First Northwest Bancorp Reports Fourth Quarter 2023 Results of Operations

First Northwest Bancorp

PORT ANGELES, Wash., Jan. 25, 2024 (GLOBE NEWSWIRE) --

Matthew P. Deines, President and CEO, comments on financial results:
"2023 was the most challenging year for many banks since the great recession," said Matthew P. Deines, President and CEO. "That was certainly the case for First Northwest Bancorp and First Fed Bank. In spite of our challenges, we celebrated our 100th anniversary in 2023, and we continue to celebrate our customers, employees and communities as we enter our second century. While we posted an operating loss in the 4th quarter, largely due to a restructure of our bond portfolio, changes to market rates led to an increase in tangible book value per share compared to September 2023 and December 2022. We look forward to a challenging and prosperous 2024 as we remain focused on our customers and their financial needs."

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 February 23, 2024, to shareholders of record as of the close of business on February 9, 2024.

2023 FINANCIAL RESULTS		4Q 23				3Q 23				4Q 22				2023				2022
OPERATING RESULTS (in millions)
Net (loss) income		$	(5.5	)		$	2.5			$	6.1			$	2.3			$	15.6
Pre-provision net interest income			14.2				15.0				18.9				61.4				69.9
Noninterest expense			17.0				14.4				15.1				61.5				62.3
Total revenue, net of interest expense *			11.3				17.9				22.3				65.5				80.2
PER SHARE DATA
Basic and diluted (loss) earnings		$	(0.62	)		$	0.28			$	0.66			$	0.26			$	1.71
Book value			16.99				16.20				16.31				16.99				16.31
Tangible book value *			16.83				16.03				16.13				16.83				16.13
BALANCE SHEET (in millions)
Total assets		$	2,202			$	2,154			$	2,042			$	2,202			$	2,042
Total loans			1,660				1,635				1,548				1,660				1,548
Total deposits			1,677				1,658				1,564				1,677				1,564
Total shareholders' equity			163				156				158				163				158
ASSET QUALITY
Net charge-off ratio (1)			0.14	%			0.30	%			0.11	%			0.20	%			0.03	%
Nonperforming assets to total assets			0.85				0.11				0.09				0.85				0.09
Allowance for credit losses on loans
to total loans			1.05				1.04				1.04				1.05				1.04
Nonperforming loan coverage ratio			94				714				900				94				900
SELECTED RATIOS
Return on average assets (1)			-1.03	%			0.46	%			1.18	%			0.11	%			0.79	%
Return on average equity (1)			-14.05				6.17				15.26				1.43				9.09
Return on average tangible equity (1) *			-14.20				6.23				15.45				1.45				9.21
Net interest margin			2.84				2.97				3.96				3.13				3.79
Efficiency ratio			150.81				80.52				67.91				93.89				77.71
Bank common equity tier 1 (CETI) ratio			13.12				13.43				13.40				13.12				13.40
Bank total risk-based capital ratio			14.11				14.38				14.42				14.11				14.42

(1)  Performance ratios are annualized, where appropriate.
^* See reconciliation of Non-GAAP Financial Measures later in this release.

	2023 Significant Items
•	First Fed Bank ("First Fed" or "Bank") took steps to reposition its securities portfolio by selling lower-yielding investments which resulted in a $5.4 million loss on the sale of $46.1 million of investment securities during the fourth quarter.
•	The Company completed final transactions related to its investments in Quin Ventures, Inc. ("Quin") and Quil Ventures, Inc. ("Quil Ventures"), which led to one-time charges for Quil Ventures totaling $1.7 million during the fourth quarter.
•	The Bank entered into a consent order with the Federal Deposit Insurance Corporation ("FDIC") pertaining to compliance matters that were self-identified by the Bank and have resulted in a strengthening of compliance controls.
•	Operating expenses, notably compensation and benefits, were down significantly year-over-year, excluding one-time charges.
•	Sale of Visa, Inc. Class B common stock generated a one-time gain of $470,000 in the fourth quarter.
•	Tangible book value* grew by 5.0% during the fourth quarter as positive changes in Other Comprehensive Income offset the net loss for the quarter. Capital ratios for the Bank remained substantially above well capitalized.
•	Loans grew year-over-year by $112.5 million, or 7.3%, to $1.66 billion.
•	Deposits grew year-over-year by $112.6 million, or 7.2%, to $1.68 billion, including a $50.8 million increase in deposits originated through digital channels.
•	Estimated insured deposits totaled $1.3 billion, or 78% of total deposits.
•	Liquidity remained ample with coverage of uninsured deposits at 1.2x.
•	Asset quality was closely monitored:
	- Past due and nonperforming loan balances were less than 1.2% of the loan portfolio.
	- Classified loans increased during the year to 2.1% of total loans.

First Northwest Bancorp (Nasdaq: FNWB) ("First Northwest" or "Company") today reported a net loss of $5.5 million for the fourth quarter of 2023, compared to net income of $2.5 million for the third quarter of 2023 and $6.1 million for the fourth quarter of 2022. Basic and diluted loss per share were $0.62 for the fourth quarter of 2023, compared to basic and diluted earnings per share of $0.28 for the third quarter of 2023 and $0.66 for the fourth quarter of 2022. In the fourth quarter of 2023, the Company generated a return on average assets of -1.03%, a return on average equity of -14.05% and a return on average tangible common equity* of -14.20%. Loss before provision for income taxes was $6.9 million for the current quarter, compared to income of $3.1 million for the preceding quarter, a decrease of $10.0 million, or 321.3%, and decreased $13.8 million compared to income of $6.9 million for the fourth quarter of 2022.

Results in the fourth quarter of 2023 were impacted by a $5.4 million loss on sale of securities as First Fed took steps to reposition its securities portfolio by selling lower yielding investments. The cash from the transaction was in part reinvested back into the portfolio at current market rates with the remainder used to fund higher yielding loans and increase liquidity. We believe this transaction will better position the Bank for higher levels of interest income in 2024.

