8-K - FNWB - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 28, 2021

FIRST NORTHWEST BANCORP

(Exact name of registrant as specified in its charter)

Washington	001-36741	46-1259100
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
105 West 8th Street , Port Angeles, Washington	98362
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(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (360) 457-0461

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol(s):	Name of each exchange on which registered:
Common Stock, par value $0.01 per share	FNWB	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02	Results of Operations and Financial Condition

On April 28, 2021, First Northwest Bancorp issued an earnings release for the quarter ended March 31, 2021. A copy of the earnings release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 8.01	Other Events

On April 28, 2021, First Northwest Bancorp announced in its earnings release that its Board of Directors has declared a quarterly cash dividend of $0.06 per share of common stock, payable on May 26, 2021, to shareholders of record as of the close of business on May 12, 2021.

Item 9.01 Financial Statements and Exhibits
(d) Exhibit.	The following exhibit is furnished with this Form 8-K.
Exhibit No.	Description
99.1	Press Release dated April 28, 2021
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		FIRST NORTHWEST BANCORP
Date:	April 29, 2021	/s/Matthew P. Deines
		Matthew P. Deines
		President and Chief Executive Officer

ex_244674.htm

Exhibit 99.1

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

First Northwest Bancorp Earns $3.1 Million, or $0.34 Per Diluted Share, in First Quarter 2021;

Highlighted by Net Interest Margin Expansion and Strong Asset Quality;

Declares Quarterly Cash Dividend of $0.06 Per Share

Port Angeles, WA, (April 28, 2021) -- First Northwest Bancorp (Nasdaq: FNWB) (“Company”), the holding company for First Federal Savings and Loan Association of Port Angeles (“Bank” or "First Fed"), today reported that net income increased 257.6% to $3.1 million, or $0.34 per diluted share, for the first quarter of 2021, compared to $873,000, or $0.09 per diluted share, for the first quarter a year ago, and decreased compared to net income of $3.8 million, or $0.41 per diluted share, for the fourth quarter of 2020. First quarter results reflected strong year-over-year revenue growth, core deposit growth and net interest margin expansion. The decrease from the prior period was primarily due to lower gains on sale of one-to-four family mortgages and available for sale investments, partially offset by increased net interest income and a lower provision for loan losses. The Company also announced that its Board of Directors declared a regular quarterly cash dividend of $0.06 per common share outstanding, payable on May 28, 2021 to shareholders of record as of the close of business on May 14, 2021.

“First Northwest Bancorp’s first quarter operating results were highlighted by strong revenue generation fueled by solid net interest income and core deposit growth,” stated Matthew P. Deines, President and CEO. “Despite ongoing pressures on loan and investment yields, net interest income increased $4.1 million, or 43.3%, over the first quarter of 2020, boosted by growth in earning assets, $362,000 in Paycheck Protection Program (“PPP”) income and a significant decline in cost of funds. We continue to generate organic commercial and consumer activity as we support our communities through an emerging recovery.”

“We are actively participating in the SBA’s current round of PPP funding that began in January 2021 and concludes at the end of May,” said Deines. “This round of SBA funding offers PPP loans for companies that did not receive a PPP loan in 2020, and also “second draw” loans targeted at hard-hit businesses that have already used their initial PPP proceeds. We funded $32.4 million in second round PPP loans during the first quarter of 2021.”

First Quarter 2021 Highlights (at or for the quarter ended March 31, 2021)

