTD Loan Growth

Net Interest Margin

Book Value per Share

$4.2 Million

$0.45

18%

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, 2021	Quarter 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, respectively	Net 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 $227,000	Total 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 quarters	Effective 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 quarters	Net 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%, respectively	Return 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 $18.49	Tangible 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

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

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.

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

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 Bank 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.

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

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.

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

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.