The Company sold available-for-sale investment securities with a book value of $46.1 million and weighted-average yield of 2.4% during the fourth quarter of 2023, for a pre-tax realized loss of $5.4 million. The investment securities sold consisted of $17.3 million of municipal bonds, $12.5 million of non-agency collateralized mortgage obligations, $7.8 million of agency collateral mortgage obligations, $2.5 million of U.S. Treasury securities, $4.0 million of collateralized mortgage obligations ("CMOs") and $1.7 million of international agency securities. During the fourth quarter of 2023, the Company used the proceeds to purchase $20.4 million of investment securities with a weighted average yield of 6.7%, fund $8.5 million of loans with a weighted-average yield of 8.5% and increase cash levels by $11.7 million at the 5.3% Fed Funds effective rate. The investment securities purchased consisted of $12.1 million of student loan floating rate bonds, $5.4 million of corporate asset-backed securities and $3.6 million of agency CMOs. These securities were all classified as available-for-sale upon purchase. The purchased securities have a positive spread differential of approximately 430 basis points over the securities that were sold, which is anticipated to result in $262,000 of additional pre-tax earnings on an annualized basis. Additionally, increased annualized interest income on loans of $723,000 and cash of $623,000, resulting from the loans funded and increased cash levels, are anticipated to have a total impact on earnings of $1.6 million. The Company estimates that the $5.4 million loss on the sale of securities will be earned back in approximately 3.4 years. The effective duration of the securities sold was 4.0 years compared to 1.0 year for the securities purchased. Upon execution of the repositioning transaction, the Bank's regulatory capital levels remained in excess of those required to be categorized as "well-capitalized." This repositioning of the securities portfolio is projected to be accretive to earnings, net interest margin and return on assets in future periods and is designed to provide the Company with greater flexibility in managing balance sheet growth.

Also during the fourth quarter of 2023, the Company determined that Quil Ventures was no longer a going concern, as their business model was not showing results, making the collectability of the receivable from and investment in Quil Ventures unlikely. Management determined that the related investment of $225,000 and commitment receivable of $1.5 million should be written off during the fourth quarter of 2023, impacting other noninterest income and other noninterest expense, respectively.

Other one-time noninterest expenses recorded in the fourth quarter of 2023 included an accrual for a civil money penalty proposed by the FDIC of $718,000 and a write-off of investor accounting related items totaling $725,000. The FDIC has proposed assessing a civil money penalty in connection with the concerns raised by the consent order entered into by the Bank. The Bank is engaged in discussions with the FDIC about the proposed civil money penalty and, as a result, other noninterest expenses in the fourth quarter of 2023 includes an accrual for a potential assessment of a civil money penalty by the FDIC. Additionally, a one-time gain of $470,000 on the sale of 1,404 shares of Visa, Inc. Class B common stock was recorded in other noninterest income during the fourth quarter of 2023.

Net Interest Income
Total interest income increased $475,000 to $26.3 million for the fourth quarter of 2023, compared to $25.8 million in the previous quarter, and increased $2.7 million from $23.7 million in the fourth quarter of 2022. Interest income increased in the current quarter due to an increased volume of loans and higher yields on loans, investments and interest-earning deposits in banks. Interest and fees on loans increased year-over-year as First Fed's loan portfolio grew as a result of draws on new and existing lines of credit, originations of multi-family and commercial real estate loans, and auto and manufactured home loan purchases. The Northpointe Mortgage Purchase Program ("Northpointe MPP") participation also provided $504,000 of additional loan interest income. Loan yields increased over the prior year due to higher rates on new originations as well as the repricing of variable rate loans tied to the Prime Rate or other indices.

Total interest expense increased $1.2 million to $12.1 million for the fourth quarter of 2023, compared to $10.9 million in the third quarter of 2023, and increased $7.4 million from $4.7 million in the fourth quarter a year ago. Current quarter interest expense was higher due to a 27 basis point increase in the cost of deposits to 2.12% for the quarter ended December 31, 2023, from 1.85% for the prior quarter. The increase over the fourth quarter of 2022 was the result of a 150 basis point increase in the cost of deposits from 0.62% in the fourth quarter one year ago, along with higher volumes and rates paid on certificates of deposit ("CDs") and short-term FHLB advances. A shift in the deposit mix from transaction and money market accounts to savings accounts and CDs resulted in higher costs of deposits. Utilization of brokered CDs also contributed to additional deposit costs with a 257 basis point increase to 4.72% for the current quarter compared to 2.15% for the fourth quarter one year ago.

Net interest income before provision for credit losses for the fourth quarter of 2023 decreased $755,000, or 5.1%, to $14.2 million, compared to $15.0 million for the preceding quarter, and decreased $4.7 million, or 25.0%, from the fourth quarter one year ago.

The Company recorded a $1.2 million provision for credit losses in the fourth quarter of 2023, primarily from the provision for credit losses on loans due to additional charge-offs from the Splash unsecured consumer loan program and an increased loss factor applied to commercial real estate loans. The provision for credit losses on loans was partially offset by a provision recovery on unfunded commitments due to a decrease in volume at quarter end. This compares to a credit loss provision of $371,000 for the preceding quarter. A loan loss provision of $285,000 was recorded for the fourth quarter of 2022, which was estimated using the incurred loss method based on historical loss trends combined with qualitative adjustments that was used prior to 2023.

The net interest margin decreased to 2.84% for the fourth quarter of 2023, from 2.97% for the prior quarter, and decreased 112 basis points compared to 3.96% for the fourth quarter of 2022. Decreases from both the prior quarter and the same quarter one year ago are due to higher funding costs for both deposits and borrowed funds. New loan originations are priced to account for the increasing cost of funds. Organic loan production is augmented with higher-yielding purchased loans through established relationships with loan originators. The Bank's fair value hedging agreement increased quarter-over-quarter interest income by $166,000. We believe the sale and redeployment of investment securities discussed above will also provide an increase in future loan and investment income.

The yield on average earning assets for the fourth quarter of 2023 increased 13 basis points to 5.27% compared to the third quarter of 2023 and increased 32 basis points from 4.95% for the fourth quarter of 2022, primarily attributable to higher loan rates at origination and increased yields on variable-rate loans. The year-over-year increase was primarily due to higher average loan balances augmented by increases in yields, which were positively impacted by the rising rate environment and overall improvements in the mix of interest-earning assets.

The cost of average interest-bearing liabilities increased 27 basis points to 2.87% for the fourth quarter of 2023, compared to 2.60% for the third quarter of 2023, and increased 163 basis points from 1.24% for the fourth quarter of 2022. Total cost of funds increased to 2.48% for the fourth quarter of 2023 from 2.23% in the prior quarter and increased from 1.02% for the fourth quarter of 2022. Current quarter increases were due to higher costs on interest-bearing deposits and borrowings in addition to increases in average CD and borrowing balances.

The increase over the same quarter last year was driven by higher rates paid on deposits and borrowings and higher average CD balances. The Company attracted and retained funding through the use of promotional products and a focus on digital account acquisition. The mix of retail deposit balances shifted from no or low-cost transaction accounts towards higher cost term certificate and savings products. Retail CDs represented 30.2%, 27.6% and 17.3% of retail deposits at December 31, 2023, September 30, 2023 and December 31, 2022, respectively. Average interest-bearing deposit balances increased $1.3 million, or 0.1%, to $1.38 billion for the fourth quarter of 2023 compared to the third quarter of 2023 and increased $135.8 million, or 10.9%, compared to $1.24 billion for the fourth quarter of 2022.