•	First quarter net income was $3.1 million, compared to $3.8 million in the preceding quarter and $873,000 in the year ago quarter.
•	Diluted earnings per share was $0.34, compared to $0.41 per share in the preceding quarter and $0.09 per share in the first quarter a year ago.
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•	Provision for loan losses was $500,000 in the first quarter, compared to $930,000 in the fourth quarter of 2020 and $1.3 million in the first quarter of 2020.
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•	Loans receivable increased 1.3% to $1.16 billion at March 31, 2021, compared to $1.14 billion at December 31, 2020, and increased 28.6% compared to $899.2 million a year ago, primarily due to growth in commercial real estate and commercial business loans, including PPP loans.
•	Deposits increased 7.6% during the quarter and increased 34.9% from one year prior, to $1.43 billion at March 31, 2021, due to successful organic and wholesale deposit-gathering strategies, including significant growth in noninterest-bearing deposits, which increased 76.8% in the last twelve months. Deposit balances benefitted from a second round of PPP and additional Federal stimulus payments during the quarter.
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•	The cost of deposits for the first quarter decreased to 0.27% from 0.33% for fourth quarter 2020 and 0.85% in the first quarter of 2020.
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•	Gain on sale of mortgage loans was $1.3 million for the first quarter compared to $2.3 million in the previous quarter and $383,000 in the first quarter of 2020, reflecting a modest slowdown in activity from the fourth quarter of 2020 and strong year-over-year quarterly mortgage originations, including refinance activity.
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•	During the first quarter, the Company repurchased 135,837 shares of common stock at an average price of $15.89 per share for a total of $2.2 million, leaving 872,030 shares remaining under the 2020 Stock Repurchase Plan approved in October 2020.
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Recent Developments

On March 22, 2021 the Company announced that First Fed has entered into an agreement with Sterling Bank and Trust of Southfield, Michigan to purchase its Bellevue, Washington branch, subject to applicable regulatory approvals and other customary closing conditions. The agreement includes the purchase of approximately $77.7 million in deposits as of the announcement date. First Fed expects to close the transaction by the end of the second quarter of 2021.

On April 16, 2021, the Company issued 29,719 shares of the Company’s common stock under the terms of an Amended and Restated Joint Venture Agreement dated April 15, 2021 (the “Joint Venture Agreement”) with the Bank, POM Peace of Mind, Inc. (“POM”), and Quin Ventures, Inc. (“Quin”). The shares were issued to POM and had a value of approximately $500,000. Under the Joint Venture Agreement, the Company and POM have established Quin to develop a digital financial wellness platform that will offer personal financial services to the general public. Under a related Marketing and Banking Services Agreement, Quin will promote the services offered through the digital financial wellness platform and the Bank will provide banking services to the customers who utilize the platform. The Marketing and Banking Services Agreement sets forth the terms governing the parties’ commercial and economic commitments and responsibilities, including the fees to be paid by the Bank to fund the costs of acquiring customers and the distribution of interchange fees. The Company has also committed to extend $15.0 million to Quin under a capital financing agreement and related promissory note.

Balance Sheet Review

Total assets increased $81.9 million, or 5.0%, to $1.74 billion at March 31, 2021, compared to $1.65 billion at December 31, 2020, and increased $339.4 million, or 24.3%, compared to $1.40 billion at March 31, 2020.

Cash and cash equivalents increased by $34.1 million, or 52.4%, to $99.3 million as of March 31, 2021, compared to $65.2 million as of December 31, 2020, as the result of gross proceeds of $40.0 million from the issuance of subordinated debt as well an increase in deposits of $101.3 million offset by increases to investment securities and loans receivable.

Investment securities increased $29.2 million to $393.5 million at March 31, 2021, compared to $364.3 million three months earlier, and increased $76.0 million compared to $317.5 million at March 31, 2020. At March 31, 2021, municipal bonds totaled $132.5 million and comprised the largest portion of the investment portfolio at 33.7%. The estimated average life of the total investment securities portfolio was 7.5 years, and the average repricing term was approximately 5.3 years.

“We continue to utilize the investment portfolio as a means to generate additional interest income,” said Geri Bullard, EVP/Chief Financial Officer. “We began adding to the investment portfolio a year ago as credit spreads widened, to deploy excess cash and prudently manage the balance sheet.”

Securities consisted of the following at the dates indicated**:**

	March 31, 2021		December 31, 2020		March 31, 2020		Three Month Change			One Year Change
	(In thousands)
Available for Sale at Fair Value	****	****	****	****	****	****	****	****	****	****	****	****
Municipal bonds	$	132,492	$	127,862	$	52,254	$	4,630		$	80,238
U.S. government and agency issued bonds (Agency bonds)		1,913		—		—		1,913			1,913
U.S. government agency issued asset-backed securities (ABS agency)		65,910		63,820		42,125		2,090			23,785
Corporate issued asset-backed securities (ABS corporate)		17,505		29,280		34,073		(11,775	)		(16,568	)
Corporate issued debt securities (Corporate debt)		43,890		35,510		9,439		8,380			34,451
U.S. Small Business Administration securities (SBA)		17,566		18,564		25,363		(998	)		(7,797	)
Mortgage-backed securities:
U.S. government agency issued mortgage-backed securities (MBS agency)		74,016		62,683		145,139		11,333			(71,123	)
Corporate issued mortgage-backed securities (MBS corporate)		40,203		26,577		9,127		13,626			31,076
Total securities available for sale	$	393,495	$	364,296	$	317,520	$	29,199		$	75,975

Net loans, excluding loans held for sale, increased $14.5 million, or 1.3%, to $1.16 billion at March 31, 2021, from $1.14 billion at December 31, 2020, and increased $257.3 million, or 28.6%, from $899.2 million a year ago. “Our lending team did an excellent job growing the loan portfolio despite a competitive operating environment, with total loans increasing 28.6% over the last twelve months,” said Randy Riffle, EVP/Chief Lending Officer. “Additionally, new PPP loan production from the SBA’s latest round contributed meaningfully to loan production, with $32.4 million in new PPP loans funded during the first quarter.” Commercial business loans decreased $17.2 million during the quarter as the result of a decrease of $41.6 million in the Northpointe Mortgage Participation program offset by an increase of $24.7 in PPP loans.

The Company originated $66.3 million in residential mortgages during the quarter and sold $37.0 million, with an average gross margin on sale of mortgage loans of approximately 2.85%. This production compares to residential mortgage originations of $95.7 million in the preceding quarter with sales of $59.3 million, with an average gross margin of 3.01%. “Mortgage banking activity exceeded the first quarter of 2020, bucking seasonal trends, especially for refinances of existing mortgages as interest rates remain historically low,” said Kelly Liske, Chief Banking Officer.

Loans receivable consisted of the following at the dates indicated**:**

	March 31, 2021			December 31, 2020			March 31, 2020			Three Month Change			One Year Change
	(In thousands)
Real Estate:	****	****	****	****	****	****	****	****	****	****	****	****	****	****	****
One to four family	$	295,831		$	309,828		$	302,688		$	(13,997	)	$	(6,857	)
Multi-family		162,487			162,467			88,794			20			73,693
Commercial real estate		296,826			296,574			260,321			252			36,505
Construction and land		157,316			123,627			48,565			33,689			108,751
Total real estate loans		912,460			892,496			700,368			19,964			212,092
Consumer:	****	****	****	****	****	****	****	****	****	****	****	****	****	****	****
Home equity		33,713			33,103			35,260			610			(1,547	)
Auto and other consumer		139,134			128,233			114,194			10,901			24,940
Total consumer loans		172,847			161,336			149,454			11,511			23,393
Commercial business		83,033			100,201			55,853			(17,168	)		27,180
Total loans		1,168,340			1,154,033			905,675			14,307			262,665
Less:	****	****	****	****	****	****	****	****	****	****	****	****	****	****	****
Net deferred loan fees		4,983			4,346			433			637			4,550
Premium on purchased loans, net		(7,347	)		(6,129	)		(4,742	)		(1,218	)		(2,605	)
Allowance for loan losses		14,265			13,847			10,830			418			3,435
Total loans receivable, net	$	1,156,439		$	1,141,969		$	899,154		$	14,470		$	257,285

The sectors most heavily impacted by the pandemic include hospitality; restaurant and food services; and lessors of commercial real estate to these businesses. The table below presents selected information on loans to these industries as of March 31, 2021.

Industry			Loan Balance
			(In thousands)
Hospitality	4.4	%	$	50,332	14	60.6	%
Restaurant and food services	0.2			1,907	6	64.8
Lessors of commercial real estate to hospitality, restaurant, and retail establishments	4.3			48,103	27	52.3

The table below presents selected information on loans that remained on COVID-19 deferrals at the periods indicated.