Selected Yields		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Loan yield			5.38	%			5.31	%			5.38	%			5.16	%			5.22	%
Investment securities yield			4.53				4.18				4.09				3.93				3.71
Cost of interest-bearing deposits			2.52				2.22				1.87				1.37				0.78
Cost of total deposits			2.12				1.85				1.54				1.12				0.62
Cost of borrowed funds			4.50				4.45				4.36				3.92				3.30
Net interest spread			2.40				2.54				2.84				3.13				3.71
Net interest margin			2.84				2.97				3.25				3.46				3.96

Noninterest Income
Noninterest income decreased 200.9% to a loss of $2.9 million for the fourth quarter of 2023 compared to income of $2.9 million for the third quarter of 2023, primarily due to the $5.4 million loss on sale of securities recognized in the fourth quarter as the Company took steps to reposition the securities portfolio. Partially offsetting the investment securities loss was an increase in the valuation of servicing rights on sold loans of $178,000 and a one-time gain on sale of Visa, Inc. Class B common stock of $470,000 recorded in other income. An additional $200,000 of funds were recouped on Splash loan charge-offs in the current quarter compared to $750,000 recorded in other income in the preceding quarter. Noninterest income decreased 187.0% from $3.4 million in the same quarter one year ago, primarily due to the loss on sale of investment securities, partially offset by the gain on the sale of Visa Class B shares. Saleable mortgage loan production and related gains continued to be impacted by higher market rates on mortgage loans compared to the prior year.

Noninterest income declined $6.3 million to $4.0 million for the year ended December 31, 2023, compared to $10.3 million for the year ended December 31, 2022, mainly due to the loss on sale of securities in the fourth quarter of 2023.

Noninterest Income
$ in thousands		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Loan and deposit service fees		$	1,068			$	1,068			$	1,064				1,141			$	1,163
Sold loan servicing fees and servicing rights mark-to-market			276				98				(191	)			493				202
Net gain on sale of loans			33				171				58				176				55
Net (loss) gain on sale of investment securities			(5,397	)			—				—				—				—
Increase in cash surrender value of bank-owned life insurance			260				252				190				226				230
Income from death benefit on bank-owned life insurance, net			—				—				—				—				1,489
Other income			831				1,315				590				298				229
Total noninterest income		$	(2,929	)		$	2,904			$	1,711			$	2,334			$	3,368

Noninterest Expense
Noninterest expense totaled $17.0 million for the fourth quarter of 2023, compared to $14.4 million for the preceding quarter and $15.1 million for the fourth quarter a year ago. Increases in other expense were due to the $1.5 million Quil Ventures commitment receivable write-off, an accrual of $718,000 for a potential civil money penalty proposed by the FDIC and a write-off of investor accounting related items totaling $725,000. These other expenses were partially offset by decreases in incentive compensation of $748,000 and marketing expenses of $266,000. The increase in total noninterest expenses compared to the fourth quarter of 2022 reflects the one-time expenses recorded for the commitment receivable, proposed civil money penalty accrual and investor accounting write-off, as well as higher Bank professional fees and FDIC insurance premiums. The year-over-year increases were partially offset by a $287,000 reduction in expenses related to Quin data processing and other expenses, and decreases in Bank incentive compensation, medical premium expenses and marketing expenses. The Company continues to focus on controlling compensation expense and reducing advertising and other discretionary spending. We do not anticipate a recurrence of any of the one-time charges referred to previously.

Noninterest expense decreased 1.4% to $61.5 million for the year ended December 31, 2023, compared to $62.3 million for the year ended December 31, 2022. Compensation expense decreased $4.7 million for the year ended December 31, 2023, primarily due to a $1.5 million reduction related to Quin compensation and lower Bank salaries, commissions, payroll taxes and medical insurance expenses. Quin non-compensation expenses included for the year ended December 31, 2023, totaled $320,000 compared to $2.7 million in the year ended December 31, 2022.

Noninterest Expense
$ in thousands		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Compensation and benefits		$	7,397			$	7,795			$	7,837			$	8,357			$	8,357
Data processing			2,107				1,945				2,038				2,119				2,119
Occupancy and equipment			1,262				1,173				1,209				1,300				1,300
Supplies, postage, and telephone			351				292				355				333				333
Regulatory assessments and state taxes			376				446				389				372				372
Advertising			235				501				1,041				486				486
Professional fees			1,119				929				806				762				762
FDIC insurance premium			418				369				257				235				235
Other expense			3,725				926				939				1,179				1,179
Total noninterest expense		$	16,990			$	14,376			$	14,871			$	15,143			$	15,143
Efficiency ratio			150.81	%			80.52	%			86.01	%			79.78	%			67.91	%

Investment Securities
Investment securities decreased $13.7 million, or 4.4%, to $295.6 million at December 31, 2023, compared to $309.3 million three months earlier, and decreased $31.0 million compared to $326.6 million at December 31, 2022. The market value of the portfolio increased $18.0 million during the fourth quarter of 2023, primarily due to a $13.1 million improvement in unrealized losses driven by a decrease in long-term interest rates and $4.9 million of realized losses related to the securities sale. At December 31, 2023, municipal bonds totaled $87.8 million and comprised the largest portion of the investment portfolio at 29.7%. Non-agency issued mortgage-backed securities ("MBS non-agency") were the second largest segment, totaling $76.1 million, or 25.7%, of the portfolio at quarter end. Included in MBS non-agency are $39.2 million of commercial mortgaged-backed securities ("CMBS"), of which 94.9% are in "A" tranches and the remaining 5.1% are in "B" tranches. Our largest exposure is to long-term care facilities, which comprises 76.0%, or $29.8 million, of our private label CMBS securities. All of the CMBS bonds have credit enhancements ranging from 29% to 97%, with a weighted-average credit enhancement of 56%, that further reduce risk of loss on these investments.

The sale of investment securities during the fourth quarter of 2023 resulted in a shift in the investment mix from mortgage-backed securities, municipal bonds and U.S. Treasury notes toward more U.S. agency and corporate asset-backed securities.

The estimated average life of the securities portfolio was approximately 7.69 years, compared to 7.65 years in the prior quarter and 8.23 years in the fourth quarter of 2022. The effective duration of the portfolio was approximately 4.75 years at December 31, 2023, compared to 4.91 years in the prior quarter and 5.08 years at the end of the fourth quarter of 2022.