			Deferred Loan Balance
			(In thousands)
June 30, 2020	12.9	%	$	128,420	297
September 30, 2020	13.9			149,542	183
December 31, 2020	0.2			2,349	19
March 31, 2021	0.7			8,052	4

Total deposits increased $101.3 million, or 7.6%, to $1.43 billion at March 31, 2021, compared to $1.33 billion at December 31, 2020, and increased $370.9 million, or 34.9%, when compared to $1.06 billion a year ago. Savings accounts increased 12.3% compared to a year ago to $186.2 million at March 31, 2021, and represented 13.0% of total deposits; transaction accounts increased 62.8% compared to a year ago to $466.1 million at March 31, 2021, and represented 32.5% of total deposits; money market accounts increased 95.6% compared to a year ago to $495.3 million, and represented 34.5% of total deposits; and certificates of deposit decreased 19.9% compared to a year ago to $287.2 million at quarter-end, and represented 20.0% of total deposits.

“Deposit balances remain at record levels as we experienced growth with existing customers and developed new deposit relationships,” said Bullard. “We strategically increased noninterest-bearing and other core deposits to manage overall funding costs. We lowered our total cost of funds over the quarter by shifting our deposit mix more toward non-maturity deposits.” Total cost of funds improved to 0.32% for the first quarter of 2021 compared to 0.38% for the fourth quarter of 2020.

Deposits consisted of the following at the dates indicated:

	March 31, 2021		December 31, 2020		March 31, 2020		Three Month Change			One Year Change
	(In thousands)
Savings	$	186,173	$	164,434	$	165,747	$	21,739		$	20,426
Transaction accounts		466,143		431,171		286,283		34,972			179,860
Money market accounts		495,265		429,143		253,198		66,122			242,067
Certificates of deposit		287,226		308,769		358,677		(21,543	)		(71,451	)
Total deposits	$	1,434,807	$	1,333,517	$	1,063,905	$	101,290		$	370,902

On March 25, 2021, the Company completed its private placement of $40.0 million of 3.75% fixed-to-floating rate subordinated notes due 2031 (the “Notes”) to certain qualified institutional buyers and accredited investors. The Notes have been structured to qualify as Tier 2 capital for the Company for regulatory capital purposes. The Company intends to use the net proceeds of the offering for general corporate purposes and provided $20.0 million to the Bank as Tier 1 capital. “We believe this capital will serve us well as we continue to grow the Company and enhance our footprint and product offerings,” said Deines.

Total shareholders' equity was $182.1 million at March 31, 2021, compared to $186.4 million three months earlier, and $167.2 million a year earlier. The decrease in equity was driven by reduced other comprehensive income of $5.2 million due to a decrease in the unrealized gain on investments of $3.5 million and a $1.7 million adjustment reflecting the recognition of prior service cost related to First Fed’s transfer out of a multiemployer pension plan into a single employer plan. The decrease in equity compared to the prior quarter was also a result of stock buybacks during the first quarter of 2021. Book value per common share was $17.86 at March 31, 2021, compared to $18.20 at December 31, 2020 and $16.02 at March 31, 2020.

Operating Results

In the first quarter of 2021, the Company generated a return on average assets ("ROAA") of 0.76%, and a return on average equity ("ROAE") of 6.70%, compared to 0.97% and 8.32%, respectively, in the fourth quarter of 2020, and 0.27% and 1.94%, respectively, in the first quarter a year ago.

Total interest income increased to $14.6 million for the first quarter of 2021, compared to $14.0 million in the previous quarter and $12.0 million in the first quarter of 2020. Interest and fees on loans increased due to loan growth compared to the prior quarter. Quarter over quarter, the yield on average loans receivable increased by 2 basis points. Total interest expense was $1.2 million for the first quarter of 2021, compared to $1.3 million in the fourth quarter of 2020, and $2.6 million in the first quarter a year ago. The decrease in interest expense was due to the decline in the cost of total deposits to 27 basis points from 34 basis points in the prior quarter and 85 basis points the first quarter one year ago.

Net interest income, before provision for loan losses, increased 6.4% during the quarter to $13.5 million, compared to $12.7 million for the preceding quarter, and increased 43.3% compared to $9.4 million in the first quarter a year ago. “The first round of PPP expired on August 8, 2020, and as of March 31, 2021, we received from the SBA proceeds on forgiven loans totaling $16.6 million. Approximately $177,000 of the income recognized during the first quarter was related to deferred fees associated with PPP loan payoffs, compared to $182,000 of the income related to deferred fees associated with PPP loan payoffs in the prior quarter,” added Riffle.

While asset quality improved during the last twelve months, additional loan growth and the anticipated impact of the COVID-19 pandemic on local businesses resulted in a $500,000 provision for loan losses during the first quarter of 2021. This compares to a provision for loan losses of $930,000 for the preceding quarter, and a provision for loan losses of $1.3 million for the first quarter of 2020.

The net interest margin expanded 2 basis point to 3.48% for the first quarter of 2021, compared to 3.46% for the fourth quarter of 2020, and increased 37 basis points compared to 3.11% for the first quarter in 2020. “Despite a challenging interest rate environment, our earning asset mix enhancements as well as substantially reducing our cost of funds helped increase our net interest margin over the past twelve months,” said Bullard.

The yield on earning assets decreased 3 basis points to 3.78% for the first quarter of 2021, compared to 3.81% for the fourth quarter of 2020, and decreased 19 basis points from 3.97% for the first quarter of 2020. The decrease was due to lower yields on the investment portfolio and loans, which was offset by higher average loan balances. The yield on the loan portfolio increased to 4.43% for the first quarter of 2021, from 4.41% for the fourth quarter of 2020, and decreased from 4.52% for the first quarter of 2020 due to a decline in the overall rate environment. The cost of interest-bearing liabilities decreased 7 basis points to 0.40% for the first quarter of 2021, compared to 0.47% for the fourth quarter of 2020, and decreased 71 basis points from 1.11% for the first quarter in 2020.

Noninterest income decreased 41.7% to $2.7 million for the first quarter of 2021 from $4.6 million for the fourth quarter of 2020 and increased 16.7% compared to $2.3 million for the first quarter a year ago. The first quarter of 2021 included a $1.3 million gain on sale of loans compared to a $2.3 million gain on sale of loans in the preceding quarter and a $383,000 gain on sale of loans in the first quarter a year ago. Noninterest income growth during the fourth quarter of 2020 also included a $912,000 gain on sale of investment securities. Loan and deposit service fees, the second largest component of noninterest income, totaled $837,000 for the first quarter 2021, compared to $940,000 for the preceding quarter and $881,000 for the first quarter a year ago.

Noninterest expense totaled $12.1 million for the first quarter of 2021, compared to $11.7 million for the preceding quarter and $9.4 million for the first quarter a year ago. The quarterly increase reflects higher compensation expense, including salaries, commissions and benefits. Also impacting operating expenses for the first quarter was the implementation of new technology enhancements for loan and deposit account applications through the use of digital and mobile banking products.

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 March 31, 2021. Common Equity Tier 1 and Total Risk-Based Capital Ratios at March 31, 2021, were 15.1 % and 16.3%, respectively. The Company distributed $20.0 million to the Bank as Tier 1 capital.

Nonperforming loans decreased to $2.1 million at March 31, 2021, from $2.3 million at December 31, 2020. The percentage of the allowance for loan losses to nonperforming loans increased to 668.1%, at March 31, 2021, from 609.2% at December 31, 2020, and 622.4% at March 31, 2020. Classified loans increased $6.6 million during the current quarter to $14.1 million at March 31, 2021, due to one substandard commercial real estate loan. The allowance for loan losses as a percentage of total loans was 1.2% at March 31, 2021, which was unchanged compared to three months and one year earlier.