Investment Securities Available for Sale, at Fair Value
$ in thousands		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Municipal bonds		$	87,761			$	93,995			$	100,503			$	101,910			$	98,050
U.S. Treasury notes			—				2,377				2,364				2,390				2,364
International agency issued bonds (Agency bonds)			—				1,703				1,717				1,745				1,702
U.S. government agency issued asset-backed securities (ABS agency)			11,782				—				—				—				—
Corporate issued asset-backed securities (ABS corporate)			5,286				—				—				—				—
Corporate issued debt securities (Corporate debt):
Senior positions			9,270				16,975				16,934				17,025				16,828
Subordinated bank notes			42,184				37,360				36,740				38,092				38,671
Mortgage-backed securities:
U.S. government agency issued mortgage-backed securities (MBS agency)			63,247				66,946				71,565				74,946				75,648
Non-agency issued mortgage-backed securities (MBS non-agency)			76,093				89,968				92,140				92,978				93,306
Total securities available for sale, at fair value		$	295,623			$	309,324			$	321,963			$	329,086			$	326,569

Loans and Unfunded Loan Commitments
Net loans, excluding loans held for sale, increased $24.5 million, or 1.5%, to $1.64 billion at December 31, 2023, from $1.62 billion at September 30, 2023, and increased $111.1 million, or 7.3%, from $1.53 billion one year ago. Commercial business loans increased $10.9 million, primarily attributable to an increase in our Northpointe MPP participation from $162,000 three months prior to $9.5 million at the current quarter end, along with $5.3 million of organic originations partially offset by repayments. One-to-four family loans increased $8.5 million during the current quarter as a result of $13.9 million in residential construction loans that converted to permanent amortizing loans, partially offset by payments received. Multi-family loans increased $7.6 million during the current quarter. The increase was primarily the result of $6.0 million of construction loans converting into permanent amortizing loans, partially offset by scheduled payments. Commercial real estate loans increased $6.5 million during the current quarter compared to the previous quarter as originations exceeded payoffs and scheduled payments. Home equity loans increased $5.5 million over the previous quarter due to draws on new and existing commitments. Auto and other consumer loans increased $344,000 during the current quarter as originations exceeded payoffs and scheduled payments. Construction loans decreased $13.7 million during the quarter, with $19.9 million converting into fully amortizing loans, partially offset by draws on new and existing loans.

The Company originated $4.5 million in residential mortgages during the fourth quarter of 2023 and sold $4.2 million, with an average gross margin on sale of mortgage loans of approximately 2.01%. This production compares to residential mortgage originations of $8.3 million in the preceding quarter with sales of $9.7 million, and an average gross margin of 2.02%. Single-family home inventory remains historically low and higher market rates on mortgage loans continue to limit saleable mortgage loan production. New single-family residence construction loan commitments totaled $2.3 million in the fourth quarter, compared to $6.5 million in the preceding quarter.

Loans by Collateral and Unfunded Commitments
$ in thousands		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
One-to-four family construction		$	60,211			$	72,991			$	74,787			$	65,770			$	63,021
All other construction and land			69,484				71,092				81,968				95,769				130,588
One-to-four family first mortgage			426,159				409,207				428,879				394,595				384,255
One-to-four family junior liens			12,250				12,859				11,956				9,140				8,219
One-to-four family revolving open-end			42,479				38,413				33,658				30,473				29,909
Commercial real estate, owner occupied:
Health care			22,523				22,677				23,157				23,311				23,463
Office			18,468				18,599				18,797				22,246				22,583
Warehouse			14,758				14,890				15,158				16,782				20,411
Other			61,304				57,414				60,054				52,212				47,778
Commercial real estate, non-owner occupied:
Office			53,548				53,879				54,926				58,711				59,216
Retail			51,384				51,466				51,824				52,175				54,800
Hospitality			67,332				61,339				53,416				45,978				46,349
Other			94,822				96,083				90,870				93,207				89,047
Multi-family residential			333,428				325,338				296,398				284,699				252,765
Commercial business loans			76,920				75,068				80,079				80,825				73,963
Commercial agriculture and fishing loans			5,422				4,437				7,844				1,829				1,847
State and political subdivision obligations			405				439				439				439				439
Consumer automobile loans			132,877				134,695				137,860				136,540				136,213
Consumer loans secured by other assets			108,542				104,999				105,653				106,360				93,041
Consumer loans unsecured			7,712				9,093				10,437				8,403				9,644
Total loans		$	1,660,028			$	1,634,978			$	1,638,160			$	1,579,464			$	1,547,551
Unfunded loan commitments		$	149,631			$	154,722			$	168,668			$	202,720			$	225,836

Deposits
Total deposits increased $19.1 million to $1.68 billion at December 31, 2023, compared to $1.66 billion at September 30, 2023, and increased $112.6 million, or 7.2%, compared to $1.56 billion one year ago. Increases in brokered CDs of $38.0 million, consumer CDs of $27.1 million, public fund CDs of $3.3 million, business CDs of $2.9 million and business money market accounts of $2.4 million, were offset by decreases in consumer demand accounts of $17.3 million, consumer money market accounts of $12.9 million, business demand accounts of $12.6 million, business savings accounts of $6.5 million and consumer savings accounts of $4.5 million, during the fourth quarter of 2023. Decreases in demand and money market accounts were driven by customer behavior as they sought out higher rates offered in CDs. Deposits originated through digital channels, which are included in the deposits described above, increased $50.8 million, or 339.8%, year-over-year to $65.8 million at December 31, 2023, from $15.0 million at December 31, 2022. The current rate environment has contributed to greater competition for deposits with additional deposit rate specials offered to attract new funds.

The Company estimates that $363.7 million, or 22%, of total deposit balances were uninsured at December 31, 2023. Approximately $235.6 million, or 14%, of total deposits were uninsured business and consumer deposits with the remaining $128.1 million, or 8%, consisting of uninsured public funds. Uninsured public fund balances are fully collateralized. The Bank holds an FHLB letter of credit as part of our participation in the Washington Public Deposit Protection Commission program which covers $110.5 million of related deposit balances. The remaining $17.6 million is fully covered through pledged securities.

Consumer deposits make up 60% of total deposits with an average balance of $24,000 per account. Business deposits make up 20% of total deposits with an average balance of $47,000 per account. Public Fund deposits make up 8% of total deposits with an average balance of $1.5 million per account. We have maintained the majority of our public fund relationships for over 10 years. The remaining 12% of account balances are brokered CDs. Approximately 68% of our customer base is located in rural areas, with 20% in urban areas and the remaining 12% are brokered deposits.

Deposits
$ in thousands		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Noninterest-bearing demand deposits		$	252,083			$	269,800			$	280,475			$	292,119			$	315,083
Interest-bearing demand deposits			169,418				182,361				179,029				189,187				193,558
Money market accounts			362,205				372,706				374,269				402,760				473,009
Savings accounts			242,148				253,182				260,279				242,117				200,920
Certificates of deposit, retail			443,412				410,136				379,484				333,510				247,824
Total retail deposits			1,469,266				1,488,185				1,473,536				1,459,693				1,430,394
Certificates of deposit, brokered			207,626				169,577				179,586				134,515				133,861
Total deposits		$	1,676,892			$	1,657,762			$	1,653,122			$	1,594,208			$	1,564,255
Public fund and tribal deposits included in total deposits		$	132,652			$	128,627			$	130,974			$	119,969			$	103,662
Total loans to total deposits			99	%			99	%			99	%			99	%			99	%

Deposit Mix		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Noninterest-bearing demand deposits			15.0	%			16.3	%			17.0	%			18.3	%			20.1	%
Interest-bearing demand deposits			10.1				11.0				10.8				11.9				12.4
Money market accounts			21.6				22.5				22.6				25.3				30.3
Savings accounts			14.4				15.3				15.7				15.2				12.8
Certificates of deposit, retail			26.5				24.7				23.0				20.9				15.8
Certificates of deposit, brokered			12.4				10.2				10.9				8.4				8.6

Cost of Deposits for the Quarter Ended		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Interest-bearing demand deposits			0.45	%			0.46	%			0.45	%			0.42	%			0.17	%
Money market accounts			1.48				1.22				0.99				0.73				0.49
Savings accounts			1.54				1.42				1.22				0.70				0.17
Certificates of deposit, retail			3.92				3.52				3.25				2.59				1.65
Certificates of deposit, brokered			4.72				4.31				3.44				2.99				2.15
Cost of total deposits			2.12				1.85				1.54				1.12				0.62

Asset Quality
Nonperforming loans were $18.6 million at December 31, 2023, an increase of $16.3 million from September 30, 2023, primarily attributable to a $15.0 million commercial construction loan placed on nonaccrual due to continued credit concerns, $877,000 of commercial business loans and a newly delinquent single-family residential loan. The percentage of the allowance for credit losses on loans to nonperforming loans decreased to 94% at December 31, 2023, from 714% at September 30, 2023, and from 900% at December 31, 2022. Classified loans increased $12.2 million to $35.1 million at December 31, 2023, due to the downgrade of a commercial loan relationship totaling $9.3 million involving several commercial real estate and business loans along with downgrades of a $3.6 million Small Business Administration loan and a $104,000 commercial business loan during the fourth quarter. The $15.0 million construction loan, which became a classified loan in the fourth quarter of 2022, and the $9.3 million commercial loan relationship account for 69% of the classified loan balance at December 31, 2023. The Bank is actively working with these borrowers to ensure the best possible outcome on these loans, including the potential sale of the underlying collateral to satisfy the real estate loans.

The allowance for credit losses on loans as a percentage of total loans was 1.05% at December 31, 2023, increasing from 1.04% at both the prior quarter end and one year earlier. The current quarter increase can be attributed to higher loan balances offset by changes in the loan mix with a shift in balances to amortizing loans, which carry lower reserve estimates.

$ in thousands		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Allowance for credit losses on loans to total loans			1.05	%			1.04	%			1.06	%			1.10	%			1.04	%
Allowance for credit losses on loans to nonperforming loans			94				714				677				661				900
Nonperforming loans to total loans			1.12				0.15				0.16				0.17				0.12
Net charge-off ratio (annualized)			0.14				0.30				0.10				0.25				0.11
Total nonperforming loans		$	18,644			$	2,374			$	2,554			$	2,633			$	1,790
Reserve for unfunded commitments		$	817			$	828			$	1,336			$	1,336			$	325

Capital
Total shareholders’ equity increased to $163.3 million at December 31, 2023, compared to $156.1 million three months earlier, due to an increase in the fair market value of the available-for-sale investment securities portfolio, net of taxes, of $14.1 million, partially offset by a net loss of $5.5 million, a $1.2 million decrease in the after-tax fair market value of derivatives, dividends declared of $673,000 and share repurchases totaling $158,000.

Tangible book value per common share* was $16.83 at December 31, 2023, compared to $16.03 at September 30, 2023, and $16.13 at December 31, 2022. Book value per common share was $16.99 at December 31, 2023, compared to $16.20 at September 30, 2023, and $16.31 at December 31, 2022.

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 December 31, 2023. Common Equity Tier 1 and Total Risk-Based Capital Ratios at December 31, 2023, were 13.1% and 14.1%, respectively.

		4Q 23				3Q 23				2Q 23				1Q 23				4Q 22
Equity to total assets			7.42	%			7.25	%			7.38	%			7.38	%			7.75	%
Tangible common equity ratio *			7.35				7.17				7.31				7.30				7.67
Capital ratios (First Fed Bank):
Tier 1 leverage			9.90				10.12				10.16				10.41				10.41
Common equity Tier 1 capital			13.12				13.43				13.10				13.34				13.40
Tier 1 risk-based			13.12				13.43				13.10				13.34				13.40
Total risk-based			14.11				14.38				14.08				14.35				14.42

Share Repurchase Program and Cash Dividend
First Northwest continued to return capital to our shareholders through cash dividends and share repurchases during the fourth quarter of 2023. We repurchased 12,205 shares of common stock under the Company's October 2020 stock repurchase plan at an average price of $12.90 per share for a total of $158,000 during the quarter ended December 31, 2023, leaving 214,132 shares remaining under the plan. In addition, the Company paid cash dividends totaling $672,000 in the fourth quarter of 2023.

__________________
^* See reconciliation of Non-GAAP Financial Measures later in this release.

Awards/Recognition

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

In October 2023, the First Fed team was honored to bring home the Gold for Best Bank in the Best of the Northwest survey hosted by Bellingham Alive for the second year in a row.

In September 2023, the First Fed team was recognized in the 2023 Best of Olympic Peninsula surveys, winning Best Bank and Best Financial Advisor in Clallam County. First Fed was also a finalist for Best Bank in Jefferson County, Best Employer in Kitsap County and Best Bank and Best Financial Institution in Bainbridge.

In June 2023, 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 for two years in row by each company’s own employees.

In May 2023, 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 last year. First Fed was ranked #1 in the medium-sized company category in 2023 and was ranked #3 in the same category in 2022.

In March 2023, First Fed won “Best Bank” in Cascadia Daily News 2023 Readers' Choice. It was the first year that First Fed had participated in this Whatcom County poll.

First Fed has been rated a 5-star bank by Bauer Financial, a leading independent bank and credit union rating and research firm. This top rating indicates that First Fed is one of the strongest banks in the nation based on capital, loan quality and other detailed performance criteria.

About the Company
First Northwest Bancorp (Nasdaq: FNWB) is a financial holding company engaged in investment activities including the business of its subsidiary, First Fed Bank. First Fed is a Pacific Northwest-based financial institution which has served its customers and communities since 1923. Currently First Fed has 16 locations in Washington state including 12 full-service branches. First Fed’s business and operating strategy is focused on building sustainable earnings by delivering a full array of financial products and services for individuals, small businesses, non-profit organizations and commercial customers. In 2022, First Northwest made an investment in The Meriwether Group, LLC, a boutique investment banking and accelerator firm. Additionally, First Northwest focuses on strategic partnerships to provide modern financial services such as digital payments and marketplace lending. First Northwest Bancorp was incorporated in 2012 and completed its initial public offering in 2015 under the ticker symbol FNWB. The Company is headquartered in Port Angeles, Washington.