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 serving Clallam, Jefferson, Kitsap, Whatcom, and King counties in Washington, through its Seattle lending center and ten full-service branches. Our 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.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data) (Unaudited)

			December 31, 2020			March 31, 2020
Assets
Cash and due from banks	15,827		$	13,508		$	15,531		17.2	%	1.9	%
Interest-bearing deposits in banks	83,444			51,647			91,633		61.6		-8.9
Investment securities available for sale, at fair value	393,495			364,296			317,520		8.0		23.9
Loans held for sale	4,037			3,753			4,531		7.6		-10.9
Loans receivable (net of allowance for loan losses of 14,265, 13,847, and 10,830)	1,156,439			1,141,969			899,154		1.3		28.6
Federal Home Loan Bank (FHLB) stock, at cost	3,997			5,977			7,581		-33.1		-47.3
Accrued interest receivable	6,251			6,966			4,124		-10.3		51.6
Premises and equipment, net	14,795			14,785			14,231		0.1		4.0
Mortgage servicing rights, net	2,309			2,120			843		8.9		173.9
Bank-owned life insurance, net	38,596			38,353			30,355		0.6		27.1
Prepaid expenses and other assets	17,103			10,975			11,436		55.8		49.6
Total assets	1,736,293		$	1,654,349		$	1,396,939		5.0	%	24.3	%
Liabilities and Shareholders' Equity
Deposits	1,434,807		$	1,333,517		$	1,063,905		7.6	%	34.9	%
FHLB advances	50,000			109,977			150,021		-54.5		-66.7
Subordinated debt	39,310			—			—		100.0		100.0
Accrued interest payable	84			53			194		58.5		-56.7
Accrued expenses and other liabilities	27,994			23,303			15,225		20.1		83.9
Advances from borrowers for taxes and insurance	2,000			1,116			443		79.2		351.5
Total liabilities	1,554,195			1,467,966			1,229,788		5.9		26.4
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 10,195,644 at March 31, 2021; issued and outstanding 10,247,185 at December 31, 2020; and issued and outstanding 10,432,963 at March 31, 2020	102			102			104		0.0		-1.9
Additional paid-in capital	96,499			97,412			99,479		-0.9		-3.0
Retained earnings	94,363			92,657			85,549		1.8		10.3
Accumulated other comprehensive income (loss), net of tax	199			5,442			(8,256	)	-96.3		102.4
Unearned employee stock ownership plan (ESOP) shares	(9,065	)		(9,230	)		(9,725	)	1.8		6.8
Total shareholders' equity	182,098			186,383			167,151		-2.3		8.9
Total liabilities and shareholders' equity	1,736,293		$	1,654,349		$	1,396,939		5.0	%	24.3	%

All values are in US Dollars.

FIRST NORTHWEST BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data) (Unaudited)