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 of factors including, but not limited to: increased competitive pressures; changes in the interest rate environment; the credit risks of lending activities; pressures on liquidity, including as a result of withdrawals of deposits or declines in the value of our investment portfolio; 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 2024 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.

For More Information Contact:
Matthew P. Deines, President and Chief Executive Officer
Geri Bullard, EVP, Chief Financial Officer and Chief Operating Officer
IRGroup@ourfirstfed.com
360-457-0461

FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) (Unaudited)
		December 31, 2023				September 30, 2023				December 31, 2022				Three Month Change				One Year Change
ASSETS
Cash and due from banks		$	19,845			$	20,609			$	17,104				-3.7	%			16.0	%
Interest-earning deposits in banks			103,324				63,277				28,492				63.3				262.6
Investment securities available for sale, at fair value			295,623				309,324				326,569				-4.4				-9.5
Loans held for sale			753				689				597				9.3				26.1
Loans receivable (net of allowance for credit losses on loans $17,510, $16,945, and $16,116)			1,642,518				1,618,033				1,531,435				1.5				7.3
Federal Home Loan Bank (FHLB) stock, at cost			13,664				12,621				11,681				8.3				17.0
Accrued interest receivable			7,894				8,093				6,743				-2.5				17.1
Premises and equipment, net			18,049				17,954				18,089				0.5				-0.2
Servicing rights on sold loans, at fair value			3,793				3,729				3,887				1.7				-2.4
Bank-owned life insurance, net			40,578				40,318				39,665				0.6				2.3
Equity and partnership investments			14,794				14,623				14,289				1.2				3.5
Goodwill and other intangible assets, net			1,086				1,087				1,089				-0.1				-0.3
Deferred tax asset, net			13,001				16,611				14,091				-21.7				-7.7
Prepaid expenses and other assets			26,875				26,577				28,339				1.1				-5.2
Total assets		$	2,201,797			$	2,153,545			$	2,042,070				2.2	%			7.8	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits		$	1,676,892			$	1,657,762			$	1,564,255				1.2	%			7.2	%
Borrowings			320,936				300,416				285,358				6.8				12.5
Accrued interest payable			3,396				2,276				455				49.2				646.4
Accrued expenses and other liabilities			35,973				34,651				32,344				3.8				11.2
Advances from borrowers for taxes and insurance			1,260				2,375				1,376				-46.9				-8.4
Total liabilities			2,038,457				1,997,480				1,883,788				2.1				8.2
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 9,611,876 at December 31, 2023; issued and outstanding 9,630,735 at September 30, 2023; and issued and outstanding 9,703,581 at December 31, 2022			96				96				97				0.0				-1.0
Additional paid-in capital			95,784				95,658				95,508				0.1				0.3
Retained earnings			107,349				113,579				114,424				-5.5				-6.2
Accumulated other comprehensive loss, net of tax			(32,636	)			(45,850	)			(40,543	)			28.8				19.5
Unearned employee stock ownership plan (ESOP) shares			(7,253	)			(7,418	)			(7,913	)			2.2				8.3
Total parent's shareholders' equity			163,340				156,065				161,573				4.7				1.1
Noncontrolling interest in Quin Ventures, Inc.			—				—				(3,291	)			n/a				100.0
Total shareholders' equity			163,340				156,065				158,282				4.7				3.2
Total liabilities and shareholders' equity		$	2,201,797			$	2,153,545			$	2,042,070				2.2	%			7.8	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data) (Unaudited)
		Quarter Ended
		December 31, 2023				September 30, 2023				December 31, 2022				Three Month Change				One Year Change
INTEREST INCOME
Interest and fees on loans receivable		$	22,083			$	21,728			$	20,240				1.6	%			9.1	%
Interest on investment securities			3,393				3,368				3,059				0.7				10.9
Interest on deposits in banks			581				524				173				10.9				235.8
FHLB dividends			252				214				189				17.8				33.3
Total interest income			26,309				25,834				23,661				1.8				11.2
INTEREST EXPENSE
Deposits			8,758				7,699				2,434				13.8				259.8
Borrowings			3,356				3,185				2,297				5.4				46.1
Total interest expense			12,114				10,884				4,731				11.3				156.1
Net interest income			14,195				14,950				18,930				-5.1				-25.0
PROVISION FOR CREDIT LOSSES
Provision for credit losses on loans			1,162				880				285				32.0				307.7
Recapture of provision for credit losses on unfunded commitments			(10	)			(509	)			—				98.0				100.0
Provision for credit losses			1,152				371				285				210.5				304.2
Net interest income after provision for credit losses			13,043				14,579				18,645				-10.5				-30.0
NONINTEREST INCOME
Loan and deposit service fees			1,068				1,068				1,163				0.0				-8.2
Sold loan servicing fees and servicing rights mark-to-market			276				98				202				181.6				36.6
Net gain on sale of loans			33				171				55				-80.7				-40.0
Net (loss) gain on sale of investment securities			(5,397	)			—				—				100.0				100.0
Increase in cash surrender value of bank-owned life insurance			260				252				230				3.2				13.0
Income from death benefit on bank-owned life insurance, net			—				—				1,489				n/a				-100.0
Other income			831				1,315				229				-36.8				262.9
Total noninterest income			(2,929	)			2,904				3,368				-200.9				-187.0
NONINTEREST EXPENSE
Compensation and benefits			7,397				7,795				8,357				-5.1				-11.5
Data processing			2,107				1,945				2,119				8.3				-0.6
Occupancy and equipment			1,262				1,173				1,300				7.6				-2.9
Supplies, postage, and telephone			351				292				333				20.2				5.4
Regulatory assessments and state taxes			376				446				372				-15.7				1.1
Advertising			235				501				486				-53.1				-51.6
Professional fees			1,119				929				762				20.5				46.9
FDIC insurance premium			418				369				235				13.3				77.9
Other expense			3,725				926				1,179				302.3				215.9
Total noninterest expense			16,990				14,376				15,143				18.2				12.2
Income before (benefit) provision for income taxes			(6,876	)			3,107				6,870				-321.3				-200.1
(Benefit) provision for income taxes			(1,354	)			603				1,008				-324.5				-234.3
Net (loss) income			(5,522	)			2,504				5,862				-320.5				-194.2
Net loss attributable to noncontrolling interest in Quin Ventures, Inc.			—				—				198				n/a				-100.0
Net (loss) income attributable to parent		$	(5,522	)		$	2,504			$	6,060				-320.5	%			-191.1	%
Basic and diluted (loss) earnings per common share		$	(0.62	)		$	0.28			$	0.66				-321.4	%			-193.9	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited)
		Year Ended December 31,								Percent
		2023				2022				Change
INTEREST INCOME
Interest and fees on loans receivable		$	84,614			$	68,635				23.3	%
Interest on investment securities			13,279				10,866				22.2
Interest on deposits in banks			2,126				375				466.9
FHLB dividends			880				502				75.3
Total interest income			100,899				80,378				25.5
INTEREST EXPENSE
Deposits			27,019				5,198				419.8
Borrowings			12,448				5,317				134.1
Total interest expense			39,467				10,515				275.3
Net interest income			61,432				69,863				-12.1
PROVISION FOR CREDIT LOSSES
Provision for credit losses on loans			2,357				1,535				53.6
(Recapture of) provision for credit losses on unfunded commitments			(1,034	)			0				100.0
Provision for credit losses			1,323				1,535				-13.8
Net interest income after provision for credit losses			60,109				68,328				-12.0
NONINTEREST INCOME
Loan and deposit service fees			4,341				4,729				-8.2
Sold loan servicing fees and servicing rights mark-to-market			676				867				-22.0
Net gain on sale of loans			438				824				-46.8
Net (loss) gain on sale of investment securities			(5,397	)			118				-4,673.7
Increase in cash surrender value of bank-owned life insurance			928				916				1.3
Income from death benefit on bank-owned life insurance, net			—				1,489				-100.0
Other income			3,034				1,384				119.2
Total noninterest income			4,020				10,327				-61.1
NONINTEREST EXPENSE
Compensation and benefits			31,209				35,940				-13.2
Data processing			8,170				7,539				8.4
Occupancy and equipment			4,858				5,398				-10.0
Supplies, postage, and telephone			1,433				1,376				4.1
Regulatory assessments and state taxes			1,635				1,539				6.2
Advertising			2,706				3,288				-17.7
Professional fees			3,738				2,645				41.3
FDIC insurance premium			1,357				888				52.8
Other			6,348				3,699				71.6
Total noninterest expense			61,454				62,312				-1.4
Income before provision for income taxes			2,675				16,343				-83.6
Provision for income taxes			549				2,847				-80.7
Net income			2,126				13,496				-84.2
Net loss attributable to noncontrolling interest in Quin Ventures, Inc.			160				2,149				-92.6
Net income attributable to parent		$	2,286			$	15,645				-85.4	%
Basic and diluted earnings per common share		$	0.26			$	1.71				-84.8	%

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
		December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Performance ratios: (1)
Return on average assets			-1.03	%			0.46	%			0.34	%			0.70	%			1.18	%
Return on average equity			-14.05				6.17				4.41				8.98				15.26
Average interest rate spread			2.40				2.54				2.84				3.14				3.72
Net interest margin (2)			2.84				2.97				3.25				3.46				3.96
Efficiency ratio (3)			150.8				80.5				86.0				79.8				67.9
Equity to total assets			7.42				7.25				7.38				7.38				7.75
Average interest-earning assets to average interest-bearing liabilities			118.2				120.0				120.7				122.4				124.8
Book value per common share		$	16.99			$	16.20			$	16.56			$	16.57			$	16.31
Tangible performance ratios:
Tangible assets (4)		$	2,200,230			$	2,151,849			$	2,161,235			$	2,170,202			$	2,040,267
Tangible common equity (4)			161,773				154,369				157,914				158,444				156,479
Tangible common equity ratio (4)			7.35	%			7.17	%			7.31	%			7.30	%			7.67	%
Return on tangible common equity (4)			-14.20				6.23				4.47				9.08				15.45
Tangible book value per common share (4)		$	16.83			$	16.03			$	16.39			$	16.38			$	16.13
Asset quality ratios:
Nonperforming assets to total assets at end of period (5)			0.85	%			0.11	%			0.12	%			0.12	%			0.09	%
Nonperforming loans to total loans (6)			1.12				0.15				0.16				0.17				0.12
Allowance for credit losses on loans to nonperforming loans (6)			93.92				713.77				677.25				660.69				900.34
Allowance for credit losses on loans to total loans			1.05				1.04				1.06				1.10				1.04
Annualized net charge-offs to average outstanding loans			0.14				0.30				0.10				0.25				0.11
Capital ratios (First Fed Bank):
Tier 1 leverage			9.9	%			10.1	%			10.2	%			10.4	%			10.4	%
Common equity Tier 1 capital			13.1				13.4				13.1				13.3				13.4
Tier 1 risk-based			13.1				13.4				13.1				13.3				13.4
Total risk-based			14.1				14.4				14.1				14.4				14.4
Other Information:
Average total assets		$	2,127,655			$	2,139,734			$	2,118,014			$	2,050,210			$	2,039,016
Average total loans			1,645,418				1,641,206				1,605,133				1,552,299				1,554,276
Average interest-earning assets			1,980,226				1,994,251				1,975,384				1,909,271				1,895,799
Average noninterest-bearing deposits			259,845				276,294				282,514				294,235				326,450
Average interest-bearing deposits			1,379,059				1,377,734				1,333,943				1,288,429				1,243,185
Average interest-bearing liabilities			1,675,044				1,661,996				1,636,188				1,559,983				1,519,106
Average equity			155,971				160,994				161,387				159,319				157,590
Average common shares -- basic			8,928,620				8,906,526				8,914,355				8,911,294				9,069,493
Average common shares -- diluted			8,968,828				8,934,882				8,931,386				8,939,601				9,106,453

(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	)	See reconciliation of Non-GAAP Financial Measures later in this release.
(5	)	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.
(6	)	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)
		As of or For the Year Ended December 31,
		2023				2022
Performance ratios: (1)
Return on average assets			0.11	%			0.79	%
Return on average equity			1.43				9.09
Average interest rate spread			2.71				3.63
Net interest margin (2)			3.13				3.79
Efficiency ratio (3)			93.9				77.7
Equity to total assets			7.42				7.75
Average interest-earning assets to average interest-bearing liabilities			120.3				128.8
Book value per common share		$	16.99			$	16.31
Tangible performance ratios:
Tangible assets (4)		$	2,200,230			$	2,040,267
Tangible common equity (4)			161,773				156,479
Tangible common equity ratio (4)			7.35	%			7.67	%
Return on tangible common equity (4)			1.45				9.21
Tangible book value per common share (4)		$	16.83			$	16.13
Asset quality ratios:
Nonperforming assets to total assets at end of period (5)			0.85	%			0.09	%
Nonperforming loans to total loans (6)			1.12				0.12
Allowance for credit losses on loans to nonperforming loans (6)			93.92				900.34
Allowance for credit losses on loans to total loans			1.05				1.04
Annualized net charge-offs to average outstanding loans			0.20				0.03
Capital ratios (First Fed Bank):
Tier 1 leverage			9.9	%			10.4	%
Common equity Tier 1 capital			13.1				13.4
Tier 1 risk-based			13.1				13.4
Total risk-based			14.1				14.4
Other Information:
Average total assets		$	2,109,200			$	1,975,233
Average total loans			1,611,352				1,464,448
Average interest-earning assets			1,965,059				1,842,645
Average noninterest-bearing deposits			278,123				335,646
Average interest-bearing deposits			1,345,130				1,228,286
Average interest-bearing liabilities			1,633,697				1,430,796
Average equity			159,413				172,125
Average common shares -- basic			8,918,284				9,082,032
Average common shares -- diluted			8,941,180				9,143,615