	Quarter Ended
	March 31, 2021		December 31, 2020		March 31, 2020		Three Month Change			One Year Change
INTEREST INCOME
Interest and fees on loans receivable	$	12,541	$	11,894	$	9,836		5.4	%		27.5	%
Interest on mortgage-backed and related securities		464		437		959		6.2			-51.6
Interest on investment securities		1,570		1,581		1,069		-0.7			46.9
Interest on deposits in banks		13		9		68		44.4			-80.9
FHLB dividends		45		56		47		-19.6			-4.3
Total interest income		14,633		13,977		11,979		4.7			22.2
INTEREST EXPENSE
Deposits		934		1,079		2,138		-13.4			-56.3
FHLB advances		191		221		434		-13.6			-56.0
Subordinated debt		25		—		—		100.0			100.0
Total interest expense		1,150		1,300		2,572		-11.5			-55.3
Net interest income		13,483		12,677		9,407		6.4			43.3
PROVISION FOR LOAN LOSSES		500		930		1,266		-46.2			-60.5
Net interest income after provision for loan losses		12,983		11,747		8,141		10.5			59.5
NONINTEREST INCOME
Loan and deposit service fees		837		940		881		-11.0			-5.0
Mortgage servicing fees, net of amortization		30		146		15		-79.5			100.0
Net gain on sale of loans		1,337		2,324		383		-42.5			249.1
Net gain on sale of investment securities		—		912		605		-100.0			-100.0
Increase in cash surrender value of bank-owned life insurance		244		249		328		-2.0			-25.6
Other income		256		67		106		282.1			141.5
Total noninterest income		2,704		4,638		2,318		-41.7			16.7
NONINTEREST EXPENSE
Compensation and benefits		7,295		7,193		5,361		1.4			36.1
Data processing		739		691		690		6.9			7.1
Occupancy and equipment		1,623		1,663		1,351		-2.4			20.1
Supplies, postage, and telephone		242		236		211		2.5			14.7
Regulatory assessments and state taxes		261		271		174		-3.7			50.0
Advertising		445		572		272		-22.2			63.6
Professional fees		522		408		400		27.9			30.5
FDIC insurance premium		148		89		—		66.3			100.0
FHLB prepayment penalty		—		—		210		n/a			-100.0
Other		819		596		713		37.4			14.9
Total noninterest expense		12,094		11,719		9,382		3.2			28.9
INCOME BEFORE PROVISION FOR INCOME TAXES		3,593		4,666		1,077		-23.0			233.6
PROVISION FOR INCOME TAXES		473		850		204		-44.4			131.9
NET INCOME	$	3,120	$	3,816	$	873		-18.2	%		257.4	%
Basic and diluted earnings per common share	$	0.34	$	0.41	$	0.09		-17.1	%		277.8	%

FIRST NORTHWEST BANCORP AND SUBSIDIARY

Selected Financial Ratios and Other Data

(Unaudited)

	As of or For the Quarter Ended
	March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020
Performance ratios: (1)
Return on average assets		0.76	%		0.97	%		0.99	%		0.56	%		0.27	%
Return on average equity		6.70			8.32			8.22			4.60			1.94
Average interest rate spread		3.38			3.35			3.22			2.90			2.86
Net interest margin (2)		3.48			3.46			3.36			3.10			3.11
Efficiency ratio (3)		74.7			67.7			60.9			72.3			80.0
Average interest-earning assets to average interest-bearing liabilities		134.6			131.7			130.9			129.5			130.1
Book value per common share	$	17.86		$	18.20		$	17.65		$	17.07		$	16.02
Asset quality ratios:
Nonperforming assets to total assets at end of period (4)		0.1	%		0.1	%		0.2	%		0.2	%		0.2	%
Nonperforming loans to total loans (5)		0.2			0.2			0.3			0.3			0.2
Allowance for loan losses to nonperforming loans (5)		668.1			609.2			419.9			360.8			622.4
Allowance for loan losses to total loans		1.2			1.2			1.2			1.2			1.2
Net charge-offs to average outstanding loans		—			—			—			—			—
Capital ratios (First Fed):
Tier 1 leverage	11.2		%		10.3	%		10.5	%		10.9	%		11.8	%
Common equity Tier 1 capital	15.1				13.4			14.7			15.1			16.8
Tier 1 risk-based	15.1				13.4			14.7			15.1			16.8
Total risk-based	16.3				14.6			16.0			16.4			18.1
Other Information:
Average total assets	$	1,645,806		$	1,567,521		$	1,488,723		$	1,401,500		$	1,287,529
Average total loans		1,144,230			1,089,505			1,009,210			938,646			876,135
Average interest-earning assets		1,549,316			1,466,103			1,401,090			1,305,437			1,208,314
Average noninterest-bearing deposits		283,204			245,024			218,615			196,698			159,214
Average interest-bearing deposits		1,092,114			1,032,608			1,009,041			936,968			849,196
Average interest-bearing liabilities		58,629			80,731			61,244			71,170			79,659
Average equity		186,171			183,424			178,887			172,009			179,614
Average shares - basic		9,094,354			9,214,965			9,257,252			9,373,253			9,624,727
Average shares - diluted		9,185,725			9,258,109			9,263,975			9,408,123			9,676,377
(1)	Performance ratios are annualized, where appropriate.
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(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.