(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	)	See reconciliation of Non-GAAP Financial Measures later in this release.
(5	)	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.
(6	)	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:
		December 31, 2023				September 30, 2023				December 31, 2022				Three Month Change				One Year Change
		(In thousands)
Commercial business loans breakout
PPP loans		$	32			$	45			$	86			$	(13	)		$	(54	)
Northpointe Bank MPP			9,502				162				—				9,340				9,502
Secured lines of credit			35,815				35,833				15,279				(18	)			20,536
Unsecured lines of credit			456				919				1,276				(463	)			(820	)
SBA loans			9,115				9,149				8,056				(34	)			1,059
Other commercial business loans			57,375				55,272				52,230				2,103				5,145
Total commercial business loans		$	112,295			$	101,380			$	76,927			$	10,915			$	35,368
Auto and other consumer loans breakout
Triad Manufactured Home loans		$	93,591			$	90,230			$	89,011			$	3,361			$	4,580
Woodside auto loans			124,401				124,833				122,961				(432	)			1,440
First Help auto loans			4,516				5,079				5,084				(563	)			(568	)
Other auto loans			4,158				5,022				8,182				(864	)			(4,024	)
Other consumer loans			22,464				23,622				13,675				(1,158	)			8,789
Total auto and other consumer loans		$	249,130			$	248,786			$	238,913			$	344			$	10,217
Construction and land loans breakout
1-4 Family construction		$	51,737			$	63,371			$	77,138			$	(11,634	)		$	(25,401	)
Multifamily construction			50,431				54,318				76,345				(3,887	)			(25,914	)
Acquisition-renovation			—				—				19,247				—				(19,247	)
Nonresidential construction			20,049				18,746				9,218				1,303				10,831
Land and development			7,474				6,999				11,698				475				(4,224	)
Total construction and land loans		$	129,691			$	143,434			$	193,646			$	(13,743	)		$	(63,955	)

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

Non-GAAP Financial Measures
This press release contains financial measures that are not defined in generally accepted accounting principles ("GAAP"). Non-GAAP measures are presented where management believes the information will help investors understand the Company’s results of operations or financial position and assess trends. Where non-GAAP financial measures are used, the comparable GAAP financial measure is also provided. 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.

Calculation of Total Revenue:

		December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
		(Dollars in thousands)
Net interest income		$	14,195			$	14,950			$	15,982			$	16,305			$	18,930
Noninterest income			(2,929	)			2,904				1,711				2,334				3,368
Total revenue, net of interest expense		$	11,266			$	17,854			$	17,693			$	18,639			$	22,298

(1)  We believe this non-GAAP metric provides an important measure with which to analyze and evaluate income available for noninterest expenses.

Calculations Based on Tangible Common Equity:

		December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
		(Dollars in thousands, except per share data)
Total shareholders' equity		$	163,340			$	156,065			$	159,557			$	160,336			$	158,282
Less: Goodwill and other intangible assets			1,086				1,087				1,087				1,088				1,089
Disallowed non-mortgage loan servicing rights			481				609				556				804				714
Total tangible common equity		$	161,773			$	154,369			$	157,914			$	158,444			$	156,479
Total assets		$	2,201,797			$	2,153,545			$	2,162,878			$	2,172,094			$	2,042,070
Less: Goodwill and other intangible assets			1,086				1,087				1,087				1,088				1,089
Disallowed non-mortgage loan servicing rights			481				609				556				804				714
Total tangible assets		$	2,200,230			$	2,151,849			$	2,161,235			$	2,170,202			$	2,040,267
Average shareholders' equity		$	155,971			$	160,994			$	161,387			$	159,319			$	157,590
Less: Average goodwill and other intangible assets			1,086				1,087				1,088				1,089				1,171
Average disallowed non-mortgage loan servicing rights			608				557				801				715				813
Total average tangible common equity		$	154,277			$	159,350			$	159,498			$	157,515			$	155,606
Tangible common equity ratio (1)			7.35	%			7.17	%			7.31	%			7.30	%			7.67	%
Net (loss) income		$	(5,522	)		$	2,504			$	1,776			$	3,528			$	6,060
Return on tangible common equity (1)			-14.20	%			6.23	%			4.47	%			9.08	%			15.45	%
Common shares outstanding			9,611,876				9,630,735				9,633,496				9,674,055				9,703,581
Tangible book value per common share (1)		$	16.83			$	16.03			$	16.39			$	16.38			$	16.13
GAAP Ratios:
Equity to total assets			7.42	%			7.25	%			7.38	%			7.38	%			7.75	%
Return on average equity			-14.05	%			6.17	%			4.41	%			8.98	%			15.26	%
Book value per common share		$	16.99			$	16.20			$	16.56			$	16.57			$	16.31

(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.

FIRST NORTHWEST BANCORP AND SUBSIDIARY ADDITIONAL INFORMATION (Dollars in thousands) (Unaudited)
		December 31, 2023				December 31, 2022
		(Dollars in thousands, except per share data)
Total shareholders' equity		$	163,340			$	158,282
Less: Goodwill and other intangible assets			1,086				1,089
Disallowed non-mortgage loan servicing rights			481				714
Total tangible common equity		$	161,773			$	156,479
Total assets		$	2,201,797			$	2,042,070
Less: Goodwill and other intangible assets			1,086				1,089
Disallowed non-mortgage loan servicing rights			481				714
Total tangible assets		$	2,200,230			$	2,040,267
Average shareholders' equity		$	159,413			$	172,125
Less: Average goodwill and other intangible assets			1,087				1,179
Average disallowed non-mortgage loan servicing rights			670				1,026
Total average tangible common equity		$	157,656			$	169,920
Tangible common equity ratio (1)			7.35	%			7.67	%
Net income		$	2,286			$	15,645
Return on tangible common equity (1)			1.45	%			9.21	%
Common shares outstanding			9,611,876				9,703,581
Tangible book value per common share (1)		$	16.83			$	16.13
GAAP Ratios:
Equity to total assets			7.42	%			7.75	%
Return on average equity			1.43	%			9.09	%
Book value per common share		$	16.99			$	16.31

(